SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-86154
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BRYLANE INC.
- ------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3794198
- ------------------------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
463 Seventh Avenue
New York, NY 10018
- ------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
(212) 613-9500
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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 [ ]
The number of shares of the registrant's common stock outstanding as of
November 28, 1998 was 17,240,889 shares.
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BRYLANE INC.
FORM 10-Q
For the Quarterly Period Ended
October 31, 1998
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INDEX Page
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Part I - Financial Information
Item 1 - Financial Statements
a) Report of Independent Accountants 3
b) Consolidated Balance Sheets
October 31, 1998 (unaudited) and January 31, 1998 4
c) Consolidated Statements of Operations (unaudited)
Thirteen weeks ended October 31, 1998 and November 1, 1997 and
Thirty-nine weeks ended October 31, 1998 and November 1, 1997 5
d) Consolidated Statements of Cash Flows (unaudited)
Thirty-nine weeks ended October 31, 1998 and November 1, 1997 6
e) Consolidated Statements of Partnership/Stockholders' Equity
Year ended January 31, 1998 and thirty-nine weeks ended
October 31, 1998 (unaudited) 7
f) Notes to Unaudited Consolidated Financial Statements 8 - 9
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 - 17
Part II - Other Information
Item 1 - Legal Proceedings 17
Item 5 - Other Information 17
Item 6 - Exhibits and Reports on Form 8-K 18 - 19
Signature 20
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Brylane Inc.
We have reviewed the accompanying consolidated balance sheet of Brylane Inc. as
of October 31, 1998, the related consolidated statements of operations for the
thirteen and thirty-nine weeks then ended, and the related consolidated
statements of cash flows and partnership/stockholders' equity for the
thirty-nine weeks then ended. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
December 4, 1998
3
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PART I - FINANCIAL INFORMATION
- ----------------------------------
ITEM 1 - Financial Statements
- ----------------------------------
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BRYLANE INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except shares and per share data)
<S> <C> <C>
October 31, January 31,
1998 1998
------------ ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ -- $ 5,083
Deferred receivables (net of allowance for doubtful accounts
of $2,098 and $1,474, respectively) 25,144 8,194
Accounts receivable, other 11,257 7,851
Inventories 240,936 219,553
Catalog costs and paper inventory 67,385 51,982
Other 7,334 6,426
------------ ------------
Total current assets 352,056 299,089
Property and equipment, net 79,998 77,095
Intangibles and deferred financing fees 323,711 333,319
Deferred income taxes 10,697 10,697
------------ ------------
Total assets $ 766,462 $ 720,200
============ ============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 154,301 $ 139,480
Accrued expenses 24,705 38,705
Reserve for returns 19,837 17,844
Revolving line of credit - current portion 78,000 19,000
Current portion of long-term debt 17,500 10,000
------------ ------------
Total current liabilities 294,343 225,029
Long-term debt 282,500 329,753
Other long-term liabilities 11,570 9,010
------------ ------------
Total liabilities 588,413 563,792
Convertible redeemable preferred stock -- 1,370
Stockholders' equity:
Common stock, $.01 par value 40,000,000 shares authorized;
20,980,396 shares issued and 17,239,596 shares outstanding
at October 31, 1998; 19,910,519 shares issued and 17,410,519
shares outstanding at January 31, 1998 210 199
Additional paid in capital 181,263 150,168
Retained earnings 138,218 119,671
Treasury stock, at cost, 3,740,800 and 2,500,000 shares, respectively (141,642) (115,000)
------------ ------------
Total stockholders' equity 178,049 155,038
------------ ------------
Total liabilities and equity $ 766,462 $ 720,200
============ ============
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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BRYLANE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except shares and per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------- ------------------------
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
------------ ----------- ----------- -----------
Net Sales $ 348,118 $ 365,454 $ 996,254 $ 968,911
Cost of goods sold 177,251 185,536 506,190 498,822
------------ ----------- ----------- -----------
Gross margin 170,867 179,918 490,064 470,089
Operating expenses:
Catalog and advertising 99,411 90,118 249,193 227,997
Fulfillment 36,375 31,193 100,237 87,608
Support services 22,766 22,753 68,086 66,503
Intangibles and organization cost amortization 2,809 2,684 8,458 8,150
------------ ----------- ----------- -----------
Total operating expenses 161,361 146,748 425,974 390,258
------------ ----------- ----------- -----------
Operating income 9,506 33,170 64,090 79,831
Interest expense, net 7,897 6,427 22,999 20,112
------------ ----------- ----------- -----------
Income before income taxes
and extraordinary charge 1,609 26,743 41,091 59,719
Provision for income taxes 623 9,895 15,824 22,637
------------ ----------- ----------- -----------
Income before extraordinary charge 986 16,848 25,267 37,082
Extraordinary charge related to early
retirement of debt, net of tax 6,720 -- 6,720 4,110
------------ ----------- ----------- -----------
Net (loss) income $ (5,734) $ 16,848 $ 18,547 $ 32,972
============ =========== =========== ===========
Basic earnings per share:
Income per share before extraordinary charge $ 0.06 $ 0.88 $ 1.40 $ 1.91
Extraordinary charge per share 0.38 -- 0.37 0.21
------------ ----------- ----------- -----------
Net (loss) income per share $ (0.32) $ 0.88 $ 1.03 $ 1.70
============ =========== =========== ===========
Diluted earnings per share:
Income per share before extraordinary charge $ 0.05 $ 0.85 $ 1.38 $ 1.86
Extraordinary charge per share 0.37 -- 0.37 0.20
------------ ----------- ----------- -----------
Net (loss) income per share $ (0.32) $ 0.85 $ 1.01 $ 1.66
============ =========== =========== ===========
Weighted average shares outstanding:
Basic 17,888,736 19,178,347 18,073,557 19,373,746
Diluted 17,949,756 20,081,115 18,359,687 20,185,900
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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BRYLANE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<S> <C> <C>
Thirty-nine Weeks Ended
-------------------------
October 31, November 1,
1998 1997
------------ ------------
OPERATING ACTIVITIES:
Net income $ 18,547 $ 32,972
Impact of other operating activities on cash flows:
Depreciation 8,663 7,617
Amortization 9,175 9,187
Non-recurring inventory charge -- 3,315
Extraordinary charge related to early retirement of debt 10,927 6,524
Non-cash compensation expense 50 523
Loss on sale of assets 41 --
Changes in operating assets and liabilities:
Accounts receivable (20,356) (13,747)
Inventories (21,383) (42,795)
Catalog costs and paper inventory (15,403) (20,839)
Accounts payable 14,821 55,564
Accrued expenses (4,730) 20,110
Reserve for returns 1,993 7,665
Other assets and liabilities 2,890 5,151
------------ ------------
Net cash provided by operating activities 5,235 71,247
------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (12,855) (10,319)
Purchase price adjustment related to Chadwick's Acquisition -- 32,888
Proceeds from sale of asset 13 --
------------ ------------
Net cash (used in) provided by investing activities (12,842) 22,569
------------ ------------
FINANCING ACTIVITIES:
Payments on debt (175,000) (464,662)
Additions to debt 29,000 --
Proceeds from issuance of 1997 Bank Credit Facility -- 181,663
Proceeds from issuance of Amended and Restated 1997 Bank Credit
Facility 300,000 235,000
Redemption of Senior Subordinated Notes (131,250) --
Proceeds from initial public offering -- 96,000
Offering fees and expenses -- (8,170)
Debt issuance fees and expenses (3,703) (1,394)
Cash receipts on management notes 1,025 965
Proceeds received from exercise of options 9,094 349
Purchase of treasury stock (26,642) (115,000)
------------ ------------
Net cash provided by (used in) financing activities 2,524 (75,249)
------------ ------------
Cash and cash equivalents, at beginning of year 5,083 3,285
------------ ------------
Cash and cash equivalents, at end of period $ -- $ 21,852
============ ============
<FN>
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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BRYLANE INC.
CONSOLIDATED STATEMENTS OF PARTNERSHIP/STOCKHOLDERS' EQUITY
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Other Additional
Equity Common Stock Paid in Retained
----------------------
(Note A) Shares Amount Capital Earnings
--------- ------------- -------- --------- --------------
Balance, February 1, 1997 $30,923 - - - $ 72,940
Net income - - - - 47,035
Tax distributions made to partners - - - - (304)
Proceeds from Initial Public Offering - 4,000,000 $ 40 $ 95,960 -
Initial Public Offering expenses - - - (8,850) -
Exchange of partnership units for common stock (33,413) 15,471,445 155 33,258 -
Purchase of treasury stock - - - - -
Recognition of deferred tax asset and opening
income tax adjustment - - - 18,142 -
Loans to management investors 2,490 - - (2,490) -
Repayment of management notes - - - 1,465 -
Conversion of convertible note - 352,908 4 9,701 -
Conversion of preferred stock - 6,500 - 130 -
Exercise of stock options - 79,666 - 1,144 -
Tax benefit related to issuance of shares under
employee benefit plans - - - 1,008 -
Exchange of stock options - - - 700 -
--------- ------------- -------- --------- --------------
Balance, January 31, 1998 - 19,910,519 199 150,168 119,671
Net income - - - - 18,547
Purchase of treasury stock - - - - -
Exercise of stock options - 627,013 6 9,088 -
Tax benefit related to options exercised - - - 9,272 -
Conversion of convertible note - 374,364 4 10,291 -
Conversion of preferred stock - 68,500 1 1,369 -
Stock options outstanding, net - - - 50 -
Repayment of management notes - - - 1,025 -
--------- ------------- -------- --------- --------------
Balance, October 31, 1998 (unaudited) $ - 20,980,396 $ 210 $181,263 $ 138,218
======== ============= ======== ========= ==============
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Treasury Stock
------------------------
Shares Amount Total
------------ ----------- ---------
Balance, February 1, 1997 - - $103,863
Net income - - 47,035
Tax distributions made to partners - - (304)
Proceeds from Initial Public Offering - - 96,000
Initial Public Offering expenses - - (8,850)
Exchange of partnership units for common stock - - --
Purchase of treasury stock (2,500,000) $ (115,000) (115,000)
Recognition of deferred tax asset and opening
income tax adjustment - - 18,142
Loans to management investors - - --
Repayment of management notes - - 1,465
Conversion of convertible note - - 9,705
Conversion of preferred stock - - 130
Exercise of stock options - - 1,144
Tax benefit related to issuance of shares under
employee benefit plans - - 1,008
Exchange of stock options - - 700
------------ ----------- ---------
Balance, January 31, 1998 (2,500,000) (115,000) 155,038
Net income - - 18,547
Purchase of treasury stock (1,240,800) (26,642) (26,642)
Exercise of stock options - - 9,094
Tax benefit related to options exercised - - 9,272
Conversion of convertible note - - 10,295
Conversion of preferred stock - - 1,370
Stock options outstanding, net - - 50
Repayment of management notes - - 1,025
------------ ----------- ---------
Balance, October 31, 1998 (unaudited) (3,740,800) $(141,642) $178,049
============ =========== =========
<FN>
Note A: The beginning balance includes general and limited partnership interests, reduction for predecessor cost-carryover
basis and loans to management investors.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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BRYLANE INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS:
Brylane Inc., a Delaware corporation ("Brylane" or the "Company"), is a
leading catalog retailer of special-size and regular-size women's and men's
apparel. The women's catalogs market apparel in the budget and low to moderate
price range and the men's catalogs market apparel in the moderate price range.
Brylane services the special-size customer through its Lane Bryant, Roaman's,
Jessica London and KingSize (men's) catalogs, and the regular-size customer
through its Chadwick's, Lerner, Bridgewater and Brett (men's) catalogs. In
addition, the Company's home catalog, introduced in September 1998, offers
value-priced home products. Brylane also markets apparel to these same customer
segments through four catalogs which it distributes under licensing arrangements
with Sears Shop at Home Services, Inc. ("Sears").
Brylane's merchandising strategy is to provide value-priced, private label
apparel with a consistent quality and fit, to concentrate on apparel with
limited fashion risk and to offer a broader selection of sizes and styles in
special-size apparel than can be found at most retail stores and in other
competing catalogs. Each of Brylane' s catalogs offers its customers
contemporary, traditional and basic apparel.
(2) BASIS OF PRESENTATION:
The consolidated financial statements at October 31, 1998 are unaudited and
have been prepared from the books and records of the Company in accordance with
generally accepted accounting principles and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. All adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of financial position and operating results for the interim
periods are reflected. These financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's most recent Annual Report on Form 10-K, which includes financial
statements for the year ended January 31, 1998.
(3) SIGNIFICANT STOCKHOLDER - PINAULT-PRINTEMPS-REDOUTE:
On April 3, 1998, Pinault-Printemps-Redoute, S.A., a company organized
under the laws of France ("PPR"), through an affiliate, acquired 43.7% of the
outstanding common stock from certain stockholders of the Company. Concurrently,
the Company and PPR entered into a governance agreement (the "Goverance
Agreement") that includes a standstill period of three years which limits PPR's
ability to acquire additional common stock to approximately 47.5% of the
outstanding shares and restricts PPR from taking certain other actions. PPR's
beneficial ownership of the common stock outstanding increased from 46.7% as of
August 17, 1998 to approximately 49.9% (50.1% together with its other
affiliates) as of December 2, 1998 due to additional shares acquired by PPR and
the purchase of shares by the Company pursuant to the Common Stock Repurchase
Program approved by the Board of Directors.
On December 2, 1998, at a special meeting of the Board of Directors, the
Company's independent directors consented, pursuant to the terms of the
Governance Agreement, to allow PPR to make a proposal to acquire all of the
outstanding common stock of Brylane not owned by PPR. Having received such
consent, PPR then made a proposal, in the form of a letter, to acquire all the
outstanding shares not previously owned for a price of $20 per share. The Board
has formed a special committee, comprised of the three independent directors, to
consider and evaluate the proposal. The special committee will retain its own
legal and financial advisors to assist in evaluating the proposal. No time
requirement has been placed on the review of the proposal. PPR has indicated to
the Company that if it is not able to consummate the proposal at a reasonable
price, it currently intends to continue to be a long-term stockholder of
Brylane.
(4) COMMITMENTS AND CONTINGENCIES:
Brylane is involved in various legal proceedings that are incidental to the
conduct of its business. Although the amount of any liability with respect to
these proceedings cannot be determined, in the opinion of management after
consultation with legal counsel, any such liability will not have a material
adverse effect on the financial position or results of operations of Brylane.
The Company has been undergoing an audit by the Indiana Department of
Revenue ("IDR"), and had previously disclosed its expectation that an assessment
against the Company was probable. Following an in depth review of the
circumstances, the IDR has advised the Company that no assessment will be made
as a result of this audit.
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(5) NEW ACCOUNTING STANDARDS:
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The standard is effective for
fiscal years beginning after December 15, 1998, with early adoption encouraged.
The Company applied the new rules prospectively beginning in the first quarter
of 1998. During the thirty-nine weeks ended October 31, 1998 the Company
capitalized $0.9 million, net of tax, ($0.05 per share on a diluted basis) of
expenditures related to internally developed software.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Startup Activities" ("SOP 98-5"). SOP 98-5 requires that the costs
of startup activities, including organizational costs, be expensed as incurred
and is effective for the Company's fiscal 1999 financial statements. The
Company has historically expensed as incurred expenditures associated with
startup activities including new businesses.
(6) RECLASSIFICATIONS:
Certain amounts in the prior period financial statements have been
reclassified to be consistent with the current period presentation. Such
reclassifications had no effect on previously reported net income.
9
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ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements are subject to a number of risks and
uncertainties, including among other things, fluctuations in revenue,
competition, risks associated with the Sears Agreement, the impact of increases
in costs of postage, paper and printing, distribution costs, control of the
Company by PPR, risks associated with acquisitions and risks related to
unionized employees at certain of the Company's facilities. Actual results in
the future could differ materially from those described in the forward-looking
statements as a result of such risk factors or other risks. The Company
undertakes no obligation to publicly release the results of any revisions of
these forward-looking statements that may reflect any future events or
circumstances.
RESULTS OF OPERATIONS
The following table sets forth certain operating data of Brylane Inc. for the
periods indicated.
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Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------- -------------------------
(Dollars in thousands) (Dollars in thousands)
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
October 31, 1998 November 1, 1997 October 31, 1998 November 1, 1997
---------------------- -------------------- ---------------------- -------------------
Net sales $ 348,118 100.0% $ 365,454 100.0% $ 996,254 100.0% $968,911 100.0%
Gross margin (1) 170,867 49.1 179,918 49.2 490,064 49.2 470,089 48.5
Operating expenses:
Catalog and advertising 99,411 28.6 90,118 24.7 249,193 25.0 227,997 23.5
Fulfillment 36,375 10.5 31,193 8.5 100,237 10.1 87,608 9.0
Support services 22,766 6.5 22,753 6.2 68,086 6.8 66,503 6.9
Amortization of acquisitions
intangibles and organization costs 2,809 0.8 2,684 0.7 8,458 0.9 8,150 0.8
---------- ---------- --------- --------- ---------- ---------- --------- --------
Operating income 9,506 2.7 33,170 9.1 64,090 6.4 79,831 8.3
Interest expense, net 7,897 2.2 6,427 1.8 22,999 2.3 20,112 2.1
---------- ---------- --------- --------- ---------- ---------- --------- --------
Income before income taxes and
extraordinary charge 1,609 0.5 26,743 7.3 41,091 4.1 59,719 6.2
Provision for income taxes 623 0.2 9,895 2.7 15,824 1.6 22,637 2.3
---------- ---------- --------- --------- ---------- ---------- --------- --------
Income before extraordinary charge 986 0.3 16,848 4.6 25,267 2.5 37,082 3.9
Extraordinary charge related to early
retirement of debt, net of tax 6,720 1.9 -- -- 6,720 0.6 4,110 0.5
---------- ---------- --------- --------- ---------- ---------- --------- --------
Net (loss) income ($5,734) (1.6)% $ 16,848 4.6% $ 18,547 1.9% $32,972 3.4%
========== ========== ========= ========= ========== ========== ========= ========
<FN>
(1) Includes a $3.3 million inventory charge for the thirty-nine weeks ended November 1, 1997 related to the
Chadwick's Acquisition to reflect the fair market value of the inventory at December 9, 1996, the closing
date of the Chadwick's Acquisition.
</TABLE>
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RECENT DEVELOPMENTS:
The Company's financial results for the thirteen weeks ended October 31,
1998 were adversely impacted by a softening of demand that affected the catalog
retail industry in general. Catalog apparel retailers, including the Company,
were also negatively affected by unusually warm weather in the Fall season which
reduced demand for outerwear, sweaters and wool items. The Company also placed
too much emphasis in its Fall catalogs on prior seasons' best sellers. This
lack of newness did not stimulate customer response.
Although the Holiday season typically brings an increase in sales for the
retail industry, the Company has not historically experienced marked increases
in net sales in the fourth quarter. Accordingly, management expects that net
sales in the fourth quarter of 1998 will be 2.0-3.0% below 1997 levels. To
address these issues, management has refocused its efforts on presenting a newer
merchandise assortment to freshen inventories and expects to increase
promotional and liquidation markdowns in the fourth quarter of 1998.
The United States Postal Service announced a postal rate increase
commencing on January 10, 1999. Brylane expects the magnitude of the postal
increase on catalog postage and merchandise postage to be approximately 3.0% and
9.0% respectively. The Company estimates the annual effect on net income to be
$3.0 million, after tax, or approximately $0.17 per share on a diluted basis.
Currently, the Company is examining ways to mitigate the costs associated with
the postal increase.
THIRTEEN WEEKS ENDED OCTOBER 31, 1998 COMPARED TO THIRTEEN WEEKS ENDED NOVEMBER
1, 1997
NET SALES:
Net sales decreased 4.7% for the thirteen weeks ended October 31, 1998 to
$348.1 million from $365.5 million in the comparable period of fiscal 1997.
While total circulation increased, net sales decreased due to lower demand per
book primarily in the regular size businesses which has been impacted by the
unusually warm Fall, especially in the demand for sweaters, outerwear and wool
items, as well as its heavy reliance on prior years' bestsellers.
GROSS MARGIN:
Gross margin for the thirteen weeks ended October 31, 1998 decreased to
$170.9 million (49.1% of net sales) from $179.9 million (49.2% of net sales) for
the same period of fiscal 1997. The slight decrease in the gross margin as a
percent of net sales is due to higher planned regular, promotional and
liquidation markdowns, offset by higher initial mark-ups which were created by
favorable merchandise sourcing from direct offshore purchases.
CATALOG AND ADVERTISING EXPENSE:
Catalog and advertising expense is comprised of the costs to produce and
distribute catalogs, primarily paper, printing and catalog mailing costs, and
the cost of acquiring names of prospective customers. For the thirteen weeks
ended October 31, 1998, catalog and advertising expense increased to $99.4
million (28.6% of net sales) from $90.1 million (24.7% of net sales) for the
same period of fiscal 1997. The increase in expense as a percent of net sales
is primarily due to an increase in circulation and lower book productivity.
FULFILLMENT EXPENSE:
Fulfillment expense includes distribution center, telemarketing, credit
services and customer service expenses, reduced by net merchandise postage
revenue. Fulfillment expense as reported in the thirteen weeks ended October
31, 1998 increased to $36.4 million (10.5% of net sales) from $31.2 million
(8.5% of net sales) for the same period in fiscal 1997. The increase in
fulfillment expense as a percent of net sales is due to reduced operational
efficiencies resulting in higher payroll costs at the West Bridgewater facility,
a decrease in net merchandise postage revenue due to the expanded use of
shipping incentives and an increase in credit service expenses primarily related
to the chargebacks associated with the deferred billing program.
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SUPPORT SERVICES EXPENSE:
Support services expense includes staffing and other administrative
overhead costs associated with the operation of the business and the license
fees associated with the Company's agreements with Sears Shop At Home. Support
services expense as reported for the thirteen weeks ended October 31, 1998 was
$22.8 million (6.5% of net sales) compared to $22.8 million (6.2% of net sales)
for the same period in fiscal 1997. The increase in support services as a
percent of net sales is due to the decrease in revenue versus the same period
last year.
AMORTIZATION EXPENSE:
Amortization expense for the thirteen weeks ended October 31, 1998,
increased to $2.8 million (0.8% of net sales) from $2.7 million (0.7% of net
sales) for the same period in fiscal 1997. The increase in the amortization
expense is due to increased amortization of the remaining net book value of
certain trademarks which was accelerated concurrent with changes in ownership
that occurred in conjunction with the Company's secondary offering in October
1997.
OPERATING INCOME:
Operating income in the thirteen weeks ended October 31, 1998 decreased to
$9.5 million (2.7% of net sales) from $33.2 million (9.1% of net sales) for the
same period of fiscal 1997. Operating income decreased by $23.7 million due to
a decrease in sales volume, higher catalog and operating costs and a decrease in
net merchandise postage revenue.
INTEREST EXPENSE:
Interest expense, net, for the thirteen weeks ended October 31, 1998
increased to $7.9 million compared to $6.4 million for the comparable period in
1997. The increase was due to higher average outstanding debt balances (see
Liquidity and Capital Resources) partially offset by slightly lower interest
rates on the term loan of the Amended and Restated 1997 Bank Credit Facility.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE:
Income before income taxes and extraordinary charge decreased to $1.6
million for the thirteen weeks ended October 31, 1998 from $26.7 million for the
same period of fiscal 1997. The decrease is primarily due to a decrease in sales
volume, higher catalog and operating costs, a decrease in net merchandise
postage revenue and an increase in net interest expense.
INCOME TAXES:
The provision for income taxes is based on current estimates by management
of the annual effective tax rate. The effective tax rate was 38.5% for the
thirteen weeks ended October 31, 1998 compared to 37.0% for the thirteen weeks
ended November 1, 1997.
EXTRAORDINARY CHARGE:
The Company's extraordinary charge of $6.7 million, net of tax, ($0.37 per
share on a diluted basis) relates to the call premium and the write-off of the
unamortized deferred financing fees in connection with the redemption of the
Senior Subordinated Notes which occurred in the thirteen weeks ended October 31,
1998.
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NET (LOSS) INCOME:
The Company had a net loss of $5.7 million (($0.32) per share on a diluted
basis) for the thirteen weeks ended October 31, 1998 compared to net income of
$16.8 million ($0.85 per share on a diluted basis) for the comparable period in
fiscal 1997. The decrease is primarily due to a decrease in sales volume,
higher catalog and operating costs, a decrease in net merchandise postage
revenue, an increase in net interest expense and an extraordinary charge related
to the redemption of the Senior Subordinated Notes.
THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998 COMPARED TO THIRTY-NINE WEEKS ENDED
NOVEMBER 1, 1997
NET SALES:
Net sales increased 2.8% for the thirty-nine weeks ended October 31, 1998
to $996.3 million from $968.9 million in the comparable period of fiscal 1997.
The increase in net sales is primarily related to an increase in sales volume
from an increase in circulation and average order size, offset by lower demand
per book in the regular size businesses as compared to the same period of fiscal
1997.
GROSS MARGIN:
Gross margin for thirty-nine weeks ended October 31, 1998 increased to
$490.1 million (49.2% of net sales) from $470.1 million (48.5% of net sales) for
the same period of fiscal 1997. Excluding the non-recurring inventory charge of
$3.3 million (0.3% of net sales) related to the step-up in the value of
inventory in connection with the Chadwick's acquisition, last year's gross
margin would have been $473.4 million (48.9% of net sales). The increase in the
gross margin as a percent of net sales, excluding the non-recurring inventory
charge in fiscal 1997, is due to the higher initial mark-ups created by
favorable merchandise sourcing from direct offshore purchases, offset by the
effects of higher planned regular, promotional and liquidation markdowns
initiated in the third quarter due to softness in demand.
CATALOG AND ADVERTISING EXPENSE:
Catalog and advertising expense for the thirty-nine weeks ended October 31,
1998, increased to $249.2 million (25.0% of net sales) from $228.0 million
(23.5% of net sales) for the same period of fiscal 1997. The increase as a
percent of net sales was primarily due to an increase in circulation and lower
book productivity as well as higher paper costs in fiscal 1998.
FULFILLMENT EXPENSE:
Fulfillment expense in the thirty-nine weeks ended October 31, 1998
increased to $100.2 million (10.1% of net sales) from $87.6 million (9.0% of net
sales) for the same period in fiscal 1997. The increase in fulfillment expense
is primarily due to reduced operational efficiencies resulting in higher payroll
costs at the West Bridgewater facility, a decrease in net merchandise postage
revenue due to the expanded use of shipping incentives and an increase in credit
service expenses primarily related to the chargebacks associated with the
deferred billing program.
SUPPORT SERVICES EXPENSE:
Support services expense for the thirty-nine weeks ended October 31, 1998
increased to $68.1 million (6.8% of net sales) from $66.5 million (6.9% of net
sales) for the same period in fiscal 1997. The decrease was primarily due to
lower incentive compensation expense, partially offset by higher staffing costs
to support growth initiatives, expenses incurred from a canceled common stock
registration and relocation costs for the KingSize business in fiscal 1998.
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AMORTIZATION EXPENSE:
Amortization expense for the thirty-nine weeks ended October 31, 1998
increased to $8.5 million (0.9% of net sales) from $8.2 million (0.8% of net
sales) for the same period in fiscal 1997. The increase in the amortization
expense is due to increased amortization of the remaining net book value of
certain trademarks which was accelerated concurrent with changes in ownership
that occurred in conjunction with the Company's secondary offering in October
1997.
OPERATING INCOME:
Operating income in the thirty-nine weeks ended October 31, 1998 decreased
to $64.1 million (6.4% of net sales) from $79.8 million (8.3% of net sales) for
the same period of fiscal 1997. Operating income decreased by $15.7 million due
to higher planned regular, promotional and liquidation markdowns, increased
catalog and operational costs and a decrease in net merchandise postage revenue
offset by higher initial mark-ups created by favorable merchandise sourcing from
direct offshore purchases.
INTEREST EXPENSE:
Interest expense, net, in the thirty-nine weeks ended October 31, 1998
increased to $23.0 million compared to $20.1 million for the comparable period
in fiscal 1997. Excluding interest income of $1.0 million related to a purchase
price adjustment associated with the Chadwick's Acquisition in fiscal 1997,
interest expense increased by $1.9 million which was due to higher average
outstanding debt balances (see Liquidity and Capital Resources) partially offset
by slightly lower interest rates on the term loan of the Amended and Restated
1997 Bank Credit Facility.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE:
Income before income taxes and extraordinary charge decreased to $41.1
million in the thirty-nine weeks ended October 31, 1998 from $59.7 million for
the same period of fiscal 1997. The decrease is due to higher planned regular,
promotional and liquidation markdowns, increased catalog and operational costs,
a decrease in net merchandise postage revenue, an increase in net interest
expense offset by higher initial mark-ups created by favorable merchandise
sourcing from direct offshore purchases.
INCOME TAXES:
The provision for income taxes is based on current estimates by management
of the annual effective tax rate. The effective tax rate was 38.5% for the
thirty-nine weeks ended October 31, 1998 compared to 37.9% for the thirty-nine
weeks ended November 1, 1997.
EXTRAORDINARY CHARGE:
The Company's extraordinary charge of $6.7 million, net of tax, ($0.37 per
share on a diluted basis) relates to the call premium and the write-off of the
unamortized deferred financing fees in connection with the redemption of the
Senior Subordinated Notes which occurred in the thirteen weeks ended October 31,
1998. The Company's extraordinary charge of $4.1 million, net of tax, ($0.20
per share on a diluted basis) for the thirty-nine weeks ended November 1, 1997
pertained to the write-off of unamortized deferred financing fees related to the
early retirement of the debt outstanding under the 1996 Bank Credit Facility.
NET (LOSS) INCOME:
Net income decreased to $18.5 million ($1.01 per share on a diluted basis)
for the thirty-nine weeks ended October 31, 1998 from $33.0 million ($1.66 per
share on a diluted basis) for the comparable period in fiscal 1997. The
decrease is due to higher planned regular, promotional and liquidation
markdowns, increased catalog and operational costs, a decrease in net
merchandise postage revenue, an increase in net interest expense and an
extraordinary charge related to the redemption of the Senior Subordinated Notes,
offset by higher initial mark-ups.
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LIQUIDITY AND CAPITAL RESOURCES:
The Company has historically funded its working capital needs, principally
building inventory to meet increased sales and its capital expenditure
requirements through a combination of funds generated from operations and
borrowings under the bank credit facility. The Company's liquidity requirements
have also included servicing the debt incurred to finance several acquisitions
and also includes servicing debt incurred to finance the repurchase of common
stock in the third quarters of both fiscal 1998 and 1997.
Operating activities resulted in cash provided of $5.2 million for the
thirty-nine weeks ended October 31, 1998 compared to cash provided of $71.2
million for the same period in fiscal 1997. The decrease in cash provided by
operations is attributable to lower operating income after non-cash charges and
an increase in net working capital, primarily due to higher levels of deferred
receivables, inventories, catalog costs and paper inventory.
Investing activities resulted in net cash used of $12.8 million in the
thirty-nine weeks ended October 31, 1998 compared to a net source of cash of
$22.6 million in the same period in fiscal 1997. The Company's capital
expenditures for the remainder of fiscal 1998 are estimated to be $4.3 million.
Financing activities for the thirty-nine weeks ended October 31, 1998
resulted in net cash provided of $2.5 million compared with a net use of cash of
$75.2 million in the prior year. During the period, the Company made two
scheduled payments totaling $5.0 million on the $175.0 million amortizing term
loan. The Company had net borrowings of $29.0 million on the revolver for the
thirty-nine weeks ended October 31, 1998. The Company received proceeds of $9.1
million related to the exercise of stock options and $1.0 million from the
payment of management notes related to stock subscriptions in the thirty-nine
weeks ended October 31, 1998. As a result of stock option exercises, a $9.3
million tax benefit was recorded as additional paid in capital. On August 27,
1998, the Board authorized the Company to purchase up to $40.0 million of its
common stock; as of October 31, 1998, the Company has purchased approximately
1.2 million shares at a cost of approximately $26.6 million. The convertible
subordinated note of $10.3 million was converted in the first quarter into
374,364 shares of common stock.
On September 21, 1998, the Company through its operating partnership
("Brylane, L.P." or the "Partnership") Amended and Restated the 1997 Bank Credit
Facility (the "Bank Credit Facility") and entered into a credit agreement
between Brylane, L.P. and Credit Lyonnais New York Branch, as administrative
agent, and guaranteed by each of the Company's subsidiaries. The aggregate
principal amount is up to $500.0 million consisting of (i) a $300.0 million
six-year amortizing term loan ("Term Loan") and (ii) a $200.0 million six-year
revolving credit facility (the "Revolving Credit Facility") with a $100.0
million sublimit for letters of credit and a $15.0 million sublimit for
swingline loans. The proceeds were used to repay the balance of the $175.0
million term loan and the Senior Subordinated Notes of $125.0 million plus a
call premium of $6.3 million. The Company paid $3.7 million in fees for
amending and restating the Bank Credit Facility.
The Revolving Credit Facility can be used for letters of credit and other
general corporate purposes, including working capital needs, permitted
acquisitions, and is also available to provide a portion of the funds to effect
the Common Stock Repurchase Program. The Term Loan requires scheduled
semi-annual principal payments of $17.5 million beginning on September 30, 1999.
In addition, Brylane is obligated to make certain mandatory prepayments of the
Term Loan and the Revolving Credit Facility under certain circumstances.
Borrowings under the Term Loan and Revolving Credit Facility bear interest at
one of two rates at the option of the Company: (i) Prime Rate (as defined by
the Bank Credit Facility) or (ii) a margin over LIBOR (as defined) for specific
interest periods. The margin may vary based on the ratio of the Partnership's
net debt to operating cash flow.
As of October 31, 1998, Brylane had $78.0 million of borrowings under the
Revolving Credit Facility and, after giving effect to the issuance of letters of
credit for $35.1 million which the Company intends to pay through funds
generated from operations, had additional capacity under the Revolving Credit
Facility of approximately $86.9 million.
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While no assurances can be given in this regard, based on current and
projected operating results, Brylane believes that cash flow from operations
will provide adequate funds for ongoing operations, funding of the purchases of
common stock for treasury, debt service on its indebtedness including scheduled
prepayments under the Bank Credit Facility and planned capital expenditures for
the foreseeable future. In addition, the Company will have availability under
the Revolving Credit Facility to finance capital needs.
Consummation of the transactions related to the acquisition of the
outstanding common stock of Brylane not owned by PPR, as contemplated by the
proposal presented by PPR to the Company's independent directors (see Part II,
Item 5), may require the consent of the lenders under the Bank Credit Facility.
If such consent, if required, was not obtained, consummation of such
transactions would constitute an Event of Default under the Bank Credit
Facility, as a result of which, all borrowings outstanding thereunder could be
declared immediately due and payable together with accrued interest thereon.
Although no discussion has been held with the lenders under the Bank Credit
Facility, the Company anticipates that it will be able to resolve any issues
that may be raised by the PPR proposal at the appropriate time.
YEAR 2000 UPDATE:
The "Year 2000" issue developed because most computer systems and programs
were designed to record years (e.g. "1998") as two-digit fields (e.g. "98").
When the year 2000 begins, these systems may interpret "00" as the year 1900 and
may stop processing date-related computations or process them incorrectly. To
prevent this, companies need to examine their computer systems and programs, fix
the problem and test the results. Year 2000 compliance must be achieved on or
before December 31, 1999. Also, certain systems currently refer to dates beyond
December 31, 1999 and, therefore, have required earlier compliance.
Year 2000 problems could effect the Company's distribution, financial,
administrative and telemarketing communication operations. For this reason, the
Company is aggressively addressing the Year 2000 issue to mitigate the effect on
software performance. The Company has computer operations located in
Indianapolis, Indiana and West Bridgewater, Massachusetts. A comprehensive
effort to identify and correct the Year 2000 issues began in late 1996 for
Indianapolis and in the fall of 1997 for West Bridgewater. Separate teams
reporting to the Company's senior management were established at both locations
to oversee the effort of (1) taking inventory of Year 2000 items; (2) assigning
priorities to identified items; (3) repairing or replacing items that are
determined not to be Year 2000 compliant; (4) testing material items; and (5)
designing and implementing contingency and business continuation plans for each
Company location.
The Company's goal is to have the remediation and replaced systems
operational by the first quarter of 1999 to allow time for testing and
verification. In addition to the in-house efforts utilizing internal personnel
and contract programmers, the Company is asking vendors, service suppliers,
communications providers and banks, whose systems failures could potentially
have a significant impact on operations, to verify their Year 2000 readiness.
Where possible Brylane will be testing such systems for compliance.
External and internal costs specifically associated with modifying internal
use software for Year 2000 compliance are expensed as incurred. The Company
estimates that its internally developed systems will be Year 2000 compliant by
early 1999. Aggregate costs for actual remediation and replacements related to
Year 2000 efforts are anticipated to range from approximately $3.0 - $4.0
million. The Company has incurred a total of approximately $2.0 million to date.
Such costs do not include normal system upgrades and replacements.
The Company believes the most likely worst-case scenarios that it might
confront with respect to the Year 2000 issues have to do with the possible
failure in one or more geographic regions of third party systems over which the
Company has no control, such as, but not limited to, power and telephone
service. The Company will put in place by second quarter of 1999 a business
continuity plan that addresses recovery from various kinds of disasters,
including recovery from significant interruption of data flows at the Company's
data systems centers and distribution centers.
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The Company's estimates of the costs of achieving Year 2000 compliance and
the date by which Year 2000 compliance will be achieved are based on
management's best estimates. These estimates are derived using numerous
assumptions about future events including the continued availability of
resources, third party modification plans and other factors. However, there can
be no assurance that these estimates will be achieved, and actual results could
differ materially from these estimates. Specific factors that might cause such
differences include, but are not limited to, the availability and cost of
personnel trained in Year 2000 issues, the ability to locate, correct, and test
all relevant computer codes, the success achieved by the Company's suppliers in
reaching Year 2000 readiness, the timely availability of necessary replacement
equipment, and similar uncertainties.
PART II - OTHER INFORMATION
- -------------------------------
ITEM 1- Legal Proceedings
- ---------------------------
On December 4, 1998, six purported stockholder class action lawsuits were
filed in the Court of Chancery of the State of Delaware, New Castle County,
against the Company, its directors, its president and chief executive officer,
and PPR, the beneficial owner of approximately 49.9% of the Company's
outstanding common stock. These actions relate to a proposal presented on
December 2, 1998 by PPR to the Company's independent directors regarding the
acquisition by PPR of all of the Company's outstanding common stock not owned by
PPR. The complaints are entitled as follows:(i) Mohammad Yassin v. Brylane Inc.,
et al., Civil Action No. 16819NC; (ii) Goldplate Holdings, Inc. v. Peter J.
Canzone, et al., Civil Action No. 16820NC; (iii) Patty Lisa v. Brylane Inc.,
et al., Civil Action No. 16821NC; (iv) F. Richard Mason v. Brylane Inc., et al.,
Civil Action No. 16823NC; (v) Judith Wit v. Brylane Inc., et al., Civil Action
No. 16824NC; and (vi) Crandon Capital Partners v. Peter J. Canzone, et al.,
Civil Action No. 16825NC. The complaints purport to seek relief on behalf of a
class of plaintiffs who own the Company's common stock (other than PPR), and
allege that the defendants breached their fiduciary duties in connection with
the proposed acquisition, and seek injunctive relief and related remedies.
The Company and the other defendants intend to defend these claims vigorously.
The Company believes the ultimate resolution of the claims will not have a
material adverse effect on its financial position, results of operations or cash
flow.
ITEM 5- Other Information
- ----------------------------
PPR PROPOSAL
On December 2, 1998, at a special meeting of the Board of Directors, the
Company's three independent directors consented, pursuant to the terms of the
Governance Agreement, to allow PPR to make a proposal to acquire all of the
outstanding common stock of Brylane not owned by PPR. Having received such
consent, PPR then made a proposal, in the form of a letter, to acquire all the
outstanding shares not previously owned for a price of $20 per share. The Board
has formed a special committee, comprised of the three independent directors,
to consider and evaluate the proposal. The special committee will retain its own
legal and financial advisors to assist in evaluating the proposal. No time
requirement has been placed on the review of the proposal. PPR has indicated to
the Company that if it is not able to consummate the proposal at a reasonable
price, it currently intends to continue to be a long-term stockholder of
Brylane. As of December 2, 1998, PPR beneficially owns approximately 49.9% of
the outstanding common stock of Brylane.
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STOCKHOLDER PROPOSALS
The Securities and Exchange Commission has amended Rule 14a-4, which
governs the use of discretionary proxy voting authority with respect to a
proposal raised by a stockholder at an annual meeting that the stockholder has
not sought to include in the proxy statement pursuant to Rule 14a-8. Rule
14a-4(c)(1) now provides that if a stockholder has not notified the company of
his or her intention to present a proposal at the meeting at least 45 days prior
to the month and day on which the prior year's proxy statement was first mailed,
then the holders of proxies solicited by the Board of Directors may use their
discretionary voting authority when the proposal is raised at the company's
annual meeting. The proxy holders will have such discretionary authority even
if the proxy statement contained no discussion of the proposal and the proxy
holders' intentions with respect thereto. If the stockholder notifies the
company of his or her intention prior to such 45 day deadline, the proxy holders
will only be able to utilize their discretionary voting authority if the
company's proxy statement includes a discussion of the proposal and the
company's intentions with respect thereto.
For Brylane, March 15, 1999 is the deadline for stockholders to give such
notice with respect to a proposal that is not sought to be included in the
Company's proxy statement with respect to the 1999 Annual Meeting which it is
currently anticipated will be held in May, 1999. As has been the case in the
past, any stockholder who wishes to have a proposal included in Brylane's proxy
statement for its 1999 Annual Meeting (which in all cases will be subject to the
rules regarding whether such proposal may be excluded notwithstanding the
request), must notify the Company pursuant to Rule 14-8 not later than December
30, 1998.
ITEM 6 - Exhibits and Reports on Form 8-K
- -------------------------------------------------
(a) Exhibits.
10.91 Amended and Restated Credit Agreement dated as of April 30, 1997,
as amended and restated as of September 21, 1998, among Brylane,
L.P., the Lenders listed therein and Credit Lyonnais New York
Branch, as Administrative Agent (the "Credit Agreement").
10.92 Amended and Restated Security Agreement dated as of April 30,
1997, as amended and restated as of September 21, 1998, among
Brylane, L.P., the Subsidiary Grantors (as defined therein), and
Credit Lyonnais New York Branch, as Security Agent.
10.93 Amended and Restated Pledge Agreement dated as of April 30, 1997,
as amended and restated as of September 21, 1998, among Brylane,
L.P., the Subsidiary Pledgors as defined therein), and Credit
Lyonnais New York Branch, as Security Agent.
10.94 Amended and Restated Guarantee Agreement dated as of April 30,
1997, as amended and restated as of September 21, 1998, among
Brylane Inc., the Guarantors (as defined therein) and Credit
Lyonnais New York Branch, as administrative agent.
10.95 Form of Issuing Bank Agreement among Brylane, L.P., the
applicable Lender, and Credit Lyonnais New York Branch, as
administrative agent.
10.96 Form of Term Note dated September 21, 1998 executed by Brylane,
L.P. in favor of each of the various Lenders which are
signatories to the Credit Agreement.
10.97 Form of Revolving Note to be executed by Brylane, L.P. in favor
of each of the various Lenders which are signatories to the
Credit Agreement.
10.98 Proposal Letter dated as of December 2, 1998 from Pinault-
Printemps-Redoute S.A. to the Independent Directors of the Board
of Directors of Brylane Inc.
10.99 Press Release dated as of December 2, 1998 and issued by Brylane
Inc. in connection with the proposal by Pinault-Printemps-Redoute
S.A. to purchase all of the outstanding shares of Brylane Inc.
not owned by it.
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10.100 Press Release dated as of December 2, 1998 and issued by Pinault-
Printemps-Redoute S.A. in connection with the proposal by
Pinault-Printemps-Redoute S.A. to purchase all of the outstanding
shares of Brylane Inc. not owned by it. (Note: the attachment
to this Exhibit is filed as Exhibit 10.98 and included herewith.)
11 Statement Re Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 8, 1998
BRYLANE INC.
By: /s/ Robert A. Pulciani
-------------------------
Robert A. Pulciani
Executive Vice President, Chief Financial
Officer and Secretary and Treasurer of
Brylane Inc.
(On behalf of the Registrant and as the principal financial and accounting
officer of the Registrant)
20
COPY
$500,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
April 30, 1997,
as amended and restated as of
September 21, 1998,
among
Brylane, L.P.,
The Lenders Listed Herein
and
Credit Lyonnais New York Branch,
as Administrative Agent
[CS&M Ref No. 4683-903]
PAGE
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE I DEFINITIONS
Page
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 22
SECTION 1.03. Types of Borrowings 22
ARTICLE II THE CREDITS
SECTION 2.01. Commitments to Lend 22
SECTION 2.02. Method of Borrowing 23
SECTION 2.03. Notes 24
SECTION 2.04. Interest Rate Elections 25
SECTION 2.05. Interest Rates 26
SECTION 2.06. Commitment Fees 28
SECTION 2.07. Termination or Reduction of Commitments 28
SECTION 2.08. Mandatory Repayments and Prepayments 29
SECTION 2.09. Optional Prepayments 31
SECTION 2.10. General Provisions as to Payments 32
SECTION 2.11. Funding Losses 32
SECTION 2.12. Computation of Interest and Fees 32
SECTION 2.13. Letters of Credit 33
SECTION 2.14. Swingline Loans 37
ARTICLE III CONDITIONS
SECTION 3.01. Effectiveness 38
SECTION 3.02. Each Credit Event 40
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Existence and Power 41
SECTION 4.02. Corporate and Governmental Authorization; No Contravention 41
SECTION 4.03. Binding Effect 42
PAGE
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SECTION 4.04. Financial Information; Title to Properties 42
SECTION 4.05. Litigation 43
SECTION 4.06. Compliance with ERISA 43
SECTION 4.07. Taxes 43
SECTION 4.08 Parent Corporation 43
SECTION 4.09. Subsidiaries 43
SECTION 4.10. Not an Investment Company 44
SECTION 4.11. Compliance with Laws 44
SECTION 4.12. Agreements 44
SECTION 4.13. Federal Reserve Regulations 44
SECTION 4.14. Disclosure 44
SECTION 4.15. Governmental Approvals 45
SECTION 4.16. Security Interests 45
SECTION 4.17. Employment and Management Agreements 45
SECTION 4.18. Capitalization 45
SECTION 4.19. Environmental Matters 45
SECTION 4.20. Year 2000 46
ARTICLE V COVENANTS
SECTION 5.01. Information 46
SECTION 5.02. Payment of Obligations 48
SECTION 5.03. Maintenance of Property; Insurance; Casualty and Condemnation 49
SECTION 5.04. Conduct of Business and Maintenance of Existence 50
SECTION 5.05. Compliance with Laws 50
SECTION 5.06. Inspection of Property, Books and Records 51
SECTION 5.07. Fiscal Year 51
SECTION 5.08. Further Assurances 51
SECTION 5.09. Subsidiaries; Partnerships 51
SECTION 5.10. Amendment of Certain Documents 52
SECTION 5.11. Debt; Preferred Stock; Rate Protection Agreements 52
SECTION 5.12. Restricted Payments 53
SECTION 5.13. Mergers, Consolidations, Acquisitions and Sales of Assets 54
SECTION 5.14. Transactions with Affiliates 55
SECTION 5.15. Sale and Lease-Back Transactions 55
SECTION 5.16. Investments 56
SECTION 5.17. Negative Pledge 56
SECTION 5.18. Use of Proceeds and Letters of Credit 57
SECTION 5.19. Grants of Negative Pledges or Dividend Restrictions 58
SECTION 5.20. Changes in Accounting 58
SECTION 5.21. Fixed Charge Coverage Ratio 58
SECTION 5.22. Minimum Adjusted Net Worth 58
SECTION 5.23. Debt Coverage Ratio 59
SECTION 5.24. Capital Expenditures 59
SECTION 5.25. Redemption 59
PAGE
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ARTICLE VI DEFAULTS
SECTION 6.01. Events of Default 59
SECTION 6.02. Notice of Default 62
ARTICLE VII THE AGENT, SECURITY AGENT AND ISSUING BANKS
SECTION 7.01. Appointment and Authorization 62
SECTION 7.02. Agent and Affiliates 62
SECTION 7.03. Action by Agent 62
SECTION 7.04. Consultation with Experts 62
SECTION 7.05. Liability of Agent 63
SECTION 7.06. Indemnification 63
SECTION 7.07. Credit Decision 63
SECTION 7.08. Successor Agent 63
SECTION 7.09. Agents Fees 64
SECTION 7.10. Sub-Agents 64
ARTICLE VIII CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair 64
SECTION 8.02. Illegality 64
SECTION 8.03. Increased Cost and Reduced Return 65
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans 66
SECTION 8.05. Replacement of Lenders 67
SECTION 8.06. Taxes 67
ARTICLE IX MISCELLANEOUS
SECTION 9.01. Notices 69
SECTION 9.02. No Waivers 69
SECTION 9.03. Expenses; Documentary Taxes; Indemnification 69
SECTION 9.04. Sharing of Set-Offs 70
SECTION 9.05. Amendments and Waivers 71
SECTION 9.06. Successors and Assigns 71
SECTION 9.07. Collateral 73
PAGE
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SECTION 9.08. Waiver of Trial by Jury 73
SECTION 9.09. New York Law 73
SECTION 9.10. Counterparts; Integration 73
SECTION 9.11. Limitation on Recourse 73
SECTION 9.12. Interest Rate Limitation 73
SECTION 9.13. Effect of Amendment and Restatement 73
Exhibit A-1 - Form of Term Notes
Exhibit A-2 - Form of Revolving Notes
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Guarantee Agreement
Exhibit D - Form of Pledge Agreement
Exhibit E - Form of Security Agreement
Exhibit F-1 - Form of Opinion of Borrower's Counsel
Exhibit F-2 - Form of Opinion of Borrower's New York Counsel
Exhibit G - Form of Issuing Bank Agreement
Exhibit H - Form of Assignment and Acceptance
Exhibit I - Form of Perfection Certificate
Schedule 1 - Commitments
Schedule 2 - Mortgaged Properties
Schedule 4.09 - Subsidiaries
Schedule 4.17 - Employment and Management Agreements
</TABLE>
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1
AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT dated as of April 30, 1997, as amended and
restated as of September 21, 1998, among BRYLANE, L.P., the LENDERS listed on
the signature pages hereof and CREDIT LYONNAIS NEW YORK BRANCH, as
Administrative Agent.
Preliminary Statement
Reference is made to the Existing Credit Agreement (such term, and all
other capitalized terms in this preliminary statement, being used as hereinafter
defined). The Borrower has requested the Lenders to amend and restate the
Existing Credit Agreement in the form hereof and, subject to the terms and
conditions of this Agreement, to continue to extend credit to the Borrower, in
the aggregate principal amount of up to $500,000,000, in the form of (i) Term
Loans made by the Lenders in an aggregate principal amount not in excess of
$300,000,000 (subject to certain limitations specified herein), (ii) Revolving
Loans made and to be made by the Lenders in an aggregate principal amount at any
time outstanding not in excess of $200,000,000 (subject to certain limitations
specified herein), (iii) Swingline Loans made and to be made by the Swingline
Lender in an aggregate principal amount not in excess of $15,000,000 (subject to
certain limitations specified herein) and (iv) Letters of Credit issued and to
be issued by the Issuing Banks in an aggregate amount at any time outstanding
not in excess of $100,000,000 (subject to certain limitations specified herein);
provided that the sum of Revolving Loans, Swingline Loans and Letters of Credit
shall not exceed $200,000,000. The additional Term Loans and a portion of the
additional Revolving Loans made under this Agreement will be used by the
Borrower to consummate the Redemption. The balance of the proceeds of any
Revolving Loans and Swingline Loans to be made by the Lenders will be used by
the Borrower to make cash payments to the Parent Corporation to repurchase up to
$40,000,000 of the Parent Corporation's common stock, to make Permitted
Acquisitions and for general corporate purposes, including to finance the
working capital requirements of the Borrower. Letters of Credit shall be issued
only for general corporate purposes in the ordinary course of business of the
Borrower.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Acquired Subsidiary" means any Subsidiary resulting from a Permitted
Acquisition.
"Acquisition" means the purchase by the Borrower of substantially all
the assets (excluding cash and certain accounts receivable) of Chadwick's, Inc.
and its subsidiary, CDM Corp., pursuant to the Asset Purchase Agreements.
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2
"Adjusted EBITDA" means, for any period, the sum of (a) Consolidated
Net Income for such period, excluding extraordinary or nonrecurring gains or
losses, plus (b) depreciation, amortization (including amortization of deferred
financing costs and of the initial write-up of inventories resulting from the
acquisition of a business, including the Acquisition) and interest expense
deducted in determining such Consolidated Net Income, plus (c) income taxes
deducted in determining such Consolidated Net Income.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.05(b).
"Administrative Questionnaire" means, with respect to each Lender, the
administrative questionnaire in the form submitted to such Lender by the Agent
and submitted to the Agent (with a copy to the Borrower) duly completed by such
Lender.
"Affiliate" means any Person (other than a Subsidiary) directly or
indirectly controlling, controlled by or under common control with the Borrower.
As used in this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. For purposes of this Agreement and the other Loan
Documents, any Person that directly or indirectly owns 10% or more of the
regularly voting common equity securities of the Parent Corporation, together
with its affiliates, shall be deemed to be an Affiliate of the Borrower.
"Agent" means Credit Lyonnais New York Branch, in its capacity as
administrative agent for the Lenders hereunder, and its successors in such
capacity.
"Amendment Effective Date" means the date on which the amendment and
restatement of the Existing Credit Agreement provided for herein becomes
effective in accordance with Section 3.01.
"Applicable Lending Office" means, with respect to any Lender, (i) in
the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Applicable Percentage" of any Lender means the percentage of the
aggregate Revolving Commitments represented by such Lender's Revolving
Commitment.
"Applicable Rate" means, for any day with respect to the commitment
fee payable hereunder with respect to the Commitments, or with respect to any
Euro-Dollar Loan or any Letter of Credit, the applicable rate per annum set
forth below under the caption "Commitment Fee" or "Euro-Dollar Margin and
Stand-By Letter of Credit Fee", as the case may be, based upon the lower of (i)
the Pricing Ratio set forth below and (ii) the senior unsecured debt ratings of
the Borrower by Standard & Poor's Ratings Group, a division of the McGraw-Hill
Companies, Inc. ("S&P") and Moody's Investors Service, Inc. ("Moody's"), if any,
as of the most recent determination date:
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3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Criteria I Criteria II Euro-Dollar Margin and
Pricing Senior Unsecured Commitment Fee Stand-By Letter of
Level Ratio ("PR") Debt Ratings (bps per annum) Credit Fee (bps per annum)
- ----- ------------- ------------------- --------------- --------------------------
VI PR>3.5x BB- or Ba3 or lower 37.5 125.0
V 3.5x>PR>3.0x BB or Ba2 30.0 100.0
IV 3.0x>PR>2.5x BB+ or Ba1 27.5 87.5
III 2.5x>PR>2.0x BBB- or Baa3 25.0 75.0
II 2.0x>PR>1.5x BBB or Baa2 20.0 50.0
I 1.5x>PR BBB+ or Baa1 15.0 40.0
</TABLE>
; provided, that (i) if such ratings of S&P and Moody's differ from each other
by one level, the lower rating will apply, (ii) if such ratings of S&P and
Moody's differ from each other by more than one level, the rating immediately
above the lower such rating will apply and (iii) if only one of S&P or Moody's
has issued such a rating in respect of the Borrower, the issued rating will
apply; and provided further that the Applicable Rate in respect of any
documentary or trade Letters of Credit shall be the greater of (x) the rate
0.15% per annum lower than the Applicable Rate from time to time in effect with
respect to Revolving Euro-Dollar Loans and (y) 0.40% per annum.
For purposes of the foregoing, (a) the Pricing Ratio and the senior
unsecured debt ratings of S&P and Moody's, if any, shall be determined as of the
end of each fiscal quarter of the Borrower's fiscal year based upon, in the case
of the Pricing Ratio, the Borrower's consolidated financial statements delivered
pursuant to Section 5.01(a) or (b) and, in the case of such ratings, such
publicly announced ratings by S&P and Moody's, if any, as of the last day of
such fiscal quarter and (b) each change in the Applicable Rate resulting from a
change in the Pricing Ratio or such ratings shall be effective during the period
commencing on the date of delivery to the Agent of such consolidated financial
statements and ending on the date immediately preceding the effective date of
the next such change; provided that the Pricing Ratio shall be deemed to be in
Category VI (i) at any time that an Event of Default has occurred and is
continuing or (ii) if the Borrower fails to deliver the consolidated financial
statements required to be delivered by it pursuant to Section 5.01(a) or (b),
during the period from the expiration of the time for delivery thereof until
such consolidated financial statements are delivered.
"Asset Purchase Agreements" means, collectively, (i) the Asset
Purchase Agreement, dated as of October 18, 1996, among The TJX Companies, Inc.,
Chadwick's, Inc. and the Borrower, and (ii) the Asset Purchase Agreement, dated
as of October 18, 1996, between CDM Corp. and the Borrower.
"Asset Sale Prepayment Event" means any sale, assignment, transfer or
other disposition of, or casualty to or condemnation of, any assets or
properties of the Borrower or any Subsidiary, other than (a) sales of inventory
and used or surplus equipment in the ordinary course of business, (b) sales of
credit card receivables pursuant to the Credit Card Agreement and (c) any other
event that would constitute an "Asset Sale Prepayment Event" if the Borrower
intends to reinvest the Net Cash Proceeds therefrom in capital assets within 270
days after receipt of such Net Cash Proceeds (any such event described in this
clause (c) being referred to as a "Reinvestment
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4
Event"); provided that (i) if the Net Cash Proceeds from any Reinvestment
Event, plus the Net Cash Proceeds from any previous Reinvestment Event that have
not yet been reinvested in capital assets, exceed $15,000,000, then an "Asset
Sale Prepayment Event" shall be deemed to have occurred with Net Cash Proceeds
equal to such excess, and (ii) if the Net Cash Proceeds from any Reinvestment
Event have not been fully reinvested in capital assets by the date that is 270
days after the receipt of such Net Cash Proceeds, an "Asset Sale Prepayment
Event" shall be deemed to have occurred on such date with Net Cash Proceeds
equal to the Net Cash Proceeds from such Reinvestment Event (excluding any
excess portion thereof referred to in clause (i) above) minus the reinvested
portion; provided further that, if a Reinvestment Event constitutes a casualty
or condemnation, then (A) clause (i) above shall not apply to Net Cash Proceeds
therefrom consisting of insurance proceeds or condemnation awards and (B) the
270-day period referred to in clause (ii) above shall be extended for such
period of time as the Borrower is actively and diligently engaged in the repair
or replacement of the affected asset or property.
"Assignee" has the meaning set forth in Section 9.06(c).
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means at any time a loan outstanding hereunder which
bears interest at such time at a rate based on the Base Rate pursuant to a
Notice of Borrowing or Notice of Interest Rate Election (or in the case of the
Borrower's failure to timely provide such a notice) or pursuant to Article VIII.
"Borrower" means Brylane, L.P., a Delaware limited partnership, and
its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Borrowing Base" means, at any time, an amount equal to the sum of (a)
90% of the excess of (i) the book value of the Borrower's inventory as of such
date, minus (ii) the book value of any such inventory that is classified for
purposes of the Borrower's financial statements as slow-moving or obsolete
inventory, plus (b) 70% of the book value of the Borrower's accounts receivable
(net of allowances for doubtful accounts) as of such date, plus (c) 50% of the
excess of (i) the book value (net of accumulated depreciation) of the Borrower's
property, plant and equipment as of such date minus (ii) the aggregate
outstanding principal amount of Capital Financing Debt as of such date. The
Borrowing Base at any time shall be determined by reference to the most recent
Borrowing Base Certificate delivered to the Agent, absent any error in such
Borrowing Base Certificate.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit B hereto, duly completed and executed by the chief financial officer,
chief accounting officer or treasurer of the Borrower.
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5
"Capital Expenditures" means, with respect to any period, (a) the
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period, as the same are (or
would be) set forth, in accordance with generally accepted accounting
principles, in a consolidated statement of cash flow of the Borrower for such
period, and (b) any other additions to assets or expenditures of the Borrower
and its Consolidated Subsidiaries during such period financed with Capital
Financing Debt, whether or not such other additions to assets or expenditures
are (or would be) set forth in such statement of cash flow (but without
duplication of amounts described in clause (a) above); provided that Permitted
Acquisitions shall not constitute "Capital Expenditures" for purposes of this
Agreement.
"Capital Financing Debt" means (a) Debt (including obligations under
capital leases) incurred to finance the acquisition, construction, improvement
or lease of property, plant or equipment or other capital assets; provided that
such Debt is incurred at the time of or within 90 days after such acquisition or
lease, or during or within 90 days after the substantial completion of such
construction or improvement; and (b) any Debt incurred to refinance Debt
described in clause (a) above, provided that the principal amount of such
refinancing Debt does not exceed the principal amount of Debt being refinanced.
"Cash Available for Principal Payments" means, for any period,
Consolidated Net Income for such period, plus, without duplication, (a)
depreciation, amortization (including amortization of the initial write-up of
inventories resulting from the acquisition of a business, including pursuant to
the Acquisition) and other noncash items deducted in determining such
Consolidated Net Income, (b) the amount, if any, by which Net Working Investment
decreased during such period and (c) the amount, if any, of cash received by the
Borrower and its Subsidiaries during such period (net of any expenses
attributable thereto not deducted in determining such Consolidated Net Income)
pursuant to transactions not in the ordinary course of business (excluding the
proceeds of the Loans), to the extent receipt of such cash is (x) not included
in income in determining such Consolidated Net Income but to be included in
income in a later period or periods and (y) not attributable to a Prepayment
Event or Reinvestment Event, minus, without duplication, (i) the amount of any
noncash items included in income in determining such Consolidated Net Income,
(ii) the amount, if any, by which Net Working Investment increased during such
period, (iii) the amount of Capital Expenditures made during such period (but
excluding Capital Expenditures to the extent financed with Capital Financing
Debt or financed with Net Cash Proceeds from a Reinvestment Event), (iv) to the
extent not deducted in determining such Consolidated Net Income, the amount, if
any, paid by the Borrower during such period as cash consideration for Permitted
Acquisitions (provided that no deduction shall be permitted pursuant to this
clause (iv) after the aggregate cumulative amount of cash consideration for
Permitted Acquisitions equals $50,000,000), (v) the amount, if any, of items
included in income in determining such Consolidated Net Income representing cash
received and included in calculating "Cash Available for Principal Payments" in
a previous period pursuant to clause (c) above, (vi) the amount, if any, by
which deferred compensation decreased during such period, (vii) to the extent
not deducted in determining such Consolidated Net Income, the amount of Tax
Advances and Tax Distributions paid in cash during such period in compliance
with Section 5.12, and (viii) in the case of the fiscal year ending on the
Saturday closest to January 31, 1998, to the
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6
extent not deducted in determining such Consolidated Net Income for such fiscal
year, the aggregate amount, if any, paid by the Borrower during such fiscal year
in cash in respect of post-closing purchase price adjustments and tax
adjustments pursuant to the Asset Purchase Agreements; provided that, for
purposes of the foregoing, Consolidated Net Income shall be determined without
regard to any gains, losses, taxes or expenses resulting from or incurred in
connection with a Prepayment Event or Reinvestment Event.
A "Change of Control" shall be deemed to have occurred if (i) any
partnership interest in the Borrower shall be owned by any Person other than the
Parent Corporation and the Parent Corporation's wholly owned subsidiaries, (ii)
any person or group (within the meaning of Rule 13d-5 of the Securities and
Exchange Commission as in effect on the date hereof) other than the Permitted
Holders shall become the beneficial owner (within the meaning of Rule 13d-3 of
such Commission as in effect on the date hereof) of voting securities (including
any options, rights or warrants to purchase, and any securities convertible into
or exchangeable for, voting securities) of the Parent Corporation representing
25% or more of the voting power represented by all outstanding securities of the
Parent Corporation or (iii) less than a majority of the seats (other than vacant
seats) on the board of directors of the Parent Corporation shall at any time be
occupied by persons who were (x) nominated by a Permitted Holder, or (y)
appointed by directors so nominated.
"Class" has the meaning set forth in Section 1.03.
"Commitment" means, with respect to each Lender, its Term Commitment
or Revolving Loan Commitment or all such Commitments, as the context may
require.
"Consolidated Adjusted Net Worth" means at any date (a) the partners'
capital of the Borrower as of such date minus (b) the amount, if any, of Tax
Advances outstanding on such date, to the extent such outstanding Tax Advances
are included in determining the amount referred to in clause (a) above.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Borrower and its Consolidated Subsidiaries for such
period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"Conversion" means the reorganization of the ownership of the Borrower
pursuant to which the Borrower became a wholly owned subsidiary of the Parent
Corporation.
"Credit Card Agreements" means (a) the Credit Card Processing
Agreement in effect on the Effective Date between the Borrower and World
Financial Network National Bank, as amended and in effect from time to time, (b)
the Accounts Receivable Purchase Agreement in effect on the Effective Date
between the Borrower and Alliance Data Systems Corporation, as
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7
amended and in effect from time to time, and (c) any successor, replacement or
additional agreement providing for similar services and transactions.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all obligations of
such Person as an account party in respect of letters of credit and bankers'
acceptances, (vi) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, and (vii) all Debt
of others Guaranteed by such Person. The amount of any Debt described in clause
(vi) above shall be deemed to be limited to the fair market value of the assets
on which a Lien has been granted to secure such Debt unless such Debt has been
assumed or Guaranteed by such Person. The amount of any Debt described in
clause (vii) above shall be limited to the maximum amount payable under the
applicable Guarantee of such Person if such Guarantee contains limitations on
the amount payable thereunder.
"Debt Coverage Ratio" means, at any date, the ratio of (i) the
consolidated Debt of the Borrower and its Consolidated Subsidiaries (excluding
(a) Letter of Credit Exposure and the amount of any other outstanding letters of
credit, except to the extent such Letter of Credit Exposure and other
outstanding letters of credit represent unreimbursed drawings thereunder;
provided that amounts excluded under this clause (a) shall not exceed
$100,000,000, and (b) contingent liabilities to repurchase accounts receivable
pursuant to the Credit Card Agreements, to the extent such contingent
liabilities constitute Debt), determined on a consolidated basis as of such
date, divided by (ii) Adjusted EBITDA for the most recent period of four
consecutive fiscal quarters of the Borrower ended on or prior to such date;
provided that if the Acquisition or a Permitted Acquisition has occurred during
the period since the commencement of the period of four consecutive fiscal
quarters for which such Adjusted EBITDA has been determined and on or prior to
such date of determination, then such Adjusted EBITDA shall be determined on a
pro forma basis (i.e., based on the assumption that the Acquisition or such
Permitted Acquisition, as the case may be, occurred on the first day of such
period of four consecutive fiscal quarters) in accordance with generally
accepted accounting principles.
"Debt Prepayment Event" means the incurrence by the Borrower or any
Subsidiary after the Effective Date of any Debt referred to in clause (iii) of
Section 5.11(a).
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Descriptive Materials" means the materials prepared by Credit
Lyonnais New York Branch and the Borrower in connection with the Transactions.
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8
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"Effective Date" means April 30, 1997.
"Environmental and Safety Laws" means any and all applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, approvals, concessions, grants, franchises,
licenses, agreements with Governmental Authorities or other governmental
restrictions or requirements binding upon the Borrower or any of its
Subsidiaries, as applicable, relating to the environment, or to employee health
or safety as it pertains to the use or handling of or exposure to noxious odors
or toxic, caustic or radioactive substances, materials or wastes (including,
without limitation, petroleum or petroleum products, polychlorinated biphenyls
(PCBs), asbestos or asbestos containing materials) or to the preservation or
reclamation of natural resources as a result of the actual or threatened
emission, discharge or release of pollutants or contaminants into the
environment including, without limitation, ambient air, surface water,
groundwater, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
such pollutants, contaminants, toxic, caustic or hazardous substances, materials
or wastes or the clean-up or other remediation thereof, including the Hazardous
Materials Transportation Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, the Clean Air Act of 1970, as amended, the Toxic
Substances Control Act of 1976, the Occupational Safety and Health Act of 1970,
as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the
Safe Drinking Water Act of 1974, as amended, and any similar or implementing
state law, and all amendments or regulations promulgated hereunder.
"Equity Prepayment Event" means the issuance of additional partnership
interests or equity securities, or receipt of additional capital contributions,
by the Borrower or the Parent Corporation, or any other equity investment in the
Borrower or the Parent Corporation, in each case after the Effective Date;
provided that (a) the foregoing shall not constitute "Equity Prepayment Events"
to the extent attributable to equity investments by members of management of the
Borrower (either made directly in the Borrower or indirectly by any partner in
or stockholder of the Borrower from funds obtained, directly or indirectly, from
such members of management) unless either (i) the aggregate Net Cash Proceeds
therefrom exceed $2,500,000 during any fiscal year of the Borrower or (ii) after
giving effect thereto the aggregate cumulative amount of Net Cash Proceeds
therefrom since December 9, 1996, exceeds the sum of $1,000,000 plus the
aggregate cumulative amount of Restricted Payments made since December 9, 1996,
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9
pursuant to clause (d) of Section 5.12, in which case the foregoing shall
constitute "Equity Prepayment Events" to the extent of any such excess referred
to in clause (i) or (ii) above; (b) the foregoing shall not constitute an
"Equity Prepayment Event" to the extent attributable to the issuance by VP
Holding Corporation of preferred stock on or about December 9, 1996, and the
investment of the proceeds thereof, directly or indirectly, in the Borrower; and
(c) the foregoing shall not constitute an "Equity Prepayment Event" to the
extent attributable to the issuance and sale of common stock by the Parent
Corporation to a participant in a Parent Corporation Stock Plan pursuant to the
terms thereof.
"Equity Prepayment Percentage" means, with respect to the Net Cash
Proceeds of any Equity Prepayment Event, (i) 100%, if the Debt Coverage Ratio at
the time of receipt of such Net Cash Proceeds (but calculated prior to giving
effect to the receipt and application thereof) is greater than or equal to
4.0:1, (ii) 75%, if such Debt Coverage Ratio is greater than or equal to 3.0:1
but less than 4.0:1, (iii) 50%, if such Debt Coverage Ratio is greater than or
equal to 2.0:1 but less than 3.0:1 or (iv) 0.0% if such Debt Coverage Ratio is
less than 2.0:1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means at any time a loan outstanding hereunder
which bears interest at such time at a rate based on the Adjusted London
Interbank Offered Rate pursuant to a Notice of Borrowing or Notice of Interest
Rate Election.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.05(b).
"Event of Default" has the meaning set forth in Section 6.01.
"Excess Cash Flow" means, for any period, the excess, if any, of Cash
Available for Principal Payments for such period over the sum of (a) principal
payments made during such period in respect of Term Loans, but excluding (i) any
such principal payments made pursuant to subsection (e) or (f) of Section 2.08
or clause (iii) of Section 5.11(a) plus (b) principal payments
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10
made during such period in respect of Capital Financing Debt (other than
pursuant to a refinancing) and any Debt incurred in reliance upon clause (iii)
of Section 5.11(a).
"Existing Credit Agreement" means the Credit Agreement dated as of
April 30, 1997, as amended and restated as of October 20, 1997, among the
Borrower, certain lenders, Morgan Guaranty Trust Company of New York, as
administrative agent, and Merrill Lynch Capital Corporation, as documentation
agent, as amended and in effect immediately prior to the Amendment Effective
Date.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of l%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Credit Lyonnais New York Branch on such
day on such transactions as determined by the Agent.
"Finance Corp." means Brylane Capital Corp., a Delaware corporation,
and its successors.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
the sum of (i) Adjusted EBITDA for such period plus (ii) rental expense deducted
in determining Consolidated Net Income for such period divided by (b) the sum of
rental expense and interest expense (excluding any portion of interest expense
representing amortization of financing costs paid in a previous period) deducted
in determining Consolidated Net Income for such period.
"Governmental Authority" means any federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
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"Guarantee Agreement" means the Amended and Restated Guarantee
Agreement among the Parent Corporation, the Subsidiaries and the Agent,
substantially in the form of Exhibit C hereto, as amended from time to time.
"Incremental Capital Expenditures" means any Capital Expenditures made
in reliance upon the proviso to Section 5.24.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
Notice of Borrowing or Notice of Interest Rate Election; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of
a calendar month; and
(c) if any Interest Period includes a date on which a payment of
principal of the Loans of the applicable Class is required to be made under
subsection (a), (b) or (c) of Section 2.08 but does not end on such date, then
(i) the principal amount (if any) of each Euro-Dollar Loan required to be repaid
on such date shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such Euro-Dollar Loan shall have an Interest Period
determined as set forth above;
(2) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending on the next Quarterly Payment Date that
occurs thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b)(i) below) which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day; and
(b) if any Interest Period includes a date on which a payment of
principal of the Loans of the applicable Class is required to be made under
subsection (a), (b) or (c) of Section 2.08 but does not end on such date, then
(i) the principal amount (if any) of each Base Rate Loan required to be repaid
on such date shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such Base Rate Loan shall have an interest Period
determined as set forth above; and
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12
(3) with respect to each Swingline Loan, the period commencing on the
date of such Loan and ending such number of days thereafter (but not exceeding
14 days) as the Borrower may elect in accordance with Section 2.04; provided
that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"Issuing Banks" means (i) First Union National Bank and (ii) any
other Lender that shall enter into an Issuing Bank Agreement as provided in
Section 2.13(m), in each case in their capacities as the issuers of Letters of
Credit, and their respective successors in such capacity.
"Issuing Bank Agreement" has the meaning set forth in Section 2.13.
"Lender" means each bank or other financial institution listed on the
signature pages hereof, each Assignee which becomes a Lender pursuant to Section
9.06(c), and their respective successors. References herein to a Lender or
Lenders may include each Issuing Bank or the Swingline Lender or both as the
context requires.
"Letter of Credit" means any letter of credit issued pursuant to
Section 2.13. Each letter of credit outstanding under the Existing Credit
Agreement immediately prior to the Amendment Effective Date shall continue to
constitute a Letter of Credit as though issued hereunder on the Amendment
Effective Date.
"Letter of Credit Disbursement" means a payment or disbursement made
by an Issuing Bank pursuant to a Letter of Credit.
"Letter of Credit Exposure" means at any time the sum of (i) the
aggregate undrawn amount of all outstanding Letters of Credit plus (ii) the
aggregate amount of all Letter of Credit Disbursements not yet reimbursed by the
Borrower as provided in Section 2.13. The Letter of Credit Exposure of any
Lender at any time shall mean its Applicable Percentage of the aggregate Letter
of Credit Exposure at such time.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has
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13
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Term Loan, a Revolving Loan (whether made as a Base
Rate Loan or a Euro-Dollar Loan) or a Swingline Loan, and "Loans" means Term
Loans, Revolving Loans or Swingline Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit, the Guarantee Agreement, the Trademark Collateral Agreement and the
Security Documents.
"London Interbank Offered Rate" has the meaning set forth in Section
2.05(b).
"Margin Stock" has the meaning given such term under Regulation U.
"Material Adverse Effect" means (i) a materially adverse effect on the
assets, financial condition or results of operations of the Borrower and its
Consolidated Subsidiaries taken as a whole, (ii) material impairment of the
ability of the Borrower or any Subsidiary to perform any material Obligations
under the Loan Documents, or (iii) material impairment of the rights of or
benefits available to the Lenders under any Loan Document.
"Material Debt" means Debt of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate principal amount exceeding $5,000,000.
"Maturity Date" means September 30, 2004.
"Minimum Adjusted Net Worth" means, at any date, the sum of (a)
$100,000,000, plus (b) 90% (or, if as of the end of the fiscal quarter for which
an amount is being calculated for purposes of this clause (b) "Minimum Adjusted
Net Worth" exceeds $150,000,000, then 50%) of the excess of (i) Consolidated Net
Income in respect of each fiscal quarter of the Borrower ending after August 2,
1997, and prior to such date of determination (adjusted as provided below),
minus (ii) as long as the Borrower is a partnership, the decrease in
Consolidated Adjusted Net Worth attributable to Tax Advances and Tax
Distributions made in respect of the Tax Distribution Amount for such fiscal
quarter, plus (c) 90% of each increase in Consolidated Adjusted Net Worth
attributable to the issuance of additional partnership interests or equity
securities by, or capital contributions to, or other equity investments in, the
Borrower after August 2, 1997; provided that "Minimum Adjusted Net Worth" shall
not decrease if the amount determined pursuant to clause (b) above in respect of
any fiscal quarter is negative (and any such negative amount shall be
disregarded in calculating "Minimum Adjusted Net Worth").
"Mortgage" means a mortgage, deed of trust or other security document
granting a lien on a Mortgaged Property to secure the Obligations.
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14
"Mortgaged Property" means each real property and the improvements
thereto identified on Schedule 2.
"Net Cash Proceeds" means, with respect to any Prepayment Event or
Reinvestment Event or any other event requiring a calculation of "Net Cash
Proceeds" hereunder, an amount equal to the cash proceeds (including insurance
proceeds and condemnation awards) received by the Borrower and its Subsidiaries
from or in respect of such event (including cash received as proceeds from any
noncash consideration received in respect of any such event), less (i) any
expenses reasonably incurred by the Borrower and its Subsidiaries in respect of
such event, (ii) in the case of an Asset Sale Prepayment Event or Reinvestment
Event, amounts required to be applied to repay Debt (other than Loans)
associated with the assets or properties subject to such Event and reasonable
reserves established in good faith by the Borrower to satisfy any
indemnification obligations undertaken in connection with such Event or to pay
other retained liabilities associated with such assets or properties, (iii)
taxes paid or payable by the Borrower and its Subsidiaries (as determined
reasonably and in good faith by the chief financial officer or chief accounting
officer of the Borrower) in respect of such event and (iv) as long as the
Borrower is a partnership, the increase, if any, in the Tax Distribution Amount
attributable to such event (as determined reasonably and in good faith by the
chief financial officer or chief accounting officer of the Borrower).
"Net Working Investment" means, at any date (i) the consolidated
current assets of the Borrower and its Consolidated Subsidiaries (excluding
cash, Temporary Cash Investments and the unamortized portion of the initial
write-up of inventories resulting from the Transactions) minus (ii) the
consolidated current liabilities of the Borrower and its Consolidated
Subsidiaries (excluding any current liabilities in respect of Debt), all
determined as of such date. Net Working Investment at any date may be a
positive or negative number. Net Working Investment increases when it becomes
more positive or less negative and decreases when it become less positive or
more negative.
"Note" means a promissory note of the Borrower payable to a Lender,
substantially in the form of Exhibit A-1 or A-2 hereto for the applicable Class,
evidencing the obligation of the Borrower to repay the Loans made by such Lender
of a particular Class, and "Notes" means any of or all such promissory notes
issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.04.
"Obligations" means (a) the due and punctual payment by the Borrower
of (i) the principal of and interest on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Borrower under Section
2.13 in respect of any Letter of Credit Disbursement, when and as due, including
interest thereon, if any, (iii) all other monetary obligations of the Borrower
to the Agent, the Security Agent, the Issuing Banks and the Lenders under this
Agreement and the other Loan Documents to which the Borrower is or is to be a
party and (iv) all monetary obligations of the
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15
Borrower under any Rate Protection Agreement entered into with a counterparty
that was a Lender at the time such Rate Protection Agreement was entered into,
(b) the due and punctual performance of all other obligations of the Borrower
under this Agreement and the other Loan Documents and (c) the due and punctual
payment and performance of all obligations of each Subsidiary under the Loan
Documents to which it is or is to be a party.
"Parent" means, with respect to any Lender, any Person controlling
such Lender.
"Parent Corporation" means Brylane Inc., a Delaware corporation, and
its successors.
"Parent Corporation Stock Plan" means an employee stock purchase plan
(or similar employee benefit arrangement) for employees of the Borrower and its
Subsidiaries that is administered by the Parent Corporation and qualifies under
Section 423 of the Internal Revenue Code.
"Participant" has the meaning set forth in Section 9.06(b).
"Partnership Agreement" means the partnership agreement of the
Borrower, as amended from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means (a) any acquisition by the Borrower of
assets or properties (other than Investments) to be utilized in the Borrower's
business, or comprising a separate business of the same type conducted by the
Borrower prior to such acquisition, excluding assets and properties acquired in
the ordinary course of business or (b) any acquisition by the Borrower of all
the outstanding capital stock of a corporation; provided that (i) no Default has
occurred and is continuing at the time of, or would result from, such
acquisition, (ii) the consideration paid by the Borrower in connection with such
acquisition consists entirely of cash or common stock or Permitted Preferred
Stock of the Parent Corporation, or warrants or options to acquire any such
common stock or Permitted Preferred Stock, or a combination thereof, (iii) the
aggregate cash consideration paid by the Borrower in connection with such
acquisition and all previous acquisitions constituting "Permitted Acquisitions"
does not exceed the sum of (A) $50,000,000 plus (B) the Net Cash Proceeds from
Equity Prepayment Events previously received by the Borrower minus (C) the
aggregate principal amount of Term Loans required to have been prepaid pursuant
to subsection (e) of Section 2.08 in respect of such Net Cash Proceeds, and (iv)
if such acquisition is made pursuant to clause (b) above, then (A) substantially
all the business of the acquired corporation is of the same type as the business
conducted by the Borrower prior to such acquisition, (B) the acquired
corporation does not have any Debt that will remain outstanding after giving
effect to such acquisition (other than Debt that would be permitted under clause
(vi) of Section 5.11(a) if incurred by the Borrower at the time of such
acquisition) and (C) such corporation does not have any subsidiaries (other
than subsidiaries that are liquidated or merged into the Borrower within 90 days
after such acquisition or that constitute Permitted Subsidiaries).
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16
Notwithstanding the foregoing, the Acquisition shall not be considered to be a
"Permitted Acquisition".
"Permitted Holders" means PPR and its affiliates and subsidiaries;
provided that the Borrower and its Subsidiaries shall not be considered to be
affiliates of PPR or subsidiaries of PPR for purposes of identifying the
"Permitted Holders".
"Permitted Preferred Stock" means preferred stock issued by the Parent
Corporation that is not subject to any mandatory redemption, repurchase or
exchange requirements.
"Permitted Subsidiary" means any Subsidiary that (i) is a Wholly Owned
Consolidated Subsidiary and (ii) complies with the requirements set forth in
Section 5.04(b) or, in the case of an Acquired Subsidiary, Section 5.04(d).
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Internal Revenue Code and is either (i) maintained by a
member of the ERISA Group for employees of a member of the ERISA Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions.
"Pledge Agreement" means the Amended and Restated Pledge Agreement
among the Borrower, the Subsidiaries parties thereto and the Security Agent,
substantially in the form of Exhibit D hereto, as amended from time to time.
"PPR" means Pinault Printemps - Redoute, S.A., a French corporation.
"Prepayment Event" means an Asset Sale Prepayment Event, a Debt
Prepayment Event or an Equity Prepayment Event.
"Pricing Ratio" means, at any date, the ratio of (i) the consolidated
Debt of the Borrower and its Consolidated Subsidiaries (excluding (a) the Letter
of Credit Exposure and the amount of any other outstanding letters of credit,
except to the extent such Letter of Credit Exposure and other outstanding
letters of credit represent unreimbursed drawings thereunder; provided that
amounts excluded under this clause (a) shall not exceed $100,000,000, and (b)
contingent liabilities to repurchase accounts receivable pursuant to the Credit
Card Agreements, to the extent such contingent liabilities constitute Debt),
determined on a consolidated basis, divided by (ii) Adjusted EBITDA for the most
recent period of four consecutive fiscal quarters of the Borrower for which
financial statements have been delivered to the Agent; provided that, solely for
purposes of this definition, the consolidated Debt of the Borrower and its
Consolidated
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17
Subsidiaries shall be determined for purposes of clause (i) above on the basis
of (a) Term Commitments outstanding on the last day of the most recent fiscal
quarter covered by the financial statements referred to in clause (ii) above,
and (b) the daily average outstanding amount of all other Debt during such most
recent period of four consecutive fiscal quarters; provided further that if the
Acquisition or a Permitted Acquisition has occurred during the period since the
commencement of the period of four consecutive fiscal quarters for which such
Adjusted EBITDA has been determined and on or prior to such date of
determination, then such Adjusted EBITDA shall be determined on a pro forma
basis (i.e., based on the assumption that the Acquisition or such Permitted
Acquisition, as the case may be, occurred on the first day of such period of
four consecutive fiscal quarters) in accordance with generally accepted
accounting principles. A change in the Pricing Ratio shall be effective on the
date of receipt by the Agent of the Borrower's financial statements
demonstrating such change.
"Prime Rate" means the rate of interest quoted by Credit Lyonnais New
York Branch in New York City from time to time as its Prime Rate.
"Proposed Distribution Center" means a new distribution center
constructed and equipped by the Borrower or the expansion of one or more
existing distribution centers owned by the Borrower, or any combination thereof.
"Quarterly Payment Date" means each day that is the last Euro-Dollar
Business Day preceding the Saturday closest to January 31, April 30, July 31 and
October 31, of each year.
"Rate Protection Agreements" means interest rate protection
agreements, foreign currency exchange agreements and other interest or exchange
rate hedging, cap, collar or swap arrangements.
"Redemption" means the redemption by the Borrower of the Subordinated
Notes on terms specified by the Borrower in its notice of redemption dated
August 21, 1998.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reinvestment Event" has the meaning set forth in the definition of
the term "Asset Sale Prepayment Event".
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA, or the regulations issued thereunder, with respect to a Plan
(other than those excepted from such reporting requirements by virtue-thereof).
"Required Lenders" means at any time Lenders with Loans, Letter of
Credit Exposure and unused Commitments representing at least a majority of the
sum of the aggregate principal amount of Loans outstanding and the aggregate
amount of the Letter of Credit Exposure and unused Commitments at such time.
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18
"Restricted Payment" means (a) any Tax Advance, Tax Distribution or
other distribution by the Borrower to any one or more of the partners in the
Borrower or otherwise on account of any partnership interest in the Borrower,
(b) any payment or other consideration on account of the purchase, redemption,
retirement or acquisition of (i) any partnership interest in the Borrower or any
shares of the Parent Corporation's capital stock, (ii) any option, warrant or
other right to acquire any partnership interest in the Borrower or any shares of
the Parent Corporation's capital stock, (c) any payment or prepayment of
principal of or premium (if any) or interest on or any other amount in respect
of any Debt in respect of the Subordinated Notes, or (d) any payment or other
consideration on account of the prepayment, purchase, redemption, retirement,
defeasance, acquisition, termination, cancelation or compromise of any Debt in
respect of the Subordinated Notes.
"Revolving Loan" means a loan made by a Lender pursuant to Section
2.01(c).
"Revolving Loan Availability Period" means the period from and
including the Effective Date to but excluding the Maturity Date, or such earlier
date as the Revolving Loan Commitments shall have expired or been terminated.
"Revolving Loan Commitment" means, as to any Lender, the obligation of
such Lender to make Revolving Loans to the Borrower and to acquire
participations in Letters of Credit in an aggregate principal amount at any one
time outstanding not exceeding the amount set forth opposite such Lender's name
in Schedule 1 hereto under the caption "Revolving Loan Commitment", as the same
may be reduced from time to time pursuant to Section 2.07 and subject to the
limitations of Sections 2.01(c) and 2.13.
"Security Agent" means Credit Lyonnais New York Branch, as successor
to Morgan Guaranty Trust Company of New York, in its capacity as security agent
under the Security Documents and its successors in such capacity.
"Security Agreement" means the Amended and Restated Security Agreement
among the Borrower, its Subsidiaries and the Security Agent, substantially in
the form of Exhibit E hereto, as amended from time to time.
"Security Documents" means the Mortgages, the Pledge Agreement, the
Security Agreement and all other security agreements, mortgages, deeds of trust
and other documents and instruments executed and delivered pursuant to Section
5.08 in order to secure any Obligations.
"Subordinated Debt Documents" means any indentures, notes or other
agreements, instruments or securities evidencing or governing the terms of any
Debt in respect of the Subordinated Notes, including any agreements or
instruments pursuant to which any Debt in respect of the Subordinated Notes is
guaranteed or secured.
"Subordinated Guarantee Agreement" means an agreement pursuant to
which a Subsidiary Guarantees the Debt in respect of the Subordinated Notes and
which (i) is required by the terms of a Subordinated Debt Document, (ii) is
subordinated to such Subsidiary's Debt in respect of the
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19
Obligations on the same terms that the Debt in respect of the Subordinated Notes
is required to be subordinated, (iii) is unsecured and (iv) does not impose any
additional covenants or other obligations (other than covenants and obligations
already contained in the Subordinated Debt Documents which become applicable by
virtue of such agreement) upon such Subsidiary.
"Subordinated Notes" means the senior subordinated notes due September
1, 2003 jointly issued by the Borrower and Finance Corp. in the aggregate
principal amount of $125,000,000.
"Subsidiary" means any corporation or other entity (including any
partnership) of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by the
Borrower.
"Swingline Exposure" means at any time the aggregate principal amount
of all Swingline Loans outstanding at such time. The Swingline Exposure of any
Lender at any time shall mean its Applicable Percentage of the Swingline
Exposure at such time.
"Swingline Lender" means Credit Lyonnais New York Branch, in its
capacity as lender of Swingline Loans hereunder, and its successors in such
capacity.
"Swingline Loan" means a loan made by the Swingline Lender pursuant to
Section 2.14.
"Syndication Agent" means Soci t G n rale in its capacity as
syndication agent for the Lenders hereunder.
"Tax Advance" means any loan made to a partner in the Borrower in
accordance with Section 5.01(c) of the Partnership Agreement.
"Tax Distribution" means any distribution made to a partner in the
Borrower in accordance with Section 5.01(b) or (d) of the Partnership Agreement.
"Tax Distribution Amount" means, in respect of any period during which
the Borrower is a partnership, an amount equal to (a) the sum of the highest
marginal Federal income tax rate and highest state and local income or franchise
tax rate applicable to any corporate partner in the Borrower on its income from
the Borrower for such period, expressed as a percentage, multiplied by (b) the
Borrower's taxable income for such period; provided that (i) the foregoing shall
be determined giving effect to the deduction of state and local income and
franchise taxes for purposes of determining Federal income taxes, (ii) the
foregoing shall be determined giving effect to any carry forward of cumulative
tax losses of the Borrower from any previous period (to the extent not
previously utilized) since the organization of the Borrower and any investment
tax credits and other tax credits generated by the Borrower and (iii) the tax
rates determined pursuant to clause (a) above shall be based on the actual tax
rates applicable to the Parent Corporation. The "Tax Distribution Amount" for
any period may be estimated for any period, provided that such estimate is
reasonably made by the Borrower's chief financial officer or chief accounting
officer in good faith, but in the event that the Borrower files any Federal
income tax return that is
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20
inconsistent with its estimate for any period (or in the event that it is
subsequently determined that such estimate or the amounts reflected in any such
Federal income tax return were incorrect) then an appropriate adjustment shall
be made to the Tax Distribution Amount for the next succeeding period or periods
to reflect such discrepancy. The "Tax Distribution Amount" also shall be
increased by the amount of any Tax Distribution to be made in accordance with
Section 5.01(d) of the Partnership Agreement.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated in the highest grade by a nationally recognized credit rating agency,
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000, (iv)
repurchase agreements with respect to securities described in clause (i) above
entered into with an office of a bank or trust company meeting the criteria
specified in clause (iii) above, or (v) any mutual fund managed by a reputable
investment manager that invests substantially all of its assets in Investments
of the type described in clauses (i), (ii), (iii) or (iv) above; provided in
each case that such Investment matures within one year from the date of
acquisition thereof by the Borrower or a Subsidiary (except that an Investment
described in clause (v) above need not satisfy the foregoing maturity
requirement, but such Investment shall be subject to redemption on demand and
the Investments made by such mutual fund shall satisfy the foregoing maturity
requirement).
"Term Commitment" means, as to any Lender, the obligation of such
Lender to make Term Loans to the Borrower in an aggregate principal amount not
exceeding the amount set forth opposite such Lender's name in Schedule 1 hereto
under the caption "Term Commitment", as the same may be reduced from time to
time pursuant to Section 2.07.
"Term Loan" means a loan made by a Lender pursuant to Section 2.01(a).
"Term Loan Availability Period" means the period from and including
the Amendment Effective Date to but excluding the date 90 days following the
Amendment Effective Date.
"Termination Date" means the last day of the Revolving Loan
Availability Period or such earlier date as the Revolving Loan Commitments shall
have expired or been terminated, all Revolving Loans have been repaid in full,
all Letter of Credit Disbursements shall have been repaid in full, and all
Letters of Credit shall have expired or been canceled.
"The Limited" means The Limited, Inc., a Delaware corporation, and its
successors.
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21
"Trademark Agreements" means, collectively, (i) the Trademark License
Agreement and the Electronic Media Trademark License Agreement previously
entered into among certain subsidiaries of The Limited as contemplated by the
Transaction Agreement, the rights of the licensees under which have been
assigned to the Borrower, as amended from time to time and (ii) each of (A) the
Assignment and License of Trademarks Agreement among The TJX Companies, Inc.,
Chadwick's, Inc. and the Borrower, as amended from time to time, (B) the
Trademarks License Agreement among The TJX Companies, Inc. and the Borrower, as
amended from time to time, and (C) the Trademarks License Agreement among the
TJX Companies, Inc. and Chadwick's Trade Name Sub, Inc., as amended from time to
time, each as entered into in connection with the Acquisition.
"Trademark Collateral Agreement" means the Trademark Collateral
Agreement dated as of April 30, 1997, among each of The Limited, certain
subsidiaries thereof and the Security Agent, as amended from time to time.
"Transaction Agreement" means the Transaction Agreement dated as of
July 13, 1993, among VGP, VLP and certain subsidiaries of The Limited, as
amended from time to time.
"Transaction Documents" means (i) the Transaction Agreement, the
Partnership Agreement, the Credit Card Agreements, the Asset Purchase Agreements
and the Trademark Agreements and (ii) any and all contracts and agreements in
effect on the Effective Date between the Borrower and any Subsidiary, on the one
hand, and any Permitted Holder, on the other hand.
"Transactions" means the transactions contemplated by the Loan
Documents, including the continuation of the Loans hereunder, the continuation
of security interests under the Security Documents and the Redemption.
"Trigger Date" means the first date on which the Debt Coverage Ratio
is 2.50:1.00 or less for two consecutive fiscal quarters (excluding up to 15
days during each such quarter).
"Type" has the meaning set forth in Section 1.03.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested benefits under
such Plan exceeds (ii) the fair market value of all Plan assets, all determined
as of the then most recent valuation date for such Plan based on the actuarial
assumptions used to fund the Plan, but only to the extent that such excess
represents a potential liability of a member of the ERISA Group to the PBGC or
the Plan under Title IV of ERISA.
"VGP" means VGP Corporation, a Delaware corporation, and its
successors.
"VLP" means VLP Corporation, a Delaware corporation, and its
successors.
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22
"Wholly Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Lenders; provided that, if the Borrower notifies the Agent that the
Borrower wishes to amend any covenant contained in Article V or the definition
of "Pricing Ratio" to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant or such definition (or
if the Agent notifies the Borrower that the Required Lenders wish to amend any
such covenant or such definition for such purpose), then the Borrower's
compliance with such covenant or the calculation of the Pricing Ratio, as
applicable, shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such amendment becomes effective in accordance with this Agreement.
SECTION 1.03. Types of Borrowings. The term "Borrowing" refers to
the portion of the aggregate principal amount of Loans of any Class outstanding
hereunder which bears interest of a specific Type and for a specific Interest
Period (subject to clauses (1)(c), and (2)(b) of the definition of Interest
Period) pursuant to a Notice of Borrowing or Notice of Interest Rate Election.
Each Lender's ratable share of each Borrowing is referred to herein as a
separate "Loan". Borrowings and Loans hereunder are distinguished by "Class"
and by "Type". The "Class" of a Loan (or of a Commitment to make such a Loan or
of a Borrowing comprising such Loans) refers to whether such Loan is a Term Loan
or a Revolving Loan, each of which constitutes a Class. The "Type" of a Loan
refers to whether such Loan is a Base Rate Loan, a Euro-Dollar Loan or a
Swingline Loan. Borrowings and Loans may be identified by both Class and Type
(e.g., a "Revolving Euro-Dollar Loan" is a Loan which is both a Revolving Loan
and a Euro-Dollar Loan).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Term Loans. Each Lender
having a Term Commitment severally agrees, on the terms and conditions set forth
in this Agreement, to make loans to the Borrower from time to time during the
Term Loan Availability Period in an aggregate principal amount not exceeding its
remaining Term Commitment at any time. Any principal amount of the Term Loans
repaid by the Borrower may not be reborrowed.
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23
(b) Revolving Loans. Each Lender having a Revolving Loan Commitment
severally agrees, on the terms and conditions set forth in this Agreement, to
make loans to the Borrower from time to time during the Revolving Loan
Availability Period; provided that the aggregate principal amount of such
Lender's loans at any one time outstanding shall not exceed the excess of (i)
the lesser of its Revolving Loan Commitment or its Applicable Percentage of the
Borrowing Base at such time, over (ii) the sum of its Letter of Credit Exposure
and its Applicable Percentage of the outstanding Swingline Loans at such time.
Within the foregoing limit, the Borrower may borrow under this subsection (c),
repay or (to the extent permitted by Section 2.09) prepay loans made under this
subsection (c) and reborrow at any time during the Revolving Loan Availability
Period under this subsection (c).
(c) Borrowings Ratable. Each Borrowing under subsection (a) or (b)
of this Section 2.01 shall be made from the Lenders ratably in proportion to
their respective Commitments of the relevant Class.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give the
Agent notice (a "Notice of Borrowing") not later than 12:00 Noon (New York City
time) on the date of any Base Rate Borrowing and not later than 12:00 Noon (New
York City time) at least three Euro-Dollar Business Days before each Euro-Dollar
Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case
of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing, which shall be $3,000,000
or a larger multiple of $1,000,000 (except that any Borrowing may be in the
aggregate amount of the unused Commitment of the applicable Class);
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Lender of the contents thereof and of such Lender's share of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower.
(c) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Lender shall (except as provided in subsection (d) of this
Section) make available its share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Agent at its address specified in
or pursuant to Section 10.01. Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied, the Agent will make
the funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address.
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24
(d) If any Lender (including the Swingline Lender) makes a new Loan
hereunder on a day on which the Borrower is to repay all or any part of an
outstanding Loan from such Lender, such Lender shall apply the proceeds of its
new Loan to make such repayment and only an amount equal to the difference (if
any) between the amount being borrowed and the amount being repaid shall be made
available by such Lender to the Agent as provided in subsection (b), or remitted
by the Borrower to the Agent as provided in Section 2.10, as the case may be.
(e) If the Agent has not received from the Borrower the payment
required by Section 2.13(g) by 12:30 P.M. (New York City time) on the date on
which an Issuing Bank has notified the Borrower and the Agent that payment of a
draft presented under any Letter of Credit will be made, as provided in Section
2.13(g), the Agent will promptly notify such Issuing Bank and each Lender of the
Letter of Credit Disbursement and, in the case of each Lender, its Applicable
Percentage of such Letter of Credit Disbursement. Not later than 2:00 P.M. (New
York City time) on such date, each Lender shall make available such Lender's
Applicable Percentage of such Letter of Credit Disbursement, in Federal or other
funds immediately available in New York City, to the Agent at its address
specified in or pursuant to Section 9.01, and the Agent will promptly make such
funds available to the applicable Issuing Bank. The Agent will promptly remit
to each Lender that shall have made such funds available its Applicable
Percentage of any amounts subsequently received by the Agent from the Borrower
in respect of such Letter of Credit Disbursement.
(f) Unless the Agent shall have received notice from a Lender prior
to the date of any Borrowing, or prior to the time of any required payment by
such Lender in respect of a Letter of Credit Disbursement, that such Lender will
not make available to the Agent such Lender's share of such Borrowing or
payment, the Agent may assume that such Lender has made such share available to
the Agent on the date of such Borrowing or payment in accordance with
subsections (c) and (d) or (e), as applicable, of this Section 2.02 and the
Agent may, in reliance upon such assumption, make available to the Borrower or
an Issuing Bank, as applicable, on such date a corresponding amount. If and to
the extent that such Lender shall not have so made such share available to the
Agent, such Lender and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available by the Agent until the
date such amount is repaid to the Agent, at (i) in the case of the Borrower, a
rate per annum equal to the higher of the Federal Funds Rate and the interest
rate applicable thereto pursuant to Section 2.05 or Section 2.13(g), as
applicable, and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall repay to the Agent such corresponding amount in respect of a
Borrowing, such amount so repaid shall constitute such Lender's Loan included in
such Borrowing for purposes of this Agreement.
SECTION 2.03. Notes. (a) Each Lender's Term Loans and Revolving
Loans shall be evidenced by a separate Note (in the form applicable to such
Class) payable to the order of such Lender for the account of its Applicable
Lending Office in an amount equal to (i) in the case of its Note evidencing Term
Loans, sum of the aggregate Commitments and outstanding Loans of such Lender of
such Class as of the Amendment Effective Date, after giving effect to the
Transactions,
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25
or (ii) in the case of its Note evidencing Revolving Loans, the aggregate
Commitment of such Lender of such Class.
(b) Each Lender may, by notice to the Borrower and the Agent, request
that its Loans of a particular Type and Class be evidenced by a separate Note.
Each such Note shall be in substantially the form of Exhibit A-1 or A-2 hereto
applicable to the relevant Class with appropriate modifications to reflect the
fact that it evidences solely Loans of the relevant Type. Each reference in
this Agreement to the "Note" or "Notes" of such Lender shall be deemed to refer
to and include any or all of such Notes, as the context may require.
(c) Upon receipt of each Lender's Note or Notes pursuant to Section
3.01(b), the Agent shall mail such Note or Notes to such Lender. Each Lender
shall record the date and amount of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto, and
prior to any transfer of any of its Notes shall endorse on the schedule forming
a part thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of any
Lender to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Lender is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
SECTION 2.04. Interest Rate Elections. (a) The initial Type of
Loans comprising each Borrowing, and the duration of the initial Interest Period
applicable thereto if they are initially Euro-Dollar Loans, shall be as
specified in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the Type of, or the duration of
the Interest Period applicable to, the Loans included in any Borrowing
(excluding overdue Loans and subject in each case to the provisions of the
definition of Interest Period and Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
designate such Loans as Euro-Dollar Loans, may elect to continue such Loans as
Base Rate Loans for an additional Interest Period, or may elect to designate
such Loans as any combination of Base Rate Loans and Euro-Dollar Loans; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
designate such Loans as Base Rate Loans, may elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, or may elect to designate
such Loans as any combination of Base Rate Loans and Euro-Dollar Loans.
Notwithstanding the foregoing, the Borrower may not elect an Interest Period for
Euro-Dollar Loans of any Class unless (A) the aggregate outstanding principal
amount of such Euro-Dollar Loans (including any such Euro-Dollar Loans of the
same Class made pursuant to Section 2.01 on the date that such Interest Period
is to begin) to which such Interest Period will apply is at least $3,000,000 and
(B) such election will not result in the total number of outstanding Euro-Dollar
Borrowings exceeding 10 at any time.
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26
(b) Any election permitted by subsection (a) of this Section may
become effective on any Euro-Dollar Business Day specified by the Borrower (the
"Election Date"); provided that the Borrower may not specify an Election Date
with respect to an outstanding Euro-Dollar Loan that is not the last day of the
Interest Period therefor. Each such election shall be made by the Borrower by
delivering a notice (a "Notice of Interest Rate Election") to the Agent not
later than 12:00 Noon (New York City time) on the day of the Election Date, if
all the resulting Loans will be Base Rate Loans, and at least three Euro-Dollar
Business Days before the Election Date, if the resulting Loans will include
Euro-Dollar Loans. Each Notice of Interest Rate Election shall specify with
respect to the outstanding Loans to which such notice applies:
(i) the Election Date;
(ii) if the Type of Loan is to be changed, the new Type of Loan and,
if such new Type is a Euro-Dollar Loan, the duration of the first Interest
Period applicable thereto;
(iii) if such Loans are Euro-Dollar Loans and the Type of such Loans
is to be continued for an additional or different Interest Period, the duration
of such additional or different Interest Period; and
(iv) if such Loans are to be designated as a combination of Base Rate
Loans and Euro-Dollar Loans, the information specified in clauses (i) through
(iii) above as to each resulting Borrowing and the aggregate amount of each such
Borrowing.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period and the last
sentence of subsection (a) of this Section.
(c) Upon receipt of a Notice of Interest Rate Election, the Agent
shall promptly notify each Lender of the contents thereof and of such Lender's
share of such Borrowing and such notice shall not thereafter be revocable by the
Borrower.
(d) If the Borrower (i) fails to deliver a timely Notice of Interest
Rate Election to the Agent electing to continue or change the Type of, or the
duration of the Interest Period applicable to, the Loans included in any
Borrowing as provided in this Section and (ii) has not theretofore delivered a
notice of prepayment relating to such Loans, then the Borrower shall be deemed
to have given the Agent a Notice of Interest Rate Election electing to change
the Type of such Loans to (or continue the Type thereof as) Base Rate Loans,
with an Interest Period commencing on the last day of the then current Interest
Period.
SECTION 2.05. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent permitted by
law, overdue interest on any Base Rate Loan shall bear interest, payable on
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27
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the rate otherwise applicable to such Base Rate Loan for such day. Each
Swingline Loan shall be a Base Rate Loan and shall bear interest as provided in
this paragraph.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Rate at the time plus the
applicable Adjusted London Interbank Offered Rate. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the first
day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100 of l%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Agent from time to
time for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 A.M., London
time, two Business Days prior to the commencement of such Interest Period, as
the rate for dollar deposits with a maturity comparable to such Interest Period.
In the event that such rate is not available at such time for any reason, then
the "London Interbank Offered Rate" with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Agent in immediately available funds in the
London interbank market at approximately 11:00 A.M., London time, two Business
Days prior to the commencement of such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(c) Any overdue principal of and, to the extent permitted by law,
overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand,
for each day from and including the date payment thereof was due to but
excluding the date of actual payment, at a rate per annum equal to the sum of 2%
plus the Applicable Rate at the time plus the Adjusted London Interbank
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28
Offered Rate applicable to such Loan (or, if the circumstances described in
clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the
sum of 2% plus the rate applicable to Base Rate Loans for such day).
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Lenders by telecopy, telex or cable of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
SECTION 2.06. Commitment Fees. During the period from and including
the date of execution and delivery of this Agreement to but excluding the last
day of the Revolving Loan Availability Period, the Borrower shall pay to the
Agent for the account of the Lenders ratably in proportion to their Revolving
Loan Commitments a commitment fee at the Applicable Rate on the daily average
amount by which the aggregate amount of the Revolving Loan Commitments exceeds
the sum of the Letter of Credit Exposure and the aggregate outstanding principal
amount of the Revolving Loans. During the period from and including the date of
execution and delivery of this Agreement to but excluding the last day of the
Term Loan Availability Period, the Borrower shall pay to the Agent for the
account of the Lenders ratably in proportion to their Term Commitments a
commitment fee at the Applicable Rate on the average daily amount of the
remaining Term Commitments. If the rate at which the commitment fee accrues
shall change, the daily average amount referred to above shall be determined
separately for the periods before and after such change. All such commitment
fees shall accrue from and including the date of execution and delivery of this
Agreement to but excluding, in the case of the Term Commitments, the last day of
the Term Loan Availability Period, or, in the case of the Revolving Loan
Commitments, the last day of the Revolving Loan Availability Period. Accrued
commitment fees under this paragraph shall be calculated by the Agent as of the
Effective Date, as of each Quarterly Payment Date, in the case of the Term
Commitments, as of the date of termination of the Term Commitments and, in the
case of the Revolving Loan Commitments, as of the date of termination of the
Revolving Loan Commitments in their entirety. The Agent shall make such
calculation and notify the Borrower of the amount so calculated within three
Domestic Business Days after each date as of which such calculation is so
required, and such fees shall be payable by the Borrower upon receipt of such
notice, except that commitment fees accrued prior to the Effective Date or any
earlier termination of the Commitments shall be payable on such date.
SECTION 2.07. Termination or Reduction of Commitments. (a) During
the Revolving Loan Availability Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Revolving Loan
Commitments at any time, if there is no Letter of Credit Exposure at such time
and if no Revolving Loans are outstanding at such time, or (ii) ratably reduce
from time to time, by an aggregate amount of $5,000,000 or any larger multiple
of $1,000,000, the aggregate amount of the Revolving Loan Commitments in excess
of the sum of the Letter of Credit Exposure and the aggregate outstanding
principal amount of the Revolving Loans and Swingline Loans; provided that the
Borrower may not terminate or reduce the Revolving Loan Commitments pursuant to
this subsection (a) at any time that any Term Loans remain outstanding. During
the Term Loan Availability Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Term Commitments
at any
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29
time, or (ii) ratably reduce from time to time, by an aggregate amount of
$5,000,000 or any larger multiple of $1,000,000, the aggregate amount of the
remaining Term Commitments.
(b) After the Term Loans have been fully repaid, the Revolving Loan
Commitments shall be ratably reduced at each time that a prepayment would have
been required in respect of the Term Loans pursuant to subsection (e) or (f) of
Section 2.08 if Term Loans were then outstanding, by an amount equal to the
prepayment that would have been so required.
(c) During the Term Loan Availability Period, the Term Commitment of
each Lender shall be reduced by the amount of any Terms Loans made by such
Lender to the Borrower on the date of such Loan. Unless previously terminated,
the Term Commitments shall terminate at 5:00 P.M. (New York City time) on the
last day of the Term Loan Availability Period.
SECTION 2.08. Mandatory Repayments and Prepayments. (a) Subject to
adjustment as provided in subsection (i) of this Section, on each date specified
below the Borrower shall repay Term Loans in the aggregate amount, if any, set
forth under the caption "Amount" opposite such date:
<TABLE>
<CAPTION>
<S> <C>
Date Amount
- ------------------ -----------
September 30, 1999 $17,500,000
March 31, 2000 17,500,000
September 30, 2000 17,500,000
March 31, 2001 17,500,000
September 30, 2001 17,500,000
March 31, 2002 17,500,000
September 30, 2002 17,500,000
March 31, 2003 17,500,000
September 30, 2003 35,000,000
March 31, 2004 62,500,000
Maturity Date 62,500,000
</TABLE>
(b) Any Term Loans outstanding on the Maturity Date shall be due and
payable on such date, together with accrued interest thereon.
(c) Any Revolving Loans and Swingline Loans outstanding on the
Termination Date shall be due and payable on such date, together with accrued
interest thereon.
(d) In the event and on each occasion that the sum of the Letter of
Credit Exposure plus the aggregate outstanding principal amount of the Revolving
Loans and the Swingline Loans exceeds the lesser of the Borrowing Base or the
sum of the Revolving Loan Commitments, the Borrower shall forthwith prepay
Revolving Loans or Swingline Loans (or, if no Revolving Loans or Swingline Loans
are outstanding, provide cash collateral in respect of the Letter of Credit
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30
Exposure pursuant to Section 2.13(k) and thereupon such cash shall be deemed to
reduce the Letter of Credit Exposure by an equivalent amount solely for purposes
of this subsection) in an amount equal to such excess.
(e) Subject to subsection (k) below, in the event and on each
occasion after the Effective Date that a Prepayment Event occurs, the Borrower
shall, promptly following (and in any event not later than the Domestic Business
Day next following) the receipt of Net Cash Proceeds in respect of such
Prepayment Event, prepay Term Loans in an aggregate principal amount equal to
100% of such Net Cash Proceeds, in the case of an Asset Sale Prepayment Event or
Debt Prepayment Event, or the applicable Equity Prepayment Percentage of such
Net Cash Proceeds, in the case of an Equity Prepayment Event; provided that no
such prepayment shall be required in an aggregate principal amount less than
$1,000,000 and any receipt of Net Cash Proceeds that would otherwise result in
prepayment of a lesser amount shall cumulate until the aggregate amount of Net
Cash Proceeds from Prepayment Events received and not yet applied hereunder
equals or exceeds $1,000,000, at which time such prepayment shall be made.
(f) Subject to subsection (k) below, as promptly as practicable but
in any event within 90 days after the end of each fiscal year of the Borrower,
commencing with the fiscal year ending on the Saturday closest to January 31,
1998, the Borrower shall prepay Term Loans in an aggregate principal amount
equal to the Excess Cash Flow with respect to such fiscal year multiplied by (i)
100%, if the Debt Coverage Ratio as of the last day of such fiscal year was
greater than or equal to 4.00:1, (ii) 75%, if the Debt Coverage Ratio as of the
last day of such fiscal year was less than 4.00:1 but greater than or equal to
3.00:1 and (iii) 50%, if the Debt Coverage Rate as of the last day of such
fiscal year was less than 3.00:1 but greater than or equal to 2.00:1; provided
that no prepayment shall be required pursuant to this subsection (f) with
respect to the Excess Cash Flow for any fiscal year if the Debt Coverage Ratio
as of the last day of such fiscal year was less than 2.00:1. The Borrower shall
deliver to the Agent at or prior to the time of each prepayment pursuant to this
subsection (f) a certificate executed by the chief financial officer of the
Borrower setting forth, in a form acceptable to the Agent, a reasonably detailed
calculation of the amount of such prepayment.
(g) On the date of each repayment or prepayment of Loans pursuant to
this Section, the Borrower shall pay interest accrued on the principal amount
repaid or prepaid to the day of repayment or prepayment. The repayments and
prepayments of the Loans required by the respective subsections of this Section
and the optional prepayments permitted by Section 2.09 are separate and
cumulative, so that any one such repayment or prepayment shall reduce any other
repayment or prepayment only as and to the extent specified in subsection (i) of
this Section.
(h) Prior to the date of each mandatory repayment or prepayment
pursuant to this Section, the Borrower shall, by notice to the Agent given not
later than 12:00 P.M. (New York City time) on the third Euro-Dollar Business Day
prior to the date of such repayment or prepayment, select which outstanding
Borrowings of the required Class are to be repaid or prepaid (in accordance with
subsection (i) of this Section, if applicable); provided that the Borrower shall
not elect to prepay any Euro-Dollar Borrowing if a Base Rate Borrowing of the
required Class is outstanding.
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31
Upon receipt of such notice, the Agent shall promptly notify each Lender of the
contents thereof and of such Lender's ratable share of such prepayment, and such
notice shall not thereafter be revocable by the Borrower. Each such repayment
or prepayment shall be applied to repay or prepay ratably the respective Loans
included in the Borrowings so selected.
(i) Any mandatory prepayment of the Term Loans pursuant to subsection
(e) or (f) of this Section shall be applied to reduce the remaining scheduled
repayments of the Term Loans pursuant to subsection (a) of this Section pro
rata, except as provided in clause (iii) of Section 5.11(a) with respect to a
Debt Prepayment Event. Any optional prepayment of the Term Loans pursuant to
Section 2.09 shall be applied, first, to reduce the scheduled repayments of the
Term Loans pursuant to subsection (a) of this Section that are scheduled to be
due during the 12-month period following the date of such prepayment, pro rata,
and, second, to reduce the remaining scheduled repayments of the Term Loans
pursuant to subsection (a) of this Section, pro rata.
(j) Each Swingline Loan shall mature, and the principal amount
thereof shall be due and payable, together with accrued interest thereon, on the
last day of the Interest Period applicable to such Swingline Loan.
(k) Notwithstanding any other provisions of this Section, no
mandatory prepayment of the Term Loans shall be required pursuant to subsection
(e) or (f) of this Section after the Trigger Date so long as the Debt Coverage
Ratio remains 2.50:1.00 or less (excluding up to 15 days during each fiscal
quarter).
SECTION 2.09. Optional Prepayments. (a) Subject to subsection (b)
below, the Borrower may, upon notice to the Agent prior to 12:00 Noon (New York
City time) on the date of prepayment (which shall be a Domestic Business Day),
in the case of Base Rate Borrowings, or three Euro-Dollar Business Days' notice
to the Agent, in the case of Euro-Dollar Borrowings, prepay any Borrowing in
whole at any time, or from time to time in part in amounts aggregating
$5,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such notice of prepayment shall specify which outstanding Borrowing is to
be prepaid in connection therewith. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Lenders included in such
Borrowing.
(b) Except as provided in Section 8.02, the Borrower may not
voluntarily prepay all or any portion of the principal amount of any Euro-Dollar
Borrowing prior to the end of the related Interest Period.
(c) The Borrower may, upon notice to the Agent prior to 12:00 Noon
(New York City time) on the date of prepayment (which shall be a Domestic
Business Day), prepay any Swingline Loan in whole at any time, or from time to
time in part in amounts aggregating $1,000,000 or any multiple of $500,000 in
excess thereof, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment.
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(d) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Lender (or, in the case of a Swingline
Loan, the Swingline Lender) of the contents thereof and of such Lender's ratable
share of such prepayment and such notice shall not thereafter be revocable by
the Borrower.
SECTION 2.10. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Lender its ratable share of each such payment received by the Agent for
the account of the Lenders. Whenever any payment of principal of, or interest
on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment, each Lender shall
repay to the Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.11. Funding Losses. If any payment of principal with
respect to any Euro-Dollar Loan (pursuant to Article II, VI or VIII or
otherwise) is made on any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed pursuant to Section
2.05(c), or if the Borrower fails to borrow, continue or prepay any Euro-Dollar
Loans after notice has been given to any Lender in accordance with Section 2.02,
2.04 or 2.08, the Borrower shall reimburse each Lender within 15 days after
demand for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
failure to borrow, provided that such Lender shall have delivered to the
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.12. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and
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paid for the actual number of days elapsed (including the first day but
excluding the last day). All fees and other interest shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).
SECTION 2.13. Letters of Credit. (a) The Borrower may request the
issuance, extension or renewal of Letters of Credit, in a form reasonably
acceptable to the Agent and the applicable Issuing Bank, appropriately
completed, for the account of the Borrower, at any time and from time to time
during the Revolving Loan Availability Period; provided that any Letter of
Credit shall be issued only if, and each request by the Borrower for the
issuance of any Letter of Credit shall be deemed a representation and warranty
of the Borrower that, immediately following the issuance of any such Letter of
Credit, (i) the Letter of Credit Exposure shall not exceed $100,000,000, (ii)
the sum of the Letter of Credit Exposure and the aggregate principal amount of
outstanding Revolving Loans and Swingline Loans shall not exceed the then
current Borrowing Base and (iii) the sum of the Letter of Credit Exposure and
the aggregate principal amount of outstanding Revolving Loans and Swingline
Loans shall not exceed the aggregate Revolving Loan Commitments at the time.
(b) Each Letter of Credit shall expire at the close of business on
the date that is five Domestic Business Days prior to the last day of the
Revolving Loan Availability Period, unless such Letter of Credit expires by its
terms (or is required by subsection (c) below to expire) on an earlier date.
Each Letter of Credit shall provide for payments of drawings in dollars.
(c) Each issuance of any Letter of Credit shall be made on at least
three Domestic Business Days' prior written notice (or such shorter notice as
shall be acceptable to the applicable Issuing Bank) from the Borrower to the
Agent (which shall give prompt notice thereof to each Lender) and the applicable
Issuing Bank specifying the date of issuance, the date on which such Letter of
Credit is to expire (which shall not be later than the earlier of (i) the date
that is five Domestic Business Days prior to the last day of the Revolving Loan
Availability Period, and (ii) subject to extension, 180 days, in the case of
documentary or trade Letters of Credit, and one year, in the case of standby
Letters of Credit, after the date of issuance of such Letter of Credit, or, if
such Letter of Credit provides that the expiry thereof may be accelerated upon
an Event of Default with respect to the Borrower specified in clause (h) or (i)
of Section 6.01, any later date permitted under clause (i) above), the amount of
such Letter of Credit, the name and address of the beneficiary of such Letter of
Credit, whether such Letter of Credit is a documentary or trade Letter of Credit
or a standby Letter of Credit, and such other information as may be necessary or
desirable to complete such Letter of Credit. Each Issuing Bank will give the
Agent prompt notice of the issuance and amount of such Letter of Credit and the
expiration of such Letter of Credit. Each Issuing Bank also will give the Agent
and the Borrower (i) daily notice of the amount available to be drawn under each
outstanding Letter of Credit and (ii) a quarterly summary indicating, on a daily
basis during such quarter, the issuance of any Letter of Credit and the amount
thereof, the expiration of any Letter of Credit and any payment on drafts
presented under Letters of Credit.
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(d) Each Issuing Bank that issues a Letter of Credit, by the issuance
of a Letter of Credit and without any further action on the part of such Issuing
Bank or the Lenders in respect thereof, hereby grants to each Lender, and each
Lender hereby acquires from such Issuing Bank, a participation in such Letter of
Credit equal to such Lender's Applicable Percentage of the aggregate amount
available to be drawn under such Letter of Credit, effective upon the issuance
of such Letter of Credit. In consideration and in furtherance of the foregoing,
each Lender hereby absolutely and unconditionally agrees to pay to the Agent, on
behalf of such Issuing Bank, in accordance with Section 2.02(e), such Lender's
Applicable Percentage of each Letter of Credit Disbursement made by such Issuing
Bank and not reimbursed by the Borrower when due in accordance with subsection
(g) of this Section; provided that the Lenders shall not be obligated to make
any such payment with respect to any wrongful Letter of Credit Disbursement made
as a result of the gross negligence or wilful misconduct of the applicable
Issuing Bank.
(e) Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to subsection (d) above in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever (subject only to the proviso in subsection
(d) above).
(f) During the Revolving Loan Availability Period (and thereafter, so
long as any Letter of Credit remains outstanding), the Borrower shall pay (i) to
the Agent for the account of the Lenders ratably in proportion to their
Revolving Loan Commitments a fee on the amount available to be drawn under each
outstanding Letter of Credit at a rate per annum equal to the Applicable Rate
from time to time in effect with respect to Revolving Euro-Dollar Loans, and
(ii) to each Issuing Bank for its own account, a fee at the rate per annum
specified in such Issuing Bank's Issuing Bank Agreement on the amount available
to be drawn under each outstanding Letter of Credit issued by such Issuing Bank.
Such fees shall accrue from and including the Effective Date to but excluding
the last day of the Revolving Loan Availability Period (provided that such fees
shall continue to accrue so long as any Letter of Credit remains outstanding).
Accrued fees under this subsection shall be calculated by the Agent as of each
Quarterly Payment Date and as of the Termination Date. The Agent shall make
such calculation and notify the Borrower of the amount so calculated within
three Domestic Business Days after each date as of which such calculation is so
required, and such fees shall be payable by the Borrower upon receipt of such
notice. In addition to the foregoing, the Borrower shall pay directly to each
Issuing Bank, for its own account, such Issuing Bank's customary processing and
documentation fees in connection with the issuance or amendment of or payment on
any Letter of Credit, payable within 15 days after demand therefor by such
Issuing Bank.
(g) If an Issuing Bank shall pay any draft presented under a Letter
of Credit, the Borrower shall pay to the Agent, on behalf of such Issuing Bank,
an amount equal to the amount of such draft before 12:00 Noon (New York City
time), on the day on which such Issuing Bank shall have notified the Borrower
that payment of such draft will be made. The Agent will promptly pay any such
amounts received by it to such Issuing Bank. If the Borrower shall fail to pay
any amount
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35
required to be paid by it under this subsection when due, such unpaid amount
shall bear interest, for each day from and including the due date to but
excluding the date of payment, at a rate per annum equal to the interest rate
applicable to overdue Base Rate Revolving Loans.
(h) The Borrower's obligation to reimburse Letter of Credit
Disbursements as provided in subsection (g) above shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of this Agreement under any and all circumstances whatsoever, and
irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any other Loan Document;
(ii) the existence of any claim, setoff, defense or other right which
the Borrower, any Subsidiary or any other person may at any time have against
the beneficiary under any Letter of Credit, any Issuing Bank, the Agent or any
Lender or any other Person in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
(iii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by any Issuing Bank under a Letter of Credit against
presentation of a draft or other document which does not comply with the terms
of such Letter of Credit; provided that such payment was not wrongfully made as
a result of the gross negligence or wilful misconduct of the applicable Issuing
Bank; and
(v) any other act or omission or delay of any kind or any other
circumstance or event whatsoever, whether or not similar to any of the foregoing
and whether or not foreseeable, that might, but for the provisions of this
subsection (h), constitute a legal or equitable discharge of the Borrower's
obligations hereunder.
(i) It is expressly understood and agreed that, for purposes of
determining whether a wrongful payment under a Letter of Credit resulted from an
Issuing Bank's gross negligence or wilful misconduct, an 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
and, in making any payment under any Letter of Credit (i) an Issuing Bank's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including reliance on the amount of
any draft presented under such Letter of Credit, whether or not the amount due
to the beneficiary thereunder equals the amount of such draft and whether or not
any document presented pursuant to such Letter of Credit proves to be
insufficient in any respect, if such document on its face appears to be in
order, and whether or not any other statement or any other document presented
pursuant to such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever
and (ii) any noncompliance in any immaterial respect of the documents presented
under such
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36
Letter of Credit with the terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of the applicable Issuing Bank.
It is further understood and agreed that, notwithstanding the proviso to clause
(iv) of subsection (h) above, the Borrower's obligation hereunder to reimburse
Letter of Credit Disbursements will not be excused by the gross negligence or
wilful misconduct of an Issuing Bank to the extent that such Letter of Credit
Disbursement actually discharged a liability of, or otherwise benefited, or was
recovered by, the Borrower; provided that the foregoing shall not be construed
to excuse an Issuing Bank from liability to the Borrower to the extent of any
direct damages suffered by the Borrower that are caused by such Issuing Bank's
gross negligence or wilful misconduct in determining whether drafts and other
documents presented under a Letter of Credit comply with the terms thereof.
(j) Each Issuing Bank shall, promptly following its receipt thereof,
examine all documents purporting to represent a demand for payment under a
Letter of Credit. Each Issuing Bank shall as promptly as possible give
telephonic notification, confirmed by telex or telecopy, to the Agent and the
Borrower of such demand for payment and whether such Issuing Bank has made or
will make a Letter of Credit Disbursement thereunder, provided that the failure
to give such notice shall not relieve the Borrower of its obligation to
reimburse any such Letter of Credit Disbursement in accordance with this
Section. The Agent shall promptly give each Lender notice thereof.
(k) In the event that the Borrower is required pursuant to the terms
of this Agreement or any other Loan Document to provide cash collateral in
respect of the Letter of Credit Exposure, the Borrower shall deposit in an
account with the Security Agent, for the benefit of the Lenders, an amount in
cash equal to the Letter of Credit Exposure (or such lesser amount as shall be
required hereunder or thereunder). Such deposit shall be held by the Security
Agent as collateral for the payment and performance of the Obligations. The
Security Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest
earned on the investment of such deposits in Temporary Cash Investments, which
investments shall be made as directed by the Borrower (unless such investments
shall be contrary to applicable law or regulation or a Default shall have
occurred and be continuing, in which case investments shall be made at the
option and sole but reasonable discretion of the Security Agent), such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall automatically be
applied by the Security Agent to reimburse each Issuing Bank for Letter of
Credit Disbursements and, if the maturity of the Loans has been accelerated, to
satisfy the Obligations. If the Borrower is required to provide an amount of
cash collateral hereunder as a result of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Domestic Business days after all Events of Default have been cured or
waived. If the Borrower is required to provide an amount of cash collateral
hereunder pursuant to Section 2.08(d), such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower upon demand; provided that, after
giving effect to such return, (i) the sum of the Letter of Credit Exposure plus
the aggregate outstanding principal amount of Revolving Loans would not exceed
the lesser of the aggregate Revolving Loan Commitments or the Borrowing Base and
(ii) no Default shall have occurred and be continuing.
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(l) All letters of credit outstanding under the Existing Credit
Agreement as of the Effective Date shall be deemed to have been issued hereunder
on the Effective Date and shall constitute "Letters of Credit" for all purposes
of the Loan Documents.
(m) The Borrower, the Agent and any Lender that is willing to be an
Issuing Bank hereunder may agree that such Lender shall be an Issuing Bank by
the execution and delivery of an agreement substantially in the form of Exhibit
G (an "Issuing Bank Agreement"). The Agent shall notify the Lenders of the
identity of any Issuing Bank appointed pursuant to this subsection (m). The
Borrower also may terminate the status of any Issuing Bank as an Issuing Bank
hereunder at any time by at least three Domestic Business Days' prior notice to
such Issuing Bank and the Agent, and the Agent shall thereupon notify the
Lenders of such termination; provided that such termination shall operate only
to relieve such Issuing Bank of its obligation to issue Letters of Credit
hereunder and shall not affect such Issuing Bank's status as an Issuing Bank or
its rights and obligations hereunder with respect to any Letters of Credit
previously issued by it.
SECTION 2.14. Swingline Loans. (a) During the Revolving Loan
Availability Period the Swingline Lender agrees, on the terms and conditions set
forth in this Agreement, to lend to the Borrower from time to time amounts that
will not result in (i) the aggregate principal amount of outstanding Swingline
Loans at any time exceeding $15,000,000, (ii) the sum of the Letter of Credit
Exposure and the aggregate principal amount of outstanding Revolving Loans and
Swingline Loans at any time exceeding the then current Borrowing Base or (iii)
the sum of the Letter of Credit Exposure and the aggregate principal amount of
all outstanding Swingline Loans and Revolving Loans at any time exceeding the
total Revolving Loan Commitments. All Swingline Loans shall be made in Dollars.
(b) In order to request a Swingline Loan, the Borrower shall notify
the Agent of such request not later than 1:00 P.M. (New York City time) on the
day of a proposed Swingline Loan, specifying the proposed date (which shall be a
Domestic Business Day) and amount of the requested Swingline Loan (which shall
be $1,000,000 or a larger multiple of $500,000) and the duration of the Interest
Period applicable thereto, subject to the definition of Interest Period. The
Agent will promptly advise the Swingline Lender of any such notice received from
the Borrower. The Swingline Lender shall make each Swingline Loan available to
the Borrower by wire transfer to the account of the Borrower most recently
specified by the Borrower by notice to the Swingline Lender for such purpose by
2:00 P.M. (New York City time) on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the Lenders
not later than 10:00 A.M. (New York City time) on any Domestic Business Day
require the Lenders to acquire participations on such Business Day in all or a
portion of the Swingline Loans outstanding. Such notice shall specify the
aggregate amount of Swingline Loans in which the Lenders will acquire
participations. In furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees, upon receipt of notice as provided above, to pay to
the Agent, for the account of the Swingline Lender, such Lender's Applicable
Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees
that its obligation to acquire participations in Swingline Loans
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pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under
this paragraph by wire transfer of immediately available funds, in the same
manner as provided in Section 2.02 with respect to Loans made by such Lender
(and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of
the Lenders). The Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph. Any amounts received by the
Swingline Lender from the Borrower in respect of a Swingline Loan after receipt
by the Swingline Lender of the proceeds of a sale of participations therein
shall be promptly remitted to the Agent; any such amounts received by the Agent
shall be promptly remitted by the Agent to the Lenders that shall have made
their payments pursuant to this paragraph and to the Swingline Lender, as their
interests may appear. The purchase of participations in a Swingline Loan
pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective,
and the Existing Credit Agreement shall be amended and restated in its entirety
as provided herein, on the date that each of the following conditions shall have
been satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Lender of a duly
executed Note or Notes, dated on or before the Amendment Effective Date
complying with the provisions of Section 2.03;
(c) receipt by the Agent of opinions of each of Riordan & McKinzie and
Richards & O'Neil, L.L.P., in each case as counsel for the Borrower,
substantially in the forms of Exhibits F-1 and F-2 hereto, respectively, and
covering such additional matters relating to the Transactions as the Required
Lenders may reasonably request;
(d) receipt by the Agent of a certificate signed by the Chairman and
Chief Executive Officer and any Vice President of the Borrower, dated the
Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02;
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(e) receipt by the Agent of counterparts of the Guarantee Agreement
duly executed by the parties thereto;
(f) receipt by the Security Agent of counterparts of the Pledge
Agreement, duly executed by the parties thereto, and certificates representing
all outstanding shares of capital stock of each corporate Subsidiary existing on
the Amendment Effective Date, accompanied by stock powers endorsed in blank;
(g) receipt by the Security Agent of counterparts of the Security
Agreement, duly executed by the parties thereto, and a duly completed and
executed Perfection Certificate from the Borrower, substantially in the form of
Exhibit I hereto;
(h) receipt by the Security Agent of each document (including each
Uniform Commercial Code financing statement or amendment thereto) required by
law or reasonably requested by the Security Agent to be filed, registered or
recorded in order to maintain in favor of the Security Agent for the benefit of
the Lenders a valid, legal and perfected security interest in or lien on the
collateral that is the subject of the Security Agreement;
(i) receipt by the Security Agent of the results of any search of the
Uniform Commercial Code filing made with respect to the Borrower and its
Subsidiaries as may be reasonably required by the Security Agent, together with
copies of such financing statements disclosed by any such search, and
accompanied by evidence that each lien indicated in any such financing
statements is permitted hereunder or has been released;
(j) receipt by the Security Agent of (i) counterparts of an amendment
to the Mortgage with respect to each Mortgaged Property, satisfactory in form
and substance to the Security Agent and signed on behalf of the record owner of
such Mortgaged Property and (ii) a bring-down policy or policies of title
insurance issued by a nationally recognized title insurance company, insuring
the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property
described therein, free of any other Liens except as permitted by Section 5.17,
together with such endorsements, coinsurance and reinsurance as the Security
Agent or the Required Lenders may reasonably request;
(k) the Required Lenders shall not have advised the Agent that, in
their judgment, there shall have occurred a material adverse change in the
assets, financial condition, prospects or results of operations of the Borrower
and its Subsidiaries, taken as a whole;
(l) after giving effect to this Agreement, the only Debt of the
Borrower and its Subsidiaries on the Amendment Effective Date will be the Loans
and other Debt that is permitted hereunder;
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(m) receipt by the Agent of all fees and other compensation payable to
the Agent, the Lenders or the Security Agent on or prior to the Amendment
Effective Date pursuant to their agreements with the Borrower;
(n) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower and its Subsidiaries, the corporate
authority for and the validity of the Loan Documents, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent;
(o) receipt by the Agent of a letter agreement, duly executed by the
Parent Corporation and in form and substance reasonably satisfactory to the
Agent, pursuant to which the Parent Corporation shall agree to observe the
covenants applicable to it set forth in Section 5.04(c);
(p) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Parent Corporation, the Borrower and its
Subsidiaries, the corporate authority for and the validity of the Loan
Documents, and any other matters relevant hereto, all in a form and substance
satisfactory to the Agent;
(q) the Borrower has made the arrangements necessary to consummate the
Redemption; and
(r) the receipt by the Security Agent of the Instrument of Resignation
and Assignment dated as of the date hereof, among the Borrower, the Lenders and
Morgan Guaranty Trust Company of New York ("Morgan"), duly executed by the
parties thereto and in form and substance reasonably satisfactory to the Agent,
pursuant to which Morgan will assign all its rights, title and interest under
the Loan Documents (including the Trademark Collateral Agreement), in its
capacity as Agent and Security Agent, to Credit Lyonnais New York Branch and
resign as Agent and Security Agent;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
September 30, 1998. The Agent shall promptly notify the Borrower and the
Lenders of the Amendment Effective Date, and such notice shall be conclusive and
binding on all parties hereto. Each of the parties hereto agrees that, as of
the Amendment Effective Date, each Lender shall be deemed to have assigned a
proportionate part of its rights and obligations under this Agreement and the
Notes to the other Lenders to the extent necessary such that the Commitments of
the Lenders as of the Amendment Effective Date shall be as set forth in Schedule
1 hereto and the participation of each Lender in any outstanding Letters of
Credit shall be proportionate to its pro rata share of the Revolving Loan
Commitments, and the Lenders agree to assume, as of the Amendment Effective
Date, such rights and obligations to such extent.
SECTION 3.02. Each Credit Event. The obligation of any Lender to
make a Loan on the occasion of any Borrowing (it being understood that, for
purposes of this Section, a "Borrowing" does not include a change or
continuation of the Type of, or the duration of the Interest Period
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applicable to, a previously outstanding Borrowing pursuant to Section 2.04) and
of the Issuing Bank to issue, extend or renew a Letter of Credit is subject to
the satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or a notice requesting issuance, extension or renewal of a Letter
of Credit as required by Section 2.13(c) or receipt by the Swingline Lender of a
notice requesting a Swingline Loan as required by Section 2.14, as applicable;
(b) the fact that, immediately after such Borrowing or the issuance,
extension or renewal of such Letter of Credit, the aggregate outstanding
principal amount of the Loans of each Class and the Letter of Credit Exposure
will not exceed the limitations set forth in Sections 2.01, 2.13(a) and 2.14;
(c) the fact that, immediately after such Borrowing or issuance,
extension or renewal of such Letter of Credit, no Default shall have occurred
and be continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents shall be true on and as
of the date of such Borrowing or issuance, extension or renewal of such Letter
of Credit (except to the extent such representations and warranties expressly
relate solely to an earlier date).
Each Borrowing hereunder and the issuance, extension or renewal of each Letter
of Credit hereunder shall be deemed to be a representation and warranty by the
Borrower on the date of such Borrowing or issuance as to the facts specified in
clauses (b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Existence and Power. The Borrower is a limited
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and has all powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted or proposed to be conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Parent
Corporation, the Borrower and each of its Subsidiaries of this Agreement and the
other Loan Documents to which it is to be a party and the consummation of the
Transactions are within its powers, have been duly authorized by all necessary
action on the part of the Parent Corporation and the Borrower, the Borrower's
partners, the Subsidiaries and their respective stockholders or partners (as
applicable), require no
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action by or in respect of, or filing with, any Governmental Authority (other
than (i) such as have been duly taken or made and (ii) filings required to
perfect Liens granted under the Security Documents) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the partnership agreement, certificate of incorporation or By-laws (as
applicable) of the Parent Corporation, the Borrower or any Subsidiary or of any
judgment, injunction, order or decree or (to the extent that such contravention
or default could result in a Material Adverse Effect) any agreement or other
instrument binding upon the Parent Corporation, the Borrower or any Subsidiary
or result in the creation or imposition of any Lien (other than the Liens of the
Security Documents) on any asset of the Parent Corporation, the Borrower or any
of its Subsidiaries, in each case both before and after giving effect to the
Transactions.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and the other Loan Documents, when executed
and delivered in accordance with this Agreement, will constitute valid and
binding obligations of each of the Borrower, the Parent Corporation and the
Subsidiaries party thereto, in each case enforceable in accordance with its
terms.
SECTION 4.04. Financial Information; Title to Properties. (a) The
consolidated balance sheet of the Borrower as of January 31, 1998 and the
related consolidated statements of operations, partnership equity and cash flows
for each of the fiscal years in the two-year period ended January 31, 1998,
reported on by Coopers & Lybrand and set forth in the Descriptive Materials,
copies of which have been delivered to each of the Lenders, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower as of such date and the results of its
operations and cash flows for such years.
(b) The unaudited consolidated balance sheet of the Borrower as of
August 1, 1998, and the related unaudited consolidated statements of operations
and cash flows for the 13-week and 26-week periods ended August 1, 1998, set
forth in the Descriptive Materials, copies of which have been delivered to each
of the Lenders, fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements referred
to in subsection (a) of this Section (except as disclosed therein), the
consolidated financial position of the Borrower as of such date and the results
of its operations for such periods (subject to normal year-end adjustments).
(c) Since August 1, 1998, there has been no material adverse change
in the assets, financial condition or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole.
(d) Each of the Borrower and the Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its material properties and
assets, except for minor defects in title that do not interfere with its ability
to conduct its business as currently conducted or proposed to be conducted or to
utilize such properties and assets for their intended purposes.
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SECTION 4.05. Litigation. There is no injunction, stay, decree or
order of any Governmental Authority or any action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision, which in any such case could have a Material Adverse
Effect or which in any manner draws into question the validity of this Agreement
or the other Loan Documents.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group
has, in all material respects, fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with respect to each
Plan and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each Plan. No
member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code in respect of any Plan,
(ii) failed to make any contribution or payment to any Plan, or made any
amendment to any Plan, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any material liability under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Taxes. The Borrower and its Subsidiaries have filed or
caused to be filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by them and have paid or
caused to be paid all taxes shown to be due on such returns or pursuant to any
assessment received by the Borrower or any Subsidiary, except where the same may
be contested in good faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Borrower and its Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.
SECTION 4.08. Parent Corporation. As of the Amendment Effective
Date, the Borrower is, directly or indirectly, wholly owned by the Parent
Corporation, the Parent Corporation does not have any subsidiaries, other than
the Borrower and the Subsidiaries and subsidiaries resulting from transfers to
the Parent Corporation of capital stock of corporations holding partnership
interests in the Borrower, and neither the Parent Corporation nor any of its
subsidiaries described above have any material assets (other than partnership
interests in the Borrower and assets of the Borrower and the Subsidiaries) or
liabilities (other than liabilities of the Borrower and the Subsidiaries).
SECTION 4.09. Subsidiaries. Each of the Borrower's Subsidiaries is a
corporation, a general partnership or a limited partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and has all corporate or partnership powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. As of the Amendment Effective Date, the only
Subsidiaries of the Borrower shall be the Subsidiaries identified on Schedule
4.09, each of which shall be a Permitted Subsidiary.
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SECTION 4.10. Not an Investment Company. The Borrower is not an
"investment company", nor is it controlled by an "investment company", within
the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.11. Compliance with Laws. Neither the Borrower nor any of
the Subsidiaries is in violation of any law, rule or regulation, or in default
with respect to any judgment, writ, injunction or decree applicable to it of any
Governmental Authority, that (individually or in the aggregate) could result in
a Material Adverse Effect.
SECTION 4.12. Agreements. (a) Except as disclosed in the
Descriptive Materials, neither the Borrower nor any of the Subsidiaries is a
party to any agreement or instrument or subject to any partnership or corporate
restriction that has resulted or could result in a Material Adverse Effect.
Neither the Borrower nor any of the Subsidiaries is a party to any agreement or
instrument or subject to any restriction (other than restrictions on the payment
of dividends or partnership distributions imposed by law) that restricts or
impairs (i) the ability of the Borrower and its Subsidiaries to grant to the
Security Agent Liens on any of their assets to secure the Obligations or (ii)
the ability of any Subsidiary to pay dividends on its capital stock or
distributions to its partners, as applicable.
(b) Neither the Borrower nor any of the Subsidiaries is in default in
any manner under any provision of any indenture or other agreement or instrument
evidencing Debt, or any other agreement or instrument to which it is a party or
by which it or any of its properties or assets are or may be bound, where such
default could result in a Material Adverse Effect.
SECTION 4.13. Federal Reserve Regulations. Neither the Borrower nor
any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
SECTION 4.14. Disclosure. All information (including the Descriptive
Materials but excluding projected financial information) furnished in writing by
or on behalf of the Borrower or any Subsidiary to the Agent or any Lender for
purposes of or in connection with this Agreement or any transaction contemplated
hereby was true and accurate in all material respects or based on reasonable
estimates on the date as of which such information was stated or certified. The
Borrower has disclosed to the Lenders in writing any and all facts (other than
prevailing economic conditions affecting similarly situated businesses
generally) known to any officer of the Borrower which materially and adversely
affect or may materially and adversely affect (to the extent the Borrower can
now reasonably foresee) the business, financial position or results of
operations of the Borrower and its Consolidated Subsidiaries, considered as a
whole. All projected financial information which has been furnished by or on
behalf of the Borrower or any Subsidiary to the Agent or any Lender was, at the
time so furnished, believed by the Borrower to have been prepared in a
reasonable manner and based on reasonable assumptions with respect to the
Borrower's business; provided that no representation is made by the Borrower
that the future results of the Borrower will equal those set forth in such
projected financial information.
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SECTION 4.15. Governmental Approvals. As of the Amendment Effective
Date, all consents and approvals of, and filings and registrations with, and all
other actions in respect of, all Governmental Authorities required in order to
consummate the Transactions shall have been obtained, given, filed or taken and
shall be in full force and effect.
SECTION 4.16. Security Interests. (a) The security interests
created in favor of the Security Agent under the Pledge Agreement will at all
times after the execution and delivery of the Pledge Agreement constitute valid,
first-priority, perfected security interests in the Pledged Securities (as
defined therein), and such Pledged Securities will be subject to no Liens (other
than unperfected Liens imposed by law) or security interests of any other
Person. No filings or recordings are or will be required in order to perfect
the security interests in the Pledged Securities created under the Pledge
Agreement.
(b) The security interests created in favor of the Security Agent for
the benefit of the Lenders under the Security Documents will constitute valid,
perfected security interests in the collateral subject thereto, subject only to
Liens permitted by the Loan Documents.
SECTION 4.17. Employment and Management Agreements. Except as
disclosed in Schedule 4.17, as of the Amendment Effective Date (after giving
effect to the Transactions) there are no (a) employment agreements covering
management employees of the Borrower, (b) agreements for management or
consulting services to which the Borrower is a party or by which it is bound, or
(c) collective bargaining agreements or other labor agreements covering any of
the employees of the Borrower.
SECTION 4.18. Capitalization. As of the Amendment Effective Date,
the only general partner in the Borrower is VGP, which is a wholly-owned
subsidiary of the Parent Corporation. As of the Amendment Effective Date, there
are no outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or other agreements or commitments of any nature relating to
any partnership interests in the Borrower, except as provided for in the
Partnership Agreement and except with respect to management plans and
arrangements.
SECTION 4.19. Environmental Matters. Except as disclosed in the
environmental audit reports delivered to the Agent prior to the date of
execution of this Agreement, each of the Borrower and the Subsidiaries has
complied with all Environmental and Safety Laws, except for any noncompliance
that, individually or in the aggregate, could not reasonably be anticipated to
result in a Material Adverse Effect. None of the Borrower and the Subsidiaries
has received notice of any failure so to comply which alone or together with any
other such failure could result in a Material Adverse Effect. Except as
disclosed in the environmental audit reports delivered to the Agent prior to the
date of execution of this Agreement, the facilities of the Borrower and the
Subsidiaries do not treat, store or dispose of any hazardous wastes, hazardous
substances, hazardous materials, toxic substances or toxic pollutants, as those
terms are used in any Environmental and Safety Laws, in violation thereof where
such violation could result, individually or together with other violations, in
a Material Adverse Effect.
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SECTION 4.20. Year 2000. To the best of the Borrower's knowledge, any
reprogramming required to permit the proper functioning, in and following the
year 2000, of (i) the computer systems of the Borrower and its subsidiaries and
(ii) equipment containing embedded microchips (including systems and equipment
supplied by others or with which the systems of the Borrower and its
subsidiaries interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed in 1999. To the best of the Borrower's
knowledge, the cost to the Borrower and its Subsidiaries of such reprogramming
and testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower and its Subsidiaries (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Lender has any Commitment
hereunder or any amount payable under any Loan Document remains unpaid or any
Letter of Credit remains outstanding:
SECTION 5.01. Information. The Borrower will deliver to each of the
Lenders:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, consolidated and consolidating balance
sheets of the Borrower and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated and consolidating statements of income
and cash flows for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by
PricewaterhouseCoopers or other independent public accountants of nationally
recognized standing;
(b) 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 of the Borrower,
consolidated balance sheets of the Borrower and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of income and
cash flows for such quarter and for the portion of the Borrower's fiscal year
ended at the end of such quarter, setting forth in each case in comparative form
the figures for the corresponding quarter and the corresponding portion of the
Borrower's previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail a list of Investments in order to establish whether
the Borrower was in compliance with Section 5.16, (ii) setting forth in
reasonable detail
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the calculations required to establish whether the Borrower was in compliance
with the requirements of Sections 5.21, 5.22 and 5.23 on the date of such
financial statements, (iii) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto, (iv) stating whether, since the date of the most recent
financial statements previously delivered pursuant to this Section, there has
been any material change in the generally accepted accounting principles applied
in the preparation of such statements and, if so, describing such change, (v)
identifying any Reinvestment Events that occurred during the previous six-month
period and the status of the reinvestment of the Net Cash Proceeds thereof, (vi)
as long as the Borrower is a partnership, setting forth the Tax Distribution
Amount and a reasonably detailed calculation thereof, and (vii) setting forth
the Pricing Ratio and a reasonably detailed calculation thereof;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i) stating
whether anything has come to their attention to cause them to believe that any
Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to subclauses (ii), (vi) and (vii) of clause (c) above;
(e) as soon as available and in any event within 20 days after the
Saturday closest to the last day of each calendar month, a summary consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of such
Saturday and the related summary consolidated statement of income for the fiscal
month then ended and for the portion of the Borrower's fiscal year then ended,
setting forth in each case in comparative form the figures for the corresponding
fiscal month and the corresponding portion of the Borrower's previous fiscal
year, prepared in accordance with generally accepted accounting principles
(subject to normal year-end adjustments);
(f) within 20 days after the Saturday closest to the last day of each
calendar month (commencing with the month ending September 30, 1998), a
Borrowing Base Certificate as of such Saturday certified by the chief financial
officer or chief accounting officer of the Borrower (which certificate the Agent
and the Security Agent shall have the right to audit at the expense of the
Borrower; provided that not more than two such audits may be conducted at the
Borrower's expense during any fiscal year of the Borrower unless an Event of
Default has occurred and is continuing);
(g) prompt notice of any default or alleged default under or breach or
alleged breach of the Trademark Agreements or Credit Card Agreements;
(h) prompt notice of each Prepayment Event or Reinvestment Event,
including a reasonably detailed calculation of the Net Cash Proceeds therefrom;
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(i) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate of
the chief financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(j) promptly upon the delivery or mailing thereof to the shareholders
of the Parent Corporation, copies of all reports, financial information
(including budgets or projections), proxy statements and other information so
delivered or mailed;
(k) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower, the Parent Corporation or Finance Corp. shall
have filed with the Securities and Exchange Commission;
(l) if and when any member of the ERISA Group (i) becomes aware of or
gives or is required to give notice to the PBGC of any Reportable Event with
respect to any Plan which might constitute grounds for or result in a
termination of such Plan by the PBGC under Title IV of ERISA, or knows that the
plan administrator of any Plan has become aware of or has given or is required
to give notice of any Reportable Event, a copy of the notice of such Reportable
Event given or required to be given to the PBGC if any such notice is required;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA under circumstances that would result in a material amount of
withdrawal liability, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, a copy of such notice; or (iv) within 10 days after the due
date for filing with the PBGC pursuant to Section 412(n) of the Internal Revenue
Code a notice of failure to make a required installment or other payment with
respect to a Plan, a statement of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such failure and
the action that the Borrower proposes to take with respect thereto, together
with a copy of any such notice given to the PBGC;
(m) promptly upon delivery thereof to the holders of Debt in respect
of the Subordinated Notes, copies of any and all reports, notices, financial
information (including any budgets or projections) and other information
delivered to such holders, to the extent not duplicative of information
previously delivered to the Lenders; and
(n) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Lender, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except in connection with a
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49
good faith contest with the applicable obligee, and will maintain, and will
cause each Subsidiary to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance; Casualty and
Condemnation. (a) The Borrower will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted.
(b) The Borrower will maintain, and will cause each Subsidiary to
maintain, (i) physical damage insurance on all real and personal property on an
all risks basis (including the perils of flood and quake), covering the repair
and replacement cost of all such property and consequential loss coverage for
business interruption and extra expense (such consequential loss coverage to be
in a reasonable amount in relation to the Borrower's gross revenues), (ii)
public liability insurance (including products/completed operations liability
coverage) in such amounts (on a per occurrence basis) as is customary with
prudent companies similarly situated in the same or similar businesses, and
(iii) such other insurance coverage in such amounts and with respect to such
risks as shall be required by the terms of any other Loan Document or as the
Required Lenders may reasonably request. All such insurance shall be provided
by financially sound and reputable insurers or such other insurers as the
Required Lenders may approve in writing. The Borrower will deliver to the
Lenders (i) on the Effective Date, a certificate dated such date showing the
amount of coverage as of such date, (ii) upon request of any Lender through the
Agent from time to time full information as to the insurance carried, (iii)
within five days of receipt of notice from any insurer a copy of any notice of
cancelation or material change in coverage from that existing on the Effective
Date and (iv) forthwith, notice of any cancelation or nonrenewal of coverage by
the Borrower.
(c) The Borrower will furnish to the Agent and the Lenders prompt
written notice of any casualty or other insured damage to any portion of any
Mortgaged Property or the commencement of any action or proceeding for the
taking of any Mortgaged Property or any part thereof or interest therein under
power of eminent domain or by condemnation or similar proceeding. If any such
event results in Net Cash Proceeds (whether in the form of insurance proceeds,
condemnation award or otherwise), the Security Agent is authorized to collect
such Net Cash Proceeds and, if received by the Borrower or any Subsidiary, such
Net Cash Proceeds shall be paid over to the Security Agent; provided that if the
aggregate Net Cash Proceeds in respect of such event are less than $5,000,000,
such Net Cash Proceeds shall be paid over to the Borrower unless a Default has
occurred and is continuing. All such Net Cash Proceeds retained by or paid over
to the Security Agent shall be held by the Security Agent and released from time
to time to pay the costs of repairing, restoring or replacing the affected
property in accordance with the terms of the applicable Mortgage, subject to the
provisions of the applicable Mortgage regarding application of such Net Cash
Proceeds during a Default. If any Net Cash Proceeds retained by or paid over to
the Security Agent as provided above continue to be held by the Security Agent
on the date that is two years after the collection of such Net Cash Proceeds,
then such Net Cash Proceeds shall be applied to prepay Term Loans as provided in
Section 2.08(e).
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SECTION 5.04. Conduct of Business and Maintenance of Existence. (a)
The Borrower will continue, and will cause each Subsidiary to continue, to
engage in business of the same general type as conducted by the Borrower and its
Subsidiaries prior to the Amendment Effective Date, and will preserve, renew and
keep in full force and effect, and, subject to Section 5.13, will cause each
Subsidiary to preserve, renew and keep in full force and effect, their
respective existences and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business.
(b) The only business or activity of a Permitted Subsidiary (other
than an Acquired Subsidiary) shall be (i) creative design activities associated
with the preparation of catalogues in connection with the Borrower's business,
(ii) the production and distribution of such catalogues, (iii) other activities
incidental to the Borrower's business, (iv) the leasing of property and
employment of management and employees for purposes of the foregoing activities,
(v) other activities incidental to such Permitted Subsidiary's business and (vi)
ownership of interests in other Permitted Subsidiaries. Without limiting the
generality of the foregoing, Permitted Subsidiaries (excluding Acquired
Subsidiaries) shall not own or acquire any inventory or collect or hold any
revenues or other proceeds generated from the sale of inventory, all of which
activities shall be conducted by the Borrower. The Borrower will not permit any
Permitted Subsidiary (other than Acquired Subsidiaries) to incur any Debt (other
than pursuant to the Guarantee Agreement, the Security Documents and a
Subordinated Guarantee Agreement) or other liability (other than liabilities for
franchise taxes and similar liabilities incidental to its existence).
(c) The only business or activity of the Parent Corporation and its
subsidiaries (other than the Borrower and its Subsidiaries) shall be the
ownership of the Borrower and activities incidental thereto, which may include
the establishment and administration of Parent Corporation Stock Plans. Without
limiting the generality of the foregoing, neither the Parent Corporation nor any
of its Subsidiaries (other than the Borrower and its Subsidiaries) will (i) have
any subsidiaries, other than the Borrower and its Subsidiaries and, in the case
of the Parent Corporation, wholly owned subsidiaries through which it indirectly
holds partnership interests in the Borrower, or (ii) have any material assets
(other than partnership interests in the Borrower) or liabilities (other than
(A) liabilities of the Borrower and its Subsidiaries and (B) liabilities arising
by operation of law or incidental to its existence).
(d) Acquired Subsidiaries shall engage only in business of the same
type as the business conducted by the Borrower prior to the acquisition thereof.
Each Acquired Subsidiary shall either (i) comply with the requirements of
Section 5.08 promptly following the acquisition thereof or (ii) be liquidated or
merged into the Borrower or another Acquired Subsidiary within 90 days after the
acquisition thereof.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, Environmental and Safety Laws and ERISA and the rules and
regulations thereunder) except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or where the failure to
comply, either alone or combined with other failures to comply, could not have a
Material Adverse Effect.
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SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each Subsidiary to permit, representatives of any Lender
at such Lender's expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired; provided that
(a) reasonable advance notice shall be given to the Borrower of any such visit
or inspection of properties and (b) the Borrower shall be afforded an
opportunity to participate in any such discussions with independent public
accountants.
SECTION 5.07. Fiscal Year. The Borrower will cause its fiscal year
to end on the Saturday closest to January 31 in each year.
SECTION 5.08. Further Assurances. The Borrower will execute any and
all further documents, financing statements, agreements and instruments, and
take all further action, which may be required under applicable law, or which
the Required Lenders or the Agent or Security Agent may reasonably request, in
order to effectuate the transactions contemplated by the Loan Documents and in
order to grant, preserve, protect and perfect the validity and first priority of
the security interests created or intended to be created by the Security
Documents. In addition, (a) the Borrower will deliver prompt written notice to
the Lenders of each Permitted Acquisition describing the assets and properties
acquired and the Borrower will, at the Borrower's cost and expense, promptly
secure the Obligations by pledging or creating, or causing to be pledged or
created, first priority (subject to Liens incurred prior to the applicable
Permitted Acquisition) perfected security interests with respect to such assets
and properties as the Agent or the Required Lenders shall reasonably designate,
and (b) if the Borrower shall form or acquire any additional Subsidiary
(including any Acquired Subsidiary), the Borrower will, at the Borrower's
expense, cause such Subsidiary to become a party to the Guarantee Agreement and
the Security Agreement and pledge (or cause to be pledged) the capital stock of
such Subsidiary under the Pledge Agreement. Such additional security interests
and Liens will be created under security agreements, mortgages, deeds of trust
and other instruments and documents in form and substance reasonably
satisfactory to the Required Lenders, and the Borrower shall deliver or cause to
be delivered to the Lenders all such instruments and documents (including legal
opinions, title insurance policies and lien searches) as the Required Lenders
shall reasonably request to evidence compliance with this Section 5.08. The
Borrower agrees to provide such evidence as the Required Lenders shall
reasonably request as to the perfection and (subject to Liens incurred prior to
the applicable Permitted Acquisition) first priority status of each such
security interest and Lien.
SECTION 5.09. Subsidiaries; Partnerships. The Borrower will not have
any Subsidiaries other than Permitted Subsidiaries. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any partnership (other
than a partnership that is a Permitted Subsidiary) or joint venture.
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SECTION 5.10. Amendment of Certain Documents. The Borrower will not
permit any amendment or modification to be made to, or any waiver of its rights
or the rights of any Subsidiary under, any Transaction Document or Subordinated
Debt Document, other than (a) amendments, modifications and waivers with respect
to the Credit Card Agreements that are not, individually or in the aggregate,
materially adverse to the interests of the Lenders, (b) amendments,
modifications and waivers with respect to the Trademark Agreement that are not,
individually or in the aggregate, adverse to the interests of the Borrower or
the Lenders, (c) amendments, modifications and waivers with respect to the
Subordinated Debt Documents limited to immaterial changes necessary to comply
with the Trust Indenture Act of 1939, as amended, in connection with
registration under the Securities Act of 1933, and (d) amendments to the
Partnership Agreement that will not have the effect of increasing the amount of
Tax Advances or Tax Distributions and that are not, individually or in the
aggregate, adverse to the interests of the Borrower or the Lenders; provided
that any such amendment, modification or waiver permitted hereunder shall be
made only after prior notice to the Lenders, and copies thereof shall be
delivered to the Lenders.
SECTION 5.11. Debt; Preferred Stock; Rate Protection Agreements. (a)
The Borrower will not, nor will it permit any of its Subsidiaries to, incur or
at any time be liable with respect to any Debt, except:
(i) Debt outstanding under this Agreement and the other Loan
Documents;
(ii) Capital Financing Debt in an aggregate principal amount not
exceeding $50,000,000 at any time outstanding;
(iii) unsecured Debt for borrowed money issued solely for cash
consideration; provided that the incurrence of such Debt shall constitute a Debt
Prepayment Event and (A) all the proceeds of such Debt shall be applied
forthwith to the prepayment of Term Loans or, after the Term Loans are fully
repaid, to the reduction of Revolving Loan Commitments and (B) notwithstanding
any contrary provision in this Agreement, any prepayment of Term Loans of either
Class required by clause (A) above shall be applied to reduce subsequent
scheduled repayments thereof pursuant to Section 2.08(a) in reverse
chronological order;
(iv) Debt arising under the Credit Card Agreements, to the extent that
payment obligations thereunder are deemed to constitute Debt; provided that the
foregoing shall not be construed to permit the sale of accounts receivable
pursuant to the Credit Card Agreements with recourse to the Borrower or
otherwise on terms and conditions (other than price) materially less favorable
to the Borrower than those specified in the Credit Card Agreements as in effect
on the Effective Date;
(v) other unsecured Debt in an aggregate principal amount not
exceeding $10,000,000 at any time outstanding;
(vi) Debt in respect of the financing of insurance premiums for
insurance obtained in the ordinary course of business; provided that the amount
of such Debt relating to any policy of
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53
insurance shall not at any time exceed the amount that the Borrower or a
Subsidiary would be entitled to receive as a refund of insurance premium if such
insurance policy were to be canceled at such time;
(vii) unsecured Debt of any Wholly Owned Consolidated Subsidiary owing
to the Borrower in respect of an Investment made by the Borrower in such
Subsidiary in compliance with Section 5.16; and
(viii) prior to the Redemption, the Subordinated Notes;
provided that the Borrower shall not permit any Subsidiary to incur or become
liable for any Debt, whether or not permitted above, other than (1) Debt in
respect of the Subordinated Notes of Finance Corp. permitted under clause (viii)
above, (2) Debt of a Wholly Owned Consolidated Subsidiary (i) acquired pursuant
to a Permitted Acquisition that is outstanding at the time of such acquisition
to the extent permitted under clause (v) above or (ii) permitted under clause
(ii) above, (3) Debt arising under the Guarantee Agreement or any Security
Document to which such Subsidiary is a party, (4) Debt in respect of the
Subordinated Notes arising under a Subordinated Guarantee Agreement to which
such Subsidiary is a party, if such Subsidiary is required to enter into such
Subordinated Guarantee Agreement by the terms of the Subordinated Debt Documents
and if such Subsidiary also Guarantees the Obligations pursuant to the Guarantee
Agreement, and (5) Debt permitted under clause (vi) or (vii) above.
(b) The Borrower will not, nor will it permit any of its Subsidiaries
to, issue any additional capital stock or partnership interests other than, in
the case of the Borrower, additional partnership interests issued in accordance
with the Partnership Agreement.
(c) The Borrower will from time to time enter into, and maintain in
effect, such Rate Protection Agreements as shall be necessary so that, within
nine months of the Amendment Effective Date, at all times at least 25%, and,
within eighteen months of the Amendment Effective Date, at all times at least
40%, of its long-term Debt (determined on a consolidated basis in accordance
with generally accepted accounting principles) consists of Debt that bears a
fixed rate of interest and Debt that is hedged pursuant to Rate Protection
Agreements to effectively bear interest at a fixed rate or to cap the rate of
interest thereon.
SECTION 5.12. Restricted Payments. The Borrower will not, nor will
it permit any of its Subsidiaries to, declare or make or agree to make, directly
or indirectly, any Restricted Payment, except (a) the Borrower may pay interest
on the Debt in respect of the Subordinated Notes as and when due unless
prohibited by the terms of subordination applicable thereto; (b) the Borrower
may make Tax Advances and Tax Distributions if (i) no Default described in
clause (a) of Section 6.01 has occurred and is continuing, (ii) the Borrower is
a partnership at the time such Tax Advance or Tax Distribution is made and (iii)
the aggregate cumulative amount of Tax Advances and Tax Distributions does not
exceed the aggregate cumulative Tax Distribution Amounts for periods completed
since the Effective Date; (c) the Borrower may make Restricted Payments to VGP,
VLP or the Parent Corporation as reimbursement of out-of-pocket expenses
PAGE
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54
actually incurred by such Affiliates to third parties (not including other
Affiliates or employees of Affiliates) in connection with their respective
existences, the administration of the Borrower and the Subsidiaries and
activities incidental thereto, provided that aggregate Restricted Payments
pursuant to this clause (c) shall not exceed the sum of (i) the aggregate
franchise taxes of VGP, VLP and the Parent Corporation paid during any fiscal
year, but in no event shall such sum exceed $1,000,000 during any such fiscal
year, and (ii) $250,000 during any fiscal year of the Borrower; (d) the Borrower
may make Restricted Payments in order to redeem, repurchase or otherwise
reacquire equity interests in the Parent Corporation (including Restricted
Payments to any partner or shareholder in the Borrower in order to permit such
partner or shareholder (either directly or indirectly through additional
payments or distributions to its parent entities) to redeem, repurchase or
otherwise reacquire equity interests in the Parent Corporation from members of
the Borrower's management, if (i) no Default has occurred and is continuing and
(ii) after giving effect to any such Restricted Payment, the aggregate
cumulative amount of Restricted Payments made pursuant to this clause (d) shall
not exceed the sum of $2,000,000 plus the amount of Net Cash Proceeds received
by the Borrower on or after the Effective Date and prior to making such
Restricted Payment from capital contributions attributable to the issuance by
the Parent Corporation of additional equity securities to members of management
of the Borrower; (e) the Borrower may make matching contributions on behalf of
its qualifying employees to a Parent Corporation Stock Plan pursuant to the
terms thereof; (i) the Borrower may make cash payments to the Parent Corporation
for the purpose of the repurchase of shares of its common stock in the open
market or otherwise, but only to the extent necessary to permit the repurchase
of a number of shares equal to the number of shares issued pursuant to a Parent
Corporation Stock Plan, provided that (1) no Default has occurred and is
continuing at the time of, or would result from, such cash payment; (2) the
amount of such cash payments during any fiscal year of the Borrower may not
exceed $3,000,000; and (3) the sum of all cash payments made under this clause
(i) from and after the Effective Date shall not exceed $10,000,000; (f) if at
the time thereof and after giving effect thereto no Default has occurred and is
continuing and the Debt Coverage Ratio is (and at all times during the period of
two consecutive fiscal quarters ended on or immediately prior to such time was)
2.00 to 1.0 or less (excluding up to 15 days during each such quarter), the
Borrower may make cash payments to the Parent Corporation in any fiscal year not
exceeding in the aggregate 50% of Consolidated Net Income for the immediately
preceding fiscal year; (g) the Borrower may make cash payments to the Parent
Corporation for the purpose of the repurchase of shares of its common stock in
the open market or otherwise, provided that (1) no Default has occurred and is
continuing at the time of or would result from any payment made pursuant to this
clause (l), and (2) the sum of all Restricted Payments made pursuant to this
clause (g) shall not exceed $40,000,000; and (h) the Borrower may consummate the
Redemption.
SECTION 5.13. Mergers, Consolidations, Acquisitions and Sales of
Assets. (a) The Borrower will not, nor will it permit any of its Subsidiaries
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or purchase or otherwise acquire (in one
transaction or a series of related transactions) any material assets, except
that (i) the foregoing shall not prohibit the consummation of the Acquisition,
(ii) the foregoing shall not prohibit the acquisition of assets in the ordinary
course of business (including Capital Expenditures permitted by Section 5.24),
(iii) the foregoing shall not prohibit Permitted
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55
Acquisitions, subject to 30 days' prior written notice to the Lenders of such
Permitted Acquisition describing the material terms of such Permitted
Acquisition and delivery to the Lenders prior to consummation of such Permitted
Acquisition of a certificate of the chief financial officer or the chief
accounting officer of the Borrower, setting forth calculations establishing to
the reasonable satisfaction of the Agent that the Borrower will be in compliance
with Section 5.23 upon giving effect to such Permitted Acquisition, (iv) if at
the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing any Wholly Owned Consolidated Subsidiary may
merge or liquidate into the Borrower (or, in the case of an Acquired Subsidiary,
into another Acquired Subsidiary) in a transaction in which the Borrower (or
such Acquired Subsidiary) is the survivor and (v) the foregoing shall not
prohibit capital contributions to the Borrower made in cash or Investments by
the Borrower in Subsidiaries permitted under Section 5.16; provided that the
acquisition of assets by Subsidiaries shall be subject to the further
restrictions set forth in Section 5.04.
(b) The Borrower will not, nor will it permit any of its Subsidiaries
to, sell, assign, transfer or otherwise dispose of any asset, including any
stock, without the prior written consent of the Required Lenders to such sale,
assignment, transfer or disposition and the terms thereof; provided, however,
that the foregoing shall not prohibit the sale of (i) inventory in the ordinary
course of business, (ii) used or surplus equipment in the ordinary course of
business, (iii) credit card receivables pursuant to the Credit Card Agreements,
and (iv) other tangible personal property and real property not exceeding
$3,000,000 in fair market value in any fiscal year of the Borrower; provided
further, however, that such sales shall be made for fair market value and solely
for cash consideration.
SECTION 5.14. Transactions with Affiliates. The Borrower will not,
nor will it permit any of its Subsidiaries to, directly or indirectly, (a) make
any Investment in an Affiliate, (b) sell, lease or otherwise transfer any assets
to or perform services for an Affiliate, (c) purchase, lease or acquire assets
or services from an Affiliate, or (d) enter into any other transaction directly
or indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate); provided
that (i) the Borrower or any of its Subsidiaries may enter into any such
transaction with an Affiliate that does not involve the payment of financial or
management advisory fees or similar consideration to an Affiliate if the
monetary or business consideration arising therefrom would not be less
advantageous to the Borrower or such Subsidiary than the monetary or business
consideration which it would obtain in a comparable arm's length transaction
with a Person not an Affiliate, (ii) the foregoing shall not prohibit the grant
of warrants or options to acquire equity interests in the Parent Corporation
pursuant to management incentive arrangements and (iii) the foregoing shall not
prohibit the Restricted Payments permitted under Section 5.12.
SECTION 5.15. Sale and Lease-Back Transactions. The Borrower will
not, nor will it permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, with any Person whereby it shall sell or transfer any
asset, real or personal, whether now owned or hereafter acquired, and thereafter
rent or lease such asset or other assets which it intends to use for
substantially the same purpose or purposes as the asset being sold or
transferred, except that
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56
the Borrower may enter into any such arrangement within 90 days after acquiring
the asset that is sold or transferred; provided that (i) for purposes of
determining compliance with clause (ii) of Section 5.11(a), such arrangement
shall be deemed to constitute Capital Financing Debt in a principal amount equal
to the amount that would constitute Debt if such arrangement were accounted for
as a capital lease and (ii) the Borrower shall not enter into any such
arrangement if, after giving effect thereto, the Borrower would not be in
compliance with clause (ii) of Section 5.11(a).
SECTION 5.16. Investments. The Borrower will not, nor will it permit
any of its Subsidiaries to, make or acquire any Investment in any Person
(including any Subsidiary) other than:
(a) Temporary Cash Investments;
(b) the acquisition by the Borrower of all the outstanding capital
stock of a corporation pursuant to a Permitted Acquisition;
(c) Tax Advances permitted under Section 5.12; and
(d) Investments consisting of advances and capital contributions made
by the Borrower in cash to any Permitted Subsidiary; provided that (i) such
Investments in Finance Corp. shall be limited to amounts necessary to discharge
franchise taxes and similar liabilities incidental to its existence, (ii) such
Investments in any other Permitted Subsidiary (other than Acquired Subsidiaries)
shall be limited to amounts necessary to discharge liabilities permitted to be
incurred by such Subsidiaries under Section 5.04, (iii) no such Investment
(other than Investments in Acquired Subsidiaries) shall be made more than five
Domestic Business Days prior to the date that payment is to be made in respect
of the liability to be discharged with the proceeds of such Investment and (iv)
such Investments shall be represented by promissory notes or capital stock
pledged pursuant to the Pledge Agreement or partnership interests subject to a
perfected Lien in favor of the Security Agent.
SECTION 5.17. Negative Pledge. The Borrower will not, nor will it
permit any of its Subsidiaries to, create, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired by it, except Liens granted under the
Security Documents and except:
(a) any Lien (other than a Lien securing Debt) existing on any asset
(other than an asset subject to a security interest granted under the Pledge
Agreement or the Security Agreement) prior to the acquisition thereof by the
Borrower or a Consolidated Subsidiary and not created in contemplation of such
acquisition;
(b) Liens for taxes not delinquent or being contested in good faith
and by appropriate proceedings;
(c) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance;
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57
(d) mechanics', workers', materialmen's, warehousemen's, landlords' or
other like Liens arising in the ordinary course of business with respect to
obligations which are not due or which are being contested in good faith;
(e) easements, rights-of-way, charges, covenants, restrictions and
matters of public record, survey defects and imperfections of title that do not
in the aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business, in each case affecting
real property;
(f) the reservation by any prior grantor of any right, title or
interest in and to all oil, gas and other hydrocarbon substances, minerals, ores
and metals of every nature and kind in and under real property that do not in
the aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(g) any Liens securing Capital Financing Debt; provided that such Lien
does not attach to any asset other than the asset financed by such Capital
Financing Debt and proceeds thereof;
(h) Liens, if any, on credit card receivables sold pursuant to the
Credit Card Agreements that arise under the Credit Card Agreements by virtue of
such sale and proceeds thereof;
(i) Liens incurred in the ordinary course of business to secure
performance of surety and indemnity bonds, leases and other contracts (other
than to secure Debt);
(j) interests (other than Debt) of a lessor or lessee arising under a
lease;
(k) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with imported
goods, which duties are not delinquent or are being contested in good faith by
appropriate proceedings;
(l) unperfected Liens on inventory arising in the ordinary course of
business securing trade accounts payable to suppliers of such inventory which
are not past due or which are being contested in good faith; and
(m) Liens arising in the ordinary course of its business which (i) do
not attach to any asset subject to a security interest granted under the
Security Documents, (ii) do not secure Debt or any other monetary obligation
(other than judgments and appeal bonds not exceeding $2,000,000 in the
aggregate) and (iii) do not in the aggregate materially detract from the value
of its assets or materially impair the use thereof in the operation of its
business.
SECTION 5.18. Use of Proceeds and Letters of Credit. The Letters of
Credit and the proceeds of the Loans made under this Agreement will be used by
the Borrower only for the purposes set forth in the preliminary statement of
this Agreement. None of such proceeds will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of buying
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58
or carrying any Margin Stock.
SECTION 5.19. Grants of Negative Pledges or Dividend Restrictions.
The Borrower will not, nor will it permit any of its Subsidiaries to, agree to
or become bound by any agreement or other arrangement that would restrict or
impair (i) the ability of the Borrower and its Subsidiaries to grant to the
Security Agent a Lien on any of their respective properties or assets (provided
that the foregoing shall not prohibit restrictions in (a) agreements entered
into in connection with the incurrence of Capital Financing Debt that restrict
or impair the ability to grant Liens on the asset financed thereby while such
Capital Financing Debt remains outstanding or (b) the Credit Card Agreements
that restrict or impair the ability to grant Liens on accounts receivable sold
thereunder) or (ii) the ability of any Subsidiary of the Borrower to pay
dividends on its capital stock.
SECTION 5.20. Changes in Accounting. The Borrower will not, nor will
it permit any of its Subsidiaries to, change its accounting policies or
practices from those utilized in the preparation of the financial statements of
the Borrower referred to in Section 4.04, except as permitted or required by
generally accepted accounting principles consistently applied.
SECTION 5.21. Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio for the period of four consecutive fiscal quarters ending on the last day
of each fiscal quarter of the Borrower set forth below will not be less than the
ratio set forth below opposite such fiscal quarters:
<TABLE>
<CAPTION>
<S> <C>
Fiscal Quarter Ending on: Ratio
- -------------------------- ------
November 1, 1997 2.20:1
January 31, 1998 2.20:1
May 2, 1998 2.20:1
August 1, 1998 2.20:1
October 31, 1998 3.00:1
January 30, 1999 3.00:1
May 1, 1999 3.00:1
July 31, 1999 3.00:1
October 30, 1999 3.00:1
January 29, 2000 3.50:1
April 29, 2000 3.50:1
July 29, 2000 3.50:1
October 28, 2000 3.50:1
February 3, 2001 and the
last day of each fiscal
quarter thereafter 4.00:1
</TABLE>
SECTION 5.22. Minimum Adjusted Net Worth. Consolidated Adjusted Net
Worth will not at any date be less than Minimum Adjusted Net Worth at such date.
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59
SECTION 5.23. Debt Coverage Ratio. The Debt Coverage Ratio will not
at any time during any period set forth below be greater than the ratio set
forth below with respect to such period:
<TABLE>
<CAPTION>
<S> <C> <C>
Period
From and Including To and Excluding Ratio:
- --------------------------------------------- ---------------- ------
Amendment Effective Date October 31, 1998 3.50:1
October 31, 1998 October 30, 1999 3.25:1
October 30, 1999 October 28, 2000 2.75:1
October 28, 2000, and at all times thereafter 2.50:1
</TABLE>
SECTION 5.24. Capital Expenditures. Capital Expenditures during any
fiscal year of the Borrower, commencing with the fiscal year ending on the
Saturday closest to January 31, 1999, will not exceed the sum of (a) $20,000,000
plus (b) during any fiscal year of the Borrower other than the first such fiscal
year, the excess of $20,000,000 over the amount of Capital Expenditures during
the immediately preceding fiscal year; provided that, for purposes of
calculating Capital Expenditures, (i) the acquisition, construction and
equipping cost of the Proposed Distribution Center shall be excluded from such
calculation to the extent such cost does not exceed $71,000,000 in the aggregate
and (ii) the cost of certain software development by the Borrower shall be
excluded from such calculation to the extent such cost does not exceed
$2,000,000 in each of the 1999 and 2000 fiscal years or $1,000,000 in each
fiscal year thereafter .
SECTION 5.25. Redemption. The Borrower shall consummate the
Redemption as of, or prior to, the last day of the Term Loan Availability
Period.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) when due any principal of any
Loan or any reimbursement obligation in respect of a Letter of Credit
Disbursement or (ii) within three Domestic Business Days of the date due, any
interest on any Loan, any fees or any other amount payable hereunder or under
any other Loan Document;
(b) the Borrower shall fail to observe or perform (i) any covenant
contained in clause (a) or (b) of Section 5.01 for three Domestic Business Days
after notice thereof has been given to the Borrower by the Agent at the request
of any Lender or (ii) any covenant contained in clause (i) of Section 5.01 or in
Section 5.07 or in Sections 5.09 to 5.24, inclusive;
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(c) the Borrower or any Subsidiary shall fail to observe or perform
any covenant or agreement contained in any Loan Document (other than those
covered by clause (a) or (b) above) for 10 days after written notice thereof has
been given to the Borrower by the Agent at the request of any Lender;
(d) any representation, warranty, certification or statement made by
the Borrower or any Subsidiary in any Loan Document or in any certificate,
financial statement or other document delivered pursuant to any Loan Document
shall prove to have been incorrect in any material respect when made (or deemed
made);
(e) the Borrower or any Subsidiary shall fail to make any payment of
principal, interest or premium in respect of any Material Debt (other than the
Obligations) at maturity;
(f) any event or condition (including, without limitation, failure to
make any payment when due) shall occur which results in the acceleration of the
maturity of any Material Debt or enables (or, with the giving of notice or lapse
of time or both, would enable) the holder of such Debt or any Person acting on
such holder's behalf to accelerate the maturity thereof or to require the
prepayment, redemption or repurchase thereof or to terminate any commitment to
lend such Debt;
(g) any of the Trademark Agreements (other than those referred to in
clause (ii) of the definition thereof) or the Credit Card Agreements shall be
canceled, terminated or repudiated (other than termination of a Credit Card
Agreement in connection with the replacement thereof with another Credit Card
Agreement), or any event shall occur that results in any of such Trademark
Agreements having a term that expires earlier than the term thereof in effect as
of the Amendment Effective Date, or any default, breach or other event shall
occur that would permit a termination of any of such Trademark Agreements (if
the Trademark Collateral Agreement were not in effect) or the Credit Card
Agreements and shall continue beyond any applicable grace period;
(h) the Parent Corporation, the Borrower or any Subsidiary (i) shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or (ii) shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or (iii) shall make a general assignment for the benefit of creditors, or (iv)
shall fail generally to pay its debts as they become due, or (v) shall take any
corporate action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced against
the Parent Corporation, the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or
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61
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Parent Corporation, the Borrower or any Subsidiary under
the Federal bankruptcy laws as now or hereafter in effect;
(j) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $1,000,000 which it shall have become liable
to pay to the PBGC or to a Plan under Title IV of ERISA or Section 412 of the
Internal Revenue Code; or notice of intent to terminate a Plan or Plans having
aggregate Unfunded Liabilities in excess of $2,000,000 (collectively, a
"Material Plan") shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or the
PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any Material Plan or a proceeding
shall be instituted by a fiduciary of any Plan against any member of the ERISA
Group to enforce Section 515 or 4219(c)(5) of ERISA where the amount in
controversy exceeds $2,000,000 and such proceeding shall not have been dismissed
within 30 days thereafter; or a Reportable Event or Reportable Events shall have
occurred with respect to a Material Plan and the Agent shall have notified the
Borrower that the Required Lenders have made a determination that, on the basis
of such Reportable Event or Reportable Events, there are reasonable grounds for
the termination of such Material Plan by the PBGC or for the appointment by an
appropriate United States District Court of a trustee to administer such
Material Plan;
(k) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $2,000,000 shall be rendered against the Borrower,
any Subsidiary or any combination thereof and shall continue unsatisfied and
unstayed for a period of 10 days, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the Borrower or any
Subsidiary to enforce any such judgment;
(l) a Change of Control shall occur; or
(m) any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by the Borrower or any
Subsidiary not to be, a valid, perfected, first priority security interest in
respect of any material amount of collateral, other than as a result of an act
or omission of the Security Agent, the Agent or any Lender and subject to
exceptions as to priority expressly permitted under the Loan Documents;
then, and in every such event, the Agent shall (i) if requested by Lenders
having more than 50% in aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon terminate, (ii) if
requested by Lenders holding Notes evidencing more than 50% in aggregate
principal amount of the Loans, by notice to the Borrower declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable (in whole or, in the sole discretion of the
Lenders, from time to time
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62
in part) without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower, (iii) if requested by Lenders having
more than 50% of the Letter of Credit Exposure, require cash collateral as
contemplated by Section 2.13(k) in an amount not exceeding the Letter of Credit
Exposure, (iv) exercise and direct the Security Agent to exercise remedies
available under the Guarantee Agreement, the Security Documents or otherwise, as
requested by the Required Lenders, or (v) any combination of the foregoing;
provided that in the case of any of the Events of Default specified in clause
(h) or (i) above with respect to the Parent Corporation or the Borrower without
any notice to the Parent Corporation or the Borrower or any other act by the
Agent or the Lenders, the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become immediately due and
payable (in whole) without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under clause (b)(i) or (c) of Section 6.01 promptly upon being
requested to do so by any Lender, and shall thereupon notify all the Lenders
thereof.
ARTICLE VII
THE AGENT, SECURITY AGENT AND ISSUING BANKS
SECTION 7.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes each of the Agent, the Security Agent, the Swingline
Lender and any Issuing Bank (each being referred to as an "Agent" for purposes
of this Article VII) to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to such Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto. For purposes of Section 7.08 of the Existing
Credit Agreement, execution of this Agreement by all the Lenders shall
constitute appointment of Credit Lyonnais New York Branch as administrative
agent hereunder.
SECTION 7.02. Agent and Affiliates. Each Lender that is an Agent
shall have the same rights and powers under this Agreement as any other Lender
and may exercise or refrain from exercising the same as though it were not an
Agent, and each such Lender and its affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with the Borrower or any
Subsidiary or affiliate of the Borrower as if it were not an Agent.
SECTION 7.03. Action by Agent. The obligations of any Agent under
the Loan Documents are only those expressly set forth herein and therein.
Without limiting the generality of the foregoing, no Agent shall be required to
take any action with respect to any Default, except as expressly provided in
Article VI.
SECTION 7.04. Consultation with Experts. Each Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts
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selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
SECTION 7.05. Liability of Agent. Neither any Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or not taken by it in connection herewith (i) with the consent or at the request
of the Required Lenders or (ii) in the absence of its own gross negligence or
willful misconduct. Neither any Agent nor any of its directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (ii) the performance
or observance of any of the covenants or agreements of the Borrower or any
Subsidiary; (iii) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered to it; or (iv) the validity,
effectiveness or genuineness of this Agreement, any other Loan Document or
Transaction Document or any other instrument or writing furnished in connection
herewith. No Agent shall incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be a
telecopy, bank wire, telex or similar writing) believed by it to be genuine or
to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Lender shall, ratably in
accordance with its Loans, Letter of Credit Exposure and unused Commitment,
indemnify each Agent (to the extent not reimbursed by the Borrower) against any
cost, expense (including counsel fees and disbursements), claim, demand, action,
loss or liability (except such as result from such Agent's gross negligence or
willful misconduct) that such Agent may suffer or incur in connection with this
Agreement or any other Loan Document or any action taken or omitted by such
Agent hereunder or thereunder.
SECTION 7.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. Any Agent (other than an Issuing Bank
in respect of Letters of Credit issued by it) may resign at any time by giving
written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor to
such Agent after consultation with the Borrower (but the foregoing shall not be
construed to require any consent or approval by the Borrower). If no successor
to such Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which, in the case of the Agent under this Agreement,
shall be a commercial bank organized or licensed under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of its appointment as an
Agent by a successor Agent,
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such successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations. After any retiring Agent's
resignation, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was an Agent.
SECTION 7.09. Agents Fees. The Borrower shall pay to each Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and such Agent.
SECTION 7.10. Sub-Agents. Each Agent may perform any of its
obligations and exercise any of its rights under the Loan Documents by or
through sub-agents. The provisions of this Article VII shall inure to the
benefit of any sub-agent of any Agent in the same manner and to the same extent
as they inure to the benefit of such Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Borrowing:
(a) the Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted London Interbank Offered Rate for such Interest
Period, or
(b) Lenders having 50% or more of the aggregate amount of the
Commitments or Loans of the relevant Class advise the Agent that the Adjusted
London Interbank Offered Rate, as the case may be, as determined by the Agent
will not adequately and fairly reflect the cost to such Lenders of funding their
Euro-Dollar Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Lenders,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Lenders to make
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any Euro-Dollar Borrowing
for which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Euro-Dollar Lending Office) with any request or directive (whether or not having
the force of law) of any such
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authority, central bank or comparable agency shall make it unlawful or
impossible for any Lender (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans and such Lender shall so notify the Agent, the
Agent shall forthwith give notice thereof to the other Lenders and the Borrower,
whereupon until such Lender notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Lender to make Euro-Dollar Loans shall be suspended. Before giving any
notice to the Agent pursuant to this Section, such Lender shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. If such Lender shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
to maturity and shall so specify in such notice, the Borrower shall immediately
prepay in full the then outstanding principal amount of each such Euro-Dollar
Loan, together with accrued interest thereon. Concurrently with prepaying each
such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal
principal amount from such Lender (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the other
Lenders), and such Lender shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
the date hereof the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency:
(i) shall subject any Lender (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Euro-Dollar Loans, its Notes, its
participations in Letters of Credit or its obligation to make Euro-Dollar Loans
or acquire participations in Letters of Credit, or shall change the basis of
taxation of payments to any Lender (or its Applicable Lending Office) of the
principal of or interest on its Euro-Dollar Loans or any other amounts due under
this Agreement in respect of its Euro-Dollar Loans or its obligation to make
Euro-Dollar Loans (except for changes in the rate of tax on, or determined by
reference to, the overall net income of such Lender or its Applicable Lending
Office imposed by the jurisdiction in which such Lender's principal executive
office or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Euro-Dollar Loan any such requirement included in
an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with
or for the account of, or credit extended by, any Lender (or its Applicable
Lending Office) or shall impose on any Lender (or its Applicable Lending Office)
or on the London interbank market any other condition affecting its Euro-Dollar
Loans, its Notes, its participations
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in Letters of Credit or its obligation to make Euro-Dollar Loans or acquire
participations in Letters of Credit;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan
or holding or acquiring a participation in any Letter of Credit, or to reduce
the amount of any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or under its Note with respect thereto, by
an amount deemed by such Lender to be material, then, within 15 days after
demand by such Lender (with a copy to the Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Lender (or its Parent)
as a consequence of such Lender's obligations hereunder to a level below that
which such Lender (or its Parent) could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, within 15 days after demand by such Lender (with a copy
to the Agent), the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender (or its Parent) for such reduction.
(c) Each Lender will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section and will designate
a different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Lender, be otherwise disadvantageous to such Lender. A certificate of any
Lender claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (a) the obligation of any Lender to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (b) any Lender has demanded compensation
under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Lender through the Agent, have elected that
the provisions of this Section shall apply to such Lender, then, unless and
until such Lender notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer apply:
(i) all Loans which would otherwise be made by such Lender as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest
and principal shall be payable
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contemporaneously with the related Euro-Dollar Loans of the other Lenders); and
(ii) after each of its Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay Euro-Dollar Loans shall
be applied to repay its Base Rate Loans instead.
SECTION 8.05. Replacement of Lenders. In the event (a) any Lender
delivers a notice under Section 8.02 or (b) any Lender demands compensation
pursuant to Section 8.03, then the Borrower may, at its sole expense and
effort, require such Lender to assign, without recourse (in accordance with
Section 9.06), all of its rights and obligations under this Agreement and the
Notes to an Assignee which shall assume such assigned obligations; provided that
(i) such assignment shall not conflict with any law, rule or regulation or order
of any court or other Governmental Authority having jurisdiction, (ii) the
Borrower shall have received the written consent of the Agent (and of an Issuing
Bank, if such Lender has a Revolving Loan Commitment) and (iii) such Assignee
(or, in the case of amounts other than principal, interest and accrued Fees, the
Borrower) shall have paid to the transferor Lender in immediately available
funds an amount equal to the sum of the principal of and interest accrued to the
date of such payment on the outstanding Loans and participations in Letter of
Credit Disbursements of such Lender, plus all Fees and other amounts accrued for
the account of such Lender hereunder (including any amounts under Section 2.11
and Section 8.03, it being understood that such assignment shall be treated as a
prepayment for purposes of Section 2.11); provided further that if prior to any
such assignment the circumstances or event that resulted in such Lender's notice
under Section 8.02 or demand for compensation under Section 8.03, as the case
may be, cease to cause such Lender to suffer increased costs or reductions in
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 8.02, as the case may be (including
as a result of any action taken by such Lender), or if such Lender shall waive
its right to claim further compensation under Section 8.03 in respect of such
circumstances or event or shall withdraw its notice under Section 8.02 in
respect of such circumstances or event, as the case may be, then such Lender
shall not thereafter be required to make any such assignment hereunder.
SECTION 8.06. Taxes. (a) For the purposes of this Section 8.06, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Lender, each Issuing Bank and
the Agent, taxes imposed on its income, and franchise or similar taxes imposed
on it, by a jurisdiction under the laws of which such Lender, such Issuing Bank
or the Agent (as the case may be) is organized or in which its principal
executive office is located or, in the case of each Lender, in which its
Applicable Lending Office is located and (ii) in the case of each Lender, any
United States withholding tax imposed on such payments but only to the extent
that such Lender is subject to United States withholding tax at the time such
Lender first becomes a party to this Agreement.
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"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any other Loan
Document or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Loan Document.
(b) Any and all payments by the Borrower to or for the account of any
Lender, any Issuing Bank or the Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Borrower
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) such Lender, such Issuing Bank or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Agent, at its address referred to in Section 9.01,
the original or a certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender, each Issuing Bank
and the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section) paid by such Lender, such Issuing Bank or
the Agent (as the case may be) and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto. This indemnification
shall be paid within 15 days after such Lender, such Issuing Bank or the Agent
(as the case may be) makes demand therefor.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower and the Agent with (i) Internal Revenue Service form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income tax
treaty to which the United States is a party which exempts the Lender from
United States withholding tax or reduces the rate of withholding tax on payments
of interest for the account of such Lender or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States or (ii) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver either Internal Revenue Code form 1001 or 4224 pursuant
to clause (i) above, a Certificate re Non-Bank Status together with two original
copies of Internal Revenue Service form W-8 (or any successor form prescribed by
the Internal Revenue Service) and any other statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is entitled to the benefits under an income tax
treaty to which the United States is a party which exempts the Lender from
United States withholding tax or reduces the rate of withholding tax on payments
of interest for the account of such Lender.
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(e) For any period with respect to which a Lender has failed to
provide the Borrower or the Agent with the appropriate form pursuant to Section
8.06(d) (unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which such form originally was required to
be provided), such Lender shall not be entitled to indemnification under Section
8.06(b) or (c) with respect to Taxes imposed by the United States; provided that
if a Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Lender pursuant to this Section, then such Lender will change
the jurisdiction of its Applicable Lending Office if such change (i) will
eliminate or reduce any such additional payment which may thereafter accrue and
(ii) in the judgment of such Lender, is not otherwise disadvantageous (other
than in a de minimis respect) to such Lender.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case the Borrower, each Issuing Bank, the Swingline Lender or
the Agent, at its address or telecopy number set forth on the signature pages
hereof, (y) in the case of any Lender, at its address or telecopy number set
forth in its Administrative Questionnaire or (z) in the case of any party, at
such other address or telecopy or telecopy number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and the appropriate answer back is received, (ii) if given by mail,
72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Agent under Article II or Article VIII shall not be effective until
received.
SECTION 9.02. No Waivers. No failure or delay by the Agent, the
Security Agent, any Issuing Bank or any Lender in exercising any right, power or
privilege hereunder or under any other Loan Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, the
Security Agent and (in the case of expenses relating to the issuance of a Letter
of Credit) the Issuing Bank, including fees and
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disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement and the other Loan Documents, any primary or
secondary syndication of the credit facilities hereunder, any waiver or consent
hereunder or thereunder or any amendment hereof or thereof or any Default or
alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by the Agent, the Security Agent, any Issuing
Bank or any Lender, including fees and disbursements of counsel, in connection
with such Event of Default and collection, bankruptcy and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify each Lender
against any transfer taxes, documentary taxes, assessments or charges made by
any Governmental Authority by reason of the execution and delivery of this
Agreement or the other Loan Documents.
(b) The Borrower agrees to indemnify the Agent, the Security Agent,
each Issuing Bank and each Lender and hold the Agent, the Security Agent, each
Issuing Bank and each Lender harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind, including, without limitation,
the reasonable fees and disbursements of counsel, which may be incurred by any
Lender (or by the Agent, the Security Agent or any Issuing Bank in connection
with its actions as such) in connection with any investigative, administrative
or judicial proceeding (whether or not the Agent, the Security Agent, such
Issuing Bank or such Lender shall be designated a party thereto) relating to or
arising out of any Loan Document or any actual or proposed use of proceeds of
Loans or Letters of Credit hereunder; provided that neither the Agent, the
Security Agent, any Issuing Bank nor any Lender shall have the right to be
indemnified hereunder for its own gross negligence or wilful misconduct as
determined by a court of competent jurisdiction.
(c) The provisions of this Section 9.03 shall remain in effect and
survive regardless of any termination of this Agreement or the repayment of the
Obligations.
SECTION 9.04. Sharing of Set-Offs. Each Lender agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of its claims in respect of
Letter of Credit Disbursements and principal and interest due with respect to
any Note held by it which is greater than the proportion received by any other
Lender in respect of the aggregate amount of claims in respect of Letter of
Credit Disbursements and principal and interest due with respect to any Note
held by such other Lender, the Lender receiving such proportionately greater
payment shall purchase such participations in the claims in respect of Letter of
Credit Disbursements and Notes held by the other Lenders, and such other
adjustments shall be made, as may be required so that all such payments of
claims in respect of Letter of Credit Disbursements and of principal and
interest with respect to the Notes held by the Lenders shall be shared by the
Lenders pro rata; provided that nothing in this Section shall impair the right
of any Lender to exercise any right of set-off or counterclaim it may have and
to apply the amount subject to such exercise to the payment of indebtedness of
the Borrower other than its indebtedness under the Loan Documents. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Letter of Credit or Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of set-
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off or counterclaim and other rights with respect to such participation as fully
as if such holder of a participation were a direct creditor of the Borrower in
the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or any other Loan Document may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed or otherwise approved in
writing by the Borrower and the Required Lenders (and, if the rights or duties
of the Agent, the Security Agent, the Swingline Lender or the Issuing Banks are
affected thereby, by the Agent, the Security Agent, the Swingline Lender or the
Issuing Banks, as the case may be); provided that no such amendment or waiver
shall (i) increase the Commitment of any Lender or subject any Lender to any
additional obligation without the consent of such Lender, (ii) reduce the
principal of or rate of interest on any Loan or any fees hereunder without the
consent of each Lender affected thereby, (iii) postpone the date fixed for any
payment of principal of any Loan under Section 2.08(a), (b) or (c) or for any
reimbursement of a Letter of Credit Disbursement or payment of interest on any
Loan or any fees hereunder or for any reduction or termination of any Commitment
without the consent of each Lender affected thereby, (iv) permit the termination
of the Trademark Agreement or any Credit Card Agreements, or any amendment or
waiver thereof that would be materially adverse to the interests of the Borrower
or the Lenders, without the consent of each Lender, (v) permit the release of
any material amount of collateral under any Security Document (except as
provided therein), without the consent of each Lender, (vi) change the
percentage of the Commitments, the percentage of the aggregate unpaid principal
amount of the Notes or the number of Lenders which shall be required for the
Lenders or any of them to take any action under this Section or any other
provision of this Agreement, without the consent of each Lender, or (vii) change
any provisions of any Loan Document in a manner that by its terms adversely
affects the rights in respect of payments due to Lenders holding Loans of any
Class differently than those holding Loans of any other Class, without the
consent of Lenders holding a majority in interest of the outstanding Loans and
unused Commitments of each affected Class (in addition to any other consent
required under any other clause of this Section).
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Lenders.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any or all of its
Commitment or its Loans or its participations in Letters of Credit. In the
event of any such grant by a Lender of a participating interest to a
Participant, whether or not upon notice to the Borrower and the Agent, such
Lender shall remain responsible for the performance of its obligations
hereunder, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement pursuant to which any Lender
may grant such a participating interest shall provide that such Lender shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this
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Agreement; provided that such participation agreement may provide that such
Lender will not agree to any modification, amendment or waiver described in
clause (i), (ii), (iii), (iv) or (v) of Section 9.05 without the consent of the
Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Article
VIII and Section 2.11 with respect to its participating interest. An assignment
or other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Lender may at any time assign to one or more banks or other
financial institutions (each an "Assignee") all, or a proportionate part of all,
of its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an instrument
executed by such Assignee and such transferor Lender, substantially in the form
of Exhibit H hereto, with (and subject to) the subscribed consent of the
Borrower and the Agent (except in each case in the case of assignments to
Lenders or Affiliates of Lenders), which consents shall not be unreasonably
withheld, and, in the case of an assignment of a Revolving Loan Commitment, the
Issuing Banks and the Swingline Lender; provided that (i) each such assignment
shall be in a minimum amount of $10,000,000 or, if less, all the remaining
rights and obligations of the transferor Lender, and (ii) any such assignment of
rights and obligations in respect of any Class of Loans or Commitments shall be
made ratably of all rights and obligations in respect of such Class but shall
not require a ratable assignment of rights and obligations in respect of another
Class. Upon execution and delivery of such an instrument, payment by such
Assignee to such transferor Lender of an amount equal to the purchase price
agreed between such transferor Lender and such Assignee, delivery to the Agent
of an executed copy of such instrument and payment to the Agent by the Assignor
of a processing fee of $3,500, then such Assignee shall be a Lender party to
this Agreement and shall have all the rights and obligations of a Lender with a
Commitment as set forth in such instrument of assumption, and the transferor
Lender shall be released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be required. Upon
the consummation of any assignment pursuant to this subsection (c), the
transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note or Notes are issued to the
Assignee, at the Borrower's expense. If the Assignee is not incorporated under
the laws of the United States of America or a state thereof, it shall deliver to
the Borrower and the Agent certification as to exemption from deduction or
withholding of any United States Federal income taxes in accordance with Section
8.06. The Agent will maintain a copy of each instrument of assignment delivered
to and accepted by it pursuant to this Section 9.06(c) and a register for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time (the
"Register"). The Agent will not grant its consent to any assignment by any
Lender without recording such assignment in the Register.
(d) Any Lender may at any time assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank. No such
assignment shall release the transferor Lender from its obligations hereunder.
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73
(e) No Assignee, Participant or other transferee of any Lender's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.06 than such Lender would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.06
requiring such Lender to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. Collateral. Each of the Lenders represents to the
Agent and each of the other Lenders that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.08. Waiver of Trial by Jury. Each of the parties hereto
irrevocably waives any and all rights to trial by jury in any legal proceeding
arising out of or relating to this Agreement or any other Loan Document or the
transactions contemplated hereby.
SECTION 9.09. New York Law. THIS AGREEMENT AND EACH NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
SECTION 9.10. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 9.11. Limitation on Recourse. Notwithstanding any contrary
provision of this Agreement or any other Loan Document, it is expressly agreed
that the Agent, the Security Agent, each Issuing Bank and each Lender shall look
solely to the assets of the Borrower (and of the Parent Corporation or any
Subsidiary party to the Guarantee Agreement or any Security Document) for the
payment and performance of the obligations of the Borrower hereunder and
thereunder, without recourse against any partner in the Borrower or any assets
of such partner on account of such obligations.
SECTION 9.12. Interest Rate Limitation. Notwithstanding anything
herein or in the Notes to the contrary, if at any time the applicable interest
rate, together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein or in any
other Loan Document, or otherwise contracted for, charged, received, taken or
reserved by any Lender, shall exceed the maximum lawful rate (the "Maximum
Rate") which may be contracted for, charged, taken, received or reserved by such
Lender in accordance with applicable law, the rate of interest payable under the
Note or Notes held by such Lender, together with all Charges payable to such
Lender, shall be limited to the Maximum Rate.
SECTION 9.13. Effect of Amendment and Restatement. Accrued interest
and fees under the Existing Credit Agreement prior to the Amendment Effective
Date shall not be affected by this
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74
Agreement; provided that interest rates and fees accruing on and after the
Amendment Effective Date shall be calculated in accordance with, and after
giving effect to, this Agreement. After giving effect to the Transactions, the
Loans made to the Borrower under the Existing Credit Agreement shall continue in
full force and effect as Loans hereunder. It is the intention of each of the
parties hereto that the Existing Credit Agreement be amended and restated so as
to preserve the perfection and priority of all security interests securing
indebtedness and obligations under the Existing Credit Agreement and the other
Loan Documents and that all indebtedness and obligations of the Borrower and its
Subsidiaries hereunder and thereunder shall be secured by the Security Documents
and that this Agreement shall not constitute a novation of the obligations and
liabilities existing under the Existing Credit Agreement or be deemed to
evidence or constitute repayment of all or any portion of any such obligations
or liabilities. The parties hereto further acknowledge and agree that this
Agreement constitutes an amendment of the Existing Credit Agreement under the
terms of Section 9.05 thereof. Unless and until the Amendment Effective Date
occurs, the Existing Credit Agreement shall continue in full force and effect
and not be affected hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
BRYLANE, L.P.,
by VGP CORPORATION,
General Partner,
by
Name:
Title:
463 Seventh Avenue
21st Floor
New York, NY 10018
Attention of Chief Financial Officer
Telecopy number:212-613-9567
CREDIT LYONNAIS NEW YORK BRANCH,
individually and as Agent,
by
Name:
Title:
by
Name:
Title:
1301 Avenue of the Americas
New York, NY 10019
Attention of Gary Teaman
Telecopy number: 212-459-3172
PAGE
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CREDIT COMMERCIAL DE FRANCE,
by
Name:
Title:
by
Name:
Title:
590 Madison Avenue
25th Floor
New York, NY 10022
Attention of Jean Jacques Salomon
Telecopy number: 212-832-7469
PAGE
<PAGE>
SOCIETE GENERALE, NEW YORK BRANCH,
by
Name:
Title:
by
Name:
Title:
1221 Avenue of the Americas
New York, NY 10020
Attention of Laurent Morel
Telecopy number: 212-278-7463
PAGE
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FIRST UNION NATIONAL BANK,
by
Name:
Title:
1345 Chestnut Street
Mail Code 1-8-12-1
Philadelphia, PA 19101
Attention of Jack Ginter
Telecopy number: 215-973-7671
EXECUTION COPY
AMENDED AND RESTATED SECURITY AGREEMENT dated as of April
30, 1997, as amended and restated as of September 21, 1998, among BRYLANE, L.P.,
a Delaware limited partnership (the "Borrower"), the subsidiaries of the
Borrower listed on Schedule I hereto and such other subsidiaries of the Borrower
as shall become parties hereto pursuant to Section 6.16 hereof (collectively,
the "Subsidiary Grantors"; the Borrower and the Subsidiary Grantors being
collectively called the "Grantors"); and CREDIT LYONNAIS NEW YORK BRANCH, as
security agent (in such capacity, the "Security Agent") for the Secured
Parties, as defined herein.
Reference is made to the Credit Agreement dated as of April 30, 1997,
as amended and restated as of September 21, 1998 (as amended from time to time,
the "Credit Agreement"), among the Borrower, the lenders party thereto (the
"Lenders") and Credit Lyonnais New York Branch, as administrative agent (in such
capacity, the "Administrative Agent"). Reference also is made to the Security
Agreement dated as of April 30, 1997 (the "Existing Security Agreement"), among
the Borrower, the Subsidiary Guarantors and Morgan Guaranty Trust Company of New
York, as security agent, and, upon the effectiveness hereof, this Agreement
shall amend and restate the Existing Security Agreement and shall maintain the
Security Interest (as herein defined) created under the Security Agreement. The
Lenders have agreed to extend credit to the Borrower pursuant to, and subject to
the terms and conditions specified in, the Credit Agreement. The obligations
of the Lenders to extend credit under the Credit Agreement are conditioned
upon, among other things, the execution and delivery by the Grantors of a
security agreement in the form hereof to secure (a) the due and punctual
payment by the Borrower of (i) the principal of and interest on the Loans, when
and as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made by the Borrower
under the Credit Agreement in respect of any Letter or Letters of Credit, when
and as due, including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral, (iii) all other
monetary obligations of the Borrower to the Secured Parties under the Credit
Agreement and the other Loan Documents to which the Borrower is or is to be a
party, and (iv) each payment required to be made by the Borrower under any Rate
Protection Agreement entered into by the Borrower with a counterparty that was a
Lender at the time such Rate Protection Agreement was entered into, (b) the due
and punctual performance of all other obligations of the Borrower under the
Credit Agreement and the other Loan Documents to which the Borrower is or is to
be a party, and (c) the due and punctual payment and performance of all
obligations of each Subsidiary under the Loan Documents to which it is or is to
be a party (all the foregoing obligations being collectively called the
"Obligations").
Accordingly, the Grantors and the Security Agent hereby agree as
follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Terms Defined in the Credit Agreement. Terms used
herein and not otherwise defined herein shall have the meanings set forth in the
Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
"Collateral" shall mean all (i) Documents, (ii) General Intangibles
and (iii) Proceeds.
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"Copyright License" shall mean any written agreement, now or hereafter
in effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (i) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (ii) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger sheets
and documents covering or relating to any of the Collateral.
"General Intangibles" shall mean all choses in action and causes of
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than accounts receivable) now owned or hereafter
acquired by any Grantor, including corporate or other business records,
mailing/customer lists, contract rights (including rights under leases, whether
entered into as lessor or lessee, Rate Protection Agreements, the Trademark
Agreements, the Transaction Agreement, the Asset Purchase Agreements and other
agreements), Intellectual Property, Partnership Interests, goodwill,
registrations, franchises and tax refund claims.
"Intellectual Property" shall mean all intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter acquired
by any Grantor, including Copyrights, Licenses, Trademarks, trade secrets,
confidential or proprietary technical and business information, know-how,
show-how or other data or information, software and databases and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.
"License" shall mean any Trademark License, Copyright License or
other license or sublicense to which any Grantor is a party, including those
listed on Schedule III.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Partnership Interests" shall mean any interest of any Grantor in any
general or limited partnership, whether as a general partner or limited partner,
and all rights of such Grantor in respect thereof, including any and all such
interests and rights of any Grantor as a partner in any Subsidiary that is a
partnership.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit H to the Credit Agreement, completed and supplemented with the
schedules and attachments contemplated thereby, and duly executed by a financial
officer of the Borrower.
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"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property which
constitutes Collateral, any value received as a consequence of the possession of
any Collateral (it being understood that "Proceeds" shall not include inventory
or other tangible personal property or any revenues generated by the Grantors in
the ordinary course of their respective businesses using trademarks and
tradenames constituting Collateral) and any payment received from any insurer or
other person or entity as a result of the destruction, loss, theft, damage or
other involuntary conversion of whatever nature of any asset or property which
constitutes Collateral, and shall include any claim of any Grantor against any
third party for (and the right to sue and recover for and the rights to damages
or profits due or accrued arising out of or in connection with) (i) past,
present or future infringement or dilution of any Trademark now or hereafter
owned by any Grantor or licensed under a Trademark License or injury to the
goodwill associated with or symbolized by any Trademark now or hereafter owned
by any Grantor, (ii) past, present or future breach of any License, (iii) past,
present or future infringement of any Copyright now or hereafter owned by any
Grantor or licensed under a Copyright License, and (iv) any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral.
"Secured Parties" shall mean (a) the Lenders party to the Credit
Agreement, (b) each counterparty to a Rate Protection Agreement entered into
with the Borrower, if such counterparty was a Lender at the time such Rate
Protection Agreement was entered into, (c) the Agent, the Security Agent, and
the Issuing Banks, in their capacities as such under each Loan Document, (d) the
beneficiaries of each indemnification obligation undertaken by any Grantor under
any Loan Document, and (e) the successors and assigns of the foregoing.
"Security Interest" shall have the meaning assigned to such term in
Section 2.01.
"Trademark License" shall mean any written agreement (including the
Trademark Agreements), now or hereafter in effect, (a) granting to any third
party any right to use any Trademark now or hereafter owned by any Grantor or
which such Grantor otherwise has the right to license, and all rights of such
Grantor under any such agreement, or (b) granting to such Grantor any right to
use any Trademark now or hereafter owned by any third party, and all rights of
such Grantor under any such agreement.
PAGE
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"Trademarks" shall mean all of the following now owned or hereafter
acquired (including acquisition of rights in respect thereof pursuant to a
Trademark License) by any Grantor: (i) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule IV, (ii) all goodwill
associated therewith or symbolized thereby, and (iii) all other assets, rights
and interests that uniquely reflect or embody such goodwill.
ARTICLE II. SECURITY INTEREST
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Security Agent, its successors and its assigns, for the
benefit of the Secured Parties, and hereby grants to the Security Agent, its
successors and assigns, for the benefit of the Secured Parties, a security
interest in, all of such Grantor's right, title and interest in, to and under
the Collateral (the "Security Interest"). Without limiting the generality of
the foregoing, the Borrower hereby assigns, as collateral security, to the
Security Agent all its right, title and interest in, to and under the Trademark
Agreements and the Transaction Agreement (which assignment also shall constitute
part of the Security Interest). The Security Agent is hereby authorized to
file one or more financing statements, continuation statements, filings with
the United States Patent and Trademark Office or United States Copyright Office
(or any successor office or any similar office in any other country) or other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by each Grantor, without the signature
of any Grantor, naming any Grantor or the Grantors as debtors and the Security
Agent as secured party.
Anything in this Section 2.01 to the contrary notwithstanding, no
Grantor shall be deemed to have borrowed, sold, conveyed, assigned, set over,
mortgaged, pledged, hypothecated or transferred, or to have granted a security
interest in, any contract right (including any lease), or in any of such
Grantor's right, title or interest therein, thereto or thereunder, if any such
action, without the consent of a third party thereto, would constitute a breach
or other contravention thereof; provided that the foregoing shall not apply to
the Trademark Agreements (except for the agreements referred to in clause (ii)
of the definition thereof), the Transaction Agreement or the partnership
agreement of any partnership that is a Subsidiary. The Grantors shall use their
best efforts, upon the request of the Security Agent, to obtain the consent of
any such third party required with respect to any contract right which is
material, individually or in the aggregate, to the business, condition or
prospects of any Grantor.
The Grantors agree at all times to keep accurate and complete
accounting records with respect to the Collateral, including a record of all
payments and Proceeds received.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Security Agent or any Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of any of the Collateral.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to the
Security Agent and the Lenders that:
SECTION 3.01. Title and Authority. Each of the Grantors has good and
valid rights in and title to the Collateral with respect to which it has
purported to grant a Security Interest hereunder (other than Trademarks which
are not, individually or in the aggregate, material to any Grantor's business,
condition or prospects) and has full power and authority to grant to the
Security Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been
duly prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements or other appropriate filings, recordings or registrations containing
a description of the Collateral have been delivered to the Security Agent for
filing in each governmental, municipal or other office specified in Schedule 5
to the Perfection Certificate, which are all the filings, recordings and
registrations (other than filings, required to be made in the United States
Patent and Trademark Office and the United States Copyright Office in order to
perfect the Security Interest in Collateral consisting of United States
registered trademarks and registered copyrights) that are necessary to publish
notice of and protect the validity of and to maintain a legal, valid and
perfected security interest in favor of the Security Agent (for the benefit of
the Secured Parties) in respect of all Collateral in which the Security Interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration in
the United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements.
(b) Each Grantor shall ensure and warrants that fully executed
security agreements in the form hereof and containing a description of all
Collateral consisting of Intellectual Property shall have been received and
delivered for recording within one month after the execution of this Agreement
with respect to United States registered Trademarks (and Trademarks for which
United States registration applications are pending) and within one month after
the execution of this Agreement with respect to United States registered
Copyrights by the United States Patent and Trademark Office and the United
States Copyright Office pursuant to 15 U.S.C. 1060 or 17 U.S.C. 205 and the
regulations thereunder, as applicable, to protect the validity of and to
establish a legal, valid and perfected security interest in favor of the
Security Agent (for the benefit of the Secured Parties) in respect of all
Collateral consisting of Licenses, Trademarks and Copyrights in which a security
interest may be perfected by filing, recording or registration in the United
States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary (other than such
actions as are necessary to perfect the Security Interest with respect to any
Collateral consisting of Licenses, Trademarks and Copyrights (or registration
or application for registration thereof) acquired or developed after the date
hereof).
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SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such jurisdictions,
and (c) a security interest that shall continue to be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the one-month
period (commencing as of the date hereof) pursuant to 15 U.S.C. 1060 or the
one-month period (commencing as of the date hereof) pursuant to 17 U.S.C. 205.
The Security Interest is and shall be prior to any other Lien on any of the
Collateral, other than Liens that the Credit Agreement expressly permits to be
prior to the Security Interest.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted by the
Credit Agreement. Other than as contemplated hereby, none of the Grantors has
filed or consented to the filing of (a) any financing statement or analogous
document under the Uniform Commercial Code or any other applicable laws covering
any Collateral, (b) any assignment in which any Grantor assigns any Collateral
or any security agreement or similar instrument covering any Collateral with
the United States Patent and Trademark Office or the United States Copyright
Office or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office.
ARTICLE IV. COVENANTS
SECTION 4.01. Change of Name; Location of Collateral; Records; Place
of Business. (a) Each of the Grantors agrees promptly to notify the Security
Agent of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility) or
(iii) in its identity or corporate structure.
SECTION 4.02. Periodic Certification. Within 45 days after the
Amendment Effective Date, the Borrower shall deliver to the Security Agent a
certificate executed by a financial officer and the chief legal officer of the
Borrower setting forth, with respect to each filing, recording or registration
contemplated by Section 3.02, the filing office, date and file number thereof
and attaching true, correct and complete acknowledgment copies of each such
filing, recording or registration. Each year, at the time of delivery of annual
financial statements with respect to the preceding fiscal year pursuant to
Section 5.01 of the Credit Agreement, the Borrower shall deliver to the Security
Agent a certificate executed by a financial officer and the chief legal officer
of the Borrower (a) setting forth the information with respect to the Grantors
required pursuant to Section 2 of the Perfection Certificate, (b) certifying
that all Uniform Commercial Code financing statements or other appropriate
filings, recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (a) above to the extent necessary to
protect and perfect the Security Interest for a period of not less than 18
months after the date of such certificate, (c) setting forth, with respect to
each filing, recording or registration (including each refiling, rerecording or
reregistration) made since the date of the Perfection Certificate or the most
recent certificate delivered pursuant to this Section, the filing office, date
and file number thereof, and (d) attaching true, correct and complete
acknowledgment copies of each such filing, recording or registration not
theretofore delivered to the Security Agent.
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SECTION 4.03. Protection of Security. Each of the Grantors shall, at
its own cost and expense, take any and all actions necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Security Agent in the Collateral and the priority thereof against any Lien not
expressly permitted under the Credit Agreement.
SECTION 4.04. Further Assurances. Each of the Grantors agrees, at
its expense, to execute, acknowledge, deliver and cause to be duly filed all
such further instruments and documents and take all such actions as the
Security Agent or any of the Lenders may from time to time request to better
assure, preserve, protect and perfect the Security Interest and the rights and
remedies created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements or other
documents in connection herewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately pledged and
delivered to the Security Agent, duly endorsed in a manner satisfactory to the
Security Agent.
Without limiting the generality of the foregoing, each Grantor hereby
agrees, promptly upon receipt of notice from the Security Agent, to supplement
this Agreement by supplementing Schedule I, II or III hereto or adding
additional schedules hereto to specifically identify any asset or item that
constitutes Copyrights, Licenses, or Trademarks. Each Grantor agrees that it
will use its best efforts to take such action as shall be necessary in order
that all representations and warranties hereunder shall be true and correct with
respect to such Collateral within 30 days after the date it has been notified
by the Security Agent of the specific identification of such Collateral.
SECTION 4.05. Taxes; Encumbrances. At its option, the Security Agent
may discharge past due taxes, assessments, charges, fees, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and not permitted under the Credit Agreement, and may pay for the maintenance
and preservation of the Collateral to the extent any of the Grantors fails to
do so as required by the Credit Agreement or this Agreement, and each of the
Grantors jointly and severally agrees to reimburse the Security Agent on demand
for any payment made or any expense incurred by the Security Agent pursuant to
the foregoing authorization; provided, however, that nothing in this Section
shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Security Agent or any Secured Party to cure or
perform, any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the Credit Agreement.
SECTION 4.06. Continuing Obligations of the Grantors. Each of the
Grantors shall remain liable to observe and perform all the conditions and
obligations to be observed and performed by it under each contract, agreement or
instrument relating to the Collateral, all in accordance with the terms and
conditions thereof, and the Grantors jointly and severally agree to indemnify
and hold harmless the Security Agent and the Secured Parties from and against
any and all liability for such performance.
SECTION 4.07. Use and Disposition of Collateral. None of the
Grantors shall make or permit to be made an assignment, pledge or hypothecation
of the Collateral or shall grant any other Lien in respect of the Collateral
except as expressly permitted by the Credit Agreement. None of the Grantors
shall make or permit to be made any transfer of the Collateral and each
Grantor shall remain at all times in possession of the Collateral owned by it,
except that unless and until the Security Agent shall notify the Grantors that
an Event of Default shall have occurred and be continuing and that during the
continuance thereof the Grantors shall not sell, convey, lease, assign, transfer
or otherwise dispose of any Collateral (which notice may be given by telephone
if promptly confirmed in writing), the Grantors may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document.
PAGE
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SECTION 4.08. Covenants Regarding License, Trademark and Copyright
Collateral. (a) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(b) Each Grantor (either itself or through licensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(c) Each Grantor shall notify the Security Agent immediately if it
knows or has reason to know that any Trademark or Copyright material to the
conduct of its business may become abandoned, lost or dedicated to the public,
or of any adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United States
Patent and Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding such Grantor's ownership of any
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.
(d) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for any Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly (or, in
the case of Trademarks and Copyrights which are not, individually or in the
aggregate, material to any Grantor's business, condition or prospects, no less
frequently than on a quarterly basis) informs the Security Agent, and, upon
request of the Security Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Security Agent may request to evidence
the Security Agent's security interest in such Trademark or Copyright, and each
Grantor hereby appoints the Security Agent as its attorney-in-fact to execute
and file such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power, being coupled with an interest,
is irrevocable.
(e) Each Grantor will take all reasonably necessary steps that are
consistent with the practice in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each registration of the Trademarks and
Copyrights which is material to the conduct of any Grantor's business, including
timely filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if consistent with good
business judgment, to initiate opposition, interference and cancelation
proceedings against third parties.
(f) In the event that any Collateral consisting of a Trademark or
Copyright material to the conduct of any Grantor's business is believed
infringed, misappropriated or diluted by a third party, such Grantor promptly
shall notify the Security Agent after it obtains knowledge thereof and shall, if
consistent with good business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution (or, in the event any third party is
contractually entitled to maintain any such suit, such Grantor shall pursue all
its available remedies, including, if applicable, by demanding such third party
to commence such suit and pursue such recovery), and take such other actions as
are appropriate under the circumstances to protect such Collateral.
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(g) Each Grantor shall use its best efforts to obtain all requisite
consents or approvals by the licensor of each Copyright License or Trademark
License to effect the assignment of all of the Grantors' right, title and
interest thereunder to the Security Agent or its designee.
ARTICLE V. REMEDIES
SECTION 5.01. Remedies upon Default. Upon the occurrence and during
the continuance of an Event of Default, each of the Grantors agrees to deliver
each item of Collateral to the Security Agent on demand, and it is agreed that
the Security Agent shall have the right (subject to applicable law) to take any
of or all the following actions at the same or different times: on demand, to
cause the Security Interest to become an assignment, transfer and conveyance of
any of or all such Collateral by the applicable Grantors to the Security Agent,
or to license or, to the extent permitted by applicable law, sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any such Collateral throughout the world on such terms and conditions and
in such manner as the Security Agent shall determine (other than in violation of
the Trademark Agreements or any other then-existing licensing arrangements to
the extent that waivers have not been obtained in the Trademark Collateral
Agreement or cannot otherwise be obtained), and with or without legal process
and with or without previous notice or demand for performance, to exercise any
and all rights afforded to a secured party under the Uniform Commercial Code or
other applicable law. Without limiting the generality of the foregoing, each of
the Grantors agrees that the Security Agent shall have the right, subject to the
mandatory requirements of current law, to sell, assign or otherwise dispose of
all or any part of the Collateral, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Security Agent shall deem appropriate. The Security Agent shall
be authorized at any such sale (if it deems it advisable to do so) to restrict
the prospective bidders or purchasers to persons who will represent and agree
that they are purchasing the Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon consummation
of any such sale the Security Agent shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold.
Each such purchaser at any such sale shall hold the property sold absolutely,
free from any claim or right on the part of any of the Grantors, and each of the
Grantors hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which such Grantor now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted.
The Security Agent shall give the Grantors 10 days' written notice
(which each of the Grantors agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions) of the Security Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Security Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Security Agent may (in its sole and absolute discretion)
determine. The Security Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Security Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Security Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Security Agent shall not incur any
PAGE
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liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public sale made pursuant to this
Section, any Secured Party may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay, valuation or appraisal on
the part of any of the Grantors (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any of the Grantors as a credit
against the purchase price, and such Secured Party may, upon compliance with
the terms of sale, hold, retain and dispose of such property without further
accountability to any of the Grantors therefor. For purposes hereof, a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof; the Security Agent shall be free to carry out such sale pursuant
to such agreement and none of the Grantors shall be entitled to the return of
the Collateral or any portion thereof subject thereto, notwithstanding the fact
that after the Security Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in full. As
an alternative to exercising the power of sale herein conferred upon it, the
Security Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
SECTION 5.02. Application of Proceeds. The Security Agent shall
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the Agent
or the Security Agent (in its capacity as such hereunder or under any other Loan
Document) in connection with such collection or sale or otherwise in connection
with this Agreement or any of the Obligations, including all court costs and
the fees and expenses of its agents and legal counsel, the repayment of all
advances made by the Security Agent hereunder or under any other Loan Document
on behalf of any of the Grantors and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any other
Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance with
the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Security Agent shall have absolute discretion as to the time of application
of any such proceeds, moneys or balances in accordance with this Agreement.
Upon any sale of the Collateral by the Security Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Security Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Security Agent or such officer or be
answerable in any way for the misapplication thereof.
SECTION 5.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Security Agent to exercise rights and remedies under
this Article at such time as the Security Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Security
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral now owned or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof (other than in violation of any Trademark Agreements or any other
then-existing licensing arrangements to the extent that waivers have not been
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obtained in the Trademark Collateral Agreement or cannot otherwise be obtained).
The use of such license by the Security Agent shall be exercised, at the option
of the Security Agent, upon the occurrence and during the continuation of an
Event of Default; provided that any license, sub-license or other transaction
entered into by the Security Agent in accordance herewith shall be binding upon
the Grantors notwithstanding any subsequent cure of an Event of Default.
ARTICLE VI. MISCELLANEOUS
SECTION 6.01. Notices. All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Subsidiary Grantor shall be given to it in care of the
Borrower at the address specified in the Credit Agreement for notices to the
Borrower thereunder.
SECTION 6.02. Security Interest Absolute. All rights of the Security
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement or any other Loan Document,
any agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing; (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument;
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations; or (d) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 6.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the making by the Lenders
of the Loans, and the execution and delivery to the Lenders of the Notes
evidencing such Loans, regardless of any investigation made by the Lenders or on
their behalf, and shall continue in full force and effect until this Agreement
shall terminate.
SECTION 6.04. Binding Effect; Several Agreement. This Agreement
shall become effective as to any Grantor when a counterpart hereof executed on
behalf of such Grantor shall have been delivered to the Security Agent and a
counterpart hereof shall have been executed on behalf of the Security Agent, and
thereafter shall be binding upon such Grantor and the Security Agent and their
respective successors and assigns, and shall inure to the benefit of such
Grantor, the Security Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign
its rights hereunder or any interest herein or in the Collateral except as
expressly contemplated by this Agreement or the Credit Agreement. This
Agreement shall be construed as a separate agreement with respect to each
Grantor and may be amended, modified, supplemented, waived or released with
respect to any Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.
SECTION 6.05. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Security Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 6.06. Security Agent Appointed Attorney-in-Fact. Each of the
Grantors hereby appoints the Security Agent the attorney-in-fact of such
Grantor for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instrument which the Security Agent may deem
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necessary or advisable to accomplish the purposes hereof, which appointment is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Security Agent shall have the right, upon the occurrence and
during the continuance of an Event of Default, with full power of substitution
either in the Security Agent's name or in the name of any Grantor, to ask for,
demand, sue for, collect, receive and give acquittance for any and all moneys
due or to become due under and by virtue of any Collateral, to endorse checks,
drafts, orders and other instruments for the payment of money payable to such
Grantor representing any dividend or other distribution payable in respect of
the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and make any agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Security Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Security Agent,
or to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Security
Agent or omitted to be taken with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any Grantor
or to any claim or action against the Security Agent or any other Secured Party.
SECTION 6.07. Security Agent's Fees and Expenses; Indemnification.
(a) Each of the Grantors jointly and severally agrees to pay upon demand to the
Security Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or agents, which
the Security Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from
or other realization upon any of the Collateral, (iii) the exercise, enforcement
or protection of any of the rights of the Security Agent hereunder or (iv) the
failure of the Grantors to perform or observe any of the provisions hereof.
(b) Without limitation of their indemnification obligations under the
other Loan Documents, each of the Pledgors jointly and severally agrees to
indemnify the Security Agent from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by the
Security Agent in connection with any investigative, administrative or judicial
proceeding relating hereto or to the Collateral, whether or not the Security
Agent is a party thereto; provided that the Security Agent shall not have the
right to be indemnified hereunder for its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents.
The provisions of this Section shall remain operative and in full force and
effect regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Loans, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the Security
Agent or any Lender. All amounts due under this Section shall be payable on
written demand therefor.
SECTION 6.08. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.09. Waivers; Amendment. (a) No failure or delay of the
Security Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Security Agent hereunder
and of the Security Agent, the Agent and the Lenders under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies which
they would otherwise have. No waiver of any provisions of this Agreement or any
other Loan Document or consent to any departure by any Grantor therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b)
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below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on any
Grantor in any case shall entitle such Grantor or any other Grantor to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Security Agent and the Grantor or Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.05 of the Credit Agreement.
SECTION 6.10. Waiver of Jury Trial. Each of the parties hereto
irrevocably waives any and all rights to trial by jury in any legal proceeding
arising out of or relating to this Agreement or any other Loan Document or the
transactions contemplated hereby.
SECTION 6.11. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 6.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section 6.04),
and shall become effective as provided in Section 6.04.
SECTION 6.13. Headings. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 6.14. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Security Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against any
Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
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(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 6.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 6.15. Termination. This Agreement and the Security Interest
shall terminate when all the Obligations (other than obligations of the Borrower
under Section 9.03(b) of the Credit Agreement, or any other indemnification
provisions contained in the Loan Documents, in respect of claims which have not
then been asserted) have been indefeasibly paid in full and the Lenders have no
further commitment to lend or to issue Letters of Credit under the Credit
Agreement, at which time the Security Agent shall execute and deliver to the
Grantors, at the Grantors' expense, all Uniform Commercial Code termination
statements and similar customary documents which the Grantors shall reasonably
request to evidence such termination. Any execution and delivery of termination
statements or documents pursuant to this Section shall be without recourse to or
warranty by the Security Agent. Each Subsidiary Grantor shall automatically be
released from its obligations hereunder and the Security Interest in the
Collateral of such Subsidiary Grantor shall be automatically released in the
event that all the capital stock of such Subsidiary Grantor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in accordance with the terms of the Credit Agreement; provided that the
Required Lenders shall have consented to such sale, transfer or other
disposition and the terms of such consent did not provide otherwise.
SECTION 6.16. Additional Grantors. Upon execution and delivery by
the Security Agent and a Subsidiary of an instrument in the form of Annex 1
hereto, such Subsidiary shall become a Subsidiary Grantor and Grantor hereunder
with the same force and effect as if originally named as a Subsidiary Grantor
and Grantor herein.
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The execution and delivery of any such instrument shall not require the consent
of any Grantor hereunder. The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BRYLANE, L.P,
by VGP CORPORATION, General Partner
by
Name:
Title:
B.L. CATALOG DISTRIBUTION, INC.,
by
Name:
Title:
BRYLANE CAPTIAL CORP.,
by
Name:
Title:
PAGE
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B.L. CATALOG DISTRIBUTION, PARTNERSHIP,
by B.L. CATALOG DISTRIBUTION, INC., General Partner,
by
Name:
Title:
by BRYLANE, L.P., General Partner
by VGP CORPORATION, General
Partner
by
Name:
Title:
B.L. MANAGEMENT SERVICES, INC.,
by
Name:
Title:
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B.L. MANAGEMENT SERVICES PARTNERSHIP,
by B.L. MANAGEMENT SERVICES, INC.,
General Partner,
by
Name:
Title:
by B.N.Y. SERVICE CORP., General
Partner,
by
Name:
Title:
B.N.Y. SERVICE CORP.
by
Name:
Title:
K.S. MANAGEMENT SERVICES, INC.
by
Name:
Title:
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C.O.B. MANAGEMENT SERVICES, INC.
by
Name:
Title:
CHADWICK'S TRADENAME SUB, INC.
by
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as Security Agent,
by
Name:
Title:
by
Name:
Title:
PAGE
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Schedule I
Subsidiary Grantors
1. B.L. Management Services, Inc., a Delaware corporation.
2. B.N.Y. Service Corp., a Delaware corporation.
3. B.L. Catalog Distribution, Inc., a Delaware corporation.
4. B.L. Management Services Partnership, a New York general partnership.
5. B.L. Catalog Distribution Partnership, an Indiana general partnership.
6. K.S. Management Services, Inc., a Delaware corporation.
7. C.O.B. Management Services, Inc., a Delaware corporation.
8. Chadwick's Tradename Sub, Inc., a Delaware corporation.
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Schedule II
Copyrights
PAGE
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Schedule III
Licenses
PAGE
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Schedule IV
Trademarks
PAGE
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Annex 1 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security Agreement dated
as of April 30, 1997, as amended and restated as of September 21, 1998, among
BRYLANE, L.P., a Delaware limited partnership (the "Borrower"), the subsidiaries
of the Borrower listed on Schedule I thereto and such other subsidiaries of the
Borrower as shall become parties thereto pursuant to Section 6.16 thereof
(collectively, the "Subsidiary Guarantors"; the Borrower and the Subsidiary
Guarantors being collectively called the "Grantors") and Credit Lyonnais New
York Branch ("Credit Lyonnais"), as security agent (in such capacity, the
"Security Agent") for the Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of
September 30, 1997, as amended and restated as of September 21, 1998 (as
amended, supplemented or otherwise modified from time to time, the Credit
Agreement), among the Borrower, the lenders from time to time party thereto (the
Lenders) and Credit Lyonnais New York Branch, as administrative agent (in such
capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee
Agreement dated as of April 30, 1997, as amended and restated as of September
21, 1998 (as amended, supplemented or otherwise modified from time to time, the
Guarantee Agreement), among the Borrower, the Guarantors (as defined therein)
and the Administrative Agent.
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security Agreement and
the Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 6.16 of the Security Agreement provides that additional
Subsidiaries of the Borrower may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Grantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Grantor
under the Security Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously issued.
Accordingly, the Security Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 6.16 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the New Grantor's right, title and
interest in and to the Collateral (as defined in the Security Agreement) of the
New Grantor. Each reference to a "Grantor" in the Security Agreement shall be
deemed to include the New Grantor. The Security Agreement is hereby
incorporated herein by reference.
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SECTION 2. The New Grantor represents and warrants to the Security
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Security Agent
shall have received counterparts of this Supplement that, when taken together,
bear the signatures of the New Grantor and the Security Agent. Delivery of an
executed signature page to this Supplement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a)
set forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in
writing and given as provided in Section 6.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
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SECTION 9. The New Grantor agrees to reimburse the Security Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Security Agent.
IN WITNESS WHEREOF, the New Grantor and the Security Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name of New Grantor],
by
Name:
Title:
Address:
CREDIT LYONNAIS NEW YORK BRANCH, as Security Agent,
by
Name:
Title:
by
Name:
Title:
EXECUTION COPY
AMENDED AND RESTATED PLEDGE AGREEMENT dated as of April 30,
1997, as amended and restated as of September 21, 1998, among BRYLANE, L.P., a
Delaware limited partnership (the "Borrower"), such subsidiaries of the Borrower
as shall become parties hereto pursuant to Section 5.16 hereof (collectively,
the "Subsidiary Pledgors"; the Borrower and the Subsidiary Pledgors being
collectively called the "Pledgors"); and CREDIT LYONNAIS NEW YORK BRANCH, as
security agent (in such capacity, the "Security Agent") for the Secured Parties,
as defined herein.
Reference is made to the Credit Agreement dated as of April 30, 1997,
as amended and restated as of September 21, 1998 (as amended from time to time,
the "Credit Agreement"), among the Borrower, the Lenders party thereto (the
"Lenders") and Credit Lyonnais New York Branch, as administrative agent (in such
capacity, the "Agent"). Reference also is made to the Pledge Agreement dated as
of April 30, 1997 (the "Existing Pledge Agreement"), among the Borrower, the
Subsidiary Pledgors and Morgan Guaranty Trust Company of New York, as security
agent, and, upon the effectiveness hereof, this Agreement shall amend and
restate the Existing Pledge Agreement and maintain the pledge of the Pledged
Securities established under the Existing Pledge Agreement. The Lenders have
agreed to extend credit to the Borrower pursuant to, and subject to the terms
and conditions specified in, the Credit Agreement. The obligations of the
Lenders to continue to extend credit under the Credit Agreement are conditioned
upon, among other things, the execution and delivery by the Pledgors of an
amended and restated pledge agreement in the form hereof to continue to secure
(a) the due and punctual payment by the Borrower of (i) the principal of and
interest on the Loans, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise; (ii) each payment
required to be made by the Borrower under the Credit Agreement in respect of any
Letter or Letters of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide cash
collateral, (iii) all other monetary obligations of the Borrower to the Secured
Parties under the Credit Agreement and the other Loan Documents to which the
Borrower is or is to be a party and (iv) each payment required to be made by the
Borrower under any Rate Protection Agreement entered into by the Borrower with a
counterparty that was a Lender at the time such Rate Protection Agreement was
entered into; (b) the due and punctual performance of all other obligations of
the Borrower under the Credit Agreement and the other Loan Documents to which
the Borrower is or is to be a party and (c) the due and punctual payment and
performance of all obligations of each Subsidiary under the Loan Documents to
which it is or is to be a party (all the foregoing obligations being
collectively called the "Obligations").
Accordingly, the Pledgors and the Security Agent hereby agree as
follows:
ARTICLE I
Definitions
SECTION 1.01. Terms Defined in the Credit Agreement. Terms used
herein and not otherwise defined herein shall have the meanings set forth in the
Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
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"Collateral" shall have the meaning assigned to such term in Section
2.01.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Federal Securities Laws" shall have the meaning assigned to such term
in Section 4.03.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Pledged Notes" shall have the meaning assigned to such term in
Section 2.01.
"Pledged Securities" shall mean the Pledged Stock, the Pledged Notes,
all other shares of capital stock, debt securities and other securities
(including warrants, options and similar rights to acquire securities) now or
hereafter included in the Collateral and all stock certificates and other
instruments evidencing any such securities.
"Pledged Stock" shall have the meaning assigned to such term in
Section 2.01.
"Secured Parties" shall mean (a) the Lenders party to the Credit
Agreement; (b) each counterparty to a Rate Protection Agreement entered into
with the Borrower, if such counterparty was a Lender at the time such Rate
Protection Agreement was entered into; (c) the Agent, the Security Agent and the
Issuing Banks, in their capacities as such under each Loan Document; (d) the
beneficiaries of each indemnification obligation undertaken by any Pledgor under
any Loan Document; and (e) the successors and assigns of the foregoing.
ARTICLE II
Pledge
SECTION 2.01. Pledge. As security for the payment or performance, as
the case may be, of the Obligations, each Pledgor hereby bargains, sells,
conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to
the Security Agent, its successors and its assigns, for the benefit of the
Secured Parties, and hereby grants to the Security Agent, its successors and
assigns, for the benefit of the Secured Parties, a security interest in, all of
such Grantor's right, title and interest in, to and under (a) the shares of
capital stock listed opposite the name of such Pledgor on Schedule I hereto and
all shares of the capital stock of any Subsidiary hereafter acquired by such
Pledgor (the "Pledged Stock") and the certificates representing the Pledged
Stock; (b) the promissory notes listed opposite the name of such Pledgor on
Schedule I hereto and all promissory notes or other debt securities of any
Subsidiary hereafter acquired by such Pledgor (the "Pledged Notes") and the
certificates representing the Pledged Notes; (c) all other property which may be
delivered to and held by the Security Agent pursuant to the terms hereof; (d)
subject to Section 2.04, all payments of dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred to
in clauses (a), (b) and (c) above; (e) subject to Section 2.04, all rights and
privileges of such Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any
of the foregoing (the items referred to in clauses (a) through (f) being
collectively called the "Collateral").
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TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and references pertaining or incidental thereto,
unto the Security Agent, its successors and its assigns, for the benefit of the
Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2.02. Delivery of the Collateral; Intercompany Obligations.
(a) Upon delivery to the Security Agent, (i) the Pledged Securities shall be
accompanied by stock powers duly executed in blank or other instruments of
transfer satisfactory to the Security Agent and by such other instruments and
documents as the Security Agent may reasonably request and (ii) all other
property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by the applicable Pledgor and such other
instruments or documents as the Security Agent may reasonably request. Each
delivery of Pledged Securities shall be accompanied by a schedule describing the
securities theretofore and then being pledged hereunder, which schedule shall be
attached hereto as Schedule I and made a part hereof. Each schedule so
delivered shall supersede any prior schedules so delivered.
(b) Each of the Pledgors agrees to promptly deliver or cause to be
delivered to the Security Agent any and all Pledged Securities, and any and all
certificates or other instruments or documents representing the Collateral.
(c) Each Pledgor will cause any obligations in respect of borrowed
money or similar advances owed to such Pledgor by the Borrower or any Subsidiary
to be evidenced by a duly executed promissory note which is pledged and
delivered to the Security Agent pursuant to the terms hereof. Any such
promissory notes may be in the form of a demand note for any and all moneys
advanced.
SECTION 2.03. Registration in Nominee Name; Denominations. The
Security Agent shall have the right (in its sole and absolute discretion) to
hold the Pledged Securities in its own name as pledgee, the name of its nominee
or the name of the applicable Pledgor, endorsed or assigned in blank or in favor
of the Security Agent. Each of the Pledgors will promptly give to the Security
Agent copies of any notices or other communications received by it with respect
to Pledged Securities registered in the name of such Pledgor. The Security
Agent shall at all times have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Agreement.
SECTION 2.04. Voting Rights; Dividends and Interest; etc. (a)
Unless and until an Event of Default shall have occurred and be continuing and
the Security Agent shall have notified the Pledgors that their rights under this
Section 2.04 are being suspended:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers accruing to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of this
Agreement, the Credit Agreement and the other Loan Documents; provided, however,
that such action would not materially and adversely affect the rights inuring to
a holder of the Pledged Securities or the rights and remedies of the Security
Agent or any of the Secured Parties under this Agreement or the Credit Agreement
or any other Loan Document or the ability of the Security Agent or any of the
Secured Parties to exercise the same.
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(ii) The Security Agent shall execute and deliver to each
Pledgor, or cause to be executed and delivered to such Pledgor, all such
proxies, powers of attorney and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting and/or
consensual rights and powers which it is entitled to exercise pursuant to
subparagraph (i) above.
(iii) Each Pledgor shall be entitled to receive and retain any
and all dividends and principal and interest payments paid in cash on the
Pledged Securities pledged by it to the extent and only to the extent that such
cash dividends and principal and interest payments are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws. Other than (A)
pursuant to the first sentence of this paragraph (a)(iii) or (B) pursuant to a
distribution or transfer of any of the assets of a Subsidiary Pledgor to the
Borrower or to a Subsidiary Pledgor that is a Wholly Owned Consolidated
Subsidiary in a transaction permitted under the Credit Agreement, all noncash
dividends and principal and interest payments, and all dividends paid or payable
in cash or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and all
other distributions made on or in respect of Pledged Securities, whether paid or
payable in cash or otherwise, whether resulting from a subdivision, combination
or reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Collateral, and, if received by a
Pledgor, shall not be commingled by such Pledgor with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Security Agent and shall be forthwith delivered to the
Security Agent in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default, after the Security Agent shall have notified the Pledgors of the
suspension of their rights under paragraph (a)(iii) above, then all rights of
any Pledgor to receive dividends and principal and interest payments which such
Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall
cease, and all such rights shall thereupon become vested in the Security Agent,
which shall have the sole and exclusive right and authority to receive and
retain such dividends, interest and principal payments. All dividends and
principal and interest payments which are received by any Pledgor contrary to
the provisions of this Section 2.04 shall be received in trust for the benefit
of the Security Agent, shall be segregated from other property or funds of such
Pledgor and shall be forthwith delivered to the Security Agent in the same form
as so received (with any necessary endorsement). Any and all money and other
property paid over to or received by the Security Agent pursuant to the
provisions of this paragraph (b) shall be retained by the Security Agent in an
account to be established by the Security Agent upon receipt of such money or
other property and shall be applied in accordance with the provisions of Section
4.02.
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(c) Upon the occurrence and during the continuance of an Event of
Default, after the Security Agent shall have notified the Pledgors of the
suspension of their rights under paragraph (a)(i) above, then all rights of the
Pledgors to exercise the voting and consensual rights and powers which they are
entitled to exercise pursuant to paragraph (a)(i) of this Section 2.04, and the
obligations of the Security Agent under paragraph (a)(ii) of this Section 2.04,
shall cease, and all such rights shall thereupon become vested in the Security
Agent, which shall have the sole and exclusive right and authority to exercise
such voting and consensual rights and powers.
(d) Any notice given by the Security Agent to the Pledgors suspending
their rights under paragraph (a) above (i) may be given by telephone if promptly
confirmed in writing, (ii) may be given to one or more of the Pledgors at the
same or different times and (iii) may suspend the rights of the Pledgors under
paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such
rights (as specified by the Security Agent in its sole and absolute discretion)
and without waiving or otherwise affecting the Security Agent's rights to give
additional notices from time to time suspending other rights so long as an Event
of Default has occurred and is continuing.
ARTICLE III
Representations, Warranties and Covenants
The Pledgors jointly and severally represent, warrant and covenant to
and with the Security Agent and the Lenders that:
(a) the Pledged Stock and Pledged Notes represent all the outstanding
capital stock of each Subsidiary that is a corporation and all the outstanding
indebtedness of each Subsidiary owed to the Borrower or to another Subsidiary;
(b) the Pledged Stock has been duly and validly authorized and issued
by the issuers thereof and is fully paid and nonassessable;
(c) except for the security interest granted hereunder, each of the
Pledgors (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule I to
be owned by such Pledgor, (ii) holds the same free and clear of all Liens (other
than unperfected Liens imposed by law) or security interests of any other
Person, (iii) will make no assignment, pledge, hypothecation or transfer of, or
create any security interest in, the Collateral, other than pursuant hereto, and
(iv) subject to Section 2.04, will cause any and all Collateral, whether for
value paid by any Pledgor or otherwise, to be forthwith deposited with the
Security Agent and pledged or assigned hereunder;
(d) except for restrictions and limitations imposed by securities laws
generally, the Collateral pledged hereunder is and will be freely transferable
and assignable, and no portion of such Collateral is or will be subject to any
option, right of first refusal, shareholders agreement, charter or by-law
provision, partnership agreement restriction or other contractual restriction of
any nature which might prohibit, impair, delay or otherwise affect the pledge of
such Collateral hereunder, the sale or disposition of the Collateral pursuant
hereto after the occurrence of an Event of Default or the exercise by the
Security Agent of its rights and remedies hereunder;
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(e) each of the Pledgors (i) has the power and authority to pledge the
Collateral pledged by it hereunder in the manner hereby done or contemplated and
(ii) will defend its title or interest thereto or therein against any and all
Liens (other than the Lien of this Agreement), however arising, of all persons
whomsoever;
(f) no consent or approval of any Governmental Authority or any
securities exchange was or is necessary to the validity of the pledge effected
hereby;
(g) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates, instruments or other
documents representing or evidencing the Collateral are delivered to the
Security Agent in accordance with this Agreement, the Security Agent will
continue to maintain a legal, valid and perfected first priority security
interest in the Pledged Securities as security for the payment and performance
of the Obligations; and
(h) the pledge effected hereby is effective to vest in the Security
Agent, on behalf of the Secured Parties, the rights of the Security Agent in the
Collateral as set forth herein.
ARTICLE IV
Remedies
SECTION 4.01. Remedies upon Default. If an Event of Default shall
have occurred and be continuing, the Security Agent may exercise, to the extent
permitted by law, all the rights of a secured party under the Uniform Commercial
Code of the State of New York (whether or not the Code is in effect in the
jurisdiction where such rights are exercised) and, in addition, the Security
Agent may, without being required to give any notice, except as herein provided
or as may be required by mandatory provisions of law, sell the Collateral, or
any part thereof, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Security Agent shall deem appropriate. The Security Agent shall be authorized
at any such sale (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not with a
view to the distribution or sale thereof, and upon consummation of any such sale
the Security Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of any Pledgor, and each Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay, valuation and appraisal which
such Pledgor now has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted.
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The Security Agent shall give each Pledgor at least 10 days' prior
written notice (which each Pledgor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the
State of New York or its equivalent in other jurisdictions) of the Security
Agent's intention to make any sale of Collateral owned by such Pledgor. Such
notice, in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker's board or on a securities exchange,
shall state the board or exchange at which such sale is to be made and the day
on which the Collateral, or portion thereof, will first be offered for sale at
such board or exchange and, in the case of a private sale, shall state the time
after which any such sale is to be made. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or places as
the Security Agent may fix and state in the notice of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold in one lot as
an entirety or in separate parcels, as the Security Agent may (in its sole and
absolute discretion) determine. The Security Agent shall not be obligated to
make any sale of any Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of such Collateral shall have been given. The
Security Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. In case any sale
of all or any part of the Collateral is made on credit or for future delivery,
the Collateral so sold may be retained by the Security Agent until the sale
price is paid in full by the purchaser or purchasers thereof, but the Security
Agent shall not incur any liability in case any such purchaser or purchasers
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. At any public
sale made pursuant to this Section any Secured Party may bid for or purchase,
free (to the extent permitted by law) from any right of redemption, stay,
valuation or appraisal on the part of any Pledgor (all said rights being also
hereby waived and released to the extent permitted by law), the Collateral or
any part thereof offered for sale and may make payment on account thereof by
using any Obligation then due and payable to it from any Pledgor as a credit
against the purchase price, and the Security Agent may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to any Pledgor therefor. For purposes hereof, a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof; the Security Agent shall be free to carry out such sale pursuant
to such agreement, and none of the Pledgors shall be entitled to the return of
the Collateral or any portion thereof subject thereto, notwithstanding the fact
that after the Security Agent shall have entered into such an agreement all
Events of Default shall have been remedied and the Obligations paid in full. As
an alternative to exercising the power of sale herein conferred upon it, the
Security Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
SECTION 4.02. Application of Proceeds of Sale. The proceeds of any
sale of Collateral pursuant to Section 4.01, as well as any Collateral
consisting of cash, shall be applied by the Security Agent as follows:
FIRST: to the payment of all costs and expenses incurred by the Agent
or the Security Agent (in its capacity as such hereunder or under any other Loan
Document) in connection with such sale or otherwise in connection with this
Agreement or any of the Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all advances made by
the Security Agent hereunder or under any other Loan Document on behalf of any
of the Pledgors and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
SECOND: to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance with
the amounts of the Obligations owed to them on the date of any such
distribution); and
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THIRD: to the Pledgors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Security Agent shall have absolute discretion as to the time of application
of any such proceeds, moneys or balances in accordance with this Agreement.
Upon any sale of the Collateral by the Security Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Security Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Security Agent or such officer or be
answerable in any way for the misapplication thereof.
SECTION 4.03. Securities Act, etc. In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other present or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. The Pledgors
understand that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Security Agent if the Security Agent were to
attempt to dispose of all or any part of the Pledged Securities, and might also
limit the extent to which or the manner in which any subsequent transferee of
any Pledged Securities could dispose of the same. Similarly, there may be other
legal restrictions or limitations affecting the Security Agent in any attempt to
dispose of all or part of the Pledged Securities under applicable Blue Sky or
other state securities laws or similar laws analogous in purpose or effect. The
Pledgors recognize that in light of the foregoing restrictions and limitations
the Security Agent may, with respect to any sale of Pledged Securities, limit
the purchasers to those who will agree, among other things, to acquire Pledged
Securities for their own account, for investment, and not with a view to the
distribution or resale thereof. The Pledgors acknowledge and agree that in
light of the foregoing restrictions and limitations, the Security Agent, in its
sole and absolute discretion, (a) may proceed to make such a sale whether or not
a registration statement for the purpose of registering the Pledged Securities
or part thereof shall have been filed under the Federal Securities Laws, and (b)
may approach and negotiate with a single possible purchaser to effect such sale.
The Pledgors acknowledge and agree that any such sale might result in prices and
other terms less favorable to the seller than if such sale were a public sale
without such restrictions. In the event of any such sale, the Security Agent
shall incur no responsibility or liability for selling all or any part of the
Pledged Securities at a price which the Security Agent, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid or
if more than a single purchaser were approached. The provisions of this Section
will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at
which the Security Agent sells.
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SECTION 4.04. Registration, etc. Each of the Pledgors agrees that,
upon the occurrence and during the continuance of an Event of Default, if for
any reason the Security Agent desires to sell any of the Pledged Securities at a
public sale, it will, at any time and from time to time, upon the written
request of the Security Agent, take or cause the issuer of such Pledged
Securities to take such action and prepare, distribute and/or file such
documents, as are required or advisable in the reasonable opinion of counsel for
the Security Agent to permit the public sale of such Pledged Securities. Each
of the Pledgors jointly and severally agrees to (a) indemnify, defend and hold
harmless the Security Agent, the other Secured Parties and their respective
officers, directors, affiliates and controlling persons from and against all
losses, liabilities, expenses, costs (including the reasonable fees and expenses
of legal counsel to the Security Agent and the Agent) and claims (including the
costs of investigation) which they may incur insofar as any such loss,
liability, expense, cost or claim arises out of or is based upon any alleged
untrue statement of a material fact contained in any prospectus, offering
circular or similar document (or any amendment or supplement thereto), or arises
out of or is based upon any alleged omission to state a material fact required
to be stated therein or necessary to make the statements in any thereof not
misleading, except insofar as the same may have been caused by any untrue
statement or omission based upon information furnished in writing to any Pledgor
or the issuer of such Pledged Securities by the Security Agent or any other
Secured Party expressly for use therein, and (b) enter into an indemnification
agreement with any underwriter of or placement agent for any Pledged Securities,
on its standard form, to substantially the same effect. Each of the Pledgors
further agrees to use all reasonable efforts to qualify, file or register, or
cause the issuer of such Pledged Securities to qualify, file or register, any of
the Pledged Securities under the Blue Sky or other securities laws of such
states as may be requested by the Security Agent and keep effective, or cause to
be kept effective, all such qualifications, filings or registrations. The
Pledgors will jointly and severally bear all costs and expenses of carrying out
their obligations under this Section. The Pledgors acknowledge that there is no
adequate remedy at law for failure by them to comply with the provisions of this
Section and that such failure would not be adequately compensable in damages,
and therefore agree that their agreements contained in this Section may be
specifically enforced.
ARTICLE V
Miscellaneous
SECTION 5.01. Notices. All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Subsidiary Pledgor shall be given to it in care of the
Borrower at the address specified in the Credit Agreement for notices to the
Borrower thereunder.
SECTION 5.02. Security Interest Absolute. All rights of the Security
Agent hereunder, the security interests granted hereunder and all obligations of
the Pledgors hereunder shall be absolute and unconditional irrespective of (a)
any lack of validity or enforceability of the Credit Agreement or any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or nonperfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Pledgor in respect of the
Obligations or this Agreement.
PAGE
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SECTION 5.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the making by the Lenders
of the Loans, and the execution and delivery to the Lenders of the Notes
evidencing such Loans, regardless of any investigation made by the Lenders or on
their behalf, and shall continue in full force and effect until this Agreement
shall terminate.
SECTION 5.04. Binding Effect; Several Agreement. This Agreement
shall become effective as to any Pledgor when a counterpart hereof executed on
behalf of such Pledgor shall have been delivered to the Security Agent and a
counterpart hereof shall have been executed on behalf of the Security Agent, and
thereafter shall be binding upon such Pledgor and the Security Agent and their
respective successors and assigns, and shall inure to the benefit of such
Pledgor, the Security Agent and the other Secured Parties and their respective
successors and assigns, except that no Pledgor shall have the right to assign
its rights hereunder or any interest herein or in the Collateral except as
expressly contemplated by this Agreement or the Credit Agreement. This
Agreement shall be construed as a separate agreement with respect to each
Pledgor and may be amended, modified, supplemented, waived or released with
respect to any Pledgor without the approval of any other Pledgor and without
affecting the obligations of any other Pledgor hereunder.
SECTION 5.05. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Pledgor or the Security Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 5.06. Security Agent Appointed Attorney-in-Fact. Each of the
Pledgors hereby appoints the Security Agent the attorney-in-fact of such Pledgor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Security Agent may deem necessary
or advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Security Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Security Agent's name or in the name of any Pledgor, to ask for, demand, sue
for, collect, receive and give acquittance for any and all moneys due or to
become due under and by virtue of any Collateral, to endorse checks, drafts,
orders and other instruments for the payment of money payable to such Pledgor
representing any dividend or other distribution payable in respect of the
Collateral or any part thereof or on account thereof and to give full discharge
for the same, to settle, compromise, prosecute or defend any action, claim or
proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer
and make any agreement respecting, or otherwise deal with, the same; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Security Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Security Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Security
Agent or omitted to be taken with respect to the Collateral or any part thereof
shall give rise to any defense, counterclaim or offset in favor of any Pledgor
or to any claim or action against the Security Agent or any other Secured Party.
SECTION 5.07. Security Agent's Fees and Expenses; Indemnification.
(a) Each of the Pledgors jointly and severally agrees to pay upon demand to the
Security Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or agents, which
the Security Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from
or other realization upon any of the Collateral, (iii) the exercise, enforcement
or protection of any of the rights of the Security Agent hereunder or (iv) the
failure of the Pledgors to perform or observe any of the provisions hereof.
PAGE
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(b) Without limitation of their indemnification obligations under the
other Loan Documents, each of the Pledgors jointly and severally agrees to
indemnify the Security Agent from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by the
Security Agent in connection with any investigative, administrative or judicial
proceeding relating hereto or to the Collateral, whether or not the Security
Agent is a party thereto; provided that the Security Agent shall not have the
right to be indemnified hereunder for its own gross negligence or wilful
misconduct as determined by a court of competent jurisdiction.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents. The
provisions of this Section shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Loans, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the Security
Agent or any Lender. All amounts due under this Section shall be payable on
written demand therefor.
SECTION 5.08. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 5.09. Waivers; Amendment. (a) No failure or delay of the
Security Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Security Agent hereunder
and of the Security Agent, the Agent and the Lenders under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies which
they would otherwise have. No waiver of any provisions of this Agreement or any
other Loan Document or consent to any departure by any Pledgor therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on any
Pledgor in any case shall entitle such Pledgor or any other Pledgor to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Security Agent and the Pledgor or Pledgors with respect to
which such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 10.05 of the Credit Agreement.
SECTION 5.10. Waiver of Jury Trial. Each of the parties hereto
irrevocably waives any and all rights to trial by jury in any legal proceeding
arising out of or relating to this Agreement or any other Loan Document or the
transactions contemplated hereby.
SECTION 5.11. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 5.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section 5.04),
and shall become effective as provided in Section 5.04.
PAGE
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SECTION 5.13. Headings. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 5.14. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Security Agent or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against any
Pledgor or its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 5.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 5.15. Termination. This Agreement and the security interests
granted hereby shall terminate when all the Obligations (other than obligations
of the Borrower under Section 9.03(b) of the Credit Agreement, or any other
indemnification provisions contained in the Loan Documents, in respect of claims
which have not then been asserted) have been indefeasibly paid in full and the
Lenders have no further commitment to lend or to issue Letters of Credit under
the Credit Agreement, at which time the Security Agent shall reassign and
deliver to the Pledgors, at the Pledgors' expense and against receipt, such of
the Collateral as shall not have been sold or otherwise applied hereunder and
shall remain held by the Security Agent hereunder, together with such documents
as the Pledgors shall reasonably request to evidence such termination and
reassignment. Any such reassignment and any execution and delivery of documents
pursuant to this Section shall be without recourse to or warranty by the
Security Agent. Each Subsidiary Pledgor shall automatically be released from
its obligations hereunder and the security interest granted hereby in the
Collateral of such Subsidiary Pledgor shall be automatically released in the
event that all the capital stock of such Subsidiary Pledgor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the
Borrower in accordance with the terms of the Credit Agreement; provided that the
Required Lenders shall have consented to such sale, transfer or other
disposition and the terms of such consent did not provide otherwise.
SECTION 5.16. Additional Pledgors. Upon execution and delivery by
the Security Agent and a Subsidiary of an instrument in the form of Annex I
hereto, such Subsidiary shall become a Subsidiary Pledgor and Pledgor hereunder
with the same force and effect as if originally named as a Subsidiary Pledgor
and Pledgor herein. The execution and delivery of any such instrument shall not
require the consent of any Pledgor hereunder. The rights and obligations of
each Pledgor hereunder shall remain in full force and effect notwithstanding the
addition of any new Pledgor as a party to this Agreement.
PAGE
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BRYLANE, L.P.,
by VGP CORPORATION, General Partner,
by
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as security agent,
by
Name:
Title:
by
Name:
Title:
PAGE
<PAGE>
SCHEDULE I
to Pledge Agreement
<TABLE>
<CAPTION>
PLEDGED SECURITIES
<S> <C> <C>
Pledgor Issuer Pledged Securities
Brylane, L.P. Brylane Capital Corp. 1,000 shares of Common Stock
Brylane, L.P. B.L. Management Services, Inc. 100 shares of Common Stock
Brylane, L.P. B.L. Catalog Distribution, Inc. 100 shares of Common Stock
Brylane, L.P. Brylane Capital Corp., B.L. Management An intercompany note executed
Services, Inc., B.L. Catalog Distribution, by the subsidiaries of Brylane,
Inc., B.L. Management Services L.P. in favor of Brylane, L.P.
Partnership and B.L. Catalog Distribution
Partnership
Brylane, L.P. B.N.Y. Service Corp. 100 shares of Common Stock
Brylane, L.P. K.S. Management Services, Inc. 100 shares of Common Stock
Brylane, L.P. C.O.B. Management Services, Inc. 100 shares of Common Stock
Brylane, L.P. Chadwick's Tradename Sub, Inc. 100 shares of Common Stock
(Chadwick's
Inc.)
Brylane, L.P. Kingsize Catalog Sales, Inc. 100 shares of Common Stock
</TABLE>
EXECUTION COPY
AMENDED AND RESTATED GUARANTEE AGREEMENT dated as of April
30, 1997, as amended and restated as of September 21, 1998, among BRYLANE, INC.,
a Delaware corporation (the "Parent Corporation"), VGP CORPORATION, a Delaware
corporation ("VGP"), VLP CORPORATION, a Delaware corporation ("VLP"), VP HOLDING
CORPORATION ("VP Holding" and together with the Parent Corporation, VGP and VLP,
the "Parent Guarantors") the subsidiaries of BRYLANE L.P., a Delaware limited
partnership and indirect wholly owned subsidiary of the Parent Corporation
("Brylane"), listed on Schedule I hereto and such other subsidiaries as shall
become parties hereto pursuant to Section 15 hereof (the Parent Guarantors and
such listed and other subsidiaries of Brylane being referred to herein
individually as a "Guarantor" and collectively as the "Guarantors") and CREDIT
LYONNAIS NEW YORK BRANCH, as administrative agent (the "Agent") for the Lenders
party to the Amended and Restated Credit Agreement dated as of April 30, 1997,
as amended and restated as of September 21, 1998 (as amended from time to time,
the "Credit Agreement"), among Brylane, the Lenders and the Agent.
Reference is made to the Guarantee Agreement dated as of April 30,
1997, as amended and restated as of October 20, 1997 (the "Existing Guarantee
Agreement"), among the Parent Corporation, Brylane, the subsidiaries of the
Borrower party thereto and Morgan Guaranty Trust Company of New York, as
security agent, and, upon the effectiveness hereof, this Agreement shall amend
and restate the Existing Guarantee Agreement and shall maintain the guarantees
created under the Existing Guarantee Agreement.
Capitalized terms used herein but not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The Lenders have respectively agreed to make loans to Brylane, and the
Issuing Banks have agreed to issue the Letters of Credit for the account of
Brylane. The obligations of the Lenders to lend, and of the Issuing Banks to
issue Letters of Credit, under the Credit Agreement are conditioned on, among
other things, the execution and delivery by the Guarantors of a guarantee
agreement in the form hereof. As the parent or Subsidiaries of Brylane, as the
case may be, the Guarantors acknowledge that they will derive substantial
benefits from the extension of credit to Brylane under the Credit Agreement. As
consideration therefor and in order to induce the Lenders to make Loans and to
induce the Issuing Banks to issue Letters of Credit, the Guarantors are willing
to execute and deliver this Agreement.
PAGE
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Accordingly, the parties hereto agree as follows:
SECTION 1. Each of the Guarantors unconditionally and irrevocably
Guarantees, jointly with the other Guarantors and severally, as a primary
obligor and not merely as a surety, (a) the due and punctual payment by Brylane
of (i) the principal of and interest on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for repayment or
otherwise; (ii) each payment required to be made by Brylane under Section 2.13
of the Credit Agreement in respect of any Letter of Credit Disbursement, when
and as due, including interest thereon, if any; (iii) all other monetary
obligations of Brylane to the Lenders (including, without limitation, the
Swingline Lender and the Issuing Banks), the Agent and the Security Agent under
the Credit Agreement and the other Loan Documents to which Brylane is or is to
be a party; and (iv) each payment required to be made by Brylane under any Rate
Protection Agreement that was entered into by Brylane with a counterparty that
was a Lender (including, without limitation, the Swingline Lender and the
Issuing Banks) at the time such Rate Protection Agreement was entered into; (b)
the due and punctual performance of all other obligations of Brylane under the
Credit Agreement, the other Loan Documents and any Rate Protection Agreement
referred to in clause (iv) above; and (c) the due and punctual payment and
performance of all obligations of each Parent Guarantor and Subsidiary under the
Loan Documents to which it is or is to be a party (all the foregoing obligations
being collectively called the "Obligations"). Each of the Guarantors further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice to or further assent from it, and it will remain bound upon its
guarantee notwithstanding any extension or renewal of any Obligation.
SECTION 2. Each of the Guarantors waives presentment to, demand of
payment from and protest to Brylane or any Parent Guarantor or Subsidiary of any
of the Obligations, and also waives notice of acceptance of its guarantee and
notice to protest for nonpayment. The obligations of each Guarantor hereunder
shall not be affected by (a) the failure of the Agent, the Security Agent or any
Lender (including, without limitation, the Swingline Lender and the Issuing
Banks) to assert any claim or demand or to enforce any right or remedy against
Brylane or any Parent Guarantor or Subsidiary under the provisions of any Loan
Document or otherwise; (b) any rescission, waiver, amendment or modification of,
or any release from any of the terms or provisions of, any Loan Document, any
guarantee or any other agreement, including with respect to any other Guarantor
under this Agreement; (c) the release of any security held by the Agent, the
Security Agent or any Lender (including, without limitation, the Swingline
Lender and the Issuing Banks) for the Obligations of any of them; or (d) the
failure of the Agent, the Security Agent or any Lender (including, without
limitation, the Swingline Lender and the Issuing Banks) to exercise any right or
remedy against any other Guarantor or guarantor of the Obligations.
PAGE
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SECTION 3. Each of the Guarantors further agrees that its guarantee
hereunder constitutes a guarantee of payment when due and not of collection, and
waives any right to require that the resort be had by the Agent, the Security
Agent or any Lender (including, without limitation, the Swingline Lender and the
Issuing Banks) to any security held for payment of the Obligations or to any
balance of any deposit account or credit on the books of the Agent, the Security
Agent or any Lender (including, without limitation, the Swingline Lender and the
Issuing Banks) in favor of Brylane or any other person.
SECTION 4. The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Agent, the Security Agent or any Lender (including, without
limitation, the Swingline Lender and the Issuing Banks) to assert any claim or
demand or to enforce any remedy under any Loan Document, any guarantee or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, wilful or otherwise, in the performance of the Obligations, or
by any other act or omission which may or might in any manner or to any extent
vary the risk of any Guarantor as a matter of law or equity (other than the
indefeasible payment in full of all the Obligations).
SECTION 5. Each of the Guarantors further agrees that its guarantee
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by the Agent, the Security Agent or any Lender (including,
without limitation, the Swingline Lender and the Issuing Banks) upon the
bankruptcy or reorganization of Brylane, any Guarantor or otherwise.
PAGE
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SECTION 6. In furtherance of the foregoing and not in limitation of
any other right which the Agent, the Security Agent or any Lender (including,
without limitation, the Swingline Lender and the Issuing Banks) has at law or in
equity against any Guarantor by virtue hereof, upon the failure of Brylane or
any Parent Guarantor or Subsidiary to pay any Obligation when and as the same
shall become due, whether at maturity, by acceleration, after notice of
repayment or otherwise, each of the Guarantors hereby promises to and will, upon
receipt of written demand by the Agent, forthwith pay, or cause to be paid, to
the Agent for distribution to the Lenders (including, without limitation, the
Swingline Lender and the Issuing Banks) and the Security Agent, if and as
appropriate, in cash the amount of such unpaid Obligation. Each Guarantor
hereby waives any claim, right or remedy which such Guarantor may now have or
hereafter acquire against Brylane or any Parent Guarantor or any Subsidiary that
arises hereunder, including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of such Guarantor against Brylane or
any Parent Guarantor or Subsidiary whether or not such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise. If
any amount shall erroneously be paid to any Guarantor on account of such
subrogation, contribution, reimbursement, indemnity and similar rights, such
amount shall be held in trust for the benefit of the Lenders (including, without
limitation, the Swingline Lender and the Issuing Banks) and shall forthwith be
paid to the Agent to be credited and applied to the payment of the Obligations.
Any term or provision of this Agreement to the contrary notwithstanding, the
maximum aggregate amount of the Obligations guaranteed hereunder by any
Guarantor that is a Subsidiary shall not exceed the maximum amount that can be
hereby guaranteed by such Guarantor without rendering this Agreement, as it
relates to such Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
SECTION 7. Each of the Guarantors jointly and severally represents
and warrants that all representations and warranties contained in the Credit
Agreement which relate to the Guarantors are true and correct. The Parent
Corporation agrees to observe the covenants applicable to it set forth in the
Credit Agreement.
SECTION 8. The guarantees made hereunder shall survive and be in full
force and effect so long as any Obligation is outstanding and has not been
indefeasibly paid and so long as the Lenders (including, without limitation, the
Swingline Lender) have any further commitment to lend or any Issuing Bank has
any further obligation to issue Letters of Credit under the Credit Agreement or
any Letter of Credit is outstanding, and shall be reinstated to the extent
provided in Section 5. Each Guarantor (other than the Parent Guarantor) shall
be released from its guarantee hereunder in the event that all the capital stock
of such Guarantor shall be sold, transferred or otherwise disposed of, in
accordance with the terms of the Credit Agreement, by Brylane or a Subsidiary
that shall own such stock, to a person that is not an Affiliate of Brylane, if
the Required Lenders shall have consented to such sale, transfer or other
disposition (and if the terms of any such consent shall not provide otherwise).
SECTION 9. This Agreement and the terms, covenants and conditions
hereof shall be binding upon each Guarantor and its successors and shall inure
to the benefit of the Agent, the Security Agent and the Lenders (including,
without limitation, the Swingline Lender and the Issuing Banks) and their
respective successors and assigns. None of the Guarantors shall be permitted to
assign or transfer any of its rights or obligations under this Agreement, except
as expressly contemplated by this Agreement or the Credit Agreement.
PAGE
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SECTION 10. No failure on the part of the Agent to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Agent, the Security Agent or any Lender (including,
without limitation, the Swingline Lender and the Issuing Banks) preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder and under the other Loan Documents are
cumulative and are not exclusive of any other remedies provided by law. Except
as provided in the Credit Agreement, none of the Agent, the Security Agent or
the Lenders (including, without limitation, the Swingline Lender and the Issuing
Banks) shall be deemed to have waived any rights hereunder or under any other
agreement or instrument unless such waiver shall be in writing and signed by
such parties.
SECTION 11. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Guarantor shall be given to it in
care of Brylane at the address specified in the Credit Agreement for notices to
Brylane thereunder.
SECTION 13. In case any one or more of the provisions contained in
this Agreement should be held invalid, illegal or unenforceable in any respect
with respect to any Guarantor, no party hereto shall be required to comply with
such provision with respect to such Guarantor for so long as such provision is
held to be invalid, illegal or unenforceable and the validity, legality and
enforceability of the remaining provisions contained herein, and of such
provision with respect to any other Guarantor, shall not in any way be affected
or impaired. The parties shall endeavor in good-faith negotiations to replace
any invalid, illegal or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 14. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument; provided that this
Agreement shall be construed as a separate agreement with respect to each
Guarantor and may be amended, modified, supplemented, waived or released with
respect to any Guarantor without the approval of any other Guarantor and without
affecting the obligations of any other Guarantor hereunder. This Agreement
shall be effective with respect to any Guarantor when a counterpart which bears
the signature of such Guarantor shall have been delivered to the Agent.
PAGE
<PAGE>
SECTION 15. Upon execution and delivery by the Agent and a Subsidiary
of an instrument in the form of Annex 1 attached hereto, such Subsidiary shall
become a Guarantor hereunder with the same force and effect as if originally
named as Guarantor herein. The execution and delivery of any such instrument
shall not require the consent of any other Guarantor hereunder. The rights and
obligations of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BRYLANE INC., as a Guarantor,
by
_________________________
Name:
Title:
VGP CORPORATION, as a Guarantor,
by
_________________________
Name:
Title:
VLP CORPORATION, as a Guarantor,
by
_________________________
Name:
Title:
VP HOLDING CORPORATION, as a Guarantor,
by
_________________________
Name:
Title:
BRYLANE CAPITAL CORP., as a Guarantor,
by
_________________________
Name:
Title:
B.L. CATALOG DISTRIBUTION, INC.,
as a Guarantor,
by
_________________________
PAGE
<PAGE>
Name:
Title:
B.L. CATALOG DISTRIBUTION PARTNERSHIP,
as a Guarantor,
by B.L. CATALOG DISTRIBUTION INC.,
General Partner,
by
_________________________
Name:
Title:
by BRYLANE, L.P., General Partner,
by VGP Corporation, General Partner,
by
_________________________
Name:
Title:
B.L. MANAGEMENT SERVICES, INC.,
as a Guarantor,
by
_________________________
Name:
Title:
B.L. MANAGEMENT SERVICES PARTNERSHIP,
as a Guarantor,
by B.L. MANAGEMENT SERVICES, INC.,
General Partner,
by
_________________________
Name:
Title:
by B.N.Y. SERVICE CORP.,
General Partner,
by
_________________________
Name:
Title:
PAGE
<PAGE>
B.N.Y. SERVICE CORP., as a Guarantor,
by
_________________________
Name:
Title:
K.S. MANAGEMENT SERVICES, INC.,
by
_________________________
Name:
Title:
C.O.B. MANAGEMENT SERVICES, INC.,
as a Guarantor,
by
_________________________
Name:
Title:
CHADWICK'S TRADENAME SUB, INC.,
as a Guarantor,
by
_________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as administrative agent,
by
_________________________
Name:
Title:
by
_________________________
Name:
Title:
PAGE
<PAGE>
Schedule I to the Amended and
Restated Guarantee Agreement
Guarantors
1. Brylane Inc., a Delaware corporation.
2. Brylane Capital Corp., a Delaware corporation.
3. B.L. Management Services, Inc., a Delaware corporation.
4. B.N.Y. Service Corp., a Delaware corporation.
5. B.L. Catalog Distribution, Inc., a Delaware corporation.
6. B.L. Management Services Partnership, a New York general partnership.
7. B.L. Catalog Distribution Partnership, an Indiana general partnership.
8. K.S. Management Services, Inc., a Delaware corporation.
9. C.O.B. Management Services, Inc., a Delaware corporation.
10. Chadwick's Tradename Sub, Inc., a Delaware corporation.
PAGE
<PAGE>
Annex 1 to the Amended and
Restated Guarantee Agreement
SUPPLEMENT NO. 1 dated as of , to the Guarantee
Agreement dated as of April 30, 1997, as amended and restated as of September [
], 1998 (as amended and supplemented through the date hereof, the "Guarantee
Agreement"), among BRYLANE INC., a Delaware corporation (the "Parent
Corporation"), the subsidiaries of BRYLANE, L.P., a Delaware limited partnership
and indirect wholly owned subsidiary of the Parent Corporation ("Brylane"),
party thereto (the Parent Corporation and such subsidiaries of Brylane being
referred to herein individually as a "Guarantor" and collectively as the
"Guarantors"), and CREDIT LYONNAIS NEW YORK BRANCH, as administrative agent (the
"Agent") for the Lenders party to the Amended and Restated Credit Agreement
dated as of April 30, 1997, as amended and restated as of September [ ], 1998
(as amended from time to time, the "Credit Agreement"), among Brylane, the
Lenders and the Agent.
A. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Guarantee Agreement.
B. The Guarantors have entered into the Guarantee Agreement in order
to induce the Lenders to extend credit under the Credit Agreement. The
Guarantee Agreement provides that additional Subsidiaries may become Guarantors
under the Guarantee Agreement by execution and delivery of an instrument in the
form of this Supplement. Pursuant to the Credit Agree-ment, the undersigned
Subsidiary (the "New Guarantor") is required to become a Guarantor under the
Guarantee Agreement. The New Guarantor desires to become a Guarantor under the
Guarantee Agreement in order to induce the Lenders to continue to extend credit
under the Credit Agreement and as consideration therefor.
Accordingly, the Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with the Guarantee Agreement, the New
Guarantor by its signature hereto shall become a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
In furtherance of the fore-going, the New Guarantor unconditionally guarantees,
jointly with the other Guarantors and severally, as a primary obligor and not
merely as surety, all of the Obligations. Each reference to a "Guarantor" in
the Guarantee Agreement shall be deemed to include the New Guarantor. The
Guarantee Agreement is hereby incorpo-rated herein by reference.
PAGE
<PAGE>
SECTION 2. This Supplement shall become effective when the Agent
shall have received a counterpart of this Supplement executed on behalf of the
New Guarantor.
SECTION 3. The New Guarantor hereby represents and warrants that this
Supplement has been duly author-ized, executed and delivered by the New
Guarantor and constitutes a valid and binding obligation of the New Guarantor,
enforceable against it in accordance with its terms.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect in accordance with its terms.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace any invalid, illegal or unenforceable provisions herein with valid
provisions, the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 7. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
PAGE
<PAGE>
SECTION 8. The New Guarantor agrees to reimburse the Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, includ-ing
the reasonable fees and expenses of counsel for the Agent.
IN WITNESS WHEREOF, the New Guarantor and the Agent have duly executed
this Supplement to the Guarantee Agreement as of the day and year first above
written.
[New Guarantor],
by
_______________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as administrative agent,
by
________________________
Name:
Title:
by
________________________
Name:
Title:
@@@
EXHIBIT G
ISSUING BANK AGREEMENT dated as of [ ], among
BRYLANE, L.P., a Delaware limited partnership (the "Borrower"), [ ] (the
"New Issuing Bank"), and CREDIT LYONNAIS NEW YORK BRANCH, as administrative
agent (the "Administrative Agent") for the lenders (the "Lenders") party to the
Amended and Restated Credit Agreement dated as of April 30, 1997, as amended and
restated as of September 21, 1998 (as amended or modified, the "Credit
Agreement"), among the Borrower, the Lenders and the Administrative Agent.
The New Issuing Bank is a Lender party to the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein are used as
defined in the Credit Agreement. The Borrower desires to appoint the New
Issuing Bank as an "Issuing Bank" under the Credit Agreement, and the New
Issuing Bank desires to accept such appointment.
Accordingly, it is hereby agreed that, subject to the consent of the
Administrative Agent, the New Issuing Bank shall be an "Issuing Bank" under the
Credit Agreement, with all the rights, powers and obligations of an Issuing Bank
thereunder.
By its execution hereof, the Administrative Agent hereby consents to
the appointment of the New Issuing Bank as an "Issuing Bank" under the Credit
Agreement. The Borrower shall pay to the New Issuing Bank, for its own account,
a fee at the rate of __% per annum on the amount available to be drawn on each
outstanding Letter of Credit issued by the New Issuing Bank.
This Agreement shall constitute a part of the Credit Agreement.
Without limiting the generality of the foregoing, Sections 9.09 and 9.10 of the
Credit Agreement shall apply to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BRYLANE, L.P.,
by VGP CORPORATION, General Partner,
by________________________
Name:
Title:
PAGE
<PAGE>
2
[NEW ISSUING BANK],
by________________________
Name:
Title:
[Address for notices]
CREDIT LYONNAIS NEW YORK BRANCH, as
Administrative Agent,
by________________________
Name:
Title:
EXHIBIT A-1
[Form of]
TERM NOTE
New York, New York
September 21, 1998
For value received, BRYLANE, L.P., a Delaware limited partnership (the
"Borrower"), promises to pay to the order of (the
"Lender"), for the account of its Applicable Lending Office, (i) on each
Quarterly Payment Date on which a payment of principal is due in respect of Term
Loans pursuant to the Credit Agreement referred to below, the unpaid principal
amount of Term Loans of the Lender due and payable to the Lender on such
Quarterly Payment Date, as provided in the Credit Agreement, and (ii) on the
Maturity Date, the aggregate unpaid principal amount of Term Loans of the
Lender. The Borrower also promises to pay interest on the unpaid principal
amount of each such Term Loan on the dates and at the rate or rates provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Credit Lyonnais New York Branch, 1301 Avenue of
the Americas, New York, NY 10019.
All Term Loans made by the Lender and all repayments of the principal
of any such Term Loans shall be recorded by the Lender and, prior to any
transfer hereof, appropriate notations to evidence the foregoing information
with respect to each such Term Loan then outstanding shall be endorsed by the
Lender on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Lender to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under any of the other Loan Documents.
PAGE
<PAGE>
This note is one of the Notes referred to in the Credit Agreement
dated as of April 30, 1997, as amended and restated as of September 21, 1998,
among the Borrower, the Lenders listed on the signature pages thereof and Credit
Lyonnais New York Branch, as Administrative Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the mandatory and optional prepayment hereof
and the acceleration of the maturity hereof.
Notwithstanding any contrary provision of the Credit Agreement or any
other Loan Document, it is expressly agreed that the Agent, the Security Agent,
the Issuing Bank and each Lender shall look solely to the assets of the Borrower
(and of any Parent Guarantor (as defined in the Guarantee Agreement) Corporation
and any Subsidiary party to the Guarantee Agreement or any Security Document)
for the payment and performance of the obligations of the Borrower hereunder and
thereunder, without recourse against any partner in the Borrower or any assets
of such partner on account of such obligations.
BRYLANE, L.P.,
by VGP CORPORATION, General
Partner,
by
______________________
Name:
Title:
by
______________________
Name:
Title:
PAGE
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
<S> <C> <C> <C> <C> <C>
Class Amount Amount of Unpaid
of of Principal Principal Notations
Date Loan Loan Repaid Balance Made by
- ---- ----- ------ --------- --------- ---------
</TABLE>
EXHIBIT A-2
[Form of]
REVOLVING NOTE
New York, New York
September 21, 1998
For value received, BRYLANE, L.P., a Delaware limited partnership (the
"Borrower"), promises to pay to the order of (the "Lender") on
the last day of the Revolving Loan Availability Period, for the account of its
Applicable Lending Office, the unpaid principal amount of all Revolving Loans
made by the Lender to the Borrower pursuant to the Credit Agreement referred to
below. The Borrower also promises to pay interest on the unpaid principal
amount of such Revolving Loans on the dates and at the rate or rates provided
for in the Credit Agreement. All such payments of principal and interest shall
be made in lawful money of the United States in Federal or other immediately
available funds at the office of Credit Lyonnais New York Branch, 1301 Avenue of
the Americas, New York, NY 10019.
All Revolving Loans made by the Lender, and all repayments of the
principal thereof, shall be recorded by the Lender and, prior to any transfer
hereof, appropriate notations to evidence the foregoing information with respect
to each such Revolving Loan then outstanding shall be endorsed by the Lender on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under any of the other Loan Documents.
This note is one of the Notes referred to in the Credit Agreement
dated as of April 30, 1997, as amended and restated as of September 21, 1998,
among the Borrower, the lenders listed on the signature pages thereof and Credit
Lyonnais New York Branch, as Administrative Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the mandatory and optional prepayment hereof
and the acceleration of the maturity hereof.
Notwithstanding any contrary provision of the Credit Agreement or any
other Loan Document, it is expressly agreed that the Agent, the Security Agent,
the Issuing Bank and each Bank shall look solely to the assets of the Borrower
(and of any Parent Guarantor (as defined in the Guarantee Agreement) and any
Subsidiary party to the Guarantee Agreement or any Security Document) for the
payment and performance of the obligations of the Borrower hereunder and
thereunder, without recourse against any partner in the Borrower or any assets
of such partner on account of such obligations.
BRYLANE, L.P.,
by VGP CORPORATION,
General Partner,
by
_________________
Name:
Title:
by
_________________
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
<S> <C> <C> <C> <C>
Amount Amount of Unpaid
Of Principal Principal Notations
Date Loan Repaid Balance Made by
- ---- ------ --------- --------- ---------
</TABLE>
Ex. 10.98
December 2, 1998
STRICTLY CONFIDENTIAL
Independent Directors
Board of Directors
Brylane Inc.
463 Seventh Avenue, 21st Floor
New York, New York
Over the past year during which Pinault-Printemps-Redoute S.A.
("PPR") first became interested in, and then acquired a significant
stake in, Brylane Inc. ("Brylane"), we have developed a growing
appreciation for the business, operations, management and catalogs of
Brylane. PPR believes, as it has since its original purchase of Brylane
shares, that Brylane can be an important element in PPR's future
international growth plans. PPR continues to have confidence in the
future performance of Brylane, its strategic direction and its current
management despite the recent disappointing operating results. We
believe that Brylane faces an increasingly difficult business
environment, with many challenging competitors, some of whom are parts
of significantly larger, well-capitalized companies. As such, PPR has
now concluded that its corporate goals would be better served if it
owned all of the equity interest in Brylane and PPR believes that
Brylane, and its various constituencies, would be better served if
Brylane were to cease being a public company subject to the vagaries
and volatility of the public equity markets.
In light of current market and economic conditions, we are
pleased that the independent directors of Brylane have consented,
pursuant to the terms of the Governance Agreement currently in effect
between PPR and Brylane, to allow PPR to make, and the independent
directors to consider and evaluate, a proposal from PPR to acquire all
of the publicly held shares of Brylane common stock
Accordingly, on behalf of PPR, we are pleased to make the
following proposal to acquire all of the outstanding common shares of
Brylane not currently owned by PPR (the "Public Shares"). The principal
terms of our proposal are as follows:
1. Our proposal would result in all holders of Public Shares
receiving $20 per share in cash. The transaction would involve an
aggregate payment of approximately $172.5 million to the holders of
Public Shares, based on the 8,623,872 Public Shares we understand to be
outstanding.
2. Initiation of the transaction would be subject to, among other
things, approval by the Board of Directors of Brylane, including the
approval of a majority of the independent directors, as required by the
Governance Agreement, execution of a definitive agreement, and other
conditions customary in transactions of this type.
3. The transaction would be financed through PPR's available cash
and committed facilities and would not be conditioned upon financing.
4. The acquisition transaction would be implemented through a
cash tender offer followed by a merger of a PPR subsidiary into
Brylane, with Brylane as the surviving corporation.
5. The separate identity of Brylane would be continued following
consummation of the transaction for the foreseeable future.
6. Brylane's officers and other employees would continue on their
present terms for the foreseeable future, and we would intend to work
with Brylane management to develop appropriate incentives for Brylane
management and employees, who, as a group, we value highly.
<PAGE>
<PAGE>
We believe that our proposal is at a fair price that reflects
Brylane's historical results and future prospects and that consummation
of our proposed transaction would be in the best interest of Brylane
and its public stockholders. Our proposed acquisition price of $20 per
share represents an 18.5% premium over yesterday's closing price for
Brylane and a 27.8% and 16.0% premium over the average of Brylane's
closing prices for the past 30 and 60 trading days, respectively.
We would like to make it clear that PPR is not interested,
under any circumstances, in selling its 49.9% interest in Brylane owned
by PPR. Together with its affiliates, PPR owns approximately 50.1% of
Brylane's common stock (based upon the 17,240,889 shares of Brylane
common stock we understand to be outstanding as of November 28, 1998)
and, thus, there is no realistic prospect of sale of a controlling
interest in Brylane to a third party. Therefore, if we are not able to
consummate the proposal at a reasonable price we currently intend to
continue to be long-term stockholders of Brylane.
We understand that this proposal will be considered by a
special committee of independent directors of Brylane, as required by
the Governance Agreement, and that such committee will wish to retain
its own financial and legal advisors to assist in those deliberations.
We invite such representatives to meet with our advisors to discuss
this proposal at your earliest convenience. As required under federal
securities laws, this proposal will be made public through a Schedule
13D filing with the SEC, and we will be issuing a press release later
today to facilitate dissemination of the information in this letter.
We hope you will view our proposal favorably and give it your
prompt attention. We reserve the right to amend or withdraw this
proposal at any time in our discretion.
We look forward to hearing from you soon.
Sincerely,
/s/ Serge Weinberg /s/ Hartmut Kramer
Serge Weinberg Hartmut Kramer
Chairman and Chief Executive Officer Member of Executive Board
Pinault-Printemps-Redoute, S.A. Pinault-Printemps-Redoute, S.A.
Chief Executive Officer
La Redoute S.A.
Ex. 10.99
For: Brylane Inc.
Contact: Robert A. Pulciani
Chief Financial Officer
(212) 613-9536
For Immediate Release Christine DiSanto/Amanda Mullin
- ----------------------- Morgen-Walke Associates
(212) 850-5600
Media: Stacy Berns/Lauren Gargano
Morgan-Walke Associates
(212) 850-5600
BOARD OF DIRECTORS OF BRYLANE INC. FORMS SPECIAL COMMITTEE TO
EVALUATE PROPOSAL OF PINAULT-PRINTEMPS-REDOUTE S.A. TO PURCHASE
BRYLANE SHARES NOT CURRENTLY OWNED
New York, New York, December 2, 1998 -- Brylane Inc. (NYSE:BYL) announced
that its Board of Directors has formed a special committee of the Board,
comprised of the three independent directors of Brylane, to evaluate a proposal
announced earlier today by Pinault-Printemps-Redoute S.A. ("PPR"), a publicly
traded speciality retailer listed on the Paris Bourse (PRTP.PA), to acquire all
of the outstanding shares of Brylane not owned by PPR for a price of $20 per
share. PPR currently owns approximately 49.9% of the outstanding Brylane common
stock.
Brylane Inc. is the nation's leading specialty catalog retailer of
value-priced apparel, with a focused portfolio of catalogs that includes Lane
Bryant, Roaman's, Jessica London and KingSize, serving the special size apparel
market, and Chadwick's of Boston, Lerner, Bridgewater and Brett serving the
regular-size apparel market. In addition, the Company's home catalog, introduced
in September 1998, offers value-priced home products. Brylane also markets
certain of its catalogs under the "Sears" name to customers of Sears, Roebuck
and Co. Under an exclusive licensing arrangement with Sears Shop at Home
Services, Inc. Brylane is headquartered in New York and has facilities in
Indiana, Massachusetts and Texas.
Ex. 10.100
IMMEDIATE RELEASE
CONTACTS:
Ruth Pachman or Roy Winnick
Kekst and Company
212-521-4891 or 4842
PINAULT-PRINTEMPS-REDOUTE S.A. PROPOSES ACQUISITION OF OUTSTANDING
SHARES OF BRYLANE INC. WHICH IT DOES NOT OWN FOR $20 PER SHARE
Paris, December 2, 1998 - Pinault-Printemps-Redoute S.A. ("PPR"),
a publicly traded specialty retailer listed on the Paris Bourse
(PRTP.PA), today announced that it has made a proposal to the
independent directors of the Board of Directors of Brylane Inc.
(NYSE: BYL) regarding the acquisition of all remaining outstanding
shares of Brylane not owned by PPR for $20 per share. The letter
reflecting PPR's proposal which was sent to the independent directors
of Brylane is attached.
PPR currently owns approximately 49.9% of the outstanding Brylane
common stock. Affiliates of PPR own an additional approximately 0.2% of
the Brylane common stock. At a price per share of $20, the aggregate
value of the transaction would be approximately $172.5 million to
acquire the shares of common stock not already owned by PPR. The $20
per share purchase price represents a premium of approximately 18.5% to
yesterday's closing price and 27.8% and 16.0% premium over the average
of the closing prices of Brylane common stock on the New York Stock
Exchange over the past 30 trading days and 60 trading days,
respectively.
PPR's proposal is subject to the approval of the Board of
Directors of Brylane, including the approval of a majority of the
independent directors on the Brylane Board, and other conditions
customary in transactions of this type. The proposed offer is not
conditioned on financing.
"We believe that this transaction will better position Brylane
to pursue future business and growth opportunities while allowing PPR
to capitalize upon cross-border opportunites in the specialty catalog
sector in a more effective manner," said Serge Weinberg, Chairman of
the Executive Board of PPR. "Although we believe that Brylane faces
many challenging competitors, PPR has concluded that its corporate
goals would be better served if it owned all of the outstanding equity
in Brylane."
PPR also stated in its proposal to the Brylane Board that PPR is
not interested, under any circumstances, in selling its interest in
Brylane. Moreover, PPR reserves the right to amend or withdraw the
proposal at any time in its discretion.
Brylane is the nation's leading specialty catalog retailer of
value-priced apparel, with a focused portfolio of catalogs that
includes Lane Bryant, Roaman's, Jessica London and KingSize, serving
the special size apparel market, and Chadwick's of Boston, Lerner,
Bridgewater and Brett serving the regular-size apparel market. In
addition, the Company's home catalog, introduced in September 1998,
offers value-priced home products. Brylane also markets certain of
its catalogs under the "Sears" name to customers of Sears, Roebuck and
Co. under an exclusive licensing arrangement with Sears Shop at Home
Services, Inc. Brylane is headquartered in New York and has facilities
in Indiana, Massachusetts and Texas.
Headquartered in Paris, PPR operates several different specialized
retail chains that sell a wide range of consumer goods. PPR's principal
chains include Printemps (general merchandise), Conforama (furniture,
household electronic goods and appliances) and Fnac (records, books,
computers and consumer electronics). Through La Redoute, PPR is
Europe's third largest mail order company.
* * *
This press release is not an offer or the solicitation of an offer
to buy any securities of Brylane, and no such offer or solicitation
will be made except in compliance with applicable securities laws.
Information Concerning Forward- Looking Statements: This press
release contains forward-looking statements as defined by the federal
securities laws and are based on PPR's current expectations and
assumptions, which are subject to a number of risks and uncertainties
that could cause actual results to differ materially from those
anticipated, projected or implied. Certain factors that could cause
actual results to differ are indicated in Brylane's filings with the
Securities and Exchange Commission.
Exhibit 11. Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
BRYLANE INC.
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
October 31, 1998 November 1, 1997 October 31, 1998 November 1, 1997
----------------- ----------------- ----------------- -----------------
Computation of Basic Earnings Per Share
- ------------------------------------------------
Net income $ (5,734) $ 16,848 $ 18,547 $ 32,972
Weighted average number of basic shares
outstanding 17,888,736 19,178,347 18,073,557 19,373,746
Basic earnings per share $ (0.32) $ 0.88 $ 1.03 $ 1.70
Computation of Diluted Earnings Per Share
- ------------------------------------------------
Net income $ (5,734) $ 16,848 $ 18,547 $ 32,972
Add: Interest on convertible debt, net of
income taxes -- 179 -- 557
----------------- ----------------- ----------------- -----------------
Adjusted net income $ (5,734) $ 17,027 $ 18,547 $ 33,529
Weighted average number of basic shares
outstanding 17,888,736 19,178,347 18,073,557 19,373,746
Add:
Issuance of shares upon conversion of
convertible redeemable preferred stock -- 75,000 32,870 75,000
Incremental shares from assumed exercise
of options 61,020 453,403 204,486 362,789
Issuance of shares upon the conversion
of the convertible note -- 374,365 48,774 374,365
----------------- ----------------- ----------------- -----------------
Total weighted average number of dilutive
shares 17,949,756 20,081,115 18,359,687 20,185,900
Diluted earnings per share $ (0.32) $ 0.85 $ 1.01 $ 1.66
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> AUG-02-1998
<PERIOD-END> OCT-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 38499
<ALLOWANCES> 2098
<INVENTORY> 240936
<CURRENT-ASSETS> 352056
<PP&E> 108389
<DEPRECIATION> 28391
<TOTAL-ASSETS> 766462
<CURRENT-LIABILITIES> 294343
<BONDS> 282500
0
0
<COMMON> 210
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