SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 [Fee Required]
For the fiscal year ended November 2, 1996
- --- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _________ to _________
Commission file number 0-24902
CENTRAL TRACTOR FARM & COUNTRY, INC.
Delaware 42-1425562
(State of incorporation) (I.R.S. Employer I.D. No.)
3915 Delaware Avenue
Des Moines, Iowa 50316-0330
(515) 266-3101
(Address and telephone number
of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 (quoted on The Nasdaq National Market System)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of 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. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant based on the closing price on January 29, 1997 was
approximately $50,247,411.
As of January 6, 1997 10,670,892 shares of the registrant's Common
Stock were outstanding.
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<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED NOVEMBER 2, 1996
Page
PART I
<S> <C> <C>
Item 1. Business................................................................. 1
Item 2. Properties............................................................... 7
Item 3. Legal Proceedings........................................................ 8
Item 4. Submission of Matters to a Vote of Security-Holders...................... 8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.... 9
Item 6. Selected Financial Data.................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition 11
and Results of Operations............................................. 11
Item 8. Financial Statements and Supplementary Data.............................. 15
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.................................................. 15
PART III
Item 10. Directors and Executive Officers of the Registrant....................... 16
Item 11. Executive Compensation................................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and Management........... 22
Item 13. Certain Relationships and Related Transactions........................... 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......... 24
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References herein to "fiscal" years are references to Central Tractor Farm
& Country, Inc.'s 52- or 53-week fiscal year, which ends on the Saturday nearest
October 31 in that year.
ITEM 1. BUSINESS
Overview
Central Tractor Farm & Country, Inc., a Delaware corporation (the "Company"
or "CT"), is an agricultural specialty retailer with 112 stores (as of December
31, 1996) serving the agricultural, hardware and related needs of rural
consumers, especially part-time and full-time farmers, hobby gardeners, skilled
tradespersons and do-it-yourself ("DIY") customers. CT was founded in 1935 and
has established itself as a market leader in the agricultural specialty market,
having strong name recognition and a loyal customer base. The Company's stores
offer a wide selection of agricultural products such as tractor parts and
accessories, specialty hardware and paint, lawn and garden items, rural
automotive parts and accessories, workwear, pet supplies and general consumer
merchandise. The Company has also established national visibility for its
products and services through its catalog operation, which has an annual
circulation of approximately 550,000.
Big Bear Farm Stores Acquisition
In May 1996, the Company acquired 31 retail stores and certain net
operating assets from Big Bear Farm Stores, Inc. ("Big Bear"), a privately owned
specialty retailer, for $5.7 million. The Company is converting these locations
to the CT format at an additional investment (including inventory) of
approximately $6.3 million.
As of December 31, 1996, 14 locations had already been converted at an
approximate cost of $3.3 million; the 17 remaining locations will be converted
at an estimated cost of $3.0 million. Management believes this conversion
process will be completed by the Spring of 1997. With locations in Iowa,
Minnesota and Wisconsin, the Big Bear stores added geographic diversity to CT's
Northeastern focus.
The Acquisition
On November 27, 1996, JWC Acquisitions I, Inc. ("JWCAC") an indirect
subsidiary of J.W. Childs Equity Partners, L.P. ("Childs") entered into
agreements (the "Securities Purchase") with certain affiliates of Butler Capital
Corporation (collectively, "BCC") and with certain members of CT's management
(the "Management Shareholders") pursuant to which JWCAC agreed to purchase at a
price of $14.00 per share 100% of BCC's shares and approximately 36.4% of the
Management Shareholders' Shares, representing approximately 64.0% and 1.4% of
the Company's outstanding common stock, respectively (collectively, the
"Securities Purchases"). In connection with the execution of the Securities
Purchase Agreements, JWCAC, its parent corporation CT Holding, Inc. ("Holding")
and Childs entered into an agreement and plan of merger (the "Merger Agreement")
with the Company, pursuant to which JWCAC will be merged with and into the
Company (the "Merger") for merger consideration of $14.25 per share (the "Merge
Consideration").
As of January 2, 1997, JWCAC had consummated the Securities Purchases and
paid related expenses utilizing $65.4 million of cash equity contributed to
JWCAC by Holding and $35.1 million of borrowings under an interim margin loan
facility (the "Margin Loan Facility") provided by a group of lenders with
NationsBank, N.A. ("NationsBank"), as administrative agent, and Fleet National
Bank ("Fleet"), as co-agent. Holding funded its equity contribution by issuing
$10.0 million of preferred stock (the "Preferred Stock") and $55.4 million of
common stock, of which $60.3 million was purchased by Childs and its affiliates.
In connection with the Securities Purchases, the Company entered into a new term
loan (the "New Term Loan") and a new revolving credit facility (the "New
Revolving Credit Facility") with Fleet, as administrative agent, and
NationsBank, as co-agent, (collectively, the "New Credit Facility") and used a
portion of such facility to refinance existing debt of the Company, including a
$16.0 million convertible note held by BCC. In connection with the Merger, (i)
the Company will become the wholly owned subsidiary of Holding, (ii) the
Management Shareholders will exchange $3.9 million in equity securities of the
Company for equity securities of Holding and (iii) the shareholders of the
Company (other than JWCAC, persons pursuing dissenters' rights and the
Management
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Shareholders) will receive the Merger Consideration. CT has filed a registration
statement with the Securities and Exchange Commission for a $100.0 million
Senior Note offering. The proceeds of the offering will be used to pay the
Merger Consideration, repay the Margin Loan Facility, pay down a portion of the
revolving borrowings under the New Credit Facility and pay related fees and
expenses.
Expansion Plan
Since the beginning of fiscal 1993, the Company has increased the number of
its retail stores from 47 to 112. From fiscal 1993 through fiscal 1994, the
Company opened ten new stores, acquired one store and closed three stores. In
fiscal 1995, the Company opened 10 new stores and acquired one store. In fiscal
1996, the Company opened 14 new stores and acquired 31 stores from Big Bear.
Subsequent to fiscal 1996, the Company has opened one new store.
The Company plans to open an additional 31 stores in the next three years
through further penetration of the Northeastern and Midwestern United States
markets and through expansion into the Southeastern United States. Management
intends to achieve this growth through new store openings and selective
acquisitions. The Company expects to open one additional store in fiscal 1997
and complete the conversion of the remaining 17 Big Bear stores to the CT format
by the Spring of 1997. On a preliminary basis, the Company has identified
potential new markets outside of its existing markets that management believes
are attractive candidates for one or more new CT stores, The number of actual
new CT store openings in the next three years may differ materially from the
Company's current projections if the Company makes a major acquisition or is
unable to find attractive store locations to rent at reasonable prices,
negotiate acceptable lease terms or acquire small regional farm store chains at
reasonable prices.
The Company seeks to locate stores in high traffic shopping districts
whenever possible in order to attract customers who prefer to do much of their
shopping at one time and place. As with its existing stores, the Company intends
to lease its new stores. The estimated cash required to open a new, leased,
large prototype store is $850,000 and the estimated cash required to open a new,
leased, small prototype store averages $600,000 (in each case, including
inventory net of accounts payable and excluding an average of approximately
$125,000 in pre-opening expenses). Of these estimated cash expenditures,
approximately half is used for initial inventory (net of accounts payable), and
the balance is used for capital expenditures, principally leasehold
improvements, fixtures and equipment. CT stores typically generate positive cash
flow in their first year of operation.
The Company also intends to continue to opportunistically relocate existing
CT stores. These relocations reflect, in most cases, the expiration of an
existing lease coupled with an opportunity to move to a more demographically
and/or physically attractive site. The Company relocated two stores during
fiscal 1996.
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Retail Stores
CT stores focus on agricultural and agricultural related products. The
Company segments its merchandising mix into seven key product categories:
agricultural products (including tractor parts and accessories), specialty
hardware, lawn and garden products, which are available in several product
categories, represent approximately 8% of total store sales. Sale of
agricultural and related products represent approximately 60% of CT's total net
sales. The growth and percentage of total store sales for each retail product
category for fiscal 1994, fiscal 1995, and fiscal 1996, and a description of
each product category, are set forth below:
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Agricultural (including tractor parts 21.6% 23.2% 24.0%
and accessories)
Specialty Hardware 21.2% 21.6% 20.6%
Lawn & Garden 20.2% 19.3% 19.6%
Workwear 7.7% 7.3% 8.4%
Rural Automotive Parts & Accessories 16.8% 16.0% 14.8%
Pet Supplies 4.9% 5.4% 6.3%
General Consumer 7.6% 7.2% 6.4%
---- ----- ----
100.0% 100.0% 100.00%
====== ====== =======
</TABLE>
Agricultural Products. CT stores' agricultural product line consists of
approximately 6,000 stock keeping units ("SKUs") supplying the needs of the
part-time and full-time farmer, including tractor parts, tillage and
harvesting parts, fencing materials and animal health supplies. This
product line consists largely of consumable products and other items
requiring replacements on a regular basis. This product line accounted for
$47.1 million, $55.9 million and $67.3 million of the Company's total
revenue in fiscal years 1994, 1995 and 1996, respectively. CT emphasizes
consumable agricultural supplies that are purchased frequently by its
customers and does not sell heavy equipment such as tractors or combines.
Specialty Hardware. CT's speciality hardware line consists of approximately
9,000 SKUs with an emphasis on products with agricultural applications.
These products accounted for $46.4 million, $51.9 million, and $57.9
million of the Company's total revenue in fiscal years 1994, 1995 and 1996,
respectively. CT stores carry a broad range of high-quality hardware with
an emphasis on recognized branded professional products, including hand
tools, power tools, mechanical tools, electrical products, including
outdoor lighting, security lighting and motors, welders, air compressors,
generators, paints, (as well as a competitively-priced private- label
brand), plumbing supplies and heating/energy equipment, including stoves,
space heaters and fans.
Lawn and Garden Products. CT's lawn and garden products consist of
approximately 2,000 SKUs, including lawn and garden tools, nursery stock,
fertilizers, lawn fencing and weed killers. These products accounted for
$44.2 million, $46.3 million and $54.8 million of the Company's total
revenue in fiscal years 1994, 1995 and 1996, respectively. To differentiate
itself from other retailers, CT also stocks a selection of lawn mowers
ranging from competitively priced items to full-featured riding lawn
mowers. CT assembles and tests the lawn mowers and sells a full assortment
of parts for follow-up service needs. CT stores offer seasonal bedding
plants, trees and shrubs in their garden centers.
Workwear. CT's workwear products, including products sold under the
Carhartt, Walls and Iron Age brand names, are targeted at the specialized
needs of its outdoor-oriented customers who require high quality functional
apparel. This product category consists of approximately 2,000 SKUs,
including premium quality insulated outerwear, overalls, flannel shirts and
work jeans. These products accounted for $16.8 million, $17.6 million, and
$23.5 million of the Company's net sales in fiscal years 1994, 1995, and
1996,
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respectively. The Company has been expanding its workwear line in its new
stores to include quality non-insulated workwear, bib overalls, twill
pants and hunting clothing.
Rural Automotive Parts and Accessories. CT's rural automotive parts and
accessories consist of approximately 3,000 SKUs, including a core selection
of automotive parts, batteries and accessories for rural vehicles,
primarily for pick-up trucks and tractors. The products accounted for $36.6
million, $38.4 million and $41.4 million of the Company's total revenue in
fiscal years 1994, 1995 and 1996. CT also stocks a small assortment of
general automotive items as a convenience to its customer, including oil
and lubrication products and anti-freeze. In addition to brand name
products, certain of the Company's automotive products are offered under
CT's own private label.
Pet Supplies. CT's pet supplies consist of approximately 1,000 SKUs,
including dog and cat foods, wild bird feed, and rabbit supplies. These
products account for $10.6 million, $13.0 million, and $17.7 million of the
Company's net sales in fiscal years 1994, 1995, and 1996, respectively. The
pet supplies sold by CT include economically priced large sizes, such as 50
pound bags of dog food. Certain of these items are sold under CT's private
label. CT has been expanding its pet supplies product category.
General Consumer Products. CT's general consumer products line consists of
approximately 1,000 SKUs, including farm replicas and collectible toys,
hunting accessories, camping items and outdoor living needs. These products
accounted for $16.6 million, $17.2 million, and $17.8 million of the
Company's net sales in fiscal years 1994, 1995, and 1996, respectively. CT
stores also offer seasonal merchandise such as charcoal grills and coolers
in the summer.
Store Operations
The Company utilizes large and small store formats in order to enable
management to enhance CT's return on investment in light of varying population
density. The Company's small stores average 11,000 square feet of indoor selling
space and had average comparable store sales of $2.5 million in fiscal 1996. The
large stores average 22,000 square feet of indoor selling space and had average
comparable store sales of $4.4 million in fiscal 1996. Small stores generally
carry a smaller selection of workwear and seasonal and other general consumer
products than large stores. In addition, the Company looks for store sites that
have 15,000 to 20,000 square feet of outdoor selling space. This outdoor selling
space is primarily used for displaying lawn and garden products, fencing,
tractor accessories and livestock watering and feeding equipment.
Both CT prototype stores are designed to provide customers with ease in
locating desired products and are clean and colorful in order to provide an
overall enjoyable shopping environment. The use of informative directional
signing adds to the ease of the customer's shopping experience. Plan-o-grams are
utilized to set merchandise assortments in the seven core product categories to
ensure uniformity of presentation, ease of shopping for the customer and to
facilitate inventory management, replenishment and restocking.
The agricultural products department is prominently featured in each store
and is identified by the parts desks. The parts desk is the focal point for CT's
new and used tractor parts program. In addition , the parts desk enables CT to
offer a high level of customer service, ranging from answering technical
questions regarding various products to the special ordering of hard to find
parts. Each parts desk is managed by the store's agricultural product specialist
who has access to the CT catalog and other inventory sources to quickly obtain
needed parts.
Each store is managed by a store manager who is responsible for all aspects
of the store operations, including the hiring and training of store associates,
work scheduling, inventory control, expense control, customer service and
associate morale. Typically, the store manager is supported by an assistant
manager and core department heads, along with an average of 18 sales associates.
Store operations are coordinated through nine district managers each of whom is
currently responsible for eleven to fifteen retail stores. In addition, the
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Company has developed and implemented consistent store standards, processes and
best practices for the chain.
The Company has established an internal store management training program
which focuses training on store operations, systems, financial matters, human
resources and sales. To support the Company's planned expansion and its
management training programs, the Company has implemented a long-range personnel
plan that provides for internal promotions, coupled with recruitment of college
graduates and hiring of individuals with previous retail experience. Store
associates receive training which emphasizes customer service, sales, product
knowledge and store procedures. All CT store operations' management, including
district managers, store managers and assistant managers are compensated based
on job performance, and participate in an incentive program, which is based on
the store/district exceeding a targeted level of profitability. The Company also
has established an incentive program for all store associates that focuses on
sales and profitability.
Other Operations
The CT catalog offers a broad assortment of new, used and rebuilt tractor
parts and agricultural componentry, including approximately 20,000 SKUs. In
fiscal 1996, catalog sales were $7.3 million. The catalog will be distributed
nationally to approximately 550,000 households in rural and agricultural
communities in fiscal 1997. The breadth of this distribution provides the
Company with name recognition among agricultural consumers in areas outside of
its core geographical markets. As a consequence, the Company anticipates some
customer familiarity with the Company when it expands into new areas.
The Company also sells tractor parts and other items, on a wholesale basis,
to other agricultural retailers and distributors. In recent years, the Company
has been reducing the number of products offered and the number of customers
served by this unit. In fiscal 1996, the Company's wholesale business generated
sales of $5.4 million.
Purchasing and Distribution
The Company maintains a staff of six merchandise buyers, each of whom is
responsible for specific product categories, at its headquarters in Des Moines,
Iowa. The purchasing and inventory control process is controlled centrally by
the Company's point of sale ("POS") and automatic replenishment systems. See "--
Corporate Offices and Management Information Systems." The Company purchases its
merchandise from approximately 1,500 vendors, none of which accounted for more
than 10% of the Company's purchases during fiscal 1996. The Company generally
maintains multiple sources of supply for its products in order to minimize the
risk of supply disruption and to improve its negotiating position. The Company
has no long-term contractual commitments with any of its vendors.
The Company operates a 135,000 square-foot distribution center in Des
Moines, Iowa and a 155,000 square-foot distribution center in Youngstown, Ohio,
from which it currently supplies the majority of its retail stores' inventory
needs. The Des Moines facility is used to handle the small part items and to
receive purchases sourced from vendors located in the Midwest. The Youngstown
facility serves primarily as a flow-through distribution station. Approximately
35% of total purchases, consisting mainly of high volume commodity are shipped
by vendors directly to individual store locations. Merchandise from the
distribution centers is shipped to each store through supply orders generated by
an automated replenishment system. The Company transports most of its
merchandise to each store once a week from both the distribution centers through
a major contract carrier. The contract carrier's truck fleet delivers all
warehouse shipments and most of the truckloads of merchandise which is shipped
directly from vendors to store locations.
The Company expects that its current distribution facilities will be
sufficient to accommodate its planned expansion through fiscal 1999.
5
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Corporate Offices and Management Information Systems
To facilitate the Company's expansion plan and to maintain consistent store
operations, CT has centralized specific functions of its operations, including
accounting, the development of policies and procedures, store layouts, visual
merchandise presentation, inventory management, merchandise procurement and
allocations, marketing and advertising, human resources and real estate. This
centralization effectively utilizes the experience and resources of the
Company's senior management and provides a high level of consistency throughout
the chain.
The Company has invested considerable resources in its management
information and control systems, which were developed beginning in 1981 and have
been expanded and improved yearly. These systems provide support for the
purchase and distribution of merchandise and help to improve the manner in which
CT stores, the corporate offices and distribution centers are operated. All CT
stores (including all of the acquired Big Bear stores) use the Company's POS
system to capture sales information at the SKU level. Through the POS system,
the Company can monitor customer purchases and inventory levels with respect to
every item of merchandise in each store daily. The company has implemented
scanning capabilities in the receiving process of its distribution centers and
currently plans to expand this to the picking and shipping process. Electronic
Data Interchange ("EDI") is used to send purchase orders to certain of its
largest suppliers. CT intends to expand its use of EDI will be expanded to
communicate invoicing, shipments and sales activity to and from most major
suppliers.
The Company also has an automated inventory replenishment system which uses
POS information, and facilitates the timely replenishment of both the stores and
the warehouses. The sales and inventory information used in this system is
updated on a daily basis. This system also provides for minimum stocking levels
for lower volume items enabling CT to carry a large number of SKUs at a minimum
of inventory carrying expense.
Competition
The Company faces competition primarily from other chain and single-store
agricultural specialty retailers, general merchandise retailers and home
centers. Some of these competitors have substantially greater financial and
other resources than the Company.
Currently, most of the Company's stores do not compete directly in the
markets of other agricultural specialty retail chains. However, the Company's
expansion plans will likely result in new stores being located in markets
currently served by one or more of these chains, and there can be no assurance
that these chains, certain of which have announced expansion plans, will not
expand into the Company's markets. Expansion by the Company into markets
currently served by its competitors or expansion by competitors into the
Company's markets could have material adverse effect on the Company's business,
financial condition or results of operation.
In addition, the Company competes in over 90% of its markets (which the
Company defines as a 30 mile radius around a store) with general merchandise
retailers and/or home centers and expects these retailers to be in many of the
markets targeted for expansion. The Company believes that its merchandise mix
and level of customer service successfully differentiate it form general
merchandise retailers and home center, and as a result the Company has to date
been able to operate profitably despite competition from general merchandise
retailers and home centers. However, in the past certain general merchandise
retailers and home centers have modified their product mix and marketing
strategies in a apparent effort to compete more effectively in the Company's
markets. There can be no assurances that these efforts will not continue or that
the Company will continue to be able to compete successfully against current and
future competition.
Advertising and Promotions
The Company's primary advertising occurs through the bi-weekly distribution
of approximately 2.5 million color circulars distributed as newspaper inserts,
at CT stores and by direct mail. In order to focus its marketing
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on the many farmers in CT's markets, the Company also advertises in
geographically zoned editions of leading farming industry magazines. In
addition, the Company runs periodic special events promoted through local
flyers, circulars and radio advertising.
Seasonality
Unlike many specialty retailers, the Company has historically generated positive
operating income in each of its four fiscal quarters. However, because the
Company is an agricultural specialty retailer, its sales necessarily fluctuate
with the seasonal needs of the agricultural community. The Company responds to
this seasonality by attempting to manage inventory levels (and the associated
working capital requirements) to meet expected demand, and by varying its use of
part-time employees. Historically, the Company's sales and operating income have
been highest in the third quarter of each fiscal year due to the farming
industry's planting season and the sale of seasonal products. Working capital
needs are highest during the second quarter. The Company expects these trends to
continue for the foreseeable future.
Employees
As of November 2, 1996, CT had approximately 2,492 employees (approximately
1,171 in full-time and approximately 1,321 in part-time positions). The company
believes its relations with its employees is good.
ITEM 2. PROPERTIES
As of December 31, 1996, the Company had 112 retail stores located in 16
states as follows:
State Number of Stores
New York 22
Iowa 21
Pennsylvania 17
Minnesota 12
Virginia 7
Ohio 6
Kentucky 5
Maryland 4
Indiana 4
Wisconsin 4
Tennessee 3
Missouri 2
New Jersey 2
Delaware 1
Massachusetts 1
Vermont 1
---
Total 112
All of the Company's 112 stores, its corporate headquarters and two
distribution centers are leased. The Company's corporate headquarters are
located adjacent to its distribution center in Des Moines, Iowa. The Company
generally negotiates retail store leases with an initial term between five and
seven years, with two or three renewal periods of five years each, exercisable
at the Company's option. In fiscal 1996, the Company paid an average of $5.03
per square foot in retail store occupancy expenses, including rent, taxes,
common area charges, repairs and maintenance. Rent expenses generally do not
vary based on sales, and generally increase 10-15% at the beginning of each
option period.
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The Company leases its corporate offices and distribution facility in Des
Moines and 16 of its stores from the former owner of the Company prior to 1988,
and certain of his family members and affiliates. The Company believes that, on
average, the rental rates and other terms of these leases are no less favorable
to the Company than could have been obtained from other third party lessors.
Each of these leases is due to expire by their terms on or before fiscal 2006
subject to options to renew exercisable at the discretion of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company has been notified by the U.S. Environmental Protection Agency
that it may have potential liability for cleanup costs associated with the
cleanup of a dumpsite near Owensburg, Kentucky. To date, the only articles of
waste identified as possibly once belonging to the Company are certain empty
battery acid containers. The Company also has been notified that it is a
fourth-party defendant of a Superfund action pending in the United States
District Court . The action alleges the Company contributed retail and office
waste which may have contained hazardous substances to a landfill in Adams
County, Pennsylvania. The Company believes that any liability it might have as a
result of these actions would be as a de minimis contributor and will not have a
material effect on the Company's financial position, liquidity or results of
operations.
The Company is not a party to any other legal proceedings, other than
routine claims and lawsuits arising in the ordinary course of business. The
Company does not believe that such claims and lawsuits, individually or in the
aggregate, will have a material adverse effect on the Company's business.
Compliance with federal, state and local laws and regulations pertaining to the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, has not had, and is not anticipated to have, a
material effect upon the capital expenditures, earnings or competitive position
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Central Tractor Farm & Country Common Stock, par value $.01 per share, is
traded on the NASDAQ National Market System under the symbol CTFC. Stock price
quotations are printed daily in major newspapers. As of January 7, 1996, there
were approximately 1,000 stockholders of record of Central Tractor Farm &
Country Common Stock.
The Company has not paid any cash dividends on the Common Stock. Although
the Company may pay limited cash dividends on the Common Stock after
consummation of the Acquisition, the Company's ability to pay cash dividends is
restricted by the New Credit Facility.
Quarterly Common Stock Prices
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------
1996 High $11.25 $16.25 $14.63 $12.50
Low $ 6.75 $10.50 $11.75 $ 9.13
1995 High $17.25 $16.00 $13.25 $12.00
Low $14.25 $12.00 $ 9.75 $ 8.50
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year End
---------------------------------------------------------------------------------
November 2, October 28, October 29, October 30, October 31,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Net sales $293,020 $251,703 $231,064 $202,589 $198,055
Income from continuing 8,744 8,185 5,181 3,270 1,464
operations
Income per share from $ 0.80 $ 0.74 $ 0.66 $ 0.42 $ 0.19
continuing operations
Number of stores at end 111 66 55 50 47
of period (1)
Comparable store sales 222 224 240 218 210
per square foot of indoor
selling space (2)
Comparable store sales 1.0% (1.6%) 10.0% 4.2% 5.4%
increases(decreases)(3)
Balance Sheet Data (at
end of period)
Working capital $ 63,803 $ 62,496 $ 50,442 $ 37,055 $ 34,167
Total Assets 159,238 149,977 139,416 113,241 111,446
Long-term debt, less 17,341 16,862 16,959 37,536 37,881
current portion (4)
Stockholders' equity 90,063 81,277 75,735 24,287 22,840
<FN>
(1) Net of three store closings in fiscal 1994.
(2) Comparable sales per square foot of indoor selling space and calculated
by dividing store sales by total indoor selling square footage for
stores open and operated by CT at least twelve months in the period.
(3) Percentage change in store sales as compared to sales for the same
stores for the prior year for stores open and operated by CT for at
least twelve months in each year. The 1.0% increase in comparable store
sales in 1996 has been adjusted to reflect a comparable 52 week year.
Comparable store sales grew 2.9% without such adjustment.
(4) Excluding, in fiscal 1995 and prior years, long-term debt from
discontinued o perations. See footnote (10) in the Notes to
Consolidated Financial Statements.
10
<PAGE>
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operation should be read in conjunction with the selected consolidated financial
data and the consolidated financial statements of the Company and related notes
thereto.
Results of Operations
The following table sets forth, for the periods indicated, certain items in
the Company's Statement of Income expressed as a percentage of net sales:
Fiscal Year Ended
-------------------------------------------
November 2, October 28, October 29,
1996 1995 1994
------------- ------------ ----------
Net sales 100.0% 100.0% 100.0%
Gross profit 29.3 29.5 30.1
Selling, general and
administrative expenses 23.3 23.2 23.6
Amortization of intangibles 0.3 0.3 0.4
------ ----- -----
Operating income 5.7 6.0 6.1
Interest expense 0.6 0.5 2.1
------ ----- -----
Income (loss) before income tax 5.1 5.5 4.0
Income taxes 2.1 2.3 1.8
------ ----- -----
Income (loss) from continuing
operations 3.0% 3.2% 2.2%
====== ===== =====
Fiscal 1996 Compared to Fiscal 1995
Net Sales for the fiscal year ended November 2, 1996 were $293.0 million,
an increase of $41.3 million, or 16.4%, as compared to net sales for the fiscal
year ended October 28, 1995 of $251.7 million. This increase was due to a
comparable store sales increase of approximately 1.0% (net of sales attributable
to an extra (53rd) week in fiscal 1996), sales during such extra week, the
opening of 14 new stores in fiscal 1996, a full year of operations for the
eleven new stores opened in fiscal 1995 as compared to a partial year for those
stores during fiscal 1995 and the acquisition of the Big Bear stores in May
1996. The increase in comparable store sales was primarily due to a comparable
store sales increase of 13.8% during the fourth quarter of fiscal 1996 as
compared to the fourth quarter of fiscal 1995. This increase in comparable store
sales during the fourth quarter was the result of normal weather conditions
during fiscal 1996 as compared to unusual and severe drought conditions during
fiscal 1995.
Gross profit for fiscal 1996 was $85.8 million, an increase of $11.4
million, or 15.3%, as compared to $74.4 million for fiscal 1995. Gross profit as
a percentage of sales was 29.3% for fiscal 1996, as compared to 29.5% for fiscal
1995. This decrease is primarily attributable to the sale of lower margin
products in the Big Bear stores prior to their conversion to the CT store
format.
Selling, general, and administrative expenses for fiscal 1996, were $68.2
million, an increase of $9.9 million, or 17.0%, for fiscal 1995. This increase
was due primarily to costs related to new store openings and costs related to
stores acquired and operated in the Big Bear acquisition. Selling, general, and
administrative expenses as a percentage of sales increased to 23.3% in fiscal
1996 as compared to 23.2% in fiscal 1995. This
11
<PAGE>
increase is attributable to higher selling, general and administrative expenses
as a percentage of sales at the new Big Bear stores, partially offset by a
decrease in selling, general and administrative expenses as a percentage of
sales at CT's existing stores. Management expects that the completion of the
conversion of the Big Bear stores to the CT store format will improve selling,
general and administrative expenses as a percentage of sales.
Amortization of intangibles was $0.9 million for fiscal 1996 and 1995.
Operating income for fiscal 1996, was $16.7 million, an increase of $1.5
million, or 9.5%, as compared to fiscal 1995. Operating income as a percentage
of sales decreased to 5.7% in fiscal 1996 from 6.0% in fiscal 1995. The decrease
resulted from the factors affecting sales, gross profit, and selling, general
and administrative expenses discussed above.
Interest expense for fiscal 1996 was $1.7 million, an increase of $0.4
million, or 27.7% as compared to $1.3 million for fiscal 1995. This increase was
primarily due to an increase in interest related to short-term borrowings under
the Company's line of credit agreement.
Income tax expense related to continuing operations for fiscal 1996, was
$6.2 million, an increase of $0.5 million, or 8.8% as compared to 5.7 million
for fiscal 1995. Income taxes as a percentage of pretax earnings were 41.7% in
fiscal 1996 as compared to 41.1% in fiscal 1995. This increase was primarily due
to the effect of a reduction of prior year over accrual in fiscal 1995.
Fiscal 1995 Compared to Fiscal 1994
Net Sales for the fiscal year ended October 28, 1995 were $251.7 million,
an increase of $20.6 million, or 8.9%, as compared to net sales for the fiscal
year ended October 29, 1994 of $231.1 million. This increase was due in the
opening of eleven new stores in fiscal 1995 and a full year of operations for
the eight new stores opened in fiscal 1994, partially offset by a comparable
store sales decrease of 1.6% and the closing of three stores during the latter
part of fiscal 1994. The 1.6% decrease in comparable store sales was primarily a
result of unusual and severe drought conditions throughout fiscal 1995 and
generally unfavorable economic conditions in the Northeast where most of the
Company's retail stores were located.
Gross profit for fiscal 1995 was $74.4 million, an increase of $4.9
million, or 6.9% as compared to $69.5 million for fiscal 1994. Gross profit as a
percentage of sales was 29.5% for fiscal 1995, as compared to 30.1% for fiscal
1994. The decrease in gross profit percentage was primarily the result of
increased promotional sales in fiscal 1995 at a lower gross margin, which was
offset by improvement in distribution costs.
Selling general and administrative expenses for fiscal 1995 were $58.3
million, an increase of $3.8 million, or 6.9%, as compared to $54.5 for fiscal
1994. This increase was due primarily to increased costs related to new store
openings, partially offset by a reduction in costs due to the closing of three
stores in fiscal 1994 and a reduction in incentive compensation costs. Selling,
general and administrative expenses as a percentage of sales decreased to 23.2%
in fiscal 1995, as compared to 23.6% in fiscal 1994, reflecting the decrease in
incentive compensation expenses as a percentage of sales partially offset by
higher selling, general and administrative expenses as a percentage of sales in
new stores.
Amortization of intangibles was $0.9 million for fiscal 1995 and $0.8
million for fiscal 1994.
Operating income for fiscal 1995 was $15.2 million, an increase of $1.0
million, or 7.5%, as compared to $14.2 for fiscal 1994. Operating income as a
percentage of sales decreased to 6.0% in fiscal 1995 from 6.1% in fiscal 1994.
The decrease resulted from the factors affecting sales, gross profit, and
selling, general and administrative expenses discussed above.
12
<PAGE>
Interest expense for fiscal 1995 was $1.3 million, a decrease of $3.5
million, or 72.7% as compared to $4.8 million for fiscal 1994. This was
primarily due to the reduction in long-term debt resulting from the debt prepaid
with the proceeds from the initial public offering completed in October 1994.
Income tax expense related to continuing operations for fiscal 1995 was
$5.7 million, an increase of $1.5 million or 36.3%, as compared to $4.2 million
for fiscal 1994. Income taxes as a percentage of pretax earnings were 41.1% in
fiscal 1995 as compared to 44.8% in fiscal 1994. This decrease was primarily due
to the effect of a proportionately lower amount of non-deductible goodwill
amortization and a reduction of prior year over accrual.
Discontinued operations represent the results of operations of the
Company's former subsidiary, Herschel Corporation ("Herschel"), a manufacturer
and distributor of non-original equipment sickle bar cutting parts, tractor
parts, tillage and other agricultural componentry. Discontinued operations
generated net income of $0.8 million in fiscal 1995, as compared to a net loss
of $0.7 million in fiscal 1994. The sale of Herschel, which was completed on
December 6, 1995, resulted in an estimated net loss on the sale of $3.4 million,
net of an income tax benefit of $0.7 million, which was reflected in the
Company's financial statements for fiscal 1995.
Liquidity and Capital Resources
In addition to cash to fund operations, CT's primary on-going cash
requirements are those necessary for the Company's expansion and relocation
programs, including inventory purchases and capital expenditures. The Company's
primary sources of liquidity are funds provided from operations, borrowings
pursuant to the Company's revolving credit facilities and short term trade
credit.
On November 2, 1996, the Company had working capital of $63.8 million, an
increase of $1.3 million, as compared to working capital of $62.5 million on
October 28, 1995. This increase resulted primarily from an increase in inventory
and a decrease in borrowings under the Company's revolving credit facility,
partially offset by a decrease in the net assets of Herschel and an increase in
accounts payable. On November 2, 1996, the Company's inventories were $107.2
million, an increase of $13.3 million, as compared to $93.9 million at October
28, 1995. This increase reflected inventory for new stores and inventory for the
stores acquired in the Big bear acquisition. The increase in inventory was
funded with cash from operations, short-term trade credit and proceeds of
approximately $13.5 million from the sale of the net assets of Herschel,
including the repayment of approximately $2.1 million in advances.
Continuing operation of the Company (before payment of income taxes)
generated $10.3 million of net cash in fiscal 1996, used $1.1 million of net
cash in fiscal 1995 and generated $0.6 million of net cash in fiscal 1994. The
increase in net cash generated in fiscal 1996, as compared to fiscal 1995,
resulted primarily from a smaller increase in inventory and an increase in
income from continuing operations before income taxes, partially offset by a
reduction in accounts payable in fiscal 1996, as compared to an increase in
fiscal 1995. The decrease in net cash generated in fiscal 1995, as compared to
fiscal 1994, resulted primarily from an increase in income from continuing
operations before income taxes.
The Company's capital expenditures were $8.8 million and $6.3 million for
fiscal 1996 and 1995, respectively. The majority of capital expenditures were
for store fixtures, equipment and leasehold improvements for new and existing
stores. The Company expects its capital expenditures for fiscal 1997 to be
approximately $5.3 million in connection with renewal and replacement costs at
existing stores and distribution centers, conversion of the Big Bear stores and
the opening of two new stores.
The Company completed the acquisition of 31 store locations and certain net
operating assets of Big Bear on May 31, 1996. The stores are being converted to
the CT format with a projected completion in April 1997. The Big Bear stores
average 11,000 square feet and fit the Company's small store prototype. The
total investment in the 31 stores including acquisition cost, additional capital
investments and working capital needs and conversion costs is expected to be
approximately $12.0 million. In addition, the conversion process requires each
store to be closed for approximately three weeks. The acquisition and the
additional investments made to date were funded with cash
13
<PAGE>
form operations and borrowings under the Company's revolving credit facility.
The Company anticipates utilizing the New Credit Facility and cash from
operations to fund the additional investments.
The Company's former revolving credit facility contained a commitment,
expiring February 1, 1998, to provide revolving loans of $25.0 million from
November 1 through May 31 of each year and $12.0 million from June 1 through
October 31 of each year. At November 2, 1996 and October 28, 1995, the Company
had $3.7 million and $6.8 million, respectively, of borrowings outstanding under
such revolving credit facility. The maximum amount of borrowings outstanding
during fiscal 1996 and 1995 was $11.9 million and $15.6 million, respectively.
On December 23, 1996, such revolving credit facility was replaced by the New
Credit Facility, which consists of an $8.0 million. five-year term facility,
which was fully funded, and a $30.0 million revolving credit facility, under
which $17.3 million was outstanding as of December 23, 1996. The Company
anticipates that approximately $1.8 million of the proceeds of the offering
described below will be used to repay revolving borrowings under the New Credit
Facility.
The New Credit Facility will mature on December 31, 2001. Borrowings under
the New Credit Facility will bear interest at rates based upon prime or
Eurodollar rates plus an applicable margin. Loans under the New Credit Facility
will be guaranteed by any and all future subsidiaries of the Company and will be
secured by security interests in substantially all of the assets of the Company
and its subsidiaries, as well as the capital stock of the Company.
The Company is party to an agreement and plan of merger pursuant to which
it is to become the wholly owned subsidiary (the "Acquisition") of CT Holding,
Inc. ("Holding"), an indirect subsidiary of J.W. Childs Equity Partners, L.P.
Holding is a holding company with no significant assets or operations other than
through its investment in the Company. Part of the financing for the Acquisition
will be raised by an offering of $100 million of debt securities (the "Notes")
to be made by the Company. After the closing, Holding's primary source of funds
will be dividends and other advances and transfers of funds from the Company.
The Company's ability to make dividends and other advances and transfer of funds
will be subject to the terms of the New Credit Facility, the Notes and other
agreements to which the Company becomes a party from time to time. The Notes and
the New Credit Facility permit the Company (subject to certain conditions) to
pay cash dividends to Holding in an amount sufficient to permit Holding to fund
certain expenses incurred in the ordinary course of business.
The Company anticipates that its principal uses of cash following the
Acquisition will be working capital requirements, debt service requirements and
capital expenditures, as well as expenditures relating to acquisitions. Based
upon current and anticipated levels of operations, the Company believes that its
cash flow from operations, together with amounts available under the New Credit
Facility, will be adequate to meet its anticipated requirements in the
foreseeable future for working capital, capital expenditures and interest
payments. The Company expects that if it were to pursue a significant
acquisition, it would arrange prior to the acquisition any additional debt or
equity financing required to fund the acquisition. No discussions with respect
to any significant acquisition are ongoing.
There can be no assurance, however, that the Company's business will
continue to generate sufficient cash flow form operations in the future to
service its debt, and the Company may be required to refinance all or a portion
of its existing debt or to obtain additional financing or to reduce its capital
spending. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained. The inability to obtain
additional financing could have a material adverse effect on the Company.
Seasonality
Unlike many specialty retailers, the Company has historically generated
positive operating income in each of its four fiscal quarters. However, because
the Company is an agricultural specialty retailer, its sales necessarily
fluctuate with the seasonal needs of the agricultural community. The Company
responds to this seasonality by attempting to manage inventory levels (and the
associated working capital requirements) to meet expected demand, and by varying
its use of part-time employees. Historically, the Company's sales and operating
income have been highest in the third quarter of each fiscal tear due to the
farming industry's planting season and the sale of seasonal
14
<PAGE>
products. Working capital needs are highest during the second quarter. The
Company expects these trends to continue for the foreseeable future.
Inflation
Management does not believe its operations have been materially affected by
inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Included at pages F-1 through F-20.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and position of each of the
Company's directors, directors designate expected to assume office upon
consummation of the Acquisition, executive officers and other significant
employees. All of the Company's officers are elected annually and serve at the
discretion of the Board of Directors.
</TABLE>
<TABLE>
<CAPTION>
Name Age Positions
<S> <C> <C>
James T. McKitrick 51 President, Chief Executive Officer, Director
Dean Longnecker 49 Executive Vice President, Finance, Secretary, Director
John W. Childs 55 Director Designate
Jerry D. Horn 59 Director Designate
Steven G. Segal 36 Director Designate
Adam L. Suttin 29 Director Designate
Jeffrey D. Swartz 36 Director Designate
William E. Watts 43 Director Designate
George D. Miller 54 Senior Vice President, Merchandising
Denny Starr 43 Senior Vice President, Finance
Jeffrey A. Stanton 44 Vice President, Human Resources
David E. Enos 36 Vice President, Management Information Systems
Daniel Cunningham 60 Vice President, New, Used and Rebuilt Tractor Parts
Jack P. Feichtner 50 Vice President, Advertising and Marketing
Glenn S. Kraiss 63 Director (1)
Daryl L. Lansdale 55 Director (1)
Francis J. Palamara 70 Director (1)
<FN>
(1) It is anticipated the Messrs. Kraiss, Lansdale and Palamara will resign
upon consummation of the Acquisition.
</FN>
</TABLE>
James T. McKitrick President and Chief Executive Officer joined the Company
in July 1992. He has over 30 years experience in retailing, including 20 years
at Kmart Corporation. Prior to joining CT, Mr. McKitrick was President and Chief
Executive Officer of Builder's Emporium, a California-based home improvement
center chain. Previously, he was with Ames Department Stores from 1987 through
1990, were he held the positions of Executive Vice President, Chairman of Zayre
Discount Store Division, and President and Chief Executive Officer of G.C.
Murphy Division, a $900 million variety store chain. Mr. McKitrick also served
as President and Chief Executive Officer of Warehouse Club, Inc. from 1986
through 1987 and Executive Vice President of Merchandising for T.G.&Y. Stores
Company from 1984 through 1986. From 1963 through 1984, Mr.
McKitrick was with the Kmart Corporation.
Dean Longnecker, Executive Vice President of Finance, has held his current
position since 1985. He joined CT in 1980 as Controller. Mr. Longnecker was
employed at Payless Cashways 1973 until 1980, most recently as Treasurer. He
received a B.S. from Iowa State University in 1970 and C.P.A. in 1972.
John W. Childs has been President of J.W. Childs Associates, L.P. since
July 1995. Prior to that time, he was an executive at Thomas H. Lee Company from
May 1987, most recently holding the position of Senior Managing Director. He is
a director of Big V Supermarkets, Inc., Cinnabon, Inc., The Edison Project,
Inc., Personal Care Group, Inc., and Select Beverages, Inc.
Jerry D. Horn has been Chairman of the Board of General Nutrition
Companies, Inc., a 3,000 store vitamin and nutritional supplement retail chain
operating under the GNC name, since October 1991 and, prior to that, held
16
<PAGE>
various positions with its predecessor since 1985. Mr. Horn is also a director
of Chadwick-Miller, Inc. and Cinnabon, Inc. and Managing Director of J.W. Childs
Associates, L.P. since July 1995.
Steven G. Segal has been a Managing Director of J.W. Childs Associates,
L.P. since July 1995. Prior to that time, he was an executive at Thomas H. Lee
Company from August 1987, most recently holding the position of Managing
Director. He is a director of Big V Supermarkets, Inc., Cinnabon, Inc. and Fitz
and Floyd, Inc.
Adam L. Suttin has been a Vice President of J.W. Childs Associates, L.P.
since July 1995. Prior to that time, he was an executive at Thomas H. Lee
Company from August 1989, most recently holding the position of Associate. He is
a director of Personal Care Group, Inc.
Jeffrey D. Swartz has been Chief Operating Officer of Timberland Co., a
manufacturer and marketer of branded footwear and apparel, since May 1991, and
has worked for that company in various positions since June 1986.
William E. Watts has been President, Chief Executive Officer and a Director
of General Nutrition Companies, Inc. since October 1991 and, prior to that, held
various positions with its predecessor since 1984.
George D. Miller, Senior Vice President, Merchandising, joined CT in June
1996. Previously, he was Vice President, Merchandising, with Home Base, a
California-based home improvement center chain from 1993 through 1996. Mr.
Miller was employed by Sears, Roebuck & Company from 1968 through 1993, most
recently as Senior Merchandise Manager. He received B.S. and M.B.A. degrees from
Indiana University.
Denny Starr, Senior Vice President, Finance joined the Company in October
1989 as Assistant Controller. He previously served as Assistant Controller of
The Witten Group, from 1986 through 1989, a holding company with operations in
manufacturing, real estate and finance. He was an Audit Manager with McGladrey &
Pullen from 1982 until 1986. Mr. Starr received his B.A. from the University of
Iowa in 1982 and C.P.A. in 1982.
Jeffery A. Stanton has served as Vice President, Human Resources since June
1992. Previously, he was employed by R.R. Donnelly & Sons and Meredith/Burda
Corporation from 1985 through 1992, as well as Reichardt's Inc. from 1972
through 1985, a specialty retailer. Mr Stanton received a B.B.A. degree from the
University of Iowa in 1972 .
David E. Enos, Vice President, Management Information Systems/Logistics,
has held his current position since 1990. Mr. Enos joined CT in 1981.
Previously, he was employed at Meredith/Burda Corporation from 1979 through
1981. He received an A.A.S. degree in Data Processing from DMACC in 1979.
Daniel Cunningham, Vice President, Used and Rebuilt Tractor Parts joined CT
in 1958. Mr. Cunningham has held several positions within the Company, including
store operations, mail order and the Company's tractor parts area. Mr.
Cunningham was promoted to his current position in 1991.
Jack P. Feichtner, Vice President Advertising and Marketing, joined CT in
July 1995. He was previously with Kmart Corporation for 27 years, where his most
recent position was Director, Advertising.
Glenn S. Kraiss has served as a director for CT since May 1996. Mr. Kraiss
joined the Walgreen Company in 1950 and is currently Executive Vice President,
Store Operations. Mr. Kraiss held several management positions with the Walgreen
Company prior to being assigned to his current position in 1978.
Daryl L. Lansdale has served as a director since May 1995. Mr. Lansdale has
been the President and Chief Executive Officer of Lil' Things, a specialty
retailer, since 1996. He was previously employed by Scotty's, Inc., a home
improvement retail company from 1988 until 1996, most recently as Chairman and
Chief Executive Officer. Mr. Lansdale served as a President and Chief Executive
Officer of the Southwest Division of Lone Star Hardware, Inc. from 1987 to 1988.
From 1976 to 1987, Mr. Lansdale was employed by the Central Home Center Division
of W.R.
17
<PAGE>
Grace and Company, where his most recent position was President and Chief
Executive Officer. Mr. Lansdale also serves as a director on other companies.
Francis J. Palamara has served as a director of the Company since August
1994 and is a member of the Audit Committee and the Compensation Committee. Mr.
Palamara joined ARAMARK, a diversified service company, in 1981 and served as
its Executive Vice President-Finance until 1988 and as a member of the Board of
Directors from 1981 to 1992. Mr Palamara served as Executive Vice President and
Chief Operating Officer of the New York Stock Exchange from 1972 to 1978. He was
Executive Vice President of Pittson Company from 1971 to 1972 and from 1978 to
1981, when he also served on the Board of Directors. Mr. Palamara is on the
board of directors of Gintel Funds, XTRA Corporation, a transportation equipment
leasing company, and the Glenmede Funds.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation earned for all services
rendered to the Company during fiscal 1994, fiscal 1995, and fiscal 1996, as
applicable, by the Company's chief executive officer, the two other executive
officers who were employed by the Company as such at the end of fiscal 1996, the
one former executive officer that served as such during fiscal 1996 but who
resigned subsequent to the end of fiscal 1996 (collectively, the "Named
Executives").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- --------------
Number of
Securities All Other
Name and Principal Fiscal Salary(1) Bonus Underlying Compensation
Position at November 2, 1996 Year ($) ($) Options ($)
- ---------------------------- ------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
James T. McKitrick 1996 365,000 91,250 -- 9,863(2)
President, Chief 1995 350,000 70,000 -- 4,357(2)
Executive Officer 1994 325,000 162,500 158,939 9,953(2)
Dean Longnecker 1996 234,000 58,500 -- 5,131(2)
Executive Vice 1995 225,000 45,000 15,000 4,152(2)
President, Finance 1994 196,686 147,890 4,565 7,524(2)
George D. Miller (3) 1996 108,462 15,190 60,000 5,128(4)
Senior Vice 1995 -- -- -- --
President, Merchandising 1994 -- -- -- --
Don Walter (5) 1996 155,000 12,480 -- 5,213(2)
Senior Vice 1995 153,750 24,800 -- 29,570(6)
President, Operations 1994 115,433 46,500 26,850 17,460(4)
<FN>
(1) Includes compensation deferred at the Named Executive's election under the Company's Profit Sharing Plan.
(2) Represents amounts contributed by the Company during each fiscal year, as applicable, to the Named Executive's Profit Sharing
Plan account.
(3) Mr. Miller joined the Company in May 1996.
(4) Represents payments or reimbursement of certain moving and relocating expenses.
(5) Mr. Walter resigned his position with the Company effective December 1, 1996.
(6) Represents amounts contributed by the Company during each fiscal year, as applicable, to the Named Executive's Profit
Sharing Plan account and also represents payments or reimbursement of certain moving and relocating expenses.
</FN>
</TABLE>
Option Grants in Last Fiscal Year
The table below shows information regarding grants of stock options, if
any, made to the Named Executives during fiscal 1996. The amounts shown for each
of the Named Executives as potential realizable values are based on arbitrarily
assumed annualized rates of stock price appreciation of five percent and ten
percent over the full term
18
<PAGE>
of the options, pursuant to applicable Securities and Exchange Commission
("SEC") regulations. Actual gains, if any, on option exercises are dependent on
the future performance of the Common Stock and overall stock market conditions.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------------------
Potential Realizable Value
at Assumed
Annual Rates of
Stock Price
% of Total Appreciation for
Name Number Options Option Term
of Granted to Exercise or --------------------------------
Options Employees in Base Price Expiration 5% 10%
Granted Fiscal Year ($/Share) Date ($) ($)
------------- ------------------ ------------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
George D. Miller 60,000 73% 13.25 5-29-06 499,800 1,267,200
<FN>
(1) Such options become exercisable at the rate of 12,000 shares on each anniversary of the original date of grant. The latest
date on which this option may be exercised is May 28, 2006.
</FN>
</TABLE>
Aggregated Option Exercises in Last Fiscal Year-End Option Values
The following table summarizes for each of the Named Executives the total
number and value of unexercised options, if any, held at November 2, 1996. For
this purpose, the value of unexercised, in-the-money options at fiscal year-end
is the difference between the exercise price and the closing sale price of the
underlying Common Stock on November 2, 1996. There can be no assurance that
these values will be realized. No options were exercised during fiscal 1996.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
----------------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name (Number) (Number) ($) ($)
- ---- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
James T. McKitrick...................... 206,517 180,663 1,708,189 583,444
Dean Longnecker......................... 4,565 15,000 -- --
George D. Miller........................ -- 60,000 -- --
Don Walter.............................. 12,410 14,440 -- --
<FN>
(1) In-the-money options for which the fair market value of the underlying securities exceeds the exercise or base price of
the option.
</FN>
</TABLE>
Employment Arrangements with Executive Officers
Mr. McKitrick is currently employed as President and Chief Executive
Officer pursuant to an employment agreement dated September 16, 1994. Under this
agreement, Mr. McKitrick currently receives a salary of $365,000, subject to
increases determined annually by the compensation committee (which increases
must at least equal increases in the consumer price index). In addition, Mr.
McKitrick is eligible for an annual bonus of up to 60% of his salary, based on
financial targets and non-quantitative performance objectives established by the
compensation committee at the beginning of each fiscal year. If his employment
is terminated by the company other than for cause of because of death or
disability, or because the Company either removed him or failed to elect him as
President and Chief Executive Officer, the Company will pay to Mr. McKitrick his
base salary (reduced by compensation received from other businesses) from the
date of termination to the later of November 1, 1997 and the first anniversary
of such termination. Pursuant to the employment agreement, Mr. McKitrick was
granted an option to acquire, at an exercise price equal to the initial public
offering price, up to 112,512 shares of Common Stock on the seventh
19
<PAGE>
anniversary of the original date of grant, with accelerated vesting in fiscal
1996 through 1998 EBIT targets are met. Mr McKitrick's employment agreement also
contains certain confidentiality and non-competition requirements .
Mr. Longnecker is employed as Executive Vice President, Finance pursuant to
an agreement dated September 16, 1994. Under this agreement, Mr. Longnecker
currently receives a salary of $234,000, subject to salary increases
determined annually by the compensation committee (which increases must at least
equal increases in the consumer price index). in addition, Mr. Longnecker is
eligible for an annual bonus of up to 48% of his salary, based on financial
targets and non-quantitative performance objectives established by the
compensation committee at the beginning of the fiscal year. If his employment is
terminated by the Company other than for cause of because of death or
disability, or because the Company either removed him or failed to retain him as
Executive Vice president, Finance, the Company will pay to Mr. Longnecker his
base salary (reduced by compensation received from other businesses) from the
date of termination to the first anniversary of such termination. Mr.
Longnecker's employment agreement also contains certain confidentiality and
non-competition provisions.
Mr. Miller is employed as Senior Vice President, Merchandising pursuant to
an agreement dated May 6, 1996. Under this agreement, Mr. Miller currently
receives a salary of $175,000, subject to salary increases determined annually
by the compensation committee (which increases must at least equal increases in
the consumer price index). in addition, Mr. Miller is eligible for an annual
bonus of up to 48% of his salary, based on financial targets and non-
quantitative performance objectives established by the compensation committee at
the beginning of the fiscal year. If his employment is terminated by the Company
other than for cause of because of death or disability, or because the Company
either removed him or failed to retain him as Senior Vice President,
Merchandising, the Company will pay to Mr. Miller his base salary (reduced by
compensation received from other businesses) from the date of termination to the
later of May 28, 1998 and the first anniversary of such termination. Mr.
Miller's employment agreement also contains certain confidentiality and
non-competition provisions.
Additionally, as part of the Acquisition, on January 2, 1997, James T.
McKitrick and G. Dean Longnecker sold to JWCAC, for 14.00 per share, 81,810 and
64,489 shares, respectively, of the Company's outstanding common stock, in
accordance with the terms of the Securities Purchase Agreements entered into at
the same time as the Merger Agreement. Additionally, the Securities Purchase
Agreements provide that at the closing of the Merger, Mr. McKitrick will
exchange outstanding options to purchase 183,935 shares of Company common stock
having an aggregate exercise price of $0.6 million for options to acquire shares
of Holding common stock valued at $2.6 million and that Mr. Longnecker will
exchange 71,429 shares of Company common stock for shares of Holding common
stock valued at $1.0 million. The Securities Purchase Agreements also contain
provisions regarding the continued employment of Messrs. McKitrick and
Longnecker in their current capacities after the Merger (the "New Employment
Agreements").
Mr. McKitrick's New Employment Agreement provides for a base salary of
$385,000, and Mr. Longnecker's provides for a base salary of $250,000, subject
in each case to annual increases as determined by the Board of Directors (which
increases must at least equal increases in the consumer price index).
Additionally, Messrs. McKitrick and Longnecker are eligible for annual cash
bonuses if the Company achieves certain operation cash flow targets, which
bonuses are not subject to any ceilings contained in the New Employment
Agreements.
Mr. McKitrick's New Employment agreement provides for severance payments
equal to his base salary for 18 months if his employment is terminated (other
than in the case of death, disability or for cause) or if he is not reelected as
President and Chief Executive Officer, reduced by any compensation he should
earn during such 18- month period from other businesses. Mr. Longnecker's New
Employment Agreement provides for severance payments equal to his base salary
for 12 months if his employment is terminated (other than in the case of death,
disability or for cause) or if he is not reelected as Executive Vice President,
Finance, not subject however, to reduction for any compensation earned from
other businesses.
The New Employment Agreements also contemplated that Messrs. McKitrick and
Longnecker will participate along with other management personnel in two stock
option plans of Holding involving 4.5% of Holding's outstanding common stock and
common stock equivalents on a fully diluted basis, respectively. Allocations of
options among the management group are to be made in the first instance by the
Chief Executive Officer of the
20
<PAGE>
Company, subject to ratification by Holding's Board of Directors. Such
allocations have not been made as of the date of this Prospectus. The management
stock options will be subject to vesting based on the Company's achievement of
certain operating cash flow targets.
Additionally, the New Employment Agreements contemplate that Messrs.
McKitrick and Longnecker will receive additional stock options which vest if the
Company is sold within six years after the effective time of the Merger and the
realized value of the common equity of the original investment group in Holding
should equal of exceed ten times the value thereof at the time of the Merger.
Mr. McKitrick's and Mr. Longnecker's options under this program are to acquire
an aggregate number of shares of common stock of Holding equal to 1.25% and
0.75%, respectively, of the total outstanding common stock and common stock
equivalents of Holding on a fully diluted basis.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of such reports. SEC regulations require the Company to
disclose failures known to it to file such reports on a timely basis. Based upon
material provided to the Company, Mr. Mckitrick failed to report on a timely
basis one transaction entered into by his wife.
21
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of January 2, 1997 by each person known to the
Company to be the beneficial owner of more than five percent of the Common
Stock, each director and director designate of the Company, each Named Executive
and all directors and executive officers of the Company as a group. Upon
consummation of the Merger, the Company will become a wholly owned subsidiary of
Holding. Except as otherwise indicated, the beneficial owners of the Common
Stock listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares. The business address
for each executive officer of the Company is in care of the Company.
Shares
Beneficially
Name and Address Owned Percent
- ---------------- ------------ -----------
JWC Acquisition I, Inc.
CT Holding, Inc.
JWC Equity Funding, Inc.
J.W. Childs Equity Partners, L.P.
J.W. Childs Advisors, L.P.
J.W. Childs Associates, L.P.
J.W. Childs Associates, Inc. (1)..................... 7,208,551 66.1%
James T. McKitrick (2)............................... 307,770 2.8
Dean Longnecker (3).................................. 102,194 *
John W. Childs (1)................................... 7,208,551 66.1
Jerry D. Horn (1).................................... 7,208,551 66.1
c/o General Nutrition Companies, Inc.
921 Penn Avenue
Pittsburgh, PA 15222
Steven G. Segal (1)............................. 7,208,551 66.1
Adam L. Suttin (1).............................. 7,208,551 66.1
Jeffrey D. Swartz............................... 0 *
c/o The Timberland Company
200 Domain Drive
Stratham, NH 03885
William E. Watts................................ 0 *
c/o General Nutrition Companies, Inc.
921 Penn Avenue
Pittsburgh, PA 15222
George D. Miller (4)............................ 60,000 *
Don Walter (5).................................. 26,850 *
Glenn Kraiss (6)................................ 5,000 *
1979 Abbots Ford
Barrington, IL 60013
Daryl Lansdale (7).............................. 7,000 *
5300 Recker Highway
Winter Haven, FL 33882
Francis J. Palamara (8).............................. 9,000 *
P.O. Box 44024
3110 East Maryland
Phoenix, AZ 85016
All Directors and executive officers as
a group (7 persons) (9)......................... 517,814 4.7
- ----------------------
* Less than 1.0%
(1) Represents 6,978,028 shares owned by JWC Acquisition I, Inc., a Delaware
corporation ("JWCAC") and an additional 230,523 shares subject to a warrant
owned by JWCAC and exercisable within 60 days. CT Holding, Inc., JWC Equity
Funding, Inc., J.W. Childs Equity Partners, L.P., J.W. Childs Advisors
L.P., J.W. Childs Associates, L.P., J.W. Childs Associates, Inc. and
Messrs. Childs, Horn, Segal and Suttin may each be deemed to beneficially
own shares owned or deemed beneficially owned by JWCAC. Each of the
foregoing, except Mr. Horn, has a business address c/o J.W. Childs
Associates, L.P., One Federal Street, Boston, MA 02110.
22
<PAGE>
(2) Includes 305,370 shares subject to stock options exercisable within 60
days. Includes 2,400 shares beneficially owned by Mr. McKitrick's wife, as
to which Mr. McKitrick disclaims beneficial ownership.
(3) Includes 19,565 shares subject to stock options exercisable within 60 days.
Includes 11,000 shares beneficially owned by Mr. Longnecker's wife and 200
shares beneficially owned by Mr. Longnecker's son, as to which Mr.
Longnecker disclaims beneficial ownership.
(4) Includes 60,000 shares subject to stock options exercisable within 60 days.
(5) Includes 26,850 shares subject to stock options exercisable within 60 days.
(6) Includes 5,000 shares subject to stock options exercisable within 60 days.
(7) Includes 7,000 shares subject to stock options exercisable within 60 days.
(8) Includes 9,000 share subject to stock options exercisable within 60 days.
(9) Includes 459,635 shares subject to stock options exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Two of the Company's suppliers, Iron age Corporation ("Iron Age") and Walls
Industries, Inc. ("Walls"), are controlled by certain BCC affiliates. Iron Age
is a manufacturer and distributor of work boots and protective footwear. Walls
is a manufacturer of insulated and non-insulated workwear, rugged outdoor and
hunting apparel and casual outerwear. The Company believes that the terms of its
purchases from Iron Age and Walls are at least as favorable to the Company as
could be obtained from other suppliers. In fiscal 1996, the Company's purchases
from Iron Age and Walls totaled $4.7 and $1.6 million respectively.
At the affective time of the merger, it is contemplated that the Company
and Holding will enter into a management agreement with Associates providing for
payment by the Company to Associates of (i) a $1.7 million closing fee in
consideration of Associates' services regarding the planning, structuring and
negotiation of the acquisition and (ii) an annual management fee of $240,000 in
consideration of Associates' ongoing provision of certain consulting and
management advisory services. Payments under this management agreement may be
made only to the extent permitted by the New Credit Facility and the Indenture.
The management agreement is expected to be for a five-year term, automatically
renewable for successive extension terms of one year, unless associates or
Holding shall give notice of termination.
Additionally, Messrs., McKitrick and Longnecker are parties to Stockholders
Agreement dated as of December 23, 1996, applicable to all shares of Holding
common stock or vested options to acquire such common stock held now or
hereafter acquired by them. The Stockholders Agreement, among other terms,
permits Holding to "call" their shares and vested options on their termination
of employment for any reason. Additionally, if Mr. McKitrick or Mr. Longnecker
is terminated for any reason other than for cause or without good reason (as
those terms are defined in the Stockholders Agreement), he has the right to
"put" his shares or vested option to Holding. Depending on the circumstances,
the price for shares of Holding common stock purchased in connection with a call
or put under the Stockholders Agreement will, in general, be cost, six times
EBITDA or seven times EBITDA. The put and call features of the Stockholders
Agreement terminate on completion of a public offering of Holding common stock
with aggregate net proceeds of $50.0 million or more.
Also, in connection with the consummation of the acquisition, the Company
will loan $250,000 to George miller to partially fund his investment in Holding
common stock. The loan will be due in ten years and require payments of interest
only prior to maturity at the applicable interest rate under the New Credit
Facility.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements. See the Index to Financial Statements
appearing at page F-1.
2. Financial Statement Schedules. The following Consolidated Financial
Statement Schedule is included at page F-21:
Schedule II - Valuation and Qualifying Accounts
No other Financial Statement Schedules have been presented since the
required information is not present or not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the consolidated financial statements or the notes thereto.
3. Exhibits.
The following exhibits are filed with this Annual Report on Form 10-K
or incorporated herein by reference.
Exhibit
No. Description
3(i).1 -- Restated Certificate of Incorporation, filed as exhibit
3(i).1 to the Company's Registration Statement on Form S-1
(File #33-82620) originally filed on August 9, 1994 and
incorporated herein by reference.
3(i).2 -- Certificated of Merger dated October 5, 1994, filed as
exhibit 3(i).2 to the Company's Registration Statement on
Form S-1 (File #33-82620) originally filed on August 9, 1994
and incorporated herein by reference.
3(ii) -- By-Laws of the Company, filed as exhibit 3(ii) to the
Company's Registration Statement on Form S-1 (File #33-82620)
originally filed on August 9, 1994 and incorporated herein by
reference.
4.1 -- Form of Common Stock Certificate of the Company, filed as
exhibit 4.1 to the Company's Registration Statement on Form
S-1 (File #33-82620) originally filed on August 9, 1994 and
incorporated herein by reference.
4.2 -- Exchange Agreement dated October 14, 1994, among the Company,
Mezzanine Lending Associates I, L.P., Mezzanine Lending
Associates II, L.P., and Mezzanine Lending Associates III,
L.P., filed as exhibit 4.2 to the Company's Registration
Statement on Form S-1 (File #33-82620) originally filed on
August 9, 1994 and incorporated herein by reference.
24
<PAGE>
4.3 -- Form of 7% Convertible Subordinated Note due 2002 (contained
as Exhibit 2 to the Exchange Agreement filed as Exhibit 4.2),
filed as exhibit 4.3 to the Company's Registration Statement
on Form S-1 (File #33-82620) originally filed on August 9,
1994 and incorporated herein by reference.
10.1 -- Credit Agreement dated January 28, 1994 among the Company,
Herschel Corporation and First Bank National association,
filed as exhibit 10.1 to the Company's Registration Statement
on Form S-1 (File #33-82620) originally filed on August 9,
1994 and incorporated herein by reference.
10.2 -- Stockholder's Agreement, dated October 14, 1994, among the
Company, Mezzanine Lending Associates I, L.P., Mezzanine
Lending Associates II, L.P., and Mezzanine Lending Associates
III, L.P., and the individual stockholders party thereto,
filed as exhibit10.2 to the Company's Registration Statement
on Form S-1 (File #33-82620) originally filed on August 9,
1994 and incorporated herein by reference.
10.3 -- Form of Stock Option Agreement of the Company with respect to
options issued prior to Form S-1 (File #33-82620) originally
filed on August 9, 1994 and incorporated herein by reference.
10.4 -- 1994 Stock Incentive Plan, filed as exhibit 10.4 Company's
Registration Statement on Form S-1 (File #33-82620)
originally filed on August 9, 1994 and incorporated herein
by reference.
10.5 -- Employment Agreement between the Company and James T.
McKitrick dated as of September 16, 1994, filed as exhibit
10.5 to the Company's Registration Statement on Form S-1
(File #33-82620) originally filed on August 9, 1994 and
incorporated herein by reference.
10.6 -- Employment Agreement between the Company and Dean
Longnecker dated as of September 16, 1994, filed as exhibit
10.6 to the Company's Registration Statement on Form S-1
(File #33- 82620) originally filed on August 9, 1994 and
incorporated herein by reference.
10.7 -- Employment Agreement between the Company and Michael London
dated as of September 16, 1994, filed as exhibit 10.7 to the
Company's Registration Statement on Form S-1 (File #33-
82620) originally filed on August 9, 1994 and incorporated
herein by reference.
10.8 -- Warrant dated August 31, 1993, registered in the name of BCC
Industrial Services, Inc., filed as exhibit 10.8 to the
Company's Registration Statement on Form S-1 (File #33-82620)
originally filed on August 9, 1994 and incorporated herein
by reference.
10.9 -- Merger Agreement dated as of September 14, 1994 between the
Company and Central Tractor Farm & Country, Inc., an Iowa
Corporation, filed as exhibit 10.9 to the Company's
Registration Statement on Form S-1 (File #33-82620)
originally filed on August 9, 1994 and incorporated
herein by reference.
10.10 -- 1994 Directors' Stock Option Plan, filed as exhibit 10.10 to
the to the Company's Registration Statement on Form S-1
(File #33-82620) originally filed on August 9, 1994 and
incorporated herein by reference.
25
<PAGE>
10.11 -- First Amendment to Credit Agreement dated December 3, 1994
among the Company, Herschel Corporation and First Bank
National Association, filed as exhibit 10.11 to the Company's
10-K originally filed on January 26, 1996 and incorporated
herein by reference.
10.12 -- Second Amendment to Credit Agreement dated May 16, 1995
among the Company, Herschel Corporation and First Bank
National Association, filed as exhibit 10.12 to the Company's
10-K originally filed on January 26, 1996 and incorporated
herein by reference.
10.13 -- Third Amendment to Credit Agreement dated December 1, 1995
among the Company and First Bank National Association, filed
as exhibit 10.13 to the Company's 10-K originally filed on
January 26, 1996 and incorporated herein by reference.
10.14 -- Asset Purchase Agreement By and Between Alamo Group (USA)
inc. (the "Buyer") and Herschel Corporation and Central
Tractor Farm and Country, Inc. (the "Sellers") dated
December 4, 1995 filed as exhibit 10.14 to the Company's
10-K originally filed on January 26, 1996 and incorporated
herein by reference.
10.15 -- Asset Purchase Agreement By and Between Central Tractor Farm
& Country, Inc., (the "Buyer") and Big Bear Farm Stores, Inc.
(the "Seller") dated May 22, 1996, filed as exhibit 10.15 to
the Company's 10-Q originally filed on September 9, 1996 and
incorporated herein by reference.
10.16 -- Agreement Plan of Merger dated November 27, 1996 by and among
Central Tractor Farm & Country, Inc., J.W. Childs Equity
Partners, L.P., JWC Holdings I, Inc., and JWC Acquisition I,
Inc., filed as an exhibit to the Company's 8-K originally
filed on December 3, 1996 and incorporated herein by reference.
10.17 -- Securities Purchase Agreement dated as of November 27, 1996
by and among Central Tractor Farm & Country, Inc., J.W. Childs
Equity Partners, L.P., JWC Holdings I, Inc., and JWC
Acquisition I, Inc., filed as an exhibit to the Company's 8-K
originally filed on December 3, 1996 and incorporated
herein by reference.
10.18 -- Securities Purchase Agreement, dated as of November 6, 1996,
by and among Mezzanine Lending Associates I, L.P., Mezzanine
Lending Associates II, L.P., Mezzanine Lending associates III,
L.P., Senior Lending Associates I, L.P., BCC Industrial
Services, JWC Acquisition I, Inc., J.W. Childs Equity
Partners, L.P., Central Tractor Farm & Country, Inc. filed as
an exhibit to JWCAC's Schedule 13D originally filed on
December 9, 1996 and incorporated herein by reference.
10.19 -- Letter Agreement, dated as of November 27, 1996 between JWC
Acquisition I, Inc. and Mr. James T. McKitrick, filed as an
exhibit to JWCAC's Schedule 13D originally filed on
December 9, 1996 and incorporated herein by reference.
10.20 -- Letter Agreement, dated as of November 27, 1996 between JWC
Acquisition I, Inc. and Mr. G. Dean Longnecker, filed as an
exhibit to JWCAC's Schedule 13D originally filed on
December 9, 1996 and incorporated herein by reference.
10.21 -- Employment Agreement between the Company and George D.
Miller dated May 6, 1996, filed as exhibit 10.25 to the
Company's Registration Statement on Form S-1 (File
#333-19613) originally filed on January 10, 1997 and
incorporated herein by reference..
26
<PAGE>
10.22 -- Credit Agreement dated as of December 23, 1996 among the
Company, Holding, JWCAC, certain banks, financial institutions
and other lenders listed therein, Fleet, as administrative
agent, and NationsBank, as co-agent.
11 -- Statement Regarding Computation of Per Share Earnings
21 -- Subsidiaries of the Company.
23.1 -- Consent of Ernst & Young, LLP
(b) Reports on Form 8-K Filed During the Last Quarter of Fiscal 1996
None.
(c) See Item 14(a)(3) of this report.
(d) See Item 14(a)(2) of this report.
27
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Ernst & Young LLP.................................................F-2
Consolidated Balance Sheets as of October 29, 1994, October 28, 1995
and November 2, 1996.....................................................F-4
Consolidated Statements of Income for fiscal years ended October 29, 1994,
October 28, 1995 and November 2, 1996....................................F-5
Consolidated Statements of Changes in Stockholders' Equity for fiscal
years ended October 29, 1994, October 28, 1995 and November 2, 1996......F-6
Consolidated Statements of Cash Flows for fiscal years ended October 29,
1994, October 28, 1995 and November 2, 1996..............................F-7
Notes to Consolidated Financial Statements..................................F-9
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Central Tractor Farm & Country, Inc.
We have audited the accompanying consolidated balance sheets of Central Tractor
Farm & Country, Inc. as of October 29, 1994, October 28, 1995 and November 2,
1996, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then ended. Our audit also
included the financial statement schedules listed in Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Central Tractor
Farm & Country, Inc. at October 29, 1994, October 28, 1995 and November 2, 1996,
and the consolidated results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
/s/ Ernst & Young LLP
Des Moines, Iowa
December 6, 1996
F-2
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
October 29, October 28, November
1994 1995 2, 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,582 $ 3,094 $ 3,809
Receivable from sale of common stock (Note 6) 6,703 -- --
Trade receivables, less allowances of $168 in
1994, $72 in 1995 and $50 in 1996 1,469 883 992
Inventory 75,044 93,874 107,203
Deferred income taxes (Note 7) 172 -- --
Other 1,511 1,383 2,368
Net assets of discontinued operations (Note 10) 8,113 13,520 --
--------- --------- ---------
Total current assets 95,594 112,754 114,372
Property, improvements and equipment:
Leasehold improvements 7,740 9,988 12,803
Furniture and fixtures 14,614 18,253 23,766
Capitalized property rights (Note 5) 2,508 2,508 2,859
Automobiles and trucks 499 817 1,065
--------- --------- ---------
25,361 31,566 40,493
Less allowances for depreciation and
amortization 10,917 13,339 16,036
--------- --------- ---------
14,444 18,227 24,457
Goodwill, net of amortization of $3,490 in 1994,
$4,014 in 1995 and $4,592 in 1996 17,454 16,930 19,018
Other intangible assets, net of amortization of
$2,406 in 1994, $2,527 in 1995 and $2,759 in
1996 1,630 1,406 1,016
Other assets 775 660 375
Noncurrent assets of discontinued operations 9,519 -- --
--------- --------- ---------
Total assets $ 139,416 $ 149,977 $ 159,238
========= ========= =========
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands)
October 29, October 28, November
1994 1995 2, 1996
------------------ ---------------- ----------------
<S> <C> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Bank line of credit (Note 3) $ 977 $ 6,789 $ 3,669
Accounts payable 37,557 39,150 41,081
Accrued payroll and bonuses 4,438 2,553 3,631
Deferred income taxes (Note 7) -- -- 913
Accrued income taxes 140 163 4
Other accrued expenses 1,482 1,506 1,101
Current portion of long-term debt and capital
lease obligations 558 97 170
--------- --------- ---------
Total current liabilities 45,152 50,258 50,569
Long-term debt, less current portion
(Notes 2 and 4) 16,017 16,000 16,000
Capital lease obligations, less current portion
(Note 5) 942 862 1,341
Deferred income taxes (Note 7) 1,570 1,580 1,265
--------- --------- ---------
Total liabilities 63,681 68,700 69,175
Stockholders' equity (Notes 3 and 6):
Preferred stock, $.01 par value: authorized
shares -5,000,000; none issued or
outstanding -- -- --
Common stock, $.01 par value: authorized
shares - 45,000,000; issued and outstanding
shares - 10,576,676 in 1994, 10,576,676 in
1995 and 10,589,082 in 1996 106 106 106
Stock warrant outstanding 665 665 665
Additional paid-in capital 69,667 69,667 69,709
Retained earnings 5,297 10,839 19,583
--------- --------- ---------
Total stockholders' equity 75,735 81,277 90,063
Commitments (Notes 5 and 8) -- -- --
--------- --------- ---------
Total liabilities and stockholders' equity $ 139,416 $ 149,977 $ 159,238
========= ========= =========
</TABLE>
See accompanying notes
F-4
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Fiscal year ended
---------------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales $ 231,064 $ 251,703 $ 293,020
Cost of sales 161,523 177,340 207,228
--------- --------- ---------
Gross profit 69,541 74,363 85,792
Selling, general and administrative expenses,
including amounts with related parties (Note 2) 54,548 58,294 68,197
Amortization of intangibles 841 862 938
--------- --------- ---------
Operating income 14,152 15,207 16,657
Interest expense, including amounts with related
parties (Note 2) 4,774 1,302 1,663
--------- --------- ---------
Income from continuing operations before income
taxes and extraordinary item 9,378 13,905 14,994
Income taxes (Note 7) 4,197 5,720 6,250
--------- --------- ---------
Income from continuing operations before
extraordinary item 5,181 8,185 8,744
Discontinued operations (Notes 7 and 10):
Income (loss) from discontinued operations, net
of income taxes (benefit) of $(340) in 1994
and $474 in 1995 (745) 812 --
Loss on sale of Herschel Corporation, net of
$665 income tax benefit -- (3,455) --
--------- --------- --------
Loss from discontinued operations (745) (2,643) --
--------- --------- --------
Income before extraordinary item 4,436 5,542 8,744
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $2,073 (Note 6) 3,110 -- --
--------- --------- ---------
Net income $ 1,326 $ 5,542 $ 8,744
========= ========= =========
Per share (Note 1):
Income from continuing operations before
extraordinary item $0.66 $0.74 $0.80
Discontinued operations:
Income (loss) from operations (0.10) 0.07 --
Loss on sale -- (0.31) --
Extraordinary loss (0.40) -- --
Net income 0.17 0.50 0.80
Weighted average common and common equivalent
shares outstanding (Note 1) 7,791 11,019 10,986
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
Fiscal years ended October 29, 1994,
October 28, 1995 and November 2, 1996
Note
Stock Additional Receivable Total
Common Warrant Paid-In from Retained Stockholders'
Stock Outstanding Capital Stockholder Earnings Equity
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity at October 30, 1993 $ 70 $ 665 $ 19,664 $ (83) $ 3,971 $ 24,287
Repurchase of common stock -- -- (70) -- -- (70)
Reduction in notes from stockholders -- -- -- 83 -- 83
Issuance of common stock in connection
with the Company's initial public
offering, net of offering expenses
(Note 6) 36 -- 50,073 -- -- 50,109
Net income -- -- -- -- 1,326 1,326
------ ------- ------- ------- ------- -------
Stockholders' equity at October 29, 1994 106 665 69,667 -- 5,297 75,735
Net income -- -- -- -- 5,542 5,542
------ ------- ------- ------- ------- -------
Stockholders' equity at October 28, 1995 106 665 69,667 -- 10,839 81,277
Exercise of common stock options -- -- 42 -- -- 42
Net income -- -- -- -- 8,744 8,744
------ ------- ------- ------- ------- -------
Stockholders' equity at November 2, 1996 $ 106 $ 665 $69,709 $ -- $19,583 $90,063
====== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
October 29, October 28, November 2,
1994 1995 1996
---------------- --------------- ---------------
<S> <C> <C> <C>
Operating activities
Income from continuing operations before income taxes and
extraordinary item $ 9,378 $ 13,905 $ 14,994
Adjustments to reconcile pretax income from continuing
operations to net cash provided by (used in) continuing
operations:
Depreciation and amortization of property, improvements
and equipment 2,206 2,523 3,056
Amortization of intangibles and other deferred assets 1,180 862 998
Loss on sale of assets 143 24 20
Deferred interest 109 -- --
Changes in operating assets and liabilities:
Trade receivables (362) 586 83
Inventory (23,345) (18,830) (4,549)
Other current assets (330) 128 (972)
Accounts payable 11,371 1,593 (3,806)
Accrued expenses 269 (1,861) 445
--------- --------- --------
619 (1,070) 10,269
Income (loss) from discontinued operations before income
taxes (1,085) 1,286 --
Adjustments to reconcile pretax income(loss) from
discontinued operations to net cash provided by
discontinued operations:
Depreciation and amortization of property, improvements
and equipment 559 559 --
Amortization of intangibles 561 561 --
Deferred interest 336 -- --
Changes in operating assets and liabilities (1,321) (651) 13,520
--------- --------- --------
(950) 1,755 13,520
Extraordinary loss on early extinguishment of debt before
income taxes (5,183) -- --
Income taxes paid, net (1,815) (5,324) (5,675)
--------- --------- --------
Net cash provided by (used in) operating activities (7,329) (4,639) 18,114
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
October 29, October 28, November 2,
1994 1995 1996
---------------- --------------- ---------------
<S> <C> <C> <C>
Investing activities
Purchases of property, improvements and equipment $ (5,207) $ (6,339) $ (8,789)
Acquisition of certain net assets of Big Bear (Note 11) -- -- (5,650)
Other (54) (74) 255
Discontinued operations (255) (400) --
--------- --------- --------
Net cash used in investing activities (5,516) (6,813) (14,184)
Financing activities
Repurchase of common stock (70) -- --
Proceeds from sale of assets -- 7 --
Borrowings under line of credit 39,025 67,020 86,782
Repayments on line of credit (38,048) (61,208) (89,902)
Payments on long-term debt (37,757) (372) (17)
Payments on capitalized lease obligations (244) (186) (120)
Proceeds from issuance of common stock 43,406 6,703 42
--------- -------- ---------
Net cash provided by (used in) financing activities 6,312 11,964 (3,215)
--------- --------- --------
Net increase (decrease) in cash and cash equivalents (6,533) 512 715
Cash and cash equivalents at beginning of period 9,115 2,582 3,094
--------- --------- --------
Cash and cash equivalents at end of period $ 2,582 $ 3,094 $ 3,809
========= ========= ========
Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 7,925 $ 1,491 $ 1,991
Supplemental schedule of noncash investing and financing
activities
Receivable from sale of common stock 6,703 -- --
</TABLE>
See accompanying notes.
F-8
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended October 29, 1994,
October 28, 1995 and November 2, 1996
1. Summary of Accounting Policies and Other Matters
Business and Principles of Consolidation
Central Tractor Farm & Country, Inc. and subsidiaries (the Company) is an
agricultural specialty retailer which operates retail stores primarily located
in the Midwest and Northeastern United States. The Company also sells
merchandise on a wholesale basis under various distributor agreements throughout
the United States. With the sale of the net operating assets of Herschel
Corporation, a wholly-owned subsidiary of the Company, continuing operations
constitute one business segment for financial reporting purposes.
The Company operates on a 52-53 week fiscal year ending on the Saturday nearest
to October 31.
All significant intercompany transactions have been eliminated from the
consolidated financial statements.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents. Investments, including repurchase agreements and commercial
paper, are carried at cost, which approximates market.
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.
Trade Receivables
Most of the Company's retail sales are cash or credit card sales, while
wholesale sales are generally on account. Concentrations of credit risk with
respect to trade receivables are limited due to the number of customers of the
Company and their geographic dispersion. The allowance for doubtful accounts is
based on a current analysis of receivable delinquencies and historical loss
experience.
Inventory
Inventory is recorded at cost, including warehousing and freight costs,
determined principally by the last-in, first-out (LIFO) method, which is not in
excess of market. The Company reviews its inventory for slow-moving, obsolete or
otherwise unsalable items on a regular basis throughout the year, including at
the time of physical inventory counts. Provision is made for any estimated
losses to be incurred with respect to slow-moving, obsolete or otherwise
unsalable inventory as such inventory is identified. Inventories valued using
the LIFO method were approximately $3,926,000, $4,851,000 and $5,081,000 at
October 29, 1994, October 28, 1995 and November 2, 1996, respectively, less than
the amounts of such inventories valued at current cost.
F-9
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Accounting Policies and Other Matters (continued)
Property, Improvements and Equipment
Property, improvements and equipment are carried at cost less allowances for
depreciation and amortization. Depreciation and amortization expense is computed
primarily on a basis of the straight-line method over the estimated useful lives
of the assets as follows:
<TABLE>
<S> <C>
Leasehold improvements (not in excess of underlying lease terms) 5 to 20 years
Furniture and fixtures 5 to 15 years
Automobiles and trucks 3 to 10 years
</TABLE>
Certain long-term lease transactions have been accounted for as capital leases.
The property rights recorded under direct financing leases are amortized on a
straight-line basis over the lesser of the useful life or the respective terms
of the leases.
Goodwill and Other Intangible Assets
Goodwill is being amortized utilizing the straight-line method principally over
periods of 40 years. Other intangible assets are being amortized over the
periods of expected benefit, ranging from 5 to 24 years. The carrying value of
goodwill and other intangibles is reviewed continually to determine whether any
impairment has occurred. This review takes into consideration the recoverability
of the unamortized amounts based on the estimated undiscounted cash flows of the
related business lines.
Deferred Income Taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred income tax assets and liabilities are determined based on the
difference between financial reporting and income tax bases of assets and
liabilities using the enacted marginal tax rates. Deferred income tax expenses
or credits are based on the changes in the asset or liability from period to
period.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value of financial instruments:
Cash equivalents, short-term investments, accounts receivable and payable,
and bank line of credit: Carrying amounts reported in the Company's
consolidated balance sheets based on historical cost approximate estimated
fair value for these instruments, due to their short-term nature.
The fair value of the convertible long-term debt is estimated to
approximate its carrying value as of November 2, 1996 and was based on the
estimated market price for this security as of that date.
Returns and Warranties
Costs relating to merchandise returns from sales at retail stores and through
distributors are not significant and are accounted for as they occur.
F-10
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Accounting Policies and Other Matters (continued)
Catalogs, Sale Flyers and Advertising Costs
The direct cost of printing and mailing the Company's annual mail order catalog
is deferred and amortized against mail order revenues over the year the catalog
is in use. The direct cost of printing and distributing sale flyers is deferred
and amortized over the life of the flyer which is generally two weeks or less.
Other advertising costs are expensed as incurred. Unamortized amounts relating
to the costs of the annual catalog and periodic sale flyers is immaterial at
each fiscal year-end. Advertising expenses were approximately $6,184,000,
$7,228,000 and $8,841,000 for fiscal 1994, 1995 and 1996, respectively.
Store Pre-Opening Costs
Direct costs, which consist principally of rent, employee compensation and
travel costs for merchandise set-up and supplies, incurred in setting up new
stores for opening are deferred and amortized over the first twenty-six weeks of
store operations. The amount of unamortized store pre-opening costs at October
29, 1994, October 28, 1995 and November 2, 1996, amounted to $502,000, $431,000
and $1,123,000, respectively.
Earnings Per Share
Per share earnings is based on the weighted average number of shares of common
stock and common stock equivalents outstanding and assuming all stock options
issued prior to the Company's initial public offering and the stock warrant were
outstanding at the beginning of each respective year. The dilutive effect of
outstanding stock options and the stock warrant were determined based upon the
Treasury Stock Method. Fully diluted earnings per share did not vary
significantly from earnings per share as presented.
Emerging Accounting Issues
The Company is not aware of any accounting standards which have been issued and
which will require the Company to change its current accounting policies or
adopt new policies, the effect of which would be material to the Company's
financial statements.
2. Transactions with Related Parties
Certain investment funds (collectively referred to as "BCC Funds") managed by
Butler Capital Corporation ("BCC") own a majority of the outstanding common
stock of the Company. The BCC Funds held the senior and subordinated notes
extinguished in October 1994, and currently hold the outstanding 7% convertible
notes (see Note 4). Interest paid on such notes in fiscal 1994, 1995 and 1996
was approximately $6,960,000, $883,000 and $1,425,000, respectively.
A company affiliated with the BCC Funds was paid a management and consulting fee
of approximately $238,000 in fiscal 1994.
The Company purchases inventory from two suppliers who are controlled by the BCC
Funds. Purchases from these suppliers aggregated approximately $3,882,000,
$6,254,000 and $6,228,000 for fiscal years 1994, 1995 and 1996, respectively.
F-11
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Line of Credit
On January 28, 1994, the Company entered into a line of credit agreement with a
commercial bank through February 1, 1998. At November 2, 1996, borrowings of
$3,669,000 and letters of credit totaling approximately $1,515,000 were
outstanding against the line of credit. Available borrowings under the line of
credit are $25,000,000 each year from November 1 through May 31 and $12,000,000
from June 1 through October 31. Interest on the outstanding borrowing varies,
but is primarily payable monthly at an annual rate equal to the bank's prime
rate. The interest rate on October 29, 1994, October 28, 1995 and November 2,
1996 was 8.25%, 8.75%, and 8.25%, respectively. In addition, the Company is
required to pay commitment fees ranging from 0.375% down to 0.125% on the total
credit line, less outstanding borrowing. During the period from April 15 through
December 31 in each year, the Company must have borrowing less than $5,000,000
outstanding under this line of credit for a consecutive period of 45 days. The
line of credit contains, among other provisions, requirements that the Company
maintain a minimum current ratio, leverage ratio and fixed charge coverage
ratio. At November 2, 1996, substantially all retained earnings were restricted.
4. Long-Term Debt
Long-term debt consisted of the following:
October 29, October 28, November 2,
1994 1995 1996
--------------- --------------- --------------
7% convertible notes $ 16,000,000 $ 16,000,000 $ 16,000,000
Other 388,989 17,044 --
------------- ------------- -------------
16,388,989 16,017,044 16,000,000
Less current portion 371,944 17,044 --
------------- ------------- -------------
$ 16,017,045 $ 16,000,000 $ 16,000,000
5 0 0
============= ============= =============
Interest on the convertible notes is payable quarterly at 7.0% per annum and the
entire principal amount is due October 31, 2002. The note may be prepaid after
October 14, 1999, at a premium of 2.0%, which declines by 1.0% annually on each
October 14 thereafter. The holders of the convertible notes have the right, at
any time prior to the close of business on October 31, 2002, to convert the
principal amounts into shares of common stock at a conversion price of $19.375
per share. The conversion price of the convertible notes is subject to
adjustment in certain events, including a common stock split, the issuance of
securities convertible or exchangeable into common stock at less than the then
fair market value of the common stock and certain mergers, consolidations or
sales of stock. The convertible notes are subordinated to the principal amounts
outstanding pursuant to the line of credit (see Note 3).
As of November 2, 1996, there are no maturities of long-term debt during the
next five fiscal years.
F-12
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Lease Obligations
The Company has entered into certain long-term lease agreements for the use of
warehouses, certain retail store facilities and computer equipment. These leases
have been accounted for as purchases of property rights and designated as
capitalized leases.
Amortization expense relating to such property rights recorded under capitalized
leases was $213,000, $130,000 and $125,000 for fiscal 1994, 1995 and 1996,
respectively. The net book value of property rights recorded under capital
leases was $829,000, $699,000 and $926,000 at October 29, 1994, October 28, 1995
and November 2, 1996, respectively.
As of November 2, 1996, the debt associated with the capitalized property rights
is represented by the present value of the minimum lease payments as follows:
Fiscal year ended in:
1997 $ 347,108
1998 324,648
1999 292,968
2000 292,968
2001 292,968
After 2001 735,000
------------
Total minimum lease payments 2,285,660
Less amount representing interest 774,663
------------
Present value of minimum lease payments 1,510,997
Less current installments 170,072
------------
$ 1,340,925
============
The Company also has entered into certain noncancelable operating leases for the
use of real estate, automobiles and trucks, and office equipment. Aggregate
rental expense for operating leases for fiscal 1994, 1995 and 1996 was
approximately $6,724,000, $7,833,000 and $9,294,000, respectively.
The following is a summary of minimum rental commitments as of November 2, 1996,
for operating leases:
<TABLE>
<CAPTION>
Automobile Office
Fiscal Year-End Real Estate and Trucks Equipment Total
- ------------------------- ------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
1997 $ 9,479,335 $ 12,293 $ 52,328 $ 9,543,956
1998 8,320,110 8,195 52,328 8,380,633
1999 6,822,291 -- 46,280 6,868,571
2000 5,288,555 -- 16,544 5,305,099
2001 2,927,707 -- 1,972 2,929,679
After 2001 6,315,729 -- -- 6,315,729
------------- --------- ---------- -------------
$ 39,153,727 $ 20,488 $ 169,452 $ 39,343,667
============= ========= ========== =============
</TABLE>
F-13
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Capital Stock and Stock Options
Capital Stock
During October 1994, the Company completed an initial public offering for the
sale of 3,565,000 shares of its common stock. The net proceeds from the offering
were used to prepay both principal and prepayment premium on the outstanding
Senior Notes and a portion of the outstanding Subordinated Notes. Prepayment
premiums on the early extinguishment of these notes resulted in an extraordinary
loss of $3,110,000, net of income tax benefit. The remaining Subordinated Notes
in the amount of $16,000,000 were exchanged for notes which are convertible into
the Company's common stock. At October 29, 1994, $6,703,000 of the net proceeds
representing the Underwriter's exercise of their over-allotment option was
receivable. This amount was received on November 2, 1994.
The Board of Directors is authorized to issue up to an aggregate of 5,000,000
shares of preferred stock, $0.01 par value per share, in one or more series,
each series to have voting preferences or other rights as determined by the
Board of Directors.
Under the Company's stockholders' agreement, common stock acquired by a
management stockholder is subject to certain restrictions on the sale or
transfer of such shares.
Stock Options
The Company has stock option arrangements with various officers, directors and
other members of management which it accounts for under the provisions of APB
Opinion No. 25 and related interpretations. The option prices approximated fair
market value at the date of grant. The options generally vest over periods of
three to seven years and must be exercised no later than ten years from the date
of grant. With respect to options for 150,200 shares, their vesting period may
be accelerated based upon the attainment of specified Company operating goals.
Shares of common stock issuable upon exercise of stock options are subject to
restrictions on transfer.
A summary of common stock option activity through November 2, 1996 is as
follows:
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------
1994 1995 1996
--------- --------- --------
<S> <C> <C> <C>
Outstanding at beginning of year 468,923 637,774 623,960
Options granted 323,464 66,800 81,900
Options exercised -- -- (12,406)
Options canceled (154,613) (80,614) (30,771)
-------- -------- --------
Outstanding at end of year 637,774 623,960 662,683
======== ======== ========
Range of option prices per share:
Outstanding $3.08-$15.50 $ 3.08-$15.50 $ 3.08-$15.50
Granted during year $3.41-$15.50 $11.50-$15.50 $11.38-$14.50
</TABLE>
F-14
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Capital Stock and Stock Options (continued)
At November 2, 1996, options for 295,973 shares were exercisable. The remaining
options become exercisable in fiscal years as follows: 1997 - 90,802 shares;
1998 - 30,916 shares; 1999 - 25,409 shares; 2000 - 14,000 shares; 2001 - 156,583
shares; 2002 - 49,000 shares.
As of November 2, 1996, the Company has reserved 914,025 shares of common stock
for issuance under stock option arrangements described above. In addition, the
Company has reserved 230,523 shares of common stock for issuance under the stock
warrant.
Compensation expense charged to operating income relating to stock option grants
amounts to $111,000 for fiscal 1994, $1,000 for fiscal 1995 and $0 for fiscal
1996.
7. Income Taxes
Deferred income taxes reflect the net tax effect of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
----------------- --------------- ---------------
<S> <C> <C> <C>
Deferred tax liabilities:
Differences in depreciation on property,
improvements and equipment $ 1,789,000 $ 1,890,000 $ 1,766,000
LIFO and uniform capitalization differences on
inventories 787,000 1,391,000 1,160,000
Prepaid advertising 211,000 174,000 244,000
Deferred leasing costs 185,000 82,000 --
Store pre-opening costs 208,000 172,000 449,000
Other 10,000 10,000 9,000
----------- ------------ -----------
Total deferred tax liabilities 3,190,000 3,719,000 3,628,000
----------- ------------ -----------
</TABLE>
F-15
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Income Taxes (continued)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Loss on sale of discontinued operations:
Ordinary loss $ -- $ 665,000 $ --
Capital loss carryforward -- 755,000 755,000
Allowance for doubtful accounts 101,000 45,000 20,000
Compensation and employee benefit accruals 174,000 148,000 58,000
Operating leases 330,000 261,000 273,000
Accrued profit sharing contributions 323,000 321,000 356,000
Stock warrant 279,000 266,000 266,000
Accrued store closing costs 168,000 86,000 32,000
Capitalized property rights and lease
obligations treated as operating leases for
income tax purposes 126,000 97,000 234,000
Other 291,000 250,000 211,000
------------ ------------ ------------
1,792,000 2,894,000 2,205,000
Less valuation allowance for capital loss
carryforward -- (755,000) (755,000)
------------ ------------ ------------
Total deferred tax assets 1,792,000 2,139,000 1,450,000
------------ ------------ ------------
Net deferred tax liabilities $ 1,398,000 $ 1,580,000 $ 2,178,000
============ ============ ============
<CAPTION>
The capital loss carryforward relating to the sale of Herschel will expire in
the year 2001.
Components of income tax expense (benefit) are as follows:
Fiscal Year Ended
--------------------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
---------------- --------------- ---------------
<S> <C> <C> <C>
Continuing operations:
Current:
Federal $ 3,121,000 $ 3,768,000 $ 3,951,000
State 709,000 1,152,000 1,199,000
------------ ----------- -----------
3,830,000 4,920,000 5,150,000
Deferred 367,000 800,000 1,100,000
------------ ----------- -----------
4,197,000 5,720,000 6,250,000
Discontinued operations:
Current (302,000) 427,000 367,000
Deferred (38,000) (618,000) (367,000)
------------ ----------- -----------
(340,000) (191,000) --
------------ ----------- -----------
Extraordinary loss - currently deductible (2,073,000) -- --
------------ ----------- -----------
Total $ 1,784,000 $ 5,529,000 $ 6,250,000
============ =========== ===========
</TABLE>
F-16
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Income Taxes (continued)
Total reported income tax expense differs from the tax that would have resulted
by applying the statutory expected federal income tax rate to income before
taxes. The reasons for these differences are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
--------------- ------------- --------------
<S> <C> <C> <C>
Income tax at federal statutory rate $ 1,057,000 $ 3,764,000 $ 5,098,000
Increases in taxes resulting from:
State income taxes, net of federal income
tax effect 403,000 897,000 833,000
Goodwill amortization 215,000 215,000 178,000
Capital loss carryforward -- 755,000 --
Other, net 109,000 102,000 141,000
Reduction of prior year overaccruals -- (204,000) --
------------ ------------ ------------
$ 1,784,000 $ 5,529,000 $ 6,250,000
============ ============ ============
</TABLE>
8. Employment Commitments
The Company has employment agreements with three officers of the Company which
provide for annual salaries amounting to approximately $775,000. Upon
termination of employment for death, disability or without cause, compensation
may be continued for a period not to exceed two years.
9. Profit Sharing Plan
The Company has a profit sharing plan covering all employees who meet certain
eligibility requirements. The plan provides for discretionary employer
contributions and allows voluntary participant contributions. Company
contributions are determined by its Board of Directors. The Company incurred
expense in connection with the profit sharing plan of $770,000, $804,000 and
$881,000 for fiscal 1994, 1995 and 1996, respectively.
F-17
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Discontinued Operations
During fiscal 1996, the Company completed the sale of its wholly owned
subsidiary, Herschel Corporation ("Herschel"), a manufacturer and wholesale
distributor of equipment parts for use in the farming industry. Herschel has
been reported as a discontinued segment of the business; accordingly, its net
assets and operating results have been segregated in the consolidated financial
statements. The net assets of Herschel Corporation have been classified as
current at October 28, 1995 as the carrying amount approximates the selling
price, plus advances to be repaid, less expenses of sale, and were realized upon
closing in December 1995.
Summarized financial information of the Company's income (loss) from
discontinued operations follow:
Fiscal Year Ended
-------------------------------
October 29, October 28,
1994 1995
------------- -------------
Net sales $ 23,312,046 $ 22,969,504
Income (loss) before income taxes (1,085,217) 1,286,242
Income taxes (credit) (340,000) 474,127
Income (loss) from discontinued operations (745,217) 812,115
11. Acquisition
On May 31, 1996, the Company acquired 31 retail stores and related net operating
assets from Big Bear Farm Stores, Inc. ("Big Bear"), an agricultural specialty
retailer, for approximately $5,650,000. The transaction was accounted for as a
purchase. The purchase price was allocated based on fair value as follows:
Inventories $ 8,780,000
Accounts receivable and other assets 206,000
Leaseholds and equipment 517,000
Deferred income taxes 135,000
Goodwill 2,666,000
Accounts payable and accrued expenses (6,654,000)
------------
$ 5,650,000
============
The results of operations of Big Bear from the date of purchase to the end of
fiscal year 1996 are included in the accompanying consolidated statement of
income.
F-18
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Acquisition (continued)
Pro forma amounts, based on the assumption that the purchase occurred at the
beginning of fiscal 1995, are as follows (in thousands, except per share data):
Fiscal Year Ended
--------------------------------------------
October 28, November 2,
1995 1996
-------------------- --------------------
Net sales $275,685 $307,847
Net income 6,018 9,104
Net income per share .55 .83
12. Quarterly Results of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of operations
for the years ended October 28, 1995 and November 2, 1996 (in thousands, except
per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Fiscal year ended October 28, 1995:
Net sales $61,836 $59,347 $74,362 $56,158
Gross profit 17,362 18,214 22,557 16,230
Income from continuing operations 1,473 2,121 4,249 342
Income (loss) from discontinued operations (1) 467 187 (3,296)
Net income (loss) 1,472 2,588 4,436 (2,954)
Per share:
Income from continuing operations 0.13 0.19 0.39 0.03
Income (loss) from discontinued -- 0.04 0.02 (0.30)
operations
Net income (loss) 0.13 0.23 0.40 (0.27)
Fiscal year ended November 2, 1996:
Net sales 69,967 62,989 86,169 73,895
Gross profit 18,862 19,245 25,417 22,268
Net income 1,280 1,684 3,937 1,843
Net income per share 0.12 0.15 0.36 0.17
</TABLE>
The sum of quarterly per share amounts do not necessarily equal the annual
amount reported, as per share amounts are computed separately for each quarter
and the full year based on respective weighted average of common and common
equivalent shares outstanding.
F-19
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Subsequent Event
On November 27, 1996, the Board of Directors of the Company approved, and the
Company entered into, a merger agreement (the "Merger Agreement") with J.W.
Childs Equity Partners, L.P. and two of its affiliates (collectively, "Childs")
that provides for the acquisition of the Company by Childs in a two-stage
transaction. The Merger Agreement provides that following the acquisition by
Childs of all of the Company shares held by affiliates of Butler Capital
Corporation (collectively, "BCC"), an affiliate of Childs will merge with and
into the Company, and Childs will acquire the remaining shares of the Company
held by public stockholders for $14.25 per share in cash. The consummation of
the merger is subject to the satisfaction of certain conditions including, among
other things, (i) the acquisition by Childs of all of the Company's shares held
by affiliates of BCC and (ii) the availability of sufficient funds to consummate
the merger pursuant to commitments obtained by Childs from its prospective
lenders.
Pursuant to an agreement executed contemporaneously with the Merger Agreement
between Childs and affiliates of BCC which own 64.5% of the Company's
outstanding common stock, BCC's affiliates have sold 1,048,214 shares of the
Company's common stock (representing 9.9% of the outstanding shares) to Childs
for a cash consideration of $14.00 per share, and have agreed to sell their
remaining shares to Childs for $14.00 per share in cash. The agreement also
provides that such BCC affiliates will agree, immediately following the
conclusion of the stock sale, to the prepayment by the Company (without payment
of any prepayment premium) of all the Company's 7% convertible notes with a face
amount of $16,000,000. In connection with the second purchase, certain members
of management agreed to sell 146,299 shares to Childs for a cash consideration
of $14.00 per share.
While the Merger Agreement is subject to stockholder approval, it is expected
that Childs will own a sufficient number of shares of Company common stock to
adopt and approve the merger.
F-20
<PAGE>
CENTRAL TRACTOR FARM & COUNTRY, INC.
Valuation and Qualifying Accounts
Schedule II
Allowance for
Trade Receivables
----------------
Balance at October 30, 1993 $(157,000)
Charged to expense (18,000)
Write-off of uncollectible accounts 7,000
------------
Balance at October 29, 1994 (168,000)
Credited to expense 30,500
Write-off of uncollectible accounts 65,500
------------
Balance at October 28, 1995 (72,000)
Credited to expense 20,500
Write-off of uncollectible accounts 1,500
------------
Balance at November 2, 1996 $ (50,000)
=============
F-21
<PAGE>
SIGNATURE
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.
CENTRAL TRACTOR FARM & COUNTRY,
INC.
DATED: January 31, 1997 By: /s/ James T. McKitrick
James T. McKitrick, President
and Chief Executive Officer
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.
DATED: January 31, 1997
/s/ James T. McKitrick President and Chief Executive Officer, Director
James T. McKitrick Principal Executive Officer)
/s/ Dean Longnecker Executive Vice President of Finance, Director
Dean Longnecker (Principal Financial and Accounting Officer)
/s/ Francis J. Palamara Director
Francis J. Palamara
/s/ Daryl Lansdale Director
Daryl Lansdale
/s/ Glenn Kraiss Director
Glenn Kraiss
EXECUTION COPY
$38,000,000
CREDIT AGREEMENT
Dated as of December 23, 1996
Among
CENTRAL TRACTOR FARM & COUNTRY, INC.,
as Borrower,
CT HOLDING, INC.,
as Holding,
JWC ACQUISITION I, INC.,
as the Purchaser,
and
THE INITIAL LENDERS, INITIAL ISSUING BANK AND
SWING LINE BANK NAMED HEREIN
as Initial Lenders, Initial Issuing Bank and Swing Line Bank
and
FLEET NATIONAL BANK
as Administrative Agent
and
NATIONSBANK, N.A.
as Co-Agent
<PAGE>
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms................................................ 2
1.02. Computation of Time Periods.......................................... 27
1.03. Accounting Terms..................................................... 28
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances......................................................... 28
2.02. Making the Advances.................................................. 30
2.03. Issuance of and Drawings and Reimbursement Under Letters of
Credit............................................................. 32
2.04. Repayment of Advances................................................ 34
2.05. Termination or Reduction of the Commitments.......................... 36
2.06. Prepayments.......................................................... 36
2.07. Interest............................................................. 38
2.08. Fees................................................................. 39
2.09. Conversion of Advances............................................... 40
2.10. Increased Costs, Etc................................................. 41
2.11. Payments and Computations............................................ 43
2.12. Taxes................................................................ 44
2.13. Sharing of Payments, Etc............................................. 47
2.14. Use of Proceeds...................................................... 47
2.15. Defaulting Lenders................................................... 48
2.16. Removal of Lender.................................................... 50
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit.................. 51
3.02. Conditions Precedent to the First Extension of Credit on or After
the Date of the Consummation of the Merger......................... 56
3.03. Conditions Precedent to Each Borrowing and Issuance.................. 59
<PAGE>
ii
3.04. Determinations Under Sections 3.01 and 3.02.......................... 60
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties....................................... 60
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants................................................ 68
5.02. Negative Covenants................................................... 74
5.03. Reporting Requirements............................................... 80
5.04. Financial Covenants.................................................. 85
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default.................................................... 86
6.02. Actions in Respect of the Letters of Credit upon Default............. 90
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.01. Authorization and Action............................................. 90
7.02. Administrative Agent's Reliance, Etc................................. 91
7.03. Fleet and Affiliates................................................. 91
7.04. Lender Party Credit Decision......................................... 92
7.05. Indemnification...................................................... 92
7.06. Successor Administrative Agents...................................... 94
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc...................................................... 95
8.02. Notices, Etc......................................................... 96
8.03. No Waiver; Remedies.................................................. 96
<PAGE>
iii
8.04. Costs and Expenses................................................... 96
8.05. Right of Set-off..................................................... 98
8.06. Binding Effect....................................................... 99
8.07. Assignments and Participations....................................... 99
8.08. Execution in Counterparts............................................102
8.09. No Liability of the Issuing Bank.....................................102
8.10. Confidentiality......................................................102
8.11. Jurisdiction, Etc....................................................103
8.12. Governing Law........................................................103
8.13. Waiver of Jury Trial.................................................103
ARTICLE IX
GUARANTY
9.01. Guaranty.............................................................104
9.02. Guaranty Absolute....................................................104
9.03. Waivers and Acknowledgments..........................................105
9.04. Subrogation..........................................................106
9.05. Continuing Guarantee; Assignments....................................107
<PAGE>
iv
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Disclosed Litigation
Schedule III - Subsidiaries
Schedule IV - Authorizations, Etc.
Schedule V - Plans
Schedule VI - Existing Debt
Schedule VII - Owned Real Property
Schedule VIII - Leased Real Property
Schedule IX - Material Contracts
Schedule X - Investments
Schedule XI - Intellectual Property
Schedule XII - Mortgaged Property
Schedule XIII - Liens
Schedule XIV - Surviving Debt
Schedule XV - Environmental Disclosure
EXHIBITS
Exhibit A-1 - Form of Term Note
Exhibit A-2 - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
<PAGE>
v
Exhibit D - Form of Security Agreement
Exhibit E - Form of Opinion of Holdings' and the Purchaser's Counsel
Exhibit F - Form of Opinion of Borrower's Counsel
Exhibit G - Form of Solvency Certificate
Exhibit H - Form of Borrowing Base Certificate
Exhibit I - Form of Management Agreement
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of December 23, 1996 among Central Tractor
Farm & Country, Inc., a Delaware corporation (the "Borrower"), CT Holding Inc.,
a Delaware corporation ("Holding"), JWC Acquisition I, Inc., a Delaware
corporation (the "Purchaser"), the banks, financial institutions and other
institutional lenders listed on the signature pages hereof as the Initial
Lenders (the "Initial Lenders"), the Initial Issuing Bank (as hereinafter
defined), the Swing Line Bank (as hereinafter defined), Fleet National Bank
("Fleet"), as administrative agent (together with any successor appointed
pursuant to Article VII, the "Administrative Agent") for the Lender Parties (as
hereinafter defined) and NationsBank, N.A. ("NationsBank) as co-agent (the
"Co-Agent") for the Lender Parties.
PRELIMINARY STATEMENTS:
(1) J.W. Childs Equity Partners, L.P. ("J.W. Childs") organized a
Subsidiary (as hereinafter defined), JWC Equity Funding, Inc., a Delaware
corporation ("Funding"), which in turn organized a single-purpose subsidiary,
Holding. Holding, in turn, organized the Purchaser as a single-purpose, wholly
owned Subsidiary.
(2) The Purchaser, pursuant to the Securities Purchase Agreement dated
as of November 27, 1996 (as the same may be amended, modified or otherwise
supplemented from time to time in accordance with the provisions of this
Agreement, the "Purchase Agreement") with the "Securityholders" referred to
therein, purchased (the "Initial Purchase") 1,048,214 shares of the Borrower's
outstanding common stock, $0.01 par value (all of such common stock being
referred to herein as the "Borrower Stock"), owned by Butler Capital Corporation
and its Affiliates (as hereinafter defined) (collectively, "Butler") for $14 in
cash per share.
(3) The Purchaser, pursuant to the terms of the Purchase Agreement,
intends to purchase (the "Additional Purchase"; together with the Initial
Purchase, the "Stock Purchase") 5,783,515 shares of the Borrower Stock and a
warrant (the "Borrower Warrant") representing 230,523 shares of Borrower Stock
from Butler for $14 in cash per share. Subsequently, the Purchaser, pursuant to
the terms of letter agreements with James McKitrick and Dean Longnecker, each
dated November 27, 1996 (the "Letter Agreements"), intends to purchase (the
"Subsequent Purchase"; together with the Initial Purchase and the Additional
Purchase, the "Stock Purchase") 146,299 shares of Borrower Stock from certain
members of senior management of the Borrower for $14 in cash per share.
(4) As promptly as practicable after the closing of the Additional
Purchase, the Purchaser will consummate a merger (the "Merger") with the
Borrower in which the Borrower will be the surviving corporation.
<PAGE>
2
(5) The Borrower has requested that, immediately upon the consummation
of the Additional Purchase, the Lender Parties lend to the Borrower up to
$38,000,000 to pay transaction fees and expenses, refinance certain Existing
Debt (as hereinafter defined) of the Borrower and that, from time to time, the
Lender Parties lend to the Borrower and issue Letters of Credit for the benefit
of the Borrower to provide working capital for the Borrower and its
Subsidiaries. The Lender Parties have indicated their willingness to agree to
lend such amounts on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Additional Purchase" has the meaning specified in the Preliminary
Statements.
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with Fleet at
its office at One Federal Street, Boston, Massachusetts 02211, ABA No. 011
000 138, Account No. 151035- 03-156, Attention: Terry DeMarco.
"Advance" means a Term Advance, a Revolving Credit Advance, a Swing
Line Advance or a Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
<PAGE>
3
"Applicable Lending Office" means, with respect to each Lender Party,
such Lender Party's Domestic Lending Office in the case of a Prime Rate
Advance and such Lender Party's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"Applicable Margin" means (x) during the period from the date hereof
through the first day of Fiscal Year 1998 1% per annum for Prime Rate
Advances and 2-1/4% per annum for Eurodollar Rate Advances and (y)
thereafter, a percentage per annum determined by reference to the Debt to
EBITDA Ratio as set forth below:
<TABLE>
<CAPTION>
Prime Rate Advances Eurodollar Rate Advances
------------------- ------------------------
<S> <C> <C>
Level I 0.25% 1.50%
-------
less than 3.0: 1
Level II 0.50% 1.75%
--------
3.0: 1 or greater,
but less than 3.5: 1 0.75% 2.00%
Level III
---------
3.5: 1 or greater,
but less than 4.0: 1
Level IV 1.00% 2.25%
--------
4.0: 1 or greater
</TABLE>
The Applicable Margin for each Prime Rate Advance shall be determined by
reference to the ratio in effect from time to time and the Applicable
Margin for each Eurodollar Rate Advance shall be determined by reference to
the ratio in effect on the first day of each Interest Period for such
Advance; provided, however, that no change in the Applicable Margin shall
be effective until three Business Days after the date on which the
Administrative Agent receives financial statements pursuant to
<PAGE>
4
Section 5.03(b), (c) or (d) and a certificate of the chief financial
officer of the Borrower demonstrating such ratio.
"Appropriate Lender" means, at any time, with respect to (a) any of the
Term or Revolving Credit Facilities, a Lender that has a Commitment with
respect to such Facility at such time, (b) the Letter of Credit Facility,
(i) the Issuing Bank and (ii) if the other Revolving Credit Lenders have
made Letter of Credit Advances pursuant to Section 2.03(c) that are
outstanding at such time, each such other Revolving Credit Lender and (c)
the Swing Line Facility, (i) the Swing Line Bank and (ii) if the other
Revolving Credit Lenders have made Swing Line Advances pursuant to Section
2.02(b) that are outstanding at such time, each such other Revolving Credit
Lender.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender Party and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 8.07 and in substantially
the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Borrower" has the meaning specified in the recital of parties to this
Agreement.
"Borrower Stock" has the meaning specified in the Preliminary
Statements.
"Borrower Warrant" has the meaning specified in the Preliminary
Statements.
"Borrower's Account" means the account of the Borrower maintained by
the Borrower with Fleet at its office at One Federal Street, Boston,
Massachusetts 02110, ABA No. 011 000 138, Account No. 937 3835380,
Attention: Terry DeMarco.
"Borrowing" means a Term Borrowing, a Revolving Credit Borrowing or a
Swing Line Borrowing.
"Borrowing Base Deficiency" means, at any time, the failure of (a) the
Loan Value of the Eligible Collateral at such time to equal or exceed (b)
the sum of (i) the aggregate principal amount of the Revolving Credit
Advances, the Letter of Credit Advances and the Swing Line Advances
outstanding at such time plus (ii) the aggregate Available Amount under all
Letters of Credit outstanding at such time.
<PAGE>
5
"Borrowing Rate Certificate" means a certificate in substantially the
form of Exhibit H hereto, duly certified by the chief financial officer of
the Borrower.
"Bridge Note Documents" means the agreements and instruments which
govern the terms of the Bridge Notes, as the same may be amended, modified
or otherwise supplemented from time to time in accordance with the
provisions of this Agreement.
"Bridge Notes" means the securities, if any, issued by the Borrower as
contemplated by the terms of the Bridge Commitment Letter dated November
26, 1996 from NationsBridge L.L.C. to J.W. Childs and any other securities
for which such securities are exchanged pursuant to such Bridge Commitment
Letter.
"Business Day" means a day of the year on which banks are not required
or authorized by law to close in Boston, Massachusetts and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.
"Butler" has the meaning specified in the Preliminary Statements.
"Capital Expenditures" means, for any Person for any period, the sum of
(a) all expenditures made, directly or indirectly, by such Person or any of
its Subsidiaries during such period for equipment, fixed assets, real
property or improvements, or for replacements or substitutions therefor or
additions thereto, that have been or should be, in accordance with GAAP,
reflected as additions to property, plant or equipment on a Consolidated
balance sheet of such Person or have a useful life of more than one year
plus (b) (without duplication) the aggregate principal amount of all Debt
(including Obligations under Capitalized Leases) assumed or incurred in
connection with any such expenditures.
"Capitalized Leases" means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
"Cash Collateral Account" has the meaning specified in the Security
Agreement.
"Cash Equivalents" means any of the following, to the extent owned by
the Borrower or any of its Subsidiaries free and clear of all Liens other
than Liens created under the Collateral Documents and having a maturity of
not greater than 360 days from the date of acquisition thereof: (a) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or obligations unconditionally guaranteed
by the full faith and credit of the Government
<PAGE>
6
of the United States, (b) insured certificates of deposit of or time
deposits with any commercial bank that is a Lender Party or a member of the
Federal Reserve System, issues (or the parent of which issues) commercial
paper rated as described in clause (c), is organized under the laws of the
United States or any State thereof and has combined capital and surplus of
at least $1 billion or (c) commercial paper in an aggregate amount of no
more than $2.5 million per issuer outstanding at any time, issued by any
corporation organized under the laws of any State of the United States and
rated at least "Prime-1" (or the then equivalent grade) by Moody's
Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard
& Poor's Ratings Group.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Co-Agent" has the meaning specified in the recital of parties to this
Agreement.
"Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is or is intended to be subject to
any Lien in favor of the Administrative Agent for the benefit of the
Secured Parties.
"Collateral Documents" means the Security Agreement, the Pledge
Agreement and any other agreement that creates or purports to create a Lien
in favor of the Administrative Agent for the benefit of the Lender Parties.
"Commitment" means a Term Commitment, a Revolving Credit Commitment
or a Letter of Credit Commitment.
"Confidential Information" means information that the Borrower
furnishes to the Administrative Agent or any Lender Party that is
proprietary in nature, including financial information, projections,
business plans and other information in a writing marked, labeled or
otherwise identified as confidential, but does not include any such
information that is or becomes generally available to the public other than
as a result of a breach by the Administrative Agent or any Lender Party of
its obligations hereunder or that is or becomes available to the
Administrative Agent or such Lender Party from a source other than the
Borrower.
<PAGE>
7
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Conversion", "Convert" and "Converted" each refer to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section
2.09 or 2.10.
"Current Assets" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets of a
company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a reserve
is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such Person
that by its terms is payable on demand or matures within one year after the
date of determination (excluding any Debt renewable or extendible, at the
option of such Person, to a date more than one year from such date or
arising under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date), (b) without duplication, all amounts of Funded Debt of
such Person required to be paid or prepaid within one year after such date
and (c) all other items (including taxes accrued as estimated) that in
accordance with GAAP would be classified as current liabilities of such
Person.
"Debt" of any Person means, without duplication, (a) all indebtedness
of such Person for borrowed money, (b) all Obligations of such Person for
the deferred purchase price of property or services (other than trade
payables not overdue by more than 90 days incurred in the ordinary course
of such Person's business), (c) all Obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all Obligations
of such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such
property), (e) all Obligations of such Person as lessee under Capitalized
Leases, (f) all Obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all Obligations of
such Person to purchase, redeem, retire, defease or otherwise make any
payment in respect of any capital stock of or other ownership or profit
interest in such Person or any other Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of Redeemable
Preferred Stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (h) all Obligations of such
Person in respect of Hedge Agreements, (i) all Debt of others referred to
in clauses (a) through (h) above or clause (j) below guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly
or indirectly by such Person through an agreement (i) to
<PAGE>
8
pay or purchase such Debt or to advance or supply funds for the payment or
purchase of such Debt, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Debt or to assure
the holder of such Debt against loss, (iii) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for
property or services irrespective of whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against
loss, and (j) all Debt referred to in clauses (a) through (j) above of
another Person secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt.
"Debt to EBITDA Ratio" means, for any fiscal quarter of Holding, a
ratio of Debt of Holding and its Subsidiaries (other than any Debt of
Holding that bears interest on a payment-in-kind basis) as at the end of
such fiscal quarter less the sum of cash and Cash Equivalents held by
Holding and its Subsidiaries as at the end of such fiscal quarter, to
Consolidated EBITDA for the most recently completed four fiscal quarters of
Holding and its Subsidiaries.
"Default" means any Event of Default or any event that would constitute
an Event of Default but for the requirement that notice be given or time
elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at any
time, the portion of any Advance required to be made by such Lender Party
to the Borrower pursuant to Section 2.01 or 2.02 at or prior to such time
which has not been made by such Lender Party or by the Administrative Agent
for the account of such Lender Party pursuant to Section 2.02(e) as of such
time. In the event that a portion of a Defaulted Advance shall be deemed
made pursuant to Section 2.15(a), the remaining portion of such Defaulted
Advance shall be considered a Defaulted Advance originally required to be
made pursuant to Section 2.01 on the same date as the Defaulted Advance so
deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any time,
any amount required to be paid by such Lender Party to the Administrative
Agent or any other Lender Party hereunder or under any other Loan Document
at or prior to such time which has not been so paid as of such time,
including, without limitation, any amount required to be paid by such
Lender Party to (a) the Swing Line Bank pursuant to Section 2.02(b) to
purchase a portion of a Swing Line Advance made by the Swing Line Bank, (b)
the Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a
Letter of Credit Advance made by the Issuing Bank, (c) the Administrative
Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for
the amount of
<PAGE>
9
any Advance made by the Administrative Agent for the account of such Lender
Party, (d) any other Lender Party pursuant to Section 2.13 to purchase any
participation in Advances owing to such other Lender Party and (e) the
Administrative Agent or the Issuing Bank pursuant to Section 7.05 to
reimburse the Administrative Agent or the Issuing Bank for such Lender
Party's ratable share of any amount required to be paid by the Lender
Parties to the Administrative Agent or the Issuing Bank as provided
therein. In the event that a portion of a Defaulted Amount shall be deemed
paid pursuant to Section 2.15(b), the remaining portion of such Defaulted
Amount shall be considered a Defaulted Amount originally required to be
paid hereunder or under any other Loan Document on the same date as the
Defaulted Amount so deemed paid in part.
"Defaulting Lender" means, at any time, any Lender Party that, at such
time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take
any action or be the subject of any action or proceeding of a type
described in Section 6.01(f).
"Disclosed Litigation" has the meaning specified in Section 3.01(j).
"Domestic Lending Office" means, with respect to any Lender Party, the
office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, as the case may be, or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Administrative Agent.
"EBITDA" means, for any period, the sum, determined on a Consolidated
basis, of (a) net income (or net loss), (b) interest expense, (c) income
tax expense, (d) depreciation expense and (e) amortization expense, in each
case of the Borrower and its Subsidiaries, determined in accordance with
GAAP for such period.
"Eligible Assignee" means (a) with respect to any Facility (other than
the Letter of Credit Facility), (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$500,000,000; (iv) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having total
assets in excess of $500,000,000; (v) a commercial bank organized under the
laws of any other country that is a member of the OECD or has concluded
special lending arrangements with the International Monetary Fund
associated with its General Arrangements to Borrow or of the Cayman
Islands, or a political subdivision of any such country, and having total
assets in excess of $500,000,000, so long as such bank is acting through a
branch or agency located in the United States; (vi) the central bank of any
country that is a member of the OECD; (vii) a finance company,
<PAGE>
10
insurance company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of $500,000,000;
and (viii) any other Person approved by the Administrative Agent and the
Borrower, such approval not to be unreasonably withheld or delayed, and (b)
with respect to the Letter of Credit Facility, a Person that is an Eligible
Assignee under subclause (iii) or (v) of clause (a) of this definition and
is approved by the Administrative Agent and the Borrower, such approval not
to be unreasonably withheld or delayed; provided, however, that neither any
Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible
Assignee under this definition.
"Eligible Collateral" means, collectively, Eligible Inventory and
Eligible Receivables.
"Eligible Inventory" means all Inventory of the Borrower other than the
following classes of Inventory:
(a) Inventory consisting of "perishable agricultural commodities"
within the meaning of the Perishable Agricultural Commodities Act of
1930, as amended, and the regulations thereunder, or on which a Lien
has arisen or may arise in favor of agricultural producers under
comparable state or local laws;
(b) Inventory that is obsolete, unusable or otherwise unavailable
for sale;
(c) Inventory with respect to which the representations and
warranties set forth in Section 8 of the Security Agreement applicable
to Inventory are not true and correct;
(d) Inventory consisting of promotional, marketing, packaging or
shipping materials and supplies;
(e) Inventory that fails to meet all standards imposed by any
governmental agency, or department or division thereof, having
regulatory authority over such Inventory or its use or sale;
(f) Inventory that is subject to any licensing, patent, royalty,
trademark, trade name or copyright agreement with any third party from
whom the Borrower has received notice of a dispute in respect of any
such agreement;
<PAGE>
11
(g) Inventory located outside the United States;
(h) Inventory that is not in the possession of or under the sole
control of the Borrower;
(i) Inventory consisting of work in progress; and
(j) Inventory in respect of which the Security Agreement, after
giving effect to the related filings of financing statements that have
then been made, if any, does not or has ceased to create a valid and
perfected first priority lien or security interest in favor of the
Lender Parties securing the Secured Obligations.
"Eligible Receivables" means all Receivables of the Borrower other than
the following classes of Receivables:
(a) Receivables that do not arise out of sales of goods or
rendering of services in the ordinary course of the Borrower's
business;
(b) Receivables on terms other than those normal or customary in
the Borrower's business;
(c) Receivables owing from any Person that is an Affiliate of the
Borrower;
(d) Receivables more than 90 days past original invoice date or
more than 60 days past the date due;
(e) Receivables owing from any Person that (i) has disputed
liability for any Receivable owing from such Person or (ii) has
otherwise asserted any claim, demand or liability, whether by action,
suit, counterclaim or otherwise;
(f) Receivables owing from any Person that shall take or be the
subject of any action or proceeding of a type described in Section
6.01(f);
(g) Receivables (i) owing from any Person that is also a supplier
to or creditor of the Borrower or (ii) representing any manufacturer's
or supplier's credits, discounts, incentive plans or similar
arrangements entitling the Borrower to discounts on future purchase
therefrom;
(h) Receivables arising out of sales to account debtors outside
the United States;
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12
(i) Receivables arising out of sales on a bill-and-hold,
guaranteed sale, sale-or-return, sale on approval or consignment basis
or subject to any right of return, set-off or charge-back;
(j) Receivables owing from an account debtor that is an agency,
department or instrumentality of the United States or any State
thereof;
(k) Receivables the full and timely payment of which the
Administrative Agent in its reasonable judgment believes to be
doubtful; and
(l) Receivables in respect of which the Security Agreement, after
giving effect to the related filings of financing statements that have
then been made, if any, does not or has ceased to create a valid and
perfected first priority lien or security interest in favor of the
Lender Parties securing the Secured Obligations.
"Environmental Action" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, any Environmental
Permit or Hazardous Material, including, without limitation, (a) by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, writ, judgment, injunction,
decree or judicial or agency interpretation, policy or guidance that has
the force and effect of law relating to pollution or protection of the
environment, public or employee health and safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"Equity" has the meaning specified in Section 3.01(f).
"Equity Investors" means J.W. Childs and its Affiliates and
co-investors, Fleet Equity Partners and its Affiliates, certain members of
management of the Borrower and certain members of the Board of Directors of
Holding.
<PAGE>
13
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of any Loan Party, or under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC, or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are met
with respect to a contributing sponsor, as defined in Section 4001(a)(13)
of ERISA, of a Plan, and an event described in paragraph (9), (10), (11),
(12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
with respect to such Plan within the following 30 days; (b) the application
for a minimum funding waiver with respect to a Plan; (c) the provision by
the administrator of any Plan of a notice of intent to terminate such Plan,
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of any Loan Party or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA; (e)
the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (f) the conditions for
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, such Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender Party,
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender Party (or, if no such
office is specified, its Domestic Lending Office), or such other office of
such Lender Party as such Lender Party may from time to time specify to the
Borrower and the Administrative Agent.
<PAGE>
14
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate per
annum at which deposits in U.S. dollars are offered by the principal office
of Fleet in London, England to prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to Fleet's Eurodollar Rate
Advance comprising part of such Borrowing to be outstanding during such
Interest Period (or, if Fleet shall not have such a Eurodollar Rate
Advance, $1,000,000) and for a period equal to such Interest Period by (b)
a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate
Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means, for any period, the amount by which (a) the
sum of (i) Consolidated net income (or loss) of the Borrower and its
Subsidiaries for such period the initial Borrowing plus (ii) the aggregate
amount of all non-cash charges deducted in arriving at such Consolidated
net income (or loss) plus (iii) if there was a net increase in Consolidated
Current Liabilities of the Borrower and its Subsidiaries during such
period, the amount of such net increase plus (iv) if there was a net
decrease in Consolidated Current Assets (excluding cash and Cash
Equivalents) of the Borrower and its Subsidiaries during such period, the
amount of such net decrease less (v) the aggregate amount of all non-cash
credits included in arriving at such Consolidated net income (or loss) less
(vi) if there was a net decrease in Consolidated Current Liabilities of the
Borrower and its Subsidiaries during such period, the amount of such net
decrease less (vii) if there was a net increase in Consolidated Current
Assets (excluding cash and Cash Equivalents) of the Borrower and its
Subsidiaries during such period, the amount of such net increase less
(viii) the aggregate amount of cash paid by the Borrower and its
Subsidiaries in respect of Capital Expenditures during such period less
(ix) without duplication, the aggregate
<PAGE>
15
amount of all cash payments made by the Borrower and its Subsidiaries in
respect of the permanent reduction of Debt (of the type referred to in
clauses (a), (c), (d), (e) and (f) of the definition thereof) during such
period exceeds (b) $2,000,000.
"Existing Debt" means Debt of the Borrower and its Subsidiaries
outstanding immediately before the date hereof.
"Extension of Credit" means a Borrowing or an issuance of a Letter of
Credit hereunder.
"Extraordinary Receipt" means any cash received by or paid to or for
the account of any Person not in the ordinary course of business,
including, without limitation, tax refunds, pension plan reversions,
proceeds of insurance (other than proceeds of business interruption
insurance to the extent such proceeds constitute compensation for lost
earnings), condemnation awards (and payments in lieu thereof) and indemnity
payments in respect of loss or damage to equipment, fixed assets or real
property; provided, however, that an Extraordinary Receipt shall not
include cash receipts received from proceeds of insurance, condemnation
awards (or payments in lieu thereof) or indemnity payments to the extent
that such proceeds, awards or payments in respect of loss or damage to
equipment, fixed assets or real property are applied (or in respect of
which expenditures were previously incurred) to replace or repair the
equipment, fixed assets or real property in respect of which such proceeds
were received in accordance with the terms of the Loan Documents, so long
as such application is made within 12 months after the occurrence of such
damage or loss.
"Facility" means the Term Facility, the Revolving Credit Facility, the
Swing Line Facility or the Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Financing Documents" means the Stock Purchase Facility Documents, the
Bridge Note Documents and the Permanent Debt Documents.
<PAGE>
16
"Fiscal Year" means a fiscal year of the Borrower and its Consolidated
Subsidiaries ending in October or November of any calendar year.
"Funded Debt" of any Person means Debt in respect of the Advances, in
the case of the Borrower, and all other Debt of such Person that by its
terms matures more than one year after the date of determination or matures
within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year after such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
after such date, excluding, however, all amounts of Funded Debt of such
Person required to be paid or prepaid within one year after the date of
determination.
"GAAP" has the meaning specified in Section 1.03.
"Guaranty" has the meaning specified in Section 9.01.
"Hazardous Materials" means (a) petroleum or petroleum products,
radioactive materials, asbestos-containing materials, polychlorinated
biphenyls and radon gas and (b) any other chemicals, materials or
substances designated or classified as hazardous or toxic, regulated under,
any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements.
"Holding" has the meaning specified in the recital of parties hereto.
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Initial Extension of Credit" means the earlier to occur of the initial
Borrowing and the initial issuance of a Letter of Credit hereunder.
"Initial Issuing Bank" means Fleet.
"Initial Lenders" has the meaning specified in the recital of parties
to this Agreement.
"Initial Purchase" has the meaning specified in the Preliminary
Statements.
"Insufficiency" means, with respect to any Plan, the amount, if any, of
its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
<PAGE>
17
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Prime Rate
Advance into such Eurodollar Rate Advance, and ending on the last day of
the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months, as the Borrower may, upon notice received by the Administrative
Agent not later than 11:00 A.M. (Boston, Massachusetts) on the third
Business Day prior to the first day of such Interest Period, select;
provided, however, that:
(a) the Borrower may not select any Interest Period with respect
to any Eurodollar Rate Advance under a Facility that ends after any
principal repayment installment date for such Facility unless, after
giving effect to such selection, the aggregate principal amount of
Prime Rate Advances and of Eurodollar Rate Advances having Interest
Periods that end on or prior to such principal repayment installment
date for such Facility shall be at least equal to the aggregate
principal amount of Advances under such Facility due and payable on or
prior to such date;
(b) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Borrowing shall be of the
same duration;
(c) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(d) whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
<PAGE>
18
"Inventory" means all Inventory referred to in Section 1(b) of the
Security Agreement.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership
or profit interest, warrants, rights, options, obligations or other
securities of such Person, any capital contribution to such Person or any
other investment in such Person, including, without limitation, any
arrangement pursuant to which the investor incurs Debt of the types
referred to in clause (i) or (j) of the definition of "Debt" in respect of
such Person.
"Issuing Bank" means the Initial Issuing Bank and each Eligible
Assignee to which the Letter of Credit Commitment hereunder has been
assigned pursuant to Section 8.07.
"J.W. Childs" has the meaning specified in the Preliminary Statements.
"L/C Cash Collateral Account" has the meaning specified in the Security
Agreement.
"L/C Related Documents" has the meaning specified in Section
2.04(e)(ii).
"Lender Party" means any Lender, the Issuing Bank or the Swing Line
Bank.
"Lenders" means the Initial Lenders and each Person that shall become a
Lender hereunder pursuant to Section 8.07.
"Letter Agreements" has the meaning specified in the Preliminary
Statements.
"Letter of Credit" has the meaning specified in Section 2.01(e).
"Letter of Credit Advance" means an advance made by the Issuing Bank or
any Revolving Credit Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing Bank
at any time, the amount set forth opposite the Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
the Issuing Bank has entered into one or more Assignments and Acceptances,
set forth for the Issuing Bank in the Register maintained by the
Administrative Agent pursuant to Section 8.07(d) as the
<PAGE>
19
Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced
at or prior to such time pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal to the
amount of the Issuing Bank's Letter of Credit Commitment at such time, as
such amount may be reduced at or prior to such time pursuant to Section
2.05.
"Lien" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential arrangement, including,
without limitation, the lien or retained security title of a conditional
vendor and any easement, right of way or other encumbrance on title to real
property.
"Loan Documents" means (a) for purposes of this Agreement and the Notes
and any amendment or modification hereof or thereof and for all other
purposes other than for purposes of the Collateral Documents, (i) this
Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each Letter
of Credit Agreement and (v) any guaranty entered into by any Subsidiary of
the Borrower pursuant to the provisions of Section 5.02(e) or (f) and (b)
for purposes of the Collateral Documents, (i) this Agreement, (ii) the
Notes, (iii) the Collateral Documents, (iv) each Letter of Credit Agreement
and (v) any guaranty entered into by any Subsidiary of the Borrower
pursuant to the provisions of Section 5.02(e) or (f), in each case as
amended or otherwise modified from time to time.
"Loan Parties" means the Borrower, Holding, the Purchaser and each
Subsidiary of the Borrower.
"Loan Value" means, with respect to (i) any Eligible Inventory, 50% of
the value of such Eligible Inventory and (ii) any Eligible Receivable, 80%
of the unpaid face Amount of such Eligible Receivable.
"Management Agreement" means the management agreement to be entered
into by the Borrower and J.W. Childs in substantially the form of Exhibit I
hereto.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party and its Subsidiaries, taken as a
whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party and its Subsidiaries, taken as a
whole, (b) the rights and remedies of
<PAGE>
20
the Administrative Agent or any Lender Party under any Loan Document or
Related Document or (c) the ability of any Loan Party to perform its
Obligations under any Loan Document or Related Document to which it is or
is to be a party.
"Material Contract" means, with respect to any Person, each contract to
which such Person is a party involving aggregate consideration payable to
or by such Person of $2,000,000 or more in any year or otherwise material
to the business, condition (financial or otherwise), operations,
performance, properties or prospects of such Person.
"Merger" has the meaning specified in the Preliminary Statements.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
November 27, 1996 among J.W. Childs, Holding, the Purchaser and the
Borrower and the other related documents, agreements, and instruments, in
each case as the same may be amended, modified or otherwise supplemented
from time to time in accordance with the provisions of this Agreement.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were
to be terminated.
"NationsBank" has the meaning specified in the recital of the parties
to this Agreement.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
other disposition of any asset or the sale or issuance of any Debt or
capital stock or other ownership or profit interest, any securities
convertible into or exchangeable for capital stock or other ownership or
profit interest or any warrants, rights, options or other securities to
acquire capital stock or other ownership or profit interest by any Person,
or any Extraordinary Receipt received by or paid to or for the account of
any Person, the aggregate amount of cash received from time to time
(whether as initial consideration or through payment or disposition of
deferred consideration) by or on behalf of such Person in connection with
such transaction after deducting therefrom
<PAGE>
21
only (without duplication) (a) reasonable and customary brokerage
commissions, underwriting fees and discounts, legal fees, finder's fees and
other similar fees and commissions, in each case to the extent, but only to
the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid to a Person that is not an Affiliate of such
Person or any Loan Party or any Affiliate of any Loan Party, (b) any Debt
permitted by Section 5.02(b)(iv)(B) or (C) and secured by assets being sold
in such transaction that is required to be paid from such proceeds, and (c)
income taxes that, as estimated by the Borrower in good faith, will be
required to be paid by the Borrower and its Subsidiaries in cash as a
result of, and within 15 months after, such sale or disposition, in each
case specified in clauses (a), (b) and (c) to the extent, but only to the
extent, that the amounts so deducted are properly attributable to such
transaction or to the asset that is the subject thereof; provided, however,
that Net Cash Proceeds from the sale, lease, transfer or other disposition
of any asset shall not include any amount of cash proceeds received in
connection with such transaction to the extent such cash proceeds are
applied to replace the asset in respect of which such cash proceeds were
received, so long as such application is made within 12 months after the
occurrence of such sale, lease, transfer or other disposition.
"Nonratable Assignment" means an assignment by a Lender Party pursuant
to Section 8.07(a) of a portion of its rights and obligations under this
Agreement, other than an assignment of a uniform, and not a varying,
percentage of all of the rights and obligations of such Lender Party under
and in respect of all of the Facilities (other than the Letter of Credit
Facility and the Swing Line Facility).
"Note" means a Term Note or a Revolving Credit Note.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"Notice of Renewal" has the meaning specified in Section 2.01(d).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.02(b).
"Notice of Termination" has the meaning specified in Section 2.01(d).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to
<PAGE>
22
payment in respect of such claim is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, disputed, undisputed, legal,
equitable, secured or unsecured, and whether or not such claim is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 6.01(f). Without limiting the generality of the foregoing, the
Obligations of the Loan Parties under the Loan Documents include (a) the
obligation to pay principal, interest, Letter of Credit commissions,
charges, expenses, fees, attorneys' fees and disbursements, indemnities and
other amounts payable by any Loan Party under any Loan Document and (b) the
obligation of any Loan Party to reimburse any amount in respect of any of
the foregoing that any Lender Party, in its sole discretion, may elect to
pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and Development.
"Open Year" has the meaning specified in Section 4.01(bb).
"Other Taxes" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permanent Debt" means the senior unsecured notes or the senior
subordinated notes issued in an aggregate principal amount not to exceed
$115,000,000 by the Borrower as contemplated by the Engagement Letter dated
November 26, 1996 from NationsBanc Capital Markets, Inc. to J.W. Childs.
"Permanent Debt Documents" means the agreements and instruments which
govern the terms of the Permanent Debt, as the same may be amended,
modified or otherwise supplemented from time to time in accordance with the
provisions of this Agreement.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b) hereof; (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other similar
Liens arising in the ordinary course of business, in each case (i) in
existence less than 90 days from the date of creation thereof or (ii) being
contested in good faith by the Borrower or any Subsidiary in appropriate
proceedings (so long as the Borrower or such Subsidiary shall, in
accordance with GAAP, have set aside on its books adequate reserves with
respect thereto); (c) deposits or pledges made in the ordinary course of
business (i) in connection with, or to secure payment of, workers'
compensation, unemployment insurance, old age pensions or other social
security, (ii)
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23
in connection with casualty insurance maintained in accordance with the
provisions of any Loan Document, (iii) to secure the performance of bids,
tenders or leases, (iv) to secure statutory obligations or surety or appeal
bonds or (v) to secure indemnity, performance or other similar bonds in the
ordinary course of business; and (d) easements, rights of way and other
encumbrances on title to real property that do not render title to the
property encumbered thereby unmarketable or materially adversely affect the
use of such property for its present purposes.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledge Agreement" has the meaning specified in Section 5.01(q).
"Preferred Stock" means, with respect to any corporation, capital stock
issued by such corporation that is entitled to a preference or priority
over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
"Prime Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest announced publicly by Fleet in Boston,
Massachusetts from time to time, as Fleet's prime rate; and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
"Prime Rate Advance" means an Advance that bears interest as provided
in Section 2.07(a)(i).
"Pro Rata Share" of any amount means, with respect to any Revolving
Credit Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time and the denominator of which is the Revolving
Credit Facility at such time.
"Purchase Agreement" has the meaning specified in the recital of
parties hereto.
"Purchaser" has the meaning specified in the Preliminary Statements.
<PAGE>
24
"Receivables" means all Receivables referred to in Section 1(c) of the
Security Agreement.
"Redeemable" means, with respect to any capital stock or other
ownership or profit interest, Debt or other right or Obligation, any such
right or Obligation that (a) the issuer has undertaken to redeem on or
prior to the Termination Date at a fixed or determinable date or dates,
whether by operation of a sinking fund or otherwise, or upon the occurrence
of a condition not solely within the control of the issuer or (b) is
redeemable at the option of the holder; provided, however, that the term
"Redeemable" shall not include any such right or Obligation that is
redeemable solely by being exchanged for common stock of the issuer.
"Register" has the meaning specified in Section 8.07(d).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Related Documents" means the Purchase Agreement, the Merger
Agreement, the Stockholders Agreement, the Management Agreement, the Letter
Agreements, the Stock Purchase Facilities Documents, the Bridge Note
Documents and the Permanent Debt Documents.
"Required Lenders" means at any time Lenders owed or holding at least a
majority in interest of the sum of (a) the aggregate principal amount of
the Advances outstanding at such time, (b) the aggregate Available Amount
of all Letters of Credit outstanding at such time, (c) the aggregate unused
Commitments under the Term Facility at such time and (d) the aggregate
Unused Revolving Credit Commitments at such time; provided, however, that
if any Lender shall be a Defaulting Lender at such time, there shall be
excluded from the determination of Required Lenders at such time (A) the
aggregate principal amount of the Advances owing to such Lender (in its
capacity as a Lender) and outstanding at such time, (B) such Lender's Pro
Rata Share of the aggregate Available Amount of all Letters of Credit
issued by such Lender and outstanding at such time, (C) the unused Term
Commitments of such Lender at such time and (D) the Unused Revolving Credit
Commitment of such Lender at such time. For purposes of this definition,
the aggregate principal amount of Swing Line Advances owing to the Swing
Line Bank and of Letter of Credit Advances owing to the Issuing Bank and
the Available Amount of each Letter of Credit shall be considered to be
owed to the Revolving Credit Lenders ratably in accordance with their
respective Revolving Credit Commitments.
"Responsible Officer" means any executive officer of any Loan Party or
any of its Subsidiaries.
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25
"Revolving Credit Advance" has the meaning specified in Section
2.01(b).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders.
"Revolving Credit Commitment" means, with respect to any Revolving
Credit Lender at any time, the amount set forth opposite such Lender's name
on Schedule I hereto under the caption "Revolving Credit Commitment" or, if
such Lender has entered into one or more Assignments and Acceptances, set
forth for such Lender in the Register maintained by the Administrative
Agent pursuant to Section 8.07(d) as such Lender's "Revolving Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Revolving Credit Facility" means, at any time, the aggregate amount of
the Revolving Credit Lenders' Revolving Credit Commitments at such time.
"Revolving Credit Lender" means any Lender that has a Revolving Credit
Commitment.
"Revolving Credit Note" means a promissory note of the Borrower payable
to the order of any Revolving Credit Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the aggregate indebtedness of the Borrower
to such Lender resulting from the Revolving Credit Advances made by such
Lender.
"Secured Obligations" has the meaning specified in the Security
Agreement.
"Secured Parties" means the Administrative Agent and the Lender
Parties.
"Security Agreement" has the meaning specified in Section
3.01(o)(viii).
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and no Person other than the Loan Parties
and the ERISA Affiliates or (b) was so maintained and in respect of which
any Loan Party or any ERISA Affiliate could have liability under Section
4069 of ERISA in the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on
<PAGE>
26
its debts as they become absolute and matured, (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay such debts and liabilities as they
mature and (d) such Person is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which such
Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become
an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit issued under the
Letter of Credit Facility, other than a Trade Letter of Credit.
"Stock Purchase" has the meaning specified in the Preliminary
Statements.
"Stock Purchase Facilities" means the "Loans" referred to in the Stock
Purchase Facility Documents.
"Stock Purchase Facility Documents" means the Credit Agreement dated as
of December 23, 1996 among the Purchaser, the lenders party thereto and
NationsBank, as administrative agent and the "Loan Papers" referred to
therein, in each case as such agreements may be amended, modified or
otherwise supplemented in accordance with the provisions of this Agreement.
"Stockholders Agreement" means the Stockholders Agreement dated as of
December 23, 1996 among Holding, the Persons listed as the "JWC Holders" on
the signature pages thereof and the Persons listed as the "Other Holders"
on the signature pages thereof, as the same may be amended, modified or
otherwise supplemented from time to time in accordance with the provisions
of this Agreement.
"Subsequent Purchase" has the meaning specified in the Preliminary
Statements.
"Subordinated Debt" means any Debt of the Borrower that is subordinated
to the Obligations of the Borrower under the Loan Documents on, and that
otherwise contains, terms and conditions reasonably satisfactory to the
Required Lenders.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital
<PAGE>
27
or profits of such partnership, joint venture or limited liability company
or (c) the beneficial interest in such trust or estate is at the time
directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
"Surviving Debt" has the meaning set forth in Section 3.01(h).
"Swing Line Advance" means an advance made by (a) the Swing Line Bank
pursuant to Section 2.01(c) or (b) any Revolving Credit Lender pursuant to
Section 2.02(b).
"Swing Line Bank" means Fleet.
"Swing Line Borrowing" means a borrowing consisting of a Swing Line
Advance made by the Swing Line Bank.
"Swing Line Facility" has the meaning specified in Section 2.01(c).
"Tax Certificate" has the meaning specified in Section 5.03(o).
"Taxes" has the meaning specified in Section 2.12(a).
"Term Advance" has the meaning specified in Section 2.01(b).
"Term Borrowing" means a borrowing consisting of simultaneous Term
Advances of the same Type made by the Term Lenders.
"Term Commitment" means, with respect to any Term Lender at any time,
the amount set forth opposite such Lender's name on Schedule I hereto under
the caption "Term Commitment" or, if such Lender has entered into one or
more Assignments and Acceptances, set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(d) as such
Lender's "Term Commitment", as such amount may be reduced at or prior to
such time pursuant to Section 2.05.
"Term Facility" means, at any time, the aggregate amount of the Term
Lenders' Term Commitments at such time.
"Term Lender" means any Lender that has a Term Commitment.
"Term Note" means a promissory note of the Borrower payable to the
order of any Term Lender, in substantially the form of Exhibit A-1 hereto,
evidencing the
<PAGE>
28
indebtedness of the Borrower to such Lender resulting from the Term Advance
made by such Lender.
"Termination Date" means the earlier of December 31, 2001 and the date
of termination in whole of the Term Commitments, the Letter of Credit
Commitments and the Revolving Credit Commitments pursuant to Section 2.05
or 6.01.
"Trade Letter of Credit" means any Letter of Credit that is issued
under the Letter of Credit Facility for the benefit of a supplier of
Inventory to the Borrower or any of its Subsidiaries to effect payment for
such Inventory.
"Transaction" means the Stock Purchase and the Merger.
"Type" refers to the distinction between Advances bearing interest at
the Prime Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Revolving Credit Commitment" means, with respect to any
Revolving Credit Lender at any time, (a) such Lender's Revolving Credit
Commitment at such time minus (b) the sum of (i) the aggregate principal
amount of all Revolving Credit Advances, Swing Line Advances and Letter of
Credit Advances made by such Lender (in its capacity as a Lender) and
outstanding at such time, plus (ii) such Lender's Pro Rata Share of (A) the
aggregate Available Amount of all Letters of Credit outstanding at such
time, (B) the aggregate principal amount of all Letter of Credit Advances
made by the Issuing Bank pursuant to Section 2.03(c) and outstanding at
such time and (C) the aggregate principal amount of all Swing Line Advances
made by the Swing Line Bank pursuant to Section 2.01(c) and outstanding at
such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA, that is maintained for employees of any Loan Party or in respect of
which any Loan Party could have liability.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
E of Title IV of ERISA.
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29
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Term Advances. Each Term Lender
severally agrees, on the terms and conditions hereinafter set forth, to make a
single advance (a "Term Advance") to the Borrower on any Business Day during the
period from the date hereof until January 31, 1997 in an amount not to exceed
such Lender's Term Commitment at such time. The Term Borrowing shall consist of
Term Advances made simultaneously by the Term Lenders ratably according to their
Term Commitments. Amounts borrowed under this Section 2.01(a) and repaid or
prepaid may not be reborrowed.
(b) The Revolving Credit Advances. Each Revolving Credit Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "Revolving Credit Advance") to the Borrower from time to time
on any Business Day during the period from the date hereof until the Termination
Date in an amount for each such Advance not to exceed such Lender's Unused
Revolving Credit Commitment at such time. Each Revolving Credit Borrowing shall
be in an aggregate amount of $1,000,000 or an integral multiple of $250,000 in
excess thereof (other than a Borrowing the proceeds of which shall be used
solely to repay or prepay in full outstanding Swing Line Advances or outstanding
Letter of Credit Advances) and shall consist of Revolving Credit Advances made
simultaneously by the Revolving Credit Lenders ratably according to their
Revolving Credit Commitments. Within the limits of each Revolving Credit
Lender's Unused Revolving Credit Commitment in effect from time to time, the
Borrower may borrow under this Section 2.01(b), prepay pursuant to Section
2.06(a) and reborrow under this Section 2.01(b).
(c) The Swing Line Advances. The Borrower may request the Swing Line
Bank to make, and the Swing Line Bank shall make, on the terms and conditions
hereinafter set forth, Swing Line Advances to the Borrower from time to time on
any Business Day during the period from the date hereof until the Termination
Date (i) in an aggregate amount
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30
not to exceed at any time outstanding $5,000,000 (the "Swing Line Facility") and
(ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate
of the Unused Revolving Credit Commitments of the Revolving Credit Lenders at
such time. No Swing Line Advance shall be used for the purpose of funding the
payment of principal of any other Swing Line Advance. Each Swing Line Borrowing
shall be in an amount of $250,000 or an integral multiple of $100,000 in excess
thereof and shall be made as a Prime Rate Advance. Within the limits of the
Swing Line Facility and within the limits referred to in clause (ii) above, the
Borrower may borrow under this Section 2.01(c), repay pursuant to Section
2.04(d) or prepay pursuant to Section 2.06(a) and reborrow under this Section
2.01(c).
(d) Letters of Credit. The Issuing Bank agrees, on the terms and
conditions hereinafter set forth, to issue letters of credit (the "Letters of
Credit") for the account of the Borrower from time to time on any Business Day
during the period from the date hereof until 45 days before the Termination Date
(i) in an aggregate Available Amount for all Letters of Credit not to exceed at
any time the Issuing Bank's Letter of Credit Commitment at such time and (ii) in
an Available Amount for each such Letter of Credit not to exceed the Unused
Revolving Credit Commitments of the Revolving Credit Lenders at such time. No
Letter of Credit shall have an expiration date (including all rights of the
Borrower or the beneficiary to require renewal) later than the earlier of 45
days before the Termination Date and (A) in the case of a Standby Letter of
Credit one year after the date of issuance thereof, but may by its terms be
renewable annually upon notice (a "Notice of Renewal") given to the Issuing Bank
and the Administrative Agent on or prior to any date for notice of renewal set
forth in such Letter of Credit but in any event at least three Business Days
prior to the date of the proposed renewal of such Standby Letter of Credit and
upon fulfillment of the applicable conditions set forth in Article III unless
the Issuing Bank has notified the Borrower (with a copy to the Administrative
Agent) on or prior to the date for notice of termination set forth in such
Letter of Credit but in any event at least 30 Business Days prior to the date of
automatic renewal of its election not to renew such Standby Letter of Credit (a
"Notice of Termination") and (B) in the case of a Trade Letter of Credit, 45
days after the date of issuance thereof; provided that the terms of each Standby
Letter of Credit that is automatically renewable annually shall (x) require the
Issuing Bank to give the beneficiary named in such Standby Letter of Credit
notice of any Notice of Termination, (y) permit such beneficiary, upon receipt
of such notice, to draw under such Standby Letter of Credit prior to the date
such Standby Letter of Credit otherwise would have been automatically renewed
and (z) not permit the expiration date (after giving effect to any renewal) of
such Standby Letter of Credit in any event to be extended to a date later than
45 days before the Termination Date. If either a Notice of Renewal is not given
by the Borrower or a Notice of Termination is given by the Issuing Bank pursuant
to the immediately preceding sentence, such Standby Letter of Credit shall
expire on the date on which it otherwise would have been automatically renewed;
provided, however, that even in the absence of receipt of a Notice of Renewal
the Issuing Bank may in its discretion, unless
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31
instructed to the contrary by the Administrative Agent or the Borrower, deem
that a Notice of Renewal had been timely delivered and in such case, a Notice of
Renewal shall be deemed to have been so delivered for all purposes under this
Agreement. Within the limits of the Letter of Credit Facility, and subject to
the limits referred to above, the Borrower may request the issuance of Letters
of Credit under this Section 2.01(d), repay any Letter of Credit Advances
resulting from drawings thereunder pursuant to Section 2.03(c) and request the
issuance of additional Letters of Credit under this Section 2.01(d).
SECTION 2.02. Making the Advances. (a) Except as otherwise provided in
Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later
than 12:00 Noon (Boston, Massachusetts time) on the third Business Day prior to
the date of the proposed Borrowing in the case of a Borrowing consisting of
Eurodollar Rate Advances, or the first Business Day prior to the date of the
proposed Borrowing in the case of a Borrowing consisting of Prime Rate Advances,
by the Borrower to the Administrative Agent, which shall give to each
Appropriate Lender prompt notice thereof by telecopier. Each such notice of a
Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately
in writing or telecopier, in substantially the form of Exhibit B hereto,
specifying therein the requested (i) date of such Borrowing, (ii) Facility under
which such Borrowing is to be made, (iii) Type of Advances comprising such
Borrowing, (iv) aggregate amount of such Borrowing and (v) in the case of a
Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for
each such Advance. Each Appropriate Lender shall, before 11:00 A.M. (Boston,
Massachusetts time) on the date of such Borrowing, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing in accordance with the respective Commitments under the
applicable Facility of such Lender and the other Appropriate Lenders. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower by crediting the Borrower's Account.
(b) Each Swing Line Borrowing shall be made on notice, given not later
than 12:00 Noon (Boston, Massachusetts time) on the date of the proposed Swing
Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative
Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line
Borrowing") shall be by telephone, confirmed immediately in writing, or
telecopier, specifying therein the requested (i) date of such Borrowing, (ii)
amount of such Borrowing and (iii) maturity of such Borrowing (which maturity
shall be no later than the seventh day after the requested date of such
Borrowing). The Swing Line Bank will make the amount of the requested Swing Line
Advance available to the Administrative Agent at the Administrative Agent's
Account, in same day funds. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Administrative Agent will make such funds available to the Borrower by
crediting the Borrower's Account. Upon written demand by the Swing Line Bank,
with a copy of such demand to the Administrative Agent, each
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32
other Revolving Credit Lender shall purchase from the Swing Line Bank, and the
Swing Line Bank shall sell and assign to each such other Revolving Credit
Lender, such other Lender's Pro Rata Share of such outstanding Swing Line
Advance as of the date of such demand, by making available for the account of
its Applicable Lending Office to the Administrative Agent for the account of the
Swing Line Bank, by deposit to the Administrative Agent's Account, in same day
funds, an amount equal to the portion of the outstanding principal amount of
such Swing Line Advance to be purchased by such Lender. The Borrower hereby
agrees to each such sale and assignment. Each Revolving Credit Lender agrees to
purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the
Business Day on which demand therefor is made by the Swing Line Bank, provided
that notice of such demand is given not later than 11:00 A.M. (Boston,
Massachusetts time) on such Business Day or (ii) the first Business Day next
succeeding such demand if notice of such demand is given after such time. Upon
any such assignment by the Swing Line Bank to any other Revolving Credit Lender
of a portion of a Swing Line Advance, the Swing Line Bank represents and
warrants to such other Lender that the Swing Line Bank is the legal and
beneficial owner of such interest being assigned by it, but makes no other
representation or warranty and assumes no responsibility with respect to such
Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent
that any Revolving Credit Lender shall not have so made the amount of such Swing
Line Advance available to the Administrative Agent, such Revolving Credit Lender
agrees to pay to the Administrative Agent forthwith on demand such amount
together with interest thereon, for each day from the date of demand by the
Swing Line Bank until the date such amount is paid to the Administrative Agent,
at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such amount for the account of the Swing Line Bank on any Business Day, such
amount so paid in respect of principal shall constitute a Swing Line Advance
made by such Lender on such Business Day for purposes of this Agreement, and the
outstanding principal amount of the Swing Line Advance made by the Swing Line
Bank shall be reduced by such amount on such Business Day.
(c) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if
the aggregate amount of such Borrowing is less than $1,000,000 or if the
obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall
then be suspended pursuant to Section 2.09 or Section 2.10 and (ii) the Advance
may not be outstanding as part of more than 7 separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall
be irrevocable and binding on the Borrower. In the case of any Borrowing that
the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, if the Borrower fails to fulfill on or before the date specified in
such Notice of Borrowing for such Borrowing the applicable conditions set forth
in Article III and the Advance to be made by such Lender as part of such
Borrowing, as a result of such failure, is not made on such date,
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33
the Borrower will pay to the Administrative Agent for each Appropriate Lender an
amount equal to the present value (calculated in accordance with this Section
2.02(d)) of interest for the Interest Period specified in such Notice of
Borrowing on the amount of such Advance, at a rate per annum equal to the excess
of (a) the Eurodollar Rate that would have been in effect for such Interest
Period over (b) the Eurodollar Rate applicable on the date of determination to a
deemed Interest Period ending on the last day of such Interest Period. The
present value of such additional interest shall be calculated by discounting the
amount of such interest for each day in the Interest Period specified in such
Notice of Borrowing from such day to the date of such repayment or termination
at an interest rate per annum equal to the interest rate determined pursuant to
the preceding sentence, and by adding all such amounts for all such days during
such period. The determination by the Administrative Agent of such amount of
interest shall, in the absence of manifest error, be conclusive.
(e) Unless the Administrative Agent shall have received notice from an
Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Administrative 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 Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay or pay to the Administrative Agent
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid or paid to the Administrative Agent, at (i) in the
case of the Borrower, the interest rate applicable at such time under Section
2.07 to Advances comprising such Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall pay to the Administrative Agent
such corresponding amount, such amount so paid shall constitute such Lender's
Advance as part of such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters
of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 12:00 Noon (Boston, Massachusetts time) on the
third Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to the Issuing Bank, which shall give to the
Administrative Agent and each Revolving Credit
<PAGE>
34
Lender prompt notice thereof by telecopier. Each such notice of issuance of a
Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed
immediately in writing or telecopier, specifying therein the requested (A) date
of such issuance (which shall be a Business Day), (B) Available Amount of such
Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and
address of the beneficiary of such Letter of Credit and (E) form of such Letter
of Credit, and shall be accompanied by such application and agreement for letter
of credit as the Issuing Bank may specify to the Borrower for use in connection
with such requested Letter of Credit (a "Letter of Credit Agreement"). If (x)
the requested form of such Letter of Credit is acceptable to the Issuing Bank in
its sole discretion and (y) it has not received notice of objection to such
issuance from Lenders holding at least a majority of the Revolving Credit
Commitments, the Issuing Bank will, upon fulfillment of the applicable
conditions set forth in Article III, make such Letter of Credit available to the
Borrower at its office referred to in Section 8.02 or as otherwise agreed with
the Borrower in connection with such issuance. In the event and to the extent
that the provisions of any Letter of Credit Agreement shall conflict with this
Agreement, the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to the
Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (B) to
each Revolving Credit Lender on the first Business Day of each month a written
report summarizing issuance and expiration dates of Letters of Credit issued
during the preceding month and drawings during such month under all Letters of
Credit and (C) to the Administrative Agent and each Revolving Credit Lender on
the first Business Day of each calendar quarter a written report setting forth
the average daily aggregate Available Amount during the preceding calendar
quarter of all Letters of Credit.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Letter of Credit Advance, which
shall be a Prime Rate Advance, in the amount of such draft. Upon written demand
by the Issuing Bank, with a copy of such demand to the Administrative Agent,
each Revolving Credit Lender shall purchase from the Issuing Bank, and the
Issuing Bank shall sell and assign to each such Revolving Credit Lender, such
Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the
date of such purchase, by making available for the account of its Applicable
Lending Office to the Administrative Agent for the account of the Issuing Bank,
by deposit to the Administrative Agent's Account, in same day funds, an amount
equal to the portion of the outstanding principal amount of such Letter of
Credit Advance to be purchased by such Lender. Promptly after receipt thereof,
the Administrative Agent shall transfer such funds to the Issuing Bank. The
Borrower hereby agrees to each such sale and assignment. Each Revolving Credit
Lender agrees to purchase its Pro Rata Share of an outstanding Letter
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35
of Credit Advance on (i) the Business Day on which demand therefor is made by
the Issuing Bank, provided notice of such demand is given not later than 11:00
A.M. ([Boston, Massachusetts] time) on such Business Day or (ii) the first
Business Day next succeeding such demand if notice of such demand is given after
such time. Upon any such assignment by the Issuing Bank to any other Revolving
Credit Lender of a portion of a Letter of Credit Advance, the Issuing Bank
represents and warrants to such other Lender that the Issuing Bank is the legal
and beneficial owner of such interest being assigned by it, free and clear of
any liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or any Loan Party. If and to the extent that any Revolving Credit Lender shall
not have so made the amount of such Letter of Credit Advance available to the
Administrative Agent, such Revolving Credit Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
its account or the account of the Issuing Bank, as applicable. If such Lender
shall pay to the Administrative Agent such amount for the account of the Issuing
Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Letter of Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Letter of Credit Advance made by the Issuing Bank shall be reduced by such
amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Term Advances. The Borrower
shall repay to the Administrative Agent for the ratable account of the Term
Lenders the aggregate outstanding principal amount of the Term Advances on the
following dates in the amounts indicated (which amounts shall be reduced as a
result of the application of prepayments in accordance with the order of
priority set forth in Section 2.06):
Date Amount
June 30, 1997 $800,000
October 31, 1997 800,000
June 30, 1998 800,000
December 31, 1998 800,000
June 30, 1999 800,000
December 31, 1999 800,000
June 30, 2000 800,000
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36
December 31, 2000 800,000
June 30, 2001 800,000
December 31, 2001 800,000
provided, however, that the final principal installment shall be repaid on the
Termination Date and in any event shall be in an amount equal to the aggregate
principal amount of the Term Advances outstanding on such date.
(b) Revolving Credit Advances. The Borrower shall repay to the
Administrative Agent for the ratable account of the Revolving Credit Lenders on
the Termination Date the aggregate outstanding principal amount of the Revolving
Credit Advances then outstanding.
(c) Swing Line Advances. The Borrower shall repay to the Administrative
Agent for the account of the Swing Line Bank and each other Revolving Credit
Lender that has made a Swing Line Advance the outstanding principal amount of
each Swing Line Advance made by each of them on the earlier of the maturity date
specified in the applicable Notice of Swing Line Borrowing (which maturity shall
be no later than the seventh day after the requested date of such Borrowing) and
the Termination Date.
(d) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of the Issuing Bank and each other
Revolving Credit Lender that has made a Letter of Credit Advance on the earlier
of demand and the Termination Date.
(ii) The Obligations of the Borrower under this Agreement, any Letter
of Credit Agreement and any other agreement or instrument relating to any Letter
of Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances:
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Borrower in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
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37
(C) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or
any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(E) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from the Guaranty or any other guarantee, for all
or any of the Obligations of the Borrower in respect of the L/C Related
Documents; or
(G) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Borrower or a guarantor (other than the
gross negligence or willful misconduct of the Issuing Bank).
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower may, upon at least five Business Days' notice to the
Administrative Agent, terminate in whole or reduce in part the unused portions
of the Term Commitments and the Letter of Credit Facility and the Unused
Revolving Credit Commitments; provided, however, that each partial reduction of
a Facility (i) shall be in an aggregate amount of $1,000,000 or an integral
multiple of $250,000 in excess thereof and (ii) shall be made ratably among the
Appropriate Lenders in accordance with their Commitments with respect to such
Facility.
(b) Mandatory. (i) On the date of the Term Borrowing, after giving
effect to such Term Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term Advances, the aggregate Term Commitments of
the Term Lenders shall be automatically and permanently reduced, on a pro rata
basis, by an amount equal to the amount by which the aggregate Term Commitments
immediately prior to such reduction exceed the aggregate unpaid principal amount
of the Term Advances then outstanding.
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38
(ii) The Letter of Credit Facility shall be permanently reduced from
time to time on the date of each reduction in the Revolving Credit Facility by
the amount, if any, by which the amount of the Letter of Credit Facility exceeds
the Revolving Credit Facility after giving effect to such reduction of the
Revolving Credit Facility.
SECTION 2.06. Prepayments. (a) Optional. The Borrower may, upon at
least one Business Day's notice in the case of Prime Rate Advances and three
Business Days' notice in the case of Eurodollar Rate Advances, in each case to
the Administrative Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding aggregate principal amount of the Advances comprising part of
the same Borrowing in whole or ratably in part, together with accrued interest
to the date of such prepayment on the aggregate principal amount prepaid;
provided, however, that (x) each partial prepayment (other than in respect of a
prepayment of the Swing Line Advances) shall be in an aggregate principal amount
of $250,000 or an integral multiple of $250,000 in excess thereof, (y) each
partial prepayment of Swing Line Advances shall be in an aggregate principal
amount of $250,000 or an integral multiple of $100,000 in excess thereof and (z)
if any prepayment of a Eurodollar Rate Advance is made on a date other than the
last day of an Interest Period for such Advance the Borrower shall also pay any
amounts owing pursuant to Section 8.04(c). In respect of each such optional
prepayment of the Term Facility, 50% of such prepayment shall be applied to the
installments of the Term Facility in direct order of maturity and the remaining
50% shall be applied to the installments of the Term Facility in inverse order
of maturity.
(b) Mandatory. (i) The Borrower shall, on the 15th day following each
date on which the Borrower delivers the annual financial statements pursuant to
Section 5.03(d) (commencing with Fiscal Year 1997), prepay an aggregate
principal amount of the Advances comprising part of the same Borrowings in an
amount equal to 75% of Excess Cash Flow for such Fiscal Year. Each such
prepayment shall be applied to the Term Facility; provided, however, that 50% of
such amount shall be applied to the installments of the Term Facility in direct
order of maturity and the remaining 50% shall be applied to the installments of
the Term Facility in inverse order of maturity. Upon the payment in full of the
Term Advances, there shall be no further mandatory prepayments pursuant to this
Section 2.05(b)(i).
(ii) The Borrower shall, on the third Business Day following the date
of receipt of the Net Cash Proceeds by any Loan Party or any of its Subsidiaries
from (A) the sale, lease, transfer or other disposition of any assets of any
Loan Party or any of its Subsidiaries (other than any sale, lease, transfer or
other disposition of assets pursuant to clause (i) of Section 5.02(e)), (B) the
incurrence or issuance by any Loan Party or any of its Subsidiaries of any Debt
(other than Debt incurred or issued pursuant to Section 5.02(b)), (C) the sale
or issuance by any Loan Party or any of its Subsidiaries of any capital stock or
other ownership or profit interest, any securities convertible into or
exchangeable for capital
<PAGE>
39
stock or other ownership or profit interest or any warrants, rights or options
to acquire capital stock or other ownership or profit interest and (D) any
Extraordinary Receipt received by or paid to or for the account of any Loan
Party or any of its Subsidiaries and not otherwise included in clause (A), (B)
or (C) above, prepay an aggregate principal amount of the Advances comprising
part of the same Borrowings equal to the amount of such Net Cash Proceeds;
provided, however, that if, on such date of receipt, any Debt is outstanding
under either the Stock Purchase Facilities Documents or the Bridge Note
Documents, the Net Cash Proceeds from the incurrence or issuance by any Loan
Party or any of its Subsidiaries of senior unsecured Debt or Subordinated Debt
may be applied to repay, prepay or redeem the Debt outstanding under the Stock
Purchase Facilities Documents or the Bridge Note Documents, as the case may be.
Each such prepayment shall be applied ratably to the Term Facility; provided,
however, that 50% of such amount shall be applied to the installments of the
Term Facility in direct order of maturity and the remaining 50% shall be applied
to the installments of the Term Facility in inverse order of maturity. Upon the
payment in full of the Term Advances, there shall be no further mandatory
prepayments pursuant to this Section 2.05(b)(ii).
(iii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Credit Advances comprising part of the same
Borrowings, the Letter of Credit Advances and the Swing Line Advances equal to
the amount by which (A) the sum of the aggregate principal amount of (x) the
Revolving Credit Advances, (y) the Letter of Credit Advances and (z) the Swing
Line Advances then outstanding plus the aggregate Available Amount of all
Letters of Credit then outstanding exceeds (B) the lesser of the Revolving
Credit Facility and the Loan Value of Eligible Collateral on such Business Day.
(iv) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in the L/C Cash Collateral
Account to equal the amount by which the aggregate Available Amount of all
Letters of Credit then outstanding exceeds the Letter of Credit Facility on such
Business Day.
(v) Prepayments of the Revolving Credit Facility made pursuant to
clause (iii) above shall be first applied to prepay Letter of Credit Advances
then outstanding until such Advances are paid in full, second applied to prepay
Swing Line Advances then outstanding until such Advances are paid in full, third
applied to prepay Revolving Credit Advances then outstanding comprising part of
the same Borrowings until such Advances are paid in full and fourth deposited in
the L/C Cash Collateral Account to cash collateralize 100% of the Available
Amount of the Letters of Credit then outstanding. Upon the drawing of any Letter
of Credit for which funds are on deposit in the L/C Cash Collateral Account,
such funds shall be applied to reimburse the Issuing Bank or the Revolving
Credit Lenders, as applicable.
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(vi) All prepayments under this subsection (b) shall be made together
with accrued interest to the date of such prepayment on the principal amount
prepaid.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Prime Rate Advances. During such periods as such Advance
is a Prime Rate Advance, a rate per annum equal at all times to the sum
of (A) the Prime Rate in effect from time to time plus (B) the
Applicable Margin in effect from time to time, payable in arrears last
day of each March, June, September and December during such periods and
on the date such Prime Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (A)
the Eurodollar Rate for such Interest Period for such Advance plus (B)
the Applicable Margin in effect on the first day of such Interest
Period, payable in arrears on the last day of such Interest Period and,
if such Interest Period has a duration of more than three months, on
each day that occurs during such Interest Period every three months
from the first day of such Interest Period and on the date such
Eurodollar Rate Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance of
a Default under Section 6.01(a) or 6.01(f), the Borrower shall pay interest on
(i) the unpaid principal amount of each Advance owing to each Lender, payable in
arrears on the dates referred to in clause (a)(i) or (a)(ii) above and on
demand, at a rate per annum equal at all times to 2% per annum above the rate
per annum required to be paid on such Advance pursuant to clause (a)(i) or
(a)(ii) above and (ii) to the fullest extent permitted by law, the amount of any
interest, fee or other amount payable hereunder that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid, in the case of interest, on the Type of Advance on which
such interest has accrued pursuant to clause (a)(i) or (a)(ii) above, and, in
all other cases, on Prime Rate Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a Notice of
Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give
notice to the
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41
Borrower and each Appropriate Lender of the applicable interest rate determined
by the Administrative Agent for purposes of clause (a)(i) or (ii).
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to the
Administrative Agent for the account of the Lenders a commitment fee, from the
date hereof in the case of each Initial Lender and from the effective date
specified in the Assignment and Acceptance pursuant to which it became a Lender
in the case of each other Lender until the Termination Date, payable in arrears
on the date of the initial Borrowing hereunder, thereafter quarterly on the last
Business Day of each March, June, September and December, commencing March 31,
1997, and on the Termination Date, at the rate of 1/2 of 1% per annum on the
average daily unused portion of each Appropriate Lender's Term Commitment and on
the sum of the average daily Unused Revolving Credit Commitment of such Lender
plus its Pro Rata Share of the average daily outstanding Swing Line Advances
during such quarter; provided, however, that no commitment fee shall accrue on
any of the Commitments of a Defaulting Lender so long as such Lender shall be a
Defaulting Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commission, payable in arrears quarterly on the last Business Day of each March,
June, September and December, commencing March 31, 1997, and on the earliest to
occur of the full drawing expiration, termination or cancellation of any such
Letter of Credit and on the Termination Date, on such Lender's Pro Rata Share of
the average daily aggregate Available Amount during such quarter of all Letters
of Credit outstanding from time to time at a rate per annum equal to the
Applicable Margin in effect from time to time for Eurodollar Advances comprising
a Revolving Credit Borrowing.
(ii) The Borrower shall pay to the Issuing Bank, for its own account,
such commissions, issuance fees, fronting fees, transfer fees and other fees and
charges in connection with the issuance or administration of each Letter of
Credit as the Borrower and the Issuing Bank shall agree.
(c) Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its own account such fees as may from time to time be
agreed between the Borrower and the Administrative Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower may on
any Business Day (without the payment of any fee or premium), upon notice given
to the Administrative Agent not later than 11:00 A.M. (Boston, Massachusetts
time) on the third Business Day prior to the date of the proposed Conversion and
subject to the provisions of Sections 2.07 and 2.10, Convert all or any portion
of the Advances of one Type comprising the same Borrowing into Advances of the
other Type; provided, however, that any Conversion of Eurodollar Rate Advances
into Prime Rate Advances shall be made only on
<PAGE>
42
the last day of an Interest Period for such Eurodollar Rate Advances, any
Conversion of Prime Rate Advances into Eurodollar Rate Advances shall be in an
amount not less than the minimum amount specified in Section 2.02(c), no
Conversion of any Advances shall result in more separate Borrowings than
permitted under Section 2.02(c) and each Conversion of Advances comprising part
of the same Borrowing under any Facility shall be made ratably among the
Appropriate Lenders in accordance with their Commitments under such Facility.
Each such notice of Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $1,000,000, such Advances shall
automatically Convert into Prime Rate Advances.
(ii) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Prime
Rate Advance.
(iii) Upon the occurrence and during the continuance of any Event of
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Prime Rate Advance
and (y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation after the date hereof or (ii) the compliance with any guideline or
request issued or promulgated after the date hereof from any central bank or
other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender Party of agreeing to make or of
making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue
or of issuing or maintaining Letters of Credit or of agreeing to make or of
making or maintaining Letter of Credit Advances (excluding for purposes of this
Section 2.10 any such increased costs resulting from (i) Taxes or Other Taxes
(as to which Section 2.12 shall govern) and (ii) changes in the basis of
taxation of overall net income or overall gross income by the United States or
by the foreign jurisdiction or state under the laws of which such Lender Party
is organized or has its Applicable Lending Office or any political subdivision
thereof), then the Borrower shall from time to time, on or prior to the third
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43
Business Day following receipt by the Borrower of the certificate referred to
below from such Lender Party (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender Party
additional amounts sufficient to compensate such Lender Party for such increased
cost; provided, however, that the Borrower shall not be responsible for costs
under this Section 2.10(a) arising more than 90 days prior to receipt by the
Borrower of the certificate from the affected Lender pursuant to this Section
2.10(a) with respect to such costs; provided further that a Lender Party
claiming additional amounts under this Section 2.10(a) agrees to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such a designation would avoid the need for, or reduce the amount of, such
increased cost that may thereafter accrue and would not, in the reasonable
judgment of such Lender Party, be otherwise disadvantageous to such Lender
Party. A certificate as to the amount of such increased cost (together with a
schedule setting forth in reasonable detail the calculation thereof), submitted
to the Borrower by such Lender Party, shall be conclusive and binding for all
purposes, absent manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request issued or promulgated after the date
hereof from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by such Lender Party or any corporation controlling
such Lender Party and that the amount of such capital is increased by or based
upon the existence of such Lender Party's commitment to lend or to issue Letters
of Credit hereunder and other commitments of such type or the issuance or
maintenance of the Letters of Credit (or similar contingent obligations), then,
on or prior to the third Business Day following receipt by the Borrower of the
certificate referred to below from such Lender Party (with a copy of such demand
to the Administrative Agent), the Borrower shall pay to the Administrative Agent
for the account of such Lender Party, from time to time as specified by such
Lender Party, additional amounts sufficient to compensate such Lender Party in
the light of such circumstances, to the extent that such Lender Party reasonably
determines such increase in capital to be allocable to the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder or to
the issuance or maintenance of any Letters of Credit; provided, however, that,
the Borrower shall not be responsible for costs under this Section 2.10(b)
arising more than 90 days prior to receipt by the Borrower of the certificate
from the affected Lender pursuant to this Section 2.10(b) with respect to such
costs. A certificate as to such amounts (together with a schedule setting forth
in reasonable detail the calculation thereof) submitted to the Borrower by such
Lender Party shall be conclusive and binding for all purposes, absent manifest
error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed at least a majority of the then aggregate unpaid
principal amount thereof Required Lenders notify the Administrative Agent that
the Eurodollar Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Lenders of making,
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44
funding or maintaining their Eurodollar Rate Advances for such Interest Period,
the Administrative Agent shall forthwith so notify the Borrower and the
Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under any
Facility will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Prime Rate Advance and (ii) the obligation of
the Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance under each
Facility under which such Lender has a Commitment will automatically, upon such
demand, Convert into a Prime Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist; provided, however, that, before making any such
demand, such Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a different
Eurodollar Lending Office if the making of such a designation would allow such
Lender or its Eurodollar Lending Office to continue to perform its obligations
to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar
Rate Advances and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, irrespective of any right of
counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 12:00 Noon (Boston, Massachusetts time) on the day when due in U.S.
dollars to the Administrative Agent at the Administrative Agent's Account in
same day funds. The Administrative Agent will promptly thereafter cause like
funds to be distributed (i) if such payment by the Borrower is in respect of
principal, interest, commitment fees or any other Obligation then payable
hereunder and under the Notes to more than one Lender Party, to such Lender
Parties for the account of their respective Applicable Lending Offices ratably
in accordance with the amounts of such respective Obligations then payable to
such Lender Parties and (ii) if such payment by the Borrower is in respect of
any Obligation then payable hereunder to one Lender Party, to such Lender Party
for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to
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Section 8.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender Party
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) If the Administrative Agent receives funds for application to the
Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such funds to each Lender Party ratably in
accordance with such Lender Party's proportionate share of the principal amount
of all outstanding Advances and the Available Amount of all Letters of Credit
then outstanding, in repayment or prepayment of such of the outstanding Advances
or other Obligations owed to such Lender Party, and for application to such
principal installments, as the Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note held by such Lender, to charge from time to
time against any or all of the Borrower's accounts with such Lender Party any
amount so due.
(d) All computations of interest, fees and Letter of Credit commissions
shall be made by the Administrative Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fees or
commissions are payable. Each determination by the Administrative Agent of an
interest rate, fee or commission hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such
<PAGE>
46
Lender Party. If and to the extent the Borrower shall not have so made such
payment in full to the Administrative Agent, each such Lender Party shall repay
to the Administrative Agent forthwith on demand such amount distributed to such
Lender Party together with interest thereon, for each day from the date such
amount is distributed to such Lender Party until the date such Lender Party
repays such amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder
or under the Notes shall be made, in accordance with Section 2.11, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender Party and the Administrative
Agent, taxes that are imposed on its overall net income by the United States and
taxes that are imposed on its overall net income (and franchise taxes imposed in
lieu thereof) by the state or foreign jurisdiction under the laws of which such
Lender Party or the Administrative Agent (as the case may be) is organized or
any political subdivision thereof and, in the case of each Lender Party, taxes
that are imposed on its overall net income (and franchise taxes imposed in lieu
thereof) by the state or foreign jurisdiction of such Lender Party's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note to any Lender Party
or the Administrative Agent, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.12) such Lender Party
or the Administrative 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 and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender Party and the
Administrative Agent for and hold it harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.12, imposed on or paid by
such Lender Party or the Administrative Agent (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification
<PAGE>
47
shall be made within 30 days from the date such Lender Party or the
Administrative Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Administrative Agent, at its address referred to in Section
8.02, the original or a certified copy of a receipt evidencing such payment. In
the case of any payment hereunder or under the Notes by or on behalf of the
Borrower through an account or branch outside the United States or by or on
behalf of the Borrower by a payor that is not a United States person, if the
Borrower determines that no Taxes are payable in respect thereof, the Borrower
shall furnish, or shall cause such payor to furnish, to the Administrative
Agent, at such address, an opinion of counsel acceptable to the Administrative
Agent stating that such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender or Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender Party in the case of each other Lender
Party, and from time to time thereafter as requested in writing by the Borrower
(but only so long thereafter as such Lender Party remains lawfully able to do
so), provide each of the Administrative Agent and the Borrower with two original
Internal Revenue Service forms 1001 or 4224, as appropriate, or any successor or
other form prescribed by the Internal Revenue Service, certifying that such
Lender Party is exempt from or entitled to a reduced rate of United States
withholding tax on payments pursuant to this Agreement or the Notes. If the
forms provided by a Lender Party at the time such Lender Party first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from Taxes unless and until such Lender Party provides the appropriate form
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; provided, however, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender Party becomes a party to this Agreement, the Lender
Party assignor was entitled to payments under subsection (a) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Lender Party assignee on such date. If any form or document referred to in this
subsection (e) requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the date hereof
by Internal Revenue Service form 1001 or 4224, that the Lender Party reasonably
considers to be confidential, the Lender Party shall give notice thereof to
<PAGE>
48
the Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide the Borrower with the appropriate form described in subsection (e) above
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under subsection (e) above), such Lender Party shall not be
entitled to indemnification under subsection (a) or (c) with respect to Taxes
imposed by the United States by reason of such failure; provided, however, that
should a Lender Party become subject to Taxes because of its failure to deliver
a form required hereunder, the Borrower shall take such steps as such Lender
Party shall reasonably request to assist such Lender Party to recover such
Taxes.
(g) Any Lender Party claiming any additional amounts payable pursuant
to this Section 2.12 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
(h) The Borrower shall not have an indemnification obligation under
subsection (a) or (c) with respect to Taxes imposed by the United States as a
result of a change in law occurring after the date hereof arising more than 90
days prior to receipt by the Borrower of notice from the affected Lender Party
with respect to such change in law.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) (a) on account of Obligations
due and payable to such Lender Party hereunder and under the Notes at such time
in excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such participations in the Obligations due and payable or
owing to them, as the case
<PAGE>
49
may be, as shall be necessary to cause such purchasing Lender Party to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender Party, such purchase from each other Lender Party shall be rescinded and
such other Lender Party shall repay to the purchasing Lender Party the purchase
price to the extent of such Lender Party's ratable share (according to the
proportion of (i) the purchase price paid to such Lender Party to (ii) the
aggregate purchase price paid to all Lender Parties) of such recovery together
with an amount equal to such Lender Party's ratable share (according to the
proportion of (i) the amount of such other Lender Party's required repayment to
(ii) the total amount so recovered from the purchasing Lender Party) of any
interest or other amount paid or payable by the purchasing Lender Party in
respect of the total amount so recovered. The Borrower agrees that any Lender
Party so purchasing a participation from another Lender Party pursuant to this
Section 2.13 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender Party were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and
issuances of Letters of Credit shall be available (and the Borrower agrees that
it shall use such proceeds and Letters of Credit) solely to pay transaction fees
and expenses, refinance the Existing Debt and provide working capital for the
Borrower and its Subsidiaries.
SECTION 2.15. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default (other than a Default which occurs directly as a result of a
Lender being a Defaulting Lender) shall occur or be continuing at such time and
to the fullest extent permitted by applicable law, set off and otherwise apply
the Obligation of the Borrower to make such payment to or for the account of
such Defaulting Lender against the obligation of such Defaulting Lender to make
such Defaulted Advance. In the event that, on any date, the Borrower shall so
set off and otherwise apply its obligation to make any such payment against the
obligation of such Defaulting Lender to make any such Defaulted Advance on or
prior to such date, the amount so set off and otherwise applied by the Borrower
shall constitute for all purposes of this Agreement and the other Loan Documents
an Advance by such Defaulting Lender made on the date under the Facility
pursuant to which such Defaulted Advance was originally required to have been
made pursuant to Section 2.01. Such Advance shall be a Prime Rate Advance and
shall be considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the
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50
Borrower exercises its right of set-off pursuant to this subsection (a) and
shall set forth in such notice (A) the name of the Defaulting Lender and the
Defaulted Advance required to be made by such Defaulting Lender and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this subsection (a). Any portion of such payment otherwise required
to be made by the Borrower to or for the account of such Defaulting Lender which
is paid by the Borrower, after giving effect to the amount set off and otherwise
applied by the Borrower pursuant to this subsection (a), shall be applied by the
Administrative Agent as specified in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
the Administrative Agent or any of the other Lender Parties and (iii) the
Borrower shall make any payment hereunder or under any other Loan Document to
the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall so
apply any such amount to the payment of any such Defaulted Amount on any date,
the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents payment, to such extent,
of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Lender Parties, ratably in
accordance with the respective portions of such Defaulted Amounts payable at
such time to the Administrative Agent and such other Lender Parties and, if the
amount of such payment made by the Borrower shall at such time be insufficient
to pay all Defaulted Amounts owing at such time to the Administrative Agent and
the other Lender Parties, in the following order of priority:
(i) first, to the Administrative Agent for any Defaulted
Amount then owing to the Administrative Agent; and
(ii) second, to any other Lender Parties for any Defaulted
Amounts then owing to such other Lender Parties, ratably in accordance
with such respective Defaulted Amounts then owing to such other Lender
Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
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51
(c) In the event that, at any one time, (i) any Lender Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower, the Administrative Agent or any
other Lender Party shall be required to pay or distribute any amount hereunder
or under any other Loan Document to or for the account of such Defaulting
Lender, then the Borrower or such other Lender Party shall pay such amount to
the Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by applicable law, hold in escrow such amount
otherwise held by it. Any funds held by the Administrative Agent in escrow under
this subsection (c) shall be deposited by the Administrative Agent in an account
with Fleet, in the name and under the control of the Administrative Agent, but
subject to the provisions of this subsection (c). The terms applicable to such
account, including the rate of interest payable with respect to the credit
balance of such account from time to time, shall be Fleet's standard terms
applicable to escrow accounts maintained with it. Any interest credited to such
account from time to time shall be held by the Administrative Agent in escrow
under, and applied by the Administrative Agent from time to time in accordance
with the provisions of, this subsection (c). The Administrative Agent shall, to
the fullest extent permitted by applicable law, apply all funds so held in
escrow from time to time to the extent necessary to make any Advances required
to be made by such Defaulting Lender and to pay any amount payable by such
Defaulting Lender hereunder and under the other Loan Documents to the
Administrative Agent or any other Lender Party, as and when such Advances or
amounts are required to be made or paid and, if the amount so held in escrow
shall at any time be insufficient to make and pay all such Advances and amounts
required to be made or paid at such time, in the following order of priority:
(i) first, to the Administrative Agent for any amount then due
and payable by such Defaulting Lender to the Administrative Agent
hereunder;
(ii) second, to any other Lender Parties for any amount then
due and payable by such Defaulting Lender to such other Lender Parties
hereunder, ratably in accordance with such respective amounts then due
and payable to such other Lender Parties; and
(iii) third, to the Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
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52
(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that the Administrative Agent or any Lender Party may have against such
Defaulting Lender with respect to any Defaulted Amount.
SECTION 2.16. Removal of Lender. In the event that any Lender Party
demands payment of costs or additional amounts pursuant to Section 2.10 or
Section 2.12 or asserts, pursuant to Section 2.10(d) that it is unlawful for
such Lender Party to make Eurodollar Rate Advances, then (subject to such Lender
Party's right to rescind such demand or assertion within 10 days after the
notice from the Borrower referred to below) the Borrower may, upon 20 days'
prior written notice to such Lender Party and the Administrative Agent, elect to
cause such Lender Party to assign its Advances and Commitments in full to an
assignee institution selected by the Borrower that meets the criteria of an
Eligible Assignee and is reasonably satisfactory to the Administrative Agent, so
long as such Lender Party receives payment in full in cash of the outstanding
principal amount of all Advances made by it and all accrued and unpaid interest
thereon and all other amounts due and payable to such Lender Party as of the
date of such assignment (including without limitation amounts owing pursuant to
Section 2.10 or 2.3), and in such case such Lender Party agrees to make such
assignment, and such assignee shall agree to accept such assignment and assume
all obligations of such Lender Party hereunder, in accordance with Section 8.07.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The
obligation of each Lender to make an Advance or of the Issuing Bank to issue a
Letter of Credit on the occasion of the Initial Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent before or
concurrently with the Initial Extension of Credit:
(a) The final terms and conditions of the Merger, including,
without limitation, all legal and tax aspects thereof, shall be (i) as
described in the Commitment Letter dated November 26, 1996 from Fleet
to J.W. Childs and otherwise consistent in all material respects with
the description thereof received in writing as part of the
Pre-Commitment Information and (ii) otherwise reasonably satisfactory
to the Lenders.
(b) The Merger Agreement shall be in full force and effect.
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53
(c) The Additional Purchase shall have been consummated in all
material respects in accordance with the Merger Agreement, without any
waiver or amendment not consented to by the Lender Parties of any
material term, provision or condition set forth therein, and in
compliance with all applicable laws.
(d) The Lender Parties shall be satisfied in their reasonable
discretion that the restrictions in Section 2.03 of the Delaware
General Corporation Law are not applicable to the Merger or that any
conditions to avoiding the restrictions contained therein have been
satisfied.
(e) The Lender Parties shall be satisfied with the corporate
and legal structure and capitalization of each Loan Party and each of
its Subsidiaries, including the terms and conditions of the charter,
bylaws and each class of capital stock of each Loan Party and each such
Subsidiary and of each agreement or instrument relating to such
structure or capitalization.
(f) The Lender Parties shall be satisfied with the terms and
conditions of the equity (the "Equity") provided on or prior to the
consummation of the Additional Purchase by the Equity Investors,
consisting of not less than $65,000,000 of common and preferred equity
(not less than $55,000,000 of which shall be common equity); and
Holding shall have received at least $65,000,000 in gross cash proceeds
from the Equity.
(g) The terms of the Stock Purchase Facilities shall be
consistent with the terms of the Acquisition Financing Commitment
Letter dated November 26, 1996 among NationsBank, NationsBanc Capital
Markets, Inc. and J.W. Childs and shall otherwise be reasonably
satisfactory to the Lender Parties; and the Purchaser shall have
received sufficient gross cash proceeds from borrowings under the Stock
Purchase Facilities to consummate the Additional Purchase.
(h) The Lender Parties shall be satisfied that all Existing
Debt, other than the Debt of the Borrower set forth on Schedule XIV
(the "Surviving Debt"), has been prepaid, redeemed or defeased in full
or otherwise satisfied and extinguished.
(i) Before giving effect to the Additional Purchase and the
other transactions contemplated by this Agreement, there shall have
occurred no Material Adverse Change since October 28, 1995.
(j) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) could reasonably be expected to have a
Material Adverse Effect other than the matters described on Schedule II
(the
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54
"Disclosed Litigation") or (ii) purports to affect the legality,
validity or enforceability of the Additional Purchase, the Merger, this
Agreement, any Note, any other Loan Document, any Related Document or
the consummation of the transactions contemplated hereby, and there
shall have been no material adverse change in the status, or financial
effect on the Borrower or any of its Subsidiaries, of the Disclosed
Litigation from that described on Schedule II.
(k) The Lender Parties shall have been given such access to
the management, records, books of account, contracts and properties of
the Borrower and its Subsidiaries as they shall have requested and
shall have received such financial business and other information
regarding each of the foregoing Persons as they shall have reasonably
requested.
(l) All governmental and third party consents and approvals
necessary in connection with the Transaction and the Facilities shall
have been obtained (without the imposition of any conditions that are
not acceptable to the Lender Parties) and shall remain in effect; all
applicable waiting periods shall have expired without any adverse
action being taken by any competent authority; and no law or regulation
shall be applicable in the reasonable judgment of the Lender Parties
that restrains, prevents or imposes materially adverse conditions upon
the Transaction or the Facilities.
(m) All of the information provided by or on behalf of J.W.
Childs or by or on behalf of the Borrower to the Administrative Agent
and the Lender Parties prior to their commitment in respect of the
Facilities (the "Pre-Commitment Information") shall be true and correct
in all material respects; and no additional information shall have come
to the attention of the Administrative Agent or the Lender Parties that
is inconsistent in any material respect with the Pre-Commitment
Information or that could reasonably be expected to have a Material
Adverse Effect.
(n) The Borrower shall have paid all accrued fees of the
Administrative Agent and the Lender Parties.
(o) The Administrative Agent shall have received on or before
the day of the Initial Extension of Credit the following, each dated
such day (unless otherwise specified), in form and substance
satisfactory to the Lender Parties (unless otherwise specified) and
(except for the Notes) in sufficient copies for each Lender Party:
(i) The Notes payable to the order of the Lenders.
(ii) Certified copies of the resolutions of the Board
of Directors of the Borrower and each other Loan Party
approving the Stock Purchase, Merger, this Agreement, the
Notes, each other Loan Document and each
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55
Related Document to which it is or is to be a party, and of
all documents evidencing other necessary corporate action and
governmental and other third party approvals and consents, if
any, with respect to the Stock Purchase, the Merger, this
Agreement, the Notes, each other Loan Document and each
Related Document.
(iii) A copy of the charter of the Borrower and each
other Loan Party and each amendment thereto, certified (as of
a date reasonably near the date of the Initial Extension of
Credit) by the Secretary of State of the jurisdiction of its
incorporation as being a true and correct copy thereof.
(iv) A copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the date of the Initial Extension of Credit,
listing the charter of the Borrower and each other Loan Party
and each amendment thereto on file in his office and
certifying that (A) such amendments are the only amendments to
the Borrower's or such other Loan Party's charter on file in
his office, (B) the Borrower and each other Loan Party have
paid all franchise taxes to the date of such certificate and
(C) the Borrower and each other Loan Party are duly
incorporated and in good standing under the laws of the State
of the jurisdiction of its incorporation.
(v) A copy of a certificate of the Secretary of State
of each of the State of Ohio and the State of Iowa, dated
reasonably near the date of the Initial Extension of Credit,
stating that the Borrower is duly qualified and in good
standing as a foreign corporation in such State and has filed
all annual reports required to be filed to the date of such
certificate.
(vi) A certificate of the Borrower and each other
Loan Party, signed on behalf of the Borrower and such other
Loan Party by its President or a Vice President and its
Secretary or any Assistant Secretary, dated the date of the
Initial Extension of Credit (the statements made in which
certificate shall be true on and as of the date of the Initial
Extension of Credit), certifying as to (A) the absence of any
amendments to the charter of the Borrower or such other Loan
Party since the date of the Secretary of State's certificate
referred to in Section 3.01(m)(iii), (B) a true and correct
copy of the bylaws of the Borrower and such other Loan Party
as in effect on the date of the Initial Extension of Credit,
(C) the due incorporation and good standing of the Borrower
and such other Loan Party as a corporation organized under the
laws of the State of Delaware, and the absence of any
proceeding for the dissolution or liquidation of the Borrower,
the Company or such other Loan Party, (D) the truth of the
representations and warranties contained in the Loan
<PAGE>
56
Documents as though made on and as of the date of the Initial
Extension of Credit and (E) the absence of any event occurring
and continuing, or resulting from the Initial Extension of
Credit, that constitutes a Default.
(vii) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party certifying
the names and true signatures of the officers of the Borrower
and such other Loan Party authorized to sign this Agreement,
the Notes, each other Loan Document and each Related Document
to which they are or are to be parties and the other documents
to be delivered hereunder and thereunder.
(viii) A security agreement in substantially the form
of Exhibit D (together with each other security agreement
delivered pursuant to Section 5.01(p), in each case as
amended, supplemented or otherwise modified from time to time
in accordance with its terms, the "Security Agreement"), duly
executed by the Borrower, together with:
(A) certificates representing the Pledged
Shares referred to therein accompanied by undated
stock powers executed in blank and instruments
evidencing the Pledged Debt referred to therein
indorsed in blank,
(B) acknowledgment copies or stamped receipt
copies of proper financing statements, duly filed on
or before the day of the Initial Extension of Credit
under the Uniform Commercial Code of all
jurisdictions that the Administrative Agent may deem
necessary or desirable in order to perfect and
protect the first priority liens and security
interests created under the Security Agreement,
covering the Collateral described in the Security
Agreement,
(C) completed requests for information,
dated on or before the date of the Initial Extension
of Credit, listing the financing statements referred
to in clause (B) above and all other effective
financing statements filed in the jurisdictions
referred to in clause (B) above that name the
Borrower as debtor, together with copies of such
other financing statements,
(D) evidence of the completion of all other
recordings and filings of or with respect to the
Security Agreement that the Administrative Agent may
deem necessary or desirable in order to perfect and
protect the Liens created thereby,
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57
(E) evidence of the insurance required by
the terms of the Security Agreement,
(F) copies of the Assigned Agreements
referred to in the Security Agreement, together with
a consent to such assignment, in substantially the
form of Exhibit B to the Security Agreement, duly
executed by each party to such Assigned Agreements
other than the Borrower, and
(G) evidence that all other action that the
Administrative Agent may deem necessary or desirable
in order to perfect and protect the first priority
liens and security interests created under the
Security Agreement has been taken.
(ix) Certified copies of each of the Related
Documents in existence on such date, duly executed by the
parties thereto and in form and substance satisfactory to the
Lender Parties, together with all agreements, instruments and
other documents delivered in connection therewith, in each
case certified by a Responsible Officer.
(x) Certificates, in substantially the form of
Exhibit G, attesting to the Solvency of each Loan Party after
giving effect to the Additional Purchase and the other
transactions contemplated hereby, from its chief financial
officer.
(xi) Evidence of insurance naming the Administrative
Agent as insured and loss payee with such responsible and
reputable insurance companies or associations, and in such
amounts and covering such risks, as is satisfactory to the
Lender Parties, including, without limitation, business
interruption insurance.
(xii) Certified copies of each employment agreement
and other compensation arrangement with each executive officer
of any Loan Party or any of its Subsidiaries.
(xiii) Certified copies of all Material Contracts of
each Loan Party and its Subsidiaries, in each case certified
by a Responsible Officer.
(xiv) A Borrowing Base Certificate.
(xv) A favorable opinion of Sullivan & Worcester,
counsel for the Purchaser and Holding, in substantially the
form of Exhibit E hereto and as to
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58
such other matter as any Lender Party through the
Administrative Agent may reasonably request.
(xvi) A favorable opinion of Dickinson, Mackaman,
Tyler & Hagen, P.C., local counsel to the Loan Parties in the
State of Iowa, in substantially the form of Exhibit F hereto
and as to such other matters as any Lender Party through the
Administrative Agent may reasonably request.
(xvii) A favorable opinion of Shearman & Sterling,
counsel for the Administrative Agent, in form and substance
satisfactory to the Administrative Agent.
SECTION 3.02. Conditions Precedent to the First Extension of Credit on
or After the Date of the Consummation of the Merger. The obligation of each
Lender to make an Advance or of the Issuing Bank to issue a Letter of Credit on
the occasion of the first Extension of Credit hereunder on or after the date of
the consummation of the Merger is subject to the following conditions precedent
before or concurrently with such Extension of Credit:
(a) The proxy statement mailed to the Borrower's shareholders
in connection with the Merger (the "Proxy Statement") shall be in form
and substance reasonably satisfactory to the Lenders.
(b) The Merger shall have been consummated in all material
respects in accordance with the Merger Agreement and the Proxy
Statement, without any waiver or amendment not consented to by the
Lenders of any material term, provision or condition set forth therein,
and in compliance with all applicable laws.
(c) Holding shall own all of the outstanding capital stock of
the Borrower, free and clear of all Liens, except those created under
the Collateral Documents and those created under the Bridge Note
Documents.
(d) The Borrower shall have received at least $100,000,000 in
gross cash proceeds from the issuance of the Permanent Debt or, in lieu
thereof, the Bridge Notes, and Holding shall have received at least
$4,000,000 of equity (which shall be in the form of rolled-over stock
and options) from certain members of management. The terms of the
Permanent Notes shall be consistent with the terms of the Engagement
Letter dated November 26, 1996 from NationsBanc Capital Markets, Inc.
to J.W. Childs and shall otherwise be reasonably satisfactory to the
Lender Parties; and, if the Bridge Notes are issued in lieu of the
Permanent Debt, the terms of the Bridge Notes shall be consistent with
the terms of the Bridge Commitment Letter
<PAGE>
59
dated November 26, 1996 from NationsBridge L.L.C. to J.W. Childs and
shall otherwise be reasonably satisfactory to the Lender Parties.
(e) After giving effect to the Merger and the other
transactions contemplated by this Agreement, there shall have occurred
no Material Adverse Change since October 28, 1995.
(f) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) could reasonably be expected to have a
Material Adverse Effect other than the Disclosed Litigation or (ii)
purports to affect the legality, validity or enforceability of the
Transaction, this Agreement, any Note, any other Loan Document, any
Related Document or the consummation of the transactions contemplated
hereby, and there shall have been no material adverse change in the
status, or financial effect on the Borrower or any of its Subsidiaries,
of the Disclosed Litigation from that described on Schedule II.
(g) All governmental and third party consents and approvals
necessary in connection with the Transaction and the Facilities shall
have been obtained (without the imposition of any conditions that are
not acceptable to the Lender Parties) and shall remain in effect; all
applicable waiting periods shall have expired without any adverse
action being taken by any competent authority; and no law or regulation
shall be applicable in the reasonable judgment of the Lender Parties
that restrains, prevents or imposes materially adverse conditions upon
the Transaction or the Facilities.
(h) The Borrower shall have paid all accrued fees and expenses
of the Administrative Agent and the Lender Parties (including the
accrued fees and expenses of counsel to the Administrative Agent and
local counsel to the Lender Parties).
(i) The Administrative Agent shall have received on or before
the day of such Extension of Credit the following, each dated such day
(unless otherwise specified), in form and substance satisfactory to the
Lender Parties (unless otherwise specified) and in sufficient copies
for each Lender Party:
(i) A copy of the charter of the Borrower and each
other Lender Party and each amendment thereto, certified (as
of a date reasonably near the date of such Extension of
Credit) by the Secretary of State of the jurisdiction of its
incorporation as being a true and correct copy thereof;
(ii) A copy of a certificate of the Secretary of
State of the jurisdiction of its incorporation, dated
reasonably near the date of such Extension of Credit, listing
the charter of the Borrower and each other Lender
<PAGE>
60
Party and each amendment thereto on file in his office and
certifying that (A) such amendments are the only amendments to
the Borrower's or such other Lender Party's charter on file in
his office, (B) the Borrower and each other Lender Party have
paid all franchise taxes to the date of such certificate and
(C) the Borrower and each other Lender Party are duly
incorporated and in good standing under the laws of the State
of the jurisdiction of its incorporation;
(iii) Certified copies of a certificate of merger or
other confirmation from the Secretary of State of the State of
Delaware satisfactory to the Lender Parties of the
consummation of the Merger.
(iv) Certified copies of each of the Related
Documents in existence on such date (and not previously
delivered to the Lender Parties pursuant to the provisions of
Section 3.01), duly executed by the parties thereto and in
form and substance satisfactory to the Lender Parties,
together with all agreements, instruments and other documents
delivered in connection therewith, in each case certified by a
Responsible Officer.
(v) Certificates, in substantially the form of
Exhibit G, attesting to the Solvency of each Lender Party
after giving effect to the Merger and the other transactions
contemplated hereby, from its chief financial officer.
(vi) A favorable opinion of Sullivan & Worcester,
counsel for the Purchaser and Holding, in substantially the
form of Exhibit G hereto and as to such other matters as any
Lender Party through the Administrative Agent may reasonably
request.
SECTION 3.03. Conditions Precedent to Each Borrowing and Issuance. The
obligation of each Appropriate Lender to make an Advance (other than a Letter of
Credit Advance made by the Issuing Bank or a Revolving Credit Lender pursuant to
Section 2.03(c) and a Swing Line Advance made by a Revolving Credit Lender
pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the
Initial Extension of Credit), and the obligation of the Issuing Bank to issue a
Letter of Credit (including the initial issuance) or renew a Letter of Credit
and the right of the Borrower to request a Swing Line Borrowing, shall be
subject to the further conditions precedent that on the date of such Borrowing
or issuance or renewal (a) the following statements shall be true (and each of
the giving of the applicable Notice of Borrowing, Notice of Swing Line
Borrowing, Notice of Issuance or Notice of Renewal and the acceptance by the
Borrower of the proceeds of such Borrowing or of such Letter of Credit or the
renewal of such Letter of Credit shall constitute a representation and warranty
by the Borrower that both on the date of such notice and on the date of such
Borrowing or issuance or renewal such statements are true):
<PAGE>
61
(i) the representations and warranties contained in each Loan
Document are correct on and as of such date, before and after giving
effect to such Borrowing or issuance or renewal and to the application
of the proceeds therefrom, as though made on and as of such date other
than any such representations or warranties that, by their terms, refer
to a specific date other than the date of such Borrowing or issuance or
renewal, in which case as of such specific date;
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or renewal or from the application of
the proceeds therefrom, that constitutes a Default; and
(iii) for each Revolving Credit Advance or Swing Line Advance
made by the Swing Line Bank or issuance or renewal of any Letter of
Credit, the sum of the Loan Values of the Eligible Collateral exceeds
the aggregate principal amount of the Revolving Credit Advances plus
Swing Line Advances plus Letter of Credit Advances to be outstanding
plus the aggregate Available Amount of all Letters of Credit then
outstanding after giving effect to such Advance or issuance or renewal,
respectively;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Appropriate Lender through the Administrative Agent
may reasonably request.
SECTION 3.04. Determinations Under Sections 3.01 and 3.02. For purposes
of determining compliance with the conditions specified in Section 3.01 or 3.02,
each Lender Party shall be deemed to have consented to, approved or accepted or
to be satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender Parties
unless an officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit or the extension of Credit
specified in Section 3.02, as the case may be, specifying its objection thereto
and if the Initial Extension of Credit or such Extension of Credit consists of a
Borrowing, such Lender Party shall not have made available to the Administrative
Agent such Lender Party's ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. Each of Holding, the
Purchaser and the Borrower represents and warrants as follows:
<PAGE>
62
(a) Each Loan Party (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to so
qualify or be licensed is not reasonably likely to have a Material
Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted. All of the outstanding capital stock of the Purchaser has
been validly issued, is fully paid and non-assessable and is owned by
Holding free and clear of all Liens; and all of the outstanding capital
stock of the Borrower has been validly issued, is fully paid and
non-assessable and, on and after the date of the consummation of the
Merger, is owned by Holding, free and clear of all Liens, except those
created under the Collateral Documents and those created under the
Bridge Note Documents.
(b) Set forth on Schedule III hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
date hereof (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the date hereof and the
percentage of the outstanding shares of each such class owned (directly
or indirectly) by such Loan Party and the number of shares covered by
all outstanding options, warrants, rights of conversion or purchase and
similar rights at the date hereof. All of the outstanding capital stock
of all of such Subsidiaries has been validly issued, is fully paid and
non-assessable and is owned by such Loan Party or one or more of its
Subsidiaries free and clear of all Liens, except those created under
the Collateral Documents. Each such Subsidiary (i) is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, (ii) is duly qualified and in
good standing as a foreign corporation in each other jurisdiction in
which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed is not reasonably likely to have a
Material Adverse Effect and (iii) has all requisite corporate power and
authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted.
(c) The execution, delivery and performance by each Loan Party
of this Agreement, the Notes, each other Loan Document and each Related
Document to which it is or is to be a party, and the consummation of
the Stock Purchase, the Merger and the other transactions contemplated
hereby, are within such Loan Party's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene
such Loan Party's charter or bylaws, (ii) violate any law
<PAGE>
63
(including, without limitation, the Securities Exchange Act of 1934 and
the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970), rule, regulation (including,
without limitation, Regulation X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting any Loan Party, any of its Subsidiaries or any of their
properties or (iv) except for the Liens created under the Loan
Documents, result in or require the creation or imposition of any Lien
upon or with respect to any of the properties of any Loan Party or any
of its Subsidiaries. No Loan Party or any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument, the violation or breach of which is reasonably likely
to have a Material Adverse Effect.
(d) (i) As of the date hereof and hereafter, no authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party is
required for (i) the due execution, delivery, recordation, filing or
performance by any Loan Party of this Agreement, the Notes, any other
Loan Document or any Related Document to which it is or is to be a
party, or for the consummation of the Stock Purchase or the other
transactions contemplated hereby (other than the Merger), (ii) the
grant by any Loan Party of the Liens granted by it pursuant to the
Collateral Documents, (iii) the perfection or maintenance of the Liens
created by the Collateral Documents (including the priority nature
thereof required by the Collateral Documents) or (iv) the exercise by
the Administrative Agent or any Lender Party of its rights under the
Loan Documents or the remedies in respect of the Collateral pursuant to
the Collateral Documents, except for the authorizations, approvals,
actions, notices and filings listed on Schedule IV, all of which have
been duly obtained, taken, given or made and are in full force and
effect. All applicable waiting periods in connection with the Stock
Purchase and the other transactions contemplated hereby (other than the
Merger) have expired without any action having been taken by any
competent authority restraining, preventing or imposing materially
adverse conditions upon the Stock Purchase or the rights of the Loan
Parties or their Subsidiaries freely to transfer or otherwise dispose
of, or to create any Lien on, any properties now owned or hereafter
acquired by any of them.
(ii) As of the date of the consummation of the Merger
and thereafter, no authorization or approval or other action
by, and no notice to or filing with, any governmental
authority or regulatory body or any third party is required
for (i) the due execution, delivery, recordation, filing or
performance by any Loan Party of this Agreement, the Notes,
any other Loan
<PAGE>
64
Document or any Related Document to which it is or is to be a
party, or for the consummation of the Stock Purchase, the
Merger or the other transactions contemplated hereby, (ii) the
grant by any Loan Party of the Liens granted by its pursuant
to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created by the Collateral Documents
(including the priority nature thereof required by the
Collateral Documents) or (iv) the exercise by the
Administrative Agent or any Lender Party of its rights under
the Loan Documents or the remedies in respect of the
Collateral pursuant to the Collateral Documents, except for
the authorizations, approvals, actions, notice and filings
listed on Schedule IV, all of which have been duly obtained,
taken, given or made and are in full force and effect. All
applicable waiting periods in connection with the Stock
Purchase or the Merger and the other transactions contemplated
hereby have expired without any action having been taken by
any competent authority restraining, preventing or imposing
materially adverse conditions upon the Stock Purchase or the
rights of the Loan Parties or their Subsidiaries freely to
transfer or otherwise dispose of, or to create any Lien on,
any properties now owned or hereafter acquired by any of them.
(e) This Agreement has been, and each of the Notes, each other
Loan Document and each Related Document when delivered hereunder will
have been, duly executed and delivered by each Loan Party thereto. This
Agreement is, and each of the Notes, each other Loan Document and each
Related Document when delivered hereunder will be, the legal, valid and
binding obligation of each Loan Party party thereto, enforceable
against such Loan Party in accordance with its terms.
(f) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at October 28, 1995, and the related Consolidated
statement of income and Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the fiscal year then ended,
accompanied by an opinion of Ernst & Young, LLP, independent public
accountants, and the Consolidated balance sheet of the Borrower and its
Subsidiaries as at July 27, 1996, and the related Consolidated
statement of income and Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the nine months then ended, duly
certified by the chief financial officer of the Borrower, copies of
which have been furnished to each Lender Party, fairly present,
subject, in the case of said balance sheet as at July 27, 1996, and
said statement of income and cash flows for the nine months then ended,
to year-end audit adjustments, the Consolidated financial condition of
the Borrower and its Subsidiaries as at such date and the Consolidated
results of the operations of the Borrower and its Subsidiaries for the
period ended on such date, all in accordance with generally accepted
accounting principles applied on a consistent basis, and since October
28, 1995, there has been no Material Adverse Change.
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65
(g) The Consolidated forecasted balance sheets, income
statements and cash flows statements of the Borrower and its
Subsidiaries delivered, or to be delivered, to the Lender Parties
pursuant to Section 3.01(m) or 5.03 were prepared in good faith on the
basis of the assumptions stated therein, which assumptions were fair in
the light of conditions existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the Borrower's
best estimate of its future financial performance.
(h) None of the information, exhibits or reports furnished by
any Loan Party to the Administrative Agent or any Lender Party in
connection with the negotiation of the Loan Documents or pursuant to
the terms of the Loan Documents contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements made therein not misleading.
(i) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) would be reasonably
likely to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of the Additional Purchase, the
Merger, this Agreement, any Note, any other Loan Document or any
Related Document or the consummation of the transactions contemplated
hereby, and there has been no adverse change in the status, or
financial effect on any Loan Party or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule II.
(j) No proceeds of any Advance or drawings under any Letter of
Credit will be used to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of
1934.
(k) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance or drawings under any Letter of Credit will be
used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock.
(l) Following application of the proceeds of each Advance or
drawing under each Letter of Credit, not more than 25 percent of the
value of the assets (either of the Borrower only or of the Borrower and
its Subsidiaries on a Consolidated basis) subject to the provisions of
Section 5.02(a) or 5.02(e) or subject to any restriction contained in
any agreement or instrument between the Borrower and any Lender Party
or any Affiliate of any Lender Party relating to Debt and within the
scope of Section 6.01(e) will be Margin Stock.
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66
(m) All Plans of the Borrower and its ERISA Affiliates are
listed on Schedule V. No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan listed on Schedule V that
has resulted in or is reasonably expected to result in a material
liability of any Loan Party or any ERISA Affiliate.
(n) As of the last annual actuarial valuation date, the funded
current liability percentage, as defined in Section 302(d)(8) of ERISA,
of each Plan exceeds 90% and there has been no material adverse change
in the funding status of any such Plan since such date.
(o) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series) for each Plan listed on Schedule V,
copies of which have been filed with the Internal Revenue Service and
furnished to the Lender Parties, is complete and accurate and fairly
presents the funding status of such Plan, and since the date of such
Schedule B there has been no material adverse change in such funding
status.
(p) Neither any Loan Party nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability to
any Multiemployer Plan listed on Schedule V.
(q) Neither any Loan Party nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan listed on Schedule V
that such Multiemployer Plan is in reorganization or has been
terminated, within the meaning of Title IV of ERISA, and no such
Multiemployer Plan is reasonably expected to be in reorganization or to
be terminated, within the meaning of Title IV of ERISA.
(r) Except as set forth in the financial statements referred
to in this Section 4.01 and in Section 5.03, the Loan Parties and their
respective Subsidiaries have no material liability with respect to
"expected post retirement benefit obligations" within the meaning of
Statement of Financial Accounting Standards No. 106.
(s) Neither the business nor the properties of any Loan Party
or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that would be reasonably
likely to have a Material Adverse Effect.
(t) The operations and properties of each Loan Party and each
of its Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance
with such Environmental Laws and Environmental Permits has been
resolved without ongoing obligations or costs,
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67
and no circumstances exist that would be reasonably likely to (i) form
the basis of an Environmental Action against any Loan Party or any of
its Subsidiaries or any of their properties that could reasonably be
expected to have a Material Adverse Effect or (ii) cause any such
property to be subject to any restrictions on ownership, occupancy, use
or transferability under any Environmental Law that could reasonably be
expected to have a Material Adverse Effect.
(u) Except as disclosed in the Phase I Environmental Site
Assessment Reports prepared by Dames & Moore for the properties at 3915
Delaware Avenue, Des Moines, Iowa and 650 Meridian Road, Youngstown,
Ohio, dated November 15, 1996 or as otherwise disclosed on Schedule XV,
none of the properties currently or, to the best knowledge of the Loan
Parties and their Subsidiaries, formerly owned or operated by any Loan
Party or any of its Subsidiaries is listed or proposed for listing on
the NPL or on the CERCLIS or any analogous foreign, state or local list
or is adjacent to any such property; to the best knowledge of the Loan
Parties and their Subsidiaries, there are no and never have been any
underground or aboveground storage tanks on any property currently
owned or operated by any Loan Party or any of its Subsidiaries; there
are no and never have been any surface impoundments, septic tanks,
pits, sumps or lagoons in which Hazardous Materials are being or have
been treated, stored or disposed on any property currently or, to the
best knowledge of the Loan Parties and their Subsidiaries, formerly
owned or operated by any Loan Party or any of its Subsidiaries in an
manner that would be reasonably likely to have a Material Adverse
Effect; there is no asbestos or asbestos-containing material on any
property currently owned or operated by any Loan Party or any of its
Subsidiaries in a manner that would be reasonably likely to have a
Material Adverse Effect; and Hazardous Materials have not been
released, discharged or disposed of on any property currently or, to
the best knowledge of the Loan Parties and their Subsidiaries, formerly
owned or operated by any Loan Party or any of its Subsidiaries in a
manner, quantity or concentration that would be reasonably likely to
have a Material Adverse Effect.
(v) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together
with other potentially responsible parties, any investigation or
assessment or remedial or response action relating to any actual or
threatened release, discharge or disposal of Hazardous Materials at any
site, location or operation, either voluntarily or pursuant to the
order of any governmental or regulatory authority or the requirements
of any Environmental Law; and all Hazardous Materials generated, used,
treated, handled or stored at, or transported to or from, any property
currently or formerly owned or operated by any Loan Party or any of its
Subsidiaries have been disposed of in a manner not reasonably expected
to result in material liability to any Loan Party or any of its
Subsidiaries.
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68
(w) Neither any Loan Party nor any of its Subsidiaries is a
party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate
restriction that would be reasonably likely to have a Material Adverse
Effect.
(x) The Collateral Documents create a valid and perfected
security interest in the Collateral having the priority set forth in
such Collateral Documents, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable
to perfect and protect such security interest have been duly taken. The
Loan Parties are the legal and beneficial owners of the Collateral free
and clear of any Lien, except for the liens and security interests
created or permitted under the Loan Documents.
(y) The Borrower has filed, has caused to be filed or has been
included in all Federal tax returns and all material other tax returns
(state, local and foreign) required to be filed and has paid all taxes
shown thereon to be due, together with applicable interest and
penalties.
(z) The aggregate unpaid amount, as of the date hereof, of
adjustments to the Federal income tax liability of the Borrower
proposed by the Internal Revenue Service with respect to Open Years
does not exceed $250,000. No issues have been raised by the Internal
Revenue Service in respect of Open Years that, in the aggregate, would
be reasonably likely to have a Material Adverse Effect.
(aa) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of the
Borrower proposed by all state, local and foreign taxing authorities
(other than amounts arising from adjustments to Federal income tax
returns) does not exceed $250,000. No issues have been raised by such
taxing authorities that, in the aggregate, would be reasonably likely
to have a Material Adverse Effect.
(bb) The Merger will not be taxable to the Borrower or any of
its Subsidiaries or Affiliates.
(cc) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor
the application of the proceeds or repayment thereof by the Borrower,
nor the consummation of the other transactions contemplated hereby,
will violate any provision of such Act or any rule, regulation or order
of the Securities and Exchange Commission thereunder.
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(dd) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ee) Set forth on Schedule VI hereto is a complete and
accurate list of all Existing Debt, showing as of the date hereof the
principal amount outstanding thereunder.
(ff) Set forth on Schedule VII hereto is a complete and
accurate list of all real property owned by any Loan Party or any of
its Subsidiaries as of the date hereof, showing as of the date hereof
the street address, county or other relevant jurisdiction, state,
record owner and book and estimated fair value thereof. Each Loan Party
or such Subsidiary has good, marketable and insurable fee simple title
to such real property, free and clear of all Liens, other than Liens
created or permitted by the Loan Documents.
(gg) Set forth on Schedule VIII hereto is a complete and
accurate list of all leases of real property under which any Loan Party
or any of its Subsidiaries is the lessee as of the date hereof, showing
as of the date hereof the street address, county or other relevant
jurisdiction, state, lessor, lessee, expiration date and annual rental
cost thereof. To the best of the Borrower's knowledge, each such lease
is the legal, valid and binding obligation of the lessor thereof,
enforceable in accordance with its terms.
(hh) Set forth on Schedule IX hereto is a complete and
accurate list of all Material Contracts of each Loan Party and its
Subsidiaries as of the date hereof, showing as of the date hereof the
parties, subject matter and term thereof. To the best of the Borrower's
knowledge (with respect to parties other than the Loan Parties and
their Subsidiaries), each such Material Contract has been duly
authorized, executed and delivered by all parties thereto, has not been
amended or otherwise modified, is in full force and effect and is
binding upon and enforceable against all parties thereto in accordance
with its terms, and there exists no default under any Material Contract
by any party thereto.
(ii) Set forth on Schedule X hereto is a complete and accurate
list of all Investments held by any Loan Party or any of its
Subsidiaries as of the date hereof, showing as of the date hereof the
amount, obligor or issuer and maturity, if any, thereof.
(jj) Set forth on Schedule XI hereto is a complete and
accurate list of all patents, trademarks, trade names, service marks
and copyrights, and all applications therefor and licenses thereof, of
each Loan Party or any of its Subsidiaries as of the
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70
date hereof, showing as of the date hereof the jurisdiction in which
registered, the registration number, the date of registration and the
expiration date.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, each of Holding, the Purchaser and the
Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and the Racketeer Influenced
and Corrupt Organizations Chapter of the Organized Crime Control Act of
1970.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained.
(c) Compliance with Environmental Laws. Comply, and cause each
of its Subsidiaries and use all reasonable efforts to cause all lessees
and other Persons operating or occupying its properties to comply, in
all material respects, with all applicable Environmental Laws and
Environmental Permits; obtain and renew and cause each of its
Subsidiaries to obtain and renew all material Environmental Permits
necessary for its operations and properties; and conduct, and cause
each of its Subsidiaries to conduct, any investigation, study, sampling
and testing, and undertake any cleanup, removal, remedial or other
action necessary to remove and clean up all Hazardous Materials from
any of its properties, to the extent required by, and in accordance
with, the requirements of applicable Environmental Laws; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to undertake any such cleanup, removal, remedial or other
action to the extent that its obligation to do so is being contested in
good faith and by proper proceedings and appropriate reserves are being
maintained with respect to such circumstances.
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71
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries (other than Central
Tractor Distributing Co.) to preserve and maintain, its existence,
legal structure, legal name, rights (charter and statutory), permits,
licenses, approvals, privileges and franchises; provided, however, that
the Borrower and the Purchaser may consummate the Merger; and provided
further that neither the Borrower nor any of its Subsidiaries shall be
required to preserve any right, permit, license, approval, privilege or
franchise if the Board of Directors of the Borrower or such Subsidiary
shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Borrower or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lender
Parties.
(f) Visitation Rights. At any reasonable time and from time to
time, permit the Administrative Agent or any of the Lender Parties or
any agents or representatives thereof, to examine and make copies of
and abstracts from the records and books of account of, and visit the
properties of, the Borrower and any of its Subsidiaries, and to discuss
the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors and with their
independent certified public accountants, provided that the Borrower
shall have received prior notice of any such discussion with such
independent certified public accountants and shall have the
opportunity, at its option, to participate in such discussion.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(h) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
(i) Performance of Related Documents. Perform and observe all
of the terms and provisions of each Related Document (other than the
Financing Documents)
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to be performed or observed by it, maintain each such Related Document
in full force and effect, enforce such Related Document in accordance
with its terms, take all such action to such end as may be from time to
time requested by the Administrative Agent and, upon request of the
Administrative Agent, make to each other party to each such Related
Document such demands and requests for information and reports or for
action as the Borrower is entitled to make under such Related Document.
(j) Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, all transactions otherwise permitted under
the Loan Documents with any of their Affiliates on terms that are fair
and reasonable and no less favorable to the Borrower or such Subsidiary
than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate, other than the performance of its obligations
under the Management Agreement.
(k) Cash Concentration Accounts. Maintain main cash
concentration accounts with Fleet or one or more banks acceptable to
the Administrative Agent that have accepted the assignment of such
accounts to the Administrative Agent pursuant to the Security Agreement
and Lockbox Accounts into which all proceeds of Collateral are paid
with Fleet or one or more banks acceptable to the Administrative Agent
that have accepted the assignment of such accounts to the
Administrative Agent pursuant to the Security Agreement.
(l) Stock of the Borrower. In the case of Holding (i) on the
date on which the Merger is consummated deliver to the Administrative
Agent a pledge agreement in form and substance satisfactory to the
Required Lenders (together with each other pledge agreement delivered
pursuant to Section 5.01(p), in each case as amended, supplemented or
otherwise modified from time to time in accordance with its terms, the
"Pledge Agreement"), duly executed by Holding, together with (x)
acknowledgment copies or stamped receipt copies of proper financing
statements, duly filed under the Uniform Commercial Code in all
jurisdictions that the Administrative Agent may deem necessary or
desirable in order to perfect and protect the liens and security
interests created under the Pledge Agreement, covering the Collateral
described in the Pledge Agreement and (y) completed requests for
information listing the financing statements referred to in clause (x)
and all other effective financing statements filed in the jurisdictions
referred to in clause (x) that name Holding as debtor, together with
copies of such other financing statements and (ii) on the date on which
the Merger is consummated or, if the Bridge Notes are issued on the
date on which the Merger is consummated, the date on which the Bridge
Notes are paid in full, deliver to the Administrative Agent pursuant to
the terms of the Security Agreement certificates representing all of
the outstanding capital stock of the Borrower accompanied by undated
stock powers executed in blank.
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73
(m) Termination of Financing Statements. Upon the request of
the Administrative Agent, and at the expense of the Borrower, within 10
days after such request, furnish to the Administrative Agent proper
termination statements on Form UCC-3 covering such financing statements
as the Administrative Agent may reasonably request that were listed in
the completed requests for information referred to in Section
3.01(o)(viii)(C).
(n) Merger. In the case of Holding and the Purchaser, cause
the Merger to occur as promptly as practicable.
(o) Lockbox Accounts. On or prior to April 30, 1996, and at
the expense of the Borrower, deliver to the Administrative Agent the
Lockbox Letters referred to in the Security Agreement, duly executed by
each Lockbox Bank referred to in the Security Agreement.
(p) Expenses. On the earlier of the date of consummation of
the Merger and the termination of the Merger Agreement, pay all accrued
expenses of the Administrative Agent (including the accrued fees and
expenses of counsel to the Administrative Agent and local counsel to
the Administrative Agent).
SECTION 5.02. Negative Covenants. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, each of Holding, the Purchaser and the Borrower will
not, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien on or with respect to any of its properties of any
character (including, without limitation, accounts) whether now owned
or hereafter acquired, or sign or file or suffer to exist, or permit
any of its Subsidiaries to sign or file or suffer to exist, under the
Uniform Commercial Code of any jurisdiction, a financing statement that
names Holding, the Purchasers, the Borrower or any of its Subsidiaries
as debtor, or sign or suffer to exist, or permit any of its
Subsidiaries to sign or suffer to exist, any security agreement
authorizing any secured party thereunder to file such financing
statement, or assign, or permit any of its Subsidiaries to assign, any
accounts or other right to receive income, excluding, however, from the
operation of the foregoing restrictions the following:
(i) Liens created under the Loan Documents;
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74
(ii) in the case of the Purchaser, Liens on the
assets of the Purchaser pursuant to the Stock Purchase
Facilities Documents;
(iii) in the case of Holding, Liens on the capital
stock of the Borrower pursuant to the Bridge Note Documents;
(iv) in the case of the Borrower and its
Subsidiaries, Permitted Liens;
(v) Liens existing on the date hereof and described
on Schedule XIII hereto;
(vi) in the case of the Borrower and its
Subsidiaries, purchase money Liens upon or in real property or
equipment acquired or held by the Borrower or any of its
Subsidiaries in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of financing the acquisition,
construction or improvement of any such property or equipment
to be subject to such Liens, or Liens existing on any such
property or equipment at the time of acquisition (other than
any such Liens created in contemplation of such acquisition
that do not secure the purchase price), or extensions,
renewals or replacements of any of the foregoing for the same
or a lesser amount; provided, however, that no such Lien shall
extend to or cover any property or equipment other than the
property or equipment being acquired, constructed or improved,
and no such extension, renewal or replacement shall extend to
or cover any property or equipment not theretofore subject to
the Lien being extended, renewed or replaced; and provided
further that the aggregate principal amount of the Debt
secured by Liens permitted by this clause (vi) at the time of
acquisition, construction or improvement of the property
subject thereto shall not exceed 80% of the cost of such
property, construction or improvement or of the then fair
value thereof, whichever shall be less and that any such Debt
shall not otherwise be prohibited by the terms of the Loan
Documents; and
(vii) in the case of the Borrower and its
Subsidiaries, Liens arising in connection with Capitalized
Leases permitted under Section 5.02(b)(iv)(C), provided that
no such Lien shall extend to or cover any Collateral or assets
other than the assets subject to such Capitalized Leases.
(b) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist,
any Debt other than:
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(i) in the case of Holding, (A) Debt under the Loan
Documents, the Stock Purchase Facilities Documents and the
Bridge Note Documents, (B) Debt in an aggregate principal
amount not to exceed $5,000,000 at any time outstanding to
certain members of management of the Borrower in exchange for
their equity ownership interests in Holding, provided that (w)
such Debt is subordinated in right of payment to the
Obligations of Holding under the Loan Documents on terms and
conditions reasonably satisfactory to the Lender Parties, (x)
such Debt shall not bear interest on a cash basis prior to the
Termination Date, (y) the final maturity of such Debt is after
the Termination Date and (z) there is no amortization of such
Debt on or prior to the Termination Date, and (C) Debt in
connection with the conversion of Preferred Stock of Holding
with a liquidation value on the date of issue not in excess of
$10,000,000, provided that (x) such Debt shall not bear
interest on a cash basis prior to the Termination Date, (y)
the final maturity of such Debt is after the Termination Date
and (z) there is no amortization of such Debt on or prior to
the Termination Date,
(ii) in the case of the Borrower,
(A) on and after the consummation of the
Merger and so long as no Permanent Debt is
outstanding, the Bridge Notes in an aggregate
principal amount not to exceed $100,000,000, and
(B) on and after the consummation of the
Merger and so long as no Bridge Notes are
outstanding, the Permanent Debt in an aggregate
principal amount not to exceed $115,000,000;
(iii) in the case of any of the Subsidiaries of the
Borrower, Debt owed to the Borrower or to a wholly-owned
Subsidiary of the Borrower, provided that any such Debt shall
be (A) evidenced by a promissory note and (B) pledged in favor
of the Lender Parties pursuant to the terms of the Security
Agreement; and
(iv) in the case of the Borrower and any of its
Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt secured by Liens permitted by
Section 5.02(a)(vi) not to exceed in the aggregate
$5,000,000 at any time outstanding,
(C) Capitalized Leases not to exceed in the
aggregate $10,000,000 at any time outstanding,
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(D) unsecured Debt incurred in the ordinary
course of business for the deferred purchase price of
property or services, maturing within one year from
the date created, and aggregating, on a Consolidated
basis, not more than $5,000,000 at any one time
outstanding,
(E) indorsement of negotiable instruments
for deposit or collection or similar transactions in
the ordinary course of business, and
(F) Debt (whether or not of the types
described above in clauses (A) through (D)) in an
aggregate principal amount not to exceed $2,500,000
at any time outstanding.
(c) Lease Obligations. Create, incur, assume, extend, renew,
modify or amend , or permit any of its Subsidiaries to create, incur,
assume, extend, renew, modify or amend, any obligations as lessee (i)
for the rental or hire of real or personal property in connection with
any sale and leaseback transaction, or (ii) for the rental or hire of
other real or personal property of any kind under leases or agreements
to lease (including Capitalized Leases) having an original term of one
year or more that would cause the direct and contingent liabilities of
the Borrower and its Subsidiaries, on a Consolidated basis, in respect
of all such obligations to exceed, in the 12 month period following
incurrence, asumption, extension, renewal, modification or amendment,
5.0% of Consolidated sales of the Borrower and its Subsidiaries for the
12 month period immediately prior thereto.
(d) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries
to do so, except that (i) the Borrower and the Purchaser may consummate
the Merger and (ii) any Subsidiary of the Borrower may merge into or
consolidate with any other Subsidiary of the Borrower, provided that,
in the case of any such merger or consolidation, the Person formed by
such merger or consolidation shall be a wholly-owned Subsidiary of the
Borrower; provided, however, that in each case, immediately after
giving effect thereto, no event shall occur and be continuing that
constitutes a Default and, in the case of any such merger to which the
Borrower is a party, the Borrower is the surviving corporation.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets, except:
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77
(i) sales of Inventory by the Borrower and its
Subsidiaries in the ordinary course of its business,
(ii) sales or other disposals of obsolete or worn-out
equipment or other assets in the ordinary course of business,
(iii) in a transaction authorized by subsection (d)
of this Section,
(iv) sales of assets by the Borrower or any
Subsidiary of the Borrower for cash and for fair value in an
aggregate amount not to exceed $2,000,000 in any Fiscal Year,
provided that the Borrower shall, on the third Business Date
following the date of receipt by the Borrower or any of its
Subsidiaries of the Net Cash Proceeds from such sale prepay
the Advances pursuant to, and in the amount and order of
priority set forth in, Section 2.06(b)(ii), and
(v) sales or other transfers of assets from any of
the Borrower's Subsidiaries to a wholly-owned domestic
Subsidiary of the Borrower (other than Central Tractor
Distributing Co.), provided that such wholly-owned domestic
Subsidiary shall become an additional grantor pursuant to the
terms of the Security Agreement and shall execute a guaranty
in form and substance reasonably satisfactory to the Required
Lenders.
(f) Investments in Other Persons. Make or hold, or permit any
of its Subsidiaries to make or hold, any Investment in any Person other
than:
(i) Investments by the Borrower and its Subsidiaries
in their Subsidiaries (other than Central Tractor Distributing
Co.) outstanding on the date hereof and additional investments
in wholly-owned Subsidiaries in an aggregate amount invested
from the date hereof not to exceed $5,000,000; provided that,
with respect to Investments in any newly acquired or created
wholly-owned Subsidiary, such Subsidiary shall become an
additional grantor pursuant to the terms of the Security
Agreement and shall execute a guaranty in form and substance
reasonably satisfactory to the Required Lenders;
(ii) loans and advances to employees of the Borrower
and its Subsidiaries in an aggregate principal amount not to
exceed $750,000 at any time outstanding;
(iii) Investments by the Borrower and its
Subsidiaries in Cash Equivalents;
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(iv) Investments consisting of intercompany Debt
permitted under Section 5.02(b)(iii);
(v) Investments existing on the date hereof and
described on Schedule X hereto;
(vi) in the case of the Borrower and its
Subsidiaries, other Investments in an aggregate amount
invested not to exceed $2,500,000 (other than any Investment
in Central Tractor Distributing Co.); provided that with
respect to Investments made under this clause (vi): (1) any
newly acquired or created Subsidiary of the Borrower or any of
its Subsidiaries shall be a wholly-owned Subsidiary thereof,
shall become an additional grantor pursuant to the terms of
the Security Agreement and shall execute a guaranty in form
and substance reasonably satisfactory to the Required Lenders;
(2) immediately before and after giving effect thereto, no
Default shall have occurred and be continuing or would result
therefrom; and (3) any business acquired or invested in
pursuant to this clause (vi) shall be in the same line of
business as the business of the Borrower or any of its
Subsidiaries; and
(vii) in the case of Holding, Investments by Holding
in its capital stock as a result of the transactions described
in Section 5.02(b)(i)(B).
(g) Dividends, Etc. In the case of the Borrower, declare or
pay any dividends, purchase, redeem, retire, defease or otherwise
acquire for value any of its capital stock or any warrants, rights or
options to acquire such capital stock, now or hereafter outstanding,
return any capital to its stockholders as such, make any distribution
of assets, capital stock, warrants, rights, options, obligations or
securities to its stockholders as such or issue or sell any capital
stock or any warrants, rights or options to acquire such capital stock,
or permit any of its Subsidiaries to do any of the foregoing or permit
any of its Subsidiaries to purchase, redeem, retire, defease or
otherwise acquire for value any capital stock of the Borrower or any
warrants, rights or options to acquire such capital stock or to issue
or sell any capital stock or any warrants, rights or options to acquire
such capital stock, except that, so long as no Default shall have
occurred and be continuing at the time of any action described in
clauses (A) through (C) below or would result therefrom, (i) the
Borrower may (A) declare and pay dividends and distributions payable
only in common stock of the Borrower, (B) except to the extent the Net
Cash Proceeds thereof are required to be applied to the prepayment of
the Bridge Notes or to the prepayment of the Advances pursuant to
Section 2.06(b), purchase, redeem, retire, defease or otherwise acquire
shares of its capital stock with the proceeds received from the issue
of new shares of its capital stock with equal or inferior voting
powers, designations, preferences and rights, and (C) declare and pay
cash dividends to Holding solely to make payments
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79
required to be made by Holding under the Stockholders Agreement and to
permit Holding to pay its current obligations up to $100,000 in any
Fiscal Year in the ordinary course of business and (ii) any Subsidiary
of the Borrower may (A) declare and pay cash dividends to the Borrower
and (B) declare and pay cash dividends to any other wholly-owned
Subsidiary of the Borrower of which it is a Subsidiary.
(h) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business
as carried on at the date hereof.
(i) Charter Amendments. Amend, or permit any of its
Subsidiaries to amend, its certificate of incorporation or bylaws.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in (i) accounting policies
or reporting practices, except as required by generally accepted
accounting principles or (ii) Fiscal Year.
(k) Prepayments, Etc. of Debt. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in
any manner, or make any payment in violation of any subordination terms
of, any Debt, other than (i) the prepayment of the Advances in
accordance with the terms of this Agreement, (ii) regularly scheduled
or required repayments, prepayments or redemptions of the Stock
Purchase Facilities and the Bridge Notes and (iii) optional prepayments
or redemptions of the Bridge Notes, or amend, modify or change in any
manner any term or condition of the Stock Purchase Facilities
Documents, the Bridge Note Documents or the Permanent Debt Documents
that would impair the value of the interest or rights of the Loan
Parties thereunder or that would impair the rights or interests of the
Administrative Agent or any Lender Party, or permit any of its
Subsidiaries to do any of the foregoing other than to prepay any Debt
payable to the Borrower.
(l) Amendment, Etc. of Related Documents. Cancel or terminate
any Related Document (other than the Financing Documents) or consent to
or accept any cancellation or termination thereof, amend, modify or
change in any manner any term or condition of any such Related Document
or give any consent, waiver or approval thereunder, waive any default
under or any breach of any term or condition of any such Related
Document, agree in any manner to any other amendment, modification or
change of any term or condition of any such Related Document or take
any other action in connection with any such Related Document that
would impair the value of the interest or rights of the Loan Parties
thereunder or that would impair the rights or interests of the
Administrative Agent or any Lender Party, or permit any of its
Subsidiaries to do any of the foregoing.
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(m) Negative Pledge. Enter into or suffer to exist, or permit
any of its Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon
any of its property or assets other than (i) in favor of the Secured
Parties or (ii) any prohibition or condition contained in the Stock
Purchase Facilities Documents, the Bridge Note Documents and the
Permanent Debt Documents.
(n) Partnerships, Etc. Become a general partner in any general
or limited partnership or joint venture, or permit any of its
Subsidiaries to do so, other than any Subsidiary the sole assets of
which consist of its interest in such partnership or joint venture.
(o) Speculative Transactions. Engage, or permit any of its
Subsidiaries to engage, in any transaction involving commodity options
or futures contracts or any similar speculative transactions
(including, without limitation, take-or-pay contracts), except for
Hedge Agreements permitted under Section 5.02(b).
(p) Capital Expenditures. In the case of the Borrower, make,
or permit any of its Subsidiaries to make, any Capital Expenditures
that would cause the aggregate of all such Capital Expenditures made by
the Borrower and its Subsidiaries in any period set forth below to
exceed the amount set forth below for such period.
Fiscal Year Ending In Amount
--------------------- ------
1997 9,000,000
1998 12,000,000
1999 12,000,000
2000 12,500,000
2001 12,500,000
; provided, however, that if, in any Fiscal Year specified
above, the amount of Capital Expenditures set forth above for
such period exceeds the amount of Capital Expenditures
actually made by the Borrower and its Subsidiaries in such
Fiscal Year, the Borrower and its Subsidiaries shall be
entitled to make additional Capital Expenditures in the next
Fiscal Year up to the amount of such excess.
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SECTION 5.03. Reporting Requirements. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Borrower will furnish to the Lender
Parties:
(a) Default Notice. As soon as possible and in any event
within two Business Days after a Responsible Officer of a Loan Party
knows, or has reason to know, of the occurrence of a Default or any
event, development or occurrence reasonably likely to have a Material
Adverse Effect continuing on the date of such statement, a statement of
the chief financial officer of the Borrower setting forth details of
such Default and the action that the Borrower has taken and proposes to
take with respect thereto.
(b) Monthly Financials. As soon as available and in any event
within 30 days after the end of each month (other than any month which
is the last month of a fiscal quarter), a Consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such month and a
Consolidated statement of income and a Consolidated statement of cash
flows of the Borrower and its Subsidiaries for the period commencing at
the end of the previous month and ending with the end of such month and
a Consolidated statements of income and a Consolidated statement of
cash flows of the Borrower and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding month of the preceding
Fiscal Year, all in reasonable detail and duly certified by the chief
financial officer of the Borrower.
(c) Quarterly Financials. As soon as available and in any
event within 45 days after the end of each of the first three quarters
of each Fiscal Year, a Consolidated balance sheet of the Borrower and
its Subsidiaries as of the end of such quarter and Consolidated
statement of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of
the previous fiscal quarter and ending with the end of such fiscal
quarter and a Consolidated statement of income and a Consolidated
statement of cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous Fiscal Year and ending
with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the
preceding Fiscal Year, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief financial officer
of the Borrower as having been prepared in accordance with GAAP,
together with (i) a certificate of said officer stating that no Default
has occurred and is continuing or, if a Default has occurred and is
continuing, a statement as to the nature thereof and the action that
the Borrower has taken and proposes to take with respect thereto and
(ii) a schedule in
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form satisfactory to the Administrative Agent of the computations used
by the Borrower in determining compliance with the covenants contained
in Sections 5.04(a) through (d), provided that in the event of any
change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide, if necessary for the determination of
compliance with Section 5.04, a statement of reconciliation conforming
such financial statements to GAAP.
(d) Annual Financials. As soon as available and in any event
within 90 days after the end of each Fiscal Year, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
including therein a Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and a Consolidated
statement of income and a Consolidated statement of cash flows of the
Borrower and its Subsidiaries for such Fiscal Year, in each case
accompanied by an unqualified opinion of Ernst & Young, LLP or other
independent public accountants of recognized standing acceptable to the
Required Lenders, together with (i) a certificate of such accounting
firm to the Lender Parties stating that in the course of the regular
audit of the business of the Borrower and its Subsidiaries, which audit
was conducted by such accounting firm in accordance with generally
accepted auditing standards, such accounting firm has obtained no
knowledge that a Default has occurred and is continuing under Section
5.02(p) or Section 5.04, or if, in the opinion of such accounting firm,
such a Default has occurred and is continuing, a statement as to the
nature thereof, (ii) a schedule in form satisfactory to the
Administrative Agent of the computations used by such accountants in
determining, as of the end of such Fiscal Year, compliance with the
covenants contained in Sections 5.04(a) through (d), provided that in
the event of any change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide, if necessary for
the determination of compliance with Section 5.04, a statement of
reconciliation conforming such financial statements to GAAP and (iii) a
certificate of the chief financial officer of the Borrower stating that
no Default has occurred and is continuing or, if a default has occurred
and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto.
(e) Annual Forecasts. As soon as available and in any event no
later than 30 days after the end of each Fiscal Year, forecasts
prepared by management of the Borrower, in form reasonably satisfactory
to the Administrative Agent, of balance sheets, income statements and
cash flow statements on a monthly basis for the Fiscal Year following
such Fiscal Year then ended and on an annual basis for each Fiscal Year
thereafter until the Termination Date.
(f) ERISA Events and ERISA Reports. Promptly and in any event
within 10 days after any Loan Party or any ERISA Affiliate knows or has
reason to know
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that any ERISA Event has occurred, a statement of the chief financial
officer of the Borrower describing such ERISA Event and the action, if
any, that such Loan Party or such ERISA Affiliate has taken and
proposes to take with respect thereto and (ii) on the date any records,
documents or other information must be furnished to the PBGC with
respect to any Plan pursuant to Section 4010 of ERISA, a copy of such
records, documents and information.
(g) Plan Terminations. Promptly and in any event within two
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any
Plan.
(h) Actuarial Reports. Promptly upon receipt thereof by any
Loan Party or any ERISA Affiliate, a copy of the annual actuarial
valuation report for each Plan the funded current liability percentage
(as defined in Section 302(d)(8) of ERISA) of which is less than 90% or
the unfunded current liability of which exceeds $100,000.
(i) Multiemployer Plan Notices. Promptly and in any event
within five Business Days after receipt thereof by any Loan Party or
any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of
each notice concerning (i) the imposition of Withdrawal Liability by
any such Multiemployer Plan, (ii) the reorganization or termination,
within the meaning of Title IV of ERISA, of any such Multiemployer Plan
or (iii) the amount of liability incurred, or that may be incurred, by
such Loan Party or any ERISA Affiliate in connection with any event
described in clause (i) or (ii).
(j) Litigation. Promptly after the commencement thereof,
notice of all actions, suits, investigations, litigation and
proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
affecting any Loan Party or any of its Subsidiaries of the type
described in Section 4.01(i), and promptly after the occurrence
thereof, notice of any adverse change in the status or the financial
effect on any Loan Party or any of its Subsidiaries of the Disclosed
Litigation from that described on Schedule II.
(k) Securities Reports. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and
reports that the Borrower (or, after the Merger, Holding) sends to its
stockholders generally, and copies of all regular, periodic and special
reports, and all registration statements, that any Loan Party or any of
its Subsidiaries files with the Securities and Exchange Commission or
any governmental authority that may be substituted therefor, or with
any national securities exchange.
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(l) Creditor Reports. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other holder of the
securities of any Loan Party or of any of its Subsidiaries pursuant to
the terms of any indenture, loan or credit or similar agreement and not
otherwise required to be furnished to the Lender Parties pursuant to
any other clause of this Section 5.03.
(m) Agreement Notices. Promptly upon receipt thereof, copies
of all notices, requests and other documents received by any Loan Party
or any of its Subsidiaries under or pursuant to any Related Document or
indenture, loan or credit or similar agreement relating to Debt in an
aggregate principal amount in excess of $2,500,000 regarding or related
to any breach or default by any party thereto or any other event that
could materially impair the value of the interests or the rights of any
Loan Party or otherwise have a Material Adverse Effect and copies of
any amendment, modification or waiver of any provision of any Related
Agreement or Material Contract or indenture, loan or credit or similar
agreement and, from time to time upon request by the Administrative
Agent, such information and reports regarding the Related Documents and
the Material Contracts as the Administrative Agent may reasonably
request.
(n) Revenue Agent Reports. Within 10 days after receipt,
copies of all Revenue Agent Reports (Internal Revenue Service Form
886), or other written proposals of the Internal Revenue Service, that
propose, determine or otherwise set forth positive adjustments to the
Federal income tax liability of the affiliated group (within the
meaning of Section 1504(a)(1) of the Internal Revenue Code) of which
the Borrower is a member aggregating $1,000,000 or more.
(o) Tax Certificates. Promptly, and in any event within five
Business Days after the due date (with extensions) for filing the final
Federal income tax return in respect of each taxable year, a
certificate (a "Tax Certificate"), signed by the President or the chief
financial officer of the Borrower, stating that the common parent of
the affiliated group (within the meaning of Section 1504(a)(1) of the
Internal Revenue Code) of which the Borrower is a member has paid to
the Internal Revenue Service or other taxing authority the full amount
that such affiliated group is required to pay in respect of Federal
income tax for such year.
(p) Environmental Conditions. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of
any noncompliance by any Loan Party or any of its Subsidiaries with any
Environmental Law or Environmental Permit that (i) could reasonably be
expected to have a Material Adverse Effect or (ii) cause any property
described in the Mortgages to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental
Law that could reasonably be expected to have a Material Adverse
Effect.
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(q) Real Property. As soon as available and in any event
within 30 days after the end of each Fiscal Year, a report
supplementing Schedules 4.01(hh) and 4.01(ii) hereto, including an
identification of all real and leased property disposed of by the
Borrower or any of its Subsidiaries during such Fiscal Year, a list and
description (including the street address, county or other relevant
jurisdiction, state, record owner, book value thereof, and in the case
of leases of property, lessor, lessee, expiration date and annual
rental cost thereof) of all real property acquired or leased during
such Fiscal Year and a description of such other changes in the
information included in such Schedules as may be necessary for such
Schedules to be accurate and complete.
(r) Insurance. As soon as available and in any event within 30
days after the end of each Fiscal Year, a report summarizing the
insurance coverage (specifying type, amount and carrier) in effect for
the Borrower and its Subsidiaries and containing such additional
information as any Lender Party (through the Administrative Agent) may
reasonably specify.
(s) Borrowing Base Certificate. As soon as available and in
any event within 15 days after the end of each month, a Borrowing Base
Certificate, as at the end of the previous month, certified by the
chief financial officer of the Borrower.
(t) Plan Schedule. As soon as practicable and in any event
within 10 days after the Borrower or one of its ERISA Affiliates
becomes a party to a Plan, an updated Schedule V listing all Plans of
the Borrower and its ERISA Affiliates.
(u) Other Information. Such other information respecting the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as
any Lender Party (through the Administrative Agent) may from time to
time reasonably request.
SECTION 5.04. Financial Covenants. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, Holding will:
(a) Minimum Net Worth. Maintain at all times an excess of
Consolidated total assets over Consolidated total liabilities, in each
case, of the Borrower and its Subsidiaries of not less than $58,000,000
plus 75% of Consolidated net income of the Borrower and its
Subsidiaries for the period after November 2, 1996 to and including
each date of determination computed on a cumulative basis for said
entire period.
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(b) Minimum EBITDA. Maintain at the end of each fiscal quarter
of Holding Consolidated EBITDA for the most recently completed four
fiscal quarters of Holding and its Subsidiaries of not less than the
amount set forth below for such period:
Four Fiscal Quarters Ending Closest To Amount
January 31, 1997 $20,900,000
April 30, 1997 $20,900,000
July 31, 1997 $21,700,000
October 31, 1997 $21,700,000
January 31, 1998 $21,700,000
April 30, 1998 $23,400,000
July 31, 1998 $24,100,000
October 31, 1998 $24,800,000
January 31, 1999 $26,200,000
April 30, 1999 $26,900,000
July 31, 1999 $28,300,000
October 31, 1999 $29,000,000
January 31, 2000 $29,800,000
April 30, 2000 $30,800,000
July 31, 2000 $32,200,000
October 31, 2000 $33,000,000
January 31, 2001 $33,700,000
April 30, 2001 $34,700,000
July 31, 2001 $36,600,000
October 31, 2001 $37,500,000
(c) Interest Coverage Ratio. Maintain at the end of each
fiscal quarter of Holding a ratio of Consolidated EBITDA for the most
recently completed four fiscal quarters of Holding and its Subsidiaries
to cash interest payable on all Debt payable by the Borrower and its
Subsidiaries during such four fiscal quarter period of not less than
the ratio set forth below for such period:
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Four Fiscal Quarters Amount
Ending Closest To ------
--------------------
January 31, 1997 1.55
April 30, 1997 1.60
July 31, 1997 1.60
October 31, 1997 1.60
January 31, 1998 1.70
April 30, 1998 1.75
July 31, 1998 1.80
October 31, 1998 1.85
January 31, 1999 1.95
April 30, 1999 2.00
July 31, 1999 2.10
October 31, 1999 2.15
January 31, 2000 2.20
April 30, 2000 2.25
July 31, 2000 2.35
October 31, 2000 2.40
January 31, 2001 2.45
April 30, 2001 2.50
July 31, 2001 2.60
October 31, 2001 2.70
(d) Debt to EBITDA Ratio. Maintain at the end of each fiscal
quarter of Holding a Debt to EBITDA Ratio of Holding and its
Subsidiaries of not more than the ratio set forth below for each period
set forth below:
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Four Fiscal Quarters Amount
Ending Closest To ------
--------------------
January 31, 1997 5.60
April 30, 1997 5.55
July 31, 1997 5.25
October 31, 1997 5.25
January 31, 1998 5.25
April 30, 1998 5.25
July 31, 1998 4.60
October 31, 1998 4.60
January 31, 1999 4.60
April 30, 1999 4.60
July 31, 1999 4.15
October 31, 1999 4.15
January 31, 2000 4.15
April 30, 2000 4.15
July 31, 2000 3.75
October 31, 2000 3.75
January 31, 2001 3.75
April 30, 2001 3.75
July 31, 2001 2.80
October 31, 2001 2.80
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any
Advance when the same shall become due and payable or (ii) the Borrower
shall fail to pay any interest on any Advance, or any Loan Party shall
fail to make any other payment under any Loan Document, in each case
under this clause (ii) within three Business Days after the same
becomes due and payable; or
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(b) any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) (i) any Loan Party shall fail to perform or observe any
term, covenant or agreement contained in Section 2.14, 5.01(f), (j),
(l), or (o), 5.02 or 5.04 or (ii) any Loan Party shall fail to maintain
its corporate existence or to perform or observe any term, covenant or
agreement contained in Section 5.03 if such failure shall remain
unremedied for 10 days; or
(d) any Loan Party shall fail to perform any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 30
days after the earlier of the date on which (A) a Responsible Officer
of the Borrower becomes aware of such failure or (B) written notice
thereof shall have been given to the Borrower by the Administrative
Agent or any Lender Party; or
(e) any Loan Party or any of its Subsidiaries shall fail to
pay any principal of, premium or interest on or any other amount
payable in respect of any Debt that is outstanding in a principal or
notional amount of at least $5,000,000 either individually or in the
aggregate (but excluding Debt outstanding hereunder) of such Loan Party
or such Subsidiary (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be
declared to be due and payable or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each
case prior to the stated maturity thereof; or
(f) any Loan Party or any of its Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Loan Party or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
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debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 45 days or any of
the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or any
substantial part of its property) shall occur; or any Loan Party or any
of its Subsidiaries shall take any corporate action to authorize any of
the actions set forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess
of $5,000,000 shall be rendered against any Loan Party or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered
against any Loan Party or any of its Subsidiaries that is reasonably
likely to have a Material Adverse Effect, and there shall be any period
of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01 or 5.01(l) shall for any reason cease to be
valid and binding on or enforceable against any Loan Party party to it,
or any such Loan Party shall so state in writing; or
(j) any Collateral Document after delivery thereof pursuant to
Section 3.01 or 5.01(p) shall for any reason (other than pursuant to
the terms thereof) cease to create a valid and perfected lien on and
security interest in the Collateral purported to be covered thereby
with the priority required thereunder; or
(k) J.W. Childs and its Affiliates and co-investors shall
cease to have beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange
Act of 1934), directly or indirectly, of Voting Stock of Holding
representing 51% or more of the combined voting power of all Voting
Stock of Holding;
(l) any ERISA Event shall have occurred with respect to a Plan
and the sum (determined as of the date of occurrence of such ERISA
Event) of the
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Insufficiency of such Plan and the Insufficiency of any and all other
Plans with respect to which an ERISA Event shall have occurred and then
exist (or the liability of the Loan Parties and the ERISA Affiliates
related to such ERISA Event) exceeds $5,000,000; or
(m) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by the Loan Parties and the ERISA Affiliates as Withdrawal
Liability (determined as of the date of such notification), exceeds
$5,000,000 or requires payments exceeding $1,000,000 per annum; or
(n) any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, and as a result of such reorganization or
termination the aggregate annual contributions of the Loan Parties and
the ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or being terminated have been or will be increased over
the amounts contributed to such Multiemployer Plans for the plan years
of such Multiemployer Plans immediately preceding the plan year in
which such reorganization or termination occurs by an amount exceeding
$5,000,000; or
(o) any Borrowing Base Deficiency shall occur and be
continuing;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by the Issuing Bank or a Revolving Credit Lender
pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender
pursuant to Section 2.02(b)) and of the Issuing Bank to issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the request, or may with the consent, of the Required Lenders, by notice to
the Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to any Loan Party under the Federal Bankruptcy
Code, (x) the obligation of each Lender to make Advances (other than Letter of
Credit Advances by the Issuing Bank or a Revolving Credit Lender pursuant to
Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to
Section 2.02(b)) and of the Issuing Bank to issue Letters of Credits shall
automatically be terminated and (y) the Notes, all such interest and all such
amounts shall automatically become and be due
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and payable, without presentment, demand, protest or any notice of any kind, all
of which are hereby expressly waived by the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default.
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit then outstanding. If
at any time the Administrative Agent determines that any funds held in the L/C
Cash Collateral Account are subject to any right or claim of any Person other
than the Administrative Agent and the Lender Parties or that the total amount of
such funds is less than the aggregate Available Amount of all Letters of Credit,
the Borrower will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Administrative Agent determines to be free
and clear of any such right and claim.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Each Lender Party (in its
capacities as a Lender, the Swing Line Bank (if applicable) and the Issuing Bank
(if applicable) hereby appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement and the other Loan Documents as are delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers
and discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action that exposes the Administrative Agent to personal liability or that
is contrary to this Agreement or applicable law. The Administrative Agent agrees
to give to each Lender Party prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
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SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (a) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(b) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender Party and shall not be responsible to
any Lender Party for any statements, warranties or representations (whether
written or oral) made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of any Loan Document on the part of
any Loan Party or to inspect the property (including the books and records) of
any Loan Party; (e) shall not be responsible to any Lender Party for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram or
telecopy) believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 7.03. Fleet and Affiliates. With respect to its Commitments,
the Advances made by it and the Notes issued to it, Fleet shall have the same
rights and powers under the Loan Documents as any other Lender Party and may
exercise the same as though it were not the Administrative Agent; and the term
"Lender Party" or "Lenders Parties" shall, unless otherwise expressly indicated,
include Fleet in its individual capacity. Fleet and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of business
with, any Loan Party, any of its Subsidiaries and any Person who may do business
with or own securities of any Loan Party or any such Subsidiary, all as if Fleet
were not the Administrative Agent and without any duty to account therefor to
the Lender Parties.
SECTION 7.04. Lender Party Credit Decision. Each Lender Party
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender Party and based on the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender Party also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
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Lender Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. (a) Each Lender Party severally agrees
to indemnify the Administrative Agent (to the extent not promptly reimbursed by
the Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of the
Loan Documents or any action taken or omitted by the Administrative Agent under
the Loan Documents; provided, however, that no Lender Party shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender Party agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by the Borrower under Section 8.04, to the extent that the Administrative Agent
is not promptly reimbursed for such costs and expenses by the Borrower. For
purposes of this Section 7.05(a), the Lender Parties' respective ratable shares
of any amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time,
(c) the aggregate unused portion of their respective Term Commitments at such
time and (d) their respective Unused Revolving Credit Commitments at such time;
provided, that the aggregate principal amount of Swing Line Advances owing to
the Swing Line Bank and of Letter of Credit Advances owing to the Issuing Bank
shall be considered to be owed to the Revolving Credit Lenders ratably in
accordance with their respective Revolving Credit Commitments. In the event that
any Defaulted Advance shall be owing by any Defaulting Lender at any time, such
Lender Party's Commitment with respect to the Facility under which such
Defaulted Advance was required to have been made shall be considered to be
unused for purposes of this Section 7.05(a) to the extent of the amount of such
Defaulted Advance. The failure of any Lender Party to reimburse the
Administrative Agent promptly upon demand for its ratable share of any amount
required to be paid by the Lender Party to the Administrative Agent as provided
herein shall not relieve any other Lender Party of its obligation hereunder to
reimburse the Administrative Agent for its ratable share of such amount, but no
Lender Party shall be responsible for the failure of any other Lender Party to
reimburse the Administrative Agent for such other Lender Party's ratable share
of such amount. Without prejudice to the survival of any other agreement of any
Lender Party hereunder, the agreement and obligations of each Lender Party
contained in this Section 7.05(a) shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the other
Loan Documents.
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(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Issuing Bank under the Loan Documents; provided, however, that no Lender
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Issuing Bank's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender Party agrees to reimburse the
Issuing Bank promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by the Borrower under Section 8.04, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower. For purposes of
this Section 7.05(b), the Lender Parties' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time,
(c) the aggregate unused portion of their respective Term Commitments at such
time plus (d) their respective Unused Working Revolving Credit Commitments at
such time; provided, that the aggregate principal amount of Swing Line Advances
owing to the Swing Line Bank and of Letter of Credit Advances owing to the
Issuing Bank shall be considered to be owed to the Revolving Credit Lenders
ratably in accordance with their respective Revolving Credit Commitments. In the
event that any Defaulted Advance shall be owing by any Defaulting Lender at any
time, such Lender Party's Commitment with respect to the Facility under which
such Defaulted Advance was required to have been made shall be considered to be
unused for purposes of this Section 7.05(b) to the extent of the amount of such
Defaulted Advance. The failure of any Lender Party to reimburse the Issuing Bank
promptly upon demand for its ratable share of any amount required to be paid by
the Lender Parties to the Issuing Bank as provided herein shall not relieve any
other Lender Party of its obligation hereunder to reimburse the Issuing Bank for
its ratable share of such amount, but no Lender Party shall be responsible for
the failure of any other Lender Party to reimburse the Issuing Bank for such
other Lender Party's ratable share of such amount. Without prejudice to the
survival of any other agreement of any Lender Party hereunder, the agreement and
obligations of each Lender Party contained in this Section 7.05(b) shall survive
the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
SECTION 7.06. Successor Administrative Agents. The Administrative Agent
may resign as to any or all of the Facilities at any time by giving written
notice thereof to the Lender Parties and the Borrower and may be removed as to
all of the Facilities at any time with or without cause by the Required Lenders.
Upon any such resignation or removal,
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the Required Lenders shall have the right to appoint a successor Administrative
Agent as to such of the Facilities as to which the Administrative Agent has
resigned or been removed. If no successor Administrative Agent shall have been
so appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of the Lender
Parties, appoint a successor Administrative Agent, which shall be a commercial
bank organized under the laws of the United States or of any State thereof and
having a combined capital and surplus of at least $250,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent as to all of the Facilities and upon the execution and
filing or recording of such financing statements, or amendments thereto, and
such amendments or supplements to the Mortgages, and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Collateral Documents, such successor Administrative Agent
shall succeed to and become vested with all the rights, powers, discretion,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
the Loan Documents. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent as to less than all of the
Facilities and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such amendments or supplements to the
Mortgages, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Administrative Agent shall succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent as to such Facilities, other than with respect to
funds transfers and other similar aspects of the administration of Borrowings
under such Facilities, issuances of Letters of Credit (notwithstanding any
resignation as Administrative Agent with respect to the Letter of Credit
Facility) and payments by the Borrower in respect of such Facilities, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement as to such Facilities, other than as aforesaid.
After any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent as to all of the Facilities, the provisions of this Article
VII shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Administrative Agent as to any Facilities under this Agreement.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes or any other Loan Document, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed (or, in the case of the Collateral
Documents, consented to) by the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) no amendment, waiver or
consent shall, unless in writing and signed by all of the Lenders (other than
any Lender Party that is, at such time, a Defaulting Lender), do any of the
following at any time: (i) waive any of the conditions specified in Section 3.01
or, in the case of the Initial Extension of Credit, Section 3.02, (ii) change
the number of Lenders or the percentage of (x) the Commitments, (y) the
aggregate unpaid principal amount of the Advances or (z) the aggregate Available
Amount of outstanding Letters of Credit that, in each case, shall be required
for the Lenders or any of them to take any action hereunder, (iii) reduce or
limit the obligations of either Holding or the Purchaser under Section 9.01 or
otherwise limit Holding' or the Purchaser's liability with respect to the
Obligations owing to the Administrative Agent and the Lender Parties, (iv)
release any material portion of the Collateral in any transaction or series of
related transactions or permit the creation, incurrence, assumption or existence
of any Lien on any material portion of the Collateral in any transaction or
series of related transactions to secure any Obligations other than Obligations
owing to the Secured Parties under the Loan Documents and other than Debt owing
to any other Person, provided that, in the case of any Lien on any material
portion of the Collateral to secure Debt owing to any other Person, (A) the
Borrower shall, on the date such Debt shall be incurred or issued, prepay the
Advances pursuant to, and in the order of priority set forth in, Section
2.06(b)(ii) in an aggregate principal amount equal to the amount of such Net
Cash Proceeds to the extent required to do so under Section 2.06(b)(ii) and (B)
the Required Lenders shall otherwise permit the creation, incurrence, assumption
or existence of such Lien and, to the extent not otherwise permitted under
Section 5.02(b), of such Debt, (v) amend this Section 8.01 and (b) no amendment,
waiver or consent shall, unless in writing and signed by the Required Lenders
and each Lender that has a Commitment under the Term Facility or Revolving
Credit Facility if affected by such amendment, waiver or consent, (i) increase
the Commitments of such Lender or subject such Lender to any additional
obligations, (ii) reduce the principal of, or interest on, the Notes held by
such Lender or any fees or other amounts payable hereunder to such Lender, (iii)
postpone any date fixed for any payment of principal of, or interest on, the
Notes held by such Lender or any fees or other amounts payable hereunder to such
Lender or (iv) change the order of application of any prepayment set forth in
Section 2.06 in any manner that materially affects such Lender; provided further
that no amendment, waiver or consent shall, unless in writing and signed by the
Swing Line Bank or the Issuing Bank, as
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the case may be, in addition to the Lenders required above to take such action,
affect the rights or obligations of the Swing Line Bank or of the Issuing Bank,
as the case may be, under this Agreement; and provided further that no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopy communication)
and mailed, telecopied or delivered, if to the Borrower, at its address at 3915
Delaware Avenue, Des Moines, Iowa 50313, Attention: Dean Longnecker; if to any
Initial Lender or the Initial Issuing Bank, at its Domestic Lending Office
specified opposite its name on Schedule I hereto; if to any other Lender Party,
at its Domestic Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender Party; and if to the Administrative Agent,
at its address at One Federal Street, Boston, MA 02110, Attention: Jed Duncan;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed or telecopied, be effective when deposited in the mails or
transmitted by telecopier, respectively, except that notices and communications
to the Administrative Agent pursuant to Article II, III or VII shall not be
effective until received by the Administrative Agent. Delivery by telecopier of
an executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender
Party or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all reasonable costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents (including, without limitation,
(A) all due diligence, collateral review, syndication, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and expenses of counsel
for the Administrative Agent with respect thereto, with respect to advising the
Administrative Agent as to its rights and responsibilities, or the perfection,
protection or preservation of rights or interests, under the Loan Documents,
with respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and
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with respect to presenting claims in or otherwise participating in or monitoring
any bankruptcy, insolvency or other similar proceeding involving creditors'
rights generally and any proceeding ancillary thereto) and (ii) all costs and
expenses of the Administrative Agent and the Lender Parties in connection with
the enforcement of the Loan Documents, whether in any action, suit or
litigation, any bankruptcy, insolvency or other similar proceeding affecting
creditors' rights generally (including, without limitation, the reasonable fees
and expenses of counsel for the Administrative Agent and each Lender Party with
respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, the Co-Agent, each Lender Party and each of their
Affiliates and their officers, directors, employees, agents and advisors (each,
an "Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection therewith)
(i) the Facilities, the actual or proposed use of the proceeds of the Advances
or the Letters of Credit, the Loan Documents or any of the transactions
contemplated thereby, including, without limitation, any acquisition or proposed
acquisition (including, without limitation, the Stock Purchase, the Merger and
any of the other transactions contemplated hereby) by Holding, the Equity
Investors or any of their Subsidiaries or Affiliates of all or any portion of
the stock or substantially all the assets of the Company or any of its
Subsidiaries or (ii) the actual or alleged presence of Hazardous Materials on
any property +of any Loan Party or any of its Subsidiaries or any Environmental
Action relating in any way to any Loan Party or any of its Subsidiaries, except
to the extent such claim, damage, loss, liability or expense results from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 8.04(b) applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by any Loan Party, its
directors, shareholders or creditors or an Indemnified Party or any Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated. The Borrower also agrees not to assert any
claim against the Administrative Agent, the Co-Agent, any Lender Party or any of
their Affiliates, or any of their respective officers, directors, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Facilities, the actual or proposed use of the proceeds of the Advances or the
Letters of Credit, the Loan Documents or any of the transactions contemplated
thereby.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion
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pursuant to Section 2.09(b)(i) or 2.10(d), acceleration of the maturity of the
Notes pursuant to Section 6.01 or for any other reason, the Borrower shall pay
to the Administrative Agent for each Appropriate Lender an amount equal to the
present value (calculated in accordance with this Section 8.04(c)) of interest
for the remaining portion of the relevant Interest Period on the amount of such
Advance, at a rate per annum equal to the excess of (a) the existing Eurodollar
Rate applicable to such Advance over (b) the Eurodollar Rate then applicable to
a deemed Interest Period ending on the last day of such Interest Period. The
present value of such additional interest shall be calculated by discounting the
amount of such interest for each day in the remaining portion of such Interest
Period from such date of payment or Conversion at a rate per annum equal to the
interest rate determined pursuant to the preceding sentence, and by adding all
such amounts for all such days during such period. The determination by the
Administrative Agent of such amount of interest shall, in the absence of
manifest error, be conclusive.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
8.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the Obligations of the Borrower now or hereafter existing under this
Agreement and the Note or Notes (if any) held by such Lender Party, irrespective
of whether such Lender Party shall have made any demand under this Agreement or
such Note or Notes and although such obligations may be unmatured. Each Lender
Party agrees promptly to notify the Borrower after any such set-off and
application; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
Party and its respective Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender Party and its respective Affiliates may have.
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SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have been notified by each Initial
Lender and the Initial Issuing Bank that such Initial Lender and the Initial
Issuing Bank has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent and each Lender Party and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender Parties.
SECTION 8.07. Assignments and Participations. (a) Each Lender may and,
if demanded by the Borrower (following a demand to such Lender pursuant to
Section 2.16), will, assign to one or more Eligible Assignees all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it and the Note or Notes held by it); provided, however, that (i) each
such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations under and in respect of one or more Facilities, (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000, (iii) each such assignment shall be to an
Eligible Assignee, (iv) each such assignment made as a result of a demand by the
Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower
after consultation with the Administrative Agent and shall be either an
assignment of all of the rights and obligations of the assigning Lender under
this Agreement or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments that
together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as
a result of a demand by the Borrower pursuant to this Section 8.07(a) unless and
until such Lender shall have received one or more payments from either the
Borrower or one or more Eligible Assignees in an aggregate amount at least equal
to the aggregate outstanding principal amount of the Advances owing to such
Lender, together with accrued interest thereon to the date of payment of such
principal amount and all other amounts payable to such Lender under this
Agreement, (vi) no such assignments shall be permitted without the consent of
the Administrative Agent until the Administrative Agent shall have notified the
Lender Parties that syndication of the Commitments hereunder has been completed,
and (vii) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3000.00.
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(b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the
case may be, hereunder and (y) the Lender or Issuing Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's or Issuing Bank's rights and obligations under this Agreement, such
Lender or Issuing Bank shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender Party or
any other Lender Party and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Loan Documents as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender or
Issuing Bank, as the case may be.
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(d) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. In the case of any assignment by a Lender, within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it under a Facility pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder under such Facility, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A-1 or A-2 hereto, as the case may be.
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time; provided, however, that (i) each such assignment shall
be to an Eligible Assignee and (ii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with a
processing and recordation fee of $3000.00.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such Lender
Party's obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
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(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by any Loan Party therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.09. No Liability of the Issuing Bank. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to
<PAGE>
105
bear any reference or adequate reference to the Letter of Credit; or (d) any
other circumstances whatsoever in making or failing to make payment under any
Letter of Credit, except that the Borrower shall have a claim against the
Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the
extent of any direct, but not consequential, damages suffered by the Borrower
that the Borrower proves were caused by (i) the Issuing Bank's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of the Letter of Credit or (ii) the
Issuing Bank's willful failure to make lawful payment under a Letter of Credit
after the presentation to it of a draft and certificates strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
SECTION 8.10. Confidentiality. Neither the Administrative Agent nor any
Lender Party shall disclose any Confidential Information to any Person without
the consent of the Borrower, other than (a) to the Administrative Agent's or
such Lender Party's Affiliates and their officers, directors, employees, agents
and advisors and to actual or prospective Eligible Assignees and participants,
and then only on a confidential basis, (b) as required by any law, rule or
regulation or judicial process and (c) as requested or required by any state,
federal or foreign authority or examiner regulating banks or banking.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is a party in any New York State or federal court. Each of
the parties hereto hereby irrevocably waives, to
<PAGE>
106
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
SECTION 8.12. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.13. Waiver of Jury Trial. Each of the Borrower, the
Administrative Agent and the Lender Parties irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the Advances or the actions of the Administrative Agent or any Lender
Party in the negotiation, administration, performance or enforcement thereof.
ARTICLE IX
GUARANTY
SECTION 9.01. Guaranty. Each of Holding and the Purchaser
unconditionally and irrevocably guarantees (the undertakings by Holding and the
Purchaser under this Article IX being the "Guaranty") the punctual payment when
due, whether at stated maturity, by acceleration or otherwise, of all
Obligations of each other Loan Party now or hereafter existing under the Loan
Documents, whether for principal, interest, fees, commissions, expenses or
otherwise (such Obligations being the "Guaranteed Obligations"), and agrees to
pay any and all expenses (including, without limitation, reasonable fees and
expenses of counsel) incurred by the Administrative Agent or any other Lender
Party in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, each of Holding' and the Purchaser's liability
shall extend to all amounts that constitute part of the Guaranteed Obligations
and would be owed by any other Loan Party to the Administrative Agent or any
other Lender Party under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such other Loan Party.
SECTION 9.02. Guaranty Absolute. Each of Holding and the Purchaser
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of the Administrative Agent or any other Secured Party with respect
thereto. The Obligations of each of Holding and the Purchaser under this
Guaranty are independent of the Guaranteed Obligations or any other Obligations
of any Loan Party under the Loan Documents, and a separate action or actions may
be brought and prosecuted against Holding or the Purchaser to enforce this
Guaranty, irrespective of whether any action is brought against any other Loan
Party or whether any
<PAGE>
107
other Loan Party is joined in any such action or actions. The liability of each
of Holding and the Purchaser under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of, and each of Holding and the
Purchaser hereby irrevocably waives any defenses it may now or hereafter have in
any way relating to, any and all of the following:
(a) any lack of validity or enforceability of any Loan
Document or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other Obligations of any Loan Party under the Loan Documents, or any
other amendment or waiver of or any consent to departure from any Loan
Document (including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to any
Loan Party or any of its Subsidiaries or otherwise);
(c) any taking, exchange, release or nonperfection of any
Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guarantee, for all or any of the Guaranteed
Obligations;
(d) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other Obligations of any Loan Party under
the Loan Documents, or any other property and assets of any other Loan
Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any other Loan Party or any of its
Subsidiaries;
(f) any failure of the Administrative Agent or any Lender
Party to disclose to any Loan Party any information relating to the
financial condition, operations, properties or prospects of any other
Loan Party now or hereafter known to the Administrative Agent or such
Lender Party, as the case may be; or
(g) any other circumstance (including, without limitation, any
statute of limitations or any existence of or reliance on any
representation by the Administrative Agent or any Lender Party) that
might otherwise constitute a defense available to, or a discharge of,
Holding, the Purchaser, any other Loan Party or any other guarantor or
surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Administrative Agent or any Lender Party or
by any other Person upon the
<PAGE>
108
insolvency, bankruptcy or reorganization of any other Loan Party or otherwise,
all as though such payment had not been made.
SECTION 9.03. Waivers and Acknowledgments. (a) Each of Holding and the
Purchaser hereby unconditionally and irrevocably waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty, and any requirement that the Administrative Agent
or any Lender Party protect, secure, perfect or insure any Lien or any property
or assets subject thereto or exhaust any right or take any action against any
other Loan Party or any other Person or any Collateral.
(b) Each of Holding and the Purchaser hereby unconditionally and
irrevocably waives any duty on the part of the Administrative Agent or any other
Lender Party to disclose to Holding or the Purchaser, as the case may be, any
matter, fact or thing relating to the business, operation or condition of any
other Loan Party or any of its Subsidiaries or its property and assets now or
hereafter known by the Administrative Agent or such Lender Party.
(c) Each of Holding and the Purchaser hereby unconditionally waives any
right to revoke this Guaranty, and acknowledges that this Guaranty is continuing
in nature and applies to all Guaranteed Obligations, whether existing now or in
the future.
(d) Each of Holding and the Purchaser acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waivers set forth in this
Section 9.03 are knowingly made in contemplation of such benefits.
SECTION 9.04. Subrogation. Each of Holding and the Purchaser hereby
unconditionally and irrevocably agrees not to exercise any rights that it may
now have or may hereafter acquire against any other Loan Party or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of its Obligations under this Guaranty or under any other Loan
Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Administrative Agent or any Lender
against such other Loan Party or any other insider guarantor or any Collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from such other Loan Party or any other insider guarantor, directly or
indirectly, in cash or other property or by setoff or in any other manner,
payment or security on account of such claim, remedy or right, until such time
as all of the Guaranteed Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash, all of the Letters of Credit
shall have expired, terminated or been cancelled and the Commitments shall have
expired or terminated. If any amount shall be paid to Holding or the Purchaser
in violation of the immediately preceding sentence at any
<PAGE>
109
time prior to the latest of (a) the payment in full in cash of all of the
Guaranteed Obligations and all other amounts payable under this Guaranty, (b)
the full drawing, termination, expiration or cancellation of all Letters of
Credit and, (c) the Termination Date, such amount shall be held in trust for the
benefit of the Administrative Agent and the other Lender Parties and shall
forthwith be paid to the Administrative Agent to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) either Holding or
the Purchaser shall pay to the Administrative Agent all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall have been paid in full in cash, (iii)
all of the Letters of Credit shall have expired, terminated or been cancelled,
and (iv) the Termination Date shall have occurred, the Administrative Agent and
the Lender Parties will, at Holding' or the Purchaser's request and expense,
execute and deliver to Holding or the Purchaser, as the case may be appropriate
documents, without recourse and without representation or warranty, necessary to
evidence the transfer of subrogation to Holding or the Purchaser, as the case
may be, of an interest in the Guaranteed Obligations resulting from the payment
made by Holding or the Purchaser, as the case may be.
SECTION 9.05. Continuing Guarantee; Assignments. This Guaranty is a
continuing guaranty and shall (a) remain in full force and effect until the
latest of (i) the payment in full in cash of all of the Guaranteed Obligations
and all other amounts payable under this Guaranty, (ii) the full drawing,
termination, expiration or cancellation of all Letters of Credit, and (iii) the
Termination Date, (b) be binding upon each of Holding and the Purchaser and
their respective successors and assigns and (c) inure to the benefit of, and be
enforceable by, the Administrative Agent and the Lender Parties and their
respective successors, transferees and assigns. Without limiting the generality
of clause (c) of the immediately preceding sentence, any Lender Party may assign
or otherwise transfer all or any portion of its rights and obligations under
this Agreement (including, without limitation, all or any portion of its
Commitment or Commitments, the Advances owing to it and the Notes held by it) to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to such Lender Party under this Article
IX or otherwise, in each case as provided in Section 8.07.
<PAGE>
110
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CENTRAL TRACTOR FARM &
COUNTRY, INC.
By /s/ James T. McKitrick
Title: President and C.E.O.
CT HOLDING INC.
By /s/ Adam L. Suttin
Title: Vice President
JWC ACQUISITION I, INC.
By /s/ Adam L. Suttin
Title: Vice President
FLEET NATIONAL BANK, as
Administrative Agent
By /s/ John E. Duncan
Title: Managing Director
NATIONSBANK, N.A., as
Co- Agent
By /s/ J. Lynn Callicott
Title: Vice President
<PAGE>
111
Initial Issuing Bank
FLEET NATIONAL BANK
By /s/ John E. Duncan
Title: Managing Director
Initial Lenders
FLEET NATIONAL BANK
By /s/ John E. Duncan
Title: Managing Director
<PAGE>
112
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Revolving Letter of Domestic Eurodollar
Term Credit Credit Lending Lending
Name of Initial Lender Commitment Commitment Commitment Office Office
---------------------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C>
Fleet National Bank $8,000,000 $30,000,000 $10,000,000
</TABLE>
<PAGE>
[Exhibits Omitted]
EXHIBIT 11
CENTRAL TRACTOR FARM & COUNTRY, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
Fiscal Year
-----------------------------------------
1994 1995 1996
--------- -------- --------
Primary:
Weighted average shares
outstanding 7,276 10,576 10,586
Net effect of dilutive stock
options and stock warrant -
based on treasury stock
method 515 443 400
--------- -------- --------
Total 7,791 11,019 10,986
========= ======== ========
Income from continuing
operations $ 5,181 $ 8,185 $ 8,744
Per share amount 0.66 0.74 0.80
Net Income 1,326 5,542 8,744
Per share amount 0.17 0.50 0.80
Fully diluted:
Weighted average shares
outstanding 7,276 10,576 10,586
Net effect of dilutive stock
options and stock warrant -
based on treasury stock
method 515 443 400
Assumed conversion of
7% convertible notes 34 826 826
--------- -------- --------
Total 7,825 11,845 11,812
========= ======== ========
Income from continuing
operations $ 5,181 $ 8,185 $ 8,744
Add 7% convertible note
interest, net of income tax
effect 28 672 672
--------- -------- --------
$ 5,209 $ 8,857 $ 9,416
========= ======== ========
Per share amount $ 0.66(A) $ 0.75(A) $ 0.80(A)
(A) Fully diluted earnings per share are not presented as the affect of the
assumed conversion of the 7% convertible note is antidilutive or less
than 3% dilutive.
Exhibit 21
<TABLE>
<CAPTION>
CENTRAL TRACTOR FARM & COUNTRY, INC.
SUBSIDIARIES
Name Jurisdiction of Incorporation Doing Business As
<S> <C> <C>
Central Tractor Distributing Co. Delaware Same
(f/k/a Herschel Corporation)
[in process of being dissolved]
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-90958) pertaining to the 1994 Stock Incentive Plan and 1994
Director's Stock Option Plan of Central Tractor Farm & Country, Inc. of our
report dated December 6, 1996, with respect to the consolidated financial
statements and schedules of Central Tractor Farm & Country, Inc. included in the
Annual Report (Form 10-K) for the year ended November 2, 1996.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
January 28, 1997
