AMENDED AND RESTATED
CREDIT AGREEMENT
among
DESIGNS, INC.
and
BAYBANK, N.A.
and
STATE STREET BANK AND TRUST COMPANY
Dated as of July 24, 1996
This AMENDED AND RESTATED CREDIT AGREEMENT, is made as of July 24, 1996
(this "Agreement"), by and among DESIGNS, INC., a Delaware corporation having
its principal place of business at 66 B Street, Needham, Massachusetts 02194
(the "Company"), BAYBANK, N.A., a national banking association having its
principal place of business at 7 New England Executive Park, Burlington,
Massachusetts 01803 ("BayBank") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110 ("State Street") as banks (said
banks are sometimes collectively referred to as the "Banks" and each
individually as a "Bank"), and BayBank as agent for the Banks (in such
capacity, the "Agent"),
Reference is made to the Credit Agreement dated as of November 17, 1994
(as amended prior to the date hereof, the "1994 Agreement"), among the
Company, BayBank Boston, N.A. (now known as BayBank, N.A. and "BayBank"
herein) and State Street.
The Company and the Banks have amended the 1994 Agreement on a number
of prior occasions and have agreed to certain additional amendments to be
effective herewith. This Agreement amends and restates, in its entirety,
the 1994 Agreement, as amended through and including the date hereof. The
terms of the 1994 Agreement, as amended prior to the date of this Agreement,
are intended to apply, as applicable, up to the date immediately preceding
the date of this Agreement, and the terms of this Agreement are intended to
apply from the date hereof forward, subject to any future amendments hereof
in accordance with the terms provided herein.
The Company and the Banks hereby agree, and agree to amend and restate
the 1994 Agreement, as follows:
ARTICLE 1
DEFINITIONS AND RELATED MATTERS
1.1 Definitions. The terms defined elsewhere in this Agreement shall
have the respective meanings ascribed to them where so defined, and the
following terms have the following respective meanings for the purposes of
this Agreement:
"Account" means any right of the Company to payment for goods sold or
leased or for services rendered not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance.
"Additional Costs" has the meaning given that term in Section 2.16.
"Affiliate" means, with respect to any Person, (i) any other person that
directly or indirectly through one or more intermediaries, controls such
Person or (ii) any other Person which is controlled by or is under common
control with such Person. As used in this definition, "control" means
possession, directly or indirectly of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent's Fee" has the meaning given that term in Section 2.3(c).
"Authorized Person" means any person authorized to request Credit
Advances on behalf of the Company by any resolution or other appropriate
evidence of authority which has been furnished to the Agent and that is
reasonably satisfactory to the Agent in form and substance. Initially,
Authorized Persons shall be those persons listed on Schedule 1.1 hereto.
"Business Day" means any day that is not a Saturday or Sunday, or a
public holiday under the law of the United States of America or The
Commonwealth of Massachusetts as applicable to a national banking association.
"Capital Expenditures" means expenditures in respect of fixed or capital
assets by the Company and any of its Subsidiaries, determined on a
consolidated basis, including the capitalized amount of Capital Lease
Obligations incurred during the relevant period.
"Capital Lease Obligations" means the obligations to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are required to be classified and
accounted for as a capital lease on the Company's balance sheet under GAAP
(including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board) and, for purposes of this Agreement,
the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP (including such Statement No. 13).
"Cash Flow" of the Company and its consolidated Subsidiaries means, for
any period, the sum (without duplication) of (a) EBITDA for such period,
minus (b) Cash Taxes for such period, minus (c) Capital Expenditures for
such period, minus (d) all Restricted Payments by the Company and its
consolidated Subsidiaries during such period, plus (e) all Occupancy Costs
for such period.
"Cash Flow Ratio" has the meaning given that term in Section 5.3(b).
"Cash Taxes" means, for any period, the sum of (a) all amounts reflected
on the consolidated income statement of the Company and its Subsidiaries as
tax expense, plus (b) any decrease (and minus any increase) in taxes payable
that would have been reflected on the consolidated balance sheet of the
Company and its Subsidiaries during such period and minus (c) any increase
(and plus any decrease) in deferred tax liability that would have been
reflected on the consolidated balance sheet of the Company and its
Subsidiaries during such period.
"Commercial L/C Commitment" has the meaning given that term in Section
2.1(b).
"Commercial L/C Credit Advances" has the meaning given that term in
Section 2.1(b).
"Commercial L/C's" has the meaning given that term in Section 2.1(b).
"Commitment" means, as to any Bank, the respective total obligations of
such Bank to make Credit Advances from time to time, all as more particularly
defined and described in Section 2.1 (and subject to adjustment in accordance
with Sections 2.2 and 2.19), all up to but not exceeding the total respective
amounts set forth in the following table:
Total
BayBank State Street Commitments -
Commitments Commitments Commitments All Banks
- ----------- ----------- ----------- ------------
Loan Commitments 11,250,000.00 3,750,000.00 15,000,000.00
Commercial L/C 33,750,000.00 11,250,000.00 45,000,000.00
Commitments
Total Commitments 45,000,000.00 15,000,000.00 60,000,000.00
"Consolidated" or "consolidated" when used with reference to any term
defined herein, unless otherwise expressly stated, means that term as applied
to the accounts of the Company and its wholly-owned Subsidiaries,
consolidated or combined in accordance with GAAP. Notwithstanding the
foregoing, as applied to the accounts of Company and its Subsidiaries for
the purpose of determining compliance with the covenants contained in
Sections 5.2 and 5.3 hereof and the application of the defined terms used
therein at and after the creation of the Joint Venture, the terms
"Consolidated" or "consolidated" shall expressly exclude the accounts of
the Joint Venture (including, without limitation, the investment of the
Company and/or its Subsidiaries in the Joint Venture).
"Credit Advance" has the meaning given that term in Section 2.1.
"Credit Request" has the meaning given that term in Section 2.7.
"Current Fiscal Year" means the fiscal year of the Company ending
February 1, 1997 (which fiscal year is commonly known as "fiscal year 1996").
"Cut-Off Date" means the day immediately preceding the Termination Date.
"Default" means any Event of Default and any event that would, with the
passage of time or the giving of notice, or both, constitute an Event of
Default.
"Dollars" or "$" means United States Dollars.
"EBITDA" shall mean, for any period, the sum (without duplication) of
(a) consolidated net income of the Company and its Subsidiaries for such
period plus (b) to the extent deducted in determining consolidated net
income for such period, the sum of (i) depreciation and amortization
(including deferred financing costs, organization costs and non-compete
amortization) for such period, (ii) interest expense for such period, (iii)
the provision for income taxes for such period, and (iv) the $15,000,000
restructuring provision taken by the Company in the fourth quarter of the
Company's fiscal year ended January 29, 1994.
"Eligible Investments" means any or all of the following:
(a) marketable direct full faith and credit obligations of, or
marketable obligations guaranteed by, the United States of America;
provided that such securities, as a group, may not, on the date of
determination, have a remaining weighted average maturity of more than
five years;
(b) marketable direct full faith and credit obligations of States
of the United States or of political subdivisions or agencies; provided
that such securities, as a group, may not, on the date of determination,
have a remaining weighted average maturity of more than five years; and
provided, further, that such obligations carry a rating of "A" or better
by a Rating Service;
(c) publicly issued bonds or debentures which have a remaining
maturity at the time of purchase of no more than five years issued by a
corporation (other than the Company or an Affiliate thereof), organized
under the laws of a State of the United States or the District of
Columbia; provided, that such obligations carry a rating of "A" or
better by a Rating Service;
(d) open market commercial paper of any corporation (other than
the Company or an Affiliate thereof) incorporated under the laws of the
United States of America or any State thereof or the District of
Columbia rated not less than "P-2" or "A-2" or its equivalent by a
Rating Service and maturing within 270 days after the date on which such
commercial paper is purchased;
(e) certificates of deposit and bankers acceptances maturing within
one year after the acquisition thereof issued by (i) any Bank or (ii) any
commercial bank organized under the laws of the United States of America
or of any political subdivision thereof the long term obligations of
which are rated "A" or better by a Rating Service;
(f) Eurodollar certificates of deposit maturing within one year
after the acquisition thereof issued by any commercial bank having
combined capital, surplus and undivided profits of at least $1 billion;
(g) repurchase agreements, having terms of less than one year, for
government obligations of the type described in (a) or (b) above, with a
commercial bank or trust company meeting the requirements of clause (e)
above;
(h) publicly issued collateralized mortgage obligations which have
a remaining maturity at the time of purchase of no more than five years;
provided, that such obligations carry a rating of "A" or better by a
Rating Service;
(i) tax-exempt bonds or notes which have a remaining maturity at
the time of purchase of no more than five years issued by any State of
the United States or the District of Columbia, or any political
subdivision thereof; provided, that such obligations carry a rating of
"A" or better by a Rating Service;
(j) publicly issued shares of common or preferred stock issued by
a corporation (other than the Company or an Affiliate thereof),
organized under the laws of any State of the United States or the
District of Columbia, and bonds or debentures convertible into shares of
such common or preferred stock, so long as (A) such securities have been
registered under the Securities Exchange Act of 1934, as amended, and
are traded on the New York Stock Exchange, the American Stock Exchange
or NASDAQ, and (B) the senior debt securities of the issuer thereof (if
any) are rated "A" or better by a Rating Service; provided, however,
that the securities under this clause (j) may not at any time comprise
more than 10% of the total assets of the Company; and
(k) interests in any fund or other pooled "open-end" investment
vehicle which (i) is a registered investment company under the
Investment Company Act of 1940, as amended and (ii) invests principally
in obligations of any of the types described in clauses (a) through (j)
above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning given that term in Section 6.1.
"Fixed Charges" of the Company and its consolidated Subsidiaries, for any
period, means the sum, determined on a consolidated basis (without duplication),
of (a) all scheduled payments of principal of Indebtedness of the Company and
its consolidated Subsidiaries and mandatory prepayments of the principal of
such Indebtedness during such period, (b) to the extent not included in (a)
and (c), all payments by the Company and its consolidated Subsidiaries of
rent under Capital Lease Obligations during such period, (c) cash interest
expense of the Company and its consolidated Subsidiaries during such period,
and (d) all Occupancy Costs during such period.
"GAAP" means generally accepted accounting principles consistently
applied.
"Guarantee" by any Person means any obligation of such Person
("Guarantor") directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person that would be classified as a liability on
the balance sheet of the Guarantor in accordance with GAAP, and, without
limiting the generality of the foregoing, any obligation, direct or
indirect, of the Guarantor (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other liability
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (b) entered
into for the purpose of assuring in any other manner the obligee of such
Indebtedness or other liability of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that
the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Indebtedness" means, as respects the Company or any of its Subsidiaries,
liabilities or obligations:
(i) for borrowed money (whether by loan or by the issuance and
sale of notes, bonds or other debt securities); or
(ii) incurred for the deferred purchase price of property or
services under any contract or commitment, whether or not in writing,
and not subject to cancellation without penalty or other expense (except
for trade indebtedness incurred in the ordinary course of business which
is not connected with the borrowing of money); or
(iii) secured by (or for which the creditor has an existing right,
contingent or otherwise, to be secured by) any mortgage, pledge, security
interest or other lien, charge or encumbrance upon or with respect to its
property or assets (including, without limitation, Accounts), whether or
not the Company or such Subsidiary has otherwise assumed or become liable
for the payment of such liabilities or obligations; or
(iv) all Capital Lease Obligations.
"Interest Period" means, with respect to any LIBOR Credit Advance, the
period commencing on the date such LIBOR Credit Advance is made or converted
from a Prime Rate Credit Advance or the last day of the next preceding
Interest Period with respect to such LIBOR Credit Advance and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Company may select as provided in Section 2.15
hereof, except that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar
month.
Notwithstanding the foregoing: (i) no Interest Period may commence
before and end after the Termination Date; (ii) each Interest Period which
would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (or, if such next succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business Day);
and (iii) notwithstanding clause (i) above, no Interest Period shall have a
duration of less than one month and, if the Interest Period therefor would
otherwise be a shorter period, such LIBOR Credit Advance shall not be
available hereunder.
"Inventory" means inventory of the Company and its Subsidiaries,
determined on a consolidated basis, held for sale at retail under any
trademark of (i) Levi Strauss & Co., or any other nationally recognized
brand name reasonably acceptable to the Banks, or (ii) the Company.
"Investment" has the meaning given that term in Section 5.2(f).
"Issuing Bank" has the meaning given that term in Section 2.19(a).
"Joint Venture" means, collectively, (a) the joint venture among
Affiliates of the Company and Levi Strauss & Co., and (b) the wholly-owned
subsidiary of the Company formed to hold the partnership interest in such
joint venture.
"Letters of Credit" and "L/C's" have the meanings given each respective
term in Section 2.1.
"L/C Fees" has the meaning given that term in Section 2.19(g).
"L/C Reimbursement Obligation" has the meaning given that term in Section
2.19(e).
"LIBOR Base Rate" means, with respect to any LIBOR Credit Advance, the
rate per annum quoted to the Company by BayBank at approximately 11:00 a.m.
Eastern time (or as soon thereafter as practicable) on the day two Business
Days prior to the first day of the Interest Period for such Credit Advance to
be the prevailing rate per annum at which Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the
principal amount of the LIBOR Credit Advance to which such Interest Period
relates are offered to BayBank by leading banks in the interbank eurodollar
market in which BayBank normally participates.
"LIBOR Credit Advance" means a Loan, the interest on which is determined
on the basis of rates referred to in the definition of "LIBOR Base Rate" in
this Section 1.1.
"LIBOR Rate" shall mean, for any LIBOR Credit Advance, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to (i) the
LIBOR Base Rate for such Credit Advance for the Interest Period for such
Credit Advance divided by (ii) 1 minus the Reserve Requirement for such
Credit Advance for such Interest Period.
"Lien" means with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For purposes of this Agreement, the Company or any of its
Subsidiaries shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset. The purchase and sale rights under the governing
documents for the Joint Venture shall not constitute a Lien.
"Loan Commitment" has the meaning given that term in Section 2.1(a).
"Loan Credit Advances" has the meaning given that term in Section 2.1(a).
"Loans" has the meaning given that term in Section 2.1(a).
"Loan Documents" means this Agreement and the Notes.
"Long-Term Lease" means a lease of (or other agreement conveying the
right to use) real property that is not cancelable on less than 90 days
notice, without penalty, by the lessee.
"MasterCard Agreement" has the meaning given that term in Section 2.1(a).
"Net Worth" of the Company and its consolidated Subsidiaries, means: (i)
the sum (determined on a consolidated basis) of preferred stock, common
stock, capital in excess of par value and retained earnings; less (ii)
treasury stock; less (iii) the book value of all assets, if any, that are
classified as intangibles in accordance with GAAP (without duplication of
items already deducted in arriving at retained earnings), but in any event
including, without limitation, good-will, research and development costs,
trademarks, trade names, copyrights, patents and franchises, unamortized debt
discount and expenses, and all similar items; less (iv) the balance, if any,
of the note receivable due from the Joint Venture.
"Next Fiscal Year" means the fiscal year of the Company commencing
February 2, 1997 (which fiscal year is commonly known as "fiscal year 1997").
"Note" has the meaning given that term in Section 2.5.
"Obligations" means any and all liabilities, obligations and undertakings
of the Company to either Bank, of every kind and description, direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
sole, joint or several, secured or unsecured, now existing or hereafter
arising under this Agreement or under any other Loan Document.
"Occupancy Costs" means common area maintenance costs, mall dues, real
estate taxes, all rent (including additional rent determined by reference to
the revenues of the tenant) paid by the Company and its Subsidiaries
(determined on a consolidated basis) under Long Term Leases, and sales taxes
on Occupancy Costs, excluding, however, utilities and telephone charges.
"Outstanding Loan Credit Advances" means, as of any date, the unpaid
aggregate principal amount of all Loan Credit Advances on such date.
"Outstanding (Commercial or Standby) L/C's" means, as of any particular
date, the aggregate of all face amounts (or such lesser amounts up to which
drafts may be presented, or for which any other demands for payment may be
made) of all L/C's issued and outstanding for the account of the Company on
such date (or such aggregate amounts of Commercial L/C's or Standby L/C's as
indicated by use of such terms).
"Parent" has the meaning given that term in Section 2.18.
"Permitted Acquisition" has the meaning given that term in Section 5.2(d).
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, entity or enterprise, or a government or
any agency or political subdivision thereof.
"Plan" means any current or future employee benefit plan or other plan
maintained for employees of the Company or any of its Subsidiaries and covered
by Title IV of ERISA, as now or hereafter amended from time to time.
"Post-Default Rate" means, in respect of any principal of any Loan or
any other amount payable by the Company under this Agreement which is not
paid when due (whether at stated maturity, by acceleration or otherwise), a
rate per annum during the period commencing on the due date until such
amount is paid in full equal to the sum of 2% plus the interest rate that
would otherwise then be applicable to Prime Rate Credit Advances.
"Prime Rate" means the lower of (a) the annual rate of interest announced
by BayBank (or its successors) from time to time at its principal office as
its "prime rate" (which may or may not be the lowest rate available from
BayBank at a given time), and (b) the prime rate or base rate on corporate
loans at large U.S. money center commercial banks as published in The Wall
Street Journal or, if publication of such rate shall be suspended or
terminated, the annual rate of interest, determined daily and expressed as a
percentage, from time to time announced by one of the five largest banking
institutions having their principal office in New York, New York and selected
by the Agent at the time such publication is suspended or terminated. Each
change in the Prime Rate shall be effective for the purposes of this
Agreement and the Notes on and as of the date such change becomes effective.
"Prime Rate Credit Advances" means Loans which bear interest at a rate
based upon the Prime Rate.
"Principal Office" means the office of the Agent identified in Section 8.3.
"Prior Fiscal Year" means the fiscal year of the Company ended February
3, 1996 (which fiscal year is commonly known as "fiscal year 1995").
"Rating Service" means either or both of Moody's Investors Service, Inc.
or Standard & Poor's Corporation.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time
to time.
"Regulatory Change" means, with respect to any Bank, any change on or
after the date of this Agreement in United States federal or Massachusetts
laws or regulations, including Regulation D, or the adoption or making on or
after such date of any interpretations, directives or requests applying to a
class of lenders including such Bank of or under any United States federal or
Massachusetts laws or regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reportable Event" shall have the meaning assigned to that term in Title
IV of ERISA, as now or hereafter amended from time to time.
"Reserve Requirement" means, for any Interest Period for a LIBOR Credit
Advance, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D against "Eurocurrency liabilities" (as
such term is used in Regulation D) by member banks of the Federal Reserve
System. Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
any Bank by reason of any Regulatory Change against (i) any category of
liabilities which includes deposits by reference to which the LIBOR Rate is
to be determined as provided in the definition of "LIBOR Base Rate" in this
Section 1.1 or (ii) any category of extensions of credit or other assets
which include LIBOR Credit Advances.
"Restricted Guarantee" has the meaning given that term in Section 5.2(c).
"Restricted Payment" means, with respect to the Company or any Subsidiary
thereof, any dividend or other distribution on any shares of capital stock of
the Company or such Subsidiary (except dividends payable solely in shares of
capital stock or rights to acquire capital stock of the Company, and dividends
payable solely to the Company or to a wholly-owned Subsidiary thereof).
"Standby L/C's" has the meaning given that term in Section 2.1(a).
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other Persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Termination Date" has the meaning given that term in Section 2.2(a).
"Total Liabilities" means, at any time, the sum (determined on a
consolidated basis) without duplication of (a) the consolidated liabilities
of the Company and its Subsidiaries at such time, determined in accordance
with GAAP (excluding the $15,000,000 restructuring charge taken by the
Company in the fourth quarter of its fiscal year ended January 29, 1994, as
amortized through such time) and (b) all Guarantees of the Company and its
consolidated Subsidiaries at such time.
"Type" of a Credit Advance refers to the determination whether such
Credit Advance is a LIBOR Credit Advance or a Prime Rate Credit Advance.
1.2 Interpretation.
(a) Words of the masculine gender include correlative words of the
feminine and neuter genders.
(b) Unless the context shall otherwise indicate, words importing
the singular include the plural and vice versa.
(c) Articles and Sections referred to by number mean the
corresponding Articles and Sections of this Agreement. References to
Schedules and Exhibits are to the Schedules and Exhibits hereto.
(d) The terms "hereby", "hereof", "hereto", "herein", "hereunder"
and any similar terms as used in this Agreement, refer to this Agreement
as a whole unless otherwise expressly stated.
(e) The table of contents and the headings of Articles and Sections
are for convenience of reference only and do not limit, define or
otherwise affect the scope or content of any provision hereof.
1.3 Accounting Terms and Determinations.
Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all financial statements
and certificates and reports as to financial matters required to be
delivered to the Banks hereunder shall be prepared, in accordance with
GAAP; provided that if any change in GAAP in itself materially affects the
calculation of any financial covenant in this Agreement, the Company may by
notice to each Bank, or any Bank may by notice to the Company, require that
such covenant thereafter be calculated in accordance with GAAP as in effect,
and applied by the Company, immediately before such change in GAAP occurs.
If such notice is given, the compliance certificates delivered pursuant to
Section 5.4 after such change occurs shall be accompanied by reconciliations
of the difference between the calculation set forth therein and a
calculation made in accordance with GAAP as in effect from time to time
after such change occurs.
ARTICLE 2
CREDIT ADVANCES
2.1 The Credit Advances. Each Bank severally agrees, on the terms of
this Agreement, to extend the following credit (hereinafter together referred
to as the "Credit Advances"), from time to time to and including the Cut-Off
Date, in the respective aggregate amounts at any one time outstanding not to
exceed its Commitment in the following categories:
(a) "Loan Credit Advances" which means the aggregate principal
amount of all advances by way of Dollars loaned to the Company by the
Banks which are outstanding on the date hereof or are hereafter made
under this Agreement ("Loans") plus, in accordance with the terms
described in Section 2.19, the Outstanding L/C's of all standby letters
of credit ("Standby L/C's") (together, the "Loan Commitment"); and
(b) "Commercial L/C Credit Advances" which means, in accordance with
the terms described in Section 2.19, the Outstanding L/C's of all
commercial or trade letters of credit ("Commercial L/C's") (the
"Commercial L/C Commitment").
(Standby L/C's and Commercial L/C's are hereinafter sometimes referred to
together as "L/C's" or as "Letters of Credit".) The respective amounts of
Outstanding Loan Credit Advances and Outstanding L/C's (Standby L/C's and
Commercial L/C's), as of the respective dates shown on Schedule 2.1 hereto, are
set forth on Schedule 2.1 hereto. As used in this Agreement, the term "Credit
Advances" specifically excludes extensions of credit outstanding, from time to
time, pursuant to the Company's Credit Card Agreement dated October 27, 1995
between the Company and BayBank (the "MasterCard Agreement").
2.2 Reductions of Commitments.
(a) Mandatory. The Commitments shall terminate on June 30, 1999
(the "Termination Date") unless earlier terminated pursuant to the
provisions of this Agreement.
(b) Optional. The Company shall have the right to terminate in full
or reduce in part the unused portions of the Commitments at any time or
from time to time, upon prior notice to the Agent as provided in Section
2.15. Each partial reduction of the Commitments shall be in an aggregate
amount at least equal to $1,000,000.
(c) No Reinstatement. The Commitments, once terminated or reduced,
may not be reinstated.
2.3 Fees.
(a) Commencing on the date of this Agreement, the Company shall
pay to the Agent, for the accounts of the Banks, a facility fee equal
to three-tenths of one percent (0.30% or 30 basis points) per annum of
the daily average of the aggregate amount of all Commitments then in
effect (as adjusted from time to time in accordance with Sections 2.2
and 2.19 regarding terminations and reductions of Commitments and
Section 2.19 regarding increases, by tranches, in available Commercial
L/C Commitments) of all Banks, payable in quarterly installments, in
arrears, on the last day of each September, December, March and June,
to and including the earlier of the date the Commitments are
terminated or the Termination Date.
(b) On the date of this Agreement, the Company will pay a non-
refundable closing fee of $35,000 to the Agent for the accounts of the
Banks.
(c) The Company shall pay to the Agent an agent's fee of $20,000
per annum (the "Agent's Fee"), which shall be payable in equal
quarterly installments, in advance, commencing as of the date of this
Agreement (with appropriate credit to the Company provided for
portions of the Agent's Fee paid prior to the date of this Agreement
covering any period after the date of this Agreement) and on the first
day of each October, January, April and July thereafter, for so long
as the Commitments are in effect and until payment in full of all
Obligations. The Agent's Fee shall be solely for the account of the
Agent and no portion thereof (except as provided in this Section
2.3(c)) shall be subject to refund, reduction or pro-ration.
(d) Except: (i) as provided in this Section 2.3; (ii) as
previously paid or accrued by the Banks pursuant to the 1994
Agreement; and (iii) as expressly provided in other parts of this
Agreement, including, in connection with payment of Additional Costs,
compensation pursuant to Sections 2.17 and 2.18, L/C Fees, and other
costs, expenses, fees and disbursements, if any, pursuant to Section
8.4, no other fees, charges and reimbursements shall be payable to the
Banks under this Agreement. The MasterCard Agreement is not a part of
this Agreement. The foregoing notwithstanding, the Company shall be
obligated to pay all principal and interest on Credit Advances as
provided in the Loan Documents.
2.4 Several Obligations. The failure of any Bank to make any Credit
Advance to be made by it on the date specified therefor shall not relieve the
other Bank of its obligation to make its Credit Advance on such date, but no
Bank shall be responsible for such failure of the other Bank.
2.5 Notes. The Credit Advances made by each Bank shall be evidenced by a
single revolving credit note of the Company (each a "Note, and collectively,
the "Notes") in substantially the form of Exhibit A hereto (and otherwise
duly completed) payable to the order of such Bank in a principal amount equal
to such Bank's total Commitment. The Company shall deliver the Notes to the
Banks as provided in Section 3.1. All Credit Advances, repayments thereof,
the Type of and Interest Period (if any) for each Credit Advance, and payments
of interest shall be recorded by each Bank in its books and records kept by
it in the normal course of its banking business, and such books and records
shall be conclusive as to the matters stated therein in the absence of
manifest error. Prior to any transfer of its Note by a Bank in accordance
with the terms of this Agreement, no notation need be made thereon by such
Bank as to any Credit Advance, repayments thereof, the Type of and Interest
Period (if any) for such Credit Advance and payments of interest. At the
time of transfer of its Note, the transferring Bank shall endorse thereon
the unpaid principal amount of each Credit Advance, the date each such
Credit Advance was made, the Type of and Interest Period (if any) for such
Credit Advance and the date to which interest thereon has been paid in full.
The transferring Bank is authorized to so endorse its Note and to attach
to, and make a part of, such Note a continuation of the schedule to such
Note as and when required.
2.6 Use of Proceeds. The Letters of Credit (and the proceeds of any and
all draws or other payments thereunder) and the proceeds of the Loans shall be
used by the Company and its Subsidiaries for their general corporate purposes.
2.7 Borrowings. The Company shall give the Agent notice of each Loan
borrowing to be made hereunder, except for Loans made to pay L/C Reimbursement
Obligations in accordance with Section 2.19, by a written or telephonic request
from an Authorized Person (a "Credit Request") to the Agent in accordance with
Section 2.15 hereof. Each Credit Request made by telephone shall be confirmed
by an Authorized Person (who need not be the same Authorized Person who made
the related telephonic request) in writing and sent on the day that such
Credit Request was made by telephone. Each Credit Request made in writing
and each confirmation of a Credit Request made by telephone shall be in the
form of Exhibit B. Not later than 4:00 p.m. Boston time on the date
specified for each such Credit Request hereunder, each Bank shall make
available the amount of the Loan to be made by it on such date by delivering
or crediting the amount thereof in immediately available funds to the
Company's account with the Agentsignated in Section 8.3(c).
2.8 Prepayments and Conversions. The Company may prepay Loans and/or
convert Loans of one Type into Loans of the other Type, at any time or from
time to time, provided that (a) the Company shall give the Agent notice of
each such prepayment or conversion as provided in Section 2.15, and (b) if
any LIBOR Credit Advances are prepaid or converted on other than the last
day of an Interest Period therefor, the Company shall have paid each Bank
the amount payable to such Bank under Section 2.17 hereof in respect of
such prepayment. Loans prepaid pursuant to this Section 2.8 may be
reborrowed in accordance with the terms and conditions of this Agreement.
2.9 Repayment of Credit Advances. The Loans shall mature on the
Termination Date.
2.10 Interest. The Company will pay to the Agent, for the account of the
Banks, interest on the unpaid principal amount, if any, of each Loan (for the
period commencing on the date hereof for Loans then outstanding, or on the
date of such Loan for such Loans made hereafter, as applicable, to but
excluding the date such Loan is paid in full) at a rate per annum, determined
by reference to the table which appears below, equal to: (a) if a LIBOR
Credit Advance, the LIBOR Rate plus the LIBOR Credit Advance Applicable
Margin (in each case, such Margin to be determined on the 51st day after the
end of each fiscal quarter of the Company (based upon the calculation of the
Cash Flow Ratio at the dates required by Section 5.3(b)) and to be effective
from that date until the 50th day after the end of the next succeeding fiscal
quarter, provided that interest on LIBOR Credit Advances will only change, if
at all, at the end of the respective Interest Periods applicable thereto),
and (b) if a Prime Rate Credit Advance, the Prime Rate plus or minus, as the
case may be, the Prime Rate Credit Advance Applicable Margin (in each case,
such Margin to be determined on the 51st day after the end of each fiscal
quarter of the Company and to be effective from that date until the 50th
day after the end of the next succeeding fiscal quarter).
Prime Rate LIBOR Credit
Cash Flow Ratio Credit Advance Advance
(as defined in Applicable Applicable
Section 5.3(b)) Margin Margin
Between 1.00-to-1.00 0.0% 1.75%
and 1.25-to-1.00, inclusive
Greater than 1.25- - 0.25% 1.50%
to-1.00 up to 1.50-
to-1.00, inclusive
Greater than 1.50- - 0.50% 1.25%
to-1.00 up to 1.75-
to-1.00, inclusive
Greater than 1.75- - 0.75% 1.00%
to-1.00
Notwithstanding any of the foregoing, the Company will pay to the Agent,
for the account of the Banks, interest at the Post-Default Rate on any
principal of any Loan made by each Bank and on any other amount payable by
the Company hereunder to or for the account of each Bank (but, if such
amount is interest, only to the extent legally enforceable), which shall not
be paid in full when due (whether at stated maturity, by acceleration or
otherwise), for the period commencing on the due date thereof until the same
is paid in full. Accrued interest on each Loan shall be payable (i) if such
Loan is a Prime Rate Credit Advance, on the last day of each calendar month
during the term hereof, (ii) if such Loan is a LIBOR Credit Advance, on the
last day of the Interest Period for such Loan (and, if such Interest Period
exceeds three months' duration, quarterly, on the last day of each
three-month period during such Interest Period), and (iii) in any event,
upon the payment, prepayment or conversion thereof, but only on the
principal so paid or prepaid or converted; provided that interest payable
at the Post-Default Rate shall be payable from time to time on demand of
either Bank.
2.11 Payments. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
hereunder and under the Notes shall be made in Dollars and in immediately
available funds to the Agent at the Principal Office, not later than 12:00
noon Eastern time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). The Agent may (but shall not be
obligated to) debit the amount of such payment which is not made by such
time to any ordinary deposit account of the Company with the Agent. The
Agent will give the Company telephonic or written notice of any amount to
be charged prior to charging such deposit account; however, the failure of
the Agent so to charge such account or to so notify the Company shall not
affect the obligation of the Company to pay interest, principal or other sums
as provided herein or in the Notes. The Company shall, at the time of making
each payment hereunder or under any Note, specify to the Agent the Credit
Advances or other amounts payable by the Company hereunder to which such
payment is to be applied (and in the event that it fails to so specify, or
if an Event of Default has occurred and is continuing, the Agent may apply
such payment for the benefit of Banks as it may elect in its sole discretion,
but subject to the other terms and conditions of this Agreement). Each
payment received by the Agent hereunder or under a Note for the account of
any Bank shall be paid promptly to such Bank, in immediately available
funds. If the due date of any payment hereunder or under any Note would
otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeeding Business Day and interest shall be payable
for any principal so extended for the period of such extension.
2.12 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Banks under Section 2.1 hereof shall be made from
the Banks, each payment of commitment fees under Section 2.3 hereof shall be
made for the account of the Banks, and each termination or reduction of the
Commitments under Section 2.2 hereof shall be applied to the Commitments of
the Banks, pro rata according to the Banks' respective percentages of the
Commitments, (b) each payment by the Company of principal of or interest on
Credit Advances of a particular Type shall be made to the Agent for the
account of the Banks pro rata in accordance with the respective unpaid
principal amounts of such Credit Advances held by the Banks and (c) each
conversion of Credit Advances of a particular Type shall be made pro rata
among the Banks in accordance with the respective principal amounts of such
Credit Advances held by the Banks.
2.13 Computations. Interest and fees hereunder and under the Notes
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which payable.
2.14 Minimum and Maximum Amounts; Types. Each borrowing, conversion and
prepayment of principal of Loans shall be in an aggregate principal amount
equal to (a) in the case of LIBOR Credit Advances, $500,000 or a larger
multiple thereof and (b) in the case of Prime Rate Credit Advances, $100,000
or a larger multiple thereof (borrowings, conversions or prepayments of
Loans of different Types or, in the case of LIBOR Credit Advances, having
different Interest Periods, outstanding at the same time hereunder to be
deemed separate borrowings, conversions and prepayments for purposes of the
foregoing); provided that (i) any Loans under the Commitments may be in the
aggregate amount of the unused portion of the Commitments and (ii) any
payment or prepayment in full of the Loans may be in the aggregate
outstanding principal amount thereof. Notwithstanding anything to the
contrary contained in this Agreement, there shall not be, at any one time,
more than seven Interest Periods in effect with respect to the LIBOR Credit
Advances.
2.15 Certain Notices. Notices to the Agent of terminations or reductions
of the Commitments, of borrowings, conversions and prepayments of Loans and of
the duration of Interest Periods shall be irrevocable and shall be effective
only if received in writing by the Agent not later than the applicable]
Eastern time deadline on the number of Business Days prior to the date that
is the date of the relevant termination, reduction, borrowing, conversion
and/or prepayment specified below:
Number of
Notice Eastern Time Deadline Business Days Prior
Termination or reduction of 2:00 p.m. 2
Commitments
Borrowing or prepayment of 2:00 p.m. 0
Prime Rate Credit Advances (same day)
Borrowing or prepayment of, 11:00 a.m. 2
conversion of or into, or
duration of Interest Period
for, LIBOR Credit Advances
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
conversion or prepayment shall specify the amount and Type of the Credit
Advances to be borrowed, converted or prepaid, the date of borrowing,
conversion or prepayment (which shall be a Business Day) and, in the case
of LIBOR Credit Advances, the duration of the Interest Period therefor
(subject to the definition of Interest Period). Each such notice of
duration of an Interest Period shall specify the LIBOR Credit Advances to
which such Interest Period is to relate. In the event that the Company
fails to select the duration of any Interest Period for any LIBOR Credit
Advances within the time period and otherwise as provided in this Section
2.15, such Credit Advances (if outstanding as LIBOR Credit Advances) will be
automatically converted into Prime Rate Credit Advances on the last day of
the then current Interest Period for such Credit Advances or (if outstanding
as Prime Rate Credit Advances) will remain as, or (if not then outstanding)
will be made as, Prime Rate Credit Advances.
2.16 Additional Costs.
(a) Subject to paragraph (b) of this Section 2.16, the Company
shall pay to each Bank, upon demand by such Bank from time to time such
amounts as such Bank may reasonably determine to be necessary to
compensate it for any costs incurred by such Bank that such Bank
determines are attributable to its making or maintaining of any LIBOR
Credit Advances hereunder or its obligation to make any of such LIBOR
Credit Advances hereunder, or any reduction in any amount receivable by
such Bank hereunder in respect of any of such LIBOR Credit Advances or
such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), in each case
resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
such Bank under this Agreement or its Note in respect of any of such
LIBOR Credit Advances (other than changes which affect taxes
measured by or imposed on the overall net income of such Bank or
its lending office for any of such LIBOR Credit Advances by the
jurisdiction in which such Bank has its principal office or such
lending office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank
(including any of such Credit Advances or any deposits referred to
in the definition of "LIBOR Base Rate" in Section 1.1 hereof),
other than any such reserve or other requirement with respect to
LIBOR Credit Advances that are reflected in the definition of
"LIBOR Rate" in Section 1.1 hereof; or
(iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities).
(b) Notwithstanding paragraph (a) above, the Company shall be
liable for the payment of Additional Costs of any Bank only to the
extent that such Additional Costs accrue following the commencement of
the first Interest Period which commences following the date that such
Bank notifies the Company of an event entitling such Bank to
compensation under paragraph (a) above.
(c) Each Bank making a claim for Additional Costs shall furnish to
the Company a certificate setting forth the basis and amount of each
request by such Bank for such compensation. Determinations and
allocations by each Bank for purposes of this Section of the effect of
any Regulatory Change on its costs of maintaining LIBOR Credit Advances
or on amounts receivable by it in respect of LIBOR Credit Advances, and
of the Additional Amounts required to compensate such Bank under this
Section 2.16, shall be conclusive absent manifest error, provided that
such determinations and allocations are made on a reasonable basis.
2.17 Compensation. The Company shall pay to each Bank, upon the request
of such Bank (with a copy to the other Bank), such amount or amounts as
shall be sufficient (in the reasonable opinion of such Bank) to compensate
it for any loss, cost or expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a LIBOR Credit Advance
made by such Bank on a date other than the last day of an Interest Period
for such Credit Advance; and
(b) any failure by the Company to borrow a LIBOR Credit Advance to
be made by such Bank on the date for such borrowing specified in the
relevant notice of borrowing under Section 2.15 hereof;
but excluding, in any event, loss of margin for the period after any such
payment, prepayment or conversion or failure to borrow; provided that such
Bank shall have delivered to the Company a certificate as to the amount of
such loss and expense along with the basis for calculation thereof.
2.18 Capital Adequacy. If any Bank shall determine that the adoption or
implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by such Bank (or its applicable lending office) 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 of reducing the rate of return on capital of such
Bank or any Person controlling such Bank (a "Parent") in respect of LIBOR
Credit Advances to a level below that which such Bank (or its Parent) could
have achieved but for such adoption, change or compliance (taking into
consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the other Bank), the Company
shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such reduction. A statement of such Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be
paid to it hereunder shall be conclusive absent manifest error; provided
that the determination thereof is made on a reasonable basis.
2.19 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, each
Bank (with respect to particular L/C's, the "Issuing Bank") agrees to
issue, within the applicable limits of its respective Commitments for
Outstanding L/C's at any one time, for the account of the Company:
(i) Commercial L/C's up to the maximum amount of its
Commercial L/C Commitment for the purpose of supporting
inventory purchases by the Company, the issuance of
Commercial L/C's to be made available in tranches of
aggregate amounts as follows:
Tranche A: $15,000,000
Tranche B: $15,000,000
Tranche C: $15,000,000
Tranche A shall be effective as of the date of this Agreement.
So long as the conditions set forth in Section 3.2 below have
been satisfied as of the date of the issuance of each L/C, the
Company shall have the right to increase the then-existing
Commercial L/C aggregate availability by the amount of the next
succeeding tranche by providing notice of its intention to do so
to the Agent not less than five (5) Business Days prior to the
intended effective date of such availability, all subject to the
maximum aggregate Commercial L/C Commitments of the Banks. Once
available, Commercial L/C Commitments may only be reduced or
terminated pursuant to the provisions of Section 2.2.
(ii) Standby L/C's up to the maximum amount of $750,000 of
Outstanding Standby L/C's at any one time, for the Company's
general corporate purposes. The Banks' Commitment to make Loan
Credit Advances shall be deemed to be reduced by an amount equal
to the then Outstanding Standby L/C's.
The Banks' Commercial L/C Commitments and Loan Commitments with respect
to Standby L/C's shall each revolve, and, subject at all times to the
applicable limits of the Commitments and the Outstanding L/C's on any
particular date, the cancellation, termination or expiration of an L/C
shall create availability for the issuance (subject to the applicable
terms of this Agreement) of the L/C's to the extent of the Outstanding
L/C so cancelled, terminated or expired.
(b) Up to the respective applicable Commitments of the Banks,
each L/C requested by the Company shall be issued by the Issuing Bank,
provided that: (i) the Company provides all reasonable, customary and
necessary instructions, documents and information necessary for the
proper preparation of the L/C; (ii) the Issuing Bank approves the form
of the L/C (which approval shall be based on usual and customary
commercial and administrative standards and shall not be unreasonably
withheld or delayed); (iii) the L/C bears an expiration date not later
than the Termination Date; (iv) the Company pays the applicable fees
as hereinafter provided for the issuance of the L/C; and (v) the
conditions set forth in Section 3.2 below have been satisfied as of
the date of the issuance of the L/C.
(c) The Company's obligations under this Section 2.19 shall be
absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or
any conditions precedent whatsoever or any setoff, counterclaim or
defense to payment which the Company may have or have had against the
Issuing Bank, the Agent, any Bank or any beneficiary of a Letter of
Credit. The Company further agrees that the Issuing Bank, the Agent
and the Banks shall not be responsible for, and the Company's L/C
Reimbursement Obligations (as defined below) shall not be affected by,
among other things, the validity or genuineness of documents or of
any endorsements thereon, even if such documents should in fact prove
to be in any or all respects invalid, fraudulent or forged, or any
dispute between or among the Company, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter
of Credit may be transferred or any claims or defenses whatsoever of
the Company, against the beneficiary of any letter of Credit or any
such transferee. The Issuing Bank, the Agent and the Banks shall not
be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Company
agrees that any action taken or omitted by the Issuing Bank, the Agent
or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith and without
manifest error, willful misconduct or gross negligence on the part of
the Agent or the Banks, shall be binding upon the Company and shall not
result in any liability on the part of the Issuing Bank, the Agent or
any Bank to the Company; provided, however, in no event shall the Agent
or the Banks be liable for any consequential damages.
(d) To the extent not inconsistent with Section 2.19(c), the
Issuing Bank and the Agent shall be entitled to rely, and shall be
fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement order or other
document reasonably believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and
upon advice and statements of legal counsel and other experts selected
by the Issuing Bank and the Agent.
(e) If any draft shall be presented or other demand for payment
shall be made under any Letter of Credit, the Issuing Bank promptly
shall notify the Company of the date and amount of the draft presented
or demand for payment and of the date and time when it expects to pay
such draft or honor such demand for payment. Provided that the Banks
do not make a Loan to the Company to satisfy any such draft or other
demand for payment, the Company agrees to pay to the Issuing Bank, ON
DEMAND, the amount required to pay each draft or other applicable
demand for payment pursuant to any L/C in immediately available Dollars
(the "L/C Reimbursement Obligation"). If a draft or other demand for
payment is payable in foreign currency, the Company's payment shall be
made in Dollars at the Issuing Bank's selling rate for
telecommunication transfers of such foreign currency at the place
of payment in effect on the date of payment by the Company or the date
of the Issuing Bank's settlement of the obligation, whichever the
Issuing Bank may require. If there is no selling rate in effect for
making such transfers on the date of payment or settlement, as the case
may be, the Company shall pay to the Issuing Bank, ON DEMAND, an
amount in Dollars equal to the Issuing Bank's actual and direct costs
of settlement of its obligations. The Company agrees to comply with
all applicable government regulations concerning foreign currency
exchange that apply to the L/C's and any drafts or other payments
thereunder. Any L/C Reimbursement Obligation not paid in advance or
on the same Business Day as the payment related thereto by the
Issuing Bank: (i) shall be paid by the making of a Loan (subject to
the limits of the aggregate Loan Commitments and the requirements of
Section 3.2 below) without further notice to or instruction from the
Company, as a Prime Rate Credit Advance; or (ii) to the extent
that the same is not paid by the making of a Loan pursuant to Clause (i)
above, shall be immediately due and payable without further notice or
demand, and, until paid in full, shall accrue interest from the date
arising until paid in full at the Post-Default Rate.
(f) Effective immediately upon the issuance of each Letter of
Credit for the account of the Company and without further action on
the part of the Issuing Bank, the Issuing Bank shall be deemed to have
granted to the other Bank, and each Bank shall be deemed to have
irrevocably purchased and received from such Issuing Bank without
recourse or warranty, an undivided interest and participation in such
Letter of Credit in proportion to each Bank's Commitment. Each Bank
agrees that it shall be absolutely liable, to the extent of its
Commitment thereof, to reimburse the Issuing Bank on demand for the
amount of each draft paid by the Issuing Bank under each Letter of
Credit to the extent that such amount is not reimbursed by the Company
or for which a Loan is not made. On the date that such draft is paid
or other payment is made by the Issuing Bank, the Issuing Bank promptly
shall notify the other Bank of the amount of any L/C Reimbursement
Obligations not paid by the making of a Loan.
(g) With respect to each L/C, the Company shall pay the
applicable fees indicated on the Letter of Credit Fee Table annexed
hereto as Schedule 2.19(g) (together the "L/C Fees"). All L/C fees
with respect to a particular L/C shall be paid to the Issuing Bank by
the Company, which shall discharge the Company's obligation to the
full extent of each such payment. To the extent that any L/C Fees are
to be divided between the Banks, the Issuing Bank shall make the
necessary allocation and pay all required shares to the other Bank.
(h) The Issuing Bank shall be entitled to administer each Letter
of Credit in the ordinary course of business and in accordance with its
usual practices, modified from time to time as it deems appropriate
under the circumstances, and shall be entitled to use its discretion
in taking or refraining from taking any action in connection herewith
as if it were the sole party involved. Any action taken or omitted
to be taken by the Issuing Bank under or in connection with any Letter
of Credit, if taken or omitted in the absence of manifest error, gross
negligence or willful misconduct, shall not create for the Issuing
Bank any resulting liability to any other Bank and in no event shall
the Issuing Bank be liable for any consequential damages.
ARTICLE 3
CONDITIONS OF CREDIT ADVANCES
3.1 Closing Requirements. The obligation of the Banks to make their
initial Credit Advance hereunder is subject to the fulfillment of each of the
following conditions precedent to the satisfaction of the Banks:
(a) Corporate Action. The Agent on behalf of the Banks shall have
received certified copies of the corporate charter and by-laws of the
Company and all corporate action taken by the Company authorizing the
execution, delivery and performance of this Agreement (including, without
limitation, a certificate of the Company setting forth the resolutions of
its Board of Directors authorizing the transactions contemplated hereby).
(b) Incumbency. The Company shall have delivered to the Agent on
behalf of the Banks a certificate in respect of the name and signature of
each of the officers (i) who is authorized to sign on its behalf this
Agreement and the other Loan Documents and (ii) who will, until replaced
by another officer or officers duly authorized for that purpose, act as
its representative for the purposes of signing documents and giving
notices and other communications in connection with this Agreement and
the other Loan Documents. The Agent and each Bank may conclusively rely
on such certificates until it receives notice in writing from the
Company to the contrary.
(c) Notes. The Agent on behalf of the Banks shall have received a
Note for each Bank, duly completed and executed. Simultaneously with the
Company's delivery of the Notes, the Banks shall deliver (i) the
Promissory Notes dated November 17, 1994 and executed and delivered to
the Banks in connection with the 1994 Agreement, each marked to
indicate cancellation or payment by replacement, and (ii) instruments
terminating the two Pledge Agreements between the Company and BayBank,
each dated as of May 8, 1995.
(d) Fees. The Banks shall have received the closing fee and the
Agent shall have received the appropriate portion of the Agent's Fee
payable pursuant to Section 2.3 hereof.
(e) Opinion of Counsel to the Company. The Agent on behalf of the
Banks shall have received an opinion of Foley, Hoag & Eliot, counsel to
the Company, addressed to the Banks, covering such matters related to
this Agreement and the Notes as the Banks may reasonably request.
(f) Counterparts. The Agent shall have received duly executed
counterparts of this Agreement, executed by the Company and each of the
Banks.
3.2 Conditions Precedent to Credit Advances. The obligation of the
Banks to make any Credit Advance (including the initial Credit Advance) is
subject to the conditions precedent that on the date of such Credit Advance
(and giving effect thereto):
(a) The representations and warranties made in this Agreement
shall continue to be correct in all material respects as of such date
as if made on and as of such date except (i) as otherwise permitted
or contemplated in this Agreement or (ii) as to which the Banks have
received written notice and as to which the Banks have given their
written consent; and
(b) No Default shall have occurred and be continuing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to execute this Agreement and to agree to
make the Credit Advances, the Company hereby represents and warrants to the
Banks as follows:
4.1 Corporate Existence. The Company and each of its corporate
Subsidiaries:
(i) is duly incorporated, validly existing and in good standing
under the laws of the state of its incorporation and is duly qualified
and in good standing as a foreign corporation in each jurisdiction in
which the failure to qualify would have a materially adverse effect
upon the financial condition, business or properties of the Company and
its Subsidiaries taken as a whole; and
(ii) has all requisite corporate power and authority to conduct
its business and to own its property, as now conducted or owned or as
proposed to be conducted or owned.
4.2 Performance of Loan Documents. The execution, delivery and
performance by the Company of this Agreement and the Notes are within its
corporate powers, have been duly authorized by all necessary corporate and
other action and do not and will not:
(i) violate any provision of its certificate of incorporation or
by-laws, as amended to date;
(ii) constitute or result in the Company or any of its Subsidiaries
being in breach of or default under or conflict with any material statute
or other law, or any material order, regulation or ruling of any court or
other tribunal or of any governmental or administrative authority or
agency of which the Company has knowledge, or any material provision
of any material indenture, agreement, lease, instrument or other
undertaking to which the Company or any of its Subsidiaries is a party
or by which it or its property or assets may be bound or affected; or
(iii) result in the imposition of any Liens on any property or
assets of the Company or any of its Subsidiaries.
4.3 Governmental Approval.
(a) The Company and each of its Subsidiaries possesses all
consents, licenses, franchises and permits of governmental and
administrative authorities and agencies as are necessary for the
conduct of their respective businesses and the ownership of their
respective properties and assets, as now conducted and owned or as
proposed to be conducted and owned, except where the absence of same
will have no material adverse effect on the ability of the Company to
perform its obligations under any Loan Document.
(b) No authorization, consent, exemption of or filing or
registration with any court or other tribunal or any governmental or
administrative authority or agency is or will be necessary to the valid
execution, delivery or performance, in any material way, by the Company
of any Loan Document.
4.4 Binding Obligations. This Agreement constitutes, and each Note,
when duly executed and delivered for value, will constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with the respective terms thereof, subject to bankruptcy,
insolvency and similar laws of general application affecting the rights
and remedies of creditors and, with respect to the availability of the
remedies of specific enforcement, injunctive relief or other equitable
remedies, to the discretion of the court before which any proceeding
therefore may be brought.
4.5 Capital Stock; Subsidiaries. All outstanding capital stock of the
Company and each of its corporate Subsidiaries has been validly issued and is
fully paid and non-assessable. As of the date of this Agreement, the Company
does not have any Subsidiaries other than as indicated on Schedule 4.5 hereto.
The Company owns, free and clear of all Liens, all of the outstanding shares
of each corporate Subsidiary.
4.6 Financial Statements.
(a) The audited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of the Prior Fiscal Year, and the
related audited statements of consolidated income and retained earnings
and consolidated changes in cash flows, for the Prior Fiscal Year then
ended, reported on by Coopers & Lybrand, independent accountants
(correct and complete copies of which have been furnished to the
Banks), fairly present the consolidated financial condition of the
Company and its consolidated Subsidiaries as at such date and the
results of consolidated operations for the Prior Fiscal Year, all
in accordance with GAAP.
(b) The unaudited consolidated balance sheets of the Company and
its consolidated Subsidiaries as at May 4, 1996 and the related unaudited
statements of consolidated income and retained earnings and consolidated
changes in cash flows, for the three month period then ended (correct
and complete copies which have been furnished to the Banks), fairly
present the consolidated financial condition of the Company and its
consolidated Subsidiaries as at such date and the results of
consolidated operations for the three month period ended on such date,
all in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes.
(c) Except as described in Schedule 4.6(c), since May 4, 1996,
there has been:
(i) no change in the consolidated assets or liabilities of
the Company and its consolidated Subsidiaries, other than changes
in the ordinary course of business, none of which has been,
either singly or in the aggregate, materially adverse;
(ii) no materially adverse depletion of cash (other than
through the payment of long-term debt of the Company prior to the
date hereof) or material decrease of working capital other than
such as result from seasonal variations or other changes in the
ordinary course of business;
(iii) no material damage, destruction or loss (whether or not
covered by insurance) adversely affecting a material portion of its
property, assets or business;
(iv) no material controversy with its employees or with any
labor organization; or
(v) no other occurrence or development whatsoever materially
affecting adversely its business, operations or condition,
financial or otherwise, or a material portion of its property or
assets, other than seasonal variations in the ordinary course of
business.
4.7 Litigation. To the knowledge of any executive officer (as defined
in Rule 405 promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended) of the Company, there are no actions,
suits,investigations or proceedings pending or, to the knowledge of any
officer or inside director of the Company, threatened against or affecting
the Company or any of its Subsidiaries or any of the respective property or
assets of any of them, by or before any court or other tribunal or any
governmental or administrative authority or agency, which, if determined
adversely to the Company or its Subsidiaries would, singly or in the
aggregate, have a material adverse effect on the condition, financial or
otherwise, of the Company or its Subsidiaries, considered as a whole or
which calls into question the validity of any Loan Document.
4.8 Regulations U and X. None of the Company or any of its
Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U or X of the Board
of Governors of the Federal Reserve System) and no part of the proceeds of
any Credit Advance hereunder will be used to purchase or carry any such
margin stock.
4.9 Encumbrances. The Company and each of its Subsidiaries has good and
clear record and marketable title to all of its respective property and
assets, and there are no Liens on any of such property or assets, except
those permitted in Section 5.2(a).
4.10 Defaults. Neither the Company nor any of its Subsidiaries is, to
the knowledge of the Company, in violation of or default under any statute
or other law or under any order, regulation or ruling of any court or other
tribunal or any governmental or administrative authority or agency, or in
any material respect under any indenture, agreement, lease, instrument or
other undertaking to which the Company or such Subsidiary is a party or by
which it or its respective property or assets may be bound or affected,
which violation or default would have a material adverse effect on the
business of the Company and such Subsidiary, considered as a whole.
4.11 Taxes. The Company and each of its Subsidiaries has filed all
material tax returns and reports (federal, state and local) required to be
filed by it, and paid all material taxes, assessments and other
governmental charges imposed upon it and its respective property and
assets, other than (i) such as are presently payable without interest or
penalty, (ii) such as are being contested in good faith by appropriate
proceedings, and for which adequate reserves are being maintained in
accordance with GAAP, or (iii) with respect to local taxes, such local
taxes payable by the Company which (A) the chief financial officer of the
Company has no knowledge of the Company's obligation to pay and (B) the
failure to pay does not have a material adverse effect on the business,
property, assets, or condition, financial or otherwise, of the Company and
its Subsidiaries. Except as described on Schedule 4.11, the federal income
tax returns of the Company and its Subsidiaries have not been audited by
the Internal Revenue Service within the last three years, all prior audits
have been closed, and there are no unpaid assessments, penalties or other
charges arising from such prior audits.
4.12 Information. The certificates, reports and other papers furnished by
or on behalf of the Company to each Bank in connection with the 1994 Agreement
and this Agreement, taken as a whole, do not contain any material
misstatement of fact or fail to state a materil fact necessary to make the
statements contained therein not misleading.
4.13 Employee Benefit Plans. Except as described on Schedule 4.13,
neither the Company nor any Subsidiary has any Plan or is a sponsor of any
multi-employer Plan; and no Reportable Event, which is now continuing, has
occurred with respect to any Plan.
4.14 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
investment company, within the meaning of the Investment Company Act of 1940,
as amended.
ARTICLE 5
COVENANTS OF THE COMPANY
5.1 Affirmative Covenants. So long as any Credit Advance or any other
Obligation shall remain unpaid, or any Commitment is outstanding, the Company
will, unless the Banks shall otherwise consent in writing:
(a) Taxes - Accrue, and cause each of its Subsidiaries to accrue,
all tax liabilities according to GAAP, and pay and discharge and cause
each of its Subsidiaries to pay and discharge, all taxes, assessments
and other governmental charges imposed upon the Company and each
Subsidiary and its respective property and assets, prior to the date
on which interest, penalties or liens accrue or attach in a material
amount, and all other known material liabilities and obligations, when
due (including, without limitation, all Obligations), provided that
neither the Company nor any Subsidiary shall be required to pay any
such tax, assessment, governmental charge or other liability (other
than Obligations) which is being contested in good faith by appropriate
proceedings, so long as adequate reserves therefor are maintained, and
provided further that payments to trade creditors shall be deemed paid
when due if made within such period of time as payments are made to
trade creditors in the customary course of business of the Company
and its Subsidiaries unless the failure to make such payments to
trade creditors within such period of time would have a material
adverse effect on the business of the Company and its Subsidiaries,
considered as a whole.
(b) Insurance - Maintain, and cause each of its Subsidiaries to
maintain, insurance with responsible insurance companies, in such amounts
and against such risks and to such extent as is usually carried by
companies engaged in a similar business and owning similar property in
the same general areas in which the Company and each of its Subsidiaries
conducts its respective business or owns its respective property and
under similar circumstances; and furnish to the Banks appropriate
evidence of the maintenance of such insurance at such times as the
Banks may reasonably request.
(c) Corporate Existence - Maintain, and, unless done in a
transaction permitted by Section 5.2(d), cause each of its Subsidiaries
to maintain, its good standing in the state of its incorporation or
formation, as the case may be, and qualify and remain qualified in
good standing in each other jurisdiction where the failure to qualify
in such other jurisdiction would have a material adverse effect upon
the financial condition, business or properties of the Company and its
Subsidiaries taken as a whole; provided however, the Company may, with
the prior written consent of the Banks (which consent shall not be
unreasonably withheld), dissolve a Subsidiary if such Subsidiary is
no longer actively conducting its business; and maintain in good
standing all material consents, licenses, franchises and permits of
public and private authorities as are necessary for the conduct of its
respective business and the ownership of its respective property and
assets.
(d) Compliance with Law - Comply, and cause each of its
Subsidiaries to comply, with the requirements of all statutes and other
laws and all rules, regulations and orders of any court or other
tribunal or governmental or administrative authority or agency
applicable to the Company or any of its Subsidiaries, or their
respective businesses, properties or assets, the failure to comply
with which would have a material adverse effect on the business of
the Company and its Subsidiaries, considered as a whole.
(e) Maintenance of Property - Maintain, and cause each of its
Subsidiaries to maintain, all property, which is necessary in the proper
conduct of its respective business, in good working order and condition
for such use, and make all necessary repairs thereto and replacements
thereof, reasonable wear and tear excepted.
(f) Maintenance of Books and Records - Maintain, and cause each of
its Subsidiaries to maintain, proper and accurate corporate, financial
and other records and books of account.
(g) Inspection - Upon reasonable notice and at all reasonable times
during normal business hours, permit, and cause each of its Subsidiaries
(other than the Joint Venture) to permit, the Banks, and agents,
accountants, auditors, attorneys and other representatives of the Banks,
to examine and make copies of and abstracts from its respective books of
account, correspondence (other than correspondence with its respective
attorneys that is subject to the attorney-client privilege or that is not
permitted to be disclosed pursuant to a confidentiality agreement between
the Company and/or any Subsidiary, on the one hand, and any other Person
that is not an Affiliate of the Company, on the other) and other records,
to examine its property and to discuss its respective financial and other
affairs with any of its respective officers, and any accountants or
auditors hired by it, it being understood that the Banks will not divulge
information obtained from such examination or received from the Company
or any of its Subsidiaries to other persons, except in connection with
the proper administration of the Loan Documents and the regulation and
examination of the Banks' banking business by state and federal
authorities.
(h) Further Assurances - From time to time, execute and deliver all
such instruments and documents, and do or cause to be done all such acts
and things, as the Banks may reasonably request, more completely to
assure to the Banks their rights hereunder and to effectuate the intent
of this Agreement.
(i) BayBank as Principal Depository, Etc. - Maintain BayBank as its
principal depository, bank of account and lending bank.
5.2 Negative Covenants. So long as any Credit Advance or any other
Obligation remains unpaid, or any Commitment remains outstanding, the Company
will not, and will not permit any Subsidiary (other than the Joint Venture)
to, unless the Banks shall otherwise consent in writing:
(a) Liens - Create, incur, assume or suffer to exist, any Lien on
or with respect to any of its respective property or assets, whether
now owned or hereafter acquired, or income or profits therefrom,
except the following:
(i) Liens for taxes, assessments or other governmental
charges which are being contested in good faith by appropriate
proceedings, and for which adequate reserves are being maintained;
(ii) Statutory Liens of carriers, warehousemen, mechanics,
materialmen, repairmen and others arising in the ordinary course of
business for sums not overdue, or which are being contested in good
faith by appropriate proceedings;
(iii) Liens incurred or deposits or pledges made in connection
with worker's compensation, health or unemployment insurance, social
security laws, or similar legislation or in connection with or to
secure the payment or performance of bids, tenders, sale agreements,
leases, trade agreements, statutory obligations or surety bonds, or
other Liens incidental to the ordinary conduct of its respective
business or the ownership of its respective property and assets,
which are not incurred in connection with the borrowings of money;
or judgment liens in proceedings which are being appealed and with
respect to which there has been a stay of execution; provided that
all of the foregoing do not in the aggregate materially adversely
affect the value of its respective property or assets or impair
the use thereof in the operation of its respective business;
(iv) Landlord's Liens arising under real property leases, or
Liens on property hereafter acquired (either in connection with
purchase money mortgages, rental purchase agreements, including
capital leases, or conditional sale or other title retention
agreements), which are restricted to the property so acquired and do
not secure Indebtedness exceeding the fair value (at the time of
acquisition) thereof;
(v) Liens in favor of the Banks;
(vi) Liens described on Schedule 5.2(a);
(vii) Easements, rights of way, restrictions, minor defects,
encroachments 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 Company or any of its
Subsidiaries; and
(viii)License agreements pursuant to which the Company licenses
any of its trademarks, tradenames, service marks, trade dress, or
other intellectual property.
(b) Indebtedness - Create, incur, assume or suffer to exist any
Indebtedness, except the following:
(i) Indebtedness to the Banks, whether arising hereunder or
otherwise;
(ii) Indebtedness described on Schedule 5.2(b), and extensions
or renewals thereof provided that there is no increase in the unpaid
principal amount thereof; and
(iii) Indebtedness secured by Liens as described in Section
5.2(a)(iv).
(c) Guarantees - Create or become or remain liable with respect to
any Guarantee; provided that (i) the Company may guaranty the payment of
amounts due under corporate credit cards issued to the Company and any
of its employees, provided such cards are only intended for use in
respect of expenses incurred in the ordinary course of the Company's
business; (ii) the Company may guaranty store leases entered into by
a Subsidiary of the Company as tenant; (iii) Guarantees in favor of the
Banks; (iv) the Company may enter into and remain liable under
Guarantees of other obligations of its wholly-owned Subsidiaries,
provided that the underlying obligation could have been incurred by the
Company as primary obligor, without violation of the provisions hereof;
and (v) the Company may enter into and remain liable under any
Guarantee of Indebtedness and/or other liabilities of its Subsidiaries
not otherwise permitted under clauses (i) through (iv) above
(hereinafter a "Restricted Guarantee"), so long as, giving effect to
the creation of such Restricted Guarantee, (A) the aggregate amount of
all Indebtedness and liabilities guaranteed under all Restricted
Guarantees entered into after the date hereof by the Company does not
exceed ten percent (10%) of the consolidated total liabilities of the
Company and its wholly-owned Subsidiaries at the time that any such
Restricted Guarantee is created, and (B) at the time of the creation
of such Restricted Guarantee (and giving effect thereto) no Default
shall have occurred and be continuing.
(d) Consolidation, Mergers or Acquisition - The Company will not,
and will not permit any of its Subsidiaries (other than the Joint
Venture) to, be a party to any merger or consolidation, or acquire the
business of any Person except (i) the merger of any wholly-owned
Subsidiary of the Company into the Company or any other wholly-owned
Subsidiary of the Company; and (ii) so long as no Default shall have
occurred and be continuing hereunder at the time of such acquisition or
after giving effect thereto, Permitted Acquisitions (as defined below).
For purposes of this Section 5.2(d), a "Permitted Acquisition" shall mean
an acquisition complying with the following:
(A) Such acquisition shall be of assets ancillary, incidental or
necessary to the retail sale of apparel and related activities, or of
100% of the stock of a corporation whose assets consist substantially
of such assets, or through the merger of such a corporation with the
Company (with the Company as the surviving corporation), or with a
Subsidiary of the Company, where, giving effect to such merger, such
corporation becomes a wholly-owned Subsidiary of the Company; and
(B) If such acquisition includes the acquisition of assets by, or
the merger of, the Company, there shall have been no change in the
identity of the chief financial officer or the chief executive officer
of the Company as a consequence of such acquisition, or if there has
been such a change, the Banks shall have consented in writing to such
change in identity within thirty (30) days thereafter (which consent
shall not be unreasonably withheld).
(e) Sales of Assets - Sell, assign, lease to another or otherwise
transfer, convey or dispose of any Relevant Assets (as hereinafter
defined), the book value of which, when added to the book value of all
other Relevant Assets sold, assigned, leased, transferred, conveyed or
disposed of during any fiscal year of the Company equals or exceeds
$500,000. The term "Relevant Asset" shall mean any asset of the Company
or any Subsidiary thereof (other than the Joint Venture) other than (i)
inventory, and obsolete or worn-out property and equipment, disposed of
in the ordinary course of business, (ii) any assets of the Company
disposed of in connection with any store closings that are charged
against the $15,000,000 reserve established in the fourth quarter of
the Company's fiscal year ended January 29, 1994, and (iii) the assets
described on Schedule 5.2(e) hereof. Notwithstanding the foregoing
provisions of this paragraph (e), (A) any Subsidiary may make any sale,
assignment, lease or other transfer otherwise prohibited by this
paragraph if the same is to a Person with whom such Subsidiary may
merge with or into pursuant to paragraph (d) above; and (B) the Company
and any Subsidiary may contribute assets to partnerships and joint
ventures to the extent permitted by Section 5.2(f)(viii) or (ix).
(f) Investments - Make any loan or advance to any person, or
purchase or otherwise acquire, the capital stock or a substantial portion
of the assets or obligations of, or any interest in, any Person (an
"Investment"), except for the following:
(i) (A) loans to officers and employees not exceeding
$400,000 in the aggregate at any one time outstanding, provided
that each such loan is for a term of not more than 90 days from
the date on which it is made and is paid within such 90-day
period; and (B) loans to the Joint Venture not exceeding
$7,500,000 in the aggregate at any one time outstanding, provided
that no such loans to the Joint Venture are outstanding on the
last day of each fiscal year of the Company or during any
so-called "clean-up period" set forth in an agreement to
which the Company and the Joint Venture are parties relating to any
such loans;
(ii) advances to employees or officers, with respect to
reimbursable expenses incurred in the ordinary course of business;
(iii) acquisition of property, subject to other limitations set
forth in this Agreement, to be used in the ordinary course of its
respective business;
(iv) Eligible Investments;
(v) advances to vendors or suppliers, for the purpose of
obtaining services or supplies, in the ordinary course of business;
(vi) advances to contractors for the construction or
renovation of stores, buildings or improvements for use in the
business of the Company;
(vii) Investments by the Company in its wholly-owned
Subsidiaries, Investments by such Subsidiaries in the Company, and
Investments by the Company in its treasury stock;
(viii) the contribution by the Company and/or any Subsidiary to
the Joint Venture of (A) "Original Levi's Stores", leases for such
Stores and related assets in connection with the creation of the
Joint Venture or (B) other assets from time to time thereafter;
provided that, in the case of any contribution described in clause
(B) hereof, no Default shall have occurred and be continuing at
the time of such contribution (and giving effect thereto); and
(ix) any other Investment by the Company or any Subsidiary
(other than the Joint Venture); provided that, giving effect to the
making of such other Investment, (A) the aggregate amount of all
such other Investments made after the date hereof by the Company
does not exceed ten percent (10%) of the consolidated total assets
of the Company and its wholly-owned Subsidiaries at the time that
such other Investment is made and (B) at the time of such other
Investment (and giving effect thereto) no Default shall have
occurred and be continuing.
(g) Line of Business - Fail to continue (or, subject to Section
5.1(c) or Section 5.2(d), allow its Subsidiaries (other than the Joint
Venture) to fail to continue) to carry on substantially the same business
as carried on during the Prior Fiscal Year, and engage in no business
other than such business and activities that are ancillary, incidental
or necessary thereto; provided, that the foregoing shall not prohibit
the expansion or contraction of the Company's business so long as the
Company is still engaged solely in the retail sale of apparel and
other activities, ancillary, incidental or necessary thereto.
(h) Restricted Payments - Declare or make any Restricted Payment if
at the time of such declaration or payment, or after giving effect
thereto, a Default or Event of Default shall have occurred and be
continuing.
5.3 Financial Covenants. So long as any Credit Advance or any other
Obligation remains unpaid, or a request for a borrowing hereunder remains
outstanding, the Company shall not, unless the Bank shall otherwise consent
in writing:
(a) Ratio of Total Liabilities to Net Worth - Permit the ratio
of Total Liabilities to Net Worth at the end of any fiscal quarter of
the Company and its consolidated Subsidiaries to be more than 0.65-to-
1.0.
(b) Cash Flow Ratio - Permit the ratio ("Cash Flow Ratio"),
calculated as of the end of any fiscal quarter of the Company and its
consolidated Subsidiaries for the period of four fiscal quarters then
ended, of (i) Cash Flow to (ii) Fixed Charges for such period to be
less than 1.0-to-1.0.
(c) Inventory Turnover Ratio - Permit the ratio, calculated as
at the end of any fiscal quarter of the Company and its consolidated
Subsidiaries, of (i) the aggregate consolidated cost of goods sold of
the Company and its consolidated Subsidiaries for the period of four
fiscal quarters then ended to (ii) total Inventory (on a FIFO basis)
of the Company and its consolidated Subsidiaries at the end of such
fiscal quarter, to be less than 2.0-to-1.0.
It is expressly understood by the Company and the Banks that the above-
described ratios shall be calculated excluding the effect of the accounts
of the Joint Venture (including, without limitation, the investment of the
Company and/or its Subsidiaries in the Joint Venture).
5.4 Reporting Requirements. So long as any Loan or any other Obligation
shall remain unpaid or any Commitment remains outstanding, the Company will,
unless the Banks shall otherwise consent in writing, furnish to the Banks:
(a) Promptly after an officer or inside director of the Company
has knowledge of the occurrence of a Default, which is then continuing,
a certificate of the chief executive officer or the chief financial
officer of the Company setting forth the details thereof and the action
which the Company has taken or proposes to take with respect thereto.
(b) Within 50 days after the end of each fiscal quarter of each
fiscal year of the Company, a quarterly report on Form 10-Q (or successor
form) of the Company and its consolidated Subsidiaries with respect to
such fiscal quarter.
(c) Within 95 days after the end of each fiscal year of the Company,
commencing with the Current Fiscal Year, an annual report on Form 10-K
(or successor form) of the Company and its consolidated Subsidiaries with
respect to such fiscal year, accompanied by the report of Coopers &
Lybrand, or other independent accountants reasonably satisfactory to the
Banks, that the financial statements included therein have been prepared
in accordance with GAAP, and that the audit in connection therewith has
been made in accordance with generally accepted auditing standards,
together with a report of such accountants that:
(i) they do not have knowledge of the existence, as at the
date of such report, of any Event of Default that is continuing on
such date, or, if an Event of Default has occurred and is
continuing, a statement as to the nature and period of existence
thereof; and
(ii) the calculations contained in the certificate referred to
in clause (ii) of paragraph (d), below are correct.
(d) Each set of financial statements furnished pursuant to
paragraph (b) or (c) of this Section shall be accompanied by a
certificate of the chief executive officer or chief financial officer
of the Company (i) stating, to the best of such officer's knowledge
after reasonable investigation, whether any Default exists on the date
of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Company is taking or proposes
to take with respect thereto and (ii) setting forth in reasonable
detail the calculations necessary to show whether the Company and its
Subsidiaries were in compliance with each of the financial ratios and
restrictions contained in this Article 5 on the date of such financial
statements, including certification of compliance with the provisions
of Section 5.2(f)(i)(B).
(e) Each set of financial statements furnished pursuant to
paragraph (b) or (c) above as to any fiscal quarter or fiscal year of
the Company, shall be accompanied by a profit and loss statement for
such fiscal quarter or fiscal year, as the case may be, with respect
to each store operated by the Company or its Subsidiaries (including
the Joint Venture), in substantially the form customarily furnished to
the Banks by the Company prior to the date hereof.
(f) Within 95 days of the end of each fiscal year of the Company, a
projected budget for the Company and its consolidated Subsidiaries for
the period commencing the beginning of the subsequent fiscal year and
continuing for a period of three total fiscal years or the remaining
years to the Termination Date, whichever is less, such budget to include
quarterly and annual consolidated cash flow statements, balance sheets,
and profit and loss statements, all in reasonable detail and duly
certified by the chief financial officer of the Company. In addition,
the Company will provide a description of the material assumptions made
in the preparation of such financial statements and a certification by
the chief financial officer that such assumptions are reasonable.
(g) Promptly after any officer or inside director of the Company
has knowledge thereof, written notice of:
(i) Any action, suit, investigation or proceeding pending or
threatened against or affecting either it or any Subsidiary or any
respective property or assets of the Company or any Subsidiary, by
or before any court or other tribunal or any governmental or
administrative authority or agency, which, if successful, would
adversely affect materially the business, property, assets or
condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole;
(ii) Termination or potential termination of any material
consent, license, permit or franchise necessary for the conduct of
the business or the ownership of the properties and assets of the
Company and its Subsidiaries taken as a whole, which, if
terminated, would have a materially adverse affect on the
business, property, assets or condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole;
(iii) Any material loss, damage or destruction (regardless of
whether the same is covered by insurance) to or of a material
portion of any of the properties or assets of the Company and
its Subsidiaries taken as a whole;
(iv) Any material controversy with the respective employees of
the Company or any Subsidiary or with any labor organization; and
(v) Any other development, adversely affecting materially the
business, property, assets or condition, financial or otherwise of
the Company and its Subsidiaries taken as a whole.
(h) Promptly upon receipt thereof, copies of all management and
other reports issued by the independent accountants to the Company or
its Board of Directors.
(i) Promptly upon the occurrence of any change in the identity of
any of the President and Chief Executive Officer, the Executive Vice
President, General Counsel and Secretary, and the Chief Financial
Officer of the Company, notice of such change.
(j) Promptly after the Company knows or has reason to know that any
Reportable Event with respect to any Plan has occurred, the statement of
the chief financial officer of the Company setting forth details as to
such Reportable Event and the action which the Company has taken or
proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty
Corporation.
(k) Promptly after the filing thereof with the Secretary of Labor
or the Pension Benefit Guaranty Corporation, copies of each annual report
which is filed with respect to each Plan for each Plan year.
(l) Promptly after the transmission or filing thereof, copies of
all notices of annual or special meetings of stockholders, proxy
statements, and other statements which the Company sends to its
stockholders or other holders of any of its securities, or files with
the Securities and Exchange Commission; provided, however, the Company
shall be under no obligation to file with the Banks any such statements
filed with the Securities and Exchange Commission which are not public
information.
(m) With reasonable promptness, such other information respecting
the Company or any of its Subsidiaries (other than the Joint Venture,
except to the extent expressly provided in Section 5.4(n) hereof) as the
Banks may from time to time reasonably request, it being understood that
neither Bank will divulge any such information obtained from the Company
or any of its Subsidiaries except in connection with the proper
administration and the enforcement of the Loan Documents and the
regulation and examination by federal or state authorities of such
Bank's banking business, or as such Bank believes in good faith is
otherwise required by law.
(n) Within 50 days after the end of each fiscal quarter of each
fiscal year of the Joint Venture a quarterly report consisting of a
balance sheet, income statement and cash flow statement comparing the
current fiscal quarter, comparable fiscal quarter of the previous year
and current fiscal quarter budget, and, within 95 days after the end of
each fiscal year of the Joint Venture, an annual financial statement
prepared by an independent certified public accountant.
ARTICLE 6
DEFAULTS
6.1 Events of Default. The occurrence of any one of the following
events, where applicable, of, by or against the Company, shall constitute an
Event of Default under this Agreement:
(a) Failure to make any payment of principal of or interest on any
Loan, or any other amount payable hereunder within five (5) Banking Days
after the same is due (whether by demand, mandatory prepayment or on the
Termination Date).
(b) Any representation, warranty or statement made by the Company
in or in connection with this Agreement, any Credit Advance or any other
Obligation shall prove to have been incorrect or false in any material
respect when made or furnished.
(c) Failure to perform or observe any covenant contained in Section
5.2 or Section 5.3 hereof.
(d) Failure to perform or observe any material covenant or
condition (other than as provided in paragraphs (a), (b) or (c) above)
contained in this Agreement, the Loan Documents or any other agreement
with either Bank (except for the MasterCard Agreement), which failure
shall continue for more than 30 days after the Company knew or should
have known of such default.
(e) Failure of the Company or any Subsidiary thereof to make any
payment in respect of Indebtedness (other than Credit Advances) in the
aggregate principal amount of more than $500,000 when due or within any
applicable grace period.
(f) Any event or condition occurs that results in the acceleration
of the maturity of any Indebtedness (other than Credit Advances) of the
Company or any of its Subsidiaries in the aggregate principal amount of
more than $500,000 or that enables (or, with the giving of notice or
passage of time would enable) a holder of such Indebtedness, or any
Person acting on behalf of such holder, to accelerate the maturity
thereof.
(g) Termination of the Company's existence or, except as permitted
in Section 5.1(c) or Section 5.2(d), any of its Subsidiaries' existence,
suspension or discontinuance of its respective business; or insolvency or
inability of the Company or any of its Subsidiaries to pay its respective
debts as they mature.
(h) Making of a general assignment for the benefit of creditors
or of a composition or similar arrangement with creditors; conveyance of
all or a substantial part of its property or assets to a trust mortgagee
or liquidating agent; or appointment, in a voluntary proceeding, of a
receiver, trustee or similar judicial officer or agent, to take charge
of or liquidate all or a substantial part of the respective property
or assets of the Company or any of its Subsidiaries.
(i) Appointment of such a receiver, trustee or similar judicial
officer or agent, in any involuntary proceeding, or action by any court
to take jurisdiction of all or a substantial part of the Company's or any
of its Subsidiaries respective property, unless the Company or such
Subsidiary is diligently contesting such appointment or the taking of
such jurisdiction by appropriate action, or if, despite such contest,
such officer or agent is not discharged or such jurisdiction is not
relinquished within a period of 90 days.
(j) Commencement of any voluntary proceeding under any provision of
Title 11 of the United States Code, as now or hereafter amended, or any
other proceeding, under any state or federal law, now or hereafter in
force, relating to bankruptcy, insolvency, reorganization, or otherwise
to the relief of debtors or the readjustment of indebtedness; or
commencement of any such proceeding against the Company or any of its
Subsidiaries, unless the Company or such Subsidiary is diligently
contesting the same by appropriate action, or if, despite such contest,
such proceeding is not dismissed within a period of 90 days.
(k) Attachment, levy or seizure of or on any material asset or
assets of the Company or of any of its Subsidiaries, which is not
released within 30 days.
(l) Entry of a final uninsured judgment which, singly or with any
other outstanding final uninsured judgments, against the Company or any
of its Subsidiaries, exceeds an aggregate amount of $500,000 if such
judgment is not discharged or execution thereof stayed pending appeal
within 60 days, or if, within 60 days after the expiration of any such
stay, it is not discharged or satisfied.
(m) With respect to any Plan as to which the Company or any of its
Subsidiaries may have any liability, (i) a contribution failure occurs
sufficient to give rise to a lien enforceable by the Pension Benefit
Guaranty Corporation under Section 302(f)(1) of ERISA, or (ii) there
shall exist a deficiency of more than $250,000 in the Plan assets
available to satisfy the benefits guaranteed under ERISA with respect
to such Plan and steps are undertaken to terminate such Plan or such
Plan is terminated or the Company or such Subsidiary withdraws from or
institutes steps to withdraw from such Plan or any Reportable Event
with respect to such Plan shall occur.
(n) Substantial (determined with respect to the Company and its
Subsidiaries taken as a whole) loss, theft, damage or destruction to or
of any substantial portion of the Company's or any of its Subsidiaries'
property (unless covered by insurance); or occurrence of any change in
the Company's or any of its Subsidiaries', condition or affairs,
financial or otherwise, which would have a material adverse effect on
the ability of the Company to perform the requirements of this
Agreement or the Notes.
(o) The Company or any Subsidiary shall fail to pay aggregate
monthly rent of at least $180,000 when due, or within any applicable
grace period, under leases for any stores that the Company or any
Subsidiary has not intentionally closed, or any other event or
condition occurs that permits (or, with the giving of notice or the
passage of time would permit) leases for stores that the Company or
such Subsidiary has not intentionally closed, with aggregate monthly
rents of at least $180,000, to be terminated prior to the stated
termination date thereof.
6.2 Rights and Remedies on Default. Upon the occurrence of any Event
of Default, and at any time thereafter, unless the same is previously cured,
the Banks may:
(i) declare the unused portion of the Commitments terminated,
whereupon the same and the obligation of the Banks to make Credit
Advances shall be thereupon terminated;
(ii) declare the entire unpaid principal amount of all Loans
then outstanding, all interest accrued and unpaid thereon and all
other amounts payable under this Agreement, and all other Obligations
of the Company, to be forthwith due and payable, whereupon the same
shall become forthwith due and payable and the Commitment shall be
terminated, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Company; and
(iii) exercise all rights and remedies hereunder, under the
Notes and under any other Loan Documents, and under any other
agreements with any Bank; and all other rights and remedies which the
Banks may have under applicable law.
6.3 Setoff.
(a) Each Bank, and any bank wholly-owned by any Bank, may, upon
the occurrence and during the continuance of an Event of Default
hereunder, to the fullest extent permitted by applicable law, off-set
any deposits (general or special, including, but not limited to
indebtedness evidenced by a certificate of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by such
Bank or bank for the account of the Company against any principal of or
interest on any Credit Advance or any other amount due hereunder
(regardless of when such deposits or indebtedness are due to the
Company). Such Bank or bank shall provide such notice of such setoff
as may be provided for in its customary operating procedures as in
effect at the time.
(b) Nothing contained in this Section 6.3 shall be deemed to affect
the authorization set forth in Section 2.11.
(c) Each Bank agrees that if it shall, through the exercise of a
right of banker's lien, setoff or counterclaim against the Company,
including, but not limited to, a secured claim under Section 506 of Title
11 of the United States Code or other security or interest arising from,
or in lieu of, such secured claim, received by such Bank under any
applicable bankruptcy, insolvency or other similar law or otherwise,
obtain payment (voluntary or involuntary) in respect of a Note held by
it as a result of which the unpaid principal portion of the Notes held
by it shall be proportionately less than the unpaid principal portion
of the Notes held by the other Bank, it shall be deemed to have
simultaneously purchased from such other Bank a participation in the
Note held by such other Bank, so that the aggregate unpaid principal
amount of the Notes and participations in Notes held by it shall be in
the same proportion to the aggregate unpaid principal amount of all
Notes then outstanding as the principal amount of the Notes held by it
prior to such exercise of banker's lien, setoff or purchases or
adjustments shall be made pursuant to this Section 6.3 and the payment
giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustments restored
without interest. The Company expressly consents to the foregoing
arrangements and agrees that any Bank holding a participation in a
Note deemed to have been so purchased may exercise any and all rights
of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Company to such Bank as fully as if such Bank held
a Note in the amount of such participation.
ARTICLE 7
THE AGENT
7.1 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder with such
powers as are specifically delegated to the Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in Section 7.5
and the first sentence of Section 7.6 hereof shall include reference to its
Affiliates and its own and its Affiliates' officers, directors, employees
and agents): (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement
and shall not by reason of this Agreement, the Note or any other document be a
trustee for any Bank; (b) shall not be responsible to any Bank for any
recitals, statements, representations or warranties contained in this
Agreement, or in any certificate or other document referred to or provided
for in, or received by any of them under, this Agreement or for the value,
validity, effectiveness, genuineness, enforceability, perfection or
sufficiency of this Agreement, any Note, or any other document referred to
or provided for herein or therein or for any failure by the Company or any
other Person to perform any of its obligations hereunder or thereunder; (c)
shall not be required to initiate or conduct any litigation or collection
proceedings hereunder except to the extent requested by both Banks; and (d)
shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided
for herein or therein or in connection herewith, except for its own
gross negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible to the Banks for the negligence
or misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Subject to the foregoing, the Agent shall on behalf of the
Banks: (i) exercise any and all rights, powers and remedies of the Banks under
this Agreement, provided, however, subject to Section 8.1 hereof, the giving
of any consent or granting of any waiver or the entering into any amendment
of this Agreement shall be given, granted or entered into only with the
unanimous written consent of the Banks; (ii) possess instruments on behalf
of any or all of the Banks; and (iii) in the event of acceleration of the
Company's Obligations hereunder, exercise the rights of the Banks hereunder
as the Agent would customarily exercise with respect to loans made
exclusively by it and of a nature comparable to the Credit Advances made
hereunder.
7.2 Reliance by Agent. The Agent shall be entitled to rely upon any
certifications, notices or other communications (including any communications
by telephone, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement, the Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by the Banks and such instructions of
the Banks, as applicable, and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
7.3 Defaults. The Agent shall not be deemed to have knowledge of the
occurrence of an Event of Default unless the Agent has received written
notice from a Bank or the Company specifying such Event of Default. In the
event that the Agent receives such a notice of the occurrence of an Event of
Default, the Agent shall give prompt notice thereof to the Banks. The Agent
shall, subject to Section 7.7, take such action as shall be directed by the
Banks, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Event of Default
as it shall deem advisable in the best interest of the Banks.
7.4 Rights as a Bank. With respect to its Commitment and the Credit
Advances made by it, the Agent in its capacity as a Bank hereunder shall have
the same rights and powers hereunder as any other Bank and may exercise the
same as though it were not acting as the Agent, and the term "Bank" or
"Banks" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. The Agent and its Affiliates may (without having
to account therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Company and any of its Affiliates as if it were not acting as the Agent, and
the Agent may accept fees and other consideration from the Company for
services as the Agent or otherwise without having to account for the same to
the Banks.
7.5 Indemnification. The Banks agree to indemnify the Agent ratably in
accordance with the aggregate principal amount of the Notes held by the Banks
(or, if no such principal or interest is at the time outstanding, ratably in
accordance with their respective shares of the aggregate Commitments) for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent
in any way relating to or arising out of this Agreement, the Notes or any
other document contemplated by or referred to herein or therein (including,
without limitation, the costs and expenses which the Company is obligated to
pay but excluding, unless an Event of Default has occurred and is
continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms of this Agreement, the Notes or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent they
arise from the gross negligence or willful misconduct of the party to be
indemnified.
7.6 Non-Reliance on Agent and Other Banks. Each Bank agrees that it
has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and its own decision to enter into
this Agreement and that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any other
document referred to or provided for herein or to inspect the properties or
books of the Company. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the affairs,
financial condition or business of the Company (or any of its Affiliates)
which may come into the possession of the Agent or any of its
Affiliates. Notwithstanding the foregoing, the Agent will use its best
efforts to provide to the Banks any and all information reasonably requested
by them and reasonably available to the Agent promptly upon such request.
7.7 Failure to Act. Except for actions expressly required of the Agent
under Articles 2 and 3 hereof, the Agent shall in all cases be fully justified
in failing or refusing to act hereunder unless it shall receive further
assurances to its satisfaction by the Banks of their indemnification
obligations under Section 7.5 hereof against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
take any such action.
7.8 Resignation of Agent. Subject to the appointment and acceptance of
a successor Agent as provided below, the Agent may resign at any time by
giving not less than thirty (30) days prior written notice thereof to the
Banks and the Company. Upon receipt by the Banks of any such notice of
resignation, the Banks shall have the right, exercisable within the 30 day
period following receipt of such notice, to appoint a successor Agent, and
shall so notify the Company of such appointment. If no successor Agent
shall have been so appointed by the Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent (and the retiring Agent shall notify the Bank of such
appointment) which shall be a bank which has a combined capital and
surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations as Agent hereunder. After the retiring
Agent's resignation hereunder as Agent, the provisions of this Article 7
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.
7.9 Cooperation of Banks. Each Bank shall (a) promptly notify the other
Banks and the Agent of any Events of Default known to such Bank under this
Agreement and not reasonably believed to have been previously disclosed to the
other Banks; (b) provide the other Banks and the Agent with such information
and documentation as such other Banks or the Agent shall reasonably request
in the performance of their respective duties hereunder, including all
information relative to the outstanding balance of principal, interest and
other sums owed to such Bank by the Company; and (c) cooperate with the
Agent with respect to any and all collection procedures at any time
commenced against the Company by the Agent on behalf of the Banks.
7.10 Amendment of Article 7. The Company hereby agrees that the
foregoing provisions of this Article 7 constitute an agreement among, and
solely for the benefit of, the Agent and the Banks (and the Agent and the
Banks acknowledge that the Company is not a party to or bound by such
foregoing provisions) and that any and all of the provisions of this Article
7 may be amended at any time by the Banks without the consent or approval
of, or prior notice to, the Company (other than the requirement of notice to
the Company of the resignation of the Agent). The Agent will promptly
furnish to the Company copies of any amendment to this Article 7 entered
into by the Banks.
ARTICLE 8
MISCELLANEOUS
8.1 Waivers; Remedies. The Company waives notice of all action by the
Banks in reliance hereon, but not any notice which is expressly required by
any provision of this Agreement to be given to the Company by any Bank. No
failure or delay by the Banks in exercising any right or remedy hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right or remedy preclude any
other or further exercise thereof or the exercise of any other right or
remedy hereunder or thereunder. No amendment, modification, termination,
consent or waiver of any provision of this Agreement or of any other Loan
Document shall in any event be effective unless the same shall be set forth
in a writing signed by the Banks and the Company, and then only to the
extent specifically set forth therein. In the event the Company requests
that the Banks give their consent, grant any waiver or enter into any
amendment to this Agreement in accordance with the terms of this Agreement,
and State Street fails to respond to such request within fifteen (15)
Business Days after receipt of a written request from the Company for such
consent, waiver or amendment, the Agent may (but shall be under no
obligation) with the consent of BayBank Boston, give such consent, grant
such waiver or enter into such amendment without State Street's consent.
The rights and remedies of the Banks hereunder and under the other Loan
Documents are cumulative and not exclusive of any other rights and remedies
under other agreements of the Company with any Bank or under applicable law,
and all such rights and remedies may be exercised singly or concurrently.
8.2 Action by Banks. No notice to or demand upon the Company in any
instance, shall entitle the Company to any other or further notice or demand
under similar or other circumstances, unless expressly required by this
Agreement, any other Loan Document or applicable law. Each of the Banks
shall be entitled to rely upon any instrument or communication in any form
believed by it to be genuine and to have been signed or sent by a proper
Person. No Bank shall be liable for any action taken or omitted to be taken
by it hereunder or under any other Loan Document, except for its own
manifest error, gross negligence or willful misconduct.
8.3 Notices.
(a) All notices, demands and other communications between any of
parties hereunder to the other shall be deemed effective (except for
Credit Requests, which shall be effective when received by the Agent)
when made in writing and delivered by hand or sent by first class mail
or by facsimile transmission, and addressed to the other party as set
forth below:
If to the Company:
66 B Street
Needham, Massachusetts 02194
Attention: Carolyn R. Faulkner, Chief Financial
Officer and Vice President
Telecopy: 617-449-8666
with a copy to Scott N. Semel, Esq., Executive Vice President,
Secretary and General Counsel, at the same address.
or to such other address of which notice is given in the same manner provided
that failure of either Bank to deliver a copy of any notice to the Company's
General Counsel shall not constitute a failure to send notice to the Company.
If to the Banks:
BayBank, N.A.
7 New England Executive Park
Burlington, Massachusetts 01803
Attention: Gisela A. LoPiano, Vice President
Telephone: (617) 564-4155
Telecopier: (617) 564-4127
and
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: F. Andrew Beise, Vice President
Telephone: (617) 654-3120
Telecopier: (617) 654-4971
or to such other address as either Bank may designate in writing to
the Company, in each case with a copy to:
Douglas C. Reynolds, Esq.
Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
Telephone: (617) 951-2013
Telecopier: (617) 951-2125
provided that the failure of the Company to deliver a copy of any notice to
Douglas C. Reynolds, Esq. shall not constitute a failure to send notice to the
Banks.
(b) Credit Requests from the Company to the Agent shall be
delivered in accordance with Section 2.7 and notices to the Agent shall
be addressed to the Agent at:
BayBank, N.A.
7 New England Executive Park
Burlington, Massachusetts 01803
Attention: Gisela A. LoPiano, Vice President
Telephone: (617) 564-4155
Telecopier: (617) 564-4127
or to such other address as the Agent may designate in writing to the other
parties hereto.
(c) The proceeds of all Credit Advances made hereunder shall be
delivered in accordance with Section 2.3 hereof to the following account of
the Company with BayBank (unless otherwise agreed in writing by the
parties hereto):
BayBank, N.A.
175 Federal Street
Boston, Massachusetts 02110
ABA #011001742
For Credit To: Account No. 0161721
Attention: Gisela A. LoPiano, Vice President
Telephone: (617) 564-4155
Telecopier: (617) 564-4127
8.4 Costs and Expenses. The Company will pay to the Banks, on request,
or the Banks may charge the Company's deposit accounts with the Agent or any
other account of the Company:
(i) all reasonable costs and expenses paid or incurred by the
Banks in connection with the preparation of this Agreement and the
other Loan Documents, and any amendment thereof, including, without
limitation, the reasonable fees and disbursements of Peabody &
Arnold, special counsel for the Banks, with respect thereto; and
(ii) the reasonable fees and disbursements of such counsel or
other legal counsel, independent public accountants and other
experts retained by the Bank in connection with the collection or
enforcement of any Loan Documents and any collateral or security
therefor, and the defense by the Banks of any claims asserted
against any of them with respect thereto, whether or not, in any
instance, litigation is commenced.
The Banks will give the Company notice of any amount to be charged to any
account of the Company pursuant to this Section prior to charging such
account.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed
to be an original and all of which taken together shall constitute but one
and the same Agreement.
8.6 Effective Date; Assignment. This Agreement shall become effective
when executed by the Company and the Banks and thereafter shall be binding
upon and inure to the benefit of the Company and the Banks and their
respective successors and assigns, except that (a) the Company may not
assign its rights hereunder or any interest herein without the prior written
consent of each of the Banks, and (b) neither Bank may assign its rights
hereunder or any interest herein without the prior written consent of the
Company (which consent shall not be unreasonably withheld or delayed),
provided that BayBank may grant participations in any Credit Advance to any
bank wholly-owned by it without the consent of the Company. No assignee,
participant or other transferee of any Bank's rights (including a transferee
by reason of a business combination involving such Bank) shall be entitled
to receive any greater payment under Section 2.16 or 2.18 than the original
transferee Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with Company's prior
written consent or at a time when the circumstances giving rise to such
greater payment did not exist.
8.7 Survival of Covenants. All of the covenants, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the making of any and all Credit Advances. All covenants,
representations and warranties contained in any of the other Loan Documents,
and in any certificate, statement, report or other document delivered by or
on behalf of the Company as provided herein, or otherwise, in connection with
the transactions contemplated hereby, shall be deemed to have been made in
this Agreement as of the date of such certificate, statement, report or other
document.
8.8 GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS.
8.9 WAIVER OF JURY TRIAL. EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH
CANNOT BE WAIVED, EACH OF THE BANKS, THE AGENT AND THE COMPANY HEREBY
IRREVOCABLY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY ACTION OR PROCEEDING
OF ANY NATURE WHATSOEVER ARISING UNDER, OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE SUBJECT MATTER OF THIS
LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP BEING ESTABLISHED
HEREBY, WHETHER ARISING UNDER STATUTE (INCLUDING ANY FEDERAL OR STATE
CONSTITUTION) OR UNDER THE LAW OF CONTRACT, TORT OR OTHERWISE AND INCLUDING,
WITHOUT LIMITATION, ANY CHALLENGE TO THE LEGALITY, VALIDITY, BINDING EFFECT
OR ENFORCEABILITY OF THIS SECTION OR THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS.
8.10 Attachments. All Exhibits and Schedules hereto are hereby
incorporated into and made a part of this Agreement.
8.11 Severability. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provision which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable.
8.12 Reliance by Company. The Company shall be entitled to rely upon any
certifications, notices or other communications (including any communications
by telephone, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the Agent.
IN WITNESS WHEREOF, the Company and the Banks have caused this Agreement
to be executed and delivered as a sealed instrument, at Boston, Massachusetts,
by their duly authorized officers, all as of the date first written above.
DESIGNS, INC.
By: /s/ Scott N. Semel
Title: Executive Vice President
BAYBANK, N.A.
By: /s/ Brehon S. Griswold
Title: Senior Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ F. Andrew Beise
Title: Vice President
Exhibit A
[Form of Note]
PROMISSORY NOTE
$ As of July , 1996
FOR VALUE RECEIVED, DESIGNS, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to (the "Bank"), or
order, at the principal office of BayBank, N.A., as Agent, presently located
at 7 New England Executive Park, Burlington, Massachusetts 01803, the
principal sum of DOLLARS (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Credit Advances made by
the Bank to the Borrower under the Credit Agreement referred to below), in
lawful money of the United States of America and in immediately available
funds, on the date and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of each such
Credit Advance, at such office, in like money and funds, for the period
commencing on the date of such Credit Advance until such Credit Advance
shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.
The date and amount of each Credit Advance made by the Bank to the
Borrower under the Credit Agreement, each payment of principal thereof, the
Type of and Interest Period (if any) for such Credit Advance, and payments of
interest shall be recorded by the Bank on its books and, prior to any
transfer of this Note (or, at the discretion of the Bank, at any other
time), endorsed by the Bank on the schedule attached hereto or any
continuation thereof, and the Borrower hereby authorizes the Bank to make
any such endorsement.
This Note is one of the Notes referred to in the Amended and
Restated Credit Agreement (as modified and supplemented and in effect from
time to time, the "Credit Agreement") dated as of July , 1996 among the
Borrower and the banks named therein (including the Bank) and evidences the
Credit Advances made by the Bank thereunder. Capitalized terms used in this
Note and not otherwise defined herein have the respective meanings assigned
to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity
of this Note upon the occurrence of certain events and for prepayments of
Credit Advances upon the terms and conditions specified therein.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
DESIGNS, INC.
By
Title:
SCHEDULE
This Note evidences Credit Advances made under the within-described
Credit Agreement to the Borrower in the principal amounts set forth
below, which Credit Advances were made on the dates set forth below,
subject to the payments and prepayments of principal set forth below:
Exhibit B
[Form of Credit Request]
Date:
BayBank, N.A.
7 New England Executive Park
Burlington, MA 01803
ATTN: Gisela A. LoPiano, Vice President
[We hereby request that the Banks] [This is to confirm our telephone
request of today for the Banks to] make pro-rata,
( ) Prime Rate Credit Advances
( ) LIBOR Credit Advances with an initial Interest Period of
[one/two/three/six] month(s) commencing on the Credit Advance Date
to us on [ , 19 ] (the "Credit Advance Date") in the aggregate
amount of $ . Please advise of our request.
The proceeds of such loan shall be credited to our account # at
BayBank, N.A.
This [request] [confirmation of our telephone request] is submitted
under and pursuant to, and the Loan is a Loan referred to in, the Amended
and Restated Credit Agreement, dated as of July , 1996, among BayBank,
N.A., State Street Bank and Trust Company and Designs, Inc. (the
"Agreement"), and we hereby confirm that the representations and warranties
contained in Article 4 of the Agreement are true and correct on and as of
the date hereof and that no Default (as defined in the Agreement) has
occurred and is continuing on the date hereof, in each case giving effect
to such Credit Advance.
Very truly yours,
DESIGNS, INC.
By:
[Authorized Signatory]