1
Exhibit 10.3
$75,000,000
SENIOR SUBORDINATED CONVERTIBLE LOAN AGREEMENT
(Bridge Facility)
Dated as of March 15, 2000
Between
VALUE CITY DEPARTMENT STORES, INC.
as Borrower
and
PRUDENTIAL SECURITIES CREDIT CORP., LLC
as Lender
2
Exhibit 10.3
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms..................................... 6
SECTION 1.02. Computation of Time Periods............................... 28
SECTION 1.03. Accounting Terms.......................................... 28
SECTION 1.04. Computations of Outstandings.............................. 28
ARTICLE II
COMMITMENTS AND ADVANCES
SECTION 2.01. The Commitments........................................... 29
SECTION 2.02. Advances.................................................. 29
SECTION 2.03. Terms Relating to the Making of Advances.................. 29
SECTION 2.04. Making of Advances........................................ 29
SECTION 2.05. Repayment of Advances..................................... 30
SECTION 2.06. Interest.................................................. 30
SECTION 2.07. Payments and Computations................................. 32
SECTION 2.08. Prepayments - Optional.................................... 33
SECTION 2.09. Prepayments - Mandatory................................... 34
SECTION 2.10. Yield Protection.......................................... 35
SECTION 2.11. Sharing of Payments, Etc.................................. 38
SECTION 2.12. Taxes..................................................... 38
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Borrowing......................... 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Status, etc. ................................... 44
SECTION 4.02. Subsidiaries.............................................. 44
SECTION 4.03. Corporate Power and Authority, etc........................ 44
SECTION 4.04. No Violation.............................................. 44
SECTION 4.05. Governmental Approvals.................................... 44
SECTION 4.06. Litigation................................................ 45
SECTION 4.07. Use of Proceeds; Margin Regulations....................... 45
SECTION 4.08. Financial Statements, etc................................. 45
SECTION 4.09. No Material Adverse Change................................ 46
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Exhibit 10.3
SECTION 4.10. Tax Returns and Payments.................................. 46
SECTION 4.11. Title to Properties, etc.................................. 46
SECTION 4.12. Lawful Operations, etc.................................... 47
SECTION 4.13. Environmental Matters..................................... 47
SECTION 4.14. Compliance with ERISA..................................... 48
SECTION 4.15. Intellectual Property, etc................................ 48
SECTION 4.16. Investment Company Act, etc............................... 48
SECTION 4.17. Burdensome Contracts; Labor Relations..................... 48
SECTION 4.18. Existing Indebtedness..................................... 49
SECTION 4.19. Year 2000 Computer Matters................................ 49
SECTION 4.20. Senior Credit Facility Documents, etc..................... 49
SECTION 4.21. Pari Passu................................................ 50
SECTION 4.22. True and Complete Disclosure.............................. 50
SECTION 4.23. Solvency.................................................. 50
SECTION 4.24. Non-Solicitation.......................................... 50
SECTION 4.25. Compliance with Securities Laws........................... 51
SECTION 4.26. Survival.................................................. 51
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Reporting Requirements.................................... 51
SECTION 5.02. Books, Records and Inspections............................ 54
SECTION 5.03. Insurance................................................. 54
SECTION 5.04. Payment of Taxes and Claims............................... 54
SECTION 5.05. Corporate Franchises...................................... 55
SECTION 5.06. Good Repair............................................... 55
SECTION 5.07. Compliance with Statutes, etc............................. 55
SECTION 5.08. Compliance with Environmental Laws........................ 55
SECTION 5.09. Fiscal Years, Fiscal Quarters............................. 56
SECTION 5.10. Certain Subsidiaries to Join in Subsidiary Guaranty....... 56
SECTION 5.11. Use of Proceeds........................................... 57
SECTION 5.12. Legal Existence........................................... 57
SECTION 5.13. Maintenance of Common Stock Listing....................... 57
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Changes in Business....................................... 58
SECTION 6.02. Consolidation, Merger, Acquisitions, Asset Sales, etc..... 58
SECTION 6.03. Liens..................................................... 59
SECTION 6.04. Advances, Investments, Loans and Guaranty Obligations..... 60
SECTION 6.05. Dividends, etc............................................ 61
SECTION 6.06. Limitation on Certain Restrictive Agreements.............. 62
SECTION 6.07. Transactions with Affiliates.............................. 62
SECTION 6.08. Plan Terminations, Minimum Funding, etc................... 63
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Exhibit 10.3
SECTION 6.09. Organization Documents.................................... 63
ARTICLE VII
FINANCIAL COVENANTS.
SECTION 7.01. Minimum Consolidated Tangible Net Worth....................63
SECTION 7.02. Consolidated Total Debt/Consolidated EBITDA Ratio..........63
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default..........................................63
SECTION 8.02. Acceleration, etc..........................................66
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.01. Authorization and Action...................................66
SECTION 9.02. Administrative Agent's Reliance, Etc.......................67
SECTION 9.03. Prudential and its Affiliates..............................67
SECTION 9.04. Lender Credit Decision.....................................67
SECTION 9.05. Indemnification............................................67
SECTION 9.06. Successor Administrative Agent.............................68
ARTICLE X
CONVERSION OF ADVANCES
SECTION 10.01. Conversion Privilege and Conversion Price..................68
SECTION 10.02. Exercise of Conversion Privilege...........................69
SECTION 10.03. Fractions of Shares of Common Stock........................69
SECTION 10.04. Borrower to Reserve Common Stock...........................70
SECTION 10.05. Taxes on Conversions.......................................70
SECTION 10.06. Covenant as to Common Stock................................70
SECTION 10.07. Reorganization, Reclassification, Merger or Sale...........70
ARTICLE XI
SUBORDINATION
SECTION 11.01. Subordinated Debt Subordinate to Senior Indebtedness.......70
SECTION 11.02. Distribution Events........................................71
SECTION 11.03. Blockage, Etc..............................................71
SECTION 11.04. Payment in Full............................................72
SECTION 11.05. In Furtherance of Subordination............................72
SECTION 11.06. Rights of Subrogation......................................72
SECTION 11.07. Further Assurances.........................................73
SECTION 11.08. Agreements in Respect of Subordinated Debt.................73
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Exhibit 10.3
SECTION 11.09. Agreement by the Borrower..................................73
SECTION 11.10. Reinstatement..............................................73
SECTION 11.11. No Waiver; Remedies........................................73
SECTION 11.12. Continuing Agreement; Assignments Under the Senior
Credit Facility............................................73
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments, Etc............................................74
SECTION 12.02. Notices, Etc...............................................74
SECTION 12.03. No Waiver; Remedies........................................75
SECTION 12.04. Costs and Expenses; Indemnification........................75
SECTION 12.05. Right of Set-off...........................................77
SECTION 12.06. Binding Effect.............................................77
SECTION 12.07. Assignments and Participations.............................78
SECTION 12.08. Governing Law; Submission to Jurisdiction..................79
SECTION 12.09. Execution in Counterparts..................................79
SECTION 12.10. Confidentiality............................................79
SECTION 12.11. Waiver of Jury Trial.......................................79
6
Exhibit 10.3
SENIOR SUBORDINATED CONVERTIBLE LOAN AGREEMENT
SENIOR SUBORDINATED CONVERTIBLE LOAN AGREEMENT, dated as of March 15, 2000
(the "AGREEMENT"), between VALUE CITY DEPARTMENT STORES, INC., an Ohio
corporation (the "BORROWER"), and PRUDENTIAL SECURITIES CREDIT CORP., LLC
("PSCC"), as the initial Lender hereunder and as Administrative Agent.
PRELIMINARY STATEMENTS:
WHEREAS, the Borrower has entered into the Senior Credit Facility as of the
date hereof and, inconnection therewith, desires to obtain up to $75,000,000 of
senior subordinated convertible financing; and
WHEREAS, PSCC is willing to provide such financing on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be applicable to the singular and plural forms of the
terms defined):
"ADMINISTRATIVE AGENT" means PSCC, in its capacity as administrative agent
hereunder, or any successor thereto as provided herein.
" ADVANCE" means an advance by a Lender to the Borrower pursuant to Article
II hereof, and refers to a Eurodollar Rate Advance or a Prime Rate Advance (each
of which shall be a "TYPE" of Advance). For purposes of this Agreement, all
Advances of a Lender (or portions thereof) of the same Type and Interest Period,
if any, made or converted on the same day to the Borrower shall be deemed to be
a single Advance by such Lender until repaid.
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a second Person if
such first Person possesses, directly or indirectly, the power (i) to vote 10%
or more of the securities having ordinary voting power for the election of
directors or managers of such second Person or (ii) to direct or cause the
direction of the management and policies of such second Person, whether through
the ownership of voting securities, by contract or otherwise. Notwithstanding
the foregoing, (x) a director, officer or employee of a Person shall not, solely
by reason of such status, be considered an Affiliate of such Person; and (y)
neither the Administrative Agent nor any Lender shall in any event be
7
Exhibit 10.3
considered an Affiliate of the Borrower or any other Loan Party or any of their
respective Subsidiaries.
"AGREEMENT" has the meaning set forth in the Introductory Paragraph hereof.
"APPLICABLE LAW" means all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant or Loan Documents in question, including
all applicable common law and equitable principles; all provisions of all
applicable state, federal and foreign constitutions, statutes, rules,
regulations and orders of governmental bodies; and orders, judgments and decrees
of all courts and arbitrators.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender:
(i) in the case of any Advance, (A) such Lender's "Eurodollar Lending
Office" in the case of a Eurodollar Rate Advance or (B) such Lender's
"Domestic Lending Office" in the case of a Prime Rate Advance, in each case
as specified opposite such Lender's name on Schedule 1.01 hereto or in the
Lender Assignment pursuant to which it became a Lender; or
(ii) in each case, such other office of such Lender as such Lender may
from time to time specify in writing to the Borrower and the Administrative
Agent.
"APPLICABLE MARGIN" means, as of any time for the determination thereof,
(i) with respect to the Advances comprising a Prime Rate Borrowing (the
"APPLICABLE PRIME RATE MARGIN") or (ii) with respect to the Advances comprising
a Eurodollar Borrowing (the "APPLICABLE EURODOLLAR MARGIN") that number of basis
points set forth in the table below (the "PRICING GRID") that corresponds to the
Borrower's ratio of Consolidated Total Debt to Consolidated EBITDA , subject to
and otherwise determined in accordance with the following:
(i) Initially, the Applicable Prime Rate Margin will be 100 basis points
and the Applicable Eurodollar Margin will be 250 basis points;
(ii) Commencing with the fiscal quarter of the Borrower ended on or nearest
to April 30, 2000, and continuing for each fiscal quarter thereafter, the
Administrative Agent will determine the Applicable Prime Rate Margin or
Applicable Eurodollar Margin for any Borrowing in accordance with the
Pricing Grid, based on the Borrower's ratio of (x) Consolidated Total Debt
as of the end of the fiscal quarter, to (y) Consolidated EBITDA for the
Testing Period ended with such fiscal quarter. Changes in the Applicable
Prime Rate Margin or Applicable Eurodollar Margin based upon changes in
such ratio shall become effective on the first day of the month following
the receipt by the Administrative Agent, pursuant to Section 5.01(c)
hereof, of the financial statements of the Borrower, accompanied by the
certificate and calculations referred to in Section 5.01(c) hereof,
demonstrating the computation of such ratio, based upon the ratio in effect
at the end of the
8
Exhibit 10.3
applicable period covered (in whole or in part) by such financial
statements;
(iii) Notwithstanding the above provisions, during the six month period
following the Closing Date, the Applicable Prime Rate Margin will in no
event be reduced below 100 basis points and the Applicable Eurodollar
Margin will in no event be reduced below 250 basis points;
(iv) Notwithstanding the above provisions but subject to clauses (v) and
(vi), below, during any period when (A) the Borrower has failed to timely
deliver its consolidated financial statements referred to in Section
5.01(a) or (b) hereof, accompanied by the certificate and calculations
referred to in Section 5.01(c) hereof, (B) a Default under Section 8.01(a)
hereof has occurred and is continuing, or (C) an Event of Default has
occurred and is continuing, the Applicable Prime Rate Margin shall be 125
basis points and the Applicable Eurodollar Margin shall be 275 basis
points, regardless of the Borrower's ratio of Consolidated Total Debt to
Consolidated EBITDA at such time;
(v) Notwithstanding the above provisions, if the Senior Credit Facility is
repaid in full prior to the first anniversary of the Closing Date, the
Applicable Prime Rate Margin shall be 250 basis points and the Applicable
Eurodollar Margin shall be 400 basis points, regardless of the Borrower's
ratio of Consolidated Total Debt to Consolidated EBITDA at such time;
(vi) On the 90th day following the first anniversary of the Closing Date
and on each successive 90th day thereafter, the Applicable Margin otherwise
applicable to any Advance or Borrowing in accordance with the foregoing
shall be increased by 50 basis points; and
(vii) Any changes in the Applicable Prime Rate Margin or the Applicable
Eurodollar Margin shall be determined by the Administrative Agent in
accordance with the above provisions and the Administrative Agent will
promptly provide notice of such determinations to the Borrower and the
Lenders. Any such determination by the Administrative Agent pursuant to
this definition shall be conclusive and binding absent manifest error.
=================================================== ================================= ================================
RATIO OF CONSOLIDATED TOTAL DEBT TO APPLICABLE EURODOLLAR APPLICABLE PRIME RATE
CONSOLIDATED EBITDA MARGIN MARGIN
--------------------------------------------------- --------------------------------- --------------------------------
Equal to or greater than 3.00 to 1.00 275 125
--------------------------------------------------- --------------------------------- --------------------------------
Equal to or greater than 2.50 to 1.00 but less 250 100
than 3.00 to 1.00
--------------------------------------------------- --------------------------------- --------------------------------
Equal to or greater than 2.00 to 1.00 but less 225 75
than 2.50 to 1.00
--------------------------------------------------- --------------------------------- --------------------------------
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Exhibit 10.3
=================================================== ================================= ================================
RATIO OF CONSOLIDATED TOTAL DEBT TO APPLICABLE EURODOLLAR APPLICABLE PRIME RATE
CONSOLIDATED EBITDA MARGIN MARGIN
--------------------------------------------------- --------------------------------- --------------------------------
Equal to or greater than 1.50 to 1.00 but less 200 50
than 2.00 to 1.00
--------------------------------------------------- --------------------------------- --------------------------------
Equal to or greater than 1.00 to 1.00 but less 175 50
than <1.50 to 1.00
--------------------------------------------------- --------------------------------- --------------------------------
Less than 1.00 to 1.00 150 50
=================================================== ================================= ================================
"APPLICABLE RATE" means, with respect to any Advance made to the Borrower,
either of (i) the Prime Rate from time to time applicable to such Advance plus
the Applicable Prime Rate Margin, or (ii) the Eurodollar Rate from time to time
applicable to such Advance plus the Applicable Eurodollar Rate Margin.
"ASSET SALES" means the sale, transfer or other disposition (including by
means of sale-leaseback, merger, consolidation or liquidation of a corporation,
partnership or limited liability company of the interests therein of the
Borrower or any Subsidiary) by the Borrower or any Subsidiary to any Person
other than the Borrower or any Subsidiary of any of their respective assets,
provided that the term Asset Sale specifically excludes any sales, transfers or
other dispositions of inventory, or obsolete or excess furniture, fixtures,
equipment or other property, tangible or intangible, in each case in the
ordinary course of business.
"BANKRUPTCY CODE" means ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, as the same may be
amended from time to time.
"BASIS POINT" means one one-hundredth of one percent.
"BLOCKAGE NOTICE" has the meaning set forth in Article XI hereof.
"BLOCKAGE PERIOD" has the meaning set forth in Article XI hereof.
"BORROWER" means Value City Department Stores, Inc., an Ohio corporation.
"BORROWING" means a borrowing consisting of one or more Advances of the
same Type and Interest Period, if any, made, continued or converted on the same
Business Day. A Borrowing may be referred to herein as being a "TYPE" of
Borrowing, corresponding to the Type of Advances comprising such Borrowing,
whether such Advances were made on the Closing Date or were continued or
converted as Advances of a certain Type and for a certain Interest Period. For
purposes of this Agreement, all Advances of the same Type and Interest Period,
if any, made, continued or converted on the same day to the Borrower shall be
deemed a single Borrowing hereunder until repaid. "BORROWING" means a borrowing
consisting of simultaneous Advances of the same Borrowing Type made or last
converted (in accordance with Section 2.06) on the same date.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in New York City and, if the applicable Business Day relates
to any Eurodollar Rate Advances, on which dealings are carried on in the London
interbank market.
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Exhibit 10.3
"CAPITAL EXPENDITURES" means expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, including
the total principal portion of Capitalized Lease Obligations.
"CAPITAL LEASE" as applied to any Person shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CAPITALIZED LEASE OBLIGATIONS" means all Obligations under Capital Leases of
the Borrower or any of its Subsidiaries in each case taken at the amount thereof
accounted for as liabilities identified as "capital lease obligations" (or any
similar words) on a consolidated balance sheet of the Borrower and its
Subsidiaries prepared in accordance with GAAP.
"CAPITAL STOCK" of any Person means any and all shares, partnership
interests, participations, rights in or other equivalents of, or interests in,
the equity of such Person, but excluding any debt securities convertible into
such equity.
"CASH PROCEEDS" means, with respect to any Asset Sale, other than a sale of
Exempt Property, the aggregate cash payments (including any cash received by way
of deferred payment pursuant to a note receivable issued in connection with such
Asset Sale, other than the portion of such deferred payment constituting
interest, but only as and when so received) received by the Borrower and/or any
Subsidiary from such Asset Sale.
"CASH EQUIVALENTS" shall mean any of the following: (i) securities issued
or directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States of America is pledged in support thereof) having maturities
of not more than one year from the date of acquisition; (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) any Lender or (y) any bank whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from ▇▇▇▇▇'▇ is at least P-1 or the
equivalent thereof (any such bank, an "APPROVED BANK"), in each case with
maturities of not more than 180 days from the date of acquisition; (iii)
commercial paper issued by any Lender or Approved Bank or by the parent company
of any Lender or Approved Bank and commercial paper issued by, or guaranteed by,
any industrial or financial company with a short- term commercial paper rating
of at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's, or guaranteed by any industrial company with a
long term unsecured debt rating of at least A or A2, or the equivalent of each
thereof, from S&P or Moody's, as the case may be, and in each case maturing
within 270 days after the date of acquisition; (iv) investments in money market
funds substantially all the assets of which are comprised of securities of the
types described in clauses (i) through (iii) above; and (v) investments in money
market funds access to which is provided as part of "sweep" accounts maintained
with a Lender or an Approved Bank.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as the same may be amended from time to time.
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Exhibit 10.3
"CHANGE OF CONTROL" means the occurrence of any of the following events:
(a) Any Person or "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person will be deemed to have "beneficial ownership"
of all securities that such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% on a fully diluted basis of the economic or voting
power of all classes of the Borrower's Capital Stock;
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election to such Board of Directors, or
whose nomination for election by the stockholders of the Borrower, was approved
by a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Borrower then in office;
(c) The shareholders of the Borrower approve a merger or consolidation
of the Borrower with any other Person, other than a merger or consolidation
which would result in the voting securities of the Borrower outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted or exchanged for voting securities of the
surviving or resulting entity) more than 75% of the combined voting power of the
voting securities of the Borrower or such surviving or resulting entity
outstanding after such merger or consolidation; and/or
(d) The Borrower is liquidated or dissolved or adopts a plan of
liquidation or dissolution.
"CLOSING DATE" means the date on which all conditions set forth in Section
3.01 hereof have been satisfied or waived by all of the Lenders, and the Lenders
fund their Advances.
"COMMITMENT" means, for each Lender, the aggregate amount set forth
opposite such Lender's name on the signature pages hereof or, if such Lender has
entered into one or more Lender Assignments, set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to Section 12.07(b).
"COMMITMENTS" shall refer to the aggregate of the Lenders' Commitments
hereunder.
"COMMON STOCK" means fully paid and nonassessable whole shares of common
stock, par value $.01 per share, of the Borrower or shares representing
substantially similar interests in the Borrower's successor.
"CONFIDENTIAL INFORMATION" means information that the Borrower furnishes to
any Lender in a writing designated as confidential, but does not include any
such information that is or becomes generally available to the public or that is
or becomes available to any Lender from a source other than the Borrower that is
not, to the best of such Lender's knowledge, acting in violation of a
confidentiality agreement with the Borrower.
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Exhibit 10.3
"CONSOLIDATED" has the meaning commonly associated therewith in accordance
with GAAP.
"CONSOLIDATED AMORTIZATION EXPENSE" shall mean, for any period, all
amortization expenses of the Borrower and its Subsidiaries, all as determined
for the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including in all events amounts expended or capitalized under Capital Leases
but excluding any amount representing capitalized interest) by the Borrower and
its Subsidiaries during that period that, in conformity with GAAP, are or are
required to be included in the property, plant or equipment reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries. Notwithstanding
the foregoing, amounts expended to complete, or capitalized in connection with
the completion of, Permitted Acquisitions, shall not constitute Consolidated
Capital Expenditures.
"CONSOLIDATED DEPRECIATION EXPENSE" shall mean, for any period, all
depreciation expenses of the Borrower and its Subsidiaries, all as determined
for the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED EBITDA" shall mean, for any period, Consolidated Net Income
for such period; plus (A) the sum of the amounts for such period included in
determining such Consolidated Net Income of (i) Consolidated Interest Expense,
(ii) Consolidated Income Tax Expense, (iii) Consolidated Depreciation Expense,
(iv) Consolidated Amortization Expense, and (v) non cash losses and charges
which are properly classified as extraordinary or nonrecurring; less (B) gains
on sales of assets and other extraordinary gains and other non-recurring
non-cash gains; all as determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP; except that in computing
Consolidated Net Income for purposes of this definition, there shall be excluded
therefrom (x) the income, (or loss) of any entity (other than Subsidiaries of
the Borrower) in which the Borrower or any of its Subsidiaries has a joint or
minority interest, except to the extent of the amount of dividends or other
distributions actually paid to the Borrower or any of its Subsidiaries during
such period, and (y) the income of any Subsidiary of the Borrower to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary; and provided
that, notwithstanding anything to the contrary contained herein, the Borrower's
Consolidated EBITDA for any Testing Period shall (x) include the appropriate
financial items for any Person or business unit which has been acquired by the
Borrower for any portion of such Testing Period prior to the date of
acquisition, and (y) exclude the appropriate financial items for any Person or
business unit which has been disposed of by the Borrower, for the portion of
such Testing Period prior to the date of disposition.
"CONSOLIDATED INCOME TAX EXPENSE" shall mean, for any period, all
provisions for taxes based on the net income of the Borrower or any of its
Subsidiaries (including, without limitation, any additions to such taxes, and
any penalties and interest with respect thereto), all as determined for the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.
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Exhibit 10.3
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, total interest
expense (including that which is capitalized and that which is attributable to
Capital Leases, in accordance with GAAP) of the Borrower and its Subsidiaries on
a consolidated basis with respect to all outstanding Indebtedness of the
Borrower and its Subsidiaries including, without limitation, net costs under
Hedge Agreements, but excluding, however, any amortization or charge off of
deferred financing costs, all as determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" shall mean for any period, the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP,
provided that there shall be excluded therefrom (i) the income, (or loss) of any
entity (other than Subsidiaries of the Borrower) in which the Borrower or any of
its Subsidiaries has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or any of its
Subsidiaries during such period, and (ii) the income of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean at any time for the
determination thereof (i) all amounts which, in conformity with GAAP, would be
included under the caption "total stockholders' equity" (or any like caption) on
a consolidated balance sheet of the Borrower as at such date, reduced by (ii)
the sum (without duplication), on a consolidated basis, of the following, to the
extent reflected as consolidated assets: (A) any write-up in the book value of
any assets subsequent to the date of the most recent financial statements
referred to in Section 4.08(a), (B) goodwill, (C) organizational expenses,
research and development expenses, patents, trademarks, copyrights licenses and
other intangible assets, (D) unamortized debt discount and expense, (E)
securities which are not readily marketable, (F) cash or Cash Equivalents held
in a sinking or other analogous fund established for the purpose of redemption,
retirement or prepayment of capital stock or Indebtedness, and (G) any items not
included in the foregoing clauses (A) through (F) which are treated as
intangibles in accordance with GAAP, provided that in no event shall
Consolidated Tangible Net Worth include any amounts in respect of Redeemable
Stock.
"CONSOLIDATED TOTAL DEBT" shall mean the sum (without duplication) of the
principal amount (using Capitalized Lease Obligations in lieu of principal
amount, in the case of any Capital Lease, or present value, based on the
implicit interest rate, in lieu of principal amount, in the case of a Synthetic
Lease, or higher of stated or liquidation value, in lieu of principal amount, in
the case of Redeemable Stock) of all Indebtedness of the Borrower and of each of
its Subsidiaries, all as determined on a consolidated basis; provided that so
long as there is no payment default under the Borrower's Guaranty Obligation
with respect to the Indebtedness of VCM, Ltd., an Ohio limited liability
company, and the maturity of such Indebtedness has not been accelerated, only
50% of such Guaranty Obligation of the Borrower shall be included in
Consolidated Total Debt.
"CONSOLIDATED TOTAL SENIOR DEBT" shall mean (i) Consolidated Total Debt,
less (ii) the aggregate principal amount of all Subordinated Indebtedness and
Pari Passu Debt of the
14
Exhibit 10.3
Borrower, all as determined for the Borrower and its consolidated Subsidiaries
on a consolidated basis.
"CONVERSION" and "CONVERT" have the meanings specified in Section 10.01
hereof.
"CONVERSION DATE" has the meaning specified in Section 10.02 hereof.
"CONVERSION NOTICE" has the meaning specified in Section 10.02 hereof.
"CONVERSION PRICE" has the meaning specified in Section 10.01 hereof.
"CONVERSION SECURITY" has the meaning specified in Section 10.01 hereof.
"CONVERTING LENDER" has the meaning specified in Section 10.01 hereof.
"DEBT FOR MONEY BORROWED" means, as applied to any Person, (i) Indebtedness
arising from the lending of money by any other Person to such Person; (ii)
Indebtedness, whether or not in any such case arising from the lending of money
by another Person to such Person, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments, or (C)
upon which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; (iv) reimbursement
obligations with respect to letters of credit or guaranties of letters of credit
and (v) Indebtedness of such Person under any guaranty of obligations that would
constitute Debt for Money Borrowed under clauses (i) through (iii) hereof, if
owed directly by such Person.
"DEFAULT" means any event, act or condition that, with the giving of
notice, the passage of time or both, would constitute an Event of Default.
"DESIGNATED HEDGE AGREEMENT" has the meaning set forth in the Senior Credit
Facility.
"DESIGNATED SENIOR DEBT" means all Senior Debt under the Senior Credit
Facility.
"DISQUALIFIED STOCK" means any class or series of Capital Stock that,
either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (a) is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to one year after the Maturity Date, (b) is redeemable at the option of the
holder thereof at any time prior to one year after the Maturity Date or (c) at
the option of the holder thereof, is convertible into or exchangeable for debt
securities at any time prior to one year after the Maturity Date.
"DISTRIBUTION" means, in respect of any Person, (i) any payment or
declaration of any dividends or other distributions with respect to any Capital
Stock of such Person (except distributions in such Capital Stock) and (ii) any
purchase, redemption or other acquisition or retirement for value of any Capital
Stock of such Person or any Affiliate of such Person unless made
contemporaneously from the net proceeds of the sale of Capital Stock.
15
Exhibit 10.3
"DISTRIBUTION EVENT" has the meaning set forth in Article XI hereof.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank or trust company organized
under the laws of the United States, or any State thereof; (b) a commercial bank
organized under the laws of any other country, provided that such bank is acting
through a branch or agency located in the United States; and (c) any other
commercial bank or other financial institution engaged generally in the business
of extending credit or purchasing debt instruments; provided, however, that (A)
any such Person shall also (i) have outstanding unsecured indebtedness that is
rated BBB- or better by Standard & Poor's or Baa3 or better by Moody's (or an
equivalent rating by another nationally recognized credit rating agency of
similar standing if neither of such corporations is then in the business of
rating unsecured indebtedness of entities engaged in such businesses) or (ii)
have combined capital and surplus (as established in its most recent report of
condition to its primary regulator) of not less than $250,000,000 (or its
equivalent in foreign currency), (B) any Person described in clause (b) or (c)
above shall, on the date on which it is to become a Lender hereunder, (i) be
entitled to receive payments hereunder without deduction or withholding of any
United States Federal income taxes and (ii) provide to the Administrative Agent
and the Borrower Internal Revenue Service Form 1001 or 4224, as appropriate,
certifying that such Person is entitled to receive payments hereunder without
deduction or withholding of any United States Federal income taxes.
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such law (hereafter
"CLAIMS"), including, without limitation, (i) any and all Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(ii) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the storage, treatment or Release (as defined in CERCLA) of any Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"ENVIRONMENTAL LAW" means any Applicable Law relating to pollution or the
regulation or protection of human health, safety, natural resources, or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata, natural resources, aquatic
species, vegetation or wetlands), including, without limitation, laws and
regulations (and all other items recited above) relating to any Release of
Hazardous Substances or otherwise relating to the manufacture, processing,
distribution, record keeping, reporting, notification, disclosure, use
treatment, storage, disposal, management, generation, recycling, transport or
handling of or exposure to Hazardous Substances. Without limiting the generality
of the foregoing, Environmental Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986; the
Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980 and the
Hazardous and Solid Waste Amendments of 1984; the Toxic Substances Control Act,
15 U.S.C.; the Federal Water Pollution Control Act; the Hazardous Materials
Transportation Act; the Clean Air Act; the Safe Drinking Water Act; the
Occupational Safety and Health Act of 1970; the Federal Insecticide, Fungicide
and Rodenticide
16
Exhibit 10.3
Act and the Endangered Species Act, each as amended, and their state and local
counterparts or equivalents.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the
Effective Date and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA AFFILIATE" means each Person (as defined in Section 3(9) of ERISA)
which together with the Borrower or a Subsidiary of the Borrower would be deemed
to be a "single employer" (i) within the meaning of Section 414(b),(c), (m) or
(o) of the Code or (ii) as a result of the Borrower or a Subsidiary of the
Borrower being or having been a general partner of such Person.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR BORROWING" means any Borrowing comprised of Advances then
bearing interest with reference to the Eurodollar Rate.
"EURODOLLAR RATE" means, for each Interest Period shall mean (x) the London
interbank offered rate for United States of America Dollar deposits for a period
equal in length to such Interest Period that appears as of 11:00 A.M. (London
time) on the second Business Day preceding the first day of such Interest Period
on the display page designated as Page 3750 on the Telerate Monitor (or such
other page or service as shall replace the Telerate Monitor for the purposes of
displaying the London interbank offered rate for United States of America Dollar
deposits), divided by (y) 1 minus the applicable Eurodollar Rate Reserve
Percentage for such Interest Period. If (i) on the date on which the Borrower
shall seek to determine the LIBOR Rate for an Interest Period, no quotation is
given on Telerate Monitor page 3750, or (ii) the Borrower shall have failed to
give at least three Business Days' prior written notice to request the advance
of funds hereunder, the LIBOR Rate shall be equal to each Lender's cost of funds
for United States Dollar deposits or comparable obligations for a period
comparable to such Interest Period on the date of determination for amounts
approximately equal to the then-outstanding principal balance of such Lender's
Note.
"EURODOLLAR RATE ADVANCE" means an Advance in respect of which the Borrower
has selected in accordance with Article II hereof, or this Agreement provides
for, interest to be computed on the basis of the Eurodollar Rate.
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Interest Period means the
reserve percentage applicable two Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of
17
Exhibit 10.3
liabilities that includes deposits by reference to which the interest rate on
Eurodollar Rate Advances is determined) having a term equal to such Interest
Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 8.01 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXEMPT PROPERTY" means (i) replacements of equipment with equipment of
like kind, function and value, provided that the replacement equipment shall be
acquired prior to or concurrently with any disposition of the equipment that is
to be replaced, the replacement Equipment shall be free and clear of Liens other
than Permitted Liens and (ii) assets held by Filene's prior to the acquisition
of such assets, and the Borrower shall have given the Lenders at least 10 days
prior written notice of such disposition.
"EXISTING INDEBTEDNESS AGREEMENTS" has the meaning specified in Section
4.18.
"FACILITY" means, at any time, the aggregate amount of the Lenders'
Commitments at such time.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"FEE LETTER" means the Engagement Letter, dated as of March 15, 2000,
between the Administrative Agent and the Borrower.
"FILENE'S" means Filene's Basement Corp. or Filene's Basement, Inc., both
Massachusetts corporations.
"FINANCIAL PROJECTIONS" shall have the meaning specified in Section
4.08(c).
"FUTURE ACQUISITION" shall mean and include (i) any acquisition on a going
concern basis (whether by purchase, lease or otherwise) of any facility and/or
business operated by any Person who is not a Subsidiary of the Borrower, and
(ii) acquisitions of a majority of the outstanding equity or other similar
interests in any such Person (whether by merger, stock purchase or otherwise).
"GAAP" has the meaning specified in Section 1.03 hereof.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses, permits, waivers, variances, orders, judgments, certificates, and
exemptions of, registrations and filings with, and reports to, all national,
state or local governments (whether domestic or foreign) and any political
subdivisions thereof in any other governmental, quasi-governmental, judicial,
administrative, public or statutory instrumentality, authority, body, agency,
bureau or entity.
18
Exhibit 10.3
"GUARANTY OBLIGATIONS" means, with respect to any Person, without duplication,
any Obligation of such Person guaranteeing any Indebtedness ("PRIMARY
INDEBTEDNESS") of any other Person ("PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such primary Indebtedness
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (A) for the purchase or payment of any such primary
Indebtedness or (B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary Indebtedness of the ability of
the primary obligor to make payment of such primary Indebtedness, or (d)
otherwise to assure or hold harmless the owner of such primary Indebtedness
against loss in respect thereof, provided, however, that the term Guaranty
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary Indebtedness in respect of which such Guaranty Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum products, explosive
or radioactive material, polychlorinated biphenyls, lead, natural or synthetic
gas, asbestos in any form that is or could become friable, urea formaldehyde
foam insulation and radon gas, (b) any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar import,
under any Environmental Law and (c) any other substance exposure to which is
regulated under any Environmental Law.
"HEDGE AGREEMENT" shall mean (i) any interest rate swap agreement, any
interest rate cap agreement, any interest rate collar agreement or other similar
agreement or arrangement designed to protect against fluctuations in interest
rates, and (ii) any currency swap agreement, forward currency purchase agreement
or similar agreement or arrangement designed to protect against fluctuations in
currency exchange rates.
"INDEBTEDNESS" means, with respect to any Person, the following without
duplication:
(i) all indebtedness of such Person for borrowed money;
(ii) all bonds, notes, debentures and similar debt securities of such
Person;
(iii) the deferred purchase price of capital assets or services which in
accordance with GAAP would be shown on the liability side of the balance sheet
of such Person;
(iv) the face amount of all letters of credit issued for the account of
such Person and, without duplication, all drafts drawn thereunder;
19
Exhibit 10.3
(v) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances;
(vi) all Indebtedness of a second Person secured by any lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed;
(vii) all Capitalized Lease Obligations of such Person;
(viii) the present value, determined on the basis of the implicit
interest rate, of all basic rental obligations under all Synthetic Leases of
such Person;
(ix) all obligations of such Person to pay a specified purchase price
for goods or services whether or not delivered or accepted, i.e., take-or-pay
and similar Obligations;
(x) all Obligations of such Person under Hedge Agreements;
(xi) the full outstanding balance of trade receivables, notes or other
instruments sold with full recourse (and the portion thereof subject to
potential recourse, if sold with limited recourse), other than in any such case
any thereof sold solely for purposes of collection of delinquent accounts;
(xii) the stated value, or liquidation value if higher, of all
Redeemable Stock of such Person; and
(xiii) all Guaranty Obligations of such Person;
provided that (A) neither trade payables nor other similar accrued expenses, in
each case arising in the ordinary course of business, nor Obligations in respect
of insurance policies or performance or surety bonds which themselves are not
guarantees of indebtedness (nor drafts, acceptances or similar instruments
evidencing the same nor obligations in respect of letters of credit supporting
the payment of the same), shall constitute Indebtedness; and (B) Indebtedness of
any Person shall in any event include (without duplication) the Indebtedness of
any other entity (including any general partnership in which such Person is a
general partner) to the extent such Person is liable thereon as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide expressly that such Person is
not liable thereon.
"INTEREST PERIOD" has the meaning assigned to that term in Section 2.06(a)
hereof.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"LEASEHOLDS" of any Person means all the right, title and interest of such
Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
20
Exhibit 10.3
"LENDER ASSIGNMENT" means an assignment and acceptance entered into by a
Lender and an assignee, and accepted by the Administrative Agent, in
substantially the form of Exhibit E hereto.
"LENDERS" means the financial institutions listed on the signature pages
hereof, and each assignee that shall become a party hereto pursuant to Section
12.07.
"LIEN" means any lien, mortgage, pledge, security interest or other charge
or encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.
"LOAN DOCUMENTS" means this Agreement, the Subsidiary Guaranty, the Notes,
the Registration Rights Agreement, the Fee Letter and each other agreement,
document or instrument executed and delivered by the Borrower or any Subsidiary
of the Borrower in favor of the Administrative Agent or any Lender hereunder or
thereunder or in connection herewith or therewith.
"LOAN PARTY" means the Borrower and each Subsidiary Guarantor.
"MARGIN STOCK" has the meaning specified in Regulation U.
"MAJORITY LENDERS" means on any date of determination, Lenders who,
collectively, on such date (i) have Percentages in the aggregate of at least
66-2/3% and (ii) if the Advances shall have been made on the Closing Date, hold
at least 66-2/3% of the then aggregate amount of the outstanding Advances of the
Lenders. Determination of those Lenders satisfying the criteria specified above
for action by the Majority Lenders shall be made by the Administrative Agent and
shall be conclusive and binding on all parties absent manifest error.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole, (b) the rights and remedies of any Lender under any Loan
Document, or (c) the ability of the Borrower or any other Person to perform its
Obligations under any Loan Document or the Senior Credit Facility.
"MATERIAL DEBT" has the meaning specified in Section 4.18.
"MATERIAL SUBSIDIARY" means, at any time, with reference to any Person, any
Subsidiary of that Person (i) that has assets at such time comprising 15% or
more of the consolidated assets of such Person and its Subsidiaries, or (ii)
whose operations in the current fiscal year are expected to, or whose operations
in the most recent fiscal year did (or would have if such Person had been a
Subsidiary for such entire fiscal year), represent 15% or more of the
consolidated earnings before interest, taxes, depreciation and amortization of
such Person and its Subsidiaries for such fiscal year.
"MATURITY DATE" means September 15, 2003, unless earlier terminated.
21
Exhibit 10.3
"MULTIEMPLOYER PLAN" of any Person means a multiemployer plan, as defined
in Section 4001(a)(3) of ERISA, to which such Person or any of its ERISA
Affiliates is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
"MULTIPLE EMPLOYER PLAN" means an employee benefit plan, other than a
Multiemployer Plan, to which the Borrower or any ERISA Affiliate, and one or
more employers other than the Borrower or an ERISA Affiliate, is making or
accruing an obligation to make contributions or, in the event that any such plan
has been terminated, to which the Borrower or an ERISA Affiliate made or accrued
an obligation to make contributions during any of the five plan years preceding
the date of termination of such plan.
"NET CASH PROCEEDS" means, with respect to any sale, lease, transfer or
other disposition of any asset, except Exempt Property, or the sale or issuance
of any capital stock, any securities convertible into or exchangeable for
capital stock or any warrants, rights or options to acquire capital stock by any
Person, or the incurrence of any Indebtedness, the aggregate amount of cash
received from time to time by or on behalf of such Person in connection with
such transaction after deducting therefrom only (a) reasonable and customary
brokerage commissions, underwriting fees and discounts, legal fees, finder's
fees and other similar fees and commissions and (b) the amount of taxes payable
in connection with or as a result of such transaction, (c) the amount of any
Indebtedness secured by a Lien on such asset that, by the terms of such
transaction, is required to be prepaid upon such disposition, in each case to
the extent, but only to the extent, that the amounts so deducted are, at the
time of receipt of such cash, actually paid to a Person that is not an Affiliate
and are properly attributable to such transaction or to the asset that is the
subject thereof and (d) any amounts that are required to be, and are, repaid to
the "Lenders" under the Senior Credit Facility.
"NOTE" means a promissory note of the Borrower payable to the order of a
Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate
indebtedness of the Borrower to such Lender resulting from the Advances made by
such Lender to the Borrower.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02 hereof.
"NYSE" means the New York Stock Exchange.
"OBLIGATION" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such Person
on any claim, whether or not the right of any creditor to payment in respect of
such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured, and
whether or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 8.01(h). Without limiting the generality of
the foregoing, the Obligations of the Borrower under the Loan Documents include
(a) the obligation to pay principal, interest, charges, expenses, fees,
attorneys' fees and disbursements, indemnities and other amounts payable by the
Borrower under any Loan Document and (b) the obligation to reimburse any amount
in respect of any of the foregoing that any Lender, in its sole discretion, may
elect to pay or advance on behalf of the Borrower.
22
Exhibit 10.3
"OPERATING LEASE" as applied to any Person means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is not accounted for as a Capital Lease on the balance sheet of that
Person.
"OTHER TAXES" has the meaning specified in Section 2.12(b) hereof.
"PARI PASSU DEBT" means any Indebtedness of the Borrower or any Subsidiary
Guarantor, whether outstanding at the date hereof or incurred thereafter, that
ranks pari passu in right of payment with the Indebtedness of the Borrower or
such Subsidiary Guarantor under the Loan Documents.
"PAYMENT IN FULL" and "PAID IN FULL", with reference to the Senior Credit
Facility, shall have the meanings assigned those terms in Article XI hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERCENTAGE" means, in respect of any Lender on any date of determination,
the percentage obtained by dividing such Lender's Commitment on such day (or, if
the Commitments shall have been terminated, the aggregate principal amount of
outstanding Advances held by such Lender on such day) by the total of the
Commitments (or outstanding Advances, as applicable) on such day, and
multiplying the quotient so obtained by 100%.
"PERMITTED ACQUISITION" shall mean and include any Future Acquisition as to
which all of the following conditions are satisfied:
(i) such Future Acquisition involves a line or lines of business which
is complementary to the lines of business in which the Borrower and its
Subsidiaries, considered as an entirety, are engaged on the Effective Date,
unless the Majority Lenders specifically approve or consent to such Future
Acquisition in writing;
(ii) such Future Acquisition is not actively opposed by the Board of
Directors (or similar governing body) of the selling Person or the Person whose
equity interests are to be acquired, unless all of the Lenders specifically
approve or consent to such Future Acquisition in writing;
(iii) the cumulative aggregate consideration for such Future Acquisition
and all other Permitted Acquisitions completed after January 31, 2000 (exclusive
of the Future Acquisition), including the principal amount of any assumed
Indebtedness and (without duplication) any Indebtedness of any acquired Person
or Persons, does not exceed $25,000,000, unless the Majority Lenders
specifically approve or consent to such Future Acquisition; and
(iv) the Borrower would, after giving effect to such Future
Acquisition, be in compliance, on a pro forma basis, with the financial
covenants contained in Article VII hereof, such pro forma ratios being
determined
(A) as if (x) such Future Acquisition had been completed at the
beginning of the most recent period of four consecutive fiscal quarters of
the Borrower for which financial information for the Borrower and the
business or Person to be acquired, is
23
Exhibit 10.3
available, and (y) any such Indebtedness, or other Indebtedness incurred to
finance such Future Acquisition, had been outstanding for such period; and
(B) without giving effect to any credit for unobtained or unrealized
gains in connection with such Future Acquisition, but taking into account
such adjustments to the overhead of such properties and assets as may
reasonably determined and specified by the Borrower to reflect the overhead
generally applicable to similar properties and assets owned by the Borrower
and its Subsidiaries, as and to the extent the Administrative Agent
determines (acting on instructions from the Majority Lenders) such
adjustments to be reasonable and appropriate under the particular
circumstances);
provided, that the term Permitted Acquisition specifically excludes any loans,
advances or minority investments otherwise permitted pursuant to Article VI.
"PERMITTED ACTIVITIES" means activities substantially related to the
business of owning and operating retail department stores, specialty stores, and
wholesale and e-commerce activities related to the Borrower's current line of
sales.
"PERMITTED LIENS" means Liens described in Section 6.03 hereof.
"PERMITTED HOLDERS" shall mean (i) those Persons who are officers and
directors of the Borrower at the Effective Date, (ii) the spouses, heirs,
legatees, descendants and blood relatives to the third degree of consanguinity
of any such Person, (iii) the executors and administrators of the estate of any
such Person, and any court appointed guardian of any such Person, (iv) any trust
for the benefit of any such Person referred to in the foregoing clauses (i) and
(ii) or any other Persons, or organized for charitable purposes, so long as one
or more members of the Current Holder Group has the exclusive or joint right to
control the voting and disposition of securities held by such trust, (v) any
entity beneficially owned by any such Person referred to in the foregoing
clauses (i) and (ii), and (vi) Schottenstein Stores Corporation.
"PERSON" means any individual, partnership, corporation (including a
business trust), limited liability company or partnership, joint stock company,
trust, unincorporated organization, association, joint venture or other entity,
or a government or any political subdivision, agency or instrumentality thereof.
"PLAN" means any multiemployer or single-employer plan as defined in
Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute by) the Borrower or a Subsidiary of the
Borrower or an ERISA Affiliate, and each such plan for the five-year period
immediately following the latest date on which the Borrower, or a Subsidiary of
the Borrower or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"PRICING GRID" means that chart found in the definition of Applicable
Margin.
"PRIME RATE" means a fluctuating interest rate per annum as shall be in effect
from time to time which rate per annum shall at all times be equal to the rate
publicly announced by Prudential from time to time as its "Prime Rate" or, if
Prudential shall not at any time of determination publicly announce a rate of
interest as its "Prime Rate", the "Prime Rate" publicly announced by
24
Exhibit 10.3
any money center bank from time to time as its "Prime Rate", as published in the
Wall Street Journal (it being understood that in either case the Prime Rate may
not be the lowest rate Prudential charges its customers). Any change in the
Prime Rate due to a change in Prudential's Prime Rate or such published rate, as
applicable, shall be effective on the effective date of such change in
Prudential's Prime Rate or such published rate, respectively.
"PRIME RATE ADVANCE" means an Advance in respect of which the Borrower has
selected in accordance with Article II hereof, or this Agreement provides for,
interest to be computed on the basis of the Prime Rate.
"PRIME RATE BORROWING" means any Borrowing comprised of Advances then
bearing interest with reference to the Prime Rate.
"PRINCIPAL PARTY" shall have the meaning specified in Section 8.01(h)
hereof.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PRUDENTIAL" means PSCC or any Affiliate thereof.
"PSCC" has the meaning specified in the Introductory Paragraph hereof.
"PURCHASE MONEY DEBT" means and includes (i) Debt for Money Borrowed for
the payment of all or any part of the purchase price of any fixed assets, (ii)
any Debt for Money Borrowed incurred at the time of or within 20 days prior to
or after the acquisition of any fixed assets for the purpose of financing all or
any part of the purchase price thereof, and (iii) any renewals, extensions or
refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time.
"PURCHASE MONEY LIEN" means a Lien upon fixed assets which secures Purchase
Money Debt, but only if such Lien shall at all times be confined solely to the
fixed assets acquired through the incurrence of the Purchase Money Debt secured
by such Lien and such Lien constitutes a purchase money security interest under
the Uniform Commercial Code of the State governing such Lien.
"QUALIFYING SUBORDINATED DEBT SECURITIES" of the Borrower or any Subsidiary
means debt securities maturing no earlier than the Maturity Date and ranking
junior to or pari passu in right of payment with (i) in the case of the
Borrower, the Advances and the Notes and (ii) in the case of any Subsidiary, the
obligations of the Subsidiary Guarantors under the Subsidiary Guaranty.
"REAL PROPERTY" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"REDEEMABLE STOCK" shall mean with respect to any Person, any capital stock
or similar equity interests of such Person that (i) is by its terms subject to
mandatory redemption, in whole or in part, pursuant to a sinking fund, scheduled
redemption or similar provisions, at any time prior to the latest Maturity Date;
or (ii) otherwise is required to be repurchased or retired on a
25
Exhibit 10.3
scheduled date or dates, upon the occurrence of any event or circumstance, at
the option of the holder or holders thereof, or otherwise, at any time prior to
the latest Maturity Date under this Agreement, other than any such repurchase or
retirement occasioned by a "change of control" or similar event.
"REGISTER" has the meaning specified in Section 12.07(b) hereof.
"REGISTRATION RIGHTS AGREEMENT" means a Registration Rights Agreement
relating to the registration, under the Securities Act, of the Conversion
Securities, substantially in the form of Exhibit D hereto.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time, and any successor or other
regulation or official interpretation relating thereto.
"REPORTABLE EVENT" means an event described in Section 4043 of ERISA or the
regulations thereunder with respect to a Plan, other than those events as to
which the notice requirement is waived under subsections .22, .23, .25, .27,
.28, .30, .31, .32, .34, .35, .63, .64, .65 or .67 of PBGC Regulation Section
4043.
"RESPONSIBLE OFFICER" means, with respect to any Person, any Person duly
authorized by such Person to execute and deliver the agreement, certificate,
instrument or other document being delivered by such Person in accordance with
the terms of this Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES OFFERING" means the public or private issuance or sale by the
Borrower or any Subsidiary of the Borrower of any equity securities or
Qualifying Subordinated Debt Securities, any securities convertible into or
exchangeable for any equity securities or Qualifying Subordinated Debt
Securities or any warrants, rights or options to acquire or subscribe for any
equity securities or Qualifying Subordinated Debt Securities.
"SENIOR AGENT" has the meaning specified in Article XI hereof.
"SENIOR CREDIT FACILITY" means the $300,000,000 Amended and Restated Credit
Agreement, dated as of March 15, 2000, among the Borrower, the lending
institutions party thereto, National City Bank, as administrative agent, and
Bank One, NA, as a co-lead arranger as such agreement may be amended, renewed,
extended, substituted, replaced, restated, refinanced, restructured,
supplemented or otherwise modified from time to time (including, without
limitation, any successive amendments, renewals, extensions, substitutions,
replacements, restatements, refinancings, restructuring, supplements or other
modifications of the foregoing); provided that with respect to any agreement
providing for the refinancing, substitution or replacement of Indebtedness under
the Senior Credit Facility (including any such agreement which increases the
principal amount thereof), such agreement shall be the Senior Credit Facility
for the purposes of this definition only if a notice to that effect is delivered
by the Borrower to
26
Exhibit 10.3
the Lenders and there shall be at any time only one credit agreement that is the
Senior Credit Facility.
"SENIOR CREDIT FACILITY LENDERS" means the Lenders under (and as defined
in) the Senior Credit Facility.
"SENIOR DEBT" means the principal of and premium, if any, and interest on
(including interest accruing after the filing of a petition initiating any
proceeding pursuant to any bankruptcy law, whether or not allowed) and other
amounts due on or in connection with any Indebtedness of the Borrower or any
Subsidiary Guarantor (other than the Obligations under the Loan Documents or
Pari Passu Debt), whether outstanding on the date hereof or thereafter incurred,
unless, in the case of such Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness will be pari passu with or subordinate in right of payment to
the Obligations under the Loan Documents. Without limiting the generality of the
foregoing, "Senior Debt" includes the principal of and premium, if any, and
interest (including interest accruing after the occurrence of an event of
default or after the filing of a petition initiating any proceeding pursuant to
any bankruptcy law, whether or not allowed) on all obligations of every nature
of the Borrower or such Subsidiary Guarantor from time to time owed to the
lenders under the Senior Credit Facility and all Indebtedness arising under the
Designated Hedge Agreements, provided, however, that any Indebtedness under any
refinancing, refunding or replacement of the Senior Credit Facility or under any
Designated Hedge Agreement will not constitute Senior Debt to the extent that
the Indebtedness thereunder is by its express terms subordinate to any other
Indebtedness of the Borrower. Notwithstanding the foregoing, "Senior Debt" will
not include (a) Indebtedness represented by Disqualified Stock, (b) any trade
payables, (c) Indebtedness of or amounts owed by the Borrower or any Subsidiary
Guarantor for compensation to employees or for services rendered to the Borrower
or such Subsidiary Guarantor, (d) any liability for foreign, federal, state,
local or other taxes owed or owing by the Borrower or any Subsidiary Guarantor,
(e) Indebtedness of the Borrower or any Subsidiary Guarantor to a Subsidiary of
the Borrower or such Subsidiary Guarantor or any other Affiliate of the Borrower
or such Subsidiary Guarantor or any of such Affiliate's Subsidiaries, (f) that
portion of any Indebtedness that, at the time of the incurrence, is incurred by
the Borrower or any Subsidiary Guarantor in violation of this Agreement, unless
arising under the Senior Credit Facility or the Designated Hedge Agreements, (g)
amounts owing under leases (other than Capitalized Lease Obligations) and (h)
Indebtedness of the Borrower or any Subsidiary Guarantor that is without
recourse to the Borrower or such Subsidiary Guarantor (regardless of any
election under Section 1111(b) of the Bankruptcy Code).
"SENIOR NONMONETARY DEFAULT" has the meaning set forth in Article XI
hereof.
"SENIOR PAYMENT DEFAULT" has the meaning set forth in Article XI hereof.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such
27
Exhibit 10.3
Person's ability to pay as such debts and liabilities mature and (d) such Person
is not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities at any time
shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be excepted to become an actual or matured liability.
"STANDARD PERMITTED LIENS" means the following:
(i) Liens for taxes not yet delinquent or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Borrower)
have been established;
(ii) Liens in respect of property or assets imposed by law which were
incurred in the ordinary course of business, such as carriers',
warehousemen's, materialmen's and mechanics' Liens and other similar Liens
arising in the ordinary course of business, which do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Borrower or
any Subsidiary;
(iii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.01;
(iv) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security;
and mechanic's Liens, carrier's Liens, and other Liens to secure the
performance of tenders, statutory obligations, contract bids, government
contracts, performance and return-of-money bonds and other similar
obligations, incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money), whether pursuant
to statutory requirements, common law or consensual arrangements;
(v) Leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or any of its
Subsidiaries and any interest or title of a lessor under any lease not in
violation of this Agreement;
(vi) easements, rights-of-way, zoning or deed restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries
considered as an entirety;
(vii) Liens arising from financing statements regarding property
subject to leases not in violation of the requirements of this Agreement,
provided that such Liens are only in respect of the property subject to,
and secure only, the respective lease (and any other lease with the same or
an affiliated lessor); and
(viii) rights of consignors of goods, whether or not perfected by the
filing of a financing statement under the UCC.
28
Exhibit 10.3
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Borrower or any
Subsidiary thereof that is subordinated in right of payment to the Obligations
of the Borrower under the Loan Documents in a manner satisfactory to Lenders.
"SUBSIDIARY" of any Person means any corporation, limited liability
company, partnership, joint venture, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership or
joint venture or (c) the beneficial interest in such trust or estate is at the
time directly or indirectly owned or controlled by such Person, by such Person
and one or more of its other Subsidiaries or by one or more of such Person's
other Subsidiaries. For purposes of the Loan Documents, the term "Subsidiary"
shall include any Person controlled by the Borrower that shall acquire any
assets or assume any liability of Filene's.
"SUBSIDIARY GUARANTOR" means any Subsidiary that is a party to a Subsidiary
Guaranty.
"SUBSIDIARY GUARANTY" has the meaning specified in Section 3.01(g)(ix)
hereof.
"SYNTHETIC LEASE" means any lease (i) which is accounted for by the lessee
as an Operating Lease, and (ii) under which the lessee is intended to be the
"owner" of the leased property for federal income tax purposes.
"TAXES" has the meaning specified in Section 2.12(a) hereof.
"TESTING PERIOD" shall mean for any determination, a single period
consisting of the four consecutive fiscal quarters of the Borrower then last
ended (whether or not such quarters are all within the same fiscal year), except
that if a particular provision of this Agreement indicates that a Testing Period
shall be of a different specified duration, such Testing Period shall consist of
the particular fiscal quarter or quarters of the Borrower then last ended which
are so indicated in such provision.
"TYPE" has the meaning assigned to such term (i) in the definition of "
Advance" when used in such context and (ii) in the definition of " Borrowing"
when used in such context.
"UCC" means the Uniform Commercial Code.
"UNFUNDED CURRENT LIABILITY" of any Plan means the amount, if any, by which
the actuarial present value of the accumulated plan benefits under the Plan as
of the close of its most recent plan year exceeds the fair market value of the
assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"UNITED STATES" and "U.S." each means United States of America.
29
Exhibit 10.3
"WHOLLY-OWNED SUBSIDIARY" means each Subsidiary of the Borrower at least
95% of whose capital stock, equity interests and partnership interests, other
than director's qualifying shares or similar interests, are owned directly or
indirectly by the Borrower.
SECTION 1.02. COMPUTATION OF TIME PERIODS.
In this Agreement in the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including" and
the words "to" and "until" each mean "to but excluding".
SECTION 1.03. ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles in the United State as
of the date of this Agreement that are consistent with those applied in the
preparation of the financial statements referred to in Section 4.08 ("GAAP").
SECTION 1.04. COMPUTATIONS OF OUTSTANDINGS.
Whenever reference is made in this Agreement to the principal amount of
Advances under this Agreement on any date, such reference shall refer to the
aggregate principal amount of all Advances on such date after giving effect to
(i) all Advances to be made on such date and the application of the proceeds
thereof and (ii) any repayment or prepayment of Advances on such date by the
Borrower.
ARTICLE II
COMMITMENTS AND ADVANCES
SECTION 2.01. THE COMMITMENTS.
Each Lender severally agrees, on the terms and conditions hereinafter set
forth, to make Advances to the Borrower on the Closing Date in an amount not to
exceed such Lender's Commitment. If the Closing Date shall not have occurred on
or prior to March 31, 2000, the Commitments shall terminate.
SECTION 2.02. ADVANCES.
Subject to Section 2.01, more than one Borrowing may be made on the same
Business Day. Each Borrowing shall consist of Advances of the same Type and
Interest Period made to the Borrower on the Closing Date, or thereafter
continued or converted as Advances of the same Type and for the same Interest
Period on the same Business Day, by the Lenders ratably according to their
respective Commitments. The Borrowing to be made on the Closing Date shall be
made on notice in substantially the form of Exhibit B hereto (the "NOTICE OF
BORROWING"), delivered by the Borrower to the Administrative Agent, by hand or
facsimile, not later than 11:00 a.m. (New York City time) (i) in the case of
Eurodollar Rate Advances, on the third Business Day prior to the Closing Date
and (ii) in the case of Prime Rate Advances, on the Closing Date. Upon receipt
of the Notice of Borrowing, the Administrative Agent shall notify the Lenders
thereof promptly on the day so received. The Notice of Borrowing shall specify
therein the requested (A) Closing Date, (B) principal amount and Type of
Advances comprising such Borrowing and (C) initial Interest Period for such
Advances. The Borrowing to be made on the Closing Date shall be subject to the
satisfaction of the conditions precedent thereto as set forth in Article III
hereof.
30
Exhibit 10.3
SECTION 2.03. TERMS RELATING TO THE MAKING OF ADVANCES.
(a) Notwithstanding anything in Section 2.02 above to the contrary:
(i) at no time shall more than four different Borrowings be
outstanding hereunder; and
(ii) each Borrowing hereunder shall be in an aggregate principal
amount of not less than $5,000,000 or an integral multiple of $1,000,000 in
excess thereof.
(b) The Notice of Borrowing shall be irrevocable and binding on the
Borrower.
SECTION 2.04. MAKING OF ADVANCES.
(a) Each Lender shall, before 1:00 p.m. (New York City time) on the Closing
Date, make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's address referred to in
Section 12.02, in same day funds, such Lender's portion of the Borrowing to be
made on such date. Advances shall be made by the Lenders ratably in accordance
with their several Commitments. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Administrative Agent will make such funds available to the Borrower at
the Administrative Agent's aforesaid address.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the time of the Borrowing to be made on the Closing Date that
such Lender will not make available to the Administrative Agent such Lender's
ratable portion of such Borrowing, the Administrative Agent may assume that such
Lender has made such portion available to the Administrative Agent on the
Closing Date in accordance with subsection (a) of this Section 2.04, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount on such date. If and to the extent that any
such Lender shall not have so made such ratable portion available to the
Administrative Agent (a "NON-PERFORMING LENDER"), the non-performing Lender and
the Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to Advances comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. Nothing
herein shall in any way limit, waive or otherwise reduce any claims that any
party hereto may have against any non-performing Lender.
(c) The failure of any Lender to make the Advance to be made by it as part
of the Borrowing on the Closing Date shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the Closing Date, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the Closing Date.
SECTION 2.05. REPAYMENT OF ADVANCES.
The Borrower shall repay the principal amount of each Advance made to it
hereunder on the Maturity Date.
SECTION 2.06. INTEREST.
31
Exhibit 10.3
(d) Interest Periods.
(i) The period commencing on the date of each Eurodollar Rate Advance
and ending on the last day of the period selected by the Borrower with
respect to such Eurodollar Rate Advance pursuant to the provisions of this
Section 2.06 is referred to herein as an "INTEREST PERIOD". The duration of
each Interest Period shall be one, two, three or (subject to availability)
six months; provided, however, that no Interest Period may be selected by
the Borrower if such Interest Period would end after the Maturity Date.
(ii) Subject to the terms and conditions of this Agreement, the
initial Interest Period for the Advances made to the Borrower on the
Closing Date shall be determined by the Borrower as set forth in its Notice
of Borrowing. The Borrower may elect to continue or convert (A) the
Advances made on the Closing Date and (B) thereafter, one or more Advances
of any Type and having the same Interest Period, to one or more Advances of
the same or any other Type and having the same or a different Interest
Period, on the following terms and subject to the following conditions:
(A) Each continuation or conversion shall be made as to all Advances
comprising a single Borrowing upon written notice given by the
Borrower to the Administrative Agent not later than 11:00 a.m. (New
York City time) on the third Business Day prior to the date of the
proposed continuation of or conversion, in the case of a continuation
or conversion to a Eurodollar Rate Advance, or on the day of the
proposed continuation of or conversion to a Prime Rate Advance. The
Administrative Agent shall notify each Lender of the contents of such
notice promptly after receipt thereof. Each such notice shall specify
therein the following information: (1) the date of such proposed
continuation or conversion (which in the case of Eurodollar Rate
Advances shall be the last day of the Interest Period then applicable
to such Advances to be continued or converted), (2) the Type of, and
Interest Period applicable to the Advances proposed to be continued or
converted, (3) the aggregate principal amount of Advances proposed to
be continued or converted, and (4) the Type of Advances to which such
Advances are proposed to be continued or converted and the Interest
Period to be applicable thereto.
(B) During the continuance of a Default, the right of the Borrower to
continue or convert Advances to Eurodollar Rate Advances shall be
suspended, and all Eurodollar Rate Advances then outstanding shall be
converted to Prime Rate Advances on the last day of the Interest
Period then in effect, if, on such day, a Default shall be continuing.
(C) During the continuance of an Event of Default, the right of the
Borrower to continue or convert Advances to Eurodollar Rate Advances
shall be suspended, and upon the occurrence of an Event of Default,
all Eurodollar Rate Advances then outstanding shall immediately,
without further act by the Borrower, be converted to Prime Rate
Advances.
32
Exhibit 10.3
(D) If no notice of continuation or conversion is received by the
Administrative Agent as provided in paragraph (A), above, with respect
to any outstanding Advances on or before the third Business Day prior
to the last day of the Interest Period then in effect for such
Advances, the Administrative Agent shall treat such absence of notice
as a deemed notice of continuation or conversion providing for such
Advances to be continued as or converted to Prime Rate Advances.
(b) INTEREST RATES. The Borrower shall pay interest on the unpaid principal
amount of each Advance made by each Lender from the date of such Advance until
such principal amount shall be paid in full, at the following rates per annum:
(i) PRIME RATE ADVANCES. In the case of a Prime Rate Advance, a rate per
annum equal at all times to the sum of the Prime Rate in effect from time
to time plus the Applicable Prime Rate Margin, payable (A) on the last day
of January, April, July and October in each year, (B) on any date on which
such Advance shall be converted to a Eurodollar Rate Advance in accordance
with Section 2.06(a), and (C) the date such Advance shall be repaid or
prepaid in full, regardless of the date of such repayment or prepayment;
provided, that (X) no interest shall be payable until March 15, 2001,
except for interest payable pursuant to the foregoing subclause (C), and
(Y) all such interest accruing for the period from the Closing Date to
March 15, 2001 and not paid as a result of this proviso shall bear interest
at the rates applicable from time to time to the Advances on which such
original interest accrued and shall be payable (with such interest thereon)
on March 15, 2001.
(ii) EURODOLLAR RATE ADVANCES. In the case of a Eurodollar Rate Advance, a
rate per annum equal at all times during the Interest Period for such
Advance to the sum of the Eurodollar Rate for such Interest Period plus the
Applicable Eurodollar Rate Margin, payable (A) on the last day of each
Interest Period, (B) on any date on which such Advance shall be converted
to a Prime Rate Advance in accordance with Section 2.06(a), and (C) the
date such Advance shall be repaid or prepaid in full, regardless of the
date of such repayment or prepayment provided, that (X) no interest shall
be payable until March 15, 2001, except for interest payable pursuant to
the foregoing subclause (C), and (Y) all such interest accruing for the
period from the Closing Date to March 15, 2001 and not paid as a result of
this proviso shall bear interest at the rates applicable from time to time
to the Advances on which such original interest accrued and shall be
payable (with such interest thereon) on March 15, 2001.
(c) OTHER AMOUNTS. Any other amounts payable hereunder that are not paid
when due shall (to the fullest extent permitted by law) bear interest, from the
date when due until paid in full, at a rate per annum equal at all times to 2.0%
per annum above the Applicable Rate in effect from time to time for Prime Rate
Advances, payable on demand.
(d) INTEREST RATE DETERMINATIONS. The Administrative Agent shall give
prompt notice to the Borrower and the Lenders of the Applicable Rate determined
from time to time by the Administrative Agent for each Advance.
33
Exhibit 10.3
(e) MAXIMUM INTEREST RATE. Notwithstanding anything to the contrary set
forth in this Agreement: (i) the Applicable Rate for any Advance shall not
exceed, at any time, the lesser of 18% per annum and the maximum amount
permitted by Applicable Law; and (ii) if at any time the Applicable rate for any
Advance shall exceed 15% per annum, such excess shall be added to the principal
of such Advance and shall bear interest as set forth in this Agreement.
SECTION 2.07. PAYMENTS AND COMPUTATIONS.
(a) The Borrower shall make each payment hereunder and under the Notes not
later than 12:00 noon (New York City time) on the day when due in U.S. Dollars
to the Administrative Agent at its address referred to in Section 12.02 hereof,
in same day funds. The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal, interest, fees or
other amounts payable to the Lenders, to the respective Lenders to whom the same
are payable, for the account of their respective Applicable Lending Offices, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance of a Lender Assignment and recording of the information contained
therein in the Register pursuant to Section 12.07, from and after the effective
date specified in such Lender Assignment, the Administrative Agent shall make
all payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Lender
Assignment shall make all appropriate adjustments in such payments for periods
prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes the Administrative Agent and each
Lender, if and to the extent payment owed by the Borrower to the Administrative
Agent or such Lender, as the case may be, is not made when due hereunder (or, in
the case of a Lender, under the Note held by such Lender), to charge from time
to time against any or all of the Borrower's accounts with the Administrative
Agent or such Lender, as the case may be, any amount so due.
(c) All computations of interest based on the Prime Rate (except when
determined on the basis of the Federal Funds Rate) shall be made on the basis of
a year of 365 or 366 days, as the case may be. All computations of interest and
other amounts payable pursuant to Section 2.10 shall be made by the Lender
claiming such interest or other amount on the basis of a year of 360 days. All
other computations of interest, including computations of interest based on the
Eurodollar Rate, the Prime Rate (when and if determined on the basis of the
Federal Funds Rate), and all computations of fees and other amounts payable
hereunder, shall be made on the basis of a year of 360 days. In each such case,
such computation shall be made for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest, fees or other amounts are payable. Each such determination by the
Administrative Agent or a Lender shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment under any Loan Document shall be stated to be due,
or the last day of an Interest Period hereunder shall be stated to occur, on a
day other than a Business Day, such payment shall be made, and the last day of
such Interest Period shall occur, on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest and fees hereunder; provided, however, that if such extension would
cause payment of interest on or principal of Eurodollar Rate Advances to be
made, or the last day of an Interest Period for a Eurodollar Rate Advance to
occur, in the next following
34
Exhibit 10.3
calendar month, such payment shall be made on the next preceding Business Day
and such reduction of time shall in such case be included in the computation of
payment of interest hereunder.
(e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the Borrower
shall not have so made such payment in full to the Administrative Agent, such
Lender shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender, together with interest thereon, for each day from
the date such amount is distributed to such Lender until the date such Lender
repays such amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.08. PREPAYMENTS - OPTIONAL.
(a) The Borrower shall not have any right to prepay any Advances
except in accordance with subsection (b) below and Section 2.09. Once prepaid,
Advances may not be reborrowed.
(b) Subject in all respects to the limitations contained in the Senior
Credit Facility as in effect on the Closing Date and Article XI of this
Agreement, the Borrower may, upon at least five Business Day's written notice to
the Administrative Agent (such notice being irrevocable), stating the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given, the Borrower shall, prepay Advances comprising part of the same
Borrowing, in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid and any amounts owing in
connection therewith pursuant to Section 2.10(c); provided, however, that each
partial prepayment shall be in an aggregate principal amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.09. PREPAYMENTS - MANDATORY.
(a) CERTAIN PROCEEDS OF ASSET SALES. Subject in all respects to the prior
rights of the Senior Credit Facility Lenders under Section 5.2 of the Senior
Credit Facility as in effect on the date hereof, to the prior payment in full of
the Senior Credit Facility and to Article XI of this Agreement, if during any
fiscal year of the Borrower, the Borrower and its Subsidiaries have received
cumulative Cash Proceeds during such fiscal year from one or more Asset Sales of
at least $1,000,000, not later than the third Business Day following the date of
receipt of any Cash Proceeds in excess of such amount, an amount, conforming to
the requirements as to the amount of partial prepayments contained in Section
2.08 hereof, at least equal to 100% of the Net Cash Proceeds then received in
excess of such amount from any Asset Sale, shall be applied as a mandatory
prepayment of principal of the outstanding Advances; provided, that (i) if no
Default under Section 8.01(a) hereof or Event of Default shall have occurred and
be continuing, (ii) the Borrower and its Subsidiaries have scheduled
Consolidated Capital Expenditures during the following 12 months, and (iii) the
Borrower notifies the Administrative Agent of the amount and nature thereof and
of its intention to reinvest all or a portion of such Net Cash Proceeds in such
Consolidated Capital Expenditures during such 12 month period, then no such
prepayment shall be required to the extent the Borrower so indicates that such
reinvestment will take place. Subject in all respects to the prior rights of the
Senior Credit Facility Lenders under Section 5.2
35
Exhibit 10.3
of the Senior Credit Facility as in effect on the date hereof, to the prior
payment in full of the Senior Credit Facility and to Article XI of this
Agreement, if at the end of any such 12 month period any portion of such Net
Cash Proceeds has not been so reinvested, the Borrower will immediately make a
prepayment of the outstanding Advances as provided above in an amount,
conforming to the requirements as to amount of prepayments contained in Section
2.08 hereof, at least equal to such remaining amount.
(b) PROCEEDS OF EQUITY SALES AND PROCEEDS OF QUALIFYING SUBORDINATED DEBT
SECURITIES. Subject in all respects to the prior rights of the Senior Credit
Facility Lenders under Section 5.2 of the Senior Credit Facility as in effect on
the date hereof and Article XI of this Agreement, not later than the Business
Day following the date of the receipt by the Borrower and/or any Subsidiary of
the cash proceeds (net of underwriting discounts and commissions, placement
agent fees and other customary fees and costs associated therewith) from any
sale or issuance of equity securities or Qualifying Subordinated Debt Securities
by the Borrower or any Subsidiary after the Closing Date (other than (i) any
inter-company sale to the Borrower or any Subsidiary and (ii) any sale or
issuance to management, employees (or key employees) or directors pursuant to
stock option or similar plans for the benefit of management, employees (key
employees) or directors generally), the Borrower will prepay Advances in an
aggregate amount, conforming to the requirements as to the amounts of partial
prepayments of outstanding Advances which are contained in Section 2.08, which
is not less than (x) 100% of such Net Proceeds, or (y) if less, an amount equal
to the then aggregate amount of outstanding Advances.
(c) CERTAIN PROCEEDS OF OTHER DEBT SECURITIES. Subject in all respects to
the prior rights of the Senior Credit Facility Lenders under Section 5.2 of the
Senior Credit Facility, to the prior payment in full of the Senior Credit
Facility and to Article XI of this Agreement, not later than the Business Day
following the date of the receipt by the Borrower and/or any Subsidiary of the
cash proceeds (net of underwriting discounts and commissions, placement agent
fees and other customary fees and costs associated therewith) from any sale or
issuance by the Borrower or any Subsidiary of debt securities other than
Qualifying Subordinated Debt Securities after the Closing Date in an
underwritten public offering, Rule 144A offering, or private placement with one
or more institutional investors, the Borrower will prepay Advances in an
aggregate amount, conforming to the requirements as to the amounts of partial
prepayments of Advances which are contained in Section 2.08 hereof, which is not
less than (x) 100% of such net proceeds, or (y) if less, an amount equal to the
then aggregate outstanding principal amount of the Advances.
(d) CHANGE OF CONTROL. Subject in all respects to the prior rights of the
Senior Credit Facility Lenders under Section 5.2 of the Senior Credit Facility
as in effect on the date hereof , to the prior payment in full of the Senior
Credit Facility and to Article XI of this Agreement, upon the occurrence of a
Change of Control, the Borrower shall on the date of such Change of Control,
prepay all Advances outstanding at such time in an amount equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon at such date
and cancel the Commitments in whole.
SECTION 2.10. YIELD PROTECTION.
(a) CHANGE IN CIRCUMSTANCES. Notwithstanding any other provision herein, if
after the date hereof, the adoption of or any change in Applicable Law or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or
36
Exhibit 10.3
administration thereof (whether or not having the force of law) shall (i) change
the basis of taxation of payments to any Lender of the principal of or interest
on any Eurodollar Rate Advance made by such Lender or any fees or other amounts
payable hereunder (other than changes in respect of taxes imposed on the overall
net income of such Lender, or its Applicable Lending Office, by the jurisdiction
in which such Lender has its principal office or in which such Applicable
Lending Office is located or by any political subdivision or taxing authority
therein), (ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against commitments or assets of, deposits with
or for the account of, or credit extended by, such Lender, or (iii) shall impose
on such Lender any other condition affecting this Agreement or Eurodollar Rate
Advances, and the result of any of the foregoing shall be (A) to increase the
cost to such Lender of issuing, maintaining or participating in this Agreement
or of agreeing to make, making or maintaining any Advance or (B) to reduce the
amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender,
upon demand, such additional amount or amounts as will compensate such Lender
for such additional costs incurred or reduction suffered.
(b) CAPITAL. If any Lender shall have determined that the adoption after
the date hereof of any law, rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any Applicable Lending Office of such
Lender), or any holding company of any such entity, with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect (i) of reducing the rate of return on such entity's capital or on the
capital of such entity's holding company, if any, as a consequence of this
Agreement, any Commitment hereunder or the portion of the Advances made by such
entity pursuant hereto to a level below that which such entity or such entity's
holding company could have achieved, but for such applicability, adoption,
change or compliance (taking into consideration such entity's policies and the
policies of such entity's holding company with respect to capital adequacy), or
(ii) of increasing or otherwise determining the amount of capital required or
expected to be maintained by such entity or such entity's holding company based
upon the existence of this Agreement, any Commitment hereunder, the portion of
the Advance made by such entity pursuant hereto and other similar such credits,
participations, commitments, agreements or assets, then from time to time the
Borrower shall pay to such Lender, upon demand, such additional amount or
amounts as will compensate such entity or such entity's holding company for any
such reduction or allocable capital cost suffered.
(c) BREAKAGE INDEMNITY. The Borrower shall indemnify each Lender against
any loss, cost or reasonable expense which such Lender may sustain or incur as a
consequence of (i) any failure by the Borrower to fulfill on the Closing Date or
the date of any continuation or conversion of Advances hereunder the applicable
conditions precedent set forth in Articles II and III, (ii) any failure by the
Borrower to borrow or continue any, or convert any outstanding Advance into a,
Eurodollar Rate Advance hereunder after the Notice of Borrowing has been
delivered pursuant to Section 2.02 hereof or after delivery of a notice of
continuation or conversion pursuant to Section 2.06(a)(ii) hereof, (iii) any
payment, prepayment, continuation or conversion of a Eurodollar Rate Advance
required or permitted by any other provision of this Agreement or otherwise made
or deemed made on a date other than the last day of the Interest
37
Exhibit 10.3
Period applicable thereto, (iv) any default in payment or prepayment of the
principal amount of any Eurodollar Rate Advance made to the Borrower or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, by irrevocable notice of prepayment or otherwise) or (v) the
occurrence of any Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Advance or any part thereof as a Eurodollar Rate Advance. Such
loss, cost or reasonable expense shall include an amount equal to the excess, if
any, as reasonably determined by such Lender, of (A) its cost of obtaining the
funds for the Eurodollar Rate Advance being paid, prepaid, converted, continued
or not borrowed or continued for the period from the date of such payment,
prepayment, conversion, continuation or failure to borrow or continue to the
last day of the Interest Period for such Advance (or, in the case of a failure
to borrow or continue, the Interest Period for such Advance which would have
commenced on the date of such failure) over (B) the amount of interest (as
reasonably determined by such Lender) that would be realized by such Lender in
reemploying the funds so paid, prepaid, converted, continued or not borrowed or
continued for such period or Interest Period, as the case may be. For purposes
of this subsection (d), it shall be presumed that in the case of any Eurodollar
Rate Advance, each Lender shall have funded each such Advance with a fixed-rate
instrument bearing the rates and maturities designated in the determination of
the Applicable Rate for such Advance.
(d) NOTICES. A certificate of any Lender setting forth such entity's claim
for compensation hereunder and the amount necessary to compensate such entity or
its holding company pursuant to subsections (a) through (c) of this Section 2.10
shall be submitted to the Borrower and the Administrative Agent and shall be
conclusive and binding for all purposes, absent manifest error. The Borrower
shall pay such Lender directly the amount shown as due on any such certificate
within 10 days after its receipt of the same. The failure of any entity to
provide such notice or to make demand for payment under this Section 2.10 shall
not constitute a waiver of such entity's rights hereunder. Each Lender shall use
reasonable efforts to ensure the accuracy and validity of any claim made by it
hereunder, but the foregoing shall not obligate any such entity to assert any
possible invalidity or inapplicability of the law, rule, regulation, guideline
or other change or condition which shall have occurred or been imposed.
(e) CHANGE IN LEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Rate Advance or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Rate Advance,
then, by written notice to the Borrower and the Administrative Agent, such
Lender may:
(i) declare that Eurodollar Rate Advances will not thereafter be made
by such Lender hereunder, whereupon the right of the Borrower to select
Eurodollar Rate Advances for any Borrowing or conversion shall be forthwith
suspended until such Lender shall withdraw such notice as provided
hereinbelow or shall cease to be a Lender hereunder pursuant to Section
12.07 hereof; and
(ii) require that all outstanding Eurodollar Rate Advances be
converted to Prime Rate Advances, in which event all Eurodollar Rate
Advances shall be
38
Exhibit 10.3
automatically converted to Prime Rate Advances as of the effective date of
such notice as provided herein below.
Upon receipt of any such notice, the Administrative Agent shall promptly notify
the other Lenders. Promptly upon becoming aware that the circumstances that
caused such Lender to deliver such notice no longer exist, such Lender shall
deliver notice thereof to the Borrower and the Administrative Agent withdrawing
such prior notice (but the failure to do so shall impose no liability upon such
Lender). Promptly upon receipt of such withdrawing notice from such Lender (or
upon such Lender assigning all of its Commitments, Advances and other rights and
obligations under the Loan Documents in accordance with Section 12.07), the
Administrative Agent shall deliver notice thereof to the Borrower and the
Lenders and such suspension shall terminate. Prior to any Lender giving notice
to the Borrower under this subsection (e), such Lender shall use reasonable
efforts to change the jurisdiction of its Applicable Lending Office, if such
change would avoid such unlawfulness and would not, in the sole determination of
such Lender, be otherwise disadvantageous to such Lender. Any notice to the
Borrower by any Lender shall be effective as to each Eurodollar Rate Advance on
the last day of the Interest Period currently applicable to such Eurodollar Rate
Advance; provided that if such notice shall state that the maintenance of such
Advance until such last day would be unlawful, such notice shall be effective on
the date of receipt by the Borrower and the Administrative Agent.
(f) MARKET RATE DISRUPTIONS. If the Majority Lenders shall notify the
Administrative Agent that the Eurodollar Rate will not adequately reflect the
cost to such Majority Lenders of making, funding or maintaining their respective
Eurodollar Rate Advances, the right of the Borrower to select or receive
Eurodollar Rate Advances for any Borrowing shall be forthwith suspended until
the Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and until such
notification from the Administrative Agent, each requested Borrowing of
Eurodollar Rate Advances hereunder shall be deemed to be a request for Prime
Rate Advances.
(g) RIGHTS OF PARTICIPANTS. Any participant in a Lender's interests
hereunder may assert any claim for yield protection under this Section 2.10 that
it could have asserted if it were a Lender hereunder. If such a claim is
asserted by any such participant, it shall be entitled to receive such
compensation from the Borrower as a Lender would receive in like circumstances;
provided, however, that with respect to any such claim, the Borrower shall have
no greater liability to the Lender and its participant, in the aggregate, than
it would have had to the Lender alone had no such participation interest been
created.
SECTION 2.11. SHARING OF PAYMENTS, ETC.
If any Lender obtains any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise, but excluding any proceeds
received by assignments or sales of participation in accordance with Section
12.07 hereof to a Person that is not an Affiliate of the Borrower) on account of
the Advances owing to it (other than pursuant to Section 2.10 hereof) in excess
of its ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participation in the Advances owing to them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
39
Exhibit 10.3
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.11 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. Notwithstanding the foregoing, if
any Lender shall obtain any such excess payment involuntarily, such Lender may,
in lieu of purchasing participation from the other Lenders in accordance with
this Section 2.11, on the date of receipt of such excess payment, return such
excess payment to the Administrative Agent for distribution in accordance with
Section 2.07.
SECTION 2.12. TAXES.
(a) All payments by or on behalf of the Borrower under any Loan Document
shall be made in accordance with Section 2.07, free and clear of and without
deduction for all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Lender and the Administrative Agent, taxes imposed on its overall
net income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Lender or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender,
taxes imposed on its overall net income, and franchise taxes imposed on it, by
the jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "TAXES").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable under any Loan Document to any Lender or the Administrative
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.12) such Lender or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made by the Borrower under any Loan Document
or from the execution, delivery or registration of, or otherwise with respect
to, any Loan Document (hereinafter referred to as "OTHER TAXES").
(c) The Borrower hereby indemnifies each Lender and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes and any Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.12) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. A claim for such
indemnification shall be set forth in a certificate of such Lender or the
Administrative Agent (as the case may be) setting forth in reasonable detail the
amount necessary to indemnify such Person pursuant to this
40
Exhibit 10.3
subsection (c) and shall be submitted to the Borrower and the Administrative
Agent and shall be conclusive and binding for all purposes, absent manifest
error. The Borrower shall pay such Lender or the Administrative Agent (as the
case may be) directly the amount shown as due on any such certificate within 30
days after the receipt of same. If any Taxes or Other Taxes for which a Lender
or the Administrative Agent has received payments from the Borrower hereunder
are refunded to such Lender or the Administrative Agent, such Lender or the
Administrative Agent, as the case may be, shall promptly forward to the Borrower
any such refunded amount. The Borrower's, the Administrative Agent's and each
Lender's obligations under this Section 2.12 shall survive the payment in full
of the Advances.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent, at its address referred to in Section
12.02, the original or a certified copy of a receipt evidencing payment thereof.
(e) Each Lender that is not incorporated under the laws of the United
States of America or any state thereof shall, on or prior to the date it becomes
a Lender hereunder, deliver to the Borrower and the Administrative Agent such
certificates, documents or other evidence, as required by the Internal Revenue
Code of 1986, as amended from time to time (the "CODE"), or treasury regulations
issued pursuant thereto, including Internal Revenue Service Form 4224, Form
1001, Form W-8 BEN or Form W-8 ECI and any other certificate or statement of
exemption required by Treasury Regulation Section 1.1441-1(a) or Section
1.1441-6(c) or any subsequent version thereof, properly completed and duly
executed by such Lender establishing that it is (i) not subject to withholding
under the Code or (ii) totally exempt from United States of America tax under a
provision of an applicable tax treaty. Each Lender shall promptly notify the
Borrower and the Administrative Agent of any change in its Applicable Lending
Office and shall deliver to the Borrower and the Administrative Agent together
with such notice such certificates, documents or other evidence referred to in
the immediately preceding sentence. Each Lender will use good faith efforts to
apprise the Borrower and the Administrative Agent as promptly as practicable of
any impending change in its tax status that would give rise to any obligation by
the Borrower to pay any additional amounts pursuant to this Section 2.12. Unless
the Borrower and the Administrative Agent have received forms or other documents
satisfactory to them indicating that payments under the Loan Documents are not
subject to United States of America withholding tax or are subject to such tax
at a rate reduced by an applicable tax treaty, the Borrower or the
Administrative Agent shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Lender organized under the
laws of a jurisdiction outside the United States of America. Each Lender
represents and warrants that each such form supplied by it to the Administrative
Agent and the Borrower pursuant to this Section 2.12, and not superseded by
another form supplied by it, is or will be, as the case may be, complete and
accurate.
(f) Any Lender claiming any additional amounts payable pursuant to this
Section 2.12 shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by the Borrower or
to change the jurisdiction of its Applicable Lending Office if the making of
such a filing or change would avoid the need for or reduce the amount of any
such additional amounts which may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous to such Lender.
41
Exhibit 10.3
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO BORROWING.
The obligation of each Lender to make an Advance on the Closing Date is
subject to the following conditions precedent:
(a) The Lenders shall be satisfied with the corporate and legal
structure and capitalization of each Loan Party, including the terms and
conditions of the charter, bylaws and each class of Capital Stock of each Loan
Party and of each agreement or instrument relating to such structure or
capitalization.
(b) All conditions to effectiveness of the Senior Credit Facility
(other than the funding of the Advances hereunder) shall have been satisfied, or
with the consent of the Lenders, waived, the initial funding under the Senior
Credit Facility shall occur substantially simultaneously, and the Administrative
Agent shall have received, in sufficient quantities for the Lenders, copies of
all documents evidencing or governing the Senior Credit Facility, including the
applicable credit agreement, the notes issued thereunder, any related guaranties
and all pledge agreements, security agreements, collateral assignments and
similar security instruments related thereto, and all closing documents, and all
such documentation shall be satisfactory in form and substance to each of the
Lenders.
(i) The Borrower shall have Consolidated EBITDA for the
Testing Period ended on or nearest to January 31, 2000, computed on a
pro forma basis as if its acquisition of certain assets and assumption
of certain liabilities of Filene's had been completed for such entire
Testing Period and any Indebtedness assumed or incurred in connection
therewith had been outstanding for such entire Testing Period, of at
least $113 million; and on the Closing Date the Administrative Agent
shall have received a certificate, dated the Closing Date, of a
responsible financial or accounting officer of the Borrower to such
effect, containing calculations in reasonable detail as to such
computation, and to the further effect that, at and as of the Closing
Date and both before and after giving effect to the initial Borrowing
hereunder and the application of the proceeds thereof, (x) no Default
or Event of Default has occurred or is continuing, and (y) all
representations and warranties of the Loan Parties contained herein or
in the other Loan Documents are true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except that as
to any such representations and warranties which expressly relate to an
earlier specified date, such representations and warranties are only
represented as having been true and correct in all material respects as
of the date when made.
(c) Since the end of the Borrower's fiscal quarter ended on or nearest
to October 31, 1999, in the sole judgment of Prudential, there has been no
change in the assets, properties, condition, business, prospects or affairs of
the Borrower and its Subsidiaries taken as a whole, or their properties and
assets considered as an entirety, except for changes solely in the ordinary
course of business, and changes incident to the acquisition of Gramex Retail
Stores, Inc. in November 1999, none of which, individually or in the aggregate,
has had or could reasonably be expected to have, a Material Adverse Effect.
42
Exhibit 10.3
(d) During the period from February 28, 2000 to the Closing Date, there
shall not have occurred a material disruption or material adverse change in
financial, banking, loan syndication or capital market conditions generally or
in the market for new issuance of high yield securities or syndicated leveraged
loans which, in the sole judgment of Prudential, could be expected to materially
adversely affect the syndication of portions or all of the Commitments to
additional Lenders.
(e) The Lenders shall be satisfied that all Material Debt, other than
the Indebtedness identified on Schedule 3.01(h), has been prepaid, redeemed or
defeased in full or otherwise satisfied and extinguished.
(f) The Lenders shall have completed a due diligence investigation of
the Borrower and its Subsidiaries in scope, and with results, satisfactory to
the Lenders.
(g) the Administrative Agent shall have received on or before the day
of the Borrowing the following, each dated such day (unless otherwise
specified), in form and substance satisfactory to each Lender (unless otherwise
specified) and (except for the Notes) in sufficient copies for each Lender:
(i) Counterparts of this Agreement, duly executed by the
Borrower,
(ii) The Notes payable to the order of the Lenders in the
amount of each Lenders' Commitment;
(iii) A copy of the charter of each Loan Party and each
amendment thereto, certified (as of a date reasonably near the date of
the Borrowing) by the Secretary of State of the State of incorporation
of such Loan Party as being a true and correct copy thereof;
(iv) With respect to each Loan Party, a copy of a certificate
of the Secretary of State of the State of its incorporation, dated
reasonably near the date of the Borrowing, listing the charter of such
Loan Party and each amendment thereto on file in his office and
certifying that (A) such amendments are the only amendments to such
Loan Party's charter on file in his office, and (B) such Loan Party is
duly incorporated and in good standing under the laws of such State;
(v) A certificate of the Secretary of State of each State
identified on Schedule 3.01(j), in each case, dated reasonably near the
date of the Borrowing, stating that the Loan Party whose name appears
in the column adjacent to the name of such State is duly qualified and
in good standing as a corporation organized under the laws of such
State or as a foreign corporation in such State and has filed all
annual reports required to be filed to the date of such certificate;
(vi) A certificate of the Borrower and each other Loan Party,
signed on behalf of the Borrower or such other Loan Party by its
President or a Vice President and its Secretary or any Assistant
Secretary, dated the date of the Borrowing (the statements made in
which certificate shall be true on and as of the date of the
Borrowing), certifying as to (A) the absence of any amendments to the
charter of the Borrower or such other Loan Party since the date of the
Secretary of State's certificate referred to in clause (iv)
43
Exhibit 10.3
above, (B) a true and correct copy of the bylaws of the Borrower or
such other Loan Party as in effect on the date of the Borrowing, (C)
the due incorporation and good standing of the Borrower or such other
Loan Party as a corporation organized under the laws of the State of
its incorporation, and the absence of any proceeding for the
dissolution or liquidation of the Borrower or such other Loan Party,
(D) the truth of the representations and warranties contained in each
of the Loan Documents and the Senior Credit Facility as though made on
and as of the date of the Borrowing; (E) the absence of any event
occurring and continuing, or resulting from the Borrowing or the
application of the proceeds therefrom, that constitutes a Default; and
(F) a true and correct copy of each of the resolutions of the Board of
Directors of the Borrower and each other Loan Party approving this
Agreement, the Notes and each other Loan Document to which it is a
party, and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this Agreement, the
Notes and each other Loan Document and the Senior Credit Facility
(vii) A certificate of the Secretary or an Assistant Secretary
of each Loan Party certifying the names and true signatures of the
officers of such Loan Party authorized to sign this Agreement, the
Notes and each other Loan Document, and each document under the Senior
Credit Facility to which it is or will be a party and the other
documents to be delivered hereunder and thereunder;
(viii) Copies of each of the documents comprising or delivered
in connection with the Senior Credit Facility, and letters from all
opining counsel addressed to the Lenders granting the Lenders
permission to rely on their respective legal opinions (if any)
delivered in connection therewith;
(ix) A Senior Subordinated Subsidiary Guaranty, substantially
the form of Exhibit C (as amended from time to time in accordance with
its terms, the "SUBSIDIARY GUARANTY"), duly executed by each Subsidiary
Guarantor;
(x) The Registration Rights Agreement duly executed by the
Borrower;
(xi) Such financial, business and other information regarding
the Borrower and its Subsidiaries as the Lenders shall have requested
including, without limitation, such financial statements, information
as to possible contingent liabilities, tax matters, environmental
matters and obligations under ERISA and such other approvals, opinions
or documents as any Lender may reasonably request as to the legality,
validity, binding effect or enforceability of the Loan Documents or the
Senior Credit Facility;
(xii) A certificate of the chief financial officer of the
Borrower, in form and substance satisfactory to the Lenders, attesting
to the Solvency of the Borrower after giving effect to the acquisition
of certain assets and assumption of certain liabilities of Filene's and
the other transactions contemplated hereby and by the Senior Credit
Facility.
(xiii) A letter, in form and substance satisfactory to the
Administrative Agent, from the Borrower to Deloitte & Touche, its
independent certified public accountants, advising such accountants
that the Lenders have been authorized to exercise all rights of
44
Exhibit 10.3
the Borrower to require such accountants to disclose any and all
financial statements and any other information of any kind that they
may have with respect to the Borrower and its Subsidiaries and
directing such accountants to comply with any reasonable request of any
Lender for such information.
(xiv) Favorable opinions of counsel for the Borrower and the
Subsidiary Guarantors, in each case, in form and substance satisfactory
to the Administrative Agent;
(xv) Such other approvals, opinions or documents as any Lender
may reasonably request.
(h) The Borrower shall have paid all accrued fees and expenses of each
Lender (including amounts owing under the Fee Letter and the accrued fees and
expenses of counsel to the Lender).
(i) The Lenders shall have received such other approvals, opinions and
documents as the Administrative Agent shall have reasonably requested.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to make
the Borrower makes the following representations and warranties to, and
agreements with, the Lenders, all of which shall survive the execution and
delivery of this Agreement:
SECTION 4.01. CORPORATE STATUS, ETC.
Each of the Borrower and its Subsidiaries (i) is a duly organized or
formed and validly existing corporation, partnership or limited liability
company, as the case may be, in good standing under the laws of the jurisdiction
of its formation and has the corporate, partnership or limited liability company
power and authority, as applicable, to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage,
and (ii) has duly qualified and is authorized to do business in all
jurisdictions where it is required to be so qualified except where the failure
to be so qualified would not have a Material Adverse Effect.
SECTION 4.02. SUBSIDIARIES.
Schedule 4.02 hereto lists, as of the date hereof, each Subsidiary of
the Borrower (and the direct and indirect ownership interest of the Borrower
therein).
SECTION 4.03. CORPORATE POWER AND AUTHORITY, ETC.
Each Loan Party has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Loan Documents to which it
is party and has taken all necessary corporate or other organizational action to
authorize the execution, delivery and performance of the Loan Documents to which
it is party. Each Loan Party has duly executed and delivered each Loan Document
to which it is party and each Loan Document to which it is party constitutes the
legal, valid and binding agreement or obligation of such Loan Party enforceable
in accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws generally affecting
45
Exhibit 10.3
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law).
SECTION 4.04. NO VIOLATION.
Neither the execution, delivery and performance by any Loan Party of
the Loan Documents to which it is party nor compliance with the terms and
provisions thereof (i) will contravene any provision of any Applicable Law, (ii)
will conflict with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of such Loan Party pursuant to the terms of any
promissory note, bond, debenture, indenture, mortgage, deed of trust, credit or
loan agreement, or any other material agreement or other instrument, to which
such Loan Party is a party or by which it or any of its property or assets are
bound or to which it may be subject, or (iii) will violate any provision of the
certificate or articles of incorporation, code of regulations or by-laws, or
other charter documents of such Loan Party.
SECTION 4.05. GOVERNMENTAL APPROVALS.
No Governmental Approvals are required to authorize or is required as a
condition to (i) the execution, delivery and performance by any Loan Party of
any Loan Document to which it is a party, or (ii) the legality, validity,
binding effect or enforceability of any Loan Document to which any Loan Party is
a party.
SECTION 4.06. LITIGATION.
There are no actions, suits or proceedings pending or, to, the
knowledge of the Borrower, threatened with respect to the Borrower or any of its
Subsidiaries (i) that have, or could reasonably be expected to have, a Material
Adverse Effect, or (ii) which purports to affect the legality, validity or
enforceability of any of the Loan Documents, or of any action to be taken by any
Loan Party pursuant to any of the Loan Documents to which it is a party.
SECTION 4.07. USE OF PROCEEDS; MARGIN REGULATIONS.
(a) The proceeds of all Loans shall be utilized only in accordance with
Section 5.11 hereof.
(b) No part of the Advance will be used directly or indirectly to
purchase or carry Margin Stock, or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock, in violation of the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
The Borrower is not engaged in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock. At no time would more than 25% of
the value of the assets of the Borrower or of the Borrower and its consolidated
Subsidiaries that are subject to any "arrangement" (as such term is used in
Section 221.2(g) of such Regulation U) hereunder be represented by Margin Stock.
SECTION 4.08. FINANCIAL STATEMENTS, ETC.
(a) The Borrower has furnished to Administrative Agent complete and
correct copies of (i) the audited consolidated balance sheets of the Borrower
and its consolidated subsidiaries as of the end of its fiscal years ended on or
nearest to January 31, 1999 and January 31, 1998, and the related audited
consolidated statements of income, stockholders' equity, and cash flows for the
46
Exhibit 10.3
fiscal years then ended, accompanied by the unqualified report thereon of the
Borrower's independent accountants; and (ii) the unaudited condensed
consolidated balance sheets of the Borrower and its consolidated subsidiaries as
of the end of its fiscal quarter ended on or nearest to October 31, 1999, and
the related unaudited condensed consolidated statements of income and of cash
flows of the Borrower and its consolidated subsidiaries for the fiscal quarter
or quarters then ended, as contained in the Form 10-Q Quarterly Report of the
Borrower filed with the SEC for such fiscal quarter. All such financial
statements have been prepared in accordance with GAAP, consistently applied
(except as stated therein), and fairly present the financial position of the
Borrower and its consolidated subsidiaries as of the respective dates indicated
and the consolidated results of their operations and cash flows for the
respective periods indicated, subject in the case of any such financial
statements which are unaudited, to normal audit adjustments, none of which will
involve a Material Adverse Effect.
(b) The Borrower now has capital sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage and is now solvent and able to pay its debts as they mature and the
Borrower, as of the Closing Date, owns property having a value, both at fair
valuation and at present fair salable value, greater than the amount required to
pay the Borrower's debts; and the Borrower is not entering into the Loan
Documents with the intent to hinder, delay or defraud its creditors.
(c) The Borrower has delivered or caused to be delivered to the Lenders
prior to the execution and delivery of this Agreement (i) a copy of the
Borrower's Report on Form 10-K as filed (without Exhibits) with the SEC for its
fiscal year ended on or nearest to January 31, 1999, which contains a general
description of the business and affairs of the Borrower and its Subsidiaries,
and (ii) financial projections prepared by management of the Borrower for the
Borrower and its Subsidiaries for the fiscal years 2000-2002, taking into
account the completion of the acquisition of certain assets and assumption of
certain liabilities of Filene's (the "Financial Projections"). The Financial
Projections were prepared on behalf of the Borrower in good faith after taking
into account the existing and historical levels of business activity of the
Borrower and its Subsidiaries, known trends, including general economic trends,
and all other information, assumptions and estimates considered by management of
the Borrower and its Subsidiaries to be pertinent thereto. The Financial
Projections were considered by management of the Borrower, as of such date of
preparation, to be realistically achievable; provided, that no representation or
warranty is made as to the impact of future general economic conditions or as to
whether the Borrower's projected consolidated results as set forth in the
Financial Projections will actually be realized. No facts are known to the
Borrower at the date hereof which, if reflected in the Financial Projections,
would result in a material adverse change in the assets, liabilities, results of
operations or cash flows reflected therein.
SECTION 4.09. NO MATERIAL ADVERSE CHANGE.
Since the end of its fiscal year ended on or nearest to January 31,
1999, there has been no change in the condition, business or affairs of the
Borrower and its Subsidiaries taken as a whole, or their properties and assets
considered as an entirety, except for changes, none of which, individually or in
the aggregate, has had or could reasonably be expected to have, a Material
Adverse Effect.
47
Exhibit 10.3
SECTION 4.10. TAX RETURNS AND PAYMENTS.
Each of the Borrower and each of its Subsidiaries has filed all federal
income tax returns and all other material tax returns, domestic and foreign,
required to be filed by it and has paid all material taxes and assessments
payable by it which have become due, other than those not yet delinquent and
except for those contested in good faith. The Borrower and each of its
Subsidiaries has established on its books such charges, accruals and reserves in
respect of taxes, assessments, fees and other governmental charges for all
fiscal periods as are required by GAAP. The Borrower knows of no proposed
assessment for additional federal, foreign or state taxes for any period, or of
any basis therefor, which, individually or in the aggregate, taking into account
such charges, accruals and reserves in respect thereof as the Borrower and its
Subsidiaries have made, could reasonably be expected to have a Material Adverse
Effect.
SECTION 4.11. TITLE TO PROPERTIES, ETC.
The Borrower and each of its Subsidiaries has good and marketable
title, in the case of real property, and good title (or valid Leaseholds, in the
case of any leased property), in the case of all other property, to all of its
properties and assets free and clear of Liens other than Liens permitted by
Section 6.03. The interests of the Borrower and each of its Subsidiaries in the
properties reflected in the most recent balance sheet referred to in Section
4.08, taken as a whole, were sufficient, in the judgment of the Borrower, as of
the date of such balance sheet for purposes of the ownership and operation of
the businesses conducted by the Borrower and such Subsidiaries.
SECTION 4.12. LAWFUL OPERATIONS, ETC.
The Borrower and each of its Subsidiaries (i) holds all necessary
federal, state and local governmental licenses, registrations, certifications,
permits and authorizations necessary to conduct its business, and (ii) is in
full compliance with all material requirements imposed by law, regulation or
rule, whether federal, state or local, which are applicable to it, its
operations, or its properties and assets, including without limitation,
applicable requirements of Environmental Laws, except for any failure to obtain
and maintain in effect, or noncompliance, which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 4.13. ENVIRONMENTAL MATTERS.
(a) The Borrower and each of its Subsidiaries is in compliance with all
Environmental Laws governing its business, except to the extent that any such
failure to comply (together with any resulting penalties, fines or forfeitures)
would not reasonably be expected to have a Material Adverse Effect. All
licenses, permits, registrations or approvals required for the conduct of the
business of the Borrower and each of its Subsidiaries under any Environmental
Law have been secured and the Borrower and each of its Subsidiaries is in
substantial compliance therewith, except for such licenses, permits,
registrations or approvals the failure to secure or to comply therewith is not
reasonably likely to have a Material Adverse Effect. Neither the Borrower nor
any of its Subsidiaries has received written notice, or otherwise knows, that it
is in any respect in noncompliance with, breach of or default under any
applicable writ, order, judgment, injunction, or decree to which the Borrower or
such Subsidiary is a party or which would affect the ability of the Borrower or
such Subsidiary to operate any real property and no event has occurred and is
continuing which, with the passage of time or the giving of notice or both,
would constitute noncompliance, breach of or default thereunder, except in each
such case, such noncompliance, breaches or defaults as would not reasonably be
expected to, in the aggregate, have a Material
48
Exhibit 10.3
Adverse Effect. There are no Environmental Claims pending or, to the best
knowledge of the Borrower, threatened wherein an unfavorable decision, ruling or
finding would reasonably be expected to have a Material Adverse Effect. There
are no facts, circumstances, conditions or occurrences on any Real Property now
or at any time owned, leased or operated by the Borrower or any of its
Subsidiaries or on any property adjacent to any such Real Property, which are
known by the Borrower or as to which the Borrower or any such Subsidiary has
received written notice, that could reasonably be expected (i) to form the basis
of an Environmental Claim against the Borrower or any of its Subsidiaries or any
Real Property of the Borrower or any of its Subsidiaries, or (ii) to cause such
Real Property to be subject to any restrictions on the ownership, occupancy, use
or transferability of such Real Property under any Environmental Law, except in
each such case, such Environmental Claims or restrictions that individually or
in the aggregate would not reasonably be expected to have a Material Adverse
Effect.
(b) Hazardous Materials have not at any time been (i) generated, used,
treated or stored on, or transported to or from, any Real Property of the
Borrower or any of its Subsidiaries or (ii) released on any such Real Property,
in each case where such occurrence or event is not in compliance with
Environmental Laws and is reasonably likely to have a Material Adverse Effect.
SECTION 4.14. COMPLIANCE WITH ERISA.
Compliance by the Borrower with the provisions hereof and Advances
contemplated hereby will not involve any prohibited transaction within the
meaning of ERISA or Section 4975 of the Internal Revenue Code. The Borrower and
each of its Subsidiaries, (i) has fulfilled all obligations under minimum
funding standards of ERISA and the Internal Revenue Code with respect to each
Plan that is not a Multiemployer Plan or a Multiple Employer Plan, (ii) has
satisfied all respective contribution obligations in respect of each
Multiemployer Plan and each Multiple Employer Plan, (iii) is in compliance in
all material respects with all other applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan, each Multiemployer Plan and
each Multiple Employer Plan, and (iv) has not incurred any liability under the
Title IV of ERISA to the PBGC with respect to any Plan, any Multiemployer Plan,
any Multiple Employer Plan, or any trust established thereunder. No Plan or
trust created thereunder has been terminated, and there have been no Reportable
Events, with respect to any Plan or trust created thereunder or with respect to
any Multiemployer Plan or Multiple Employer Plan, which termination or
Reportable Event will or could result in the termination of such Plan,
Multiemployer Plan or Multiple Employer Plan and give rise to a material
liability of the Borrower or any ERISA Affiliate in respect thereof. Neither the
Borrower nor any ERISA Affiliate is at the date hereof, or has been at any time
within the two years preceding the date hereof, an employer required to
contribute to any Multiemployer Plan or Multiple Employer Plan, or a
"contributing sponsor" (as such term is defined in Section 4001 of ERISA) in any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as has been
disclosed to the Lenders in writing.
SECTION 4.15. INTELLECTUAL PROPERTY, ETC.
The Borrower and each of its Subsidiaries has obtained or has the right
to use all material patents, trademarks, servicemarks, trade names, copyrights,
licenses and other rights with respect to the foregoing necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others, except for such patents, trademarks, servicemarks,
trade
49
Exhibit 10.3
names, copyrights, licenses and rights, the loss of which, and such conflicts,
which in any such case individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.16. INVESTMENT COMPANY ACT, ETC.
Neither the Borrower nor any of its Subsidiaries is subject to
regulation with respect to the creation or incurrence of Indebtedness under the
Investment Company Act of 1940, as amended, the ICC Termination Act of 1995, as
amended, the Federal Power Act, as amended, the Public Utility Holding Company
Act of 1935, as amended, or any applicable state public utility law.
SECTION 4.17. BURDENSOME CONTRACTS; LABOR RELATIONS.
Neither the Borrower nor any of its Subsidiaries (i) is subject to any
burdensome contract, agreement, corporate restriction, judgment, decree or
order, (ii) is a party to any labor dispute affecting any bargaining unit or
other group of employees generally, (iii) is subject to any material strike,
slow down, workout or other concerted interruptions of operations by employees
of the Borrower or any Subsidiary, whether or not relating to any labor
contracts, (iv) is subject to any significant pending or, to the knowledge of
the Borrower, threatened, unfair labor practice complaint, before the National
Labor Relations Board, and (v) is subject to any significant pending or, to the
knowledge of the Borrower, threatened, grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement, (vi) is
subject to any significant pending or, to the knowledge of the Borrower,
threatened, significant strike, labor dispute, slowdown or stoppage, or (vii)
is, to the knowledge of the Borrower, involved or subject to any union
representation organizing or certification matter with respect to the employees
of the Borrower or any of its Subsidiaries, except (with respect to any matter
specified in any of the above clauses), for such matters as, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.18. EXISTING INDEBTEDNESS.
Schedule 3.01(h) sets forth a true and complete list, as of the date or
dates set forth therein, of all Indebtedness of the Borrower and each of its
Subsidiaries, on a consolidated basis, which (i) has an outstanding principal
amount of at least $250,000, or may be incurred pursuant to existing commitments
or lines of credit, or (ii) is secured by any Lien on any property of the
Borrower or any Subsidiary (herein "Material Debt"), and which will be
outstanding on the Closing Date after giving effect to the initial Borrowing
hereunder, other than the Indebtedness created under the Loan Documents. As and
to the extent the Administrative Agent has so requested, the Borrower has
provided to the Administrative Agent prior to the date of execution hereof true
and complete copies (or summary descriptions) of all agreements and instruments
governing the Indebtedness listed on Schedule 3.01(h) (the "Existing
Indebtedness Agreements").
SECTION 4.19. YEAR 2000 COMPUTER MATTERS.
During 1999 and prior thereto, the Borrower and its Subsidiaries
reviewed the areas within their business and operations which could have been
adversely affected by the "Year 2000 Computer Issue" (that is, the risk that
computer applications used by the Borrower and its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999). Based on such review, the
activities completed by the Borrower and its Subsidiaries as a consequence of
such review and the
50
Exhibit 10.3
Borrower's analysis and planning relative thereto, and events subsequent to
December 31, 1999 involving the Borrower and its Subsidiaries, the Borrower
reasonably believes that the "Year 2000 Computer Issue" has not had, and is not
reasonably likely to have, a Material Adverse Effect, and that all computer
applications used by the Borrower and its Subsidiaries can properly recognize
and perform date-sensitive functions involving certain dates prior to and any
date on or after December 31, 1999 (i.e, "are Y2K compliant").
SECTION 4.20. SENIOR CREDIT FACILITY DOCUMENTS, ETC.
The Borrower has delivered to the Administrative Agent prior to the
Closing Date true, correct and complete copies of all of the Senior Credit
Facility Documents. The "Senior Credit Facility Documents" constitute all of the
agreements, disclosure schedules, side letters and other documents relating to
the incurrence by the Borrower of the Senior Credit Facility. Each Senior Credit
Facility Document which has been executed and delivered at or prior to the
Closing Date is the legal, valid and binding agreement or obligation of each
party thereto, enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law). At and as of the Closing Date, (i) to the best
of the Borrower's knowledge, all of the representations and warranties contained
in the Senior Credit Facility Documents or made in any other certificate or
other document delivered in connection therewith will be true and correct in all
material respects, (ii) all of the terms, covenants, agreements and conditions
contained therein required to be performed or complied with at or prior to such
time will have been duly performed or complied with in all material respects,
(iii) all material consents and approvals of, and filings and registrations
with, and all other actions in respect of, all governmental agencies,
authorities or instrumentalities required to be obtained, given, filed or taken
by any party to any of the Senior Credit Facility Documents or any of its
Subsidiaries in order to make or consummate each component of the transactions
contemplated thereby will have been obtained, given, filed or taken and are or
will be in full force and effect, except for filings, consents or notices not
required by federal or state securities laws to be made at such time, which
filings, consents or notices have been or will be made during the period in
which they are required to be made, and (iv) each component of such transactions
shall have been consummated in accordance, in all material respects, with the
applicable Senior Credit Facility Documents and in compliance, in all material
respects, with all applicable laws.
SECTION 4.21. PARI PASSU.
Except for the obligations of the Borrower under the Senior Credit
Facility, the Obligations under this Agreement and the other Loan Documents rank
junior in right of payment to all existing and future Senior Debt and at least
pari passu with all other subordinated Indebtedness of the Borrower.
SECTION 4.22. TRUE AND COMPLETE DISCLOSURE.
All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Administrative Agent or any Lender for purposes
of or in connection with this Agreement or any transaction contemplated herein,
other than the Financial Projections (as to which representations are made only
as provided in Section 4.08), is, and all other such factual information (taken
as a whole) hereafter furnished by or on behalf of such Person in writing to any
Lender will be, true and
51
Exhibit 10.3
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information (taken as a whole) not misleading at such
time in light of the circumstances under which such information was provided,
except that any such future information consisting of financial projections
prepared by management of the Borrower is only represented herein as being based
on good faith estimates and assumptions believed by such Persons to be
reasonable at the time made, it being recognized by the Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
materially from the projected results. As of the Closing Date, there is no fact
known to the Borrower or any of its Subsidiaries which has, or could reasonably
be expected to have, a Material Adverse Effect which has not theretofore been
disclosed in writing to the Lenders.
SECTION 4.23. SOLVENCY.
The Borrower is, individually and together with its Subsidiaries,
Solvent.
SECTION 4.24. NON-SOLICITATION.
Neither the Borrower nor anyone acting on its behalf has offered the
Notes for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any Person other
than the Administrative Agent. Neither the Borrower nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of Section 5 of the
Securities Act.
SECTION 4.25. COMPLIANCE WITH SECURITIES LAWS.
The offer and sale of the Notes is, and the issuance of the Conversion
Securities will be, exempt from the registration requirements of the Securities
Act, and in compliance with all applicable state securities laws.
SECTION 4.26. SURVIVAL.
The representations and warranties set forth in Article IV hereof shall
survive until the earlier of the repayment or conversion of the Advances in
full, together with accrued interest thereon.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Advance remains unpaid or any Lender has any Commitment
hereunder, the Borrower will, unless the Majority Lenders otherwise consent in
writing:
SECTION 5.01. REPORTING REQUIREMENTS.
Furnish to each Lender and the Administrative Agent:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event
within 90 days after the close of each fiscal year of the Borrower, the
consolidated and consolidating balance sheets of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income, of stockholder's equity and
of cash flows for such fiscal year, in each case setting forth comparative
figures for the preceding fiscal
52
Exhibit 10.3
year, all in reasonable detail and accompanied by the opinion with respect to
such consolidated financial statements of independent public accountants of
recognized national standing selected by the Borrower, which opinion shall be
unqualified and shall (i) state that such accountants audited such consolidated
financial statements in accordance with generally accepted auditing standards,
that such accountants believe that such audit provides a reasonable basis for
their opinion, and that in their opinion such consolidated financial statements
present fairly, in all material respects, the consolidated financial position of
the Borrower and its consolidated subsidiaries as at the end of such fiscal year
and the consolidated results of their operations and cash flows for such fiscal
year in conformity with generally accepted accounting principles, or (ii)
contain such statements as are customarily included in unqualified reports of
independent accountants in conformity with the recommendations and requirements
of the American Institute of Certified Public Accountants (or any successor
organization).
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the close of each of the quarterly accounting periods
in each fiscal year of the Borrower, the unaudited condensed consolidated and
consolidating balance sheets of the Borrower and its consolidated Subsidiaries
as at the end of such quarterly period and the related unaudited condensed
consolidated and consolidating statements of income and of cash flows for such
quarterly period, and setting forth, in the case of such unaudited consolidated
statements of income and of cash flows, comparative figures for the related
periods in the prior fiscal year, and which consolidated financial statements
shall be certified on behalf of the Borrower by the Chief Financial Officer or
other Responsible Officer of the Borrower, subject to changes resulting from
normal year-end audit adjustments.
(c) OFFICER'S COMPLIANCE CERTIFICATES. At the time of the delivery of
the financial statements provided for in Sections 5.01(a) and (b), a certificate
on behalf of the Borrower of the Chief Financial Officer or other Responsible
Officer of the Borrower to the effect that, to the best knowledge of the
Borrower, no Default or Event of Default exists or, if any Default or Event of
Default does exist, specifying the nature and extent thereof, which certificate
shall set forth the calculations required to establish compliance with the
provisions of Article VII hereof, inclusive of this Agreement, including an
identification of the amounts of any financial items of Persons or business
units acquired by the Borrower for any periods prior to the date of acquisition
which are used in making such calculations.
(d) ANNUAL BUDGETS AND FORECASTS. Not later than 45 days after the
commencement of the first fiscal quarter in any fiscal year of the Borrower and
its Subsidiaries, a consolidated budget in reasonable detail for such fiscal
year, and (if and to the extent prepared by management of the Borrower) for any
subsequent fiscal years, as customarily prepared by management for its internal
use, setting forth, with appropriate discussion, the forecasted balance sheet,
income statement, operating cash flows and capital expenditures of the Borrower
and its Subsidiaries for the period covered thereby, and the principal
assumptions upon which forecasts and budget are based.
(e) AUDITORS' INTERNAL CONTROL COMMENT LETTERS, ETC. Promptly upon
receipt thereof, a copy of each letter or memorandum commenting on internal
accounting controls and/or accounting or financial reporting policies followed
by the Borrower and/or any of its Subsidiaries, which is submitted to the
Borrower by its independent accountants in connection
53
Exhibit 10.3
with any annual or interim audit made by them of the books of the Borrower or
any of its Subsidiaries.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event within
three Business Days, in the case of clause (i) below, or five Business Days, in
the case of clause (ii) below, after the Borrower or any of its Subsidiaries
obtains knowledge thereof, notice of
(i) the occurrence of any event which constitutes a Default or
Event of Default, which notice shall specify the nature thereof, the
period of existence thereof and what action the Borrower proposes to
take with respect thereto, and
(ii) any litigation or governmental or regulatory
investigation or proceeding pending against or involving the Borrower
or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the ability of
the Borrower to perform its obligations hereunder or under any other
Credit Document.
(g) ERISA. Promptly, and in any event within 10 days after the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows of the
occurrence of any of the following, the Borrower will deliver to each of the
Lenders a certificate on behalf of the Borrower of a Responsible Officer of the
Borrower setting forth the full details as to such occurrence and the action, if
any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC,
a Plan participant or the Plan administrator with respect thereto:
(i) that a Reportable Event has occurred with respect to any
Plan;
(ii) the institution of any steps by the Borrower, any ERISA
Affiliate, the PBGC or any other Person to terminate any Plan;
(iii) the institution of any steps by the Borrower or any
ERISA Affiliate to withdraw from any Plan;
(iv) the institution of any steps by the Borrower or any
Subsidiary to withdraw from any Multiemployer Plan or Multiple Employer
Plan, if such withdrawal could result in withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) in excess of
$1,000,000;
(v) a non-exempt "prohibited transaction" within the meaning
of Section 406 of ERISA in connection with any Plan;
(vi) that a Plan has an Unfunded Current Liability exceeding
$1,000,000;
(vii) any material increase in the contingent liability of the
Borrower or any Subsidiary with respect to any post-retirement welfare
liability; or
54
Exhibit 10.3
(viii) the taking of any action by, or the threatening of the
taking of any action by, the Internal Revenue Service, the Department
of Labor or the PBGC with respect to any of the foregoing.
(h) ENVIRONMENTAL MATTERS. Promptly upon, and in any event within 10
Business Days after, an officer of the Borrower obtains actual knowledge
thereof, notice of any of the following environmental matters which involves any
reasonable likelihood (in the Borrower's reasonable judgment) of resulting in a
Material Adverse Effect: (i) any pending or threatened (in writing)
Environmental Claim against the Borrower or any of its Subsidiaries or any Real
Property owned or operated by the Borrower or any of its Subsidiaries; (ii) any
condition or occurrence on or arising from any Real Property owned or operated
by the Borrower or any of its Subsidiaries that (A) results in noncompliance by
the Borrower or any of its Subsidiaries with any applicable Environmental Law or
(B) would reasonably be expected to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real Property; (iii)
any condition or occurrence on any Real Property owned, leased or operated by
the Borrower or any of its Subsidiaries that could reasonably be expected to
cause such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability by the Borrower or any of its Subsidiaries of
such Real Property under any Environmental Law; and (iv) the taking of any
removal or remedial action in response to the actual or alleged presence of any
Hazardous Material on any Real Property owned, leased or operated by the
Borrower or any of its Subsidiaries as required by any Environmental Law or any
governmental or other administrative agency. All such notices shall describe in
reasonable detail the nature of the Environmental Claim and the Borrower's or
such Subsidiary's response thereto.
(i) SEC REPORTS AND REGISTRATION STATEMENTS. Promptly upon transmission
thereof or other filing with the SEC, copies of all registration statements
(other than the exhibits thereto and any registration statement on Form S-8 or
its equivalent) and annual, quarterly or current reports that the Borrower or
any of its Subsidiaries files with the SEC.
(j) OTHER INFORMATION. With reasonable promptness, such other
information or documents (financial or otherwise) relating to the Borrower or
any of its Subsidiaries as any Lender may reasonably request from time to time.
SECTION 5.02. BOOKS, RECORDS AND INSPECTIONS.
Do the following, and will cause each of its Subsidiaries to do the
following: (i) keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Borrower or such Subsidiaries, as the case may be, in accordance
with GAAP, in the case of the Borrower, or which are reconcilable to a GAAP
presentation, in the case of any Subsidiary; and (ii) permit, upon at least five
Business Days' notice to the Chief Financial Officer or any other Responsible
Officer of the Borrower, officers and designated representatives of the
Administrative Agent or any of the Lenders to visit and inspect any of the
properties or assets of the Borrower and any of its Subsidiaries in whomsoever's
possession (but only to the extent the Borrower or such Subsidiary has the right
to do so to the extent in the possession of another Person), and to examine (and
make copies of or take extracts from) the books of account of the Borrower and
any of its Subsidiaries and discuss the affairs, finances and accounts of the
Borrower and of any of its Subsidiaries with, and be advised as to the same by,
its and their officers and independent accountants and independent
55
Exhibit 10.3
actuaries, if any, all at such reasonable times and intervals and to such
reasonable extent as the Administrative Agent or any of the Lenders may request.
SECTION 5.03. INSURANCE.
Do the following, and will cause each of its Subsidiaries to do the
following: (i) maintain insurance coverage by such insurers and in such forms
and amounts and against such risks as are generally consistent with the
insurance coverage maintained by the Borrower and its Subsidiaries at the date
hereof, and (ii) forthwith upon any Lender's written request, furnish to such
Lender such information about such insurance as such Lender may from time to
time reasonably request, which information shall be prepared in form and detail
satisfactory to such Lender and certified by a Responsible Officer of the
Borrower.
SECTION 5.04. PAYMENT OF TAXES AND CLAIMS.
Pay and discharge, and will cause each of its Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any properties belonging to it,
prior to the date on which penalties attach thereto, and all lawful claims
which, if unpaid, might become a Lien or charge upon any properties of the
Borrower or any of its Subsidiaries; provided that neither the Borrower nor any
of its Subsidiaries shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if it has maintained adequate reserves with respect thereto in accordance with
GAAP; and provided, further, that the Borrower will not be considered to be in
default of any of the provisions of this sentence if the Borrower or any
Subsidiary fails to pay any such amount which, individually or in the aggregate,
is immaterial to the Borrower and its Subsidiaries considered as an entirety.
SECTION 5.06. CORPORATE FRANCHISES.
Do, and will cause each of its Subsidiaries to do, or cause to be done,
all things necessary to preserve and keep in full force and effect its corporate
or other organizational existence, rights, authority and franchises, provided
that nothing in this Section 5.05 shall be deemed to prohibit (i) any
transaction permitted by Section 6.02; (ii) the termination of existence of any
Subsidiary if (A) the Borrower determines that such termination is in its best
interest and (B) such termination is not adverse in any material respect to the
Lenders; or (iii) the loss of any rights, authorities or franchises if the loss
thereof, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.07. GOOD REPAIR.
Do the following, and will cause each of its Subsidiaries to the
following: ensure that its material properties and equipment used or useful in
its business in whomsoever's possession they may be, are kept in good repair,
working order and condition, normal wear and tear excepted, and that from time
to time there are made in such properties and equipment all needful and proper
repairs, renewals, replacements, extensions, additions, betterments and
improvements, thereto, to the extent and in the manner customary for companies
in similar businesses.
SECTION 5.07. COMPLIANCE WITH STATUTES, ETC.
Do the following, and will cause each of its Subsidiaries to the
following: comply, in all material respects, with all Applicable Law other than
those (i) being contested in good faith by
56
Exhibit 10.3
appropriate proceedings, as to which adequate reserves are established to the
extent required under GAAP, and (ii) the noncompliance with which would not
have, and which would not be reasonably expected to have, a Material Adverse
Effect or a material adverse effect on the ability of the Borrower to perform
its obligations under any Loan Document.
SECTION 5.08. COMPLIANCE WITH ENVIRONMENTAL LAWS.
Without limitation of the covenants contained in Section 5.07 hereof:
(a) Do the following, and will cause each of its Subsidiaries to the
following: (i) comply, in all material respects, with all Environmental Laws
applicable to the ownership, lease or use of all Real Property now or hereafter
owned, leased or operated by the Borrower or any of its Subsidiaries, and
promptly pay or cause to be paid all costs and expenses incurred in connection
with such compliance, except for such noncompliance as would not have, and which
would not be reasonably expected to have, a Material Adverse Effect or a
material adverse effect on the ability of the Borrower to perform its
obligations under any Loan Document; and (ii) keep or cause to be kept all such
Real Property free and clear of any Liens imposed pursuant to such Environmental
Laws which are not permitted under Section 6.03.
(b) Without limitation of the foregoing, if the Borrower or any of its
Subsidiaries shall generate, use, treat, store, release or dispose of, or permit
the generation, use, treatment, storage, release or disposal of, Hazardous
Materials on any Real Property now or hereafter owned, leased or operated by the
Borrower or any of its Subsidiaries, or transport or permit the transportation
of Hazardous Materials to or from any such Real Property, any such action shall
be effected only in the ordinary course of business and in any event in
compliance, in all material respects, with all Environmental Laws applicable
thereto, except for such noncompliance as would not have, and which would not be
reasonably expected to have, a Material Adverse Effect or a material adverse
effect on the ability of the Borrower to perform its obligations under any Loan
Document.
(c) If required to do so under any applicable order of any governmental
agency, undertake, and cause each of its Subsidiaries to undertake, any clean
up, removal, remedial or other action necessary to remove and clean up any
Hazardous Materials from any Real Property owned, leased or operated by the
Borrower or any of its Subsidiaries in accordance with, in all material
respects, the requirements of all applicable Environmental Laws and in
accordance with, in all material respects, such orders of all governmental
authorities, except (i) to the extent that the Borrower or such Subsidiary is
contesting such order in good faith and by appropriate proceedings and for which
adequate reserves have been established to the extent required by GAAP, or (ii)
for such noncompliance as would not have, and which would not be reasonably
expected to have, a Material Adverse Effect or a material adverse effect on the
ability of the Borrower to perform its obligations under any Loan Document.
SECTION 5.09. FISCAL YEARS, FISCAL QUARTERS.
(a) Do the following, for consolidated financial reporting purposes,
continue to use the Saturday ending on or nearest to January 31 as the end of
its fiscal year and the dates determined in accordance with the National Retail
Federation's 4-5-4 Suggested Retail Calendar as the end of its first three
fiscal quarters, subject to any changes in such fiscal year or fiscal quarters
made as provided below. If the Borrower shall change (x) its fiscal year or
fiscal quarters, or (y) any of its Subsidiaries' fiscal years or fiscal quarters
(other than the fiscal year or fiscal quarters of a
57
Exhibit 10.3
Person which becomes a Subsidiary, made at the time such Person becomes a
Subsidiary, to conform to the Borrower's fiscal year and fiscal quarters or to
conform to the fiscal year or fiscal quarters which the Borrower generally
utilizes for its Subsidiaries), the Borrower will promptly, and in any event
within 30 days following any such change, deliver a notice to the Administrative
Agent and the Lenders describing such change and any material accounting entries
made in connection therewith and stating whether such change will have any
impact upon any financial computations to be made hereunder, and if any such
impact is foreseen, describing in reasonable detail the nature and extent of
such impact. If the Majority Lenders determine that any such change will have
any impact upon any financial computations to be made hereunder which is adverse
to the Lenders, the Borrower will, if so requested by the Administrative Agent,
enter into an amendment to this Agreement, in form and substance satisfactory to
the Administrative Agent and the Majority Lenders, modifying any of the
financial covenants or related provisions hereof in such manner as the Required
Lenders determine is necessary to eliminate such adverse effect.
SECTION 5.09. CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY.
(a) If at any time after the Closing Date,
(x) the Borrower has any Subsidiary (other than a Foreign
Subsidiary as to which Section 5.10(b) applies) which is not a party to
the Subsidiary Guaranty, or
(y) an Event of Default shall have occurred and be continuing
and the Borrower has any Subsidiary which is not a party to the
Subsidiary Guaranty,
notify the Administrative Agent in writing of such event, identifying
the Subsidiary in question and referring specifically to the rights of the
Administrative Agent and the Lenders under this Section. The Borrower will,
within 30 days following request therefor from the Administrative Agent (who may
give such request on its own initiative or upon request by the Majority
Lenders), cause such Subsidiary to deliver to the Administrative Agent, in
sufficient quantities for the Lenders, (i) a joinder supplement, satisfactory in
form and substance to the Administrative Agent and the Required Lenders, duly
executed by such Subsidiary, pursuant to which such Subsidiary joins in the
Subsidiary Guaranty as a guarantor thereunder, and (ii) if such Subsidiary is a
corporation, resolutions of the Board of Directors of such Subsidiary, certified
by the Secretary or an Assistant Secretary of such Subsidiary as duly adopted
and in full force and effect, authorizing the execution and delivery of such
joinder supplement, or if such Subsidiary is not a corporation, such other
evidence of the authority of such Subsidiary to execute such joinder supplement
as the Administrative Agent may reasonably request.
Notwithstanding the foregoing provisions of this Section 5.10 the
Borrower shall not, unless an Event of Default shall have occurred and be
continuing, be required to cause a Foreign Subsidiary to join in the Subsidiary
Guaranty, if (i) to do so would subject the Borrower to liability for additional
United States income taxes by virtue of Section 956 of the Internal Revenue Code
in an amount the Borrower considers material, and (ii) the Borrower provides the
Administrative Agent with documentation, including computations prepared by the
Borrower's internal tax officer, its independent accountants or tax counsel,
reasonably acceptable to the Majority Lenders, in support thereof.
58
Exhibit 10.3
SECTION 5.11. USE OF PROCEEDS.
Use the proceeds of the Advances only in accordance with all applicable
laws, including Regulations T, U and X of the Board of Governors of the Federal
Reserve System.
SECTION 5.12. LEGAL EXISTENCE.
Preserve and keep in full force and effect its existence, corporate or
otherwise, material licenses and rights (statutory or otherwise) and franchises
to the extent necessary to carry on its business.
SECTION 5.13. MAINTENANCE OF COMMON STOCK LISTING.
Maintain and cause to be quoted, at all times, shares of the Borrower's
Common Stock on the NYSE or NASDAQ.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Advance remains unpaid or any Lender has any Commitment
hereunder, the Borrower will not, at any time without the written consent of the
Majority Lenders or if required under Section 12.01 of all Lenders do any of the
following:
SECTION 6.01. CHANGES IN BUSINESS.
Neither the Borrower nor any of its Subsidiaries will engage in any
business other than Permitted Activities.
SECTION 6.02. CONSOLIDATION, MERGER, ACQUISITIONS, ASSET SALES, ETC.
The Borrower will not, and will not permit any Subsidiary to, (1) wind
up, liquidate or dissolve its affairs, (2) enter into any transaction of merger
or consolidation, (3) make or otherwise effect any Future Acquisition, (4) sell
or otherwise dispose of any of its property or assets outside the ordinary
course of business, or otherwise make or otherwise effect any Asset Sale, or (5)
agree to do any of the foregoing at any future time, except that the following
shall be permitted, if such transaction would not affect the Lenders' right to
Convert Advances hereunder:
(a) CERTAIN INTERCOMPANY MERGERS, ETC. If no Default or Event of
Default shall have occurred and be continuing or would result therefrom, (i) the
merger, consolidation or amalgamation of any Wholly-Owned Subsidiary with or
into the Borrower or another Wholly-Owned Subsidiary, so long as in any merger,
consolidation or amalgamation involving the Borrower, the Borrower is the
surviving or continuing or resulting corporation, (ii) the liquidation or
dissolution of any Wholly-Owned Subsidiary of the Borrower, and (iii) the
transfer or other disposition of any property by the Borrower to any
Wholly-Owned Subsidiary or by any Wholly-Owned Subsidiary to the Borrower or any
other Wholly-Owned Subsidiary of the Borrower, shall each be permitted.
(b) PERMITTED ACQUISITIONS. If no Default or Event of Default shall
have occurred and be continuing or would result therefrom, the Borrower or any
Subsidiary may make any acquisition which is a Permitted Acquisition, provided
that all of the conditions contained in the definition of the term Permitted
Acquisition are satisfied.
(c) PERMITTED DISPOSITIONS. If no Default or Event of Default shall
have occurred and be continuing or would result therefrom, the Borrower or any
of its Subsidiaries may (i) sell any
59
Exhibit 10.3
property, land or building (including any related receivables or other
intangible assets) to any Person which is not a Subsidiary of the Borrower, or
(ii) sell the entire capital stock (or other equity interests) and Indebtedness
of any Subsidiary owned by the Borrower or any other Subsidiary to any Person
which is not a Subsidiary of the Borrower, or (iii) permit any Subsidiary to be
merged or consolidated with a Person which is not an Affiliate of the Borrower,
or (iv) consummate any other Asset Sale with a Person who is not a Subsidiary of
the Borrower; provided that:
(1) the consideration for such transaction represents fair
value (as determined by management of the Borrower), and at least 75% of such
consideration consists of cash,
(2) in the case of any such transaction involving
consideration in excess of $1,000,000, at least five Business Days prior to the
date of completion of such transaction the Borrower shall have delivered to the
Administrative Agent an officer's certificate executed on behalf of the Borrower
by a Responsible Officer of the Borrower, which certificate shall contain a
description of the proposed transaction, the date such transaction is scheduled
to be consummated, the estimated purchase price or other consideration for such
transaction, financial information pertaining to compliance with the preceding
clause (A), and which shall (if requested by the Administrative Agent) include a
certified copy of the draft or definitive documentation pertaining thereto, and
(3) contemporaneously therewith, the Borrower prepays Advances
as and to the extent contemplated by Section 2.09.
(d) LEASES. The Borrower or any of its Subsidiaries may enter into
leases of Property or assets not constituting Future Acquisitions, provided such
leases are not otherwise in violation of this Agreement.
(e) CAPITAL EXPENDITURES. The Borrower and it Subsidiaries shall be
permitted to make the Consolidated Capital Expenditures, provided such
Consolidated Capital Expenditures are not otherwise in violation of this
Agreement.
(f) PERMITTED INVESTMENTS. The Borrower and it Subsidiaries shall be
permitted to make the investments permitted pursuant to Section 6.04.
SECTION 6.03. LIENS.
The Borrower will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Lien upon or with respect to any
property or assets of any kind (real or personal, tangible or intangible) of the
Borrower or any such Subsidiary whether now owned or hereafter acquired, or sell
any such property or assets subject to an understanding or agreement, contingent
or otherwise, to repurchase such property or assets (including sales of accounts
receivable or notes with or without recourse to the Borrower or any of its
Subsidiaries, other than for purposes of collection of delinquent accounts in
the ordinary course of business) or assign any right to receive income, or file
or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute, except
that the foregoing restrictions shall not apply to:
(a) STANDARD PERMITTED LIENS: the Standard Permitted Liens;
60
Exhibit 10.3
(b) EXISTING LIENS, ETC.: Liens (i) in existence on the Effective Date
which are listed, and the Indebtedness secured thereby and the property subject
thereto on the Effective Date described, in Annex IV, or (ii) arising out of the
refinancing, extension, renewal or refunding of any Indebtedness secured by any
such Liens, provided that the principal amount of such Indebtedness is not
increased and such Indebtedness is not secured by any additional assets;
(c) SENIOR CREDIT FACILITY: Liens securing the Senior Credit Facility
and/or the Designated Hedge Agreements on property or assets of any kind (real
or personal, tangible or intangible) of the Borrower or any Subsidiary, whether
now owned or hereafter acquired and whether in existence on the Closing Date or
otherwise; and
(d) PURCHASE MONEY LIENS AND LIENS ON ACQUIRED PROPERTIES: Liens which
(i) are placed upon equipment or machinery or improvements to
Real Property (including the associated Real Property) used in the
ordinary course of business of the Borrower or any Subsidiary at the
time of (or within 180 days after) the acquisition of such equipment or
machinery or the completion of such improvements by the Borrower or any
such Subsidiary to secure Indebtedness incurred to pay or finance all
or a portion of the purchase price or other cost thereof, provided that
the Lien encumbering the equipment or machinery so acquired or the Real
Property so improved does not encumber any other asset of the Borrower
or any such Subsidiary; or
(ii) are existing on property or other assets at the time
acquired by the Borrower or any Subsidiary or on assets of a Person at
the time such Person first becomes a Subsidiary of the Borrower;
provided that (A) any such Liens were not created at the time of or in
contemplation of the acquisition of such assets or Person by the
Borrower or any of its Subsidiaries; (B) in the case of any such
acquisition of a Person, any such Lien attaches only to the property
and assets of such Person; and (C) in the case of any such acquisition
of property or assets by the Borrower or any Subsidiary, any such Lien
attaches only to the property and assets so acquired and not to any
other property or assets of the Borrower or any Subsidiary;
provided that the Indebtedness secured by any such Lien does not exceed
100% of the fair market value of the property and assets to which such Lien
attaches, determined at the time of the acquisition or improvement of such
property or asset or the time at which such Person becomes a Subsidiary of the
Borrower (except in the circumstances described in clause (ii) above to the
extent such Liens constituted customary Purchase Money Liens at the time of
incurrence and were entered into in the ordinary course of business).
SECTION 6.04. ADVANCES, INVESTMENTS, LOANS AND GUARANTY OBLIGATIONS.
The Borrower will not, and will not permit any of its Subsidiaries to,
(1) lend money or credit or make advances to any Person, (2) purchase or acquire
any stock, obligations or securities of, or any other interest in, or make any
capital contribution to, or other investment in, any Person, (3) create, acquire
or hold any Subsidiary, (4) be or become a party to any joint venture, member of
a limited liability company or partner of a partnership, or (5) be or become
obligated under any Guaranty Obligations (other than those created in favor of
the Lenders pursuant to the Loan Documents), except:
61
Exhibit 10.3
(a) the Borrower or any of its Subsidiaries may invest in cash
and Cash Equivalents;
(b) any endorsement of a check or other medium of payment for
deposit or collection, or any similar transaction in the normal course
of business;
(c) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(d) investments acquired by the Borrower or any of its
Subsidiaries (i) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer
of such other investment, or (ii) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
(e) loans and advances to employees for business-related
travel expenses, moving expenses, costs of replacement homes, business
machines or supplies, automobiles and other similar expenses, in each
case incurred in the ordinary course of business, shall be permitted;
(f) investments in the capital of any Wholly-Owned Subsidiary
which is not a Foreign Subsidiary;
(g) to the extent not permitted by the foregoing clauses,
existing investments in any Subsidiaries (and any increases thereof
attributable to increases in retained earnings);
(h) to the extent not permitted by the foregoing clauses, the
existing loans, advances, investments and guarantees described on
Schedule 3.01(h) hereto;
(i) any unsecured Guaranty Obligations;
(j) investments of the Borrower and its Subsidiaries in Hedge
Agreements;
(k) loans and advances by any Subsidiary of the Borrower to
the Borrower, provided that the Indebtedness represented thereby
constitutes Subordinated Indebtedness;
(l) loans and advances by the Borrower or by any Subsidiary of
the Borrower to, or other investments in, any Subsidiary of the
Borrower which is (i) a Subsidiary Guarantor, (ii) a Wholly-Owned
Subsidiary, and (iii) not a Foreign Subsidiary;
(m) loans and advances by any Subsidiary of the Borrower which
is not a Subsidiary Guarantor to, or other investments by any such
Subsidiary in, any other Subsidiary of the Borrower which is a
Wholly-Owned Subsidiary;
(n) the Future Acquisitions permitted by Section 6.02;
62
Exhibit 10.3
(o) loans, advances and investments of any Person which are
outstanding at the time such Person becomes a Subsidiary of the
Borrower as a result of an Acquisition permitted by Section 6.02, but
not any increase in the amount thereof; and
(p) any other loans, advances, investments (whether in the
form of cash or contribution of property, and if in the form of a
contribution of property, such property shall be valued for purposes of
this clause at the fair value thereof as reasonably determined by the
Borrower) and Guaranty Obligations, in or to or for the benefit of, any
corporation, partnership, limited liability company, joint venture or
other business entity, which is not itself a Subsidiary of the Borrower
or owned or controlled by any director, officer or employee of the
Borrower or any of its Subsidiaries, not otherwise permitted by the
foregoing clauses, made after December 31, 1999 (such loans, advances
and investments and Guaranty Obligations, collectively, "BASKET
INVESTMENTS AND GUARANTEES"), shall be permitted to be incurred if (i)
no Event of Default shall have occurred and be continuing, or would
result therefrom, and (ii) the aggregate cumulative amount of such
Basket Investments and Guarantees (taking into account any repayments
of loans or advances), does not exceed $10,000,000.
SECTION 6.05. DIVIDENDS, ETC.
The Borrower will not (x) directly or indirectly made, except that (i)
Subsidiaries may make Distributions to the Borrower and (ii) the Borrower may
make cash payments for any of such purposes if:
(a) no Default under Section 8.01(a) or Event of Default shall
have occurred and be continuing at the time of declaration or payment
thereof;
(b) after giving pro forma effect thereto, the Borrower will
be in compliance with the provisions of Article VII hereof; and
(c) at the time of making any such cash payment and after
giving effect thereto, the aggregate amount so expended during the then
current fiscal year does not exceed the greater of (A) $5,000,000, or
(B) 10% of the Consolidated Net Income of the Borrower accrued during
such fiscal year through the most recently completed fiscal month of
such fiscal year, provided that in any case there shall be excluded
from Consolidated Net Income of the Borrower for purposes of this
Section 6.05(c) only: (x) any extraordinary items of gain, any gain
arising from any sale or other disposition of any capital asset
otherwise than in the ordinary course of business, and any gain arising
from the revaluation of assets; and (y) any restoration to income of
any reserve except to the extent that the provision therefor was made
out of income otherwise includible in determining Consolidated Net
Income of the Borrower for such period.
SECTION 6.06. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS.
The Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into, incur or permit to exist or become
effective, any agreement or other arrangement that prohibits, restricts or
imposes any condition upon the ability of any such Subsidiary to pay dividends
or make any other distributions on its capital stock or any other interest or
participation in its profits owned by the Borrower or any Subsidiary of the
Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the
Borrower, or to make loans or advances to the Borrower or any of the Borrower's
other Subsidiaries, or transfer any of its
63
Exhibit 10.3
property or assets to the Borrower or any of the Borrower's other Subsidiaries,
except for such restrictions existing under or by reason of (i) Applicable Law,
(ii) this Agreement and the other Loan Documents, (iii) the Senior Credit
Facility, (iv) restrictions contained agreements evidencing in Material Debt as
in effect on the Closing Date (and similar restrictions governing any
Indebtedness incurred in connection with the refinancing of the Material Debt),
and (v) customary restrictions affecting only a Subsidiary of the Borrower under
any agreement or instrument governing any of the Indebtedness of a Subsidiary.
SECTION 6.07.TRANSACTIONS WITH AFFILIATES.
The Borrower will not, and will not permit any Subsidiary to, enter
into any transaction or series of transactions with any Affiliate (other than,
in the case of the Borrower, any Subsidiary, and in the case of a Subsidiary,
the Borrower or another Subsidiary) other than in the ordinary course of
business of and pursuant to the reasonable requirements of the Borrower's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person other than an Affiliate, except (i) sales
of goods to an Affiliate for use or distribution outside the United States which
in the good faith judgment of the Borrower complies with any applicable legal
requirements of the Internal Revenue Code, or (ii) agreements and transactions
with and payments to officers, directors and shareholders which are either (A)
entered into in the ordinary course of business and not prohibited by any of the
provisions of this Agreement, or (B) entered into outside the ordinary course of
business, approved by the directors or shareholders of the Borrower, and not
prohibited by any of the provisions of this Agreement.
SECTION 6.08. PLAN TERMINATIONS, MINIMUM FUNDING, ETC.
The Borrower will not, and will not permit any ERISA Affiliate to, (i)
terminate any Plan or plans so as to result in liability of the Borrower or any
ERISA Affiliate to the PBGC in excess of, in the aggregate, the amount which is
equal to 10% of the Borrower's Consolidated Tangible Net Worth as of the date of
the then most recent financial statements furnished to the Lenders pursuant to
the provisions of this Agreement, (ii) permit to exist one or more events or
conditions which reasonably present a material risk of the termination by the
PBGC of any Plan or Plans with respect to which the Borrower or any ERISA
Affiliate would, in the event of such termination, incur liability to the PBGC
in excess of such amount in the aggregate, or (iii) fail to comply with the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
any Plan.
SECTION 6.09. ORGANIZATION DOCUMENTS.
Amend, modify or otherwise change any of the terms or provisions in any
of its constituent documents as in effect on the date hereof, except for changes
that do not affect in any way the Borrower's or any of its Subsidiaries' rights
and obligations to enter into and perform the Loan Documents to which it is a
party and to pay all of the Obligations under the Loan Documents and that do not
otherwise have a Material Adverse Effect.
ARTICLE VII
FINANCIAL COVENANTS.
So long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower shall, unless the Majority Lenders otherwise
consent in writing:
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Exhibit 10.3
SECTION 7.01. MINIMUM CONSOLIDATED TANGIBLE NET WORTH.
The Borrower will not permit its Consolidated Tangible Net Worth at any
time to be less than $218,000,000.
SECTION 7.02. CONSOLIDATED TOTAL DEBT/CONSOLIDATED EBITDA RATIO.
The Borrower will not at any time permit the ratio of (x) its
Consolidated Total Debt at such time to (y) its Consolidated EBITDA for its
Testing Period most recently ended, to exceed 3.75 to 1.00.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT.
Any of the following specified events (each an "EVENT OF DEFAULT")
shall constitute an Event of Default hereunder:
(a) PAYMENTS: the Borrower shall fail to pay when due any principal of
any Advance, or the Borrower shall fail to pay within five days after the date
when due any interest on any Advance, or any other Loan Party shall fail to make
any other payment under any Loan Document within five days following the date
when the same becomes due and payable; or
(b) REPRESENTATIONS, ETC.: any representation, warranty or statement
made by the Borrower or any other Loan Party herein or in any other Loan
Document or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
(c) CERTAIN COVENANTS: the Borrower shall default in the due
performance or observance by it of any term, covenant or agreement contained in
Article VII of this Agreement; or
(d) OTHER COVENANTS: the Borrower shall default in the due performance
or observance by it of any term, covenant or agreement contained in this
Agreement or any other Credit Document, other than those referred to in Section
8.01(a) or (b) or (c) above, and such default is not remedied within 30 days
after the earlier of (i) an officer of the Borrower obtaining actual knowledge
of such default and (ii) the Borrower receiving written notice of such default
from the Administrative Agent or the Majority Lenders (any such notice to be
identified as a "notice of default " and to refer specifically to this
paragraph); or
(e) INDEBTEDNESS UNDER OTHER AGREEMENTS: the Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations), or having an aggregate unpaid principal amount of
$10,000,000 or greater, and such default shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to such
Indebtedness, or (ii) default in the observance or performance of any agreement
or condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto (and all grace periods
applicable to such observance, performance or condition shall have expired), or
any other event shall occur or condition exist, the effect of which default or
other event or condition is that such Indebtedness of the Borrower or any of its
Subsidiaries shall be declared to be, or shall otherwise become, due and
payable, or
65
Exhibit 10.3
shall be required to be prepaid (other than by a regularly scheduled required
prepayment or redemption) prior to the stated maturity thereof; or
(f) OTHER LOAN DOCUMENTS: the Subsidiary Guaranty shall cease for any
reason (other than termination in accordance with its terms) to be in full force
and effect; or any Loan Party shall default in any payment obligation
thereunder; or any Loan Party shall default in any material respect in the due
performance and observance of any other obligation thereunder and such default
shall continue unremedied for a period of at least 30 days after notice by the
Administrative Agent or the Majority Lenders; or any Loan Party shall (or seek
to) disaffirm or otherwise limit its obligations thereunder otherwise than in
strict compliance with the terms thereof; or
(g) JUDGMENTS: one or more judgments or decrees shall be entered
against the Borrower and/or any of its Subsidiaries involving a liability (other
than a liability covered by insurance, as to which the carrier has adequate
claims paying ability and has not reserved its rights) of $10,000,000 or more in
the aggregate for all such judgments and decrees for the Borrower and its
Subsidiaries) and any such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 30 days (or such longer
period, not in excess of 60 days, during which enforcement thereof, and the
filing of any judgment lien, is effectively stayed or prohibited) from the entry
thereof; or
(h) BANKRUPTCY, ETC.: any of the following shall occur:
(i) the Borrower, or any of its Subsidiaries which, alone or
when combined or consolidated with any other Subsidiary which itself is
the subject of a case or proceeding referred to below, would be a
Material Subsidiary (the Borrower and each of such other Persons, each
a "PRINCIPAL PARTY") shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy," as now
or hereafter in effect, or any successor thereto (the "BANKRUPTCY
CODE"); or
(ii) an involuntary case is commenced against any Principal
Party under the Bankruptcy Code and the petition is not controverted
within 10 days, or is not dismissed within 60 days, after commencement
of the case; or
(iii) a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the
property of any Principal Party; or
(iv) any Principal Party commences (including by way of
applying for or consenting to the appointment of, or the taking of
possession by, a rehabilitator, receiver, custodian, trustee,
conservator or liquidator (collectively, a "CONSERVATOR") of itself or
all or any substantial portion of its property) any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency, liquidation, rehabilitation,
conservatorship or similar law of any jurisdiction whether now or
hereafter in effect relating to such Principal Party; or
(v) any such proceeding is commenced against any Principal
Party to the extent such proceeding is consented by such Person or
remains undismissed for a period of 60 days; or
66
Exhibit 10.3
(vi) any Principal Party is adjudicated insolvent or bankrupt;
or
(vii) any order of relief or other order approving any such
case or proceeding is entered; or
(viii) any Principal Party suffers any appointment of any
conservator or the like for it or any substantial part of its property
which continues undischarged or unstayed for a period of 60 days; or
(ix) any Principal Party makes a general assignment for the
benefit of creditors; or
(x) any corporate (or similar organizational) action is taken
by any Principal Party for the purpose of effecting any of the
foregoing; or
(i) ERISA: (A) any of the events described in clauses (i) through
(viii) of Section 5.01(g) shall have occurred; or (B) there shall result from
any such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and any
such event or events or any such lien, security interest or liability, in each
case referred to in the foregoing clauses (A) or (B), individually, and/or in
the aggregate, in the opinion of the Majority Lenders, has had, or could
reasonably be expected to have, a Material Adverse Effect; or
SECTION 8.02. ACCELERATION, ETC.
Upon the occurrence of any Event of Default, and at any time
thereafter, if any Event of Default shall then be continuing, the Administrative
Agent shall, upon the written request of the Majority Lenders, by written notice
to the Borrower, take any or all of the following actions, without prejudice to
the rights of any Lender to enforce its claims against the Borrower or any other
Party in any manner permitted under Applicable Law:
(a) declare the Notes terminated, whereupon the Commitment of each
Lender shall forthwith terminate immediately without any other notice of any
kind;
(b) declare the principal of and any accrued interest in respect of all
of the Notes, and all Obligations owing hereunder and thereunder to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and/or
(c) take such other actions and exercise any other right or remedy
available under any of the Loan Documents or applicable law;
provided that, if an Event of Default specified in Section 8.01(h) shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (a) and/or
(b) above shall occur automatically without the giving of any such notice.
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Exhibit 10.3
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.01. AUTHORIZATION AND ACTION.
Each Lender hereby appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by the Loan Documents (including, without
limitation, enforcement or collection thereof), the Administrative Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders; provided, however, that
the Administrative Agent shall not be required to take any action which exposes
the Administrative Agent to personal liability or which is contrary to the Loan
Documents or Applicable Law. The Administrative Agent agrees to deliver promptly
to each Lender notice of each notice given to it by the Borrower pursuant to the
terms of this Agreement.
SECTION 9.02. ADMINISTRATIVE AGENT'S RELIANCE, ETC.
Neither the Administrative Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
by it or them under or in connection with any Loan Document, except for its or
their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Administrative Agent: (i) may treat the payee
of any Note as the holder thereof until the Administrative Agent receives and
accepts a Lender Assignment entered into by the Lender which is the payee of
such Note, as assignor, and an assignee, as provided in Section 12.07 hereof;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with any Loan Document; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of any Loan Document on the part of the Borrower to be performed or
observed, or to inspect any property (including the books and records) of the
Borrower; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of any Loan Document by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by facsimile) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 9.03. PRUDENTIAL AND ITS AFFILIATES.
With respect to its Commitment and the Note issued to it, Prudential
shall have the same rights and powers under the Loan Documents as any other
Lender and may exercise the same as though it were not the Administrative Agent,
and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated,
include Prudential in its individual capacity. Prudential and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all
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Exhibit 10.3
as if Prudential were not the Administrative Agent and without any duty to
account therefore to the Lenders.
SECTION 9.04. LENDER CREDIT DECISION.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on the
financial statements and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative 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.
SECTION 9.05. INDEMNIFICATION.
The Lenders agree to indemnify the Administrative Agent (to the extent
not reimbursed by the Borrower), ratably according to the respective principal
amounts of the Notes then held by each of them (or if no Notes are at the time
outstanding, ratably according to the respective Commitments of the Lenders; if
any Notes or Commitments are held by the Borrower or any Affiliate thereof, any
ratable apportionment hereunder shall exclude the principal amount of the Notes
held by the Borrower or such Affiliate or their respective Commitments (if any)
hereunder), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Administrative Agent in its capacity as such in any way
relating to or arising out of any Loan Document or any action taken or omitted
by the Administrative Agent in its capacity as such under any Loan Document,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for
such Lender's ratable share of any out-of-pocket expenses (including counsel
fees) incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, the Loan Documents to the
extent that the Administrative Agent is entitled to reimbursement for such
expenses pursuant to Section 12.04 but is not reimbursed for such expenses by
the Borrower.
SECTION 9.06. SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, with any such resignation to
become effective only upon the appointment of a successor Administrative Agent
pursuant to this Section 9.06. Upon any such resignation, the Majority Lenders
shall have the right to appoint a successor Administrative Agent, which shall be
a Lender or another commercial bank or trust company reasonably acceptable to
the Borrower organized or licensed under the laws of the United States, or of
any State thereof. If no successor Administrative Agent shall have been so
appointed by the Majority Lenders, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which shall be Lender or
shall be another commercial bank or trust company organized or licensed under
the laws of
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Exhibit 10.3
the United States or of any State thereof reasonably acceptable to the Borrower.
In addition to the foregoing right of the Administrative Agent to resign, the
Majority Lenders may remove the Administrative Agent at any time, with or
without cause, concurrently with the appointment by the Majority Lenders of a
successor Administrative Agent. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Article VII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under the Loan Documents.
ARTICLE X
CONVERSION OF ADVANCES
SECTION 10.01. CONVERSION PRIVILEGE AND CONVERSION PRICE.
(a) Subject to and upon compliance with the provisions of this Article,
at any time and from time to time after the first anniversary of the Closing
Date, to the extent Advances remain outstanding, any Lender may at its option
convert ("CONVERT"; or a "CONVERSION") all or a portion of its Advances into
fully paid and nonassessable shares of Common Stock of the Borrower ("CONVERSION
SECURITIES") at the Conversion Price, determined as hereinafter provided, in
effect at the time of receipt of a Conversion Notice by the Borrower. Such
conversion right shall expire at the close of business on the Maturity Date.
(b) Each Lender that elects to convert its Advances in accordance with
the terms of this Article (a "CONVERTING LENDER") shall convert such Advances
into Conversion Securities by dividing the amount of such Advances plus all
accrued and unpaid interest thereon by the Conversion Price. The "CONVERSION
PRICE" will be equal to 95% of the arithmetic mean (and rounded to the nearest
one-hundredth of a cent) of the high and low sales price per share of the Common
Stock as reported on the NYSE on each of the 20 trading days ending on the day
preceding the date of the Conversion Notice.
SECTION 10.02. EXERCISE OF CONVERSION PRIVILEGE.
(a) In order to exercise the Conversion with respect to any Advance or
portion thereof, a Converting Lender shall deliver to the Borrower written
notice (the "CONVERSION NOTICE") by telecopier, or any other method described in
Section 12.02 hereof, not less than two Business Days nor more than 10 Business
Days prior to the date of such Conversion (the "CONVERSION DATE"). The
Conversion Notice shall describe (1) the proposed Conversion Date, (2) the
amount of the Advances and accrued interest to be Converted, (3) any portion of
the Advances held by such Converting Lender that are not to be Converted, (4)
the calculation of the Conversion Price, (5) the number Conversion Securities to
be issued and (6) the amount of cash, if any, to be paid by the Borrower to the
Converting Lender in lieu of fractional shares.
(b) Conversion Securities issued on a Conversion Date shall be deemed
to have been issued immediately prior to the close of business on such
Conversion Date, and a Converting Lender shall be treated for all purposes as
the record holder of such Conversion Securities at
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Exhibit 10.3
such time. On the Conversion Date, the Borrower shall issue and deliver to the
Converting Lender, (i) a certificate or certificates for the Conversion
Securities issuable on such Conversion Date, (ii) payment in lieu of any
fraction of a share, as provided in Section 10.03(a) hereof.
(c) All Conversion Securities delivered upon such Conversion shall bear
a restrictive legend substantially in the form of the legend set forth in the
Registration Rights Agreement and shall be subject to the terms and conditions
set forth therein. If Conversion Securities to be issued upon Conversion are to
be registered in a name other than that of the Lender, the security registrar
shall, prior to such Conversion, record in the security register the name of the
Person in whose name such Conversion Securities are to be registered.
SECTION 10.03. FRACTIONS OF SHARES OF COMMON STOCK.
No fractional shares of Common Stock or scrip certificates in respect
thereof shall be issued upon Conversion. The number of full shares which shall
be issuable upon conversion thereof shall be computed on the basis of the
aggregate amount of Advances to be Converted plus accrued and unpaid interest
thereon in accordance with the terms of Section 10.01(b) hereof. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any Advances, the Borrower shall pay a cash adjustment in respect
of such fraction (calculated to the nearest 1/100 of a share) in an amount in
Dollars equal to the same fraction of the Conversion Securities multiplied by a
fraction the numerator of which shall be the Conversion Price and the
denominator of which shall be 0.95.
SECTION 10.04. BORROWER TO RESERVE COMMON STOCK.
The Borrower shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but previously unissued Common Stock,
for the purpose of effecting the Conversion of all outstanding Advances and
interest thereon, the full number of shares of Common Stock then issuable upon
the conversion of all such Advances.
SECTION 10.05. TAXES ON CONVERSIONS.
The Borrower will pay any and all transfer, stamp, documentary and
other similar taxes and duties that may be payable in respect of the issue or
delivery of Conversion Securities.
SECTION 10.06. COVENANT AS TO COMMON STOCK.
The Borrower covenants that all shares of Common Stock which may be
delivered upon Conversion of Advances will be newly issued shares, upon such
delivery will have been duly authorized and validly issued, will be fully paid
and nonassessable and the Borrower will pay all taxes, liens and charges with
respect to the issue thereof. The Borrower further covenants that all
governmental, corporate, shareholder and third-party approvals (including those
of any exchange on which such Conversion Securities are, or are proposed to be
listed) will have been duly obtained and will be in full force and effect on or
before any Conversion Securities are or are required to be issued pursuant to
this Article.
SECTION 10.07. REORGANIZATION, RECLASSIFICATION, MERGER OR SALE.
If the Borrower shall reorganize or reclassify the outstanding shares
of Common Stock (other than to change the par value thereof) or effect a merger
or similar transaction in which the Borrower is not the surviving or continuing
corporation after such merger or similar transaction, then the Advances shall be
convertible into the stock, securities or assets as would otherwise be
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Exhibit 10.3
issued or payable with respect to or in exchange for that number of shares of
Common Stock into which such Advances could have been converted immediately
prior to such reorganization, reclassification or transaction (assuming that a
Conversion Date could have occurred at such time) or into Common Stock, as each
Electing Lender may elect. The Corporation will not effect any merger or similar
transaction, unless prior to the consummation thereof the successor or
continuing corporation resulting from such merger or similar transaction shall
assume by written instrument, the obligation to deliver to each Electing Lender
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Electing Lender may be entitled to receive.
ARTICLE XI
SUBORDINATION
SECTION 11.01. SUBORDINATED DEBT SUBORDINATE TO SENIOR INDEBTEDNESS.
The Lenders agree that the Obligations of the Loan Parties under the
Loan Documents are subordinate in right of payment to the prior payment in full
of all Senior Debt, whether outstanding on the Closing Date or thereafter
incurred, all in accordance with this Article XI.
SECTION 11.02. DISTRIBUTION EVENTS.
Upon any payment or distribution of assets of the Borrower to creditors
upon any dissolution, winding up, liquidation, arrangement, reorganization,
adjustment, protection, relief or composition of the Borrower or its debts,
whether voluntary or involuntary, in any bankruptcy, insolvency, arrangement,
reorganization, receivership, relief or other similar case or proceeding under
any Federal or State bankruptcy or similar law or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities of
the Borrower or otherwise (each such event, a "DISTRIBUTION EVENT"), the holders
of Senior Debt will first be paid in full, in cash or cash equivalents, all
amounts due or to become due on or in respect of such Senior Debt (including
interest accruing after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Lenders are entitled to
receive any payment of principal of and interest on the amounts outstanding
under the Loan Documents. In the event that, notwithstanding the foregoing, any
Lender receives any payment or distribution of assets of the Borrower of any
kind or character (excluding equity or subordinated securities of the Borrower
provided for in a plan of reorganization or readjustment that, in the case of
subordinated securities, are subordinated in right of payment to all Senior Debt
to at least the same extent as the Indebtedness under the Loan Documents is so
subordinated) after the occurrence of a Distribution Event but before all the
Senior Debt is paid in full, then such payment or distribution will be held in
trust for the holders of Senior Debt and will be required to be paid over or
delivered forthwith to the trustee in bankruptcy or other Person making payment
or distribution of assets of the Borrower for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay the Senior Debt in
full. Notwithstanding the foregoing, following the commencement of a proceeding
under the Bankruptcy Code and if the holders of Senior Debt receive less than
payment in full, the Lenders may retain any payment or distribution paid by the
Borrower under the Loan Documents pursuant to a plan of reorganization if
(i) the holders of claims for Designated Senior Debt (who are
entitled to vote for such plan in accordance with the Bankruptcy Code)
approve such plan by a vote
72
Exhibit 10.3
which equals at least (x) 66-2/3% in principal amount of such claims
and (y) one-half in number of such claims, or
(ii) in the event that there is more than one class of
Designated Senior Debt in such proceeding, the holders of claims for
each such class (who are entitled to vote for such plan in accordance
with the Bankruptcy Code) approve such plan by a vote which equals at
least (x) 66-2/3% in principal amount of such claims of such class and
(y) one-half in number of such claims of such class.
SECTION 11.03. BLOCKAGE, ETC.
The Borrower may not make any payments on account of the Indebtedness
outstanding under the Loan Documents if a default in the payment of principal of
(or premium, if any) or interest on the Designated Senior Debt has occurred and
is continuing or a default in the payment when due of any other obligation under
Designated Senior Debt has occurred and is continuing (a "Senior Payment
Default"). In addition, if any default (other than a Senior Payment Default) has
occurred and is continuing with respect to any Designated Senior Debt permitting
the holders thereof (or a trustee or agent on behalf thereof) to accelerate the
maturity thereof (A "Senior Nonmonetary Default") and the Borrower has received
written notice thereof from the Administrative Agent under (and as defined in)
the Senior Credit Facility (the "Senior Agent"), then the Borrower may not make
any payments on account of the Indebtedness outstanding under the Loan Documents
for a period (a "Blockage Period") commencing on the date the Borrower receives
such written notice (a "Blockage Notice") and ending on the earliest of (x) 179
days after the date on which the applicable Blockage Notice is received unless a
Senior Payment Default has occurred and is continuing at the end of such 179-day
period, (y) the date, if any, on which the Designated Senior Debt to which such
default relates is discharged or such default is waived or otherwise cured and
(z) the date, if any, on which such Blockage Period has been terminated by
written notice to the Borrower from the Senior Agent. However, the Borrower may
make payments with respect to the Indebtedness outstanding under the Loan
Documents without regard to the foregoing: (i) if the Borrower receives written
notice approving such payment from the Senior Agent or (ii) to the extent of
cash proceeds (net of underwriting discounts and commissions, placement agent
fees and other customary fees and costs associated therewith) from any
Securities Offering the consummation of which has been approved by the Senior
Agent pursuant to Section 9.13 of the Senior Credit Facility. In any event, not
more than one Blockage Period may be commenced during any period of 360
consecutive days, and there must be a period of at least 181 consecutive days in
each period of 360 consecutive days when no Blockage Period is in effect. No
Senior Nonmonetary Default that existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior Debt
initiating such Blockage Period will be, or can be, made the basis for the
commencement of a subsequent Blockage Period, unless such default has been cured
or waived for a period of not less than 90 consecutive days. In the event that,
notwithstanding the foregoing, the Borrower makes any payment to the Lenders
prohibited by these blockage provisions, then such payment will be held in trust
for the holders of the Designated Senior Debt initiating such Blockage Period
and will be required to be paid over and delivered forthwith to the Senior Agent
for the benefit of the holders of such Designated Senior Debt.
73
Exhibit 10.3
SECTION 11.04. PAYMENT IN FULL.
For purposes of this Agreement, the Senior Credit Facility shall not be
deemed to have been paid in full until the Commitments under (and as defined in)
the Senior Credit Facility shall have terminated and all amounts due and owing
or to become due and owing thereunder (other than contingent amounts in respect
of indemnification, cost reimbursement and similar amounts for which no claim
has been made) have been paid in full in cash or Cash Equivalents.
SECTION 11.05. IN FURTHERANCE OF SUBORDINATION.
Each Lender authorizes and directs the Administrative Agent on its
behalf to take such action as may be necessary or appropriate to effectuate, as
between the Lenders and the Senior Agent and the Senior Credit Facility Lenders,
the subordination as provided in this Article and appoints the Administrative
Agent its attorney-in-fact for any and all such purposes.
SECTION 11.06. RIGHTS OF SUBROGATION.
Subject to the payment in full of all Senior Debt, the Lenders shall be
subrogated, to the extent of the payments or distributions made to the holders
of such Senior Debt pursuant to the provisions of this Article, to the rights of
the holders of such Senior Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt until all of the
Obligations hereunder shall have been paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior Debt of
any cash, property or securities to which the Lenders or the Administrative
Agent would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Debt by the Lenders or the Administrative Agent, shall, as among the
Borrower, its creditors other than holders of Senior Debt and the Lenders, be
deemed to be a payment or distribution by the Borrower to or on account of the
Senior Debt; provided, however, that no payment or distribution to the Senior
Agent or the Senior Credit Facility Lenders pursuant to the provisions of this
Article shall entitle the Administrative Agent or any Lender to exercise any
right of subrogation in respect thereof until the Designated Senior Indebtedness
shall have been paid in full.
SECTION 11.07. FURTHER ASSURANCES.
The Lenders, the Administrative Agent, the Borrower and each Subsidiary
Guarantor will, at the Borrower's expense and at any time and from time to time,
promptly execute and deliver all further instruments and documents, and take all
further action, be necessary or desirable, or that the Senior Agent may
reasonably request, in order to protect any right or interest granted or
purported to be granted hereby or to enable the Senior Agent or any Senior
Credit Facility Lender to exercise and enforce its rights and remedies
hereunder.
SECTION 11.08. AGREEMENTS IN RESPECT OF SUBORDINATED DEBT.
(i) No amendment, waiver or other modification of the Loan Documents
shall adversely affect the rights or interests of the Senior Agent or the Senior
Credit Facility Lenders hereunder.
(ii) The Administrative Agent shall promptly notify the Senior Agent of
the occurrence of any Default or Event of Default under the Loan Documents of
which the Administrative Agent is actually aware.
74
Exhibit 10.3
SECTION 11.09. AGREEMENT BY THE BORROWER.
The Borrower agrees that it will not make any payment of any of the
Obligations, or take any other action, in contravention of the provisions of
this Article.
SECTION 11.10. REINSTATEMENT.
The provisions of this Article shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Designated Senior Debt is rescinded or must otherwise be returned by the Senior
Agent or any Senior Credit facility Lender upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
SECTION 11.11. NO WAIVER; REMEDIES.
No failure on the part of the Senior Agent or any Senior Credit
Facility Lender 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. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 11.12. CONTINUING AGREEMENT; ASSIGNMENTS UNDER THE SENIOR CREDIT
FACILITY.
The provisions of this Article constitute a continuing agreement and
shall (i) remain in full force and effect until the payment in full of the
Senior Debt, (ii) be binding upon the Lenders, the Administrative Agent, the
Borrower and their respective successors and assigns, and (iii) inure to the
benefit of, and be enforceable by, the Senior Agent, the Senior Credit Facility
Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), any Senior Credit
Facility Lender may assign or otherwise transfer all or any portion of its
rights and obligations under the Senior Credit Facility (including, without
limitation, all or any portion of any note to be held by it) to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights in respect thereof granted to such Senior Credit Facility Lender
herein.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. AMENDMENTS, ETC.
No amendment or waiver of any provision of any Loan Document, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Lenders, do any of the following: (a) waive, modify or eliminate any of the
conditions specified in Article III, (b) increase the Commitment of any Lender
hereunder or increase the Commitments of the Lenders that may be maintained
hereunder or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Notes, any Applicable Margin or any fees or
other amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
under the Loan Documents, (e) change the Percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Lenders which
shall be required for the Lenders or any of them to take any action under the
Loan Documents, (f) amend any Loan Document in a manner intended
75
Exhibit 10.3
to prefer one or more Lenders over any other Lenders, or (g) amend this Section
12.01; provided, that no amendment, waiver or consent shall, unless in writing
and signed by the Administrative Agent, in addition to the Lenders required
above to take such action, affect the rights or duties of the Administrative
Agent under any Loan Document.
SECTION 12.02. NOTICES, ETC.
Except as otherwise expressly provided herein, all notices and other
communications provided for under the Loan Documents shall be in writing
(including facsimile communication) and mailed, sent by facsimile or hand
delivered:
(a) if to the Borrower, to it at Value City Department Stores,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Senior Vice President, Chief Financial
Officer; telecopier: (▇▇▇) ▇▇▇-▇▇▇▇; with a copy to
Schottenstein Stores Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇; Attention ▇▇▇▇▇ ▇▇▇▇, Esq., telecopier: (614)
443-0972.
(b) if to the Administrative Agent, to it at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇;
telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Prudential
Securities Incorporated, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇; telecopier: (212)
778-5718; and Prudential Securities Incorporated, ▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, telecopier (▇▇▇) ▇▇▇-▇▇▇▇,
(c) if to any other Lender, at such address as shall be designated
by such Lender in a written notice to the other parties;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective
when deposited in the mails, delivered to the telegraph company, transmitted by
telecopier, confirmed by telex answerback or delivered to the cable company,
respectively.
SECTION 12.03. NO WAIVER; REMEDIES.
No failure on the part of any Lender, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 12.04. COSTS AND EXPENSES; INDEMNIFICATION.
(a) The Borrower agrees to pay on demand (i) all costs and expenses of
the Administrative Agent and the Lenders in connection with the waiver,
amendment or enforcement of the Loan Documents (including, without limitation,
the reasonable fees and expenses of counsel for the Administrative Agent with
respect thereto, with respect to advising the Lenders as to their rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with the
Borrower or with other creditors of the Borrower or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or
76
Exhibit 10.3
otherwise participating in or monitoring any bankruptcy, insolvency or other
similar proceedings involving creditors' rights generally and any proceeding
ancillary thereto) and (ii) all costs and expenses of the Administrative Agent
and the Lenders in connection with the enforcement of the Loan Documents,
whether in any action, suit or litigation, any bankruptcy, insolvency or other
similar proceeding affecting creditors' rights generally or otherwise
(including, without limitation, the reasonable fees and expenses of counsel for
Administrative Agent and each Lender with respect thereto).
(b) (i) The Borrower agrees that it will indemnify and hold harmless
the Administrative Agent and the Lenders to the fullest extent
permitted by law, from and against any and all losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses
and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal or other costs,
expenses and disbursements in giving testimony or furnishing documents
in response to a subpoena or otherwise), including, without limitation,
the costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, proceeding or
investigation (whether or not in connection with litigation in which
Administrative Agent or any of the Lenders is a party thereto),
directly or indirectly, caused by, relating to, based upon, arising out
of or in connection with (a) this Agreement and the other Loan
Documents, (b) the acquisition of certain assets and assumption of
certain liabilities of Filene's or (c) any untrue statement or alleged
untrue statement of a material fact contained in, or omissions or
alleged omissions from any filing with any governmental agency or
similar statements or omissions in or from any information furnished by
the Borrower or any of its Subsidiaries or Affiliates to the
Administrative Agent or any of the Lenders or any other Person in
connection with this Agreement and the other Loan Documents; provided,
however, that such indemnity agreement shall not apply to any such
loss, claim, damage, obligation, penalty, judgment, award, liability,
cost, expense or disbursement to the extent it is found in a final
judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from the gross
negligence or willful misconduct of any of Administrative Agent and the
Lenders. The Borrower also agrees that the Administrative Agent and the
Lenders shall have no liability (whether direct or indirect, in
contract or tort or otherwise) to the Borrower for or in connection
with this Agreement and the other Loan Documents or the transactions
contemplated thereby, except for any such losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses
and disbursements that are finally judicially determined by a court of
competent jurisdiction (not subject to further appeal) to have resulted
from the bad faith or gross negligence of any of the Lenders.
(ii) The indemnification provisions in this Section shall be
in addition to any liability which the Borrower may have to the Lenders
or the Persons indemnified below in this sentence and shall extend to
the following: the Lenders, the Administrative Agent, their respective
affiliated entities, directors, officers, employees, legal counsel,
agents and controlling persons (within the meaning of the federal
securities laws), and none of such indemnified Persons shall be liable
for any act or omission of any of the others. All references to
"Lender(s)" in these indemnification provisions shall be understood to
include any and all of the foregoing.
77
Exhibit 10.3
(iii) If any action, suit, proceeding or investigation is
commenced, as to which any indemnified party proposes to demand
indemnification, it shall notify the Borrower with reasonable
promptness; provided, however, that any failure by any indemnified
party to so notify the Borrower shall not relieve the Borrower from its
obligations hereunder. the Administrative Agent, on behalf of the
Lenders, shall have the right to retain counsel of its choice to
represent the Lenders, and the Borrower shall pay the fees, expenses
and disbursement of such counsel; and such counsel shall, to the extent
consistent with its professional responsibilities, cooperate with the
Borrower and any counsel designated by the Borrower. The Borrower shall
be liable for any settlement of any claim against any of the Lenders
made with the Borrower's written consent, which consent shall not be
unreasonably withheld. The Borrower shall not, without the prior
written consent of the Administrative Agent, settle or compromise any
claim, or permit a default or consent to the entry of any judgment in
respect thereof, unless such settlement, compromise or consent
includes, as an unconditional term thereof, the giving by the claimant
to each of the Lenders of an unconditional and irrevocable release from
all liability in respect of such claim.
(iv) In order to provide for just and equitable contribution,
if a claim for indemnification pursuant to the indemnification
provisions contained in this Section is made but is found in a final
judgment by a court of competent jurisdiction (not subject to further
appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification
in such case, then the Borrower, on the one hand, and the Lenders, on
the other hand, shall contribute to the losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses
and disbursements to which the indemnified Persons may be subject in
accordance with the relative benefits received by the Borrower, on the
one hand, and the Lenders, on the other hand, and also the relative
fault of the Borrower, on the one hand, and the Lenders, on the other
hand, in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements and
the relevant equitable considerations shall also be considered. No
Person found liable for a fraudulent misrepresentation shall be
entitled to contribution from any Person who is not also found liable
for such fraudulent misrepresentation. Notwithstanding the foregoing,
none of the Lenders shall be obligated to contribute any amount
hereunder that exceeds the amount of fees previously received by such
Lender pursuant to the Fee Letter.
(v) Neither termination of the Commitments nor repayment of
the Advances shall affect the indemnification provisions contained in
this Section which shall then remain operative and in full force and
effect.
(c) If the Borrower fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
fees and expenses of counsel and indemnities, such amount may be paid on behalf
of the Borrower by any Lender, in its sole discretion.
78
Exhibit 10.3
SECTION 12.05. RIGHT OF SET-OFF.
Upon (a) the occurrence and during the continuance of any Event of
Default and (b) the making of the request or the granting of the consent
specified by Section 8.01 hereof to authorize The Administrative Agent to
declare the Notes due and payable pursuant to the provisions of Section 8.01
hereof, each Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any and all of the Obligations of
the Borrower now or hereafter existing under this Agreement and the Note or
Notes held by such Lender, irrespective of whether such Lender shall have made
any demand under this Agreement or such Note or Notes and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such set-off and application; provided, however, that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender under this Section 12.05 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender may have.
SECTION 12.06. BINDING EFFECT.
This Agreement shall become effective when it shall have been executed
by the Borrower, the Administrative Agent and each Lender and thereafter shall
be binding upon and inure to the benefit of the Borrower, The Administrative
Agent and each Lender party thereto from time to time and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 12.07. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Lender may assign to one or more banks or other entities all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment or Commitments and the
Advances owing to it and the Note or Notes held by it); provided, however, that
(i) the amount of the Commitment of the assigning Lender being assigned pursuant
to each such assignment shall in no event be less than $5,000,000 and shall be
an integral multiple of $1,000,000, and (ii) each such assignment shall be to an
Eligible Assignee.
(b) The Administrative Agent shall maintain at its address referred to
in Section 12.02 hereof a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing under the Facility to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(c) The Borrower hereby agrees to cooperate with the Lenders in
connection with the assignment of the Commitments and Advances under Section
12.07(a) hereof. Within five Business Days after its receipt of notice, the
Borrower, at its own expense, shall execute and deliver to the applicable Lender
in exchange for the surrendered Note or Notes a new Note to the order of such
Lender's assignee in an amount equal to the Commitment assumed by it and, if the
79
Exhibit 10.3
assigning Lender has retained a Commitment hereunder, a new Note to the order of
the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes, shall
be dated the effective date of such assignment.
(d) Each Lender may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitments and the Advances owing to it and the Note or
Notes held by it); provided, however, that (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitments) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by the Borrower therefrom, except to the extent
that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation.
(e) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 12.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower; provided, however, that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any Confidential Information received by it from
such Lender.
(f) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 12.08. GOVERNING LAW; SUBMISSION TO JURISDICTION.
THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES. THE BORROWER HEREBY
SUBMITS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK
LOCATED IN NEW YORK COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO SOLE
AND ABSOLUTE ELECTION OF THE HOLDERS OF THE NOTES AND TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE
NOTES OR ANY OTHER LOAN DOCUMENT SHALL BE
80
Exhibit 10.3
LITIGATED IN SUCH COURTS, AND THE BORROWER WAIVES ANY OBJECTION WHICH IT MAY
HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURTS.
SECTION 12.09. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 12.10. CONFIDENTIALITY.
Neither The Administrative Agent nor any Lender shall disclose any
Confidential Information to any Person without the consent of the Borrower,
other than (a) to such Lender's Affiliates and their officers, directors,
employees, agents and advisors and to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process and (c) as requested or required by any
state, federal or foreign authority or examiner regulating financial
institutions.
SECTION 12.11. WAIVER OF JURY TRIAL.
(a) Each of the Borrower and the Lenders hereby irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to any of the Loan
Documents, the Advances or the actions of any Lender in the negotiation,
administration, performance or enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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Exhibit 10.3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
VALUE CITY DEPARTMENT STORES,
INC., as Borrower
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Senior V. P. / Chief Fin. Officer
Initial Commitment PRUDENTIAL SECURITIES CREDIT
------------------ CORP., LLC, as a Lender
$75,000,000.00
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Senior Vice President