FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
/ X / Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
/ / Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-25464
DOLLAR TREE STORES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1387365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2555 ELLSMERE AVENUE
NORFOLK COMMERCE PARK
NORFOLK, VIRGINIA 23513
(Address of principal executives office)
TELEPHONE NUMBER (757) 857-4600
(Registrants telephone number, including area code)
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 / /
As of November 1, 1996, there were 25,877,265 shares of the Registrant's Common
Stock outstanding.
<PAGE>
DOLLAR TREE STORES, INC.
and subsidiaries
INDEX
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995........................... 3
Condensed Consolidated Income Statements
Three months and nine months ended September 30, 1996 and 1995..... 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995...................... 5
Notes to Condensed Consolidated Financial Statements................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................... 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 14
Signatures................................................... 15
<PAGE>
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
September 30, December 31,
1996 1995
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents.................... $ 4,121 $ 22,415
Accounts receivable.......................... 2,364 380
Merchandise inventories ..................... 112,439 40,113
Deferred tax asset .......................... 853 720
Prepaid expenses and other current assets ... 4,104 2,392
------- -------
Total current assets..................... 123,881 66,020
------- -------
Property and equipment, net....................... 34,693 23,091
Deferred tax asset................................ 2,750 2,219
Goodwill, net (note 2) ........................... 46,985 --
Other assets, net................................. 730 291
------- -------
TOTAL ASSETS............................. $209,039 $ 91,621
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank........................ $ 36,500 $ --
Accounts payable ............................ 38,369 19,603
Accrued liabilities ......................... 9,957 8,939
Income taxes payable......................... 832 8,244
Current installments of obligations
under capital leases...................... 343 101
------- -------
Total current liabilities................ 86,001 36,887
------- -------
Notes payable to bank,
long-term portion (notes 2 and 3).............. 40,000 --
Senior subordinated notes......................... -- 7,000
Junior subordinated notes......................... -- 7,000
Obligations under capital leases,
excluding current installments................. 956 417
Other liabilities................................. 3,662 1,230
------- -------
Total liabilities........................ 130,619 52,534
------- -------
Shareholders' equity:
Common stock, par value $0.01. Authorized
100,000,000 shares, 25,874,104 issued and
outstanding at September 30, 1996 (note 8).. 259 166
Additional paid-in capital................... 31,608 2,980
Retained earnings............................ 46,553 35,941
------- -------
Total shareholders' equity.................. 78,420 39,087
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.. $209,039 $ 91,621
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1996 1995 1996 1995
-------- ------- -------- --------
Net sales ............... $110,588 $ 67,427 $298,252 $179,045
Cost of sales................ 68,698 41,359 191,633 114,179
------- ------- ------- -------
Gross profit........ 41,890 26,068 106,619 64,866
------- ------- ------- -------
Selling, general, and
administrative expenses:
Operating expenses........ 28,075 17,974 77,843 48,555
Depreciation and
amortization............ 2,681 1,438 7,486 3,911
------- ------- ------- -------
Total selling, general
and administrative
expenses................ 30,756 19,412 85,329 52,466
------- ------- ------- -------
Operating income............. 11,134 6,656 21,290 12,400
Interest expense............. 1,408 791 4,032 1,937
------- ------- ------- -------
Income before income taxes... 9,726 5,865 17,258 10,463
Provision for income taxes... 3,748 2,260 6,646 4,029
------- ------- ------- -------
Net income.......... $ 5,978 $ 3,605 $ 10,612 $ 6,434
======= ======= ======= =======
Net income per share ........ $ 0.21 $ 0.13 $ 0.38 $ 0.23
======= ======= ======= =======
Weighted average number of
common shares and common
share equivalents
outstanding (note 3):
Primary ............ 28,664 27,674 28,191 27,536
Fully diluted....... 28,707 27,723 28,255 27,698
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
DOLLAR TREE STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
----------------------
1996 1995
-------- ---------
Cash flows from operating activities:
Net income........................................ $ 10,612 $ 6,434
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization.................. 7,485 3,911
Loss on disposal of property and equipment .... 258 208
Provision for deferred income taxes............ (664) (403)
Changes in assets and liabilities increasing
(decreasing) cash and cash equivalents,
net of effects resulting from purchase
of Dollar Bills, Inc.:
Accounts receivable......................... (411) 67
Merchandise inventories..................... (56,291) (33,727)
Prepaid expenses and other current assets... (1,527) (545)
Other assets ............................... 267 (39)
Accounts payable............................ 10,971 7,454
Accrued liabilities......................... (1,105) (192)
Income taxes payable........................ (7,412) (5,701)
Other liabilities........................... 57 (463)
-------- --------
Total adjustments.......................... (48,372) (29,046)
-------- --------
Net cash used in operating activities ..... (37,760) (22,612)
-------- --------
Cash flows from investing activities:
Capital expenditures ............................. (12,495) (8,987)
Proceeds from sale of property and equipment...... 23 32
Payment for purchase of Dollar Bills, Inc.,
net of cash acquired............................. (52,209) --
-------- --------
Net cash used in investing activities...... (64,681) (8,955)
-------- --------
Cash flows from financing activities:
Net proceeds from notes payable to bank........... 29,600 28,600
Principal payments under capital
lease obligations................................ (174) (52)
Proceeds from options exercised and purchase
of shares under ESPP............................. 2,902 238
Proceeds from public offering..................... 25,819 --
Proceeds from long-term debt...................... 92,630 --
Repayment of long-term debt....................... (52,630) --
Repayment of senior and junior
subordinated notes............................... (14,000) --
-------- --------
Net cash provided by financing activities.. 84,147 28,786
-------- --------
Net decrease in cash
and cash equivalents.............................. (18,294) (2,781)
Cash and cash equivalents at beginning of period... 22,415 6,016
-------- --------
Cash and cash equivalents at end of period......... $ 4,121 $ 3,235
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
DOLLAR TREE STORES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Dollar Tree Stores, Inc.
and subsidiaries (the "Company") at September 30, 1996, and for the three- and
nine-month periods then ended, are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim period. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations for the year ended December 31,
1995, contained in the Company's Annual Report on Form 10- K. The results of
operations for the three- and nine-month periods ended September 30, 1996 are
not necessarily indicative of the results to be expected for the entire year
ending December 31, 1996.
2. ACQUISITION OF DOLLAR BILLS, INC.
On January 31, 1996, the Company acquired all of the outstanding stock of
Dollar Bills, Inc. ("Dollar Bills" ), formerly known as Terrific Promotions,
Inc., which owned and operated 136 discount variety stores under the name Dollar
Bill$, a distribution center in the Chicago area and a wholesale division. The
acquisition is accounted for by the purchase method of accounting. Amounts shown
in these financial statements include the aggregate purchase price and the
relative fair values of the assets and liabilities of Dollar Bills. The Company
financed the acquisition through borrowings under a development facility with
its commercial lenders, which, together with its working capital facility, was
refinanced into a $135 million revolving credit facility on September 27, 1996
(see note 3).
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight line basis over 25 years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
organization.
3. LONG-TERM DEBT
On September 27, 1996, the Company entered into a credit agreement with its
banks which provides for a $135 million revolving credit facility to be used for
working capital, letters of credit, and development needs, bearing interest at
the agent bank's prime rate or LIBOR plus a spread, at the Company's option.
Currently, the interest rate is approximately 6.6%. The credit facility is
secured by the Company's assets. The agreement, among
6
<PAGE>
other things, requires the maintenance of certain specified ratios, restricts
the amount of capital expenditures, restricts the payments of cash dividends and
other distributions, prohibits the incurrence of certain new indebtedness,
prohibits a change in control, and establishes certain minimum beneficial
ownership requirements of the founding shareholders. The maturity date of the
facility is May 31, 2000. The facility must be paid down to a specified amount
for at least 30 consecutive days at any time between December 1 and March 1 of
each year. For 30 days during the period from December 1, 1996 to March 1, 1997,
the facility must be paid down to $40 million.
4. STOCK SPLIT AND NET INCOME PER SHARE
In connection with a stock dividend authorized by the Board of Directors,
the Company issued one-half share for each outstanding share of Common Stock,
payable April 19, 1996 to shareholders of record as of April 5, 1996. All share
and per share data in these financial statements and accompanying notes have
been retroactively adjusted to reflect this dividend, having the effect of a
three-for-two stock split.
Primary net income per share has been computed by dividing net income by
the weighted average number of common shares and common share equivalents
outstanding. Common share equivalents include the weighted average number of
outstanding stock options and warrants after applying the treasury method. The
market price used in applying the treasury method was $15.00 per share, restated
to $10.00 per share due to the stock split, through March 6, 1995 and the
closing market price of the stock at the end of each week thereafter.
The fully diluted computation was based on the greater of the average
market price of the stock at the end of each week in the period or the market
price at the end of the period. Net income per share was the same using either
primary or fully diluted shares and share equivalents. All amounts have been
adjusted to reflect the stock split.
5. STOCK OPTION PLAN, STOCK INCENTIVE PLAN, EMPLOYEE STOCK PURCHASE PLAN AND
UNATTACHED WARRANTS
The Company maintains a stock option plan ("SOP") which was established on
December 16, 1993 and a stock incentive plan ("SIP") which was established on
January 1, 1995. No additional shares may be granted under the SOP and, under
the terms of the SIP, options for no more than 270,000 shares of common stock
may be granted in any calendar year.
At September 30, 1996 and 1995, options for the following numbers of shares
(restated for the stock split) were outstanding under each plan:
Options for Shares Outstanding at Exercise
PLAN September 30, 1996 September 30, 1995 Price/Range
---- ------------------ ------------------ -------------
SOP........ 342,456 613,254 $ 2.90
SIP........ 480,091 178,950 $10.00 - 33.50
The options above include options for 227,735 shares, net of lapses and
cancellations, granted during the second quarter of 1996 and 9,500 shares
7
<PAGE>
granted during the third quarter of 1996 which are not included in the earnings
per share calculation.
On January 1, 1995, the Company also established The Dollar Tree Stores,
Inc. Employee Stock Purchase Plan (the "ESPP"). The Company reserved 225,000
shares of common stock for future issuance under the ESPP. The ESPP enables
eligible employees, as defined in the ESPP, to buy shares of common stock for
85% of fair market value on the first day or the last day of the applicable
offering period, whichever is lower. As of November 8, 1996, 9,168 shares
(post-split) have been purchased under the ESPP.
Additionally, in 1993 and 1994, the Company issued unattached warrants to
purchase a total of 2,482,178 shares of Common Stock to certain shareholders.
These warrants carry an exercise price of $1.93 and may be exercised upon the
occurrence of certain events.
The Company adopted the provisions of SFAS No. 123, Accounting for Stock-
Based Compensation, as of January 1, 1996.
6. REGISTRATION STATEMENT FILED ON FORM S-3
The Company sold 750,000 shares of Common Stock on June 10, 1996, pursuant
to a registration statement filed on Form S-3 under the Securities Act of 1933.
In connection with this offering, the Company received approximately $25.3
million, net of offering expenses. The Company used the proceeds of the offering
to repay its 9% Senior and Junior Subordinated Notes and pay down its
development facility.
7. DOLLAR TREE STORES, INC. AND SUBSIDIARIES AND DOLLAR BILLS INC. UNAUDITED
CONDENSED CONSOLIDATED PROFORMA INCOME STATEMENT
The following unaudited pro forma financial information of the Company is
based on the historical Consolidated Financial Statements of the Company for the
year ended December 31, 1995 and for the nine months ended September 30, 1996
adjusted to give effect to the Company's acquisition of Dollar Bills on January
31, 1996. The unaudited pro forma condensed consolidated income statements for
the year ended December 31, 1995 and the nine months ended September 30, 1996
give effect to the transactions described as if they had occurred on January 1,
1995 and January 1, 1996, respectively. The pro forma adjustments are based upon
currently available information and upon certain assumptions that management of
the Company believes are reasonable. Final purchase adjustments may differ from
the pro forma adjustments herein. The pro forma financial information is
presented for informational purposes and does not purport to represent what the
Company's actual results of operations would have been if the transaction
described had been consummated on January 1, 1995 (for the year ended December
31, 1995) or on January 1, 1996 (for the nine months ended September 30, 1996).
The pro forma financial information should be read in conjunction with the
related Notes, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and the Consolidated Financial Statements of the Company
and the Notes thereto and the Financial Statements of Dollar Bills and
8
<PAGE>
the Notes thereto incorporated by reference.
The acquisition of Dollar Bills has been accounted for by the purchase
method of accounting. Accordingly, the Company established new accounting basis
for the assets and liabilities of Dollar Bills based upon the relative fair
values thereof and the aggregate purchase price paid by the Company. These
values are reflected in the Company's September 30, 1996 condensed consolidated
balance sheet.
The unaudited pro forma condensed consolidated income statements do not
purport to be indicative of the results that would have occurred had the
transaction taken place at the beginning of the period presented or of future
results.
<TABLE>
<CAPTION>
Unaudited Pro Forma Condensed Consolidated Income Statements
(In thousands except per share data)
For the Year Ended December 31, 1995 For the Nine Months Ended September 30, 1996
----------------------------------------------- -----------------------------------------------------
Pro Forma Pro Forma
The Company Dollar Bills Adjustments Pro Forma The Company Dollar Bills(1) Adjustments Pro Forma
----------- ------------ ----------- --------- ----------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales.......... $300,229 $103,850 $404,079 $298,252 $ 6,482 $304,734
Gross profit....... 112,679 27,497 140,176 106,619 1,803 108,422
Selling, general &
administrative
expenses......... 75,967 22,201 (4,004)(2) 96,144 85,329 2,613 (529)(2) 87,572
1,980 (3) 159 (3)
Operating income
(loss)........... 36,712 5,296 44,032 21,290 (810) 20,850
Interest expense... 2,618 505 3,850 (4) 6,973 4,032 50 324 (4) 4,406
Income (loss) before
income taxes..... 34,094 4,791 37,059 17,258 (860) 16,444
Provision for
income taxes..... 13,127 178 963 (5) 14,268 6,646 (26) (288)(5) 6,332
Net income (loss).. $ 20,967 $ 4,613 $ 22,791 $10,612 $ (834) $10,112
======== ======== ======== ======== ======== ========
Net income
per share(6)..... $ 0.76 $ 0.83 $ 0.38 $ 0.36
======== ======== ======== ========
Weighted average
number of common
shares and common
share equivalents
outstanding:..... 27,589 27,589 28,191 28,191
======== ======== ======== ========
</TABLE>
(1) Represents January 1996 results of Dollars Bills. The Company acquired
Dollars Bills on January 31, 1996 and accordingly the Company's income statement
for the nine months ended September 30, 1996 includes the results of the
acquired business beginning February 1, 1996.
(2) Represents the elimination of duplicative operating costs associated
9
<PAGE>
with Dollar Bills corporate headquarters and distribution facility.
(3) Represents amortization of goodwill recognized in connection with the
acquisition of Dollar Bills which is being amortized by the Company over a 25
year period.
(4) Represents interest expense related to the borrowings under the
Company's development facility used to fund the acquisition.
(5) Represents income taxes related to the conversion of Dollars Bills to a
C Corporation at an assumed effective tax rate of 38.5%.
(6) Net income per common share and pro forma income per common share is
computed by dividing net income and pro forma net income by the weighted average
number of common shares and common share equivalents outstanding. Common share
equivalents include all outstanding stock options and warrants after applying
the treasury stock method.
NOTE 8. INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
On July 23, 1996, the shareholders of the Company approved an increase in
authorized shares of Common Stock from 50,000,000 to 100,000,000 shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS AND GENERAL COMMENTS
Net sales increased $43.2 million, or 64.0%, to $110.6 million for the
three months ended September 30, 1996, from $67.4 million for the three months
ended September 30, 1995. Of this increase, (i) approximately 59.6%, or $25.7
million, was attributable to the acquisition of 136 Dollar Bill$ stores on
January 31, 1996, (ii) approximately 34.1%, or $14.8 million, was attributable
to stores opened in 1995 and 1996 which are not included in the Company's
comparable store net sales calculation, and (iii) approximately 6.3%, or $2.7
million, was attributable to comparable store net sales growth, which
represented a 4.3% increase over comparable store net sales in the corresponding
quarter of the prior period. Dollar Bill$ stores are not included in the
comparable store net sales calculation. Because substantially all the Company's
products sell for $1.00, the increase in comparable store net sales was a direct
result of increased unit volume. The Company opened 26 new stores during the
third quarter of 1996; the same number of stores (26) was opened during the
third quarter of 1995.
Management anticipates that the primary source of future sales growth will
be new store openings and, to a lesser degree, sales increases from expanded and
relocated stores and comparable store net sales increases. Although the Company
has experienced significant increases in comparable store net sales
historically, management expects that any increases in comparable store net
10
<PAGE>
sales in the future will be smaller than those experienced historically.
Gross profit, which consists of net sales less cost of sales (including
distribution and certain occupancy costs), increased $15.8 million, or 60.7%, to
$41.9 million in the third quarter of 1996 from $26.1 million in the third
quarter of 1995. As a percentage of net sales, gross profit decreased to 37.9%
from 38.7%, primarily due to increases in merchandise costs (including freight),
inventory shrinkage and markdowns, offset by slight decreases in occupancy and
distribution costs as a percentage of net sales. Higher inventory shrinkage
resulted from physical inventories completed at approximately half of the 136
Dollar Bill$ stores, which experience greater shrinkage than seen in the Dollar
Tree stores. Increased markdowns during the third quarter of 1996 compared to
the third quarter of 1995 are due to a difference in timing of markdowns and
continued merchandise clearance in the Dollar Bill$ stores. Year-to-date,
inventory shrinkage and markdowns as a percentage of sales are consistent with
last year.
Selling, general and administrative expenses, which include operating
expenses and depreciation and amortization, increased $11.3 million, or 58.4%,
to $30.8 million in the third quarter of 1996 from $19.4 million in the third
quarter of 1995, and decreased as a percentage of net sales to 27.8% from 28.8%
during the same period. This decrease resulted primarily from hourly payroll
costs savings due to controls instituted during the first quarter. In the fourth
quarter, management expects, but there can be no assurances, that any payroll
savings will be sufficient to offset the minimum wage increase which became
effective October 1, 1996. During the third quarter of 1996, the Company's
operating expenses increased by approximately $0.3 million due to costs and
expenses incurred in connection with the Dollar Bills litigation and
integration. Amortization of goodwill relating to the acquisition amounted to
$0.5 million for the third quarter of 1996.
Operating income increased $4.5 million, or 67.3%, to $11.1 million for the
third quarter of 1996 from $6.7 million for the comparable period in 1995, and
increased as a percentage of net sales to 10.1% from 9.9% during the same period
for the reasons noted above.
INTEREST EXPENSE
Interest expense increased $0.6 million in the third quarter of 1996
compared to the third quarter of 1995 to $1.4 million from $0.8 million during
the same period. This increase is primarily a result of borrowings under the
Company's development facility in connection with the Dollar Bills acquisition,
and the amortization of deferred financing costs relating thereto.
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS AND GENERAL COMMENTS
Net sales increased $119.2 million, or 66.6%, to $298.3 million for the
nine months ended September 30, 1996, from $179.0 million for the nine months
ended September 30, 1995. Of this increase, (i) approximately 55.1%, or $65.7
11
<PAGE>
million, was attributable to the acquisition of 136 Dollar Bill$ stores on
January 31, 1996, (ii) approximately 37.4%, or $44.6 million, was attributable
to stores opened in 1995 and 1996 which are not included in the Company's
comparable store net sales calculation, and (iii) approximately 7.5%, or $8.9
million, was attributable to comparable store net sales growth, which
represented a 5.4% increase over comparable store net sales in the corresponding
quarter of the prior period. Dollar Bill$ stores are not included in the
comparable store net sales calculation. Because substantially all the Company's
products sell for $1.00, the increase in comparable store net sales was a direct
result of increased unit volume. The Company opened 79 new stores and closed
three stores during the first nine months of 1996 compared to opening 71 new
stores and closing two stores during the first nine months of 1995.
Gross profit, which consists of net sales less cost of sales (including
distribution and certain occupancy costs), increased $41.8 million, or 64.4%, to
$106.6 million in the first nine months of 1996 from $64.9 million in the first
nine months of 1995. As a percentage of net sales, gross profit decreased to
35.7% from 36.2%, primarily due to increased sales of domestic and consumable
products, which generally carry a lower merchandise margin, partially offset by
a decrease in freight costs, as domestic freight is less costly than foreign
freight, and slight decreases in occupancy and distribution costs as a
percentage of net sales. Management expects that the Company's product mix will
continue to contain a higher proportion of domestic products, due to the
addition of Dollar Bill$ stores and the introduction of more domestic goods in
existing stores.
Selling, general and administrative expenses, which include operating
expenses and depreciation and amortization, increased $32.9 million, or 62.6%,
to $85.3 million in the first nine months of 1996 from $52.5 million in the
first nine months of 1995, and decreased as a percentage of net sales to 28.6%
from 29.3% during the same period. This decrease resulted primarily from hourly
payroll costs savings, partially offset by transactional costs and expenses,
including the amortization of goodwill, incurred with the purchase of Dollar
Bills. During the first nine months of 1996, the Company's operating expenses,
excluding amortization, increased by approximately $2.4 million due to costs and
expenses incurred in connection with the Dollar Bills acquisition and
litigation. Amortization of goodwill relating to the acquisition amounted to
$1.3 million for the first nine months of 1996.
Operating income increased $8.9 million, or 71.7%, to $21.3 million for the
first nine months of 1996 from $12.4 million for the comparable period in 1995,
and increased as a percentage of net sales to 7.1% from 6.9% during the same
period for the reasons noted above.
INTEREST EXPENSE
Interest expense increased $2.1 million in the first nine months of 1996
compared to the first nine months of 1995 to $4.0 million from $1.9 million
during the same period. This increase is primarily a result of borrowings under
the Company's development facility in connection with the Dollar Bills
acquisition, and the amortization of deferred financing costs relating
12
<PAGE>
thereto.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements result primarily from capital
expenditures related to new store openings and working capital requirements
related to new and existing stores. The Company's working capital requirements
for existing stores are seasonal in nature and typically reach their peak near
the end of the third and the beginning of the fourth quarter of the year.
Historically, the Company has met its seasonal working capital requirements for
its existing stores and funded its store expansion program from internally
generated funds and borrowings under its credit facilities.
During the first nine months of 1996 and 1995, net cash used in operations was
$37.8 million and $22.6 million, respectively, primarily used to build inventory
levels. During the first nine months of 1996 and 1995, net cash used in
investing activities was $64.7 million and $9.0 million, respectively, the
increase consisting primarily of payment for the acquisition of Dollar Bills in
1996 and payment for capital expenditures in both years. Net cash provided by
financing activities was $84.1 million and $28.8 million during the first nine
months of 1996 and 1995, the increase primarily attributable to borrowings
incurred to fund the acquisition of Dollar Bills in January 1996 and to capital
raised during a public offering completed in June, 1996.
On September 27, 1996, the Company replaced its existing working capital and
development facilities with a new $135.0 million revolving credit facility. The
Company's borrowings under its bank facilities were $76.5 million at September
30, 1996, and $28.6 million at September 30, 1995. There were no amounts
outstanding at December 31, 1995. Under the Company's new bank facilities, an
additional $58.5 million is available at September 30, 1996 (see note 3).
PART II . OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 30, 1996, the Company filed a motion to dismiss the lawsuit
previously filed against the Company in the United States District Court for the
Northern District of Illinois, Eastern Division by the former owners of Dollar
Bill$ and a corporation they control; the lawsuit was previously reported in the
Company's Forms 10-Q for the periods ended March 31 and June 30, 1996. The
Company emphatically denies the Plaintiffs' claims and will continue to defend
itself vigorously in this matter.
This litigation is in its early stages and discovery is not yet completed;
however, based on management's understanding of the facts as developed in
discovery (which facts are contested by the Plaintiffs) and the advice of its
litigation counsel for this matter in reliance on such facts, the Company
believes that it is unlikely that the Plaintiffs will ultimately prevail on the
merits of this litigation. Accordingly, the Company believes that the
13
<PAGE>
ultimate outcome of this matter will not have a material adverse effect on the
Company's results of operations or financial condition. Nevertheless,
particularly in light of the contested factual circumstances, there can be no
assurances regarding the ultimate outcome of this litigation or that this
litigation will not have a material adverse effect on the Company's results of
operations or financial condition. In any event, the litigation has diverted,
and is expected to continue to divert, the efforts and attention of the
Company's management.
As reported in the 10-Q for the second quarter of 1996, the Company
terminated its relationship with a Hong Kong trading company that had obtained
payment on a number of letters of credit issued on the Company's behalf by
falsely claiming that conforming goods had been shipped, when in fact the
trading company had either shipped non-conforming goods or empty containers. All
undrawn irrevocable letters of credit issued to that trading company have now
reached their expiry date. Although there can be no assurances in this regard,
the Company believes it is unlikely that its losses in connection with this
matter will exceed its previously established reserves.
Additionally, the Company is a party to ordinary routine litigation and
proceedings incidental to its business, including certain matters which may
occasionally be asserted by the U.S. Consumer Product Safety Commission, none of
which is individually or in the aggregate material to the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Amended and Restated Revolving Credit Agreement (the "Credit
Agreement") among the Company, Dollar Tree Distribution, Inc.,
Dollar Tree Management, Inc., and The First National Bank of
Boston, NationsBank, N.A., Signet Bank, Crestar Bank, First Union
National Bank of Virginia, Amsouth Bank of Alabama, and Union Bank
of California, N.A. (collectively, the "Banks").
10.2 Schedule 1 to Credit Agreement.
10.3 Form of Revolving Credit Note between Dollar Tree Distribution, Inc.
as maker and the Banks.
10.4 Amendment and Ratification of Security Agreement by and between
the Company and The First National Bank of Boston as agent for the
Banks.
10.5 Amendment and Ratification of Security Agreement by and between
Dollar Tree Distribution, Inc. and The First National Bank of Boston
as agent for the Banks.
10.6 Amendment and Ratification of Security Agreement by and between
Dollar Tree Management and The First National Bank of Boston as agent
for the Banks.
10.7 Unlimited Guaranty by the Company.
14
<PAGE>
10.8 Unlimited Guaranty by Dollar Tree Management, Inc.
10.9 Amendment and Ratification of Negative Pledge Agreement by and
between the Company and The First National Bank of Boston as agent
for the Banks.
10.10 Amendment and Ratification of Negative Pledge Agreement by and
between certain shareholders of the Company and The First National
Bank of Boston as agent for the Banks.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarter.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATE: November 11, 1996
DOLLAR TREE STORES, INC.
By: /s/ H. Ray Compton
-----------------------
H. Ray Compton
Executive Vice President and
Chief Financial Officer
(principal financial and accounting officer)
15
EXHIBIT 10.1
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
among
DOLLAR TREE DISTRIBUTION, INC.
DOLLAR TREE STORES, INC.
DOLLAR TREE MANAGEMENT, INC.
and
THE FIRST NATIONAL BANK OF BOSTON
NATIONSBANK, N.A.
SIGNET BANK
CRESTAR BANK
FIRST UNION NATIONAL BANK OF VIRGINIA
AMSOUTH BANK OF ALABAMA
UNION BANK OF CALIFORNIA, N.A.
and
THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT
Dated as of September 27, 1996
-----------------
-----------------------------------------------------------------
-----------------------------------------------------------------
1
<PAGE>
TABLE OF CONTENTS
Title
Section Page
SECTION 1 DEFINITIONS.......................................................10
Section 1.1. Definitions...............................................10
Section 1.2. Rules of Interpretation...................................27
Section 2. THE LOANS.........................................................27
Section 2.1. Commitment to Make Revolving Credit
Loans...................................................27
Section 2.2. Reduction of Revolving Credit Commitment..................28
Section 2.3. The Revolving Credit Notes................................28
Section 2.4. Interest on Revolving Credit Loans........................29
Section 2.5. Requests for Revolving Credit Loans.......................29
Section 2.6. Maturity..................................................30
Section 2.7. Mandatory Repayments of Revolving Credit Loans............30
Section 2.8. Voluntary Repayments of Revolving Credit Loans............30
Section 2.9. Conversion Options........................................30
Section 2.10. Funds for Loans...........................................31
Section 3. LETTERS OF CREDIT................................................32
Section 3.1. Establishment of Letter of Credit Sublimits...............32
Section 3.2. Letter of Credit Fees.....................................33
Section 3.4. Effect of Drawing Under Letter of Credit..................33
Section 3.5. Requests for Issuance of Letters of Credit................34
Section 3.6. Indemnity.................................................34
Section 3.7. Letter of Credit Participation and Certain Payments.......35
Section 3.8. Additional Provisions Relating to Letters of Credit.......36
Section 4. CERTAIN GENERAL PROVISIONS..................................... 38
Section 4.1. Agent's Fee...............................................38
Section 4.2 Facility Fees.............................................38
Section 4.3. Funds for Payments........................................38
Section 4.4. Computations..............................................39
Section 4.5. Inability to Determine LIBOR Rate.........................39
Section 4.6. Illegality................................................39
Section 4.7. Additional Costs, Etc.....................................40
Section 4.8. Capital Adequacy..........................................41
Section 4.9. Certificate...............................................41
Section 4.10. Indemnity.................................................41
Section 4.11. Interest After Default....................................42
2
<PAGE>
Section Page
Section 5. COLLATERAL SECURITY..............................................42
Section 5.1. Collateral................................................42
Section 5.2. Intercompany Receivables, Chattel Paper,
Contract Rights....................................43
Section 6. REPRESENTATIONS AND WARRANTIES...................................43
Section 6.1. Corporate Authority; Etc..................................43
Section 6.2. Governmental Approvals....................................44
Section 6.3. Title to Properties; Leases...............................44
Section 6.4. Solvency; Financial Statements............................44
Section 6.5. No Material Changes, Etc..................................45
Section 6.6. Franchises, Patents, Copyrights, Etc......................45
Section 6.7. Litigation................................................45
Section 6.8. No Materially Adverse Contracts, Etc......................46
Section 6.9. Compliance With Other Instruments, Laws, Etc. ............46
Section 6.10. Tax Status................................................46
Section 6.11. No Event of Default.......................................46
Section 6.12. Holding Company and Investment Company Acts...............46
Section 6.13. Absence of UCC Financing Statements, Etc..................46
Section 6.14. Setoff, Etc...............................................47
Section 6.15. Certain Transactions......................................47
Section 6.16. Employee Benefit Plans; Multiemployer
Plans; Guaranteed Pension Plans.........................47
Section 6.17. Regulations U and X.......................................47
Section 6.18. Environmental Compliance..................................48
Section 6.19. Subsidiaries..............................................48
Section 6.20. Loan Documents............................................48
Section 6.21. Trade Names...............................................48
Section 6.22. Stock Ownership and Pledge................................49
Section 7. AFFIRMATIVE COVENANTS............................................49
Section 7.1. Punctual Payment..........................................49
Section 7.2. Maintenance of Office.....................................49
Section 7.3. Records and Accounts......................................49
Section 7.4. Financial Statements, Certificates and Information........49
Section 7.5. Notices...................................................51
Section 7.6. Existence; Maintenance of Properties......................52
Section 7.7. Insurance.................................................52
Section 7.8. Taxes.....................................................52
Section 7.9. Inspection of Properties and Books........................53
Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits....53
Section 7.11. Use of Proceeds...........................................53
Section 7.12. ERISA Compliance..........................................54
Section 7.13. Bank Accounts.............................................54
Section 7.14. Further Assurances........................................54
3
<PAGE>
Section Page
Section 8. CERTAIN NEGATIVE COVENANTS.......................................54
Section 8.1. Restrictions on Indebtedness..............................54
Section 8.2. Restrictions on Liens, Etc................................55
Section 8.3. Restrictions on Investments...............................56
Section 8.4. Merger, Consolidation.....................................56
Section 8.5. Sale and Leaseback........................................57
Section 8.6. Compliance with Environmental Laws........................57
Section 8.7. Distributions.............................................57
Section 8.8. Subsidiaries..............................................57
Section 8.9. Fiscal Year...............................................57
Section 8.10. Loans and Advances........................................57
Section 8.11. Transactions with Affiliates..............................58
Section 8.12. Stock Ownership...........................................58
Section 8.13. Amendments to Organizational Documents....................58
Section 9. FINANCIAL COVENANTS OF THE BORROWER..............................58
Section 9.1. Tangible Net Worth........................................58
Section 9.2. Funded Debt to EBITDA Ratio...............................59
Section 9.3. Operating Cash Flow to Debt Service Ratio.................59
Section 9.4. Maximum Capital Expenditures..............................59
Section 9.5. Inventory Reliance........................................59
Section 9.6. Current Ratio.............................................60
Section 9.7. Solvency..................................................60
Section 10. CLOSING CONDITIONS..............................................60
Section 10.1. Loan Documents............................................61
Section 10.2. Certified Copies of Organization Documents................61
Section 10.3. By-laws; Resolutions......................................61
Section 10.4. Incumbency Certificate; Authorized Signers................61
Section 10.5. Validity of Liens.........................................61
Section 10.6. Opinion of Counsel Concerning
Organization and Loan Documents.........................61
Section 10.7. Payment of Fees...........................................62
Section 10.8. Resignation of Nationsbank, N.A...........................62
Section 10.9. Officers' Certificate.....................................62
Section 10.10. Negative Pledge...........................................62
Section 10.11. Projections...............................................62
Section 10.12. Additional Documents......................................62
Section 11. CONDITIONS TO ALL BORROWINGS AND ISSUANCE OF LETTERS OF CREDIT...62
Section 11.1. Representations True; No Event of Default.................62
Section 11.2. No Legal Impediment.......................................63
Section 11.3. Governmental Regulation...................................63
Section 11.4. Proceedings and Documents.................................63
Section 11.5 No Material Adverse Change................................63
4
<PAGE>
Section Page
Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC.............................63
Section 12.1. Events of Default and Acceleration........................63
Section 12.2. Termination of Commitments................................66
Section 12.3. Remedies..................................................67
Section 12.4. Performance by Lenders....................................67
Section 12.5. Distribution of Collateral Proceeds.......................67
Section 13. SETOFF...........................................................68
Section 14. THE AGENT........................................................69
Section 14.1. Authorization.............................................69
Section 14.2. Employees and Agents......................................69
Section 14.3. No Liability..............................................69
Section 14.4. No Representations........................................70
Section 14.5. Payments..................................................70
Section 14.6. Holders of Notes..........................................71
Section 14.7. Indemnity.................................................71
Section 14.8. Agent as Lender...........................................72
Section 14.9. Resignation...............................................72
Section 14.10. Notification of Defaults and Events of Default............72
Section 14.11. Duties in the Case of Enforcement.........................72
Section 15. EXPENSES.........................................................73
Section 16. INDEMNIFICATION..................................................73
Section 17. SURVIVAL OF COVENANTS, ETC.......................................75
Section 18. ASSIGNMENT AND PARTICIPATION.....................................75
Section 18.1. Conditions to Assignment by Lenders......................75
Section 18.2. Certain Representations and Warranties;
Limitations; Covenants..................................76
Section 18.3. Register.................................................77
Section 18.4. New Notes................................................77
Section 18.5. Participations...........................................77
Section 18.6. Pledge by Lender.........................................78
Section 18.7. No Assignment by Borrower.................................78
Section 18.8. Disclosure................................................78
Section 19. NOTICES, ETC.....................................................78
Section 20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE............ ..79
Section 21. HEADINGS.........................................................79
5
<PAGE>
Section Page
Section 22. COUNTERPARTS.....................................................79
Section 23. ENTIRE AGREEMENT, ETC............................................79
Section 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS...................79
Section 25. CONSENTS, AMENDMENTS, WAIVERS, ETC...............................80
Section 26. MAXIMUM INTEREST RATE............................................81
Section 27. CONFIDENTIALITY..................................................81
Section 28. SEVERABILITY.....................................................81
6
<PAGE>
EXHIBITS
Exhibit A Revolving Credit Notes
Exhibit B Request for Loans
Exhibit C Notice of Conversion
Exhibit D Compliance Certificate
Exhibit E Assignment and Acceptance
Exhibit F Form of Negative Pledge
7
<PAGE>
SCHEDULES
Schedule 1 Lenders, Commitments, and Commitment Percentages
Schedule 6.7 Litigation
Schedule 6.15 Related Transactions
Schedule 6.16 Plans
Schedule 6.18 Environmental Compliance
Schedule 6.19 Subsidiaries
Schedule 6.21 Trade Names
Schedule 7.7 Insurance
Schedule 8.1 Indebtedness
Schedule 8.2 Permitted Liens
Schedule 8.3 Investments
Schedule 8.10 Loans and Advances
8
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
September 27, 1996, by and among
Dollar Tree Distribution, Inc. (the "Borrower"), a Virginia corporation
having its chief executive office at 2555 Ellsmere Avenue, Norfolk, Virginia
23513;
Dollar Tree Stores, Inc. ("DTS"), a Virginia corporation having its
chief executive office at 2555 Ellsmere Avenue, Norfolk, Virginia;
Dollar Tree Management, Inc. ("DTM"), a Virginia corporation having its
chief executive office at 2555 Ellsmere Avenue, Norfolk, Virginia;
The First National Bank of Boston, NationsBank, N.A., Signet Bank,
Crestar Bank, First Union National Bank of Virginia, Amsouth Bank of Alabama,
Union Bank of California, N.A. and all other financial institutions which are
now or may hereafter become parties hereto (individually, a "Lender" and
collectively, the "Lenders"); and
The First National Bank of Boston, a national banking association
having its head office at 100 Federal Street, Boston, Massachusetts, as Agent
for the Lenders (in such capacity, the "Agent").
WITNESSETH
WHEREAS, the Borrower, among others, entered into a Credit Agreement
with the Lenders and NationsBank, N.A. as Administrative Agent and L/C Agent
dated January 11, 1996 (as such Credit Agreement has been heretofore amended,
the "Original Agreement"); and
WHEREAS, NationsBank, N.A. desires to resign as Administrative Agent
(having resigned as L/C Agent on May 3, 1996) and the parties have requested
that The First National Bank of Boston hereafter serve as agent; and
WHEREAS, the Lenders and the Borrower desire to modify, amend, and
restate the Original Agreement as provided herein.
NOW THEREFORE, IT IS AGREED:
9
<PAGE>
SECTION I
DEFINITIONS
Section 1.1. DEFINITIONS.
The following terms shall have the meanings set forth in this Section 1
or elsewhere in the provisions of this Agreement referred to below:
ACCOUNTS. As defined in the UCC and also all accounts receivable and
other forms of obligations and rights to payment for credit extended for goods
sold or leased, or services rendered.
AFFILIATE. Any Subsidiary of any Obligor and any other entity which
directly or indirectly controls, is controlled by, or is under common control
with, any Obligor. For purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to vote more than fifty percent
(50%) of the securities having ordinary voting power for the election of
directors of such Person.
AGENT. The First National Bank of Boston acting as agent for the
Lenders.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
AGREEMENT. This Revolving Credit Agreement, including the Schedules and
Exhibits hereto, all as modified, amended, supplemented or restated.
APPLICABLE MARGIN. Initially, the rates set forth below for Base Rate
Loans, LIBOR Rate Loans and Reference Rate Loans:
Base Rate Loans Applicable LIBOR and Reference Rate Loans
Margin Applicable Margin
- --------------------------- -------------------------------
0 basis points 115 basis points
The Applicable Margin shall be adjusted, based upon the following
performance covenants:
Applicable Margin-LIBOR Applicable
Funded Rate Loans and Reference Margin-Base
Tier Period Debt/EBITDA Rate Loans Rate Loans
- ---- ------ ----------- ------------------------ ----------
I 1996 Less than or 90 basis points 0 basis
equal to 1.00:1 points
1997 Less than or
equal to 1.00:1
10
<PAGE>
1998 Less than or
equal to 1.00:1
1999 Less than or
equal to 1.00:1
2000 Less than or
equal to 1.00:1
II 1996 Less than or 115 basis points 0 basis
equal to 1.50:1 points
but greater
than 1.00:1
1997 Less than or
equal to 1.50:1
but greater
than 1.00:1
1998 Less than or
equal to 1.25:1
but greater
than 1.00:1
1999 Less than or
equal to 1.25:1
but greater
than 1.00:1
2000 Less than or
equal to 1.25:1
but greater
than 1.00:1
III 1996 Less than or 145 basis points 0 basis
equal to 2.25:1 points
but greater
than 1.50:1
1997 Less than or
equal to 1.85:1
but greater
than 1.50:1
1998 Less than or
equal to 1.50:1
but greater
than 1.25:1
1999 Less than or
equal to 1.50:1
but greater
than 1.25:1
11
<PAGE>
2000 Less than or
equal to 1.50:1
but greater
than 1.25:1
For purposes of determining the Applicable Margin, the foregoing
performance measures shall be tested quarterly on a rolling four-quarter basis
beginning with the quarter ending December 31, 1996. The Applicable Margin shall
be adjusted based upon, and as of the fifth (5th) Business Day after the due
date of, the financial statements required to be delivered to the Agent under
Section 7.4(b) of this Agreement. The Applicable Margin shall be the Applicable
Margin set forth in the Tier in which the performance measures are met.
ASSIGNMENT AND ACCEPTANCE. As defined in Section 18.1 hereof.
AVAILABILITY. On any day,
(a) The Revolving Credit Ceiling
(less)
(b) The aggregate amount then undrawn under all Outstanding
Letters of Credit issued or incurred hereunder for the account, and/or
benefit, of the Borrower.
BALANCE SHEET DATE. June 30, 1996.
BENEFICIAL OWNERSHIP. As defined in Rule 13d-3 under the Securities
Exchange Act of 1934, and in all events, all trusts established by the Founders
for the benefit of their family, whether or not included in such definition.
BASE RATE. The greater of (a) the annual rate of interest announced
from time to time by FNBB at its head office in Boston, Massachusetts as its
"base rate" or (b) The Federal Funds Effec tive Rate plus 1/2 of 1% per annum
(rounded upwards, if neces sary, to the next 1/8th of 1%).
BASE RATE LOANS. Those Loans bearing interest calculated by refer- ence
to the Base Rate.
BORROWER. As defined in the preamble hereto.
BUSINESS DAY. Any day, other than a Saturday or Sunday, or legal
holiday on which banking institutions in Boston, Massachu setts or Norfolk,
Virginia are open for the transaction of banking business and, in the case of
LIBOR Rate Loans and Reference Rate Loans, also a day which is a LIBOR Business
Day.
12
<PAGE>
CAPITAL EXPENDITURES. All Capitalized Leases and all expenditures made
by any Obligor which are capitalized or are required to be capitalized on the
Consolidated cash flow statement of the Obligors in accordance with Generally
Accepted Accounting Principles.
CAPITALIZED LEASES. Leases under which any Obligor is the lessee or
obligor, the discounted future rental payment obligations under which are
capitalized or are required to be capitalized on the balance sheet of the lessee
or obligor in accordance with Generally Accepted Accounting Principles.
CHANGE IN CONTROL. (a) Any Person or group of Persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934) not a
stockholder on the date hereof shall have acquired Beneficial Ownership of 51%
or more of the outstanding shares of common stock of any Obligor or (b) a
majority of the board of directors of any Obligor is not comprised of Continuing
Directors.
CLOSING DATE. The first date on which the conditions set forth in
Section 11 and Section 12 have been satisfied and any Loans are to be made.
CODE. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively as the same may be supple mented or amended and in
effect from time to time.
COLLATERAL. All assets of the Borrower and the Guarantors, whenever
acquired, including, without limitation, all Accounts, Inventory, Equipment,
eneral Intangibles, Intercompany Receivables, and Real Estate.
COMMITMENT. With respect to each Lender, the amount set forth on
Schedule 1 hereto as the amount of such Lender's Com mitment to make Revolving
Credit Loans to the Borrower, as the same may be reduced from time to time in
accordance with Section 2.3, below.
COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set
forth on Schedule 1 hereto as such Lender's percentage of the aggregate
Commitments of all of the Lenders.
CONSOLIDATED OR consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of DTS and its
Subsidiaries, consolidated in accordance with Generally Accepted Accounting
Principles.
CONSOLIDATED CURRENT ASSETS. At any time, all assets of DTS and its
Subsidiaries which would, in accordance with Generally Accepted Accounting
Principles, be classified as current assets, but excluding (i) Accounts with
respect to products, goods, and/or services which were delivered or performed by
Obligors more than ninety (90) days prior to such date, and (ii) the assets
13
<PAGE>
described in subparagraphs (a) through (f) of the definition of Consolidated
Tangible Net Worth.
CONSOLIDATED CURRENT LIABILITIES. At any time, all liabilities of DTS
and its Subsidiaries (including, without limitation, the Revolving Credit Loans)
which would, in accordance with Generally Accepted Accounting Principles, be
classified as current liabilities.
CONSOLIDATED EBITDA. With respect to any fiscal period, the result
(determined with respect to the same period and without duplication) of the
following: (a) Consolidated Net Income (or Deficit); plus (b) all depreciation,
amortization and other non-cash deductions included as an expense of DTS and its
Subsidiaries in the determination of Consolidated Net Income (or Deficit); minus
(c) extraordinary gains; plus (d) all taxes included as an expense of DTS and
its Subsidiaries in the determination of Consolidated Net Income (or Deficit);
plus (e) interest included as an expense of DTS and its Subsidiaries in the
determination of Consolidated Net Income (or Deficit).
CONSOLIDATED NET INCOME (OR DEFICIT). With respect to any fiscal
period, the consolidated net income (or deficit) of DTS and its Subsidiaries,
after deduction of all expenses, taxes, and other proper charges, determined in
accordance with Generally Accepted Accounting Principles.
CONSOLIDATED OPERATING CASH FLOW. With respect to any fiscal period,
the result (determined with respect to the same period and without duplication)
of (a) Consolidated EBITDA; minus (b) Capital Expenditures made or incurred
during such period plus (c) Rents payable during such period.
CONSOLIDATED TANGIBLE NET WORTH. The difference between Consolidated
Total Assets and Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of DTS and its Subsidiaries
properly classified as intangible assets under Generally Accepted Accounting
Principles, including such items as goodwill, the purchase price of acquired
assets in excess of the fair market value thereof, unamortized debt discount and
expense, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the foregoing; plus
(b) all amounts representing any write-up in the book value of any
assets of DTS or its Subsidiaries resulting from a revaluation thereof
subsequent to the Balance Sheet Date; plus
(c) to the extent not already deducted, all reserves; plus
14
<PAGE>
(d) the value of any minority interests in Subsidiaries; plus
(e) the aggregate amount of all loans made by DTS or any Subsidiary to
any officer, employee, or shareholder of DTS or any Subsidiary; plus
(f) Assets located, and notes and receivables due from obligors
domiciled, outside of the United States of America (excluding inventory in
transit).
CONSOLIDATED TOTAL ASSETS. At any date, all assets of DTS and its
Subsidiaries that, in accordance with Generally Accepted Accounting Principles,
should be classified as assets on a Consolidated balance sheet of DTS and its
Subsidiaries.
CONSOLIDATED TOTAL LIABILITIES. At any date, all liabili ties of DTS
and its Subsidiaries that, in accordance with Generally Accepted Accounting
Principles, should be classified as liabilities on the Consolidated balance
sheet of DTS and its Subsidiaries.
CONTINUING DIRECTORS. A member of the board of directors of any Obligor
who either (a) was a member of such board prior to the date hereof and
continuously thereafter or (b) became a member of such board after the date
hereof and whose election or nomination for election was approved by a vote of
the majority of the Continuing Directors then members of such board.
CONVERSION REQUEST. A notice given by the Borrower to the Agent of its
election to convert or continue a Loan in accordance with Section 2.9.
DTM. As defined in the preamble hereto.
DTS. As defined in the preamble hereto.
DEBT SERVICE CHARGES. For any fiscal period, the sum of (i) the
expenses of DTS and its Subsidiaries for such period for interest payable with
respect to Indebtedness (including, without limitation, the Obligations and
imputed interest on Capitalized Leases) and all fees paid on account of or with
respect thereto, plus (ii) principal payments made or required to be made on
account of Indebtedness (including, without limitation, Capitalized Leases) for
such period, plus (iii) Distributions made during such period, plus (iv) Rents
paid during such period, in each case determined in accordance with Generally
Accepted Accounting Principles.
DEFAULT. See Section 12.1.
DISTRIBUTION. With respect to any Person, the declaration or payment of
any dividend on or in respect of any shares of any class of capital stock,
15
<PAGE>
other than (a) dividends payable solely in shares of common stock of such Person
and (b) the payment of cash in lieu of the distribution of fractional shares in
the event of any stock dividend or stock split; the purchase, redemption, or
other retirement of any shares of any class of capital stock of such Person,
directly or indirectly by such Person through a Subsidiary of such Person or
otherwise, unless such capital stock shall be redeemed or reacquired through the
exchange of such stock with stock of the same class, and except for the
redemption, repurchase, or acquisition of stock of the Borrower or DTM by DTS;
the return of capital by such Person to its shareholders as such; or any other
distribution (whether of such or other property) on or in respect of any shares
of any class of capital stock of such Person.
DOCUMENTARY LETTERS OF CREDIT. Letters of credit issued pursuant to
this Agreement or the Original Agreement to support the Borrower's purchases in
the ordinary course of business of inventory for resale to DTS for use in its
retail store business, the drawing under which requires the delivery of bills of
lading, airway bills or other similar types of documents of title.
DOLLARS OR $. Dollars in lawful currency of the United States of
America.
DOMESTIC LENDING OFFICE. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of such
Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans or Reference Rate Loans.
DRAWDOWN DATE. The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or continued in accordance with Section
2.9.
EMPLOYEE Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
ENVIRONMENTAL LAWS. Any and all applicable foreign, feder al, state and
local environmental, health or safety statutes, laws, regulations, rules, and
ordinances (whether now existing or hereafter enacted or promulgated), of all
governmental agencies, bureaus or departments which may now or hereafter have
jurisdic tion over DTS or any of its Subsidiaries and all applicable judicial
and administrative and regulatory decrees, judgments and orders relating to
injury to, or the protection of, real or personal property or human health or
the environment, including, without limitation, all requirements pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
emissions, discharges, releases or threatened releases of Hazardous Substances,
16
<PAGE>
whether solid, liquid or gaseous in nature, into the environment or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of such Hazardous Substances.
EQUIPMENT. "Equipment" as defined in the UCC and all motor vehicles,
rolling stock, machinery, office equipment, plant equipment, tools, dies, molds,
store fixtures, furniture, and other goods, property, and assets which are used
and/or were purchased for use in the operation or furtherance of the business of
any Person and any and all accessions and additions thereto and substitutions
therefor.
ERISA. The Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, collectively as the same may be supplemented
or amended and in effect from time to time.
ERISA AFFILIATE. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event (other than a reportable
event described in Subsections 4043(b)(2)-(4) and 4043(b)(6)-(9), which do not
require a thirty (30) day notice to the PBGC) with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
EUROCURRENCY RESERVE RATE. For any day, the maximum rate (expressed as
a decimal) at which any lender subject thereto would be required to maintain
reserves under Regulation D of the Board of Governors of the Federal Reserve
System (or any successor or similar regulations relating to such reserve
requirements) against "Eurocurrency Liabilities" (as that term is used in
Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in the Eurocurrency Reserve Rate.
EVENT OF DEFAULT. See Section 12.1.
FACILITY FEE RATE. Initially, 0.20 percent per annum. The Facility
Fee Rate shall be adjusted based upon the following performance covenant:
Facility Fee
Tier Period Funded Debt/EBITDA Rate
- ---- ------ ------------------ -------------
I 1996 Less than or equal to 1.00:1 17.5 basis
points per annum
1997 Less than or equal to 1.00:1
17
<PAGE>
1998 Less than or equal to 1.00:1
1999 Less than or equal to 1.00:1
2000 Less than or equal to 1.00:1
II 1996 Less than or equal to 1.50:1 but 20 basis points
greater than 1.00:1 per annum
1997 Less than or equal to 1.50:1 but
greater than 1.00:1
1998 Less than or equal to 1.25:1 but
greater than 1.00:1
1999 Less than or equal to 1.25:1 but
greater than 1.00:1
2000 Less than or equal to 1.25:1 but
greater than 1.00:1
III 1996 Less than or equal to 2.25:1 but 22.5 basis
greater than 1.50:1 points per annum
1997 Less than or equal to 1.85:1 but
greater than 1.50:1
1998 Less than or equal to 1.50:1 but
greater than 1.25:1
1999 Less than or equal to 1.50:1 but
greater than 1.25:1
2000 Less than or equal to 1.50:1 but
greater than 1.25:1
For purposes of determining the Facility Fee Rate, the foregoing
performance measures shall be tested quarterly on a rolling four-quarter basis
beginning with the quarter ending December 31, 1996. The Facility Fee Rate shall
be based upon, and adjusted as of the fifth (5th) Business Day after the due
date of, the financial statements required to be delivered to the Agent under
Section 7.4(b) of this Agreement. The Facility Fee Rate shall be the Facility
Fee Rate set forth in the Tier in which the performance measures are met.
FEDERAL FUNDS EFFECTIVE RATE. For any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal fund
brokers, as published for such day (or, if such day is not a Business Day, for
the next preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
18
<PAGE>
the quotations for such day on such transactions received by the Agent from
three federal funds brokers of recognized standing selected by the Agent.
FNBB. The First National Bank of Boston, a national banking
association, in its individual capacity.
FOUNDERS. Each of Macon F. Brock, Jr., Joan P. Brock, H. Ray Compton,
J. Douglas Perry, and Patricia W. Perry.
FUNDED DEBT. At any time, an amount equal to the sum of the then
outstanding balances of (a) the Loans, plus (b) Capitalized Leases, plus (c)
other Indebtedness for borrowed money or other extensions of credit.
GENERAL INTANGIBLES. "General Intangibles" as defined in the UCC and
all amounts due to any Person not constituting Accounts; contractual rights;
records; customer lists; telephone numbers; goodwill; causes of action;
judgments; licenses; fran chises; patents, patent applications, patents pending
and other intellectual property; computer software programs, including the
source and object codes therefor; tradenames, trademarks and service marks and
all goodwill relating thereto.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time
and (ii) consistently applied with past financial statements of the Borrower
adopting the same prin ciples; provided that in each case referred to in this
definition of "Generally Accepted Accounting Principles" a certified public
accountant would, insofar as the use of such accounting prin ciples is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in Gener ally Accepted Accounting Principles) as
to financial statements in which such principles have been properly applied. In
the event of a change in Generally Accepted Accounting Principles, the Lenders
and the Obligors will thereafter revise any covenants set forth in Sections 9.1
through 9.7 of this Agreement affected thereby in order to make such covenants
as now applied consistent with Generally Accepted Accounting Principles then in
effect.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
GUARANTIES. Unlimited Guarantees of the Obligations executed and
delivered by each of the Guarantors in favor of the Agent and the Lenders.
19
<PAGE>
GUARANTORS. Each of DTS, DTM and all presently existing and
future Subsidiaries of DTS, DTM, or the Borrower.
HAZARDOUS SUBSTANCES. Any substance (i) the presence of which requires
or may hereafter require notification, investiga tion or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste,"
hazardous material" or "hazardous substance" or "controlled industrial waste" or
"pol lutant" or "contaminant" under any present or future Environmen tal Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioac tive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, depart ment, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Borrower; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").
INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with Generally Accepted Accounting Principles should be classified
upon the consolidated balance sheet of DTS and its Subsidiaries as liabilities,
or to which reference should be made by footnotes thereto, including in any
event and whether or not so classified: (a) all obligations for borrowed money
or other extensions of credit whether or not secured or unsecured, absolute or
contingent, including, without limitation, unmatured reimbursement obligations
with respect to letters of credit or guarantees issued for the account of or on
behalf of DTS and its Subsidiaries, and all obligations representing the
deferred purchase price of property, other than accounts payable arising in the
ordinary course of business, (b) all obligations evidenced by bonds, notes,
debentures or other similar instruments; (c) all liabilities secured by any
mortgage, pledge, security interest, lien, charge, or other encumbrance existing
on property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; and (d) all guarantees, endorsements
(other than endorsements in the ordinary course of business of negotiable
instruments or documents for deposit or collection) and other contingent
obligations whether direct or indirect in respect of indebtedness of others or
otherwise, including any obligations with respect to puts, swaps, and other
similar undertakings, any obligation to supply funds to or in any manner to
invest in, directly or indirectly, the debtor, to purchase indebtedness, or to
assure the owner of indebtedness against loss, through an agreement to purchase
goods, supplies, or services for the purpose of enabling the debtor to make
20
<PAGE>
payment of the indebtedness held by such owner or otherwise, and the
obligations to reimburse the issuer in respect of any letters of credit; (e)
that portion of all obligations arising under Capital Leases that is required to
be capitalized on the consol idated balance sheet of DTS and its Subsidiaries;
and (f) all redeemable preferred stock of DTS or its Subsidiaries valued at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends.
INTERCOMPANY LOANS as defined in Section 5.2 hereof.
INTERCOMPANY LOAN DOCUMENTS. The Promissory Notes, the Security
Agreement, and Intercompany Cash Management Agreements, evidencing all loans
among the Obligors, which documentation is being delivered to, and will be held
by the Agent as additional Collateral securing the Obligations.
INTERCOMPANY RECEIVABLES as defined in Section 5.2 hereof.
INTEREST PAYMENT DATE. (a) As to any Base Rate Loan or any Reference
Rate Loan, the Business Day immediately following the last day of the Interest
Period relating thereto; and (b) as to any LIBOR Rate Loan, the last day of any
Interest Period.
INTEREST PERIOD. With respect to each Loan, (a) initially, the period
commencing on the Drawdown Date of such Loan and ending (i) for any Base Rate
Loan or Reference Rate Loan, on the last day of each December, March, June, and
September; and (ii) for any LIBOR Rate Loan, 30, 60, or 90 days as the Borrower
may elect in the request for such Loan; and (b) thereafter, each period
commencing on the last day of the preceding Interest Period applicable to such
Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:
(A) if any Interest Period with respect to a LIBOR Rate Loan would
otherwise end on a day that is not a LIBOR Business Day, that Interest Period
shall be extended to the next succeeding LIBOR Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding LIBOR Business Day;
(B) if any Interest Period with respect to a Base Rate Loan or
Reference Rate Loan would end on a day that is not a Business Day, that Interest
Period shall end on the next succeeding Business Day;
(C) if the Borrower shall fail to give notice as provided in Section
2.9, the Borrower shall be deemed to have requested a conversion of the affected
LIBOR Rate Loan to a Base Rate Loan on the last day of the then current Interest
Period with respect thereto;
21
<PAGE>
(D) any Interest Period relating to any LIBOR Rate Loan that begins on
the last LIBOR Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last LIBOR Business Day of a calendar month;
and
(E) any Interest Period relating to any LIBOR Rate Loan that would
otherwise extend beyond the Revolving Credit Loan Maturity Date shall end,
instead, on the Revolving Credit Loan Maturity Date.
INVENTORY. "Inventory" as defined in the UCC and all goods, wares,
merchandise, raw materials, work in process, finished goods, and all packaging,
advertising, and shipping materials and documents related to any of the
foregoing, and all labels and other names or marks affixed or to be affixed
thereto for iden tifying or selling the same, and other personal property of
every description held for sale or lease or furnished or to be fur nished under
a contract of sale or service, or used or consumed or to be used or consumed in
any Person's business.
INVENTORY RELIANCE RATIO. At any time, the ratio of (a) the sum of (i)
the Obligors' Consolidated accounts payable plus (ii) the Outstanding balance of
the Loans plus (iii) the amounts then available to be drawn under Outstanding
Letters of Credit minus (iv) (A) from the Closing Date through November 30,
1997, the sum of $40,000,000.00; (B) from December 1, 1997 through November 30,
1998, the sum of $30,000,000.00; (C) from December 1, 1998 through November 30,
1999, the sum of $20,000,000.00; and (D) from and after December 1, 1999, the
sum of $10,000,000.00 to (b) the sum of (i) the Obligors' Consolidated
Inventory, plus (ii) Inventory-in-transit to any of the Obligors.
INVESTMENTS. All expenditures made and all liabilities and commitments
incurred (contingently or otherwise) for the purchase or acquisition of capital
stock, partnership interests, or equity interests or securities, or Indebtedness
of, or for loans, advances, capital contributions or transfers of property to,
or in respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In deter mining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
22
<PAGE>
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
ISSUING LENDER. Any Lender who issues Letters of Credit on behalf of
the Borrower pursuant to the provisions of Section 3 of this Agreement. Any
Person who issued a Letter of Credit under the Original Agreement shall be
deemed an Issuing Lender hereunder with respect to any outstanding Letters of
Credit issued by such Person under the Original Agreement.
L/C REQUEST. As defined in Section 3.5(a) hereof.
LENDERS. See Preamble.
LETTERS OF CREDIT. Documentary Letters of Credit and
Standby Letters of Credit.
LIBOR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in the London
interbank market.
LIBOR LENDING OFFICE. Initially, the office of each Lender designated
as such in Schedule 1 hereto; thereafter, such other office of such Lender, if
any, that shall be making or maintaining LIBOR Rate Loans.
LIBOR RATE. The quotient (rounded to the fourth decimal place) of (a)
the rate at which FNBB's LIBOR Lending Office is offered Dollar deposits two
LIBOR Business Days prior to the beginning of such Interest Period in the London
interbank market for delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to the amount of
the LIBOR Rate Loan to which such Interest Period applies, divided by (b) a
number equal to 1.00 minus the Eurocurrency Reserve Rate.
LIBOR RATE LOANS. Those Loans bearing interest calculated by refer-
ence to the LIBOR Rate.
LOAN DOCUMENTS. This Agreement, the Notes, the Security Documents, all
Letters of Credit, the Guaranties, the Intercompany Loan Documents, and other
instruments, documents and agreements executed in connection therewith, as each
may be modified, amended, supplemented or restated.
LOANS. The Revolving Credit Loans to be made by the Lenders hereunder
and including any loans made by the Lenders under Section 3.4 hereof.
MAJORITY LENDERS. Prior to termination of the Commitments, Lenders
23
<PAGE>
whose Commitment Percentages aggregate not less than 51% of all Commitment
Percentages. After termination of the Commitments, Lenders whose percentage
of the Outstanding Obliga tions aggregate not less than 51% of all Outstanding
Obligations.
MAXIMUM RATE. As of any day, the highest nonusurious rate of interest
(if any) permitted by applicable law on such day that at any time, or from time
to time, may be contracted for, taken, reserved, charged or received on the
Indebtedness evidenced by the Notes under the laws which are presently in effect
in the United States of America and the Commonwealth of Massachusetts applicable
to the holders of the Notes and such Indebtedness or, to the extent permitted by
law, under such applicable laws of the United States of America and the
Commonwealth of Massachusetts which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
NOTE(S). The Revolving Credit Notes.
OBLIGATIONS. All indebtedness, obligations and liabilities of each of
the Obligors to any of the Lenders and the Agent, individually or collectively,
under this Agreement or any of the other Loan Documents or in respect of any of
the Loans or the Notes or other instruments at any time evidencing any thereof,
all of the foregoing whether existing on the date of this Agreement or arising
or incurred hereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law of otherwise.
OBLIGORS. Collectively, the Borrower and the Guarantors.
ORIGINAL AGREEMENT. As defined in the recitals hereto.
OUTSTANDING. The aggregate unpaid principal of the Loans and/or the
Letters of Credit as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERMITTED INTERCOMPANY DISTRIBUTIONS. Distributions from Borrower or
DTM to DTS, from DTS to Borrower or DTM, or from DTM to DTS or Borrower.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 8.2.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
24
<PAGE>
PROCESS AGENT. Robert C. Nusbaum, Esquire, whose address is 1700
Dominion Tower, Norfolk, Virginia 23510.
REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
RECORD. Any record, including computer records, maintained by any
Lender with respect to any Loan.
REFERENCE RATE. On any day, the LIBOR Rate quoted for Interest Periods
of thirty (30) days. The Reference Rate shall be adjusted daily by the Agent
based upon the LIBOR Rate quoted on such day.
REFERENCE RATE LOANS. Those Loans bearing interest calculated by
reference to the Reference Rate.
REGISTER. As defined in Section 18.3 hereof.
RENTS. All consideration paid in the ordinary course of business by DTS
and its Subsidiaries to any Person for the use or occupation of property under
any operating lease to which DTS or any of its Subsidiaries is the lessee or
obligor, determined in accordance with Generally Accepted Accounting Principles.
REQUIRED LENDERS. Prior to termination of the Commitments, Lenders
whose Commitment Percentages aggregate not less than 66 2/3% of all Commitment
Percentages. After termination of the Commitments, Lenders whose percentage of
the Outstanding Obliga tions aggregate not less than 66 2/3% of all Outstanding
Obliga tions.
REVOLVING CREDIT CEILING. $135,000,000.00 (subject to reduction as
provided in Section 2.2, below).
REVOLVING CREDIT MATURITY DATE. May 31, 2000, or such earlier date on
which the Revolving Credit Loans shall become due and payable pursuant to the
terms hereof.
REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by
the Lenders to the Borrower pursuant to Section 2.
REVOLVING CREDIT NOTE. As defined in Section 2.3 hereof.
SECURITY DOCUMENTS. All security agreements, non-encum brance
agreements and other instruments, documents, and agree ments from the Borrower
and/or any Guarantor, granting a lien, security interest or other right in favor
of the Agent and the Lenders in any asset of the Borrower or any Guarantor to
25
<PAGE>
secure the Obligations, whether such agreements now exist or hereafter arise.
SOLVENT. With respect to any Person as of any date, that on such date
(i) the fair value of the property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent liabilities, of
such Person, (ii) the present fair salable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become matured, (iii) such Person is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (iv) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (v) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
STANDBY LETTER OF CREDIT. Letters of Credit issued pursuant to the
Original Agreement or pursuant to this Agreement, the drawing under which does
not require the delivery of bills of lading, airway bills or other similar types
of documents of title, or which are customarily referred to as standby letters
of credit.
STOCK OPTION PLAN. Any Stock Option Plans, Stock Incentive Plans,
Employee Stock Purchase Plans, and any other plans of a similar nature of any of
the Obligors in effect now or in the future.
SUBSIDIARY. Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes or controlling interests) of the outstanding Voting Interests.
TYPE. As to any Loan, its nature as a Base Rate Loan, Reference Rate
Loan or a LIBOR Rate Loan.
UCC. The Uniform Commercial Code as enacted in The Common wealth of
Massachusetts, as such may be supplemented or amended and in effect from time to
time.
26
<PAGE>
VOTING INTERESTS. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, (a) to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association,
partnership, trust or other business entity involved, or (b) to control, manage,
or conduct the business of the corporation, partnership, association, trust or
other business entity involved.
Section 1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by Generally Accepted Accounting Principles.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms which are defined in the UCC and are not
otherwise specifically defined herein or by Generally Accepted Accounting
Principles shall have the meanings assigned to them in the UCC.
(h) Reference to a particular "Section " refers to that
section of this Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
Section 2. THE LOANS.
Section 2.1. COMMITMENT TO MAKE REVOLVING CREDIT LOANS. (a) Subject to
the terms and conditions set forth in this Agreement, each of the Lenders
severally (and not jointly) agrees to lend to the Borrower and the Borrower may
borrow, repay, and reborrow from time to time between the Closing Date and the
Revolving Credit Maturity Date upon notice by the Borrower to the Agent given in
accordance with Section 2.5, such sums as are requested by the Borrower up to a
27
<PAGE>
maximum aggregate principal amount Outstanding (after giving effect to all
amounts requested) at any one time equal to such Lender's Commitment, (each a
"Revolving Credit Loan"), provided, that the sum of the Outstanding amount of
the Revolving Credit Loans (after giving effect to all amounts requested) shall
not at any time exceed the lesser of Availability or, when applicable, the
amounts set forth in Section 2.1(b) hereof. The Revolving Credit Loans shall be
made pro rata in accordance with each Lender's Commitment Percentage. Each
request for a Revolving Credit Loan hereunder shall constitute a representation
and warranty by the Borrower that the conditions set forth in Section 10 and
Section 11, in the case of the initial Revolving Credit Loan, and Section 11, in
the case of all other Revolving Credit Loans, have been satisfied on the date of
such request.
(b) For thirty (30) consecutive days between December 1 through March 1
of each year, the Outstanding Loans shall be reduced to an amount not to exceed
the following, and during such thirty day period, the Borrower shall not borrow,
and the Lenders shall have no obligation to lend, an amount which would cause
the Outstanding Loans to exceed the following:
Period Maximum Amount
December 1, 1996 - March 1, 1997 $40,000,000.00
December 1, 1997 - March 1, 1998 $30,000,000.00
December 1, 1998 - March 1, 1999 $20,000,000.00
December 1, 1999 - March 1, 2000 $10,000,000.00
In the event that on or before January 29 of each year the Borrower has
failed to reduce and repay its Outstanding Loans so as to satisfy the provisions
of this Section 2.1(b), then as of January 30 of such year, (i) to the extent
that the Outstanding Loans exceed the Maximum Amount set forth above, the
Borrower shall reduce the Outstanding Loans to such Maximum Amount, and (ii) the
Outstanding Loans shall not thereafter exceed such Maximum Amount for such
period of time as may be necessary for the Borrower to have satisfied the
provisions of this Section 2.1(b).
Section 2.2. REDUCTION OF REVOLVING CREDIT COMMITMENT. The Borrower
shall have the right at any time and from time to time upon five (5) Business
Days' prior written notice to the Agent to reduce by an integral multiple of
$1,000,000.00 or terminate entirely the unborrowed portion of the Lenders'
Commit ment, whereupon the Commitments of the Lenders shall be reduced pro rata
in accordance with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated. No reduction or
termination of the Commitments may be reinstated.
Section 2.3. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans
shall be evidenced by separate promissory notes of the Borrower in substantially
the form of Exhibit A hereto (the "Revolving Credit Notes"), dated as of the
Closing Date and completed with appropriate insertions. One Revolving Credit
28
<PAGE>
Note shall be payable to the order of each Lender in a principal amount
equal to such Lender's Commitment with respect to the Revolving Credit Loans.
The Borrower irrevocably authorizes each Lender to make or cause to be made, at
or about the time of the Drawdown Date of any Revolving Credit Loan or at the
time of receipt of any payment of principal on such Lender's Revolving Credit
Note, an appropriate notation on such Lender's Record reflecting the making of
such Revolving Credit Loan or (as the case may be) the receipt of such payment.
The Outstanding amount of the Revolving Credit Loans set forth on such Lender's
Record shall be prima facie evidence of the principal amount thereof owing and
unpaid to such Lender, but the failure to record, or any error in so recording,
any such amount on such Lender's Record shall not limit or otherwise affect the
obligations of the Borrower hereunder or under any Revolving Credit Note to make
payments of principal of or interest on any Revolving Credit Note when due.
Section 2.4. INTEREST ON REVOLVING CREDIT LOANS.
(a) Each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of the Interest Period
with respect thereto at a rate equal to the aggregate of the Base Rate plus the
Applicable Margin.
(b) Each Reference Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at a rate equal to the aggregate of the
Reference Rate plus the Applicable Margin.
(c) Each LIBOR Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of the Interest Period
with respect thereto at a rate equal to the aggregate of the Applicable Margin
plus the LIBOR Rate determined for such Interest Period.
(d) The Borrower shall pay interest on each Revolving Credit Loan in
arrears on each Interest Payment Date with respect thereto.
Section 2.5. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrower shall
give to the Agent telephonic notice (confirmed in writing (including by
electronic mail) in the form of Exhibit B hereto) of each Revolving Credit Loan
requested hereunder. Each such notice shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Lenders on the proposed Drawdown Date.
29
<PAGE>
(a) Notices for any Base Rate Loans or Reference Rate Loans shall be
furnished to the Agent no later than 11:00 a.m. (Boston time) on the Business
Day of the proposed Drawdown Date. Each such notice shall specify the principal
amount of the Revolving Credit Loan requested. Each such notice shall be in a
minimum amount of $100,000 or an integral multiple of $100,000 in excess
thereof.
(b) Notices for any LIBOR Rate Loans shall be furnished to the Agent by
12:00 noon (Boston time) two (2) LIBOR Business Days prior to the proposed
Drawdown Date. Each such notice shall specify (i) the principal amount of the
Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such
Revolving Credit Loan and (iii) the Interest Period for such Revolving Credit
Loan. Each such notice shall be in a minimum amount of $1,000,000 or an integral
multiple of $100,000 in excess thereof. Promptly upon the receipt of any notice
of a LIBOR Rate Loan, the Agent shall notify each of the Lenders thereof.
Section 2.6. MATURITY. The Borrower promises to pay on the Revolving
Credit Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Maturity Date, all of the Revolving Credit Loans Outstanding on
such date, together with any and all accrued and unpaid interest thereon.
Section 2.7. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any
time the aggregate Outstanding principal balance of the Revolving Credit Loans
exceeds Availability, then the Borrower shall immediately pay the amount of such
excess to the Agent for the respective accounts of the Lenders for application
to the Revolving Credit Loans.
Section 2.8. VOLUNTARY REPAYMENTS OF REVOLVING CREDIT LOANS. The
Borrower shall have the right, at its election, to repay the Outstanding amount
of the Revolving Credit Loans, as a whole or in part, at any time without
penalty or premium; provided that the full or partial repayment of the
Outstanding amount of any LIBOR Rate Loan may be made only on the last day of
the Interest Period relating thereto. The Borrower shall furnish the Agent, no
later than 10:00 a.m. Boston time, at least two (2) LIBOR Business Days prior
written notice of any proposed repayment of any LIBOR Rate Loans, specifying the
proposed date of payment and the principal amount to be paid. Each partial
prepayment of the Revolving Credit Loans shall be in an integral multiple of
$100,000, and shall be applied, in the absence of instruction by the Borrower,
first to the principal of Base Rate Loans, and then to the principal of
Reference Rate Loans, and finally, to the principal of LIBOR Rate Loans. No
repayment hereunder shall postpone the date for, or reduce the amount of, any
subsequent payment with respect to the Loans. Any Loans which are prepaid may be
reborrowed, subject to the terms and conditions hereof.
Section 2.9. CONVERSION OPTIONS.
(a) The Borrower may elect from time to time to convert any Loan to a
Loan of another Type, provided that (i) with respect to any such conversion of a
LIBOR Rate Loan into a Loan of another Type, such conversion shall only be made
on the last day of the Interest Period with respect thereto; (ii) with respect
30
<PAGE>
to any such conversion of a Loan to a Loan of another Type, the Borrower shall
give the Agent notice of such election no later than 12:00 noon (Boston time)
two (2) LIBOR Business Days prior to the proposed date of conversion; and (iii)
no Loan may be converted into a LIBOR Rate Loan when any Default or Event of
Default has occurred and is continuing. Any notice of conversion shall be in the
form of Exhibit C, annexed hereto. All or any part of Outstanding Loans of any
Type may be converted as provided herein, provided that (x) partial conversions
shall be in an aggregate principal amount of $1,000,000 or an integral multiple
of $100,000.00 in excess thereof and (y) no more than five (5) Interest Periods
for Revolving Credit Loans which are LIBOR Rate Loans may be outstanding at any
one time. Each Conversion Request shall be irrevocable by the Borrower.
(b) Any Loan of any Type may be continued as such upon the expiration
of an Interest Period with respect thereto by compliance by the Borrower with
the notice provisions contained in Section 2.9(a); provided that no LIBOR Rate
Loan may be con tinued as such when any Default or Event of Default has occurred
and is continuing, but shall be automatically converted to a Base Rate Loan on
the last day of the first Interest Period relating thereto ending during the
continuance of any Default or Event of Default of which the officers of the
Agent active upon the Borrower's account have actual knowledge. The Agent shall
notify the Lenders promptly when any such automatic conversion contem plated by
this Section 2.9(b) is scheduled to occur.
(c) In the event that the Borrower does not notify the Agent of the
Borrower's election hereunder with respect to any Loan, such Loan shall be
automatically converted to a Base Rate Loan at the end of the applicable
Interest Period.
Section 2.10. FUNDS FOR LOANS.
(a) Each Lender does hereby authorize the Agent to make all Loans,
subject to the terms and conditions of this Agreement and not to exceed in the
aggregate the sum of all Lenders Commitments, which are requested by the
Borrower during any Business Day. Each Lender does hereby further irrevocably
agree, whether or not an Event of Default has occurred or the Obligations have
been accelerated, not later than 2:00 p.m. (Boston time) on each Business Day to
make available to the Agent, at its Head Office, in immediately available funds,
the amount of such Lender's Commitment Percentage of each Revolving Credit Loan
to be made by the Agent on such Business Day after taking into account payments
31
<PAGE>
received by the Agent and applied to the Revolving Credit Loans on such Business
Day. The failure or refusal of any Lender to make available to the Agent at the
aforesaid time and place the amount of its Commitment Percentage of the
Revolving Credit Loans shall not relieve any other Lender from its several
obligation hereunder to make available to the Agent the amount of such other
Lender's Commitment Percentage of any Loan, nor shall such failure or refusal
obligate any other Lender to fund such failing or refusing Lender's Commitment
Percentage of any Loan. The Agent shall make the funds so received from the
Lenders available to the Borrower by depositing such funds in an account of the
Borrower maintained with any Lender and designated by the Borrower in its
request for a Revolving Credit Loan pursuant to Section 2.5 hereof no later than
3.00 p.m. (Boston time) on the Drawdown Date thereof.
(b) The Agent may, unless notified to the contrary by any Lender prior
to 2:00 p.m. (Boston time) on the Drawdown Date, assume that such Lender has
made available to the Agent the amount of such Lender's Commitment Percentage of
the Loan made on such Drawdown Date. If any Lender makes available to the Agent
such amount on a date after the Drawdown Date, such Lender shall pay to the
Agent on demand an amount equal to the product of (i) the weighted average,
computed for the period referred to in clause (iii) below, of the interest rate
paid by the Agent for federal funds acquired by the Agent during each day
included in such period, times (ii) the amount of such Lender's Commitment
Percentage of such Loans, times (iii) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date to the date on
which the amount of such Lender's Commitment Percentage of such Loans shall
become immediately available to the Agent, and the denominator of which is 365.
A statement of the Agent submitted to such Lender with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due and
owing to the Agent by such Lender. If the amount of such Lender's Commitment
Percentage of such Loans is not made available to the Agent by such Lender
within three (3) Business Days following such Drawdown Date, the Agent shall be
entitled to recover such amount from the Borrower on demand, with interest
thereon at the rate per annum applicable to the subject Loans made on such
Drawdown Date.
Section 3. LETTERS OF CREDIT.
Section 3.1. ESTABLISHMENT OF LETTER OF CREDIT SUBLIMITS.
(a) Subject to the terms and conditions of the within Agreement, until
the earlier of (i) one hundred eighty (180) Business Days prior to the Revolving
Credit Maturity Date or (ii) the occurrence of any Default, the Borrower may
request that any Lender issue, and each Lender shall issue Letters of Credit.
32
<PAGE>
Each such Letter of Credit shall be in such form, scope, and substance, as the
Borrower and such Issuing Lender may agree from time to time.
(b) The amount which the beneficiaries under all Documentary Letters of
Credit then Outstanding may draw thereunder shall not at any time exceed the sum
of $70,000,000.00.
(c) The aggregate of (i) the amount which the beneficiaries under all
Letters of Credit at any time Outstanding may draw thereunder, plus (ii) all
Revolving Credit Loans then Outstanding, shall not exceed the Revolving Credit
Ceiling.
(d) No Lender shall be obligated to issue a Letter of Credit if upon
such issuance, the aggregate of such Lender's Commitment Percentage of (i) all
Outstanding Letters of Credit and (ii) all Revolving Credit Loans then
Outstanding, would exceed such Lender's Commitment.
(e) No Documentary Letter of Credit shall have an expiry date later
than the earlier of:
(i) 180 days (or such longer period as may be
approved by the Agent) after the issuance of such
Documentary Letter of Credit; or
(ii) The Revolving Credit Maturity Date.
(f) No Standby Letter of Credit shall have an expiry date later than
the earlier of
(i) 365 days after the issuance of such Standby
Letter of Credit; or
(ii) Ninety (90) days prior to the Revolving
Credit Maturity Date.
Section 3.2. LETTER OF CREDIT FEES.
The Borrower shall pay to the Issuing Lender for any Letter of Credit
such standard issuance, processing, fronting, amendment, negotiation and
administrative fees on account of each Letter of Credit as the Issuing Lender
and the Borrower may agree. All fees provided for in this Section shall be
calculated in accordance with the provisions of Section 4.3 hereof and shall not
be subject to refund or rebate under any circumstances.
Section 3.4. EFFECT OF DRAWING UNDER LETTER OF CREDIT.
The Borrower shall reimburse the Issuing Lender for the amount of any
honoring of a Letter of Credit issued for the account of the Borrower and
honored in accordance with the terms of such Letter of Credit. Any drawing or
presentation which is not so reimbursed by the Borrower on the Business Day when
33
<PAGE>
so honored, shall constitute, a Loan (or if the Commitments have been terminated
shall constitute a loan by each of the Lenders to be made in accordance with
Section 3.7 hereof pro rata in accordance with each Lender's Commitment
Percentage). If, as the result of the making of any loan hereunder, the
Borrower's Availability is then exceeded, the Borrower shall make a mandatory
prepayment in the amount and manner described in Section 2.7(a) hereof.
Section 3.5. REQUESTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) The Borrower shall give the Issuing Lender such prior telephonic,
electronic, or written notice of each request for Letter of Credit issuances (an
"L/C Request") as such Issuing Lender may require, specifying the aggregate
amount and requested issuance date (which shall be a Business Day). Thereafter,
the Borrower shall promptly provide the Issuing Lender additional information
with respect to any L/C Request as the Issuing Lender deems necessary or
appropriate to respond to such L/C Request. Such L/C Request shall be
irrevocable by the Borrower. Upon receipt of an L/C Request, the Issuing Lender
shall promptly notify the Agent thereof.
(b) Each request for the issuance of a Letter of Credit hereunder shall
constitute a representation by the Borrower that the applicable conditions set
forth in Articles 10 and 11, below, have been satisfied on the date of such
request.
(c) The Borrower shall execute and deliver to the Issuing Lender such
further documents and instruments in connection with any Letter of Credit as the
Issuing Lender, in accordance with the Issuing Lender's then customary practices
with respect to similar facilities, reasonably may request.
Section 3.6. INDEMNITY. The Borrower agrees to indemnify each Issuing
Lender and hold it harmless from and against any and all claims, damages,
losses, liabilities, costs and expenses whatsoever which it may incur or suffer
by reason of or in connection with the execution and delivery or assignment of
or payment or presentation under or in respect of any Letter of Credit issued by
such Issuing Lender or any action taken or omitted to be taken with respect to
any Letter of Credit issued by such Issuing Lender, except to the extent that
any such claims, damages, losses, liabilities, costs or expenses shall be caused
by the willful misconduct, gross negligence or bad faith of such Issuing Lender,
it being understood that (x) in making such payment, such Issuing Lender's or
its correspondent's exclusive reliance in good faith on the documents presented
to and believed to be genuine by it in accordance with the terms of such Letter
of Credit as to any and all matters set forth therein, including, without
limitation, reliance in good faith on any affidavit presented pursuant to such
34
<PAGE>
Letter of Credit and on the amount of any sight draft presented pursuant to any
Letter of Credit whether or not any statement or any other documents presented
pursuant to such Letter of Credit proves to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein proves to be untrue or
inaccurate in any respect whatsoever and (y) any such noncompliance in a
nonmaterial respect shall, in each case, not be deemed willful misconduct, gross
negligence or bad faith of such Issuing Lender. Upon demand by any Issuing
Lender at any time, the Borrower shall reimburse such Issuing Lender for any
legal or other expenses incurred in connection with investigating or defending
against any of the foregoing, except if the same is due to such Issuing Lender's
gross negligence, bad faith, or willful misconduct as aforesaid. Without
limiting the foregoing, the Borrower's indemnification provided herein shall
include any claims, damages, losses, liabilities, costs, or expenses whatsoever
which may be incurred by any Issuing Lender to any correspondent utilized by
such Issuing Lender with respect to any Letter of Credit. The indemnities
contained herein shall survive the expiration or termination of the Letters of
Credit and this Agreement and shall be payable upon demand.
Section 3.7. LETTER OF CREDIT PARTICIPATION AND CERTAIN PAYMENTS. (a)
Each Lender agrees that by becoming a party to this Agreement, each such Lender,
without any further action, shall be deemed to have taken, as of the date of
issuance of each outstanding Letter of Credit for the account of the Borrower,
an undivided participating interest from each Issuing Lender in all Letters of
Credit issued for the account of the Borrower outstanding at such time and the
Letter of Credit Agreements relating thereto in a percentage equal to such
Lender's Commitment Percentage. Each Lender shall hold the relevant Issuing
Lender harmless and indemnify such Issuing Lender for such Lender's pro rata
share of any drawing under any Letter of Credit in which it has taken such an
undivided participating interest under this Section 3.7.
(b) The obligation of each Lender to make payments to an Issuing Lender
with respect to any Letter of Credit issued for the account of the Borrower
after having taken a participation therein as provided above shall be
irrevocable and shall not be subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances (other than in the event of the Issuing
Lender's negligence or willful misconduct with respect to such Letter of
Credit), including without limitation any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, any of the Loan Documents, and all other documents and
instruments executed by any of the Obligors or any Affiliate thereof
and delivered to the Agent, the Issuing Lender thereof or any other
35
<PAGE>
Lender in connection with or related to the Loans, the Letters of
Credit or the Collateral, together with any and all amendments,
extensions, renewals and modifications thereof;
(ii) the existence of any claim, set-off, defense or
other right which any Obligor may have at any time against the
beneficiary named in any Letter of Credit or any transferee of any
Letter of Credit (or any person for whom any such transferee may be
acting), the Agent, the Issuing Lender thereof, any other Lender or any
other person, whether in connection with this Agreement, such Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between any Obligor
or any Subsidiary thereof and the beneficiary named in such Letter of
Credit);
(iii) any draft, certificate or any other document
presented under any 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) the surrender or impairment of any security
for the performance or observance of any of the terms of any
of this Agreement or any of the Loan Documents; or
(v) the occurrence of any Default or Event of Default.
Section 3.8. ADDITIONAL PROVISIONS RELATING TO LETTERS OF CREDIT.
(a) The obligations of the Borrower with respect to Letters of Credit
shall be absolute and unconditional and shall rank pari pasu with the
obligations of the Borrower to repay all other Obligations.
(b) None of the Issuing Lender, the Issuing Lender's correspondents,
any advising, negotiating, or paying bank with respect to any Letter of Credit,
the Agent, or the Lenders shall be responsible in any way for:
(i) performance by any beneficiary under any
Letter of Credit of that beneficiary's obligations to the
Borrower; or
(ii) the form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal effect of;
any documents called for under any Letter of Credit if (with respect to
the foregoing) such documents on their face appear to be in order.
36
<PAGE>
(c) The Issuing Lender may honor, as complying with the terms of any
Letter of Credit and of any drawing thereunder, any drafts or other documents
otherwise in order, but signed or issued by an administrator, executor,
conservator, trustee in bankruptcy, debtor in possession, assignee for the
benefit of the creditors, liquidator, receiver, or other legal representative of
the party authorized under such Letter of Credit to draw or issue such drafts or
other documents.
(d) Unless otherwise agreed to in the applicable Letter of Credit
application, the Borrower hereby authorizes the Issuing Lender to (i) select an
advising bank, if any; (ii) select a paying bank, if any; and (iii) select a
negotiating bank.
(e) The Issuing Lender, the Agent, and the Lenders shall have
discharged their respective obligations under any Letter of Credit which, or the
drawing under which, includes payment instructions, by the initiation of the
method of payment called for in, and in accordance with, such instruments (or by
any other commercially reasonable and comparable method). The Issuing Lender,
the Agent, and the Lenders do not assume any responsibility for any inaccuracy,
interruption, error, or delay in transmission or delivery by post, telegraph or
cable, or for any inaccuracy of translation.
(f) The Issuing Lender's, the Agent's and the Lenders' rights, powers,
privileges and immunities specified in or arising under this Section with
respect to Letters of Credit are in addition to any heretofore or at any time
hereafter otherwise created or arising, whether by statute or rule of law or
contract.
(g) The Letters of Credit, except to the extent otherwise expressly
provided hereunder or agreed to in writing by the Issuing Lender, the Agent, and
the account party of the subject Letter of Credit, will be governed by the
Uniform Customs and Practice for Documentary Credits (1983 Revision),
International Chamber of Commerce, Publication No. 400, and any subsequent
revisions thereof.
(h) The obligations of the Borrower under the within Agreement with
respect to the Letters of Credit are absolute, unconditional, and irrevocable
and shall be performed strictly in accordance with the terms hereof under all
circumstances, whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint or stay in the enforcement of the within
Agreement, any Letter of Credit, or any other agreement or instrument
relating thereto.
37
<PAGE>
(ii) The existence of any claim, set-off, defense, or
other right which the Borrower may have at any time against the
beneficiary of any Letter of Credit.
Section 4. CERTAIN GENERAL PROVISIONS.
Section 4.1. AGENT'S FEE. The Borrower shall pay to the Agent annually,
for the Agent's own account, an Agent's fee in the sum of $25,000.00. Such
Agent's fee shall be paid in equal quarterly installments, in advance, on the
first day of each calendar quarter, commencing October 1, 1996. Such Agent's fee
shall be deemed fully earned on each such anniversary and shall not be
refundable in whole or in part under any circumstances.
Section 4.2 FACILITY FEES. The Borrower agrees to pay to the Agent, for
the accounts of the Lenders, in accordance with their respective Commitment
Percentages, a facility fee calculated by multiplying the Facility Fee Rate by
the Revolving Credit Ceiling as of the last day of each calendar quarter. Such
facility fee shall be paid in equal quarterly installments, in arrears, on the
first day of each calendar quarter, commencing January 1, 1997. Such facility
fee shall be deemed fully earned on each such payment date and shall not be
refundable in whole or in part under any circumstances.
Section 4.3. FUNDS FOR PAYMENTS.
(a) All payments of principal, interest, commitment fees, closing fees
and any other amounts due hereunder or under any of the other Loan Documents
shall be made to the Agent, for the respective accounts of the Lenders and the
Agent, on or before 12:00 noon (Boston time), at the Agent's head office at 100
Federal Street, Boston, Massachusetts 02110, or at such other location in the
Boston, Massachusetts area that the Agent may from time to time designate, in
each case in immediately available funds.
(b) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or coun terclaim and free and clear
of and without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the Borrower is
compelled by law to make such deduction or withholding. If any such obligation
is imposed upon the Borrower with respect to any amount payable by it hereunder
or under any of the other Loan Documents, the Borrower will pay to the Agent,
for the account of the Lenders or (as the case may be) the Agent, on the date on
which such amount is due and payable hereunder or under such other Loan
Document, such addi tional amount in Dollars as shall be necessary to enable the
38
<PAGE>
Lenders or the Agent to receive the same net amount which the Lenders or the
Agent would have received on such due date had no such obligation been imposed
upon the Borrower. The Borrower will deliver promptly to the Agent certificates
or other valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such other Loan
Document.
Section 4.4. COMPUTATIONS. All computations of interest on the Loans
and of other fees payable by the Borrower to the extent applicable shall be
based on a 360-day year and paid for the actual number of days elapsed. Each
change in the Base Rate shall be effective, for purposes of the determination of
interest hereunder, contemporaneously with the effectiveness of such change in
the Base Rate. Except as otherwise provided in the definition of the term
"Interest Period" with respect to LIBOR Rate Loans, whenever a payment hereunder
or under any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
Outstanding amount of the Loans as reflected on the Revolving Credit Note
Records from time to time shall be considered correct and binding on the
Borrower unless within ten (10) Business Days after receipt by the Borrower from
the Agent of any notice of such Outstanding amount, the Borrower shall notify
the Agent to the contrary.
Section 4.5. INABILITY TO DETERMINE LIBOR RATE. In the event, prior to
the commencement of any Interest Period relating to any LIBOR Rate Loan or
Reference Rate Loan, the Agent shall determine that adequate and reasonable
methods do not exist for ascertaining the LIBOR Rate that would otherwise
determine the rate of interest to be applicable to any LIBOR Rate Loan or
Reference Rate Loan during any Interest Period, the Agent shall forthwith give
notice of such determination (which shall be conclusive and binding on the
Borrower and the Lenders) to the Borrower and the Lenders. In such event (a) any
request for a Loan with respect to LIBOR Rate Loans or Reference Rate Loans
shall be automatically withdrawn and shall be deemed a request for Base Rate
Loans, (b) each LIBOR Rate Loan or Reference Rate Loan on the last day of the
then current Interest Period thereof will automatically become a Base Rate Loan,
and (c) the obligations of the Lenders to make LIBOR Rate Loans and Reference
Rate Loans shall be suspended until the Agent determines that the circumstances
giving rise to such suspension no longer exist, whereupon the Agent shall so
notify the Borrower and the Lenders.
Section 4.6. ILLEGALITY. Notwithstanding any other provisions herein,
if any present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain LIBOR Rate Loans or Reference Rate Loans, such Lender shall
forthwith give notice of such circumstances to the Borrower and thereupon (a)
the Commitment of such Lender to make LIBOR Rate Loans or Reference Rate Loans
39
<PAGE>
or convert Loans of another type to LIBOR Rate Loans or Reference Rate Loans
shall forthwith be sus pended and (b) the LIBOR Rate Loans and Reference Rate
Loans then Outstanding shall be converted automatically to Base Rate Loans on
the last day of each Interest Period applicable thereto or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Lender, upon demand by such Lender, any additional
amounts necessary to compensate such Lender for any costs in curred by such
Lender in making any conversion in accordance with this Section 4.6, including
any interest or fees payable by such Lender to lenders of funds obtained by it
in order to make or maintain its LIBOR Rate Loans or Reference Rate Loans
hereunder and any amounts payable under Section 4.10 hereof.
Section 4.7. ADDITIONAL COSTS, ETC. If any change in any applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy, impost (which is
not applicable to such Lender or the Agent at the time of execution of this
Agreement), duty, charge, fee, deduction or withholding of any nature with
respect to this Agreement, the other Loan Documents, such Lender's Commitment or
the Loans (other than taxes based upon or measured by the income or profits of
such Lender or the Agent); or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Lender of the principal of or the
interest on any Loans or any other amounts payable to any Lender under this
Agreement or the other Loan Documents; or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or deposits in
or for the account of, or loans by, or commitments of an office of any Lender;
or
(d) impose on any Lender or the Agent any other condi tions or
requirements (which are not applicable to the Agent or such Lender at the time
of execution of this Agreement) with respect to this Agreement, the other Loan
Documents, the Loans, such Lender's Commitment, or any class of loans or
commitments of which any of the Loans or such Lender's Commitment forms a part;
40
<PAGE>
(e) impose on any Lender any other conditions or requirements relating
to any Letters of Credit (which are not applicable to the Agent or such Lender
at the time of execution of this Agreement).
and the result of any of the foregoing is to increase the cost to any
Lender of making, funding, issuing, renewing, extending or maintaining any of
the Loans or such Lender's Commitment or Letters of Credit then, and in each
such case, the Borrower will, upon demand made by the Agent or any such Lender
at any time and from time to time and as often as the occasion therefor may
arise, pay to such Lender or the Agent such additional amounts as will be
sufficient to compensate such Lender or the Agent for such additional cost,
reduction, payment or foregone interest or other sum.
Section 4.8. CAPITAL ADEQUACY. If any present or future law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) or the interpretation thereof by a court or
governmental authority with appropriate jurisdiction affects the amount of
capital required or expected to be maintained by any Lender or the Agent or any
corporation controlling such Lender or the Agent and such Lender or the Agent
determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of the Loans or the Commitments made or
deemed to be made pursuant hereto, then the Agent or any such Lender may notify
the Borrower of such fact, and the Borrower shall pay to such Lender or the
Agent from time to time on demand, as an additional fee payable hereunder, such
amount as such Lender or the Agent shall determine in good faith and certify in
a notice to the Borrower to be an amount that will adequately compensate such
Lender in light of these circumstances for its increased costs of maintaining
such capital.
Section 4.9. CERTIFICATE. A certificate setting forth any additional
amounts payable pursuant to Section Section 4.7 or 4.8 and a brief explanation
of such amounts which are due, submitted by any Lender or the Agent to the
Borrower, shall be prima facie evidence that such amounts are due and owing.
Section 4.10. INDEMNITY. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from and against any loss, cost or expense
(including loss of anticipated profits based upon the then Applicable Margin)
that such Lender may sustain or incur (including, without limitation, by virtue
of acceleration after the occurrence of any Event of Default) as a consequence
of (a) default by the Borrower in payment of the principal amount of or any
interest on any LIBOR Rate Loans as and when due and payable, including any such
41
<PAGE>
loss or expense arising from interest or fees payable by such Lender to lenders
of funds obtained by it in order to maintain its LIBOR Rate Loans, (b) default
by the Borrower in making a borrowing or conversion after the Borrower has given
(or is deemed to have given) a request for a Loan or a Conversion Request (c)
the making of any payment of a LIBOR Rate Loan or the making of any conversion
of any such Loan to a Base Rate Loan or Reference Rate Loan on a day that is not
the last day of the applicable Interest Period with respect thereto, including
interest or fees payable by such Lender to lenders of funds obtained by it in
order to maintain any such Loans. The within indemnification shall not apply,
however, to any loss, cost, or expense which any Lender may incur if a court of
competent jurisdiction finally determines (after all appeals have been exhausted
or waived) that such loss, cost, or expense was incurred by virtue of the
Lender's bad faith, gross negligence, or willful misconduct.
Section 4.11. INTEREST AFTER DEFAULT. Following the occurrence of an
Event of Default, principal and (to the extent permitted by applicable law)
interest on the Loans and all other amounts payable hereunder or under any of
the other Loan Documents, at the option of the Agent, shall bear interest (com
pounded daily) payable on demand at a rate per annum equal to the aggregate of
the Base Rate plus three and one-half percent (3 1/2%) per annum.
Section 5. COLLATERAL SECURITY.
Section 5.1. COLLATERAL. (a) The Obligations shall be secured by a
first priority security interest to be held by the Agent (subject only to
Permitted Liens) in the Collateral.
(b) Except as provided in Section 5.2 hereof, the Agent agrees not to
perfect any security interest granted under the Security Documents unless and
until the occurrence of an Event of Default hereunder, in which case such
perfection shall be obtained at the Obligors' cost. Simultaneously with the
execution of this Agreement, each Obligor shall execute any and all documents
reasonably necessary to obtain such perfection (excluding perfection of a
security interest in Collateral located in retail locations), and Agent shall
hold such documents and shall not record same until after the occurrence of an
Event of Default. In addition, each Obligor shall immediately notify Agent in
the event the location of any such Collateral changes and will execute such
additional filing documents which would be necessary to perfect such security
interest. Upon the occurrence of an Event of Default, Obligors shall execute
such additional documents as requested by Agent necessary to perfect Lenders'
security interest in all of the Collateral (excluding the Collateral located in
the retail store locations of DTS), and Agent shall record such documents in all
appropriate jurisdictions necessary or in Agent's opinion advisable, to
42
<PAGE>
perfect such security interests, unless the Majority Lenders object to said
filing in writing delivered to Agent within ten (10) Business Days
following receipt of notice of Agent's intent to file such UCC financing
statements; provided, however, Obligors shall not be third party beneficiaries
of this provision. Such recordation and filing fees shall be immediately
reimbursed by Obligors to Agent and, if not reimbursed within two (2) Business
Days after request therefor by Agent, such amounts shall begin to accrue
interest at the default rate set forth in Section 4.11 hereof.
Section 5.2. INTERCOMPANY RECEIVABLES, CHATTEL PAPER, CONTRACT RIGHTS.
Notwithstanding the foregoing, the Obligations shall also be secured by a
perfected, first priority security interest in all of any Obligor's receivables
due, or to become due, from another Obligor or any other Affiliate of the
Obligors and arising from the sale by an Obligor of inventory or other property
or services to another Obligor or any other Affiliate ("Intercompany
Receivables") and all amounts due or to become due from any Obligor or any other
Affiliates for loans, and/or other advances by any Obligor of funds or property
to another Obligor or other Affiliates ("Intercompany Loans"), and the
Intercompany Loan Documents, together with all contract rights or other general
intangibles contained in or arising from any and all notes, security agreements,
and chattel paper including the Intercompany Loan Documents (which such notes,
security agreements and chattel paper shall be held by Lenders) and instruments,
documents, or agreements evidencing and/or governing such Intercompany
Receivables and Intercompany Loans.
Section 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Agent and the Lenders as follows.
Section 6.1. CORPORATE AUTHORITY; ETC.
(a) Incorporation; Good Standing. Each of the Borrower, DTS, and DTM
(i) is a Virginia corporation, validly existing and in good standing under the
laws of the State of Virginia (ii) has all requisite power to own its property
and conduct its business as now conducted and as presently contemplated, and
(iii) is in good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where Collateral is located and in each other
jurisdiction where such qualification is necessary except where a failure to be
so qualified in such other jurisdiction would not have a materially adverse
effect on the business, assets or financial condition of such Obligor.
(b) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which any Obligor or the Founders is
to become a party and the transactions contemplated hereby and thereby (i) are
within the authority of each Obligor, (ii) have been duly authorized by all
43
<PAGE>
necessary proceedings, (iii) do not and will not conflict with or
result in any breach or contravention of any provision of law, statute, rule,
regulation or agreement to which any Obligor is subject or any judgment, order,
writ, injunction, license or permit applicable to any Obligor, and (iv) do not
and will not conflict with any provision of any Obligor's organization documents
or other charter documents or bylaws of, or any agreement or other instrument
binding upon, any Obligor.
(c) Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which each Obligor is or is to become a party will
result in valid and legally binding obligations of each Obligor enforceable
against it in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
Section 6.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower or any Obligor is or is to become a party and the
transactions contemplated hereby and thereby do not require the approval or
consent of, or filing with, any governmental agency or authority other than
those already obtained and the filing of related financing statements in the
appropriate records office with respect thereto.
Section 6.3. TITLE TO PROPERTIES; LEASES. DTS and its Subsidiaries own,
or possess under Capitalized Leases, all of the assets reflected in the
consolidated balance sheet of DTS and its Subsidiaries as at the Balance Sheet
Date or acquired since that date (except property and assets sold or otherwise
disposed of in the ordinary course of business since that date), and such assets
are not subject to any mortgages, leases (other than Capitalized Leases),
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
Section 6.4. SOLVENCY; FINANCIAL STATEMENTS. Each of the Obligors
(other than DTM) is solvent. The following financial statements have been
furnished to each of the Lenders:
(a) A consolidated balance sheet of DTS and its Subsidiaries as of
December 31, 1995, and a consolidated statement of income for the fiscal year
then ended, accompanied by an auditor's report prepared without qualification by
KPMG Peat Marwick or another independent certified public accountant selected by
DTS and satisfactory to the Agent. Such balance sheet and statement of income
have been prepared in accordance with Generally Accepted Accounting Principles
44
<PAGE>
and fairly present the financial condition of DTS and its Subsidiaries as at the
close of business on the date thereof and the results of operations for the
fiscal year then ended. There are no contingent liabilities of DTS or any of its
Subsidiaries as of such date involving material amounts, known to the officers
of DTS or any of its Subsidiaries not disclosed in said balance sheet and the
related notes thereto.
(b) A consolidated balance sheet, a consolidated statement of income
and a consolidated statement of cash flow of DTS and its Subsidiaries for each
of the fiscal quarters of DTS ended since December 31, 1995 certified by the
chief financial officer of DTS to have been prepared in accordance with
Generally Accepted Accounting Principles consistent with those used in the
preparation of the annual audited statements delivered pursuant to paragraph (a)
above and to fairly present the financial condition of DTS and its Subsidiaries
as at the close of business on the dates thereof and the results of operations
for the fiscal quarters then ended (subject to year-end adjustments). There are
no contingent liabilities of DTS or any of its Subsidiaries as of such dates
involving material amounts, known to the officers of DTS or any of its
Subsidiaries, not disclosed in such balance sheets and the related notes
thereto.
Section 6.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date,
there has occurred no materially adverse change in the financial condition or
business of the Borrower, DTS or its Subsidiaries as shown on or reflected in
the consolidated balance sheet of DTS and its Subsidiaries as of the Balance
Sheet Date, or the consolidated statement of income for the fiscal year then
ended, other than changes in the ordinary course of business that have not had
any materially adverse effect either individually or in the aggregate on the
business or financial condition of the Borrower, DTS or its Subsidiaries.
Section 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Obligors possess
all franchises, patents, copyrights, trademarks, trade names, licenses and
permits, and rights in respect of the foregoing, adequate for the conduct of its
business substantially as now conducted without known conflict with any rights
of others.
Section 6.7. LITIGATION. Except as stated on Schedule 6.7, there are no
actions, suits, proceedings or investigations of any kind pending or, to the
knowledge of the Borrower, threatened against any Obligors before any court,
tribunal or administrative agency or board that, if adversely determined, might,
either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of any Obligor or materially
45
<PAGE>
impair the right of any Obligor to carry on business substantially as now
conducted by it, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
Consolidated balance sheet of DTS and its Subsidiaries, or which question the
validity of this Agreement or any of the other Loan Documents, or any action
taken or to be taken pursuant hereto or thereto.
Section 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Obligors
is subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation that has or is expected in the
future to have a materially adverse effect on the business, assets or financial
condition of any Obligor. None of the Obligors is a party to any contract or
agreement that has or is expected, in the judgment of the Borrower's officers,
to have any materially adverse effect on the business of any Obligor.
Section 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the
Obligors is in violation of any provision of its charter or other organization
documents, by-laws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that could result in the imposition of substantial penalties or
materially and adversely affect the financial condition, properties or business
of any Obligor.
Section 6.10. TAX STATUS. Each Obligor (a) has made or filed, or placed
under lawful extension, all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(b) has paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any juris diction, and the officers of the
Borrower know of no basis for any such claim.
Section 6.11. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
Section 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the
Obligors is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935; nor is it an "investment
company", or an "affiliated company" or a "principal underwriter" of an
"investment company", as such terms are defined in the Investment Company Act of
1940.
Section 6.13. ABSENCE OF UCC FINANCING STATEMENTS, ETC. Except with
respect to Permitted Liens, to Borrower's knowledge, there is no financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry, or other public
46
<PAGE>
office, that purports to cover, affect or give notice of any present or possible
future lien on, or security interest in, any Collateral or rights thereunder.
Section 6.14. SETOFF, ETC. The Collateral and the rights of the Agent
and the Lenders with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Obligors are the owner of the
Collateral free from any lien, security interest, encumbrance and, to the
knowledge of the Borrower, any other claim or demand, except for Permitted
Liens.
Section 6.15. CERTAIN TRANSACTIONS. Except as set forth on Schedule
6.15, none of the officers, directors, or employees of any Obligor is presently
a party to any transaction with any Obligor (other than for services as
employees, officers and directors), including any contract, agreement or other
arrange ment providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, trustee, director or such employee or, to the knowledge
of the Borrower, any corpora tion, partnership, trust or other entity in which
any officer, trustee, director, or any such employee has a substantial inter est
or is an officer, director, trustee or partner.
Section 6.16. EMPLOYEE BENEFIT PLANS; MULTIEMPLOYER PLANS; GUARANTEED
PENSION PLANS.
(a) Neither the Borrower nor any ERISA Affiliate maintains or
contributes to any Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan other than as set forth in Schedule 6.16 hereof.
(b) (i) No Reportable Event has occurred and is continuing with respect
to any such Plan; (ii) PBGC has not instituted proceedings to terminate any such
Plan; (iii) none of the Obligors has (A) incurred any liability to PBGC with
respect to any such Plan other than for premiums not yet due or payable, or (B)
instituted or does not intend to institute proceedings to terminate any such
Plan under Sections 4041 or 4041A of ERISA or withdraw from any Multi-Employer
Pension Plan (as that term is defined in Section 3(37) of ERISA); (iv) each such
Plan of the Obligors has been maintained and funded in all material respects in
accordance with its terms and with all provisions of ERISA and the Code
applicable thereto; (v) where applicable, each of the Obligors has complied with
all applicable minimum funding requirements of ERISA and the Code with respect
to each Plan; (vi) there are no unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA) with respect to any such Plan of any of the
Obligors which pose a risk of causing a lien to be created in its assets; and
(vii) no material prohibited transaction under the Code or ERISA has occurred
with respect to any such Plan of any of the Obligors.
Section 6.17. REGULATIONS U AND X. No portion of any Loan is to be used
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
47
<PAGE>
Section 6.18. ENVIRONMENTAL COMPLIANCE. Except as disclosed on Schedule
6.18,
(a) the operations of the Obligors comply with all applicable
Environmental Laws;
(b) none of the operations of any Obligor is the subject of any
judicial or administrative proceeding alleging the violation of any
Environmental Laws;
(c) none of the operations of any Obligor is the subject of any federal
or state investigation evaluating whether the Borrower or any of the
Subsidiaries disposed of any hazardous or toxic waste, substance or constituent
at any site that may require remedial action, or any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any hazardous or toxic waste, substance or constituent into the
environment;
(d) none of the Obligors has filed any notice under any federal or
state law indicating past or present treatment, storage or disposal of a
hazardous waste or reporting a spill or release of a hazardous or toxic waste,
substance or constituent into the environment;
(e) none of the Obligors has any contingent liability of which the
Borrower has knowledge or reasonably should have knowledge in connection with
any release of any hazardous or toxic waste, substance or constituent into the
environment, nor has any Obligor received any notice, letter or other indication
of potential liability arising from the disposal of any hazardous or toxic
waste, substance or constituent into the environment.
Section 6.19. SUBSIDIARIES. Schedule 6.19 sets forth all of the
Subsidiaries of the Borrower and DTS. Except as set forth in Schedule 6.19, the
Borrower or DTS, as applicable, is the owner, free and clear of all liens and
encumbrances, of all of the issued and outstanding capital stock of each
Subsidiary. Except as set forth in Schedule 6.19, all shares of such stock have
been validly issued and are fully paid and nonassessable and no rights to
subscribe to any additional shares have been granted, and no options, warrants,
or similar rights are outstanding.
Section 6.20. LOAN DOCUMENTS. All of the representations and warranties
of any Obligor made in the other Loan Documents or any document or instrument
delivered to the Agent or the Lenders pursuant to or in connection with any of
such Loan Documents are true and correct in all material respects.
Section 6.21. TRADE NAMES. The Obligors do not transact or engage, and
have not transacted or engaged, in business under any names other than those set
forth in Schedule 6.21 hereto.
48
<PAGE>
Section 6.22. STOCK OWNERSHIP AND PLEDGE. The Founders have Beneficial
Ownership of not less than ten percent (10%) of the aggregate of (a) all issued
and outstanding voting capital stock and (b) other ownership rights and
interests in DTS voting capital stock. DTS owns all of the stock and other
ownership rights and interest in the Borrower and DTM. Except as set forth in
Schedule 6.19 and except for options to purchase capital stock of DTS granted
pursuant to the Stock Option Plan, which are consistent in all respects with
written descriptions thereof previously provided to the Lenders, there are no
liens, encumbrances, options, warrants, claims or other rights of any other
parties to any stock or ownership rights or interests in any Obligor. DTS has
furnished to the Lenders complete copies of any and all stockholders,
shareholders or other agreements (and all amendments thereto) affecting
ownership rights or interests in the capital stock of the Obligors.
Section 7. AFFIRMATIVE COVENANTS. The Obligors covenant and agree that,
so long as any Obligation is Outstanding or any Lender has any obligation to
make any Loan:
Section 7.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loans and all
interest, fees and other Obligations provided for in this Agreement, all in
accordance with the terms of this Agreement and the Notes, as well as all other
sums owing pursuant to the Loan Documents.
Section 7.2. MAINTENANCE OF OFFICE. The Borrower will maintain its
chief executive office in Norfolk, Virginia, or at such other place in the
United States of America as the Borrower shall designate upon not less than
thirty (30) days prior written notice to the Agent and the Lenders.
Section 7.3. RECORDS AND ACCOUNTS. Each Obligor will (a) keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with Generally Accepted Accounting Principles and (b)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation and amortization of its properties, contingencies, and other
reserves.
Section 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrower will deliver to each of the Lenders:
(a) As soon as practicable, but in any event not later than
one hundred twenty (120) days after the end of each fiscal year of DTS,
the audited consolidated balance sheet of DTS and its Subsidiaries at
the end of such year, and the related audited consolidated statements
of earnings and cash flows for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
statements to be in reasonable detail, prepared in accordance with
Generally Accepted Accounting Principles, and accompanied by an
auditor's report prepared without qualification by KPMG Peat Marwick
(or by another independent certified public accountant acceptable to
the Agent), together with the notes accompanying the financial
statements.
49
<PAGE>
(b) As soon as practicable, but in any event not later than
forty-five (45) days after the end of each fiscal quarter of DTS,
copies of the unaudited consolidated balance sheet of DTS and its
Subsidiaries as of the end of such quarter, and the related unaudited
consolidated statements of income and cash flow for such quarter and
that portion of the fiscal year of DTS then elapsed, all in reasonable
detail and prepared in accordance with Generally Accepted Accounting
Principles, in each case setting forth in comparative form the figures
for the corresponding period of the prior fiscal year, together with a
certification by the principal financial or accounting officer of DTS
that the information contained in such financial statements fairly
presents the financial position of DTS and its Subsidiaries on the date
thereof (subject to year-end adjustments). In addition, the Borrower
shall include an analysis of gross margins and of "same store sales",
as applicable for each Obligor, in form satisfactory to the Lenders.
(c) Simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b), above, a statement
in the form of Exhibit D hereto signed by the principal financial or
accounting officer of the Borrower and setting forth in reasonable
detail computations evidencing compliance with the covenants contained
in Section Section 9.1 through 9.7 and (if applicable) reconciliations
to reflect changes in Generally Accepted Ac counting Principles since
the Balance Sheet Date.
(d) As soon as available and in any event within ninety (90)
days after the close of each Fiscal Year, (i) copies of internally
50
<PAGE>
prepared unaudited consolidated and consolidating balance sheets and
statements of income of Obligors for such Fiscal Year prepared in a
manner consistent with past practice and in form and substance
satisfactory to the Lenders and (ii) internally prepared reports
reflecting gross margin results and providing such "same store"
analysis of financial performance as the Lenders may request, all
of which shall be in form satisfactory to the Lenders.
(e) As soon as practicable, but in any event not later than
sixty (60) days after the close of each Fiscal Year, monthly
projections of the financial condition and results of operations of the
Obligors for the current fiscal year and annual projections thereof for
each fiscal year thereafter through and including the Fiscal Year of
the Revolving Credit Maturity Date, including, but not limited to, a
projected Consolidated balance sheet, statement of operations, and
statement of cash flows for each of such Fiscal Years.
(f) Contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of any Obligor.
(g) Contemporaneously with any Obligor's receipt
thereof, copies of all accountants' management letters.
(h) From time to time such other financial data and
information as the Agent or any Lender may reasonably
request.
Section 7.5. NOTICES.
(a) Defaults. The Borrower will, and shall cause each other
Obligor to, promptly notify the Agent and each of the Lenders in writing of the
occurrence of any Default or Event of Default. If any Person shall give any
notice or take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Agreement or under any note,
evidence of indebtedness, indenture or other obligation to which or with respect
to which any Obligor is a party or obligor, whether as principal or surety, and
such default would permit the holder of such note or obligation or other
evidence of indebtedness to accelerate the maturity thereof, which acceleration
would have a material adverse effect on any Obligor, the Borrower shall, and
shall cause each other Obligor to, forthwith give written notice thereof to the
Agent and each of the Lenders, describing the notice or action and the nature of
the claimed default.
(b) Environmental Events. The Borrower will, and will cause
each other Obligor to, promptly give notice to the Agent (i) of any
violation of any Environmental Law that any Obligor reports in writing or is
reportable by such Person in writing to any federal, state or local
environmental agency and (ii) upon becoming aware thereof, of any inquiry,
proceeding, investiga tion, or other action, including a notice from any agency
of potential environmental liability, or any federal, state or local
environmental agency or board, that in either case involves any Real Estate or
has the potential to materially affect the assets, liabilities, financial
condition or operations of any Obligor or the Agent's security interests
pursuant to the Security Documents.
51
<PAGE>
(c) Notification of Claims against Collateral. The Borrower
will, and will cause each other Obligor to, immediately upon becoming aware
thereof, notify the Agent and each of the Lenders in writing of any setoff,
claims (including, with respect to any Real Estate, environmental claims),
withholdings or other defenses to which any of the Collateral, or the rights of
the Agent or the Lenders with respect to the Collateral, are subject.
(d) Notice of Litigation and Judgments. The Borrower will, and
will cause each other Obligor to, give notice to the Agent and each of the
Lenders in writing within fifteen (15) days of becoming aware of any litigation
or proceedings threatened in writing or any pending litigation and proceedings
affecting any Obligor or to which any Obligor is or is to become a party
involving an uninsured claim against any Obligor that could reasonably be
expected to have a materially adverse effect on any Obligor and stating the
nature and status of such litigation or proceedings. The Borrower will, and will
cause each other Obligor to, give notice to the Agent and each of the Lenders,
in writing, in form and detail satisfactory to the Agent and each of the
Lenders, within ten (10) days of any judgment in excess of $100,000.00, not
covered by insurance, final or otherwise, against any Obligor.
Section 7.6. EXISTENCE; MAINTENANCE OF PROPERTIES. Each Obligor will do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence as a Virginia corporation. The Borrower will do or cause to
be done all things necessary to preserve and keep in full force all of its
rights and franchises and those of the other Obligors. Each Obligor (a) will
cause all of its properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment, (b) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of such Obligor may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
and (c) will each continue to engage primarily in the businesses now conducted
by it and in related businesses.
52
<PAGE>
Section 7.7. INSURANCE. Schedule 7.7 sets forth all presently existing
insurance maintained by the Obligors. The Obligors will maintain insurance on
all Collateral as required by the Loan Documents and will maintain with respect
to its other properties, with financially sound and reputable insurers,
insurance with respect to such properties and its business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such periods
as may be reasonable and prudent.
Section 7.8. TAXES. Each Obligor will duly pay and dis charge, or cause
to be paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the income or
profits therefrom, as well as all claims for labor, materials, or sup plies;
provided, however, that Obligors shall not be required to pay any such tax,
assessment, charge or levy if and so long as the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings, appropriate accruals and cash reserves therefor have been
established in accordance with GAAP and no lien with respect thereto has been
filed against such Obligor or any of its assets.
Section 7.9. INSPECTION OF PROPERTIES AND BOOKS. (a) Each Obligor shall
permit the Agent or any of the Agent's designated representatives upon
twenty-four (24) hours prior notice to the Borrower (at the Borrower's expense),
to visit and inspect any of the properties of any Obligor to examine the books
of account of any Obligor (and to make copies thereof and extracts therefrom)
and to discuss the affairs, finances and accounts of any Obligor with, and to be
advised as to the same by, its officers, all at such reasonable times and
intervals as the Agent may reasonably request (but in no event in excess of
twice in any fiscal year if no Default has arisen).
(b) Without limiting the rights of the Agent and the Lenders under
Section 7.9(a), above, the Obligor shall permit the Agent, at the Borrower's
expense, to undertake at least one (1) commercial finance examination annually.
Section 7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
Each Obligor will comply with (a) all applicable laws and regulations now or
hereafter in effect wherever its business is conducted, including all
Environmental Laws, (b) the provisions of its corporate charter and other
charter documents and by-laws, (c) all agreements and instruments to which it is
a party or by which it or any of its properties may be bound and (d) all
applicable decrees, orders, and judgments except for violations which, in the
aggregate, do not have a material adverse effect on the business, operations,
properties, assets, or financial condition of such Obligor. If at any time while
any Obligation is Outstanding or the Lenders have any obligation to make Loans
hereunder, any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary or
required in order that any Obligor may fulfill any of its obligations hereunder,
each Obligor will promptly take or cause to be taken all reasonable steps to
obtain such authorization, consent, approval, permit or license and furnish the
Agent and the Lenders with evidence thereof.
53
<PAGE>
Section 7.11. USE OF PROCEEDS. The Borrower will use the proceeds of
the Revolving Credit Loans solely to refinance existing Indebtedness, for
working capital, and for Capital Expenditures.
Section 7.12. ERISA COMPLIANCE. Each of the Obligors shall at all times
make prompt payment of all contributions required under all Employee Benefit
Plans, Multiemployer Plans and Guaranteed Pension Plans and required to meet the
minimum funding standard set forth in ERISA with respect to all such Plans.
Section 7.13. BANK ACCOUNTS. Each Obligor shall maintain all of its
principal operating and other deposit accounts with any one or more of the
Lenders.
Section 7.14. FURTHER ASSURANCES. Each Obligor will cooperate with the
Agent and the Lenders and execute such further instruments and documents as any
Lender or the Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Agreement and the other Loan Documents.
Section 8. CERTAIN NEGATIVE COVENANTS. The Obligors covenant and agree
that, so long as any Obligation is Outstanding or any of the Lenders has any
obligation to make any Loans:
Section 8.1. RESTRICTIONS ON INDEBTEDNESS. No Obligor will create,
incur, assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under any of
the Loan Documents;
(b) current liabilities of any Obligor incurred in the
ordinary course of business but not incurred through (i) the borrowing
of money, or (ii) the obtaining of credit except for credit on an open
account basis customarily extended and in fact extended in connection
with normal purchases of goods and services;
54
<PAGE>
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards not in
excess of $2,000,000.00 in the aggregate that have been in force for
less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Obligor
shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of execution shall have been
obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotia
tion and warranties of products or services, in each case
incurred in the ordinary course of business;
(f) the Intercompany Loans;
(g) Indebtedness incurred for the construction of the new
distribution and office center for the Obligors, the terms of which
Indebtedness are approved by the Agent in its discretion, which
approval shall not be unreasonably withheld; and
(h) Indebtedness existing on the date of this Agreement and
listed and described on Schedule 8.1 hereto.
Section 8.2. RESTRICTIONS ON LIENS, ETC.. No Obligor will (a) create or
incur or suffer to be created or incurred or to exist any lien, encumbrance,
mortgage, pledge, charge, restriction or other security interest of any kind
upon any of its property or assets of any character whether now owned or
hereafter acquired, or upon the income or profits therefrom; (b) transfer any of
its property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c) acquire, or
agree or have an option to acquire, any property or assets upon conditional sale
or other title retention or purchase money security agreement, device or
arrangement; (d) suffer to exist for a period of more than thirty (30) days
after the same shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; or (e)
sell, assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles, chattel paper or instruments, with or without recourse;
provided that any Obligor may create or incur or suffer to be created or
incurred or to exist:
55
<PAGE>
(i) liens in favor of any Obligor on all or part of
the assets of another Obligor securing Indebtedness owing by
such other Obligor;
(ii) liens on properties to secure taxes, assessments
and other government charges or claims for labor, material
or supplies in respect of obligations not overdue;
(iii) deposits or pledges made in connection with, or
to secure payment of, workmen's compensation, unemployment
insurance, old age pensions or other social security
obligations;
(iv) liens on properties in respect of judgments or
awards, the Indebtedness with respect to which is permitted
by Section 8.1(d);
(v) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties in existence
less than 40 days from the date of creation thereof in
respect of obligations not overdue;
(vi) encumbrances on properties consisting of
easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities
in the title thereto, landlord's or lessor's liens under
leases to which any Obligor is a party, and other minor
liens or encumbrances none of which interferes materially
with the use of the property affected in the ordinary
conduct of the business of any Obligor, which defects do not
individually or in the aggregate have a materially adverse
effect on the business of any Obligor individually or of DTS
and its Subsidiaries on a consolidated basis.
(vii) presently outstanding liens listed on Schedule
8.2 hereto; and
(viii) liens in favor of the Agent and the Lenders
under the Loan Documents.
Section 8.3. RESTRICTIONS ON INVESTMENTS. No Obligor will make or
permit to exist or to remain outstanding any Investment, except Investments
which constitute:
(a) short term Investments (determined in accordance with
Generally Accepted Accounting Principles), including, without
limitation, marketable direct or guaranteed obligations of the United
States of America; demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks; securities
commonly known as "commercial paper" issued by a corporation organized
and existing under the laws of the United States of America or any
state thereof; and repurchase agreements secured by any of the
foregoing; and
(b) Investments existing on the date hereof and listed
on Schedule 8.3 hereto.
Section 8.4. MERGER, CONSOLIDATION. Without the prior written consent
of the Agent, no Obligor will become a party to any merger or consolidation, or
agree to or effect any asset acquisition or disposition or stock acquisition or
disposition (other than the acquisition or disposition of assets in the ordinary
56
<PAGE>
course of business for fair consideration and consistent with past practices)
except (i) the merger or consolidation of one or more of the Subsidiaries of DTS
with and into DTS, or (ii) the merger or consolidation of two or more
Subsidiaries of DTS.
Section 8.5. SALE AND LEASEBACK. Without the prior written consent of
the Agent (which shall not be unreasonably withheld), no Obligor will enter into
any arrangement, directly or indirectly, whereby any Obligor shall sell or
transfer any property owned by it in order then or thereafter to lease such
property or lease other property that such Obligor intends to use for
substantially the same purpose as the property being sold or transferred.
Section 8.6. COMPLIANCE WITH ENVIRONMENTAL LAWS. No Obligor will do any
of the following: (a) use any of the Real Estate or any portion thereof as a
facility for the handling, processing, storage or disposal of Hazardous
Substances, except in full compliance with Environmental Laws, (b) cause or
permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances except in full
compliance with Environmental Laws, (c) generate or dispose of any Hazardous
Substances on any of the Real Estate except in full compliance with
Environmental Laws, or (d) conduct any activity at any Real Estate or use any
Real Estate in any manner so as to cause a Release.
Section 8.7. DISTRIBUTIONS. Except for (a) Permitted Intercompany
Distributions or (b) as otherwise specifically permitted hereunder or (c) as to
which the Agent shall hereafter consent in writing, no Obligor will make any
Distributions.
Section 8.8. SUBSIDIARIES. Without limiting the provisions of Section
8.3, no Obligor shall acquire, form, or otherwise invest in any Subsidiary,
without the prior written consent of the Agent which consent shall not be
unreasonably withheld. Without limiting the foregoing, the Obligors acknowledge
that the Agent's consent may be conditioned upon, among other things, the
Agent's receipt of a security interest in the Subsidiary's capital stock and
assets in order to secure the Obligations.
Section 8.9. FISCAL YEAR. The fiscal year of DTS and its Subsidiaries
presently ends on December 31 of each year. The Obligors shall not change their
fiscal year end without furnishing prior written notice thereof to, and first
obtaining the consent of, the Lenders, which consent shall not be unreasonably
withheld or delayed.
Section 8.10. LOANS AND ADVANCES. The Obligors will not
make any loans or advances to any Person other than:
(a) Loans and advances existing on the date hereof and
listed on Schedule 8.10 hereof; and
57
<PAGE>
(b) Loans and advances to and among the Obligors for
working capital purposes pursuant and subject to the terms
of the Intercompany Loan Documents.
(c) Loans and advances to employees of the Obligors (excluding
the Founders), which do not exceed the sum of $25,000.00 to any single
employee or $100,000.00 in the aggregate to all employees.
Section 8.11. TRANSACTIONS WITH AFFILIATES. Each of the Obligors may
enter into transactions with (except for making loans to) Affiliates or
shareholders upon terms not less favorable to any such Obligor than would be
obtainable at the time in comparable transactions of such Obligor in arms'
length dealings with Persons other than Affiliates or shareholders and shall
immediately disclose in writing any of said transactions to the Lenders.
Section 8.12. STOCK OWNERSHIP. Unless the Lenders shall agree otherwise
in writing,
(a) the Founders shall have Beneficial Ownership of shares in
DTS constituting at least ten percent (10%) of the aggregate of (i)
DTS's issued and outstanding voting capital stock and (ii) all other
rights and interests to DTS's voting capital stock, free and clear of
all liens and encumbrances; and
(b) there shall not occur any Change in Control with
respect to any of the Obligors.
Section 8.13. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. The Obligors
shall not amend their articles of incorporation or bylaws, and shall not
designate, issue, create, or authorize additional classes of stock (common or
preferred) without the prior written consent of Lenders.
Section 9. FINANCIAL COVENANTS OF THE BORROWER. The Obligors covenant
and agree that, so long as any Obligation is Outstanding or any Lender has any
obligation to make any Loans:
Section 9.1. TANGIBLE NET WORTH. At the end of each fiscal year of the
DTS, DTS and its Subsidiaries shall maintain a Consolidated Tangible Net Worth
equal to the sum of (i) the Consolidated Tangible Net Worth as of the
immediately preceding fiscal year end plus (ii) the greater of (A)
$20,000,000.00 or (B) seventy-five percent (75%) of the Consolidated Net Income
(or Deficit) for the fiscal year in which the determination of the Borrower's
compliance with this Section is then being made; provided that, for purposes of
determining compliance with this Section 9.1 for the fiscal year ending December
31, 1996 only, Consolidated Tangible Net Worth shall be measured on an unaudited
pro forma basis and calculated in the same manner as set forth in Securities and
Exchange Commission Form 10K submitted by DTS for the fiscal year ending
December 31, 1995 and further provided that, for purposes of determining
58
<PAGE>
compliance with this Section 9.1 for the fiscal year ending December 31, 1997,
the audited Consolidated Tangible Net Worth of DTS and its Subsidiaries as of
December 31, 1996 (and not the amount calculated pursuant to the above proviso)
shall be utilized for purposes of subparagraph (i) above.
Section 9.2. FUNDED DEBT TO EBITDA RATIO. The Borrower shall not permit
the ratio of Funded Debt to EBITDA, measured quarterly in arrears on a rolling
four (4) quarter basis, to be greater than the following:
Quarterly Periods Ending in Ratio
Fiscal Year 1996 2.25:1
Fiscal Year 1997 1.85:1
Fiscal Year 1998 1.50:1
Fiscal Year 1999 1.50:1
Fiscal Year 2000 1.50:1
Section 9.3. OPERATING CASH FLOW TO DEBT SERVICE RATIO. The Borrower
shall not permit the ratio of Consolidated Operating Cash Flow to Debt Service
Charges, measured quarterly on a rolling four (4) quarter basis, to be less than
the following:
Quarterly Periods Ending Minimum Ratio
Each of the first three fiscal quarters in
fiscal year 1996 1.50:1
Fiscal year End 1996 and each fiscal quarter
thereafter 2.00:1
Section 9.4. MAXIMUM CAPITAL EXPENDITURES. The Obligors shall not make
or incur Capital Expenditures (exclusive of costs related to the construction of
the new distribution and office center) in excess of the following amounts for
the following periods:
Period Maximum Amount
Fiscal Year 1996 $20,000,000
Fiscal Year 1997 $25,000,000
Fiscal Year 1998 $30,000,000
Fiscal Year 1999 $35,000,000
First Five Months of
Fiscal Year 2000 $20,000,000
59
<PAGE>
Section 9.5. INVENTORY RELIANCE. The Borrower shall not permit its
Inventory Reliance Ratio to exceed the following amounts during the following
periods:
Period Ratio
Each of the first three fiscal quarters in
fiscal year 1996 0.95:1
Fiscal Year End 1996 0.65:1
Each of the first three fiscal quarters in
fiscal year 1997 0.90:1
Fiscal Year End 1997 0.65:1
Each of the first three fiscal quarters in
fiscal year 1998 0.85:1
Fiscal Year End 1998 0.65:1
Each of the first three fiscal quarters in
fiscal year 1999 0.75:1
Fiscal Year End 1999 0.65:1
The first fiscal quarter in fiscal year 2000 0.75:1
In the event that the foregoing ratio is not satisfied for any period,
the Obligors may resubmit to the Agent a Compliance Certificate with respect to
the Inventory Reliance Ratio as of, and on, a date thirty (30) days after the
end of the period for which the ratio was not satisfied. No Event of Default
shall be deemed to have occurred hereunder if the resubmitted Compliance
Certificate reflects that the Obligors are in compliance with the Inventory
Reliance Ratio as of the resubmission date.
Section 9.6. CURRENT RATIO. The Borrower shall not permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities to be less than
the following as of the following periods:
Fiscal Quarter Ending
December 31, 1996 1.25:1.00
March 31, 1997 1.35:1.00
June 30, 1997 1.35:1.00
September 30, 1997 1.35:1.00
December 31, 1997 and each Fiscal
Quarter End thereafter 1.50:1.00
Section 9.7. SOLVENCY. Each of the Obligors (other than DTM) shall
remain Solvent at all times.
Section 10. CLOSING CONDITIONS. The obligations of the Agent and the
Lenders to make the Revolving Credit Loans and of the Lenders to issue Letters
60
<PAGE>
of Credit, respectively, shall be subject to satisfaction of the following
conditions precedent:
Section 10.1. LOAN DOCUMENTS. Each of the Loan Documents shall have
been duly executed and delivered by the respective parties thereto and, shall be
in full force and effect and shall be in form and substance satisfactory to each
of the Lenders.
Section 10.2. CERTIFIED COPIES OF ORGANIZATION DOCUMENTS. Each of the
Lenders shall have received from the Obligors a copy, certified as of a recent
date by the appropriate officer of the State in which each Obligor is organized
to be true and complete, of the corporate charter and any other organization
documents of such Obligor as in effect on such date of certification.
Section 10.3. BY-LAWS; RESOLUTIONS. All action on the part of the
Obligors necessary for the valid execution, delivery and performance by the
Obligors of this Agreement and the other Loan Documents to which they are or are
to become a party shall have been duly and effectively taken, and evidence
thereof satisfactory to the Lenders shall have been provided to each of the
Lenders. Each of the Lenders shall have received from the each Obligor true
copies of its by-laws and the resolutions adopted by its board of directors
authorizing the transactions described herein, each certified by such Obligor's
secretary as of a recent date to be true and complete.
Section 10.4. INCUMBENCY CERTIFICATE; AUTHORIZED SIGNERS. Each of the
Lenders shall have received from the Obligors an incumbency certificate, dated
as of the Closing Date, signed by a duly authorized officer of each Obligor and
giving the name and bearing a specimen signature of each individual who shall be
authorized: (a) to sign, in the name and on behalf of such Obligor, each of the
Loan Documents to which such Obligor is or is to become a party; (b) to make
requests for Loans and Conversion Requests on behalf of the Borrower; and (c) to
give notices and to take other action on behalf of the Obligors under the Loan
Documents.
Section 10.5. VALIDITY OF LIENS. The Security Documents shall be
effective to create in favor of the Agent for the benefit of the Lenders a
legal, valid and enforceable first (except for Permitted Liens entitled to
priority under applicable law) security interest in the Collateral. Subject to
the provisions of Section 5.1(b) hereof, all filings, recordings, deliveries of
instruments and other actions necessary or desirable in the opinion of the
Lenders to protect and preserve such security interests shall have been duly
effected. The Agent shall have received evidence thereof in form and substance
satisfactory to the Agent and the Lenders.
Section 10.6. OPINION OF COUNSEL CONCERNING ORGANIZATION AND LOAN
DOCUMENTS. Each of the Lenders and the Agent shall have received a favorable
61
<PAGE>
opinion addressed to the Lenders and the Agent and dated as of the Closing Date,
in form and substance satisfactory to the Lenders and the Agent from Messrs.
Hofheimer, Nusbaum, McPhaul & Samuels.
Section 10.7. PAYMENT OF FEES. The Borrower shall have paid to the
Agent and the Lenders (a) all expenses then due and owing pursuant to Section 15
hereof; (b) the Agent's fee due pursuant to Section 4.1 hereof, and (c) any
syndication fees payable to a Lender which was not also a lender under the
Original Agreement.
Section 10.8. RESIGNATION OF NATIONSBANK, N.A. Nationsbank, N.A. shall
have resigned as Administrative Agent under the Original Agreement and evidence
thereof shall have been furnished to the Lenders.
Section 10.9. OFFICERS' CERTIFICATE. Each of the Lenders and the Agent
shall have received a certificate signed by a duly elected officer of each of
the Obligors stating that, to his best knowledge and belief, after reasonable
and due investigation and review of matters pertinent to the subject mater of
such certificate: (i) all of the representations and warranties contained in
Section 6 hereof and/or in the other Loan Documents are true and correct as of
the date hereof; and (ii) no event has occurred and is continuing, or would
result from the making of any Loan or issuance of any Letter of Credit, which
constitutes or would constitute a Default or an Event of Default.
Section 10.10. NEGATIVE PLEDGE. The Agent and the Lenders shall have
received the negative pledges of the Founders with respect to their Beneficial
Ownership of the capital stock of DTS, and of DTS with respect to the capital
stock of its Subsidiaries, including, without limitation, the Borrower and DTM,
in the form of Exhibit F annexed hereto.
Section 10.11. PROJECTIONS. The Agent and the Lenders shall have
received annual projections in form and substance satisfactory to the Lenders
for the fiscal years of DTS and its Subsidiaries, ending December 31, 1997,
1998, 1999, and 2000.
Section 10.12. ADDITIONAL DOCUMENTS. The Obligors shall have provided
such additional instruments and documents to the Agent and the Lenders as the
Agent and the Agent's counsel may have reasonably requested.
Section 11. CONDITIONS TO ALL BORROWINGS AND ISSUANCE OF LETTERS OF
CREDIT. The obligations of the Lenders to make any Loan or to issue any Letter
of Credit, whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
Section 11.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of the Obligors contained in this Agreement, the
62
<PAGE>
other Loan Documents or in any document or instrument delivered pursuant to or
in connection with this Agreement shall be true as of the date as of which they
were made and shall also be true at and as of the time of the making of such
Loan or the issuance of the Letter of Credit, with the same effect as if made at
and as of that time (except to the extent of changes resulting from transactions
contemplated and permitted by this Agreement and the other Loan Documents and
changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and except to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. Each of the
Lenders shall have received a certificate of the Borrower signed by an
authorized officer of the Borrower to such effect.
Section 11.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the reasonable
opinion of any Lender would make it illegal for such Lender to make such Loan.
Section 11.3. GOVERNMENTAL REGULATION. Each Lender shall have received
such statements in substance and form reasonably satisfactory to such Lender as
such Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 11.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with the transactions contemplated by this Agreement, the other Loan Documents
and all other documents incident thereto shall be satisfactory in substance and
in form to the Lenders and to the Agent's counsel, and the Lenders and such
counsel shall have received all information and such counterpart originals or
certified or other copies of such documents as the Agent may reasonably request.
Section 11.5 NO MATERIAL ADVERSE CHANGE. No change that would cause any
(i) material adverse effect whatsoever upon the validity or enforceability of
any of the Loan Documents, (ii) material adverse effect upon the financial
condition or business operations of any Obligor, (iii) material adverse effect
upon the ability of any Obligor to fulfill its obligations under any of the Loan
Documents, or (iv) adverse effect which causes a Default or an Event of Default
shall have occurred since the date of the last financial statements delivered
pursuant to Section 7.4.
Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
63
<PAGE>
(a) the Borrower shall fail to pay any principal of the Loans
when the same shall become due and payable, whether at the stated date
of maturity or any accelerated date of maturity or at any other date
fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans
or any fees, expense, or other sums due hereunder or under any of the
other Loan Documents, within fifteen (15) days of when the same shall
become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower shall fail to pay when due any amount
due to any Issuing Lender with respect to a Letter of
Credit;
(d) except as provided in Section 12.1(e), below, any Obligor
shall fail to comply with any of its covenants contained in this
Agreement or any of the covenants contained in any other Loan
Documents;
(e) any Obligor shall fail to perform any term, covenant or
agreement contained in Sections 7.6, 7.8 and 7.10 of this Agreement for
thirty (30) days after written notice of such failure has been given to
the Borrower by the Agent;
(f) any representation or warranty of any Obligor in this
Agreement or any of the other Loan Documents or in any other document
or instrument delivered pursuant to or in connection with this
Agreement is determined by the Agent to have been false in any material
respect upon the date when made or deemed to have been made or
repeated;
(g) any Obligor shall fail to pay at maturity, or
within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any Capitalized
Leases in excess of $500,000 in the aggregate, or fail to observe or
perform any term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing borrowed money or credit
received or in respect of any Capitalized Leases for such period of
time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;
(h) any Obligor (other than DTM) shall cease to be Solvent, or
shall make an assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay its debts as they
mature or become due, or shall petition or apply for the appointment of
a trustee or other custodian, liquidator or receiver of any Obligor or
64
<PAGE>
of any substantial part of the assets of any Obligor or shall commence
any case or other proceeding relating to any Obligor under any
bankruptcy, reor ganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to authorize or in
furtherance of any of the fore going, or if any such petition or
application shall be filed or any such case or other proceeding shall
be commenced against any Obligor and such Obligor shall indicate its
approval thereof, consent thereto or acquiescence therein;
(i) The filing of any case or other proceeding against any
Obligor under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect and such case or proceeding is
not discharged or dismissed within sixty (60) days of its commencement;
a decree or order is entered appointing any such trustee, custodian,
liquidator or receiver or adjudicating any Obligor bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of
any Obligor, in an involuntary case under federal bankruptcy laws as
now or hereafter constituted;
(j) there shall remain in force, undischarged, unsat isfied
and unstayed, for more than thirty days, whether or not consecutive,
any uninsured final judgment against any Obligor that, with other
outstanding uninsured final judgments, undischarged, against the
Obligors exceeds $2,000,000.00 in the aggregate;
(k) if any of the Loan Documents shall be cancelled,
terminated, revoked or rescinded or any action at law, suit
or in equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of
any Obligor, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof;
(l) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Lenders shall
have determined in their reasonable discretion that such event
reasonably could be expected to result in liability of any Obligor to
the PBGC on such Guaranteed Pension Plan in an aggregate amount
exceeding $500,000.00 and (i) such event in the circumstances occurring
reasonably could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC or for the appointment by the
65
<PAGE>
appropriate United States District Court of a trustee to administer
such Guaranteed Pension Plan; or (ii) a trustee shall have been
appointed by the United States District Court to administer such Plan;
or (iii) the PBGC shall have instituted proceedings to terminate such
Guaranteed Pension Plan;
(m) any Obligor shall be indicted for a federal crime,
a punishment for which could include the forfeiture of any
assets of any Obligor;
(n) Any uninsured loss, theft, damage or destruction to or of
any material part of the Collateral, or any encumbrances or the making
of any levy, seizure, or attachment thereof or thereon.
then, and in any such event, so long as the same may be continu ing, the Agent
may, and, upon the request of the Required Lenders in any other case, shall, by
notice in writing to the Borrower declare all amounts owing with respect to this
Agreement, the Notes and the other Loan Documents to be, and they shall
thereupon forthwith become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower; provided that in the event of any Event of Default
specified in Section 12.1(h) or 12.1(i), all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from any of the Lenders or the Agent.
Section 12.2. TERMINATION OF COMMITMENTS. If any one or more Events of
Default specified in Section 12.1(h) or Section 12.1(i) shall occur, the
Commitments shall forthwith terminate and the Lenders shall be relieved of all
obligations to make Loans to the Borrower and of all obligations to cause
Letters of Credit to be issued. If any other Event of Default shall have
occurred and be continuing, or if on any Drawdown Date the conditions precedent
to the making of the Loans to be made on such Drawdown Date are not satisfied,
the Agent, upon the request of the Required Lenders, shall by notice to the
Borrower, terminate the Commitments, and upon such notice being given such
Commitments shall terminate immediately and the Lenders shall be relieved of all
further obligations to make Loans and of all obligations to cause Letters of
Credit to be issued. No termination of the Commitments hereunder shall relieve
the Borrower of any of the Obligations or any of its existing obligations to the
Agent and the Lenders arising under other agreements or instruments.
Furthermore, in the event of termination of the Commitments hereunder, the
Borrower shall furnish the Agent with cash collateral for all Outstanding
Letters of Credit in an amount equal to one hundred five percent of the maximum
undrawn amount of all Outstanding Letters of Credit. Such cash collateral may be
immediately applied against any drawing under any such Letter of Credit without
66
<PAGE>
further notice to or consent from the Borrower and, to the extent not utilized
for such purpose, shall secure, and may be applied against, any and all
Obligations hereunder.
Section 12.3. REMEDIES. In case any one or more of the Events of
Default shall have occurred and be continuing, and whether or not the Lenders
shall have accelerated the maturity of the Loans pursuant to Section 12.1, the
Agent or any Lender, if owed any amount with respect to the Loans may proceed,
with the consent of the Required Lenders, but not otherwise, to protect and
enforce its rights and remedies under this Agreement, the Notes or any of the
other Loan Documents by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations to such Lender or the Agent are evidenced,
and, if such amount shall have become due, by declara tion or otherwise, proceed
to enforce the payment thereof or any other legal or equitable right of such
Lender or the Agent provided that, no Lender shall seek to enforce any
Guaranties or to realize upon any Collateral, as such rights are to be exercised
exclusively by the Agent for the benefit of the Lenders. No remedy herein
conferred upon any Lender or the Agent or the holder of any Note is intended to
be exclusive of any other remedy and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or any other provision of
law.
Section 12.4. PERFORMANCE BY LENDERS. Should any of the Obligors fail
to perform any covenant, duty or agreement contained herein or in any of the
Loan Documents, the Lenders may perform or attempt to perform such covenant,
duty or agreement on its behalf. In such event, any of the Obligors so requested
shall, at the request of any of the Lenders, promptly pay any amount reasonably
expended by such Lenders in such performance or attempted performance, to such
Lender at Agent's principal office in Boston, Massachusetts, together with
interest thereon at the lesser of the default rate set forth in Section 4.11
hereof or the Maximum Rate, from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly understood that the Lenders
assume no liability or responsibility for the performance of any duties of any
of the Obligors hereunder or under any of the Loan Documents or other control
over the management and affairs of any of the Obligors.
Section 12.5. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that,
following the occurrence or during the continuance of any Default or Event of
Default, the Agent or any Lender, as the case may be, receives any monies in
connection with the enforcement of any of the Security Documents, or otherwise
with respect to the realization upon any of the Collateral, such monies shall be
turned over to the Agent and distributed by the Agent for application as
follows:
67
<PAGE>
(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent and each Lender for or in respect of all
reasonable costs, expenses, disbursements and losses which shall have
been incurred or sustained by the Agent or any such Lender in
connection with the collection of such monies by the Agent or such
Lenders (exclusive of the Agent's fee payable pursuant to Section 4.1),
for the exercise, protection or enforcement by the Agent or any such
Lenders of all or any of the rights, remedies, powers and privileges of
the Agent or such Lenders under this Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent or such Lenders against
any taxes or liens which by law shall have, or may have, priority over
the rights of the Agent or the Lenders to such monies;
(b) Second, to all other Obligations in such order or
preference as the Agent may determine; provided, however, that
distributions in respect of such Obligations shall be made (i) pari
passu among Obligations with respect to the Agent's fee payable
pursuant to Section 4.1 and all other such Obligations and (ii) such
Obligations owing to the Lenders with respect to each type of
Obligation such as interest, principal, fees and expenses, shall be
made among the Lenders pro rata; and provided, further that the Agent
may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Lenders and the
Agent of all of the Obligations, to the payment of any obligations
required to be paid pursuant to Section 9-504(1)(c) of the Uniform
Commercial Code of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to
the Borrower or to such other Persons as are entitled
thereto.
Section 13. SETOFF. Regardless of the adequacy of any collateral, any
deposits (general or specific, time or demand, provisional or final, regardless
of currency, maturity, or the branch of where such deposits are held) or other
sums credited by or due from any of the Lenders to the Borrower and any
securities or other property of the Borrower in the possession of such Lender at
any time may be applied to or set off against the payment of Obligations and any
and all other liabilities, direct, or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, of the Borrower to such
Lender. Each of the Lenders agrees with each other Lender that (a) if an amount
to be set off is to be applied to Indebtedness of the Borrower to such Lender,
other than Indebtedness evidenced by the Note held by such Lender, such amount
shall be applied ratably to such other Indebtedness and to the Indebtedness
evidenced by such Note held by such Lender, and (b) if such Lender shall receive
from the Borrower, whether by voluntary payment, exercise of the right of
setoff, counterclaim, cross action, enforcement of the claim evidenced by the
Note held by such Lender by proceedings against the Borrower at law or in equity
68
<PAGE>
or by proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Note held by such Lender any amount in excess of its ratable portion of the
payments received by all of the Lenders with respect to the Notes held by all of
the Lenders, such Lender will make such disposition and arrangements with the
other Lenders with respect to such excess, either by way of distribution, pro
tanto assignment of claims, subrogation or otherwise as shall result in each
Lender receiving in respect of the Note held by it its proportionate payment as
contemplated by this Agreement; provided that if all or any part of such excess
payment is thereafter recovered from such Lender, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
Section 14. THE AGENT.
Section 14.1. AUTHORIZATION. The Agent is authorized to take such
action on behalf of each of the Lenders and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent. The
relationship between the Agent and the Lenders is and shall be that of agent and
principal only, and nothing contained in this Agreement or any of the other Loan
Documents shall be construed to constitute the Agent as a trustee for any
Lender.
Section 14.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and, if the reasonable fees and expenses of
any such Persons are not paid by the Borrower, they shall be paid by the Lenders
based upon their respective Commitment Percentages.
Section 14.3. NO LIABILITY. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
69
<PAGE>
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
Section 14.4. NO REPRESENTATIONS. The Agent shall not be responsible
for the execution or validity or enforceability of this Agreement, the Notes,
any of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectibility of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or repre sentations made herein or in any of
the other Loan Documents or in any certificate or instrument hereafter furnished
to it by or on behalf of any Obligor, or be bound to ascertain or inquire as to
the performance or observance of any of the terms, conditions, covenants or
agreements herein or in any instrument at any time constituting, or intended to
constitute, collateral security for the Notes. The Agent shall not be bound to
ascertain whether any notice, consent, waiver or request delivered to it by any
Obligor or any holder of any of the Notes shall have been duly authorized or is
true, accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Lenders, with respect to the credit worthiness or financial
condition of any Obligor. Each Lender acknowledges that it has, independently
and without reliance upon the Agent or any other Lender, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
Section 14.5. PAYMENTS.
(a) As between the Agent and the Borrower, a payment by the
Borrower to the Agent hereunder or any of the other Loan Documents for the
account of any Lender shall constitute a payment to each Lender. The Agent
agrees promptly to distribute to each Lender such Lender's pro rata share of
payments received by the Agent for the account of the Lenders except as
otherwise expressly provided herein or in any of the other Loan Documents.
(b) If in the opinion of the Agent the distribution of any
amount received by it in such capacity hereunder, under the Notes or under any
of the other Loan Documents could reasonably be expected to involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent jurisdiction.
If a court of competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
70
<PAGE>
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Lender that fails (i) to make
available to the Agent its pro rata share of any Loan that the Agent made on its
behalf or (ii) to comply with the provisions of Section 13 with respect to
making dispositions and arrangements with the other Lenders, where such Lender's
share of any payment received, whether by setoff or otherwise, is in excess of
its pro rata share of such payments due and payable to all of the Lenders, in
each case as, when and to the full extent required by the provisions of this
Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be
deemed a Delinquent Lender until such time as such delinquency is cured. A
Delinquent Lender shall be deemed to have assigned any and all payments due to
it from the Borrower, whether on account of Outstanding Loans, interest, fees or
otherwise, to the re maining nondelinquent Lenders for application to, and
reduction of, their respective pro rata shares of all Outstanding Loans. The
Delinquent Lender hereby authorizes the Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro rata shares of all
Outstanding Loans. A Delin quent Lender shall be deemed to have satisfied in
full a delin quency when and if the Lenders' respective pro rata shares of all
Outstanding Loans have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency.
(d) In addition to any other remedies provided for herein, a
Delinquent Lender shall not be entitled to vote on any matters (except a
Delinquent Lender may vote on those matters requiring a unanimous vote pursuant
to Section 25 hereof) until the delinquency is cured.
Section 14.6. HOLDERS OF NOTES. The Agent may deem and treat the payee
of any Note as the absolute owner or purchaser thereof for all purposes hereof
until it shall have been furnished in writing with a different name by such
payee or by a subsequent holder, assignee or transferee.
Section 14.7. INDEMNITY. The Lenders (including the Agent in its
capacity as a Lender) ratably agree hereby to indemnify and hold harmless the
Agent from and against any and all claims, actions and suits (whether groundless
or otherwise), losses, damages, costs, expenses (including any expenses for
which the Agent has not been reimbursed by the Borrower as required by Section
15), and liabilities of every nature and character arising out of or related to
71
<PAGE>
this Agreement, the Notes, or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or the Agent's actions
taken here under or thereunder, except to the extent that any of the same shall
be directly caused by the Agent's willful misconduct or gross negligence.
Section 14.8. AGENT AS LENDER. In its individual capacity, FNBB and any
of its Affiliates shall have the same obligations and the same rights, powers
and privileges in respect to its Commitment and the Loans made by it, and as the
holder of any of the Notes as it would have were it not also the Agent.
Section 14.9. RESIGNATION. The Agent may resign at any time by giving
thirty (30) days' prior written notice thereof to the Lenders and the Borrower.
Upon any such resignation, unless a Default or Event of Default shall then
exist, the Borrower shall have the right to appoint a successor Agent; provided
that such successor Agent must then be a Lender hereunder. If a Default or Event
of Default shall have occurred and be continu ing, such successor Agent shall be
selected by the Majority Lenders. If no successor Agent shall have been so
appointed and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent which shall be a
commercial bank licensed or organized under the laws of the United States of
America or any state thereof and having a combined capital and surplus of at
least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
Section 14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each
Lender hereby agrees that, upon learning of the existence of a Default or an
Event of Default, it shall promptly notify the Agent thereof. The Agent hereby
agrees that upon receipt of any notice under this Section 14.10 it shall
promptly notify the other Lenders of the existence of such Default or Event of
Default.
Section 14.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Majority Lenders and (b) the Lenders have provided to the Agent
such additional indemnities and assurances against expenses and liabilities as
the Agent may reasonably request, proceed to enforce the provisions of the
Security Documents authorizing the sale or other disposition of all or any part
of the Collateral and exercise all or any such other legal and equitable and
other rights or remedies as it may have in respect of such Collateral. The
72
<PAGE>
Majority Lenders may direct the Agent in writing as to the method and the extent
of any such sale or other disposition, the Lenders hereby agreeing to indemnify
and hold the Agent harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided that the
Agent need not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
Section 15. EXPENSES. The Obligors, jointly and severally, agree to pay
(a) the reasonable costs of producing and reproducing this Agreement, the other
Loan Documents and the other agreements and instruments mentioned herein, (b)
any taxes (including any interest and penalties in respect thereto) payable by
the Agent or any of the Lenders (other than taxes based upon the Agent's or any
Lender's net income), including any recording, mortgage, documentary or
intangibles taxes in connection with the Loan Documents, or other taxes payable
on or with respect to the transactions contemplated by this Agreement, including
any taxes payable by the Agent or any of the Lenders after the Closing Date (the
Obligors hereby agreeing to indemnify the Agent and each Lender with respect
thereto), (c) all appraisal fees, engineer's fees, and the reasonable fees,
expenses and disbursements of the Agent's counsel or any local counsel to the
Agent incurred in connection with the preparation, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals, consents or
waivers hereto or hereunder, (d) the fees, expenses and disbursements of the
Agent and the Lenders incurred by the Agent and the Lenders in connection with
the preparation of the Loan Documents and other instruments mentioned herein,
(e) the fees, expenses and disbursements of the Agent incurred by the Agent in
connection with the administration or interpretation of the Loan Documents and
other instruments mentioned herein, (f) all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and costs and the fees and costs of
appraisers, engineers, investment bankers or other experts retained by any
Lender or the Agent in connection with any such enforcement proceedings)
incurred by any Lender or the Agent in connection with (i) the enforcement of or
preservation of rights under any of the Loan Documents against any Obligor or
the administration thereof and (ii) any litigation, proceeding or dispute
whether arising hereunder or otherwise, in any way related to any Lender's or
the Agent's relationship with any Obligor and (f) all reasonable fees, expenses
and disbursements of any Lender or the Agent incurred in connection with UCC
searches, UCC filings or mortgage recordings. The covenants of this Section 15
shall survive payment or satisfaction of payment of amounts owing with respect
to the Notes.
Section 16. INDEMNIFICATION. The Obligors, jointly and severally, agree
to indemnify and hold harmless the Agent, the Issuing Lenders, and the Lenders
73
<PAGE>
from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses arising out of this Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(a) any use by the Borrower or any of its Subsidiaries or Affiliates of the
proceeds of any of the Loans, or the relationship of any of the Obligors and
Agent or any of the Lenders under this Agreement or any transaction contemplated
pursuant to this Agreement, (b) any Obligor's entering into or performing this
Agreement or any of the other Loan Documents or (c) any administrative or
investigative proceeding by any governmental authority directly or indirectly
related to a claim, demand, action or cause of action described in clauses (a)
or (b) above, (d) with respect to the Obligors and their respective properties
and assets, the violation of any Environmental Law, the Release or threatened
Release of any Hazardous Substances or any action, suit, proceeding or
investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to claims with respect to wrongful death, personal
injury or damage to property), in each case including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such claim; provided however that neither a Lender nor the Agent shall be
entitled to indemnification if such Lender or the Agent acted in bad faith, with
gross negligence, or with willful misconduct. If any claim, demand, action or
cause of action is asserted against any indemnitee, such indemnitee shall
promptly notify DTS, but the failure to so promptly notify DTS shall not affect
the Obligors' obligations under this section unless such failure materially
prejudices any Obligor's right to participate in the contest of such claim,
demand, action or cause of action, as hereinafter provided. If requested by DTS
in writing and so long as no Default or Event of Default shall have occurred and
be continuing, such indemnitee shall (at DTS's expense) in good faith contest
the validity, applicability and amount of such claim, demand, action or cause of
action and shall permit any Obligor to participate in such contest. Any
indemnitee that proposes to settle or compromise any claim or proceeding for
which any Obligor may be liable for payment of indemnity hereunder shall give
DTS written notice of the terms of such proposed settlement or compromise
reasonably in advance of settling or compromising such claim or proceeding and
shall obtain the approval of DTS thereto (which approval shall not be
unreasonably withheld). Each indemnitee is authorized to employ counsel in
enforcing its rights hereunder and in defending against any claim, demand,
action or cause of action covered by this section (the fees and expenses of
which counsel shall promptly be paid by the Obligors); provided, however, that
each indemnitee shall endeavor, but shall not be obligated, in connection with
any matter covered by this section which also involves other indemnitees, to use
reasonable efforts to avoid unnecessary duplication of effort by counsel for all
indemnitees. The provisions of this Section 16 shall survive the repayment of
the Loan and the termination of the obligations of the Lenders hereunder.
74
<PAGE>
Section 17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in the Notes, in any of the other
Loan Documents or in any documents or other papers delivered by or on behalf of
any Obligor pursuant hereto shall be deemed to have been relied upon by the
Lenders and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Lenders of any of the
Loans and issuance of any Letters of Credit, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this Agreement
or the Notes or any of the other Loan Documents remains Outstanding or any
Lender has any obligation to make any Loans or issue any Letters of Credit. The
indemnification obligations of the Obligors provided herein and the other Loan
Documents shall survive the full repayment of amounts due and the termination of
the obligations of the Lenders hereunder and thereunder to the extent provided
herein and therein. All statements contained in any certificate or other paper
delivered to any Lender or the Agent at any time by or on behalf of the Obligors
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by such Obligor hereunder.
Section 18. ASSIGNMENT AND PARTICIPATION.
Section 18.1. CONDITIONS TO ASSIGNMENT BY LENDERS. Except as provided
herein, each Lender may assign all or a portion of its interests, rights and
obligations under this Agreement (including all or a portion of its Commitment
Percentage and Commitment and the same portion of the Loans at the time owing to
it, and the Notes held by it; provided that (a) the Agent shall have given its
prior written consent to such assignment, which consent shall not be
unreasonably withheld or delayed; (b) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement, (c) each assignment shall be in an amount that
is at least $10,000,000.00, (d) in the event that the entire Commitment of a
Lender is not assigned, such Lender shall retain, free of any such assignment,
an amount of its Commitment of not less than $15,000,000.00; (e) if FNBB is
assigning all or a portion of its interests, rights and obligations under this
Agreement, FNBB shall have furnished the other Lenders with five (5) Business
Days' prior written notice of its intention to assign all or a portion of its
interests; (f) if an Event of Default is not then existing, the Borrower shall
have given its prior written consent to such assignment, which consent shall not
be unreasonably withheld or delayed; and (g) the parties to such assignment
shall execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance, substantially in the form of
Exhibit E hereto (an "Assignment and Acceptance"), together with any Notes
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
75
<PAGE>
the execution thereof, (i) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder, and (ii) the assigning Lender shall, to the
extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in Section 18.3, be released from its obligations
under this Agreement.
Section 18.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS;
COVENANTS. By executing and delivering an Assignment and Acceptance, the parties
to the assignment thereunder confirm to and agree with each other and the other
parties hereto as follows: (a) other than the representation and warranty that
it is the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto; (b) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Obligor, or the performance or observance by any
Obligor of any of their obligations under this Agreement or any of the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; (c) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 7.4 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (d) such assignee will, independently and without
reliance upon the assigning Lender, the Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (e) such assignee appoints and authorizes the Agent 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 the Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto; (f)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender; and (g) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and Acceptance.
Section 18.3. REGISTER. The Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register or similar list (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitment Percentages of, and principal amount of the Loans owing to the
76
<PAGE>
Lenders from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Obligors, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agree ment. The Register shall be available for
inspection by the Borrower and the Lenders at any reasonable time and from time
to time upon reasonable prior notice. Upon each such recordation, the assigning
Lender agrees to pay to the Agent a registration fee in the sum of $3,000.00.
Section 18.4. NEW NOTES. Upon its receipt of an Assignment and
Acceptance executed by the parties to such assignment, together with each Note
subject to such assignment, the Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrower and
the Lenders (other than the assigning Lender). Within five (5) Business Days
after receipt of such notice, the Borrower, at its own expense, shall execute
and deliver to the Agent, in exchange for each surrendered Note, a new Note to
the order of such assignee in an amount equal to the amount assumed by such
assignee pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Lender in an amount equal to the amount retained by it
hereunder. Such new Notes shall provide that they are replacements for the
surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Notes. The surrendered Notes shall be
cancelled and returned to the Borrower.
Section 18.5. PARTICIPATIONS. Each Lender may sell participations to
one or more banks or other entities in all or a portion of such Lender's rights
and obligations under this Agreement and the other Loan Documents; provided that
(a) the Agent shall have given its prior written consent to such participation,
(b) each such participation shall be in an amount of not less than
$5,000,000.00, (c) any such sale or participation shall not affect the rights
and duties of the selling Lender hereunder to the Borrower, (d) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Lender as it relates to such participant,
reduce the amount of any fees to which such participant is entitled or extend
any regularly scheduled payment date for principal or interest, and (e) no
participant shall have the right to grant further participations or assign its
rights, obligations or interests under such participation to other Persons
without the prior written consent of the Agent.
77
<PAGE>
Section 18.6. PLEDGE BY LENDER. Notwithstanding the provisions of
Section 18.1, any Lender may at any time pledge all or any portion of its
interest and rights under this Agreement (including all or any portion of its
Note) to any of the twelve Federal Reserve Lenders organized under Section 4 of
the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the
enforcement thereof shall release the pledgor Lender from its obligations
hereunder or under any of the other Loan Documents.
Section 18.7. NO ASSIGNMENT BY BORROWER. The Borrower shall not assign
or transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Lenders.
Section 18.8. DISCLOSURE. The Borrower agrees that in addition to
disclosures made in accordance with standard banking practices any Lender may
disclose information obtained by such Lender pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder.
Section 19. NOTICES, ETC. Except as otherwise expressly provided in
this Agreement, all notices and other communications made or required to be
given pursuant to this Agreement or the Note shall be in writing and shall be
delivered in hand, mailed by United States registered or certified first class
mail, postage prepaid, sent by overnight courier, or sent by telegraph,
telecopy, telefax or telex and confirmed by delivery via courier or postal
service, addressed as follows:
(a) if to any Obligor, at 2555 Ellsmere Avenue,
Norfolk, Virginia 23513, Attention: H. Ray Compton,
Facsimile No. (804) 855-5555 or at such other address for
notice as the Borrower shall last have furnished in writing
to the Person giving the notice; and
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Bethann R. Halligan,
Managing Director, Facsimile No. (617) 434-6685, or such
other address for notice as the Agent shall last have
furnished in writing to the Borrower.
(c) if to any Lender, at such Lender's address set forth on
Schedule 1 hereto, or such other address for notice as such Lender
shall have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
78
<PAGE>
Section 20. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS
AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE PARTIES AGREE THAT ANY SUIT FOR THE ENFORCEMENT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS SHALL BE BROUGHT
EXCLUSIVELY IN THE COURTS OF THE COMMONWEALTH OF VIRGINIA OR ANY FEDERAL COURT
SITTING THEREIN EXCEPT THAT SUIT MAY BE BROUGHT IN OTHER JURISDICTIONS TO THE
EXTENT NECESSARY TO ENFORCE THE LENDERS' RIGHTS WITH RESPECT TO COLLATERAL
LOCATED WITHIN THAT JURISDICTION AND CONSENTS TO THE JURISDICTION OF SUCH COURT
AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON ANY OBLIGOR BY MAIL
TO THE PROCESS AGENT UPON RECEIPT THEREOF. THE PARTIES HEREBY WAIVE ANY
OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE AND JURISDICTION OF
ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.
Section 21. HEADINGS. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
Section 22. COUNTERPARTS. This Agreement and any amendment hereof may
be executed in several counterparts and by each party on a separate counterpart,
each of which when so executed and delivered shall be an original, and all of
which together shall constitute one instrument. In proving this Agreement it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
Section 23. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except as provided in Section 25.
Section 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS. EACH
OBLIGOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR
ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT TO THE
EXTENT EXPRESSLY PROHIBITED BY LAW, EACH OBLIGOR HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OBLIGOR (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED,
79
<PAGE>
EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
Section 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise
expressly provided in this Agreement, any consent or approval required or
permitted by this Agreement may be given, and any term of this Agreement or of
any other instrument related hereto or mentioned herein may be amended, and the
performance or observance by any Obligor of any terms of this Agreement or such
other instrument or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Majority Lenders.
Notwith standing the foregoing,
(a) the rate of interest on, the dates for payment of, or
amounts payable on any such date on account of, principal or interest
under the Notes, the amount or term of the Commitments of the Lenders,
and the amount of any fee payable to a Lender hereunder may not be
changed without the written consent of each Lender affected thereby;
(b) none of the following: the definition of Majority Lenders
or Required Lenders; the forgiveness of any of the Obligations; the
release of any Collateral in connection with any sale or disposition
thereof outside the ordinary course of business having a value (as
determined by the Agent) in the aggregate in excess of $2,500,000; the
release of any pledgors or third party accommodators; the percentage of
Lenders necessary to accelerate the Obligations;
may be amended without the written consent of all of the Lenders;
(c) and the amount of the Agent's fee payable for the Agent's
account and the provisions of Section 14 may not be amended without the
written consent of the Agent.
No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Lender in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon the Borrower shall entitle the Borrower to other or further notice
or demand in similar or other circumstances.
80
<PAGE>
Section 26. MAXIMUM INTEREST RATE. Regardless of any provision
contained in any of the Loan Documents, the Lenders shall never be entitled to
receive, collect or apply as interest on the Notes any amount in excess of
interest calculated at the Maximum Rate, and, in the event that the Lenders ever
receive, collect or applies as interest any such excess, the amount which would
be excessive interest shall be deemed to be a partial prepayment of principal
and treated hereunder as such; and, if the principal amount of the Obligation is
paid in full, any remaining excess shall forthwith be paid to the payor thereof.
Section 27. CONFIDENTIALITY. The Lenders agree to hold any confidential
information which they may receive from any of the Obligors pursuant to this
Agreement in confidence, except for disclosure (i) to legal counsel,
accountants, and other professional advisors, (ii) to regulatory officials,
(iii) as required by law or legal process or in connection with any legal
proceeding.
Section 28. SEVERABILITY. The provisions of this Agreement are
severable, and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Agreement in
any jurisdiction.
81
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first set forth above.
DOLLAR TREE DISTRIBUTION, INC.
By: /s/ H. Ray Compton
------------------------------------
Name: H. Ray Compton
Title: Executive Vice President
DOLLAR TREE STORES, INC.
By: /s/ H. Ray Compton
------------------------------------
Name: H. Ray Compton
Title: Executive Vice President
DOLLAR TREE MANAGEMENT, INC.
By: /s/ H. Ray Compton
------------------------------------
Name: H. Ray Compton
Title: Executive Vice President
THE FIRST NATIONAL BANK OF
BOSTON, individually and as
Agent
By: /s/ Bethann R. Halligan
-----------------------------------
Name: Bethann R. Halligan
Title: Managing Director
Address:100 Federal Street
Boston, Massachusetts 02110
Facsimile No.: (617) 434-6685
NATIONSBANK, N.A.
By: /s/ G. R. Webb, Jr.
-----------------------------------
Name: G. R. Webb. Jr.
Title: Senior Vice President
Address: One Commercial Place
Norfolk, Virginia 23510
Facsimile No.: (757) 441-8600
SIGNET BANK
By: /s/ James A. Whitham
-----------------------------------
Name: James A. Whitham
Title: Vice President
Address: 500 East Plume Street
Norfolk, Virginia 23510
Facsimile No.: (757) 640-4291
82
<PAGE>
CRESTAR BANK
By: /s/ Bruce W. Nave
-----------------------------------
Name: Bruce W. Nave
Title: Vice President
Address: 500 East Main Street
Norfolk, Virginia 23510
Facsimile No.: (757) 624-5457
FIRST UNION NATIONAL BANK OF
VIRGINIA
By: /s/ Raymond T. Nasser
-----------------------------------
Name: Raymond T. Nasser
Title: Senior Vice President
Address: 201 South Jefferson Street
Roanoke, Virginia
Facsimile No.: (540) 563-6130
AMSOUTH BANK OF ALABAMA
By: /s/ John Hooker
-----------------------------------
Name: John Hooker
Title: Commercial Banking Officer
Address: 1900 Fifth Avenue, 7th Floor
Birmingham, Alabama 35203
Facsimile No.: (205) 583-4436
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Dana A. Cox
----------------------------------
Name: Dana A. Cox
Title: Vice President
Address:
Facsimile No.: (415) 705-7085
83
EXHIBIT 10.2
Schedule 1
to
Amended and Restated Revolving Credit Agreement
Lenders, Commitments, and Commitment Percentages
Lender Commitment Commitment
Percentage
The First National $30,000,000.00 22.222%
Bank of Boston
NationsBank, N.A. $20,000,000.00 14.815%
Crestar Bank $20,000,000.00 14.815%
Signet Bank $20,000,000.00 14.815%
AmSouth Bank of Alabama $15,000,000.00 11.111%
First Union National $15,000,000.00 11.111%
Bank of Virginia
Union Bank of California, N.A. $15,000,000.00 11.111%
EXHIBIT 10.3
REVOLVING CREDIT NOTE
Boston, Massachusetts
$xx,xxx,xxx.xx September 27, 1996
FOR VALUE RECEIVED, the undersigned, Dollar Tree Distribution, Inc., a
Virginia corporation with its principal executive offices at 2555 Ellsmere
Avenue, Norfolk, Virginia (the "Borrower") absolutely and unconditionally
promises to pay to the order of ____________________________________, a national
banking association (the "Holder"), at the Agent's office, presently ___________
_______________________________, or at such other place as the Agent may
designate, the following:
PRINCIPAL: The principal amount of
__________________________ DOLLARS ($xx,xxx,xxx.xx)
or if less, the outstanding principal balance of the Revolving Credit
Loans advanced to the Borrower under the Loan Agreement (defined
below).
INTEREST: Interest on the principal balance hereof from time
to time outstanding, which interest shall be paid at the times and
rates, and in the manner, provided in the Loan Agreement.
In all events and under all circumstances, the entire unpaid
principal balance of the within Note and all accrued and unpaid
interest thereon shall be due and payable on the Revolving Credit
Maturity Date.
Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in that certain Amended and Restated Revolving Credit
Agreement (herein, as amended from time to time hereafter, the "Loan Agreement")
executed as of the date of this Note between the Borrower, DTS and DTM, and The
First National Bank of Boston, NationsBank, N.A., Signet Bank, Crestar Bank,
First Union National Bank of Virginia, AmSouth Bank of Alabama and Union Bank of
California, N.A. (together with any other institutions who may hereafter become
parties to the Amended and Restated Revolving Credit Agreement, collectively,
the "Lenders") and The First National Bank of Boston, as Agent.
This Note is a Revolving Credit Note which has been executed and
delivered in accordance with Section 2.3 of the Loan Agreement. Reference is
made to the Loan Agreement for a description of the benefits to which the Holder
and the Agent (and any successors or assigns thereof) are entitled on account
hereof and for reference to the security, and other collateral interests which
secure the Obligations.
1
<PAGE>
The within Note may be prepaid in whole and in part, and shall be
prepaid, all as provided in the Loan Agreement. In the event the Borrower fails
to pay any instalment of principal and/or interest as and within applicable cure
periods (if any) set forth in the Loan Agreement, or otherwise fails to repay
this Note on its due date, the Borrower agrees to pay to the Agent on demand a
late charge in an amount equal to five percent (5.0%) of the overdue payment.
Upon the occurrence of any Event of Default, all of the Obligations,
including, without limitation, the entire unpaid principal balance of the within
Note and all accrued and unpaid interest hereon, may become or be declared due
and payable as provided in the Loan Agreement.
The undersigned and every endorser and guarantor of the within Note
and/or said Obligations, waives presentment, demand, notice, protest and all
other demands and notices in connection herewith; assents to any extension or
postponement of the time of payment or any other indulgence with respect hereto
and to any substitution, exchange, or release of collateral which secures the
within Note; assents to the addition or release of any other party or person
primarily or secondarily liable on account of the within Note and/or said
Obligations; and agrees to pay all costs and expenses at any time incurred by
the Holder or the Agent as set forth in the Loan Agreement.
THE BORROWER, TO THE EXTENT ENTITLED THERETO, WAIVES ANY PRESENT OR
FUTURE RIGHT OF THE BORROWER OR OF ANY OTHER PERSON LIABLE TO THE HOLDER OR THE
AGENT ON ACCOUNT OF OR IN RESPECT TO THE OBLIGATIONS, TO A TRIAL BY JURY IN ANY
CASE OR CONTROVERSY IN WHICH THE HOLDER OR THE AGENT IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE HOLDER OR AGENT
OR IN WHICH THE HOLDER OR AGENT IS JOINED AS A PARTY LITIGANT), WHICH CASE OR
CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY RELATIONSHIP AMONGST OR
BETWEEN THE BORROWER, ANY SUCH PERSON, AND THE HOLDER OR THE AGENT.
This Note is delivered to the Holder at Boston, Massachusetts; shall
take effect as a sealed instrument under the laws of The Commonwealth of
Massachusetts; and shall be governed and construed in accordance with the laws
of said Commonwealth.
WITNESS: DOLLAR TREE DISTRIBUTION, INC.
/s/ Carolyn C. Lilla By: /s/ H. Ray Compton
- --------------------------------- ---------------------------
Print Name Name: H. Ray Compton
Title: Executive Vice President
2
EXHIBIT 10.4
AMENDMENT AND RATIFICATION OF SECURITY AGREEMENT
September 27, 1996
The First National Bank
of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Re: Loan Arrangement by and among The First National Bank
of Boston, as Agent for the Lenders, the Lenders, and
Dollar Tree Distribution, Inc., Dollar Tree Stores,
Inc., and Dollar Tree Management, Inc.
Gentlemen:
Reference is made to a loan arrangement (the "Loan Arrangement") dated
as of January 11, 1996 by and among NationsBank, N.A., as agent for the Lenders
pursuant to that certain Credit Agreement dated January 11, 1996 (the "Loan
Agreement"), with Dollar Tree Distribution, Inc. ("DTD"), Dollar Tree Stores,
Inc. ("DTS"), and Dollar Tree Management, Inc.("DTM"). The undersigned has
executed and delivered to NationsBank, N.A., as agent for the Lenders, a certain
Security Agreement-Commercial dated January 11, 1996 (the "Security Agreement")
pursuant to which the undersigned granted a security interest in certain
Collateral (as defined therein) as security for the undersigned's Indebtedness
(as defined therein) to the Lenders. The undersigned has also executed and
delivered to the Lenders a certain Guaranty dated January 11, 1996 (the
"Guaranty") pursuant to which the undersigned guarantied the Indebtedness (as
defined therein) of DTD to the Lenders.
The Lenders, NationsBank, N.A., agent, DTS, DTM, and DTD have agreed to
amend and restate the Loan Arrangement (the "Amended Loan Arrangement"),
pursuant to which, among other things, (i) the principal amount of the loans to
be made to DTD shall be increased to $135,000,000.00, (ii) First Union National
Bank of Virginia, AmSouth Bank of Alabama, and Union Bank of California, N.A.
shall join as Lenders, and (iii) NationsBank, N.A. shall resign as Agent, and
The First National Bank of Boston, shall be appointed as successor Agent of the
Lenders.
In connection with the Amended Loan Arrangement, DTS, DTM, and DTD have
on this date executed and delivered among other documents, instruments, and
agreements, (i) a certain Amended and Restated Revolving Credit Agreement (the
"Amended Loan Agreement") to the Lenders which are a party to the Amended Loan
Agreement and to The First National Bank of Boston, as Agent for
1
<PAGE>
the Lenders, (ii) a certain Unlimited Guaranty (the "New Guaranty"), pursuant to
which the undersigned has guarantied the Obligations (as defined therein) of
DTD) to the Lenders which are a party to the Amended Loan Agreement and to The
First National Bank of Boston, as Agent for the Lenders.
In order to induce the Lenders and the Agent to enter into the Amended
Loan Agreement, the undersigned hereby:
a. Ratifies, confirms and reaffirms, except as modified
by this Agreement, all and singular, the terms and
conditions of the Security Agreement, including,
without limitation, all representations, warranties
and covenants made therein;
b. Acknowledges and agrees that any and all references in
the Security Agreement (i) to the term "Lenders" or to
the term "Banks" shall mean and refer to the Lenders
presently a party to the Amended Loan Agreement,
together with any other institutions who may hereafter
become parties to the Amended Loan Agreement, (ii) to
the term "Agent" shall mean and refer to The First
National Bank of Boston, or any successor Agent as
provided for in the Amended Loan Agreement, and (iii)
to the term "Loan Agreement" shall mean and refer to
the Amended Loan Agreement, and any other
modifications, amendments, substitutions or renewals
thereof.
c. Acknowledges, confirms and agrees that the
Indebtedness (as defined in the Security Agreement) of
the undersigned to the Lenders and the Agent includes,
without limitation,(i) the Obligations (as defined in
the Amended Loan Agreement, and any further any
modifications, amendments, substitutions or renewals
thereof, (ii) the Guaranty, and any modifications,
amendments, substitutions or renewals thereof, and
(iii) the New Guaranty, and any modifications,
amendments, substitutions or renewals thereof.
d. Acknowledges and agrees that the Security Agreement is amended
by deleting therefrom the first sentence in the paragraph
entitled "Location of Collateral" on page 2, and replacing it
with the following: "The locations of the Collateral are
listed on Exhibit "1" attached hereto and incoporated herein
by reference".
e. Acknowledges and agrees that the Security Agreement is
amended by deleting therefrom the text "12.6" in the
2
<PAGE>
paragraph entitled "Remedies" on page 5, and replacing
it with the following: "19".
f. Acknowledges and agrees that the Security Agreement is
amended by deleting therefrom the entire text in the
paragraph entitled "Application of Proceeds on
Default" on page 6, and replacing it with the
following:
"After the occurrence of an Event of Default, the
proceeds from the sale of the Collateral shall be
distributed in accordance with the provisions of
Section 12.5 of the Loan Agreement."
g. Acknowledges and agrees that the Security Agreement is
amended by deleting the first sentence in the last
paragraph on page 6, and replacing it with the
following:
"This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts, and all
jurisdictional and venue requirements shall be determined in
accordance with the provisions of the Loan Agreement. Further,
in the event that there are any inconsistencies between this
Agreement and the Loan Agreement, the terms and conditions of
the Loan Agreement shall govern."
h. Acknowledges, confirms and agrees that any and all
Collateral previously, now or hereafter granted by the
undersigned to the Bank shall secure the prompt,
punctual and faithful payment and perform of all and
each of the undersigned's Indebtedness to the Lenders
and the Agent;
i. Acknowledges, confirms and agrees that the Security Agreement
shall remain in full force and effect and shall in no way be
effected or modified by the execution of the Amended Loan
Agreement and/or any other documents, instruments and/or
agreements executed in connection therewith.
3
<PAGE>
This letter shall take effect as a sealed instrument as of the date
first written above.
DOLLAR TREE STORES, INC.
By: /s/ H. Ray Compton
---------------------------------
Name: H. Ray Compton
Title: Executive Vice President
Accepted and agreed this 27th day of September, 1996
THE FIRST NATIONAL BANK OF BOSTON
As Agent
By: /s/ Bethann R. Halligan
---------------------------
Name: Bethann R. Halligan
Title Managing Director
4
EXHIBIT 10.5
AMENDMENT AND RATIFICATION OF SECURITY AGREEMENT
September 27, 1996
The First National Bank
of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Re: Loan Arrangement by and among The First National Bank
of Boston as Agent, for the Lenders and Dollar Tree
Distribution, Inc., Dollar Tree Stores, Inc., and
Dollar Tree Management, Inc.
Gentlemen:
Reference is made to a loan arrangement (the "Loan Arrangement") dated
as of January 11, 1996 by and among NationsBank, N.A., as agent for the Lenders
pursuant to that certain Credit Agreement dated January 11, 1996 (the "Loan
Agreement") with Dollar Tree Distribution, Inc. ("DTD"), Dollar Tree Stores,
Inc. ("DTS"), and Dollar Tree Management, Inc.("DTM"). The undersigned has
executed and delivered to NationsBank, N.A., as agent for the Lenders, a certain
Security Agreement-Commercial dated January 11, 1996 (the "Security Agreement")
pursuant to which the undersigned granted a security interest in certain
Collateral (as defined therein) as security for the undersigned's Indebtedness
(as defined therein) to the Lenders and to NationsBank, N.A. as agent.
Capitalized terms used herein and not otherwise defined shall have the meaning
assigned to them in the Security Agreement.
The Lenders, NationsBank, as agent, DTS, DTM, and DTD have agreed to
amend and restate the Loan Arrangement (the "Amended Loan Arrangement"),
pursuant to which, among other things, (i) the principal amount of the loans to
be made to DTD shall be increased to $135,000,000.00, (ii) First Union National
Bank of Virginia, AmSouth Bank of Alabama, and Union Bank of California, N.A.
shall join as Lenders, and (iii) NationsBank, N.A. shall resign as Agent, and
The First National Bank of Boston, shall be appointed as successor Agent for the
Lenders.
In connection with the Amended Loan Arrangement, DTS, DTM, and DTD have
on this date executed and delivered among other documents, instruments, and
agreements, a certain Amended and Restated Revolving Credit Agreement (the
"Amended Loan Agreement") to the Lenders which are a party to the Amended Loan
Agreement and to The First National Bank of Boston, as Agent for the Lenders.
1
<PAGE>
In order to induce the Lenders and the Agent to enter into the Amended
Loan Agreement, the undersigned hereby:
a. Ratifies, confirms and reaffirms, except as modified
by this Agreement, all and singular, the terms and
conditions of the Security Agreement, including,
without limitation, all representations, warranties
and covenants made therein;
b. Acknowledges and agrees that any and all references in
the Security Agreement (i) to the term "Lenders" or to
the term "Banks" shall mean and refer to the Lenders
presently a party to the Amended Loan Agreement,
together with any other institutions who may hereafter
become parties to the Amended Loan Agreement, (ii) to
the term "Agent" shall mean and refer to The First
National Bank of Boston, or any successor Agent as
provided for in the Amended Loan Agreement, and (iii)
to the term "Loan Agreement" shall mean and refer to
the Amended Loan Agreement, and any other
modifications, amendments, substitutions or renewals
thereof.
c. Acknowledges, confirms and agrees that the
Indebtedness of the undersigned to the Lenders and the
Agent includes, without limitation, the Obligations
(as defined in the Amended Loan Agreement, and any
modifications, amendments, substitutions or renewals,
thereof.
d. Acknowledges and agrees that the Security Agreement is
amended by deleting therefrom the text "12.6" in the
paragraph entitled "Remedies" on page 5, and replacing
it with the following: "19".
e. Acknowledges and agrees that the Security Agreement is
amended by deleting therefrom the entire text in the
paragraph entitled "Application of Proceeds on
Default" on page 6, and replacing it with the
following:
"After the occurrence of an Event of
Default, the proceeds from the sale of
the Collateral shall be distributed in
accordance with the provisions of
Section 12.5 of the Loan Agreement."
f. Acknowledges and agrees that the Security Agreement is
amended by deleting the first sentence in the second
2
<PAGE>
paragraph on page 7, and replacing it with the
following:
"This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of
Massachusetts, and all jurisdictional and venue
requirements shall be determined in accordance with
the provisions of the Loan Agreement. Further, in the
event there are any inconsistencies between this
Agreement and the Loan Agreement, the terms and
conditions of the Loan Agreement shall govern."
g. Acknowledges, confirms and agrees that any and all
Collateral previously, now or hereafter granted by the
undersigned to the Bank shall secure the prompt,
punctual and faithful payment and perform of all and
each of the undersigned's Indebtedness to the Lenders
and the Agent;
h. Acknowledges, confirms and agrees that the Security
Agreement shall remain in full force and effect and
shall in no way be effected or modified by the
execution of the Amended Loan Agreement and/or any
other documents, instruments and/or agreements
executed in connection therewith.
This letter shall take effect as a sealed instrument as of
the date first written above.
DOLLAR TREE DISTRIBUTION, INC.
By: /s/ H. Ray Compton
----------------------------
Name: H. Ray Compton
Title: Executive Vice President
3
<PAGE>
Accepted and agreed this 27th day of September, 1996
THE FIRST NATIONAL BANK OF BOSTON
As Agent
By: /s/ Bethann R. Halligan
---------------------------
Name: Bethann R. Halligan
Title Managing Director
4
EXHIBIT 10.6
AMENDMENT AND RATIFICATION OF SECURITY AGREEMENT
September 27, 1996
The First National Bank
of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Re: Loan Arrangement by and among The First National Bank
of Boston, as Agent for the Lenders, the Lenders, and
Dollar Tree Distribution, Inc., Dollar Tree Stores,
Inc., and Dollar Tree Management, Inc.
Gentlemen:
Reference is made to a loan arrangement (the "Loan Arrangement") dated
as of January 11, 1996 by and among NationsBank, N.A., as agent for the Lenders
pursuant to that certain Credit Agreement dated January 11, 1996 (the "Loan
Agreement"), with Dollar Tree Distribution, Inc. ("DTD"), Dollar Tree Stores,
Inc. ("DTS"), and Dollar Tree Management, Inc.("DTM"). The undersigned has
executed and delivered to NationsBank, N.A., as agent for the Lenders, a certain
Security Agreement-Commercial dated January 11, 1996 (the "Security Agreement")
pursuant to which the undersigned granted a security interest in certain
Collateral (as defined therein) as security for the undersigned's Indebtedness
(as defined therein) to the Lenders. The undersigned has also executed and
delivered to the Lenders a certain Guaranty dated January 11, 1996 (the
"Guaranty") pursuant to which the undersigned guarantied the Indebtedness (as
defined therein) of DTD to the Lenders.
The Lenders, NationsBank, N.A., agent, DTS, DTM, and DTD have agreed to
amend and restate the Loan Arrangement (the "Amended Loan Arrangement"),
pursuant to which, among other things, (i) the principal amount of the loans to
be made to DTD shall be increased to $135,000,000.00, (ii) First Union National
Bank of Virginia, AmSouth Bank of Alabama, and Union Bank of California, N.A.
shall join as Lenders, and (iii) NationsBank, N.A. shall resign as Agent, and
The First National Bank of Boston, shall be appointed as successor Agent of the
Lenders.
In connection with the Amended Loan Arrangement, DTS, DTM, and DTD have
on this date executed and delivered among other documents, instruments, and
agreements, (i) a certain Amended and Restated Revolving Credit Agreement (the
"Amended Loan Agreement") to the Lenders which are a party to the Amended Loan
Agreement and to The First National Bank of Boston, as Agent for the Lenders,
(ii) a certain Unlimited Guaranty (the "New Guaranty"), pursuant to which the
undersigned has guarantied the Obligations (as defined therein) of DTD) to the
Lenders which are a party to the Amended Loan Agreement and to The First
National Bank of Boston, as Agent for the Lenders.
1
<PAGE>
In order to induce the Lenders and the Agent to enter into the Amended
Loan Agreement, the undersigned hereby:
a. Ratifies, confirms and reaffirms, except as modified
by this Agreement, all and singular, the terms and
conditions of the Security Agreement, including,
without limitation, all representations, warranties
and covenants made therein;
b. Acknowledges and agrees that any and all references in
the Security Agreement (i) to the term "Lenders" or to
the term "Banks" shall mean and refer to the Lenders
presently a party to the Amended Loan Agreement,
together with any other institutions who may hereafter
become parties to the Amended Loan Agreement, (ii) to
the term "Agent" shall mean and refer to The First
National Bank of Boston, or any successor Agent as
provided for in the Amended Loan Agreement, and (iii)
to the term "Loan Agreement" shall mean and refer to
the Amended Loan Agreement, and any other
modifications, amendments, substitutions or renewals
thereof.
c. Acknowledges, confirms and agrees that the
Indebtedness (as defined in the Security Agreement) of
the undersigned to the Lenders and the Agent includes,
without limitation,(i) the Obligations (as defined in
the Amended Loan Agreement, and any further any
modifications, amendments, substitutions or renewals
thereof, (ii) the Guaranty, and any modifications,
amendments, substitutions or renewals thereof, and
(iii) the New Guaranty, and any modifications,
amendments, substitutions or renewals thereof.
d. Acknowledges and agrees that the Security Agreement is
amended by deleting therefrom the text "12.6" in the
paragraph entitled "Remedies" on page 5, and replacing
it with the following: "19".
e. Acknowledges and agrees that the Security Agreement is
amended by deleting therefrom the entire text in the
paragraph entitled "Application of Proceeds on
Default" on page 6, and replacing it with the
following:
"After the occurrence of an Event of
Default, the proceeds from the sale of
the Collateral shall be distributed in
accordance with the provisions of
Section 12.5 of the Loan Agreement."
2
<PAGE>
f. Acknowledges and agrees that the Security Agreement is
amended by deleting the first sentence in the last
paragraph on page 6, and replacing it with the
following:
"This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of
Massachusetts, and all jurisdictional and venue
requirements shall be determined in accordance with
the provisions of the Loan Agreement. Further, in the
event that there are any inconsistencies between this
Agreement and the Loan Agreement, the terms and
conditions of the Loan Agreement shall govern."
g. Acknowledges, confirms and agrees that any and all
Collateral previously, now or hereafter granted by the
undersigned to the Bank shall secure the prompt,
punctual and faithful payment and perform of all and
each of the undersigned's Indebtedness to the Lenders
and the Agent;
h. Acknowledges, confirms and agrees that the Security
Agreement shall remain in full force and effect and
shall in no way be effected or modified by the
execution of the Amended Loan Agreement and/or any
other documents, instruments and/or agreements
executed in connection therewith.
This letter shall take effect as a sealed instrument as of
the date first written above.
DOLLAR TREE MANAGEMENT, INC.
By: /s/ H. Ray Compton
----------------------------
Name: H. Ray Compton
Title: Executive Vice President
Accepted and agreed this 27th day of September, 1996
THE FIRST NATIONAL BANK OF BOSTON
As Agent
By: /s/ Bethann R. Halligan
---------------------------
Name: Bethann R. Halligan
Title Managing Director
3
EXHIBIT 10.7
UNLIMITED GUARANTY
GUARANTY, dated as of September 27, 1996 by DOLLAR TREE STORES, INC., a
Virginia Corporation (the "Guarantor"), in favor of The First National Bank of
Boston, NationsBank, N.A., Signet Bank, Crestar Bank, First Union National Bank
of Virginia, AmSouth Bank of Alabama and Union Bank of California, N.A.,
(together with any other institutions who may hereafter become parties to a
certain Amended and Restated Revolving Credit Agreement (the "Credit Agreement")
of even date herewith, collectively, the "Banks"), and The First National Bank
of Boston, as Agent for the Banks, or any successor Agent to the Banks as
provided for in the Credit Agreement. In consideration of the Banks' giving, in
their discretion, time, credit or banking facilities or accommodations to Dollar
Tree Distribution, Inc., a Virginia corporation having its chief executive
office at 2555 Ellsmere Avenue, Norfolk, Virginia (together with its successors,
the "Customer"), the Guarantor agrees as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
guarantees to the Banks and to the Agent the full and
punctual payment when due (whether at maturity, by
acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the
Customer to the Banks and to Agent, or any of them, whether
direct or indirect, absolute or contingent, due or to become
due, secured or unsecured, now existing or hereafter arising
or acquired (whether by way of discount, letter of credit,
lease, loan, overdraft or otherwise) (the "Obligations").
This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of
the Obligations and not of their collectibility only and is
in no way conditioned upon any requirement that the Banks or
the Agent first attempt to collect any of the Obligations
from the Customer or resort to any security or other means
of obtaining their payment. Should the Customer default in
the payment or performance of any of the Obligations, the
obligations of the Guarantor hereunder shall become
immediately due and payable to the Banks and the Agent,
without demand or notice of any nature, all of which are
expressly waived by the Guarantor. Payments by the
Guarantor hereunder may be required by the Banks or the
Agent on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees,
as the principal obligor and not as a guarantor only, to pay
to the Banks and the Agent, or any of them, on demand, all
costs and expenses (including court costs and legal
expenses) incurred or expended by the Banks, or any of them,
in connection with the Obligations, this Guaranty and the
enforcement thereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts
1
<PAGE>
become due until payment, at the rate of interest set forth
in Section 4.11 of the Credit Agreement.
3. UNLIMITED GUARANTY. The liability of the Guarantor
hereunder shall be unlimited.
4. WAIVERS BY GUARANTOR; BANKS/AGENT FREEDOM TO ACT. The
Guarantor agrees that the Obligations will be paid and
performed strictly in accordance with their respective terms
regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or
the rights of the Banks or the Agent with respect thereto.
The Guarantor waives presentment, demand, protest, notice of
acceptance, notice of Obligations incurred and all other
notices of any kind, except notices required pursuant to the
Credit Agreement, all defenses which may be available by
virtue of any valuation, stay, moratorium law or other
similar law now or hereafter in effect, any right to require
the marshalling of assets of the Customer, and all
suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the
provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and
agrees that the obligations of the Guarantor hereunder shall
not be released or discharged, in whole or in part, or
otherwise affected by (i) the failure of the Banks or the
Agent to assert any claim or demand or to enforce any right
or remedy against the Customer; (ii) any extensions or
renewals of any Obligation; (iii) any rescissions, waivers,
amendments or modifications of any of the terms or
provisions of any agreement evidencing, securing or
otherwise executed in connection with any Obligation; (iv)
the substitution or release of any entity primarily or
secondarily liable for any Obligation; (v) the adequacy of
any rights the Banks or the Agent may have against any
collateral or other means of obtaining repayment of the
Obligations; (vi) the impairment of any collateral securing
the Obligations, including without limitation the failure to
perfect or preserve any rights the Banks or the Agent might
have in such collateral or the substitution, exchange,
surrender, release, loss or destruction of any such
collateral; or (vii) any other act or omission which might
in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of
the Guarantor, all of which may be done without notice to
the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for
any reason the Customer has no legal existence or is under
no legal obligation to discharge any of the Obligations, or
if any of the Obligations have become irrecoverable from the
Customer by operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor to
2
<PAGE>
the same extent as if the Guarantor at all times had been
the principal obligor on all such Obligations. In the event
that acceleration of the time for payment of the Obligations
is stayed upon the insolvency, bankruptcy or reorganization
of the Customer, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of any
agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and
payable by the Guarantor.
6. SUBROGATION; SUBORDINATION. The Guarantor shall not
exercise any rights against the Customer arising as a result
of payment by the Guarantor hereunder, by way of subrogation
or otherwise, and will not prove any claim in competition
with the Agent, the Banks or their affiliates in respect of
any payment hereunder in bankruptcy or insolvency
proceedings of any nature; the Guarantor will not claim any
set-off or counterclaim against the Customer in respect of
any liability of the Guarantor to the Customer; and the
Guarantor waives any benefit of and any right to participate
in any collateral which may be held by the Agent, the Banks
or any such affiliate. The payment of any amounts due with
respect to any indebtedness of the Customer now or hereafter
held by the Guarantor is hereby subordinated to the prior
payment in full of the Obligations, provided that so long as
no default in the payment or performance of the Obligations
has occurred and is continuing, or no demand for payment of
any of the Obligations has been made that remains
unsatisfied, the Customer may make, and the Guarantor may
demand and accept, any scheduled payments of principal of
and interest on such subordinated indebtedness in the
amounts, at the rates and on the dates specified in such
instruments, securities or other writings as shall evidence
such subordinated indebtedness. The Guarantor agrees that
after the occurrence of any default in the payment or
performance of the Obligations, the Guarantor will not
demand, sue for or otherwise attempt to collect any such
indebtedness of the Customer to the Guarantor until the
Obligations shall have been paid in full. If, not
withstanding the foregoing sentence, the Guarantor shall
collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and
received by the Guarantor as trustee for the Banks and the
Agent and be paid over to the Agent on account of the
Obligations without affecting in any manner the liability of
the Guarantor under the other provisions of this Guaranty.
7. SECURITY; SET-OFF. The Guarantor grants to the Banks and
the Agent, as security for the full and punctual payment and
performance of the Guarantor's obligations hereunder, a
continuing lien on and security interest in all securities
or other property belonging to the Guarantor now or
hereafter held by the Banks and the Agent and in ail
3
<PAGE>
deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from the Banks and
the Agent to the Guarantor or subject to withdrawal by the
Guarantor; and regardless of the adequacy of any collateral
or other means of obtaining repayment of the Obligations,
the Banks and the Agent are hereby authorized at any time
and from time to time, without notice to the Guarantor (any
such notice being expressly waived by the Guarantor) and to
the fullest extent permitted by law, to set off and apply
such deposits and other sums against the obligations of the
Guarantor under this Guaranty, whether or not the Banks or
the Agent shall have made any demand under this Guaranty and
although such obligations may be contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees to do all such
things and execute all such documents, including financing
statements, as the Banks and the Agent may consider
necessary or desirable to give full effect to this Guaranty
and to perfect and preserve the rights and powers of the
Banks and the Agent hereunder.
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in
full force and effect until the Banks are given written
notice of the Guarantor's intention to discontinue this
Guaranty, notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of the
Obligations. No such notice shall be effective unless
delivered in accordance with Section 19 of the Credit
Agreement. No such notice shall affect any rights of the
Agent or the Banks or of any affiliate hereunder including,
without limitation, the rights set forth in Sections 4 and
6, with respect to Obligations incurred prior to the receipt
of such notice or Obligations incurred pursuant to any
contract or commitment in existence prior to such receipt,
and all checks, drafts, notes, instruments (negotiable or
otherwise) and writings made by or for the account of the
Customer and drawn on the Banks or any of its agents
purporting to be dated on or before the date of receipt of
such notice, although presented to and paid or accepted by
the Banks after that date, shall form part of the
Obligations. This Guaranty shall continue to be effective
or be reinstated, notwithstanding any such notice, if at any
time any payment made or value received with respect to an
Obligation is rescinded or must otherwise be returned by the
Agent or the Banks upon the insolvency, bankruptcy or
reorganization of the Customer, or otherwise, all as though
such payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon
the Guarantor, its successors and assigns, and shall inure
to the benefit of and be enforceable by the Agent and the
Banks and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing
4
<PAGE>
sentence, the Banks and the Agent may assign or otherwise
transfer any agreement or any note held by it evidencing,
securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein,
to any other person or entity, and such other person or
entity shall thereupon become vested, to the extent set
forth in the agreement evidencing such assignment, transfer
or participation, with all the rights in respect thereof
granted to the Banks and the Agent herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by
the Guarantor therefrom shall be effective unless the same
shall be in writing and signed by the Banks and the Agent.
No failure on the part of the Banks or the Agent to
exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other
right.
12. NOTICES. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise
specifically provided herein, shall be delivered in
accordance with Section 19 of the Credit Agreement.
13. SUPPLEMENTAL GUARANTY. This Guaranty supplements the
Guarantor's Guaranty dated January 11, 1996 (the "January
Guaranty"). In the event there are any inconsistencies
between this Guaranty and the January Guaranty, the terms
and conditions of this Guaranty shall govern.
14. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is
intended to take effect as a sealed instrument and shall be
governed by, and construed in accordance with, the laws of
The Commonwealth of Massachusetts. The Guarantor agrees
that any suit for the enforcement of this Guaranty shall be
brought exclusively in the courts of The Commonwealth of
Virginia or any Federal Court sitting therein, except that
suit may be brought in other jurisdictions to the extent
necessary to enforce the Banks' rights with respect to
Collateral (as defined in the Credit Agreement) located
within that jurisdiction, and consents to the exclusive
jurisdiction of such court and to service of process in any
such suit being made upon the Guarantor by mail at the
address specified in Section 19 of the Credit Agreement upon
receipt thereof. The Guarantor hereby waives any objection
that it may now or hereafter have to the venue of any such
suit or any such court or that such suit was brought in an
inconvenient court.
15. MISCELLANEOUS. This Guaranty constitutes the entire
agreement of the Guarantor with respect to the matters set
5
<PAGE>
forth herein. The rights and remedies herein provided are
cumulative and not exclusive of any remedies provided by law
or any other agreement, and this Guaranty shall be in
addition to any other guaranty of the Obligations. The
invalidity or unenforceability of any one or more sections
of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are
for the ease of reference only and shall not affect the
meaning of the relevant provisions. The meanings of all
defined terms used in this Guaranty shall be equally
applicable to the singular and plural forms of the terms
defined.
16. JURY WAIVER. THE BANKS AND THE AGENT (BY THEIR ACCEPTANCE
HEREOF) AND THE GUARANTOR AGREE THAT NONE OF THEM, INCLUDING
ANY ASSIGNEE OR SUCCESSOR SHALL SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE BASED UPON, OR ARISING OUT OF, THIS GUARANTY, ANY
RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM. NEITHER THE
BANKS, THE AGENT, NOR THE GUARANTOR SHALL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS
OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANKS,
THE AGENT, AND THE GUARANTOR, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NEITHER THE BANKS, THE AGENT, NOR
THE GUARANTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the Guarantor has executed and delivered
this Guaranty, or caused this Guaranty to be executed and deliv
ered by its duly authorized officer, as of the date appearing on
page one.
WITNESS: GUARANTOR: DOLLAR TREE STORES, INC.
/s/ Carolyn C. Lilla By: /s/ H. Ray Compton
------------------------------
Name: Carolyn C. Lilla Name: H. Ray Compton
Address: 848 Stacey Place Address: 2555 Ellsmere Avenue
Virginia Beach, Virginia 23464 Norfolk, Virginia 23513
6
EXHIBIT 10.8
UNLIMITED GUARANTY
GUARANTY, dated as of September 27, 1996 by DOLLAR TREE MANAGEMENT,
INC., a Virginia Corporation (the "Guarantor"), in favor of The First National
Bank of Boston, NationsBank, N.A., Signet Bank, Crestar Bank, First Union
National Bank of Virginia, AmSouth Bank of Alabama and Union Bank of California,
N.A., (together with any other institutions who may hereafter become parties to
a certain Amended and Restated Revolving Credit Agreement (the "Credit
Agreement") of even date herewith, collectively, the "Banks"), and The First
National Bank of Boston, as Agent for the Banks, or any successor Agent to the
Banks as provided for in the Credit Agreement. In consideration of the Banks'
giving, in their discretion, time, credit or banking facilities or
accommodations to Dollar Tree Distribution, Inc., a Virginia corporation having
its chief executive office at 2555 Ellsmere Avenue, Norfolk, Virginia (together
with its successors, the "Customer"), the Guarantor agrees as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
guarantees to the Banks and to the Agent the full and
punctual payment when due (whether at maturity, by
acceleration or otherwise), and the performance, of all
liabilities, agreements and other obligations of the
Customer to the Banks and to Agent, or any of them, whether
direct or indirect, absolute or contingent, due or to become
due, secured or unsecured, now existing or hereafter arising
or acquired (whether by way of discount, letter of credit,
lease, loan, overdraft or otherwise) (the "Obligations").
This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of
the Obligations and not of their collectibility only and is
in no way conditioned upon any requirement that the Banks or
the Agent first attempt to collect any of the Obligations
from the Customer or resort to any security or other means
of obtaining their payment. Should the Customer default in
the payment or performance of any of the Obligations, the
obligations of the Guarantor hereunder shall become
immediately due and payable to the Banks and the Agent,
without demand or notice of any nature, all of which are
expressly waived by the Guarantor. Payments by the
Guarantor hereunder may be required by the Banks or the
Agent on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees,
as the principal obligor and not as a guarantor only, to pay
to the Banks and the Agent, or any of them, on demand, all
costs and expenses (including court costs and legal
expenses) incurred or expended by the Banks, or any of them,
in connection with the Obligations, this Guaranty and the
enforcement thereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts
1
<PAGE>
become due until payment, at the rate of interest set forth
in Section 4.11 of the Credit Agreement.
3. UNLIMITED GUARANTY. The liability of the Guarantor
hereunder shall be unlimited.
4. WAIVERS BY GUARANTOR; BANKS/AGENT FREEDOM TO ACT. The
Guarantor agrees that the Obligations will be paid and
performed strictly in accordance with their respective terms
regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or
the rights of the Banks or the Agent with respect thereto.
The Guarantor waives presentment, demand, protest, notice of
acceptance, notice of Obligations incurred and all other
notices of any kind, except notices required pursuant to the
Credit Agreement, all defenses which may be available by
virtue of any valuation, stay, moratorium law or other
similar law now or hereafter in effect, any right to require
the marshalling of assets of the Customer, and all
suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the
provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and
agrees that the obligations of the Guarantor hereunder shall
not be released or discharged, in whole or in part, or
otherwise affected by (i) the failure of the Banks or the
Agent to assert any claim or demand or to enforce any right
or remedy against the Customer; (ii) any extensions or
renewals of any Obligation; (iii) any rescissions, waivers,
amendments or modifications of any of the terms or
provisions of any agreement evidencing, securing or
otherwise executed in connection with any Obligation; (iv)
the substitution or release of any entity primarily or
secondarily liable for any Obligation; (v) the adequacy of
any rights the Banks or the Agent may have against any
collateral or other means of obtaining repayment of the
Obligations; (vi) the impairment of any collateral securing
the Obligations, including without limitation the failure to
perfect or preserve any rights the Banks or the Agent might
have in such collateral or the substitution, exchange,
surrender, release, loss or destruction of any such
collateral; or (vii) any other act or omission which might
in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of
the Guarantor, all of which may be done without notice to
the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for
any reason the Customer has no legal existence or is under
no legal obligation to discharge any of the Obligations, or
if any of the Obligations have become irrecoverable from the
Customer by operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor to
the same extent as if the Guarantor at all times had been
2
<PAGE>
the principal obligor on all such Obligations. In the event
that acceleration of the time for payment of the Obligations
is stayed upon the insolvency, bankruptcy or reorganization
of the Customer, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of any
agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and
payable by the Guarantor.
6. SUBROGATION; SUBORDINATION. The Guarantor shall not
exercise any rights against the Customer arising as a result
of payment by the Guarantor hereunder, by way of subrogation
or otherwise, and will not prove any claim in competition
with the Agent, the Banks or their affiliates in respect of
any payment hereunder in bankruptcy or insolvency
proceedings of any nature; the Guarantor will not claim any
set-off or counterclaim against the Customer in respect of
any liability of the Guarantor to the Customer; and the
Guarantor waives any benefit of and any right to participate
in any collateral which may be held by the Agent, the Banks
or any such affiliate. The payment of any amounts due with
respect to any indebtedness of the Customer now or hereafter
held by the Guarantor is hereby subordinated to the prior
payment in full of the Obligations, provided that so long as
no default in the payment or performance of the Obligations
has occurred and is continuing, or no demand for payment of
any of the Obligations has been made that remains
unsatisfied, the Customer may make, and the Guarantor may
demand and accept, any scheduled payments of principal of
and interest on such subordinated indebtedness in the
amounts, at the rates and on the dates specified in such
instruments, securities or other writings as shall evidence
such subordinated indebtedness. The Guarantor agrees that
after the occurrence of any default in the payment or
performance of the Obligations, the Guarantor will not
demand, sue for or otherwise attempt to collect any such
indebtedness of the Customer to the Guarantor until the
Obligations shall have been paid in full. If, not
withstanding the foregoing sentence, the Guarantor shall
collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and
received by the Guarantor as trustee for the Banks and the
Agent and be paid over to the Agent on account of the
Obligations without affecting in any manner the liability of
the Guarantor under the other provisions of this Guaranty.
7. SECURITY; SET-OFF. The Guarantor grants to the Banks and
the Agent, as security for the full and punctual payment and
performance of the Guarantor's obligations hereunder, a
continuing lien on and security interest in all securities
or other property belonging to the Guarantor now or
hereafter held by the Banks and the Agent and in ail
deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from the Banks and
3
<PAGE>
the Agent to the Guarantor or subject to withdrawal by the
Guarantor; and regardless of the adequacy of any collateral
or other means of obtaining repayment of the Obligations,
the Banks and the Agent are hereby authorized at any time
and from time to time, without notice to the Guarantor (any
such notice being expressly waived by the Guarantor) and to
the fullest extent permitted by law, to set off and apply
such deposits and other sums against the obligations of the
Guarantor under this Guaranty, whether or not the Banks or
the Agent shall have made any demand under this Guaranty and
although such obligations may be contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees to do all such
things and execute all such documents, including financing
statements, as the Banks and the Agent may consider
necessary or desirable to give full effect to this Guaranty
and to perfect and preserve the rights and powers of the
Banks and the Agent hereunder.
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in
full force and effect until the Banks are given written
notice of the Guarantor's intention to discontinue this
Guaranty, notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of the
Obligations. No such notice shall be effective unless
delivered in accordance with Section 19 of the Credit
Agreement. No such notice shall affect any rights of the
Agent or the Banks or of any affiliate hereunder including,
without limitation, the rights set forth in Sections 4 and
6, with respect to Obligations incurred prior to the receipt
of such notice or Obligations incurred pursuant to any
contract or commitment in existence prior to such receipt,
and all checks, drafts, notes, instruments (negotiable or
otherwise) and writings made by or for the account of the
Customer and drawn on the Banks or any of its agents
purporting to be dated on or before the date of receipt of
such notice, although presented to and paid or accepted by
the Banks after that date, shall form part of the
Obligations. This Guaranty shall continue to be effective
or be reinstated, notwithstanding any such notice, if at any
time any payment made or value received with respect to an
Obligation is rescinded or must otherwise be returned by the
Agent or the Banks upon the insolvency, bankruptcy or
reorganization of the Customer, or otherwise, all as though
such payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon
the Guarantor, its successors and assigns, and shall inure
to the benefit of and be enforceable by the Agent and the
Banks and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing
sentence, the Banks and the Agent may assign or otherwise
transfer any agreement or any note held by it evidencing,
securing or otherwise executed in connection with the
4
<PAGE>
Obligations, or sell participations in any interest therein,
to any other person or entity, and such other person or
entity shall thereupon become vested, to the extent set
forth in the agreement evidencing such assignment, transfer
or participation, with all the rights in respect thereof
granted to the Banks and the Agent herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by
the Guarantor therefrom shall be effective unless the same
shall be in writing and signed by the Banks and the Agent.
No failure on the part of the Banks or the Agent to
exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other
right.
12. NOTICES. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise
specifically provided herein, shall be delivered in
accordance with Section 19 of the Credit Agreement.
13. SUPPLEMENTAL GUARANTY. This Guaranty supplements the
Guarantor's Guaranty dated January 11, 1996 (the "January
Guaranty"). In the event there are any inconsistencies
between this Guaranty and the January Guaranty, the terms
and conditions of this Guaranty shall govern.
14. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is
intended to take effect as a sealed instrument and shall be
governed by, and construed in accordance with, the laws of
The Commonwealth of Massachusetts. The Guarantor agrees
that any suit for the enforcement of this Guaranty shall be
brought exclusively in the courts of The Commonwealth of
Virginia or any Federal Court sitting therein, except that
suit may be brought in other jurisdictions to the extent
necessary to enforce the Banks' rights with respect to
Collateral (as defined in the Credit Agreement) located
within that jurisdiction, and consents to the exclusive
jurisdiction of such court and to service of process in any
such suit being made upon the Guarantor by mail at the
address specified in Section 19 of the Credit Agreement upon
receipt thereof. The Guarantor hereby waives any objection
that it may now or hereafter have to the venue of any such
suit or any such court or that such suit was brought in an
inconvenient court.
15. MISCELLANEOUS. This Guaranty constitutes the entire
agreement of the Guarantor with respect to the matters set
forth herein. The rights and remedies herein provided are
cumulative and not exclusive of any remedies provided by law
or any other agreement, and this Guaranty shall be in
addition to any other guaranty of the Obligations. The
5
<PAGE>
invalidity or unenforceability of any one or more sections
of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are
for the ease of reference only and shall not affect the
meaning of the relevant provisions. The meanings of all
defined terms used in this Guaranty shall be equally
applicable to the singular and plural forms of the terms
defined.
16. JURY WAIVER. THE BANKS AND THE AGENT (BY THEIR ACCEPTANCE
HEREOF) AND THE GUARANTOR AGREE THAT NONE OF THEM, INCLUDING
ANY ASSIGNEE OR SUCCESSOR SHALL SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE BASED UPON, OR ARISING OUT OF, THIS GUARANTY, ANY
RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM. NEITHER THE
BANKS, THE AGENT, NOR THE GUARANTOR SHALL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS
OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANKS,
THE AGENT, AND THE GUARANTOR, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NEITHER THE BANKS, THE AGENT, NOR
THE GUARANTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER
THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the Guarantor has executed and delivered
this Guaranty, or caused this Guaranty to be executed and deliv
ered by its duly authorized officer, as of the date appearing on
page one.
WITNESS: GUARANTOR: DOLLAR TREE MANAGEMENT, INC.
/s/ Carolyn C. Lilla By: /s/ H. Ray Compton
------------------------------
Name: Carolyn C. Lilla Name: H. Ray Compton
Address: 848 Stacey Place Address: 2555 Ellsmere Avenue
Virginia Beach, Virginia 23464 Norfolk, Virginia 23513
6
EXHIBIT 10.9
AMENDMENT AND RATIFICATION OF NEGATIVE PLEDGE AGREEMENT
September 27, 1996
The First National Bank
of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Re: Loan Arrangement by and among The First National Bank
of Boston, as Agent for the Lenders, the Lenders, and
Dollar Tree Distribution, Inc., Dollar Tree Stores,
Inc., and Dollar Tree Management, Inc.
Gentlemen:
Reference is made to that certain Negative Pledge Agreement (the
"Agreement") dated as of January 11, 1996 by and among the (i) undersigned as
"Grantor", (ii) NationsBank, N.A. as agent (the "Grantee") for the Lenders
referred to in a certain Credit Agreement dated as of January 11, 1996, by and
among Dollar Tree Distribution, Inc. ("DTD"), Dollar Tree Stores, Inc. ("DTS"),
and Dollar Tree Management, Inc.("DTM"), and (iii) the Lenders. Unless otherwise
defined herein, all capitalized terms used herein shall have the meaning set
forth in the Agreement.
The Lenders, DTS, DTM, and DTD have agreed to amend and restate the
Credit Agreement pursuant to a certain Amended and Restated Revolving Credit
Agreement dated September 27, 1996 (the "Amended Credit Agreement"), pursuant to
which, among other things, (i) the principal amount of the Loans to be made to
DTD shall be increased to $135,000,000.00, (ii) First Union National Bank of
Virginia, AmSouth Bank of Alabama and Union Bank of California, N.A. shall join
as Lenders, and (iii) NationsBank, N.A. shall resign as agent, and The First
National Bank of Boston, shall be appointed as successor Agent of the Lenders.
In order to induce the Lenders and The First National Bank of Boston,
as Agent, to enter into the Amended Credit Agreement, the undersigned hereby:
a. Ratifies, confirms and reaffirms, except as modified
herein, all and singular, the terms and conditions of
the Agreement, including, without limitation, all
representations, warranties and covenants made
therein;
b. Acknowledges and agrees that any and all references in
the Agreement (i) to the term "Grantee" shall mean and
refer to The First National Bank of Boston, as Agent
1
<PAGE>
for the Lenders, or any successor Agent as provided for in the
Amended Credit Agreement, (ii) to the term "Lenders" shall
mean and refer to The First National Bank of Boston,
NationsBank, N.A., Signet Bank, Crestar Bank, First Union
National Bank of Virginia, AmSouth Bank of Alabama, and Union
Bank of California,N.A., together with any other institutions
who may hereafter become parties to the Amended Loan
Agreement, (iii) to the term "Credit Agreement" shall mean and
refer to the Amended Credit Agreement, and any future
modifications, subsitutions, renewals, amendments, or
replacements thereof, and (iv) the term "Loans" shall mean and
refer to the Revolving Credit Loans in the aggregate principal
amount of up to $135,000,000.00 to be obtained by the Obligors
from the Lenders.
c. Acknowledges and agrees that the Agreement is amended
by deleting the reference to NationsBank, N.A. and its
address in the second (2nd) paragraph on Page 1, and
replacing it with the following:
"The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Bethann R. Halligan
Managing Director
Facsimile No.(617)434-0630"
This letter shall take effect as a sealed instrument as of the date
first written above.
Dollar Tree Stores, Inc.
By: /s/ H. Ray Compton
---------------------------------
Name: H. Ray Compton
Title: Executive Vice President
Accepted and agreed this 27th day of September, 1996
THE FIRST NATIONAL BANK OF BOSTON
As Agent
By: /s/ Bethann R. Halligan
---------------------------
Name: Bethann R. Halligan
Title: Managing Director
2
<PAGE>
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named H. Ray Compton, the
Executive Vice President of Dollar Tree Stores, Inc., and acknowledged the
foregoing to be the free act and deed of Dollar Tree Stores, Inc., before me,
/s/ Carolyn C. Lilla
------------------------
Notary Public
My Commission Expires:
4/30/99
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named Bethann R. Halligan, the
Managing Director of The First National Bank of Boston, and acknowledged the
foregoing to be the free act and deed of The First Bank of Boston, before me,
/s/ Carolyn C. Lilla
-------------------------
Notary Public
My Commission Expires:
4/30/99
9
EXHIBIT 10.10
AMENDMENT AND RATIFICATION OF NEGATIVE PLEDGE AGREEMENT
September 27, 1996
The First National Bank
of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Re: Loan Arrangement by and among The First National Bank
of Boston, as Agent for the Lenders, the Lenders, and
Dollar Tree Distribution, Inc., Dollar Tree Stores,
Inc., and Dollar Tree Management, Inc.
Gentlemen:
Reference is made to that certain Negative Pledge Agreement (the
"Agreement") dated as of January 11, 1996 by and among the (i) undersigned as
"Grantors", (ii) NationsBank, N.A. as Agent (the "Grantee") for the Lenders
referred to in a certain Credit Agreement dated as of January 11, 1996, by and
among Dollar Tree Distribution, Inc. ("DTD"), Dollar Tree Stores, Inc. ("DTS"),
and Dollar Tree Management, Inc.("DTM"), and (iii) the Lenders. Unless otherwise
defined herein, all capitalized terms used herein shall have the meaning set
forth in the Agreement.
The Lenders, DTS, DTM, and DTD have agreed to amend and restate the
Credit Agreement pursuant to a certain Amended and Restated Revolving Credit
Agreement dated September 27, 1996 (the "Amended Credit Agreement"), pursuant to
which, among other things, (i) the principal amount of the Loans to be made to
DTD shall be increased to $135,000,000.00, (ii) First Union National Bank of
Virginia, AmSouth Bank of Alabama, and Union Bank of California, N.A. shall join
as Lenders, and (iii) NationsBank, N.A. shall resign as Agent, and The First
National Bank of Boston, shall be appointed as successor Agent of the Lenders.
In order to induce the Lenders and The First National Bank of Boston,
as Agent, to enter into the Amended Credit Agreement, the undersigned hereby:
a. Ratify, confirm and reaffirm, except as modified
herein, all and singular, the terms and conditions of
the Agreement, including, without limitation, all
representations, warranties and covenants made
therein;
b. Acknowledge and agree that any and all references in
the Agreement (i) to the term "Grantee" shall mean and
refer to The First National Bank of Boston, as Agent
1
<PAGE>
for the Lenders, or any successor Agent as provided
for in the Amended Credit Agreement, (ii) to the term
"Lenders" shall mean and refer to The First National
Bank of Boston, NationsBank, N.A., Signet Bank,
Crestar Bank, First Union National Bank of Virginia,
AmSouth Bank of Alabama, and Union Bank of California,
N.A., together with any other institutions who may
hereafter become parties to the Amended Loan
Agreement, (iii) to the term "Credit Agreement" shall
mean and refer to the Amended Credit Agreement, and
any future modifications, substitutions, renewals,
amendments, or replacements thereof, and (iv) the term
"Loans" shall mean and refer to the Revolving Credit
Loans in the aggregate principal amount of up to
$135,000,000.00 to be obtained by the Obligors from
the Lenders.
c. Acknowledges and agrees that the Agreement is amended
as follows:
i. by deleting the reference to NationsBank, N.A.
and its address in the third (3rd) paragraph on
Page 1, and replacing it with the following:
"The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Bethann R. Halligan
Managing Director
Facsimile No.(617)434-0630"
ii. by deleting the first sentence from paragraph
numbered 1 on page 1 and 2, and replacing it with
the following:
"Grantors hereby agree that, for so long as any
part of the Loans remains outstanding, they will
not, without first obtaining the prior written
consent of the Grantee, transfer, assign, or
otherwise convey or create or permit any lien,
encumbrance, charge, or security interest of any
kind to exist with respect to, voting capital
stock in Parent, in which they have Beneficial
Ownership (as defined in the Credit Agreement),
such that they would have Beneficial Ownership,
free and clear of all liens and encumbrances, in
an amount equal to less than ten percent (10%) of
the aggregate of (a) Parent's issued and
outstanding voting capital stock and (b) all
2
<PAGE>
rights and interests in Parent's voting capital
stock."
iii. by deleting the text from paragraph 2(i) on page
2 in its entirety, and replacing it with the
following:
"That Grantors collectively have on the date
hereof Beneficial Ownership (as defined in the
Credit Agreement) of shares of the Stock such
that there are no liens or encumbrances upon or
affecting such Stock in an amount equal to at
least ten percent (10%) of the issued and
outstanding voting capital stock of Parent."
This letter shall take effect as a sealed instrument as of
the date first written above.
/s/ Macon F. Brock, Jr.
-----------------------------
Macon F. Brock, Jr.
/s/ Joan P. Brock
-----------------------------
Joan P. Brock
/s/ J. Douglas Perry
-----------------------------
J. Douglas Perry
/s/ Patricia W. Perry
-----------------------------
Patricia W. Perry
/s/ H. Ray Compton
-----------------------------
H. Ray Compton
Accepted and agreed this 27th day of September, 1996
THE FIRST NATIONAL BANK OF BOSTON
As Agent
By: /s/ Bethann R. Halligan
---------------------------
Name: Bethann R. Halligan
Title Managing Director
3
<PAGE>
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named Macon F. Brock, and
acknowledged the foregoing to be his free act and deed, before me,
/s/ Terri Thompson
-------------------------
Notary Public
My Commission Expires:
8/31/99
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named Joan P. Brock, and
acknowledged the foregoing to be her free act and deed, before me,
/s/ Terri Thompson
-------------------------
Notary Public
My Commission Expires:
8/31/99
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named J. Douglas Perry, and
acknowledged the foregoing to be his free act and deed, before me,
/s/ Terri Thompson
-------------------------
Notary Public
My Commission Expires:
8/31/99
4
<PAGE>
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named Patricia W. Perry, and
acknowledged the foregoing to be her free act and deed, before me,
/s/ Terri Thompson
-------------------------
Notary Public
My Commission Expires:
8/31/99
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named H. Ray Compton, and
acknowledged the foregoing to be his free act and deed, before me,
/s/ Terri Thompson
-------------------------
Notary Public
My Commission Expires:
8/31/99
COMMONWEALTH OF VIRGINIA
City of Norfolk, ss September 27,1996
Then personally appeared the above named Bethann R. Halligan, the
Managing Director of The First National Bank of Boston, and acknowledged the
foregoing to be the free act and deed of The First Bank of Boston, before me,
/s/ Carolyn C. Lilla
-------------------------
Notary Public
My Commission Expires:
4/30/99
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 4,121
<SECURITIES> 0
<RECEIVABLES> 2,363
<ALLOWANCES> 0
<INVENTORY> 112,439
<CURRENT-ASSETS> 123,881
<PP&E> 56,429
<DEPRECIATION> 21,736
<TOTAL-ASSETS> 209,039
<CURRENT-LIABILITIES> 86,001
<BONDS> 0
0
0
<COMMON> 259
<OTHER-SE> 78,161
<TOTAL-LIABILITY-AND-EQUITY> 209,039
<SALES> 298,252
<TOTAL-REVENUES> 298,252
<CGS> 191,633
<TOTAL-COSTS> 191,633
<OTHER-EXPENSES> 85,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,032
<INCOME-PRETAX> 17,258
<INCOME-TAX> 6,646
<INCOME-CONTINUING> 10,612
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,612
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
