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CREDIT AGREEMENT
$150,000,000
MICHAELS STORES, INC.
NATIONSBANK OF TEXAS, N.A., AS
ADMINISTRATIVE LENDER
JUNE 17, 1994
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MICHAELS STORES, INC.
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITION OF TERMS
Section 1.01 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . 1
Section 1.02 ACCOUNTING TERMS AND OTHER DETERMINATIONS. . . . . . . 18
ARTICLE II
REVOLVING LOAN
Section 2.01 COMMITMENT FOR REVOLVING LOAN. . . . . . . . . . . . . 18
Section 2.02 NOTES. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.03 EXPIRATION OF COMMITMENT TO LEND UNDER THE LOAN. . . . 19
Section 2.04 REQUEST FOR ADVANCES . . . . . . . . . . . . . . . . . 19
Section 2.05 USE OF PROCEEDS OF THE ADVANCES. . . . . . . . . . . . 20
Section 2.06 BORROWING BASE AND BORROWING BASE REPORT . . . . . . . 20
Section 2.07 COMMITMENT FEE . . . . . . . . . . . . . . . . . . . . 20
Section 2.08 ADDITIONAL FEES. . . . . . . . . . . . . . . . . . . . 20
Section 2.09 REDUCTION/TERMINATION OF COMMITMENT. . . . . . . . . . 20
Section 2.10 REPAYMENT. . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.11 INTEREST . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.12 POST-DEFAULT RATE. . . . . . . . . . . . . . . . . . . 21
Section 2.13 PAYMENTS ON NON-BUSINESS DAYS. . . . . . . . . . . . . 22
Section 2.14 OPTIONAL PREPAYMENTS . . . . . . . . . . . . . . . . . 22
Section 2.15 MANDATORY PREPAYMENT . . . . . . . . . . . . . . . . . 22
Section 2.16 MANNER AND PLACE OF PAYMENTS AND PREPAYMENTS . . . . . 23
Section 2.17 COMPUTATION OF INTEREST. . . . . . . . . . . . . . . . 23
Section 2.18 INTEREST RECAPTURE . . . . . . . . . . . . . . . . . . 23
Section 2.19 INDEMNITY PROVISIONS . . . . . . . . . . . . . . . . . 23
Section 2.20 LIMITATION ON EURODOLLAR RATE BORROWINGS . . . . . . . 24
Section 2.21 DETERMINATION OF INTEREST RATES. . . . . . . . . . . . 24
Section 2.22 CONTINUATION/CONVERSION. . . . . . . . . . . . . . . . 25
Section 2.23 EFFECT OF FAILURE TO GIVE NOTICE . . . . . . . . . . . 25
Section 2.24 CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . 25
Section 2.25 SHARING OF PAYMENTS. . . . . . . . . . . . . . . . . . 26
Section 2.26 NON-RECEIPT OF FUNDS BY ADMINISTRATIVE LENDER. . . . . 26
Section 2.27 CALCULATION OF RATES . . . . . . . . . . . . . . . . . 27
Section 2.28 BOOKING ADVANCES . . . . . . . . . . . . . . . . . . . 27
Section 2.29 QUOTATION OF RATES . . . . . . . . . . . . . . . . . . 27
Section 2.30 REPLACEMENT BY COMPANY OF A LENDER . . . . . . . . . . 28
ARTICLE III
LETTERS OF CREDIT
Section 3.01 LETTER OF CREDIT COMMITMENT. . . . . . . . . . . . . . 29
Section 3.02 APPLICATION FOR AND ISSUANCE OF COMMERCIAL LETTERS
OF CREDIT AND STAND-BY LETTERS OF CREDIT . . . . . . . 29
Section 3.03 COMMISSION; PAYMENT OF DRAFTS DRAWN UNDER
LETTERS OF CREDIT; INCORPORATION OF TERMS OF
THE APPLICATIONS . . . . . . . . . . . . . . . . . . . 30
Section 3.04 REIMBURSEMENT OBLIGATION OF LENDERS. . . . . . . . . . 31
Section 3.05 SHARING OF PAYMENTS. . . . . . . . . . . . . . . . . . 32
Section 3.06 DUTIES OF ADMINISTRATIVE LENDER. . . . . . . . . . . . 32
Section 3.07 LENDERS, GENERALLY . . . . . . . . . . . . . . . . . . 33
Section 3.08 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 33
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 CONDITIONS TO THE CLOSING DATE . . . . . . . . . . . . 33
Section 4.02 CONDITIONS PRECEDENT TO EACH ADVANCE . . . . . . . . . 36
Section 4.03 CONDITIONS PRECEDENT TO EACH LETTER OF CREDIT. . . . . 36
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 ORGANIZATION, AUTHORITY, AND QUALIFICATION . . . . . . 37
Section 5.02 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . 38
Section 5.03 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.04 AUTHORIZATION AND COMPLIANCE WITH LAWS; MATERIAL
AGREEMENTS; ENFORCEABILITY . . . . . . . . . . . . . . 38
Section 5.05 LITIGATION AND JUDGMENTS . . . . . . . . . . . . . . . 39
Section 5.06 OWNERSHIP OF PROPERTIES; LIENS . . . . . . . . . . . . 39
Section 5.07 USE OF PROCEEDS; MARGIN SECURITIES . . . . . . . . . . 39
Section 5.08 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.09 NO APPROVALS REQUIRED. . . . . . . . . . . . . . . . . 40
Section 5.10 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11 LANDLORD'S LIENS . . . . . . . . . . . . . . . . . . . 40
Section 5.12 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . 40
Section 5.13 SUBORDINATED DEBT. . . . . . . . . . . . . . . . . . . 40
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ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.01 REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . 41
Section 6.02 PERFORMANCE OF OBLIGATIONS . . . . . . . . . . . . . . 43
Section 6.03 PRESERVATION OF EXISTENCE AND FRANCHISES AND
CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . 43
Section 6.04 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . 43
Section 6.05 PAYMENT OF TAXES AND OTHER CHARGES . . . . . . . . . . 44
Section 6.06 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.07 MAINTENANCE OF BOOKS AND RECORDS . . . . . . . . . . . 44
Section 6.08 INSPECTION OF PROPERTIES, BOOKS AND RECORDS. . . . . . 44
Section 6.09 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 45
Section 6.10 EXPENSES AND LEGAL FEES. . . . . . . . . . . . . . . . 45
Section 6.11 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . 45
Section 6.12 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . 46
Section 6.13 SYNDICATION. . . . . . . . . . . . . . . . . . . . . . 46
Section 6.14 SUBORDINATED DEBT. . . . . . . . . . . . . . . . . . . 46
ARTICLE VII
NEGATIVE COVENANTS
Section 7.01 FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . 47
Section 7.02 ADDITIONAL DEBT. . . . . . . . . . . . . . . . . . . . 47
Section 7.03 PERMITTED LIENS. . . . . . . . . . . . . . . . . . . . 48
Section 7.04 CASH DIVIDENDS, REDEMPTION, AND RESTRICTED PAYMENTS. . 49
Section 7.05 MERGERS, SALES OF ASSETS AND DISSOLUTIONS. . . . . . . 49
Section 7.06 CHANGES IN BUSINESS. . . . . . . . . . . . . . . . . . 51
Section 7.07 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . 51
Section 7.08 SUBORDINATED DEBT. . . . . . . . . . . . . . . . . . . 51
Section 7.09 INVESTMENTS AND ACQUISITIONS . . . . . . . . . . . . . 52
Section 7.10 BORROWING BASE . . . . . . . . . . . . . . . . . . . . 52
Section 7.11 AMENDMENT TO MATERIAL AGREEMENTS . . . . . . . . . . . 52
Section 7.12 SALE AND LEASEBACK . . . . . . . . . . . . . . . . . . 53
Section 7.13 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . 53
ARTICLE VIII
DEFAULT
Section 8.01 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . 53
Section 8.02 REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . . 57
Section 8.03 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . 58
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Section 8.04 PERFORMANCE BY ADMINISTRATIVE LENDER . . . . . . . . . 58
Section 8.05 LENDERS NOT IN CONTROL . . . . . . . . . . . . . . . . 59
Section 8.06 CUMULATIVE RIGHTS. . . . . . . . . . . . . . . . . . . 59
Section 8.07 EXPENDITURES BY LENDERS. . . . . . . . . . . . . . . . 59
ARTICLE IX
AGREEMENT AMONG LENDERS
Section 9.01 AGREEMENT AMONG LENDERS. . . . . . . . . . . . . . . . 60
Section 9.02 LENDER CREDIT DECISION . . . . . . . . . . . . . . . . 62
Section 9.03 BENEFITS OF ARTICLE. . . . . . . . . . . . . . . . . . 62
ARTICLE X
MISCELLANEOUS
Section 10.01 NO ORAL MODIFICATIONS. . . . . . . . . . . . . . . . . 63
Section 10.02 BENEFIT; ASSIGNMENTS AND PARTICIPATIONS. . . . . . . . 63
Section 10.03 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . 65
Section 10.04 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.05 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . 66
Section 10.06 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 66
Section 10.07 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE . . 66
Section 10.08 EXCEPTIONS TO COVENANTS. . . . . . . . . . . . . . . . 67
Section 10.09 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.10 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.11 WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . . . 69
Section 10.12 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 69
Section 10.13 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . 69
Section 10.14 SURVIVAL AND APPLICATION OF REPRESENTATIONS AND
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.15 RATE PROVISION . . . . . . . . . . . . . . . . . . . . 70
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SCHEDULES AND EXHIBITS
Schedule 1.01 Stock Option Plans
Schedule 4.01 Offices Where UCC-11 Searches Were Conducted
Schedule 5.01 Subsidiaries and Capital Structure
Schedule 5.05 Litigation
Schedule 5.06 Liens
Schedule 5.11 Disclosure of Landlord Actions
Schedule 7.02 Existing Debt
Exhibit A Note Form
Exhibit B Notice of Borrowing/Conversion
Exhibit C Borrowing Base Report
Exhibit D Guaranties
Exhibit E Loan Compliance Certificate
Exhibit F Assignment and Acceptance Agreement
v
MICHAELS STORES, INC.
$150,000,000
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement") is entered into effective as of
June 17, 1994 among MICHAELS STORES, INC., a Delaware corporation ("Company"),
NationsBank of Texas, N.A., as Administrative Lender (as defined below) and
Lenders (as defined below).
RECITALS
WHEREAS, Company has requested a revolving credit facility of up to
$150,000,000, such revolving credit facility to include a letter of credit
facility of up to $25,000,000; and
WHEREAS, Lenders are willing to provide such credit facility;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms of all
the Loan Papers (as hereinafter defined) Company, Lenders and Administrative
Lender agree as follows:
ARTICLE I
DEFINITION OF TERMS
Section 1.01 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the respective meanings indicated below (such
meanings to be applicable equally to both the singular and plural forms of such
terms):
"ACCOUNTS PAYABLE" means trade payables owed by Company in connection with
the acquisition of inventory by Company.
"ACQUISITION" means any acquisition of all or substantially all the assets
of any Person, or all or a majority of the voting stock or Capital Stock of any
Person.
"ADMINISTRATIVE LENDER" means NationsBank of Texas, N.A. or such other
successor Administrative Lender determined in accordance with the provisions of
Section 9.01(b) hereof.
"ADVANCE" or "ADVANCES" means the disbursement or disbursements of a sum or
sums loaned by Lenders to Company pursuant to Article II of this Agreement.
"AFFILIATE" means a Person that directly, or indirectly through one or more
intermediaries, Controls, or is Controlled By or is Under Common Control with
any other Person.
"APPLICABLE LAW" means (i) all provisions of constitutions, statutes,
rules, regulations and orders of governmental bodies or regulatory agencies
applicable to any such Person, and all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, including, without limitation, Applicable Environmental Laws, and (ii) in
respect of contracts made or performed in the State of Texas, "Applicable Law"
also means the laws of the United States of America, including, without limiting
the foregoing, 12 USC SECTION SECTION 85 and 86(a), as amended to the date
hereof and as the same may be amended at any time and from time to time
hereafter, and any other statute of the United States of America now or at any
time hereafter prescribing the maximum rates of interest on loans and extensions
of credit, and the laws of the State of Texas, including, without limitation,
Articles 5069-1.04 and 5069-1.07(a), Title 79, Revised Civil Statutes of Texas,
1925, as amended ("Art. 1.04"), and any other statute of the State of Texas now
or at any time hereafter prescribing maximum rates of interest on loans and
extensions of credit, provided however, that pursuant to Article 5069-15.10(b),
Title 79, Revised Civil Statutes of Texas, 1925, as amended, Company agrees that
the provisions of Chapter 15, Title 79, Revised Civil Statutes of Texas, 1925,
as amended, shall not apply to the Loan hereunder.
"APPLICABLE MARGIN" means with respect to (a) Eurodollar Rate Borrowings,
1% per annum, (b) Stand-By Letters of Credit, 1% on the face amount of any such
Stand-By Letter of Credit and (c) Commercial Letters of Credit, 1/4 of 1% per
annum. Notwithstanding the foregoing, commencing June 1, 1995, every June 1 and
December 1 of each year during the term hereof, effective on such date, the
Applicable Margin shall be adjusted to reflect the Applicable Margin prescribed
by the chart below for the Fixed Charges Coverage Ratio as demonstrated by the
most recently delivered Compliance Certificate. The Applicable Margin for each
type of Advance and Letter of Credit shall mean the respective amount set forth
below opposite such relevant Fixed Charges Coverage Ratio in Columns A, B and C
below, until the first succeeding semi-annual anniversary that the Compliance
Certificate demonstrates a change in the Fixed Charges Coverage Ratio to an
amount so that another Applicable Margin shall be applied. In order to obtain
an adjustment to a lower Applicable Margin, Company must demonstrate to the
reasonable satisfaction of Administrative Lender the required applicable Fixed
Charges Coverage Ratio.
2
COLUMN A COLUMN B COLUMN C
Per Annum Rate Per Annum Rate
Fixed Charges Eurodollar Rate Commercial Letters Stand-By Letters
Coverage Ratio Borrowings of Credit of Credit
- - - - - -------------- --------------- ------------------ ----------------
Less than
1.75 to 1.00 1.50% 0.38% 1.50%
Greater than or equal
to 1.75 to 1.00 but
less than
3.00 to 1.00 1.00% 0.25% 1.00%
Greater than or equal to
3.00 to 1.00 0.75% 0.20% 0.75%
"APPLICATION" means any Application and Agreement for Commercial Letters of
Credit, or Letter of Credit Master Agreement, dictating the terms and conditions
for computerized requests for Commercial Letters of Credit, in favor of
Administrative Lender, in Administrative Lender's standard form for commercial
letters of credit, and any stand-by letter of credit application delivered to
Administrative Lender for or in connection with any Stand-By Letter of Credit
pursuant to Article III hereof, in Administrative Lender's standard form for
stand-by letters of credit.
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" means any agreement substantially in
the form of EXHIBIT F hereto, pursuant to which any Lender assigns any interest
in its rights and obligations hereunder (including the Obligation) in accordance
with the terms and provisions of Section 10.02 hereof.
"ASSUMED DEBT" means any Debt of any Person assumed by Company in
connection with any Acquisition permitted pursuant to the terms of
Section 7.02(v) hereof.
"AUDITOR" means Ernst & Young, or any other nationally recognized
accounting firm acceptable to Lenders.
"AUTHORIZED FINANCIAL OFFICER" means the president, chief financial
officer, vice president-finance and business planning, treasurer or assistant
treasurer of Company, or such other person from time to time designated in
writing by any of the foregoing.
"AVAILABLE ADVANCE AMOUNT" means, with respect to Company on any date of
determination, an amount equal to the lesser of (a) the Commitment minus the sum
of (i) the aggregate face amount of all outstanding Letters of Credit on such
date plus (ii) all outstanding Advances on such date and (b) the Borrowing Base
minus the sum of (i) the
3
aggregate face amount of all outstanding Letters of Credit on such date plus
(ii) all outstanding Advances on such date.
"BASE RATE" means a fluctuating rate per annum as shall be in effect from
time to time equal to the lesser of (a) the Highest Lawful Rate and (b) the
higher of (i) the rate of interest as then in effect announced publicly by
NationsBank of Texas, N.A. in Dallas, Texas from time to time as its U.S. dollar
prime commercial lending rate (which rate may or may not be the lowest rate of
interest charged by NationsBank of Texas, N.A. from time to time) and (ii) the
sum of (A) the Federal Funds Rate, plus (B) 0.50%. The Base Rate shall be
adjusted automatically as of the opening of business on the effective date of
each change in the prime commercial lending rate or Federal Funds Rate, as
applicable, to account for such change.
"BORROWING" means a borrowing consisting of one or more Advances made to
Company at the same time by Lenders under Article II of this Agreement. A
Borrowing is a "BASE RATE BORROWING" if it bears interest at the Base Rate. A
Borrowing is a "EURODOLLAR RATE BORROWING" if it bears interest at the
Eurodollar Rate.
"BORROWING BASE" means, at the time of determination thereof, an amount
equal to 50% of the positive difference between (a) Eligible Inventory and (b)
Accounts Payable.
"BORROWING BASE REPORT" means a report, required to be delivered monthly by
Company to each Lender pursuant to Section 2.06 hereof, in the form attached
hereto as EXHIBIT C.
"BORROWING DATE" means a date upon which an Advance is made hereunder.
"BUSINESS DAY" means (a) with respect to any Base Rate Borrowing, a day on
which national banks in Dallas, Texas are open for the conduct of commercial
banking business, and (b) with respect to any Eurodollar Rate Borrowing, a day
on which business is conducted in the interbank Eurodollar market and on which
national banks in Dallas, Texas are open for the conduct of commercial banking
business.
"CAPITAL STOCK" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person that is a corporation and partnership interests (general and
limited) in any Person that is a partnership.
"CASH EQUIVALENTS" means (a) money market funds that invest only in debt
securities (including, without limitation, bankers' acceptances, bearer deposit
notes, loan participations, promissory notes and medium-term notes) which mature
within 400 days after the date of purchase and (i) for any such investment
issued by a financial institution, the issuer (A) maintains a long-term debt
rating of at least "BBB" (or its then equivalent) according to Standard & Poor's
Corporation or a Thompson Bankwatch rating of at least "C" and (B) has a
combined capital and surplus and undivided profits of not less than $1,000,000,
or any other financial institution if the amount on deposit is fully insured by
the Federal Deposit
4
Insurance Corporation, and (ii) for any corporate issuer, such investment is
rated "P-1" (or its then equivalent) according to Moody's Investors Service,
Inc., "A-1" (or its then equivalent) according to Standard & Poor's Corporation,
"F-1" (or its then equivalent) according to Fitch's Investors Service, Inc. or
"D-1" (or its then equivalent) according to Duff & Phelps, or a better rating,
or, which, if unrated, are determined by the fund to be of comparable quality to
debt securities which have such ratings, and (b) investments (directly or
through a money market mutual fund) in (i) certificates of deposit, repurchase
agreements, and other interest bearing deposits or accounts with United States
commercial banks having a combined capital and surplus of at least $100,000,000,
whose debt obligations have one of the three highest ratings obtainable from
Standard & Poor's Corporation or Moody's Investors Service, Inc., which
certificates, repurchase agreements, deposits, and accounts mature within one
year from the date of investment, (ii) obligations issued or unconditionally
guaranteed by the United States government, or issued by any agency or
instrumentality thereof and backed by the full faith and credit of the United
States government, which obligations mature within one year from the date of
investment, (iii) direct obligations issued by any state or political
subdivision of the United States, which mature within one year from the date of
investment and have the highest rating obtainable from Standard & Poor's
Corporation or Moody's Investors Service, Inc. on the date of investment, and
(iv) commercial paper which has one of the highest ratings obtainable from
Standard & Poor's Corporation or Moody's Investors Service, Inc.
"CHANGE IN CONTROL" means (a)(i) the acquisition of all or substantially
all assets of Company by any Person or affiliated group of Persons, or (ii) the
acquisition by any person (as "person" is defined in section 13(d) of the
Securities Exchange Act of 1934, as amended), in a single transaction or series
of transactions, of the beneficial ownership of 50% or more of the outstanding
voting stock of Company (other than acquisitions by (A) any Persons or group of
Persons acting together, who hold beneficially or of record, in excess of 10% of
the outstanding voting stock of Company in the aggregate on the Closing Date, or
(B) any of Sam Wyly, Charles J. Wyly, Jr., any Person under the Control of Sam
Wyly or Charles J. Wyly, Jr. or any family member of Sam Wyly or Charles J.
Wyly, Jr.) or (b) any "Change in Control" as described and set forth in the
Subordinated Debt documentation.
"CLOSING DATE" means June 17, 1994.
"COMMERCIAL LETTERS OF CREDIT" means commercial letters of credit issued by
Administrative Lender on behalf of Lenders from time to time at the request of
and for the account of Company pursuant to Article III hereof, and all such
renewals and extensions thereof.
"COMMITMENT" means $150,000,000 as such amount may be terminated or reduced
in accordance with Section 2.09 hereof from time to time, which such amount
includes the Letter of Credit Commitment.
5
"CONTROL" or "CONTROLLED BY" or "UNDER COMMON CONTROL" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that in any event any Person which beneficially
owns, directly or indirectly, 10% or more (in number or votes) of the securities
having ordinary voting power for the election of directors of a corporation
shall be conclusively presumed to control such corporation.
"CURRENT ASSETS" means, as of the date of any determination thereof, such
assets of Company and its Subsidiaries as would be required by GAAP to be
included as current assets on the consolidated balance sheet of a corporation
conducting a business the same as or similar to that of Company.
"CURRENT LIABILITIES" means, as of the date of determination thereof, all
indebtedness which by its terms is payable on demand or matures not more than
one year from the date of determination thereof, fixed sinking fund payments or
other prepayments to be made with respect to any indebtedness within one year
after the date of determination thereof and all of the items which in accordance
with GAAP would be included as current liabilities on the consolidated balance
sheet of Company and its Subsidiaries.
"DEBT" means, with respect to Company and its Subsidiaries, (i) all
indebtedness, direct or indirect, whether or not represented by bonds,
debentures, notes or other securities, for the repayment of money borrowed, (ii)
all deferred indebtedness for the payment of the purchase price of property or
assets purchased, (iii) all indebtedness under any lease which, under GAAP, is
required to be capitalized for balance sheet purposes, (iv) all guaranties,
endorsements, assumptions or other contingent obligations, in respect of, or to
purchase or otherwise acquire, indebtedness of others, (v) all contingent
obligations (as defined in accordance with GAAP) of any type whatsoever
(excluding contingent obligations arising as a result of litigation listed on
SCHEDULE 5.05 or with respect to which Company's reasonable expectation is that
such litigation will result in a liability or other obligation of less than
$1,000,000 in the aggregate for Company or any such Subsidiary), and (vi) all
indebtedness secured by any mortgage, pledge, security interest or lien existing
on property owned by any of Company and its Subsidiaries, whether or not the
indebtedness secured thereby shall have been assumed by any of Company and its
Subsidiaries; provided that under no circumstances shall trade payables of
Company and its Subsidiaries incurred in the ordinary course of business be
included in this definition of "Debt".
"DEFAULT" means the occurrence of any event which, with the lapse of time
or notice or both, would become an Event of Default.
"DIVIDEND" means, as to any Person, (a) any declaration or payment of any
dividend (other than a dividend in stock or the right to acquire stock) on, or
the setting aside or the creation of a sinking fund with respect to, or the
making of any pro rata distribution, loan, advance or investment to or in any
holder (in its capacity as a shareholder) of, any Capital Stock of such Person,
or (b) any purchase, redemption, or other acquisition or retirement for
6
value of any Capital Stock of such Person, or the setting aside of funds or the
creation of a sinking fund with respect thereto.
"DOLLAR(S)" and the sign "$", means lawful money of the United States of
America, unless otherwise explicitly specified.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having total assets in excess of
$1,000,000,000; (b) a savings and loan association or savings bank organized
under the laws of the United States, or any state thereof, having total assets
in excess of $500,000,000, and not in receivership or conservatorship; (c) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development, or a political
subdivision of any such country, and having total assets in excess of
$1,000,000,000, provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is
described in this clause; and (d) the central bank of any country which is a
member of the Organization for Economic Cooperation and Development.
"ELIGIBLE INVENTORY" means at any date the lesser of the actual cost or the
current fair market value of inventory of Company and its Subsidiaries
determined in accordance with GAAP, provided that such inventory shall
constitute Eligible Inventory only if on the date as of which the determination
is being made it (i) shall not be damaged or obsolete, (ii) shall not have
exceeded its normal shelf life, and (iii) shall not be subject to any Lien,
except Permitted Liens. Eligible Inventory will include the face amount of
Commercial Letters of Credit outstanding in support of the purchase of Eligible
Inventory, but shall not include any inventory of Company or any Subsidiary
which is subject to a security interest securing any indebtedness of Company or
such Subsidiary.
"ENVIRONMENTAL LAWS" means any and all present and future Federal, state,
local and foreign laws, rules or regulations, and any orders or decrees, in each
case as now or hereafter in effect, relating to the regulation or protection of
human health, safety and the environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes (as defined in such laws, rules or regulations)
into the indoor or outdoor environment, including, without limitation, ambient
air, soil, surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or toxic or hazardous substances or wastes (as defined in such laws, rules or
regulations).
"ERISA" means the Employee Retirement Income Security Act of 1974, together
with all amendments from time to time thereto, including any rules or
regulations promulgated thereunder.
7
"EURODOLLAR RATE" means, at the time any determination thereof is to be
made by Administrative Lender and for any Interest Period during which the
Eurodollar Rate is applicable, the lesser of (a) the Highest Lawful Rate and (b)
the sum of (i) the Applicable Margin plus (ii) the interest rate per annum
(rounded upwards, if necessary to the nearest one-sixteenth of one percent)
which is the quotient of (A) the rate per annum at which dollar deposits in
immediately available funds are offered to Administrative Lender two Business
Days before the first day of such applicable Interest Period by prime banks in
the interbank Eurodollar market as at or about 11:00 A.M., Dallas, Texas time,
for delivery on the first day of such applicable Interest Period, for the number
of days comprised therein and in an amount equal to the aggregate amount bearing
such interest rate to be outstanding for such applicable Interest Period,
divided by (B) the remainder of 1.00 MINUS the Eurodollar Reserve Percentage
applicable to such amounts.
"EURODOLLAR RESERVE PERCENTAGE" means, with respect to each Interest Period
during which the Eurodollar Rate is applicable, that percentage (expressed as a
decimal) determined by Administrative Lender to be the actual reserve
requirement in effect on the first day of such Interest Period for
Administrative Lender, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor), (including any basic, supplemental and
emergency reserves applicable to "eurocurrency liabilities") pursuant to
Regulation D or any other then applicable regulation of the Board of Governors
which prescribes reserve requirements applicable to "eurocurrency liabilities,"
as defined in Regulation D. The Eurodollar Reserve Percentage shall be a fixed
percentage calculated at, and effective from the first day of, such Interest
Period. Each determination by Administrative Lender of the Eurodollar Reserve
Percentage shall, in the absence of manifest error, be conclusive and binding.
"EVENT OF DEFAULT" means the occurrence of any such event set forth in
Article VIII hereof, which has not been waived by Lenders in writing in
accordance with the provisions of this Agreement.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of Dallas, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such date on such
transactions received by Administrative Lender from three federal funds brokers
of recognized standing selected by it.
"FEE LETTERS" means that certain fee letter described in Section 2.08 of
this Agreement, and any other fee letters executed by Company from time to time,
as any such letters may be amended, extended, modified, revised, replaced or
substituted from time to time.
8
"FISCAL MONTH" means one of the twelve four- or five-week accounting
periods comprising a fiscal year of Company.
"FIXED CHARGES" means for Company and its Subsidiaries as of any
determination date for the preceding 12-month period, the sum of (a) interest
expense for such period plus (b) operating lease expense for such period all as
determined and consolidated in accordance with GAAP.
"FIXED CHARGES COVERAGE RATIO" means for Company and its Subsidiaries as of
any determination date for the preceding 12-month period, the ratio of (a) the
sum of (i) consolidated income of Company and its Subsidiaries before income
taxes for such period (excluding extraordinary cash gains or losses for such
period), plus (ii) interest expense for such period plus (iii) operating lease
expense for such period to (b) Fixed Charges.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question; and the requisite
that such principles be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.
"GUARANTIES" means each of the Guaranty Agreements in substantially the
form of EXHIBIT D attached hereto executed by each of the Guarantors, and
"GUARANTY" means any of the Guaranties, as each may be amended, modified,
renewed, extended or replaced from time to time.
"GUARANTORS" means each Subsidiary and each Person that may hereafter be
required to execute a Guaranty under the terms of this Agreement, and
"GUARANTOR" means any one of the Guarantors.
"HAZARDOUS MATERIAL" means, collectively, (a) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, insulation, transformers or other equipment that in
each case contains dielectric fluid containing polychlorinated biphenyls
(PCB's), (b) any chemicals or other material or substances which are now or
hereafter become defined as or included in the definition of "hazardous
substances", "hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"HIGHEST LAWFUL RATE" means at the particular time in question the maximum
rate of interest which, under Applicable Law, Lenders are then permitted to
charge on the
9
Obligations. If the maximum rate of interest which, under Applicable Law,
Lenders are permitted to charge on the Obligations shall change after the date
hereof, the Highest Lawful Rate shall be automatically increased or decreased,
as the case may be, from time to time as of the effective time of each change in
the Highest Lawful Rate without notice to Company. For purposes of determining
the Highest Lawful Rate under the Applicable Law of the State of Texas, the
applicable rate ceiling shall be (i) the indicated rate ceiling described in and
computed in accordance with the provisions of Section (a)(1) of Art. 1.04 or
(ii) if the parties subsequently contract if allowed by Applicable Law after
notice, the quarterly ceiling or the annualized ceiling computed pursuant to
Section (d) of Art. 1.04; provided, however, that at any time the indicated rate
ceiling, the quarterly ceiling or the annualized ceiling shall be less than 18%
per annum or more than 24% per annum, the provisions of Sections (b)(1) and (2)
of said Art. 1.04 shall control for purposes of such determination, as
applicable.
"INDENTURE" has the meaning ascribed thereto in the definition of
Subordinated Debt herein.
"INTEREST PERIOD" means, (a) as to any portion of the Loan bearing interest
at the Base Rate, as described in subsection (i) below, (b) as to any portion of
the Loan bearing interest at the Eurodollar Rate, a period of one month, two
months, three months or six months, as Company may elect in the manner set forth
in Section 2.04 or Section 2.22 hereof, as the case may be, provided that:
(i) the Interest Period for Advances hereunder which are to bear
interest at the Base Rate shall commence on the date each such Advance is
made or converted to a Base Rate Borrowing and shall end on the earlier of
the Maturity Date or the first Payment Date after the Advance during the
term of this Agreement;
(ii) the initial Interest Period for Advances hereunder which are to
bear interest at the Eurodollar Rate shall commence on the date each such
Advance is made or converted to a Eurodollar Rate Borrowing, and each
Interest Period occurring thereafter for such Advance shall commence on the
day on which the next preceding Interest Period for such Advance expires;
and
(iii) no Interest Period shall extend beyond the Maturity Date.
"INVESTMENT" in any Person means any investment, whether by means of
securities purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person or the subordination of any claim against such
Person to other indebtedness of such Person, excluding Acquisitions, provided
that, Company is permitted to subordinate any claim against any Person to other
indebtedness of such Person so long as (a) there exists no Default or Event of
Default before and immediately after such action and (b) such action is taken
only in connection with the settlement of litigation involving Company or any
Subsidiary.
10
"LAW" means all statutes, laws, ordinances, regulations, orders, writs,
injunctions or decrees of the United States, any state or commonwealth, any
municipality, any foreign country, any territory or possession, or any Tribunal.
"LENDERS" means Administrative Lender and each other Lender signatory
hereto or from time to time a party hereto in accordance with the terms of
Section 10.02 hereof and pursuant to an Assignment and Acceptance Agreement
(such Lenders together with NationsBank of Texas, N.A. collectively referred to
herein as "Lenders" and individually, each a "Lender").
"LETTERS OF CREDIT" means the Stand-By Letters of Credit and Commercial
Letters of Credit, as each may be amended, modified, renewed or extended from
time to time.
"LETTER OF CREDIT COMMITMENT" means an amount equal to the lesser of (a)
$25,000,000 or (b) the difference between $150,000,000 minus the aggregate
outstanding Advances under the Loan or (c) the difference between the Commitment
minus the aggregate outstanding Advances under the Loan.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, option, easement, preference, priority, hypothecation,
assignment, tax lien, mechanic's lien, materialmen's lien or charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of Texas or comparable law of any
jurisdiction).
"LITIGATION" means any action, suit or proceeding, at law or in equity,
and/or any claim or investigation, conducted or threatened by or before any
Tribunal, including, but not limited to, proceedings, claims, lawsuits, and/or
investigations under or pursuant to any occupational safety and health,
antitrust, unfair competition, securities, tax, or other laws, or under or
pursuant to any contract, agreement, or other instrument.
"LOAN COMPLIANCE CERTIFICATE" means any and each certificate in the form of
EXHIBIT E hereto from time to time delivered by Company to Administrative Lender
pursuant to the terms of this Agreement.
"LOAN PAPERS" means this Agreement and all documents executed in connection
with or pursuant to or contemplated by this Agreement, whether executed prior to
or contemporaneously herewith, or subsequent to the execution hereof, including,
without limitation, each of the Notes, the Guaranties, all Applications, all
Letters of Credit, all Assignment and Acceptance Agreements, all Fee Letters,
each certificate or report relating to the Borrowing Base, each Loan Compliance
Certificate and all other security agreements, pledges, documents, certificates,
agreements, mortgages, deeds of trust, other fee letters, waiver letters, other
instruments or documents granting a security interest and/or lien in any
11
assets of any Person securing the Obligations, and other instruments
contemplated hereby, or executed or delivered by Company or its Subsidiaries
pursuant hereto or in connection herewith from time to time, as each may be
amended, modified, renewed, substituted or extended from time to time.
"LOAN" means the loan made or to be made by Lenders to Company pursuant to
Section 2.01 of this Agreement, the Letter of Credit facility pursuant to
Article III hereof, and any other extensions of credit made by Lenders to
Company pursuant to this Agreement and any amendment thereto or extension
thereof.
"M/A ENTITY" has the meaning ascribed thereto in Section 7.05 hereof.
"MAJORITY LENDERS" means any combination of Lenders having at least 66.67%
of the aggregate amount of Advances outstanding hereunder; provided, however,
that if no Advances are outstanding, such term means any combination of Lenders
having aggregate Specified Percentages equal to at least 66.67%.
"MATERIAL ADVERSE CHANGE" means any circumstance or event that (a) can
reasonably be expected to cause a Default or Event of Default, (b) otherwise can
reasonably be expected to (i) be material and adverse to the continued operation
of Company and its Subsidiaries taken as a whole, or (ii) be material and
adverse to the financial condition, business operations, prospects or properties
of Company and its Subsidiaries taken as a whole, (c) could reasonably be
expected to adversely affect the performance by Company of its obligations under
the Loan Papers, or (d) in any manner whatsoever does or can reasonably be
expected to materially and adversely affect the validity or enforceability of
any of the Loan Papers.
"MATURITY DATE" means June 16, 1997 or such earlier date as the Loan
becomes due and payable, regardless of how such maturity is brought about,
whether at stated maturity, by acceleration, scheduled reduction or otherwise.
"MAXIMUM AMOUNT" means, under Applicable Law, the maximum amount of
interest which Lenders are permitted to charge and collect from Company on the
Obligations.
"MULTI-EMPLOYER PLAN" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which Company, any Subsidiary, or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding six plan years made or accrued an obligation to make contributions,
such plan being maintained pursuant to one or more collective bargaining
agreements.
"NCMI" means NationsBanc Capital Markets, Inc.
"NET WORTH" means the consolidated net worth of Company and its
Subsidiaries, determined in accordance with GAAP.
12
"NOTES" means each promissory note in substantially the form of EXHIBIT A
attached hereto, evidencing indebtedness of Company to each Lender under the
Loan, and any amendments, modifications, extensions, renewals or replacements
thereof.
"NOTICE OF BORROWING/CONVERSION" shall have the meaning given to such term
in Section 2.04 of this Agreement and shall be in substantially the form of
EXHIBIT B attached hereto.
"OBLIGATIONS" means all present and future obligations and indebtedness
(including, without limitation, the Reimbursement Obligations), and all
renewals, modifications and extensions thereof, or any part thereof, of Company
and all Subsidiaries to Lenders now existing or hereafter arising, pursuant to
or in connection with the Loan Papers, including all interest accruing thereon
and reasonable attorneys' fees and expenses of Administrative Lender incurred in
connection with this Agreement and the Loan Papers and reasonable attorneys'
fees and expenses of Lenders incurred in connection with the enforcement of Loan
Papers and collection of Debt hereunder, as provided in the Loan Papers,
regardless of whether such obligations and indebtedness are direct, indirect,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several, including, but not limited to, the indebtedness and obligations
evidenced by this Agreement, the Notes, the Applications, the Letters of Credit,
and any and all other Loan Papers.
"PAYMENT DATE" means the first Business Day of each February, May, August
and November during the term of this Agreement, commencing with the first such
date to occur after the Closing Date and ending after payment in full of all
Advances and Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.
"PERMITTED LIENS" means any one or more of the following:
(a) Liens for taxes or assessments either not yet delinquent or the
validity or amount of which is being contested in good faith by appropriate
proceedings diligently prosecuted and as to which adequate reserves shall
have been set aside in conformity with GAAP;
(b) Deposits or pledges to secure the payment of workers
compensation, unemployment insurance or other social security benefits or
obligations, or to secure the performance of bids, trade contracts, public
or statutory obligations, surety or appeal bonds and other obligations of a
like nature incurred in the ordinary course of business;
(c) Materialmen's, mechanics', workmen's, repairmen's, or other like
liens arising in the ordinary course of business or by operation of Law to
secure obligations not yet delinquent or which within ten days of any lien
filing by the lien claimant are being contested by Company or Subsidiary in
good faith and for which (a) adequate
13
reserves shall have been set aside in conformity with GAAP or (b) as to
which adequate bonds shall have been obtained;
(d) (i) Existing Liens as disclosed on SCHEDULE 5.06, (ii) other
Liens in existence on the Closing Date that do not constitute blanket Liens
on any of Company's or its Subsidiaries' equipment, inventory, accounts or
other receivables, and (iii) Liens on real property in existence on the
Closing Date, or renewals and extensions of any thereof, so long as such
Liens are not expanded to cover any additional property or assets of
Company;
(e) Liens securing the deferred purchase price payment for assets,
which Liens are created at the time of, or substantially simultaneously
with, acquisition of such assets, provided that in any such case
(i) no such Lien shall extend to or cover any other property or
assets of Company or of any Subsidiary, as the case may be,
and
(ii) the aggregate principal amount of the indebtedness secured
by all such Liens in respect of any such property or assets
shall not exceed the greater of (A) the fair market value of
such property or assets at the time of such acquisition, or
(B) the good faith allocated purchase price of such assets;
and
(f) consensual landlord's Liens and landlord's Liens arising by
operation of law.
"PERSON" means an individual, partnership, joint venture, corporation,
trust, Tribunal, unincorporated organization, and government, or any department,
agency, or political subdivision thereof.
"PLAN" means any plan subject to Title VI of ERISA and maintained for
employees of Company or any Subsidiary, or of any member of a controlled group
of corporations, as the term "controlled group of corporations" is defined in
Section 1563 of the Internal Revenue Code of 1986, as amended, of which Company
or a Subsidiary is a part.
"PRO RATA" and "PRO RATA PART" as to each Lender means according to its
Specified Percentage of the aggregate amount of the Loan and Reimbursement
Obligations, PLUS its Specified Percentage of the stated amount of Letters of
Credit outstanding hereunder; provided, however, that if there are no Advances
or Letters of Credit outstanding hereunder, such terms means, as to each Lender,
according to its Specified Percentage of the aggregate Commitment hereunder.
"REIMBURSEMENT NOTICE" has the meaning ascribed thereto in Section 2.24
hereof.
14
"REIMBURSEMENT OBLIGATION" means the obligation (whether or not choate) of
Company to reimburse Administrative Lender for the account of Lenders in their
Specified Percentages for draws under Letters of Credit.
"RELEASE" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, ground water, wetlands, land
or subsurface strata.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
including any failure to meet the minimum funding standard of Section 412 of the
Code and of Section 302 of ERISA.
"RESTRICTED PAYMENT" means
(a) the declaration or payment of Dividends by, or distribution (in cash,
property, obligations or other securities, Capital Stock or any combination
thereof) on account of, or
(b) other payments or distributions (whether made by Company or any of its
Subsidiaries and whether by reduction of capital or otherwise) on account of, or
(c) the setting apart of money for a sinking or other analogous fund
(whether by Company or any of its Subsidiaries) for the purchase, redemption,
retirement or other acquisition of any shares of,
any class of Capital Stock of Company or any warrant, option or other right to
acquire such Capital Stock, but excluding Dividends or other distributions
payable solely in common stock or partnership interests of Company (having
identical rights as the then-outstanding partnership interests of Company) or
rights to acquire common stock or partnership interests of Company (having
identical rights as the then-outstanding partnership interests of Company).
"RIGHTS" means with respect to any Person, the rights, remedies (equitable
or legal), claims, causes of action, powers, and privileges granted to such
Person pursuant to any or all of this Agreement, the Notes, the other Loan
Papers or any other document, instrument or other agreement heretofore, now, or
hereafter executed in connection herewith, whether granted or arising pursuant
to the express provisions of any of the foregoing, or at law, or in equity, by
constitution, statute, case or otherwise.
"SPECIAL COUNSEL" means the law firm of Donohoe, Jameson & Carroll, P.C. or
any other counsel selected from time to time by Administrative Lender.
15
"SPECIFIED PERCENTAGE" means with respect to each Lender, the percentage
set forth opposite such Lender's name on the signature pages below, or as
adjusted pursuant to Section 2.30(a) hereof or pursuant to, and as set forth
therein, each Assignment and Acceptance Agreement.
"STAND-BY LETTERS OF CREDIT" means those certain standby letters of credit
issued by Administrative Lender on behalf of Lenders for the account of Company
in accordance with Article III hereof, and all such letters of credit issued by
Administrative Lender on behalf of Lenders in renewal or extension thereof.
"STOCK OPTION PLANS" means those certain stock option plans, programs or
arrangements in effect on the Closing Date and described on SCHEDULE 1.01
hereto.
"SUBORDINATED DEBT" shall mean indebtedness of Company pursuant to those
certain 4 3/4% / 6 3/4% Step-up Convertible Subordinated Notes Due 2003, issued
as of January 22, 1993, under and pursuant to that certain Indenture, dated as
of January 22, 1993 among Company as Issuer and NationsBank of Texas, N.A. as
Trustee (the "Indenture"), as the same shall be amended, restated, modified,
extended, renewed or replaced.
"SUBSIDIARY" means any Person, and "SUBSIDIARIES" means all such Persons
that meet either of the following criteria: (a) more than 50% of the outstanding
voting securities of which shall at the time be owned or controlled, directly or
indirectly, by Company or by one or more Subsidiaries, or by Company and one or
more Subsidiaries, or any voluntary association, joint stock company, voting
trust or similar organization which is so owned or controlled or (b) (i) any of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by Company or by one or more Subsidiaries,
or by Company and one or more Subsidiaries, or any voluntary association, joint
stock company, voting trust or similar organization which is so owned or
controlled and (ii) such Subsidiary has received any advance or loan from
Company or any Subsidiary and such loan or advance is outstanding on such date.
"TERMINATION EVENT" means (a) a reportable event described in Section 4043
of ERISA and the regulations issued thereunder (other than a Reportable Event
not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of Company or any Subsidiary from a Plan
during a Plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA or (c) the filing of a notice of intent to terminate
a Plan or the treatment of Plan amendment as termination under Section 4041 of
ERISA or (d) the institution of proceedings to terminate a Plan by the PBGC or
(e) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a Trustee to
administer, any Plan.
"TOTAL LIABILITIES" means, as of the date of any determination thereof, the
aggregate (after eliminating intercompany items) of all liabilities of Company
and its Subsidiaries determined in accordance with GAAP (including capitalized
leases). Notwithstanding
16
anything contained herein or in the other Loan Papers to the contrary, such term
shall include all guaranties and liabilities relating to letters of credit
(other than commercial letters of credit).
"TRIBUNAL" means any state, federal, foreign or other court, or
governmental department, board, bureau, agency, commission or instrumentality.
"TRUSTEE" has the meaning ascribed thereto in the Indenture.
Section 1.02 ACCOUNTING TERMS AND OTHER DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP.
References herein to one gender shall be deemed to include the other gender.
All other terms used herein shall have the meanings as otherwise stated herein.
ARTICLE II
REVOLVING LOAN
Section 2.01 COMMITMENT FOR REVOLVING LOAN. Subject to the terms and
conditions of this Agreement, and provided that there exists no Default or Event
of Default, Lenders agree to loan to Company in accordance with their Specified
Percentages, in several Advances from time to time during the term of this
Agreement until the Maturity Date, such amounts as Company may request up to an
amount equal to the Available Advance Amount. Subject to the foregoing
limitations, and the other terms and provisions of this Agreement, Company may
borrow, repay, and reborrow Advances under the Loan under this Section 2.01.
Each Eurodollar Rate Borrowing under the Loan shall be in the aggregate
principal amount of $1,000,000, or in integral multiples of $100,000 in excess
thereof. Each Base Rate Borrowing under the Loan shall be in the aggregate
principal amount of $500,000, or in integral multiples of $100,000 in excess
thereof.
Section 2.02 NOTES. The indebtedness arising by reason of Advances by
Lenders to Company pursuant to Section 2.01 hereof shall be evidenced by Notes,
duly authorized and executed by Company in substantially the form attached
hereto as EXHIBIT A, payable to the order of each Lender in the original
principal amount of each Lender's Specified Percentage of the Commitment. All
principal evidenced by the Notes shall be due and payable on the Maturity Date.
Section 2.03 EXPIRATION OF COMMITMENT TO LEND UNDER THE LOAN. Lenders
shall have no obligation to make additional Advances under Section 2.01 hereof
after 1:00 P.M., Dallas, Texas time on the Maturity Date; provided, however,
that Company's Obligations
17
and the Rights of Lenders under the Loan Papers shall continue in full force and
effect until Company has paid and performed the Obligations in full.
Section 2.04 REQUEST FOR ADVANCES. Company shall give Administrative
Lender a telephonic or written notice ("Notice of Borrowing/Conversion") of any
proposed Borrowing under the Loan which, in the case of telephonic notice, shall
be promptly confirmed in writing and, in each case, shall be irrevocable. All
telephonic notices of borrowing shall be made to NationsBank of Texas, N.A.,
attn.: Molly Oxford, telephone (214) 508-3255, or (800) 547-2005, facsimile
(214) 508-2515, or such other person as Administrative Lender may from time to
time specify. Administrative Lender shall promptly notify Lenders upon receipt
of such notice, and each Lender shall, on the date of any such Borrowing,
deliver to Administrative Lender at its principal office, such Lender's
Specified Percentage of such Borrowing in immediately available funds in
accordance with Administrative Lender's instructions. Each Notice of
Borrowing/Conversion under the Loan shall be given to Administrative Lender by
an Authorized Financial Officer not later than 12:00 noon, Dallas, Texas time on
the date of any proposed Base Rate Borrowing requested by Company, and not later
than 12:00 noon, Dallas, Texas time at least three Business Days prior to any
proposed Eurodollar Rate Borrowing requested by Company. Each such Notice of
Borrowing/Conversion shall specify: (i) the rate (Base Rate or Eurodollar Rate)
which Company desires; (ii) the principal amount proposed to be covered; (iii)
the Borrowing Date (which shall be a Business Day); (iv) a proposed Interest
Period for any Advance bearing interest at an Eurodollar Rate; and (v) and
certify as to satisfaction of the condition precedent set forth in Section
4.02(e) hereof. After Administrative Lender has notified Lenders of such
Borrowing and upon satisfaction of the conditions precedent set forth in Article
IV hereof, Administrative Lender will make such funds available to Company on
the date of such Borrowing by, at Company's option, (i) wiring the funds to or
for the account of Company or (ii) depositing such funds in Company's account(s)
with Administrative Lender at Administrative Lender's banking house.
Section 2.05 USE OF PROCEEDS OF THE ADVANCES. The proceeds of the
Advances shall be used for working capital and other general corporate purposes
of Company.
Section 2.06 BORROWING BASE AND BORROWING BASE REPORT. Notwithstanding
anything to the contrary in this Agreement or in any of the other Loan Papers,
the sum of the (a) aggregate amount of all Advances outstanding at any time
under the Loan, plus (b) the aggregate face amount of all outstanding Letters of
Credit at any such time, shall not exceed the lesser of (i) the Commitment and
(ii) the Borrowing Base. The Borrowing Base shall be computed on the Closing
Date, and thereafter shall be recomputed as of the last day of each Fiscal Month
utilizing a Borrowing Base Report, with appropriate completions, which shall be
furnished to Administrative Lender and each Lender within 30 days after the end
of each Fiscal Month and certified as to correctness by an Authorized Financial
Officer; provided that the correctness of the Borrowing Base Report submitted
for the 12th Fiscal Month of each fiscal year shall be qualified to the extent
of adjustments reflected in the audited financial statements for such fiscal
year.
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Section 2.07 COMMITMENT FEE. Subject to Section 10.15 hereof, Company
agrees to pay to Administrative Lender for the account of Lenders in their Pro
Rata Part a commitment fee on the average daily amount of the Commitment minus
the sum of (a) the aggregate amount of all Advances outstanding, plus (b) the
aggregate face amount of all outstanding Letters of Credit, from the Closing
Date to and including the Maturity Date, at the rate of one-quarter of one
percent (1/4%) per annum payable in arrears, computed and payable quarterly on
each Payment Date and on the Maturity Date.
Section 2.08 ADDITIONAL FEES. Subject to Section 10.15 hereof, Company
shall pay fees for the arranging of this facility and the underwriting of this
facility in an amount agreed to in that certain Fee Letter of even date hereof,
between Company, NCMI and Administrative Lender.
Section 2.09 REDUCTION/TERMINATION OF COMMITMENT.
(a) PARTIAL REDUCTION. Company shall have the right, upon not less
than 20 Business Days' notice to Administrative Lender, which shall
promptly notify Lenders, to reduce the Commitment in part; provided,
however, that (i) each partial termination shall be in an aggregate amount
which is not less than $5,000,000 and, if in excess thereof, an integral
multiple of $1,000,000, (ii) no reduction in the Commitment shall cause any
Loan to be repaid prior to the last day of its Interest Period, and (iii)
in no event may the Commitment be reduced to an amount less than the sum of
the aggregate amount of outstanding Advances under the Loan hereunder plus
the aggregate face amount of all outstanding Letters of Credit as of such
date.
(b) TERMINATION. Company shall have the right, at any time, to
wholly terminate the Commitment of Lenders hereunder; provided that as of
the effective date of such termination, all principal and interest with
respect to the Loan shall have been paid in full and Company shall have
fully discharged all obligations to Lenders to the satisfaction of Lenders
with respect to the Letters of Credit. Company shall give Administrative
Lender written notice (which shall promptly notify Lenders) of its desire
to terminate Lenders' Commitment and obligations hereunder no later than 20
Business Days prior to the date termination is desired to be effective, and
the Maturity Date shall then occur.
(c) GENERAL. Each reduction in any Commitment pursuant to this
Section 2.09 shall reduce such Commitment of each Lender according to its
Specified Percentage immediately prior to such reduction. Once reduced or
terminated, the Commitment of Lenders may not be increased or reinstated.
Any notice provided by Company under this Section 2.09 shall be
irrevocable.
Section 2.10 REPAYMENT.
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(a) ALL ADVANCES AND OTHER OBLIGATIONS. All outstanding Advances
under the Loan, all Reimbursement Obligations and all other outstanding
Obligations shall be due and payable to Administrative Lender on behalf of
Lenders in full on the Maturity Date.
(b) BORROWINGS. Each Eurodollar Rate Borrowing shall be due and
payable on the last day of its Interest Period and on the Maturity Date.
Section 2.11 INTEREST. Interest, computed on the outstanding principal
balance from day to day outstanding under the Notes, shall be due and payable as
it accrues on the last day of each Interest Period and on the Maturity Date with
respect to any Borrowing under the Loan; provided that, with respect to any
Eurodollar Rate Borrowing, to the extent any Interest Period exceeds three
months, interest shall also be payable on each Payment Date occurring during
such Interest Period. The outstanding principal balance of the Notes shall bear
interest prior to the Maturity Date at a varying rate per annum equal to the
Base Rate, Eurodollar Rate as selected by Company.
Section 2.12 POST-DEFAULT RATE. Subject to Section 10.15 hereof, upon
the occurrence of an Event of Default and during the continuance thereof, after
notice to Company by Administrative Lender, all Advances outstanding under the
Loan shall bear interest at a rate per annum equal to the lesser of the Highest
Lawful Rate and the Base Rate plus 5%.
Section 2.13 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension; except that as to a
Eurodollar Rate Borrowing, if the next succeeding Business Day is in the next
calendar month, then the due date shall be the immediately preceding Business
Day.
Section 2.14 OPTIONAL PREPAYMENTS. Except as required by Section 2.15 or
Section 2.20(c) hereof, Company shall not make any prepayments on any portion of
any Eurodollar Rate Borrowing on a day which is not the last day of the
applicable Interest Period with respect thereto. Subject to the provisions of
the first sentence hereof, Company shall have the right, at its option, to
prepay the amounts outstanding under the Notes in part at any time and from time
to time, and in whole at any time, without premium or penalty. Each optional
prepayment shall be in an aggregate principal amount at least equal to the
lesser of (i) $100,000, or (ii) the remaining unpaid principal amount of the
Notes being prepaid. Upon the prepayment of the Notes in full, accrued interest
on the principal amount of such Notes shall become due and payable on such
prepayment date. Unless otherwise specified by Company at the time of
prepayment, each prepayment shall be applied first to payment of the principal
balance of the Notes, then to the payment of accrued interest owing on the
Notes, and thereafter to all other Obligations.
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Section 2.15 MANDATORY PREPAYMENT.
(a) MONTHLY. Company shall make mandatory prepayments under the Loan if,
as of the last day of any Fiscal Month, the sum of the (i) total principal
amount of all outstanding Advances, plus (ii) the aggregate face amount of all
outstanding Letters of Credit, exceeds the lesser of (A) the Commitment or (B)
the Borrowing Base. In such event, Company shall make a principal prepayment on
the Loan to Administrative Lender for the account of Lenders in the amount of
such excess within the earlier of (I) 5 Business Days after Company's actual
knowledge thereof, or (II) 30 days after the last day of any Fiscal Month.
(b) ANNUAL. During each 12-month period any Obligations are outstanding
hereunder, Company shall, for one consecutive 30 day period during the period
commencing December 1 and ending the following February 28 of each such 12-month
period, reduce the outstanding Advances under the Loan to an amount equal to or
less than the product of $200,000 times the number of store locations operating
business as of December 1 of such 12-month period.
Section 2.16 MANNER AND PLACE OF PAYMENTS AND PREPAYMENTS. All payments
and prepayments of principal and interest on the Notes shall be made to
Administrative Lender for the account of Lenders in their Pro Rata Parts, at its
office at 901 Main Street, Dallas, Texas 75202, in immediately available funds.
Section 2.17 COMPUTATION OF INTEREST. Subject to Section 10.15 hereof,
interest on (a) Base Rate Borrowings shall be calculated on the basis of a year
of 365 or 366 days, as the case may be, for the actual number of the days
elapsed, and (b) interest on Eurodollar Rate Borrowings, fees and other amounts
owed hereunder shall be calculated on the basis of a year of 360 days, for the
actual number of days elapsed. Any changes in the rate of interest on the Notes
resulting from changes in the Base Rate shall become effective as of the opening
of business on the day on which such change in the Base Rate shall occur.
Section 2.18 INTEREST RECAPTURE. If at any time the interest rate
applicable to any Advance under the Loan or any other extension of credit
pursuant to this Agreement shall exceed the Highest Lawful Rate, thereby causing
the interest on such Advance or other extension of credit to be limited to the
Highest Lawful Rate, then any subsequent reduction in such interest rate as
provided hereunder shall not reduce the rate of interest on the Loan below the
Highest Lawful Rate until the aggregate amount of interest accrued on the Loan
equals the aggregate amount of interest which would have accrued on the Loan if
the interest rate had not been limited to the Highest Lawful Rate.
Section 2.19 INDEMNITY PROVISIONS. Company agrees to indemnify Lenders
against, and pay to Administrative Lender on behalf of any such Lender on
demand, amounts equal to: (i) the cost of any present and future reserve or
special deposit requirements or any taxes (other than federal, state, or local
taxes on or measured by the overall income of Lender or the portion thereof
allocable to the applicable jurisdiction), domestic or foreign, which any
21
Lender is required to keep or pay by reason of its funding any Eurodollar Rate
Borrowing (other than reserves which are already reflected in determining the
rate of interest in accordance with the terms hereof); (ii) any costs or
expenses incurred by any Lender as a result of Company's failure to borrow a
portion of an Advance to bear interest at a Eurodollar Rate once requested
and/or Company's payment or conversion for any reason (including without
limitation a payment under Section 2.15 hereof or a conversion under Section
2.20(c) hereof) of all or a portion of any Eurodollar Rate Borrowings prior to
the end of the Interest Period and/or Company's failure to make any payment
hereunder when due, including, without limitation, any loss arising from the
reemployment of funds at rates lower than the cost to such Lender of such funds.
A certificate of such Lender, setting forth in reasonable detail the basis for
the determination of such costs and expenses, shall constitute PRIMA FACIE
evidence of such costs and expenses, absent manifest error.
Section 2.20 LIMITATION ON EURODOLLAR RATE BORROWINGS. If, at any time
during the term of this Agreement Administrative Lender or any Lender reasonably
determines that:
(a) eurodollar deposits in the appropriate amount and for the
appropriate period are not being offered in the interbank eurodollar
market, Administrative Lender shall promptly give notice thereof to Company
(and such determination shall be conclusive on Company), and thereafter no
new Eurodollar Rate Borrowings shall be permitted until such time as
eurodollar deposits for the appropriate amount and for the appropriate
period are again offered in the interbank eurodollar market; or
(b) as a result of changes in the Law, or the adoption or making of
any interpretations, directives, or regulations (whether or not having the
force of law) by any court, governmental authority, or reserve bank charged
with the interpretation or administration thereof, the Eurodollar Rate will
not adequately and fairly reflect the cost to Lenders of making,
maintaining, or funding a proposed Eurodollar Rate Borrowing that Company
has requested be made or continued, then Administrative Lender shall
promptly give notice to Company of such determination, and any such
requested Advance shall bear interest at the Base Rate; or
(c) as a result of changes in the Law, or the adoption or making of
any interpretations, directives, or regulations (whether or not having the
force of law) by any court, governmental authority, or reserve bank charged
with the interpretation or administration thereof, it shall be or become
unlawful or impossible to make, maintain, or fund any Eurodollar Rate
Borrowing, Lenders' obligations to make or continue the affected Eurodollar
Rate Borrowing shall be automatically canceled, and the affected Eurodollar
Rate Borrowing or Borrowings shall be automatically converted to an Advance
bearing interest at the Base Rate, and Company shall pay Administrative
Lender any additional cost or expense which any Lender incurs as a result
of any such conversion prior to the last day of the then current Interest
Period for such Eurodollar Rate Borrowings, in accordance with Section 2.19
hereof.
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Section 2.21 DETERMINATION OF INTEREST RATES. Administrative Lender
shall determine each interest rate applicable to Eurodollar Rate Borrowings
hereunder, and its determination thereof shall be conclusive in the absence of
manifest error. Administrative Lender shall, at the request of Company, furnish
such information concerning the calculation of the interest rate on any
Eurodollar Rate Borrowing as Company may reasonably request.
Section 2.22 CONTINUATION/CONVERSION. Subject to the limitations and
provisions of this Agreement, Company shall have the option, at any time or from
time to time, of continuing or converting the applicable interest rate to all or
any portion of the outstanding Advances, by giving Administrative Lender a
Notice of Borrowing/Conversion of any proposed continuation or conversion of
such rate which, in the case of telephonic notice, shall be promptly confirmed
in writing and, in each case, shall be irrevocable. All telephonic notices of
continuation or conversion shall be made to NationsBank of Texas, N.A., attn.:
Molly Oxford, telephone (214) 508-3255, or (800) 547-2005, facsimile (214) 508-
2515, or such other person as Administrative Lender may from time to time
specify. Each Notice of Borrowing/Conversion shall be given by an Authorized
Financial Officer not later than 12:00 noon, Dallas, Texas time on the date of
any proposed continuation of or conversion to a Base Rate Borrowing, and not
later than 12:00 noon, Dallas, Texas time at least three Business Days prior to
any proposed continuation of or conversion to a Eurodollar Rate Borrowing. Each
Notice of Borrowing/Conversion shall specify: (i) the rate (Base Rate or
Eurodollar Rate) which Company desires; (ii) the principal amount proposed to be
covered; (iii) the effective date of such continuation or conversion (which
shall be a Business Day); and (iv) a proposed Interest Period for any Borrowing
bearing interest at an Eurodollar Rate. Any continuation or conversion of any
Advances to a Eurodollar Rate shall be in the aggregate amount of $1,000,000.
Any continuation or conversion of any Advances to a Eurodollar Rate Borrowing
shall be in the aggregate amount of $1,000,000 and in integral multiples of
$100,000 in excess thereof.
Section 2.23 EFFECT OF FAILURE TO GIVE NOTICE. If Company fails to give
Administrative Lender a Notice of Borrowing/Conversion prior to the expiration
of any then-relevant Interest Period with respect to any Eurodollar Rate
Borrowing or the information provided in any Notice of Borrowing/Conversion is
incomplete, Company shall be deemed to have elected to convert such Eurodollar
Rate Borrowing, in whole, to a Base Rate Borrowing at the end of the
then-relevant Interest Period.
Section 2.24 CAPITAL ADEQUACY. If any Lender shall have determined that
the adoption of any Applicable Law or guideline regarding the amount of capital
required to be maintained by any Lender, or any change in such Law or guideline,
or any change in the interpretation or administration thereof by any Tribunal,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance therewith by any such Lender (or any
lending office of such any Lender) with any directive regarding capital adequacy
(whether or not having the force of Law) of any such Tribunal, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender's capital as a direct consequence of its obligations hereunder to
a level below that which such Lender
23
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
such Lender shall immediately notify Company and Administrative Lender (such
notice referred to herein as the "Reimbursement Notice"), and, subject to
Section 2.30 hereof, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction to the extent not
compensated for in the Base Rate or Eurodollar Rate, or in amounts paid by
Company pursuant to Sections 2.19 or 2.20 hereof. Amounts payable to any such
Lender under this Section and comparable provisions in agreements with other
borrowers of such Lender shall be allocated among such Lender's borrowers in
good faith and on an equitable basis (which may include a consideration of
relative credit risk). A certificate of such Lender in reasonable detail
setting forth the amount or amounts as shall be necessary to compensate such
Lender (or participating banks or other entities pursuant to Section 10.02
hereof) as specified in this Section 2.24 shall be delivered to Company and
shall be conclusive absent manifest error. Subject to Section 2.29 hereof,
Company shall pay such Lender the amount shown as due on any such certificate
upon demand by such Lender.
Section 2.25 SHARING OF PAYMENTS. Any Lender obtaining a payment
(whether voluntary or involuntary, due to the exercise of any right of set-off,
or otherwise) on account of Loan or Reimbursement Obligations in excess of its
Pro Rata Part shall purchase from each other Lender such participation in the
Loan and Reimbursement Obligations as shall be necessary to cause such
purchasing Lender to share the excess payment Pro Rata with each other Lender;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. Company agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.25, to the fullest extent
permitted by Law, may exercise all its Rights of payment (including the Right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of Company in the amount of such participation. A Lender shall
not be required to share any such non-routine payment to the extent that it
exceeds the aggregate amount of all Loan and Reimbursement Obligations then
outstanding.
Section 2.26 NON-RECEIPT OF FUNDS BY ADMINISTRATIVE LENDER. Unless
Administrative Lender shall have been notified by a Lender prior to the date of
any proposed Advance to be made by such Lender or payment of its Specified
Percentage to Administrative Lender under any provision of this Agreement (which
notice shall be effective upon receipt), that such Lender does not intend to
make the proceeds of any such Advance or reimbursement required under any
provision of this Agreement available to Administrative Lender, Administrative
Lender may assume that such Lender has made such proceeds available to
Administrative Lender on such date and Administrative Lender may in reliance
upon such assumption (but shall not be required to) make available to Company a
corresponding amount. If such corresponding amount is not in fact made
available to Administrative Lender by such Lender, Administrative Lender shall
be entitled to recover such amount on demand from such Lender (or, if such
Lender fails to pay such amount forthwith upon such demand, from Company)
together with interest thereon in respect of each day during the
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period commencing on the date such amount was available to Company and ending on
(but excluding) the date Administrative Lender recovers such amount at a per
annum rate equal to the effective rate for overnight federal funds as reported
by the Federal Reserve Bank of Dallas for each applicable Business Day (or, if
such day is not a Business Day, for the next preceding Business Day).
Section 2.27 CALCULATION OF RATES. The provisions of this Agreement
relating to calculation of the Eurodollar Rate are included only for the purpose
of determining the rate of interest or other amounts to be paid hereunder that
are based upon such rate, it being understood that each Lender shall be entitled
to fund and maintain its funding of all or any part of a Eurodollar Rate
Borrowing as it sees fit. All such determinations hereunder, however, shall be
made as if each Lender had actually funded and maintained funding of each
Eurodollar Rate Borrowing through the purchase in the London Interbank Market of
one or more Eurodollar deposits in an amount equal to the principal amount of
such Advance and having a maturity corresponding to such Interest Period.
Section 2.28 BOOKING ADVANCES. Any Lender may make, carry or transfer
Advances at, to or for the account of any of its branch offices or the office of
any affiliate.
Section 2.29 QUOTATION OF RATES. It is hereby acknowledged that the
Authorized Financial Officer on behalf of Company may call Administrative Lender
on or before the date on which notice of an elective interest rate is to be
delivered by the Authorized Financial Officer on behalf of Company in order to
receive an indication of the Eurodollar Rate then in effect, but that such
projection shall not be binding upon Administrative Lender or Lenders nor affect
the rate of interest which thereafter is actually in effect when the election is
made.
Section 2.30 REPLACEMENT BY COMPANY OF A LENDER.
(a) CAPITAL ADEQUACY. If any Lender has requested compensation in
accordance with the terms of Section 2.24 hereof and (i) such request is not the
result of any uniform changes in the statutes or regulations for capital
adequacy, (ii) there exists no Default or Event of Default hereunder, and
(iii) Company and such Lender are unable to reach a written agreement regarding
such request within 30 days following written notice by such Lender to Company
and Administrative Lender of such request, then after the expiration of 30 days
following the delivery of the Reimbursement Notice, Company may (A) replace such
Lender in whole with another Eligible Assignee reasonably acceptable to
Administrative Lender pursuant to an Assignment and Acceptance Agreement, or (B)
reduce the Commitment in the full amount of such Lender's Specified Percentage
of the Commitment and repay such Lender in full. So long as Company
accomplishes the replacement or repayment of such Lender within 60 days
following the delivery of the Reimbursement Notice, Company shall not owe any
such Lender any amounts under Section 2.24 hereof. If Company does not
accomplish either replacement or repayment of such Lender within such 60 days,
Company shall owe such Lender in accordance with the terms of any written
agreement reached
25
between such Lender and Company, and, if no such agreement has been reached,
Company shall owe such Lender in accordance with the terms and provisions of
Section 2.24 hereof. If the Commitment is reduced by Company pursuant to this
Section 2.30(a), Company and Lenders agree that the Specified Percentages of
each Lender will be automatically ratably adjusted to reflect such reduction of
the Commitment. Each Lender agrees to the automatic readjustment of each
remaining Lender's contingent liabilities under Section 3.04 hereof according to
the new (adjusted) Specified Percentages.
(b) ACQUIRED LENDER. If any Lender is acquired by or merges with any
other Person (including any other Lender) and (i) such Lender is not the
surviving Person, and (ii) there exists no Default or Event of Default
hereunder, Company may replace such Lender in whole with another Eligible
Assignee acceptable to Administrative Lender pursuant to an Assignment and
Acceptance Agreement within thirty days following the date of consummation of
any such Acquisition.
(c) CERTAIN CIRCUMSTANCES. If (a) there exists no Default or Event of
Default on any such date and no Default or Event of Default shall be caused by
the action permitted below and (b) any Lender refuses to consent to any
amendment, waiver or consent to any provision hereof or in any Loan Paper in
accordance with the terms of Section 10.10 hereof (other than an amendment to
increase the Commitment of such Lender), but to which each other Lender has
previously agreed, then, Company may, with the prior written consent of
Administrative Lender, within 90 days after the date of such consent, amendment
or waiver, replace such Lender in whole with another Eligible Assignee, pursuant
to an Assignment and Acceptance Agreement and otherwise in accordance with the
terms of Section 10.02 hereof.
ARTICLE III
LETTERS OF CREDIT
Section 3.01 LETTER OF CREDIT COMMITMENT. Subject to the terms and
conditions of this Agreement and each Application, each Lender agrees that
Administrative Lender shall, and Administrative Lender agrees on behalf of
Lenders in their Pro Rata Part to, issue Commercial Letters of Credit and
Stand-By Letters of Credit as requested by Company, provided that at no time
shall the aggregate face amount of all Letters of Credit exceed the Letter of
Credit Commitment. No Letter of Credit shall have an expiration date later than
the Maturity Date.
Section 3.02 APPLICATION FOR AND ISSUANCE OF COMMERCIAL LETTERS OF CREDIT
AND STAND-BY LETTERS OF CREDIT.
(a) COMMERCIAL LETTERS OF CREDIT. Commercial Letters of Credit
issued under this Article III (i) shall be in forms acceptable to
Administrative Lender, (ii) shall be issued upon at least one Business
Day's notice on such date as Company may
26
designate, (iii) shall not be issued in an aggregate face amount exceeding
the difference between Letter of Credit Commitment minus the aggregate face
amount of all outstanding Stand-By Letters of Credit, (iv) shall be dated
the date of issuance and (v) shall expire on such date as may be requested
by Company, but in no event later than the earlier of (a) 365 days after
their respective issuance dates or (b) the Maturity Date. Company's
request for the issuance of each Commercial Letter of Credit hereunder
shall be via a duly executed and completed Application. Notwithstanding
anything herein or in any other Loan Papers to the contrary, in no event
shall Company be entitled to request the issuance of a Commercial Letter of
Credit if the issuance of such Letter of Credit would cause the sum of (i)
the aggregate face amount of all Letters of Credit, plus (ii) the aggregate
amount of all Advances outstanding, to exceed the lesser of (A) the
Commitment and (B) the Borrowing Base.
(b) STAND-BY LETTERS OF CREDIT. Each Stand-By Letter of Credit
issued under this Article III (i) shall be in a form acceptable to
Administrative Lender, (ii) shall be issued upon at least one Business
Day's notice on such date as Company may designate, (iii) shall not be
issued in an aggregate face amount of all Stand-By Letters of Credit
outstanding at any one time exceeding the difference between Letter of
Credit Commitment minus the aggregate face amount of all outstanding
Commercial Letters of Credit, (iv) shall be dated the date of issuance and
(v) shall expire on such date as may be requested by Company, but in no
event later than the Maturity Date. Company's request for each issuance of
a Stand-By Letter of Credit hereunder shall be via a duly executed and
completed Application. Notwithstanding anything herein or in any other
Loan Papers to the contrary, in no event shall Company be entitled to
request the issuance of a Stand-By Letter of Credit if the issuance of such
Letter of Credit would cause the sum of (i) the aggregate face amount of
all Letters of Credit, plus (ii) the aggregate amount of all Advances
outstanding, to exceed the lesser of (A) the Commitment and (B) the
Borrowing Base.
Section 3.03 COMMISSION; PAYMENT OF DRAFTS DRAWN UNDER LETTERS OF CREDIT;
INCORPORATION OF TERMS OF THE APPLICATIONS.
(a) Subject to Section 10.15 hereof, for the issuance of each Commercial
Letter of Credit, Company shall pay:
(i) to Administrative Lender for the account of Lenders in their Pro
Rata Part, the Applicable Margin on the face amount of each Commercial
Letter of Credit, payable by Company as it accrues upon receipt of an
invoice from Administrative Lender; and
(ii) to Administrative Lender for its own account an issuance fee
equal to $100 for each Commercial Letter of Credit, such issuance fee to be
payable by Company upon receipt of an invoice from Administrative Lender.
27
(b) Subject to Section 10.15 hereof, for the issuance of each Stand-By
Letter of Credit, Company shall pay:
(i) to Administrative Lender for the account of Lenders in their Pro
Rata Part, the product of the Applicable Margin for any Stand-By Letter of
Credit on such date of issuance, multiplied by the face amount of such
Stand-By Letter of Credit, such credit fee to be payable by Company upon
receipt by Company of an invoice from Administrative Lender; and
(ii) to Administrative Lender for its own account an issuance fee
equal to one-tenth of one percent (1/10 of 1%) per annum of the face amount
of each Stand-By Letter of Credit, such issuance fee to be payable by
Company upon receipt by Company of an invoice from Administrative Lender.
All the terms and provisions of any and all Applications under this Article III
are incorporated herein by reference; provided, however, that in the event of a
conflict between the provisions of this Agreement and any Application, the
provisions of this Agreement shall control. Company shall pay to Administrative
Lender for the account of Lenders in their Pro Rata Part on demand an amount
equal to the face amount of each draft drawn or purporting to be drawn under a
Letter of Credit in accordance with the terms of the Application unless all
conditions precedent under Article IV have been satisfied and there exists no
Default or Event of Default, at which such time Company may request an Advance
under the Loan. If for any reason Company may not or does not request an
Advance under the Loan, Administrative Lender may debit Company's account(s)
with Administrative Lender (up to the credit balance thereof) in order to pay
each such draft, but Administrative Lender shall not be required to effect any
such debit. If Company's account(s) have insufficient funds with which to pay
such draft and if payment thereof is not otherwise made or provided for on the
maturity date of the draft, the face amount of the maturing draft shall
automatically be deemed to be an Advance under the Loan so long as there exists
no Default or Event of Default, the conditions precedent under Article IV have
been met and satisfied, and the total principal amount of all outstanding
Advances (after treating the face amount of the draft as an Advance) would not
exceed the lesser of (a) the Commitment minus the sum of the aggregate
outstanding face amount of all Letters of Credit plus the aggregate outstanding
amount of Advances under the Loan or (b) the Borrowing Base minus the sum of the
aggregate outstanding face amount of all Letters of Credit plus the aggregate
outstanding amount of Advances under the Loan. Such Advance shall be evidenced
by a Notice of Borrowing/Conversion to be received by Administrative Lender not
more than two Business Days following the date the draft matured. The failure
of Company to transmit such Notice of Borrowing/Conversion shall not affect
Company's obligation to repay such amount, and such amount shall be deemed to be
a Base Rate Borrowing.
Section 3.04 REIMBURSEMENT OBLIGATION OF Lenders. Each Lender (including
NationsBank of Texas, N.A. in its capacity as a Lender) agrees that it shall be
28
unconditionally and irrevocably liable, without regard to the occurrence of any
Default or Event of Default, to reimburse Administrative Lender on demand for
such Lender's Specified Percentage of the amount of each draft paid by
Administrative Lender in respect of any Letter of Credit, to the extent that
such amount is not reimbursed to Administrative Lender by Company. If
Administrative Lender is required at any time (whether before or after the
expiration date of any Letter of Credit) to return to Company or to a trustee,
receiver, liquidator, custodian or other similar official any portion of the
payments made by or on behalf of Company to Administrative Lender in
reimbursement of payments made by Administrative Lender under any Letter of
Credit and interest thereon, each Lender shall, upon demand by Administrative
Lender, forthwith pay over to Administrative Lender such Lender's Specified
Percentage of such amount. All amounts payable by any Lender under this
Section 3.04 shall include interest thereon from the day the applicable draw is
made (or the date such Lender was to have made such reimbursement payment, as
appropriate), to but not including the date such amount is paid by such Lender
to Administrative Lender, at a per annum rate equal to the effective rate for
overnight federal funds as reported by the Federal Reserve Bank for each
applicable Business Day (or, if such day is not a Business Day, for the next
preceding Business Day). The obligations of Lenders under this Section 3.04
shall continue after the Maturity Date and survive any termination of this
Agreement.
Section 3.05 SHARING OF PAYMENTS. Each payment made by a Lender pursuant
to Section 3.04 shall be treated as the purchase by such Lender of a
participating interest in the Reimbursement Obligation in an amount equal to
such payment. Each Lender shall share in any interest which accrues and is paid
by Company according to such Lender's Specified Percentage. All amounts
recovered by Administrative Lender or any Lender hereunder or under any other
Loan Papers and which are applied to the Reimbursement Obligation shall be
distributed to Lenders according to their Specified Percentages.
Section 3.06 DUTIES OF ADMINISTRATIVE LENDER. Administrative Lender
agrees with each Lender that it will exercise and give the same care and
attention to each Letter of Credit as it gives to its other letters of credit
and Administrative Lender's sole liability to each Lender shall be to distribute
promptly to each Lender, as and when received by Administrative Lender, each
Lender's Specified Percentage of any payments made to Administrative Lender by
Company under this Article III. Each Lender and Company agrees that, in paying
any draft, Administrative Lender shall not have any responsibility to obtain
any document (other than the drafts, certificates and other documents required
by the Letter of Credit and/or this Agreement) or to ascertain or inquire as to
the validity or accuracy of any such document or the authority of the person
delivering any such document. None of Administrative Lender and its
representatives, directors, officers, employees, attorneys or agents shall be
liable to any Lender or Company for (i) any action taken or omitted in
connection herewith at the request or with the approval of any Lender in its
capacity as Administrative Lender, (ii) any action taken or omitted in the
absence of gross negligence and the absence of wilful misconduct, (iii) any
recitals, statements, representations or warranties contained in any document
distributed to any Lender, (iv) the
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creditworthiness of Company or (v) the execution, effectiveness, genuineness,
validity or enforceability of any Loan Papers or any other document contemplated
hereby or thereby. Administrative Lender and its officers, directors,
employees, attorneys and agents shall be entitled to rely and shall be fully
protected in relying on any writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telex or teletype message, statement,
order, or other document or conversation believed by it or them to be genuine
and correct and to have been signed or made by the proper person and, with
respect to legal matters, upon opinions of counsel selected by Administrative
Lender.
Section 3.07 LENDERS, GENERALLY. No Lender shall be liable for the
performance or nonperformance of the obligations of any other Lender under this
Article III.
Section 3.08 GENERAL PROVISIONS.
(a) MAXIMUM AMOUNT AND TERM. At no time shall the aggregate
outstanding face amount of all Letters of Credit exceed the lesser of (i)
$25,000,000, (ii) the Commitment minus the aggregate outstanding Advances
under the Loan and (iii) the Borrowing Base minus the aggregate outstanding
Advances under the Loan. No Letter of Credit shall have an expiration date
later than the Maturity Date.
(b) COMPUTATION OF APPLICABLE MARGIN FOR LETTERS OF CREDIT. Subject
to Section 10.15 hereof, the Applicable Margin on Commercial Letters of
Credit issued hereunder shall be calculated on the basis of a year of 365
or 366 days, as the case may be, for the actual number of days such
Commercial Letters of Credit remain outstanding.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 CONDITIONS TO THE CLOSING DATE AND THE INITIAL ADVANCE. The
obligation of each Lender to enter into this Agreement, to make each and every
Advance and issue Letters of Credit hereunder is subject to the accuracy, as of
the date hereof, of the representations and warranties herein contained, to the
performance by Company of its obligations to be performed hereunder on or before
the date of each Advance, issuance or creation, and to the satisfaction of the
following further conditions:
(a) REPRESENTATIONS AND WARRANTIES; NO DEFAULT OR EVENT OF DEFAULT.
The representations and warranties contained in Article V hereof shall be
true in all material respects on and as of the date of each Advance and
each issuance of a Letter of Credit hereunder as if such representations
and warranties had been made on and as of such dates; and on each such date
no Default or Event of Default shall have occurred and be continuing.
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(b) COMPANY'S RESOLUTIONS AND PROCEEDINGS. On the Closing Date,
Company shall have delivered to Administrative Lender, in form and
substance satisfactory to Administrative Lender and each Lender:
(i) resolutions of the Executive Committee of the Board of
Directors of Company, certified by its secretary or assistant
secretary, which resolutions shall authorize the execution, delivery
and performance by Company of this Agreement, the Notes, and the other
Loan Papers to which Company is a party;
(ii) a certificate of incumbency certified by the secretary or
assistant secretary of Company with specimen signatures of the
president or vice president and secretary or other officers of Company
who will sign this Agreement, the Notes, and the other Loan Papers;
(iii) certificate of incorporation of Company certified as of
a recent date by the Secretary of State of the State of Delaware;
(iv) bylaws of Company certified by the secretary or assistant
secretary of Company;
(v) recent certificate of the appropriate government officials
of the State of Delaware as to the existence and good standing of
Company;
(vi) recent certificates of the appropriate government officials
of each state in which Company conducts business evidencing the
authority of Company to do business in such state; and
(vii) copies of all Stock Option Plans.
(c) NOTES AND LOAN PAPERS. Company shall have executed and delivered
to each Lender its Note in the amount of each such Lender's Specified
Percentage of the Commitment, a Loan Compliance Certificate, a Borrowing
Base Report and all other Loan Papers required to be delivered on the
Closing Date.
(d) OPINION OF COMPANY'S COUNSEL. On the Closing Date, Company shall
have delivered to Administrative Lender a favorable opinion of counsel to
Company satisfactory to Administrative Lender and Lenders, dated the
Closing Date, in form and substance acceptable to Administrative Lender and
Special Counsel.
(e) GUARANTIES. Each Subsidiary shall have executed and delivered to
Administrative Lender a Guaranty in form and substance satisfactory to
Special Counsel.
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(f) SUBSIDIARY'S RESOLUTIONS AND PROCEEDINGS. Each Subsidiary shall
have delivered to Administrative Lender, in form and substance satisfactory
to Administrative Lender and Lenders:
(i) resolutions of the Board of Directors of such Subsidiary
certified by its secretary or assistant secretary, which resolutions
shall authorize the execution, delivery and performance by such
Subsidiary of the Guaranty and any other Loan Papers to which such
Subsidiary is a party;
(ii) a certificate of incumbency certified by the secretary or
assistant secretary of such Subsidiary with specimen signatures of the
president or vice president and secretary or other officers of such
Subsidiary who will sign the other Loan Papers to which such
Subsidiary is a party;
(iii) certificate or articles of incorporation of such
Subsidiary certified as of a recent date by the Secretary of State of
the state of such Subsidiary's incorporation;
(iv) bylaws of such Subsidiary certified by the secretary or
assistant secretary of such Subsidiary; and
(v) recent certificates of the appropriate government
officials of the state of incorporation of such Subsidiary and any
other state in which such Subsidiary conducts business as to the
existence and good standing of such Subsidiary in such state.
(g) INSURANCE. Company and each Subsidiary shall have delivered to
Administrative Lender certificates of insurance or other evidence reasonably
satisfactory to Administrative Lender reflecting compliance with Section 6.06 of
this Agreement, including, without limitation, detailed descriptions of all
self-insurance programs or proposed self-insurance programs in existence on the
Closing Date.
(h) LIEN SEARCH REPORT. On the Closing Date, Company shall have delivered
to Administrative Lender the results of Uniform Commercial Code searches showing
all financing statements and other documents or instruments on file against
Company in the office of the Secretary of State for the States listed on
SCHEDULE 4.01 hereto, and such Lien search reports shall show no Liens against
any properties of Company except Permitted Liens.
(i) LEGAL DETAILS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Administrative Lender,
each Lender, Special Counsel and each Lender's counsel, and Administrative
Lender and each Lender shall have received copies of all documents which they
may reasonably request in connection with such
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transactions and all corporate proceedings with respect thereto in form and
substance satisfactory to Administrative Lender, each Lender and Special
Counsel.
Section 4.02 CONDITIONS PRECEDENT TO EACH ADVANCE. The obligation of
each Lender to make each Advance shall be subject to the further conditions
precedent that on the date of such Advance the following statements shall be
true (and the delivery of each notice of borrowing under Section 2.04 hereof, or
notice of continuation or conversion under Section 2.22 hereof, or the
acceptance by Company of the proceeds of any Advance shall constitute a
representation that on the disbursement date they are true):
(a) The representations and warranties contained in Article V hereof
are true and correct on such date, as though made on and as of such date,
(b) No event has occurred and is continuing, or would result from
such Advance (including the intended application of the proceeds of such
Advance), that does or could reasonably be expected to constitute a Default
or Event of Default,
(c) No Material Adverse Change, as determined by Lenders shall have
occurred and be continuing since January 30, 1994,
(d) Upon giving effect to such Advance, the aggregate amount of the
sum of (i) all outstanding Advances under the Loan plus (ii) the aggregate
face amount of all outstanding Letters of Credit will not exceed the lesser
of (A) the Commitment or (B) the Borrowing Base as of such date, and
(e) Each Lender shall have received, in form and substance acceptable
to it, such other approvals, documents, certificates, opinions and
information as it may have reasonably deemed necessary or appropriate and
requested in writing.
Section 4.03 CONDITIONS PRECEDENT TO EACH LETTER OF CREDIT. The
obligation of Administrative Lender to issue each Letter of Credit shall be
subject to the further conditions precedent that on the date of such Letter of
Credit issuance the following statements shall be true (and the delivery of each
notice of borrowing under Section 2.04 hereof, or notice of continuation or
conversion under Section 2.22 hereof, or the acceptance by Company of the
proceeds of any Advance shall constitute a representation that on the
disbursement date they are true):
(a) The representations and warranties contained in Article V hereof
are true and correct on such date, as though made on and as of such date,
(b) No event has occurred and is continuing, or would result from the
issuance of such Letter of Credit, that does or could constitute a Default
or Event of Default,
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(c) No Material Adverse Change, as determined by Lenders, shall have
occurred and be continuing since January 30, 1994,
(d) A duly completed, executed and delivered Application (executed by
Company) with respect to such Letter of Credit shall have been received by
Administrative Lender,
(e) Upon giving effect to such Letter of Credit, the aggregate amount
of the sum of (i) the aggregate face amount of all outstanding Letters of
Credit, plus (ii) all outstanding Advances under the Loan will not exceed
the lesser of (A) the Commitment or (B) the Borrowing Base as of such date,
and
(f) Administrative Lender shall have received, in form and substance
acceptable to it, such other approvals, documents, certificates, opinions
and information as it may have reasonably deemed necessary or appropriate
and requested in writing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Company represents and warrants to each Lender as follows:
Section 5.01 ORGANIZATION, AUTHORITY, AND QUALIFICATION. (a) Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, (b) Company has the corporate power and authority
to execute, deliver and perform this Agreement, the Notes, and the other Loan
Papers to which it is a party, and to borrow hereunder, (c) each of Company and
its Subsidiaries is in all respects duly qualified and licensed under all
applicable laws or regulations to own its properties as now owned and to carry
on its business as now conducted, except where the failure to so qualify could
not reasonably be expected to cause a Material Adverse Change, (d) each of
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction where the character of
its properties or nature of its activities make such qualification necessary,
except where the failure to so qualify could not reasonably be expected to cause
a Material Adverse Change, (e) Company presently has no Subsidiaries except
those listed on SCHEDULE 5.01 attached hereto, which schedule correctly reflects
the jurisdiction of organization, the percent ownership position of Company in
each such Subsidiary, the classes of Company's and each Subsidiary's Capital
Stock, and the numbers of shares or partnership interests authorized and
outstanding of Company and each Subsidiary, (f) each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, and (g) each Subsidiary has the corporate power and
authority to execute, deliver and perform its respective Guaranty and any other
Loan Papers to which it is a party.
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Section 5.02 FINANCIAL STATEMENTS. Company has delivered to Lender
audited consolidated financial statements as at and for the fiscal year ended
January 30, 1994. Such financial statements fairly reflect the financial
condition of Company and its Subsidiaries as at such dates and fairly reflect
the results of the operations of Company and its Subsidiaries for the periods
then ended, all in conformity with GAAP. There has been no Material Adverse
Change since January 30, 1994.
Section 5.03 DEFAULT. Neither Company nor any Subsidiary is in default
in any material respect under the provisions of any document or instrument
evidencing any material obligation, indebtedness, or liability of Company or
such Subsidiary, or of any agreement relating thereto, or under any order, writ,
injunction, or decree of any court, and is not in default in any material
respect under or in violation of any order, regulation, or demand of any
Tribunal, which default or violation would have consequences which could cause a
Material Adverse Change.
Section 5.04 AUTHORIZATION AND COMPLIANCE WITH LAWS; MATERIAL AGREEMENTS;
ENFORCEABILITY. (a) The execution, delivery and performance of this Agreement,
the borrowing hereunder and the execution, delivery and performance of the Notes
and the other Loan Papers by Company have been duly authorized by all requisite
corporate action on the part of Company and will not violate the certificate of
incorporation or bylaws of Company and will not violate any material provision
of law or order of any Tribunal. The execution, delivery and performance of
this Agreement, the borrowing hereunder and the execution, delivery and
performance of the Notes and the other Loan Papers by Company will not conflict
with, result in a breach of the provisions of, constitute a default under (or
result in the imposition of any Lien, or encumbrance upon the assets of Company
or any Subsidiary pursuant to the provisions of, except Permitted Liens) any
indenture, mortgage, deed of trust, franchise, permit, license, note, or other
agreement or instrument to which Company or any Subsidiary is a party, except to
the extent any conflict, breach, or default could not reasonably be expected to
cause a Material Adverse Change; and (b) the execution, delivery and performance
of its respective Guaranty and any other Loan Papers to which it is a party have
been duly authorized by all requisite corporate action on the part of each
Subsidiary, will not violate the certificate of incorporation or articles of
incorporation, as the case may be, of such Subsidiary or bylaws of such
Subsidiary, and will not violate any material provision of law or order of any
Tribunal. The execution, delivery and performance of its respective Guaranty
and any other Loan Papers to which it is a party will not conflict with, result
in a breach of the provisions of, constitute a default under (or result in the
imposition of any Lien, or encumbrance upon the assets of such Subsidiary
pursuant to, except Permitted Liens) the provisions of any material indenture,
mortgage, deed of trust, franchise, permit, license, note, or other agreement or
instrument to which any Subsidiary is a party. This Agreement, the Notes and
each other Loan Paper is the legal, valid and binding obligation of Company and
each Subsidiary executing and delivering the same, each enforceable in
accordance with its respective terms.
35
Section 5.05 LITIGATION AND JUDGMENTS. There is no Litigation by or
before any Tribunal pending, or, to the knowledge of Company, threatened against
or affecting Company or any Subsidiary or involving the validity or
enforceability of any of the Loan Papers, which, if adversely determined, could
reasonably be expected to cause a Material Adverse Change, or materially
adversely affect the ability of Company to perform its obligations as
contemplated by this Agreement, other than litigation disclosed on SCHEDULE 5.05
hereto. There are no outstanding judgments against Company or any Subsidiary in
excess of $1,000,000.
Section 5.06 OWNERSHIP OF PROPERTIES; LIENS. Company and each Subsidiary
has good and indefeasible title or valid leasehold interests in all its material
properties and assets, real and personal, and none of such property or assets or
leasehold interests is subject to any security interests or Liens of any kind,
except Liens described on SCHEDULE 5.06 hereof and Permitted Liens.
Section 5.07 USE OF PROCEEDS; MARGIN SECURITIES. The proceeds of the
Loan will be used for the purposes set forth in Section 2.05 of this Agreement
and for no other purposes. Neither Company nor any Subsidiary 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 Regulations G, U, or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any extension of credit under
this Agreement will be used to purchase or carry any such margin stock or to
extend credit to others for the purpose of purchasing or carrying any such
margin stock. Neither Company nor any Person acting on its behalf has taken or
will take any action which might cause this Agreement or the Notes to violate
any of said Regulations G, U, or X, or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as now in effect or as the same may hereafter be in
effect.
Section 5.08 TAXES. Company and each Subsidiary has filed all Federal
and state tax returns or reports required of them, including but not limited to
income, franchise, employment, and sales taxes, and have paid all tax liability
to the extent the same has become due and before it may have become delinquent
in accordance with such returns, and except for routine sales and use tax
audits, Company knows of no pending investigations of Company or any Subsidiary
by any taxing authority, or of any material pending but unassessed tax
liability.
Section 5.09 NO APPROVALS REQUIRED. No registration with or approval of
any Tribunal is necessary for the execution or validity of this Agreement, the
Notes and the other Loan Papers.
Section 5.10 ERISA. Company and each Subsidiary have complied with all
applicable minimum funding requirements and all other applicable and material
requirements of ERISA, and there are no existing conditions which would give
rise to any
36
liability thereunder. No Reportable Event (as defined in Section 4043 of ERISA)
has occurred in connection with any such plan which might constitute grounds
for the termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such plan.
Section 5.11 LANDLORD'S LIENS. On the Closing Date, no landlord is
exercising any of its rights with respect to any statutory or contractual
landlord's liens covering the assets of Company or any Subsidiary at any
warehouse facility of Company or any of its Subsidiaries, except as set forth on
SCHEDULE 5.11 hereof. At all times after the Closing Date, no landlord is
exercising any of its rights with respect to any statutory or contractual
landlord's liens covering the assets of Company or any Subsidiary at any
warehouse facility of Company or any of its Subsidiaries, except where such
exercise could not reasonably be expected to cause a Material Adverse Change.
Section 5.12 SUBSIDIARIES. Company has no Subsidiaries, except as
described on SCHEDULE 5.01 hereto.
Section 5.13 SUBORDINATED DEBT. The Obligations are designated as, and
constitute "Senior Indebtedness" as defined in the Indenture, and as such, the
Obligations are senior and superior in right of payment to the Subordinated Debt
to the extent described in the Indenture.
ARTICLE VI
AFFIRMATIVE COVENANTS
Company covenants and agrees that, as long as Company may borrow hereunder
and until payment in full of the Obligations:
Section 6.01 REPORTING REQUIREMENTS. Promptly as set forth below,
Company will deliver to Administrative Lender and each Lender:
(a) As soon as available, and in any event within 90 days after the
end of each fiscal year, Company will furnish to each Lender a copy of the
annual consolidated audit report of Company and its Subsidiaries for such
fiscal year containing balance sheets, statements of income, statements of
stockholders' equity, and statements of cash flow, and prepared in
accordance with GAAP, certified by the Auditor to Lenders to present fairly
the financial condition and results of the operations of Company and its
Subsidiaries at the date and for the periods indicated therein, such audit
report to be accompanied by a Loan Compliance Certificate (herein so
called) in substantially the form attached hereto as EXHIBIT E, with
appropriate completions, signed by an Authorized Financial Officer.
37
(b) As soon as available, and in any event within 45 days after the
end of each of the first three fiscal quarters in each fiscal year, Company
will furnish to each Lender a copy of an unaudited consolidated financial
report of Company and its Subsidiaries as at the end of such fiscal quarter
and for both the quarterly period then ended and the then-elapsed portion
of the fiscal year, containing balance sheets and statements of income, and
prepared in accordance with GAAP (except for the absence of footnotes and
subject to changes resulting from audit and normal year-end adjustments),
certified by an Authorized Financial Officer to present fairly the
financial condition and results of the operations of Company and its
Subsidiaries at the date and for the periods indicated therein, each such
financial report to be accompanied by a Loan Compliance Certificate, with
appropriate completions, signed by an Authorized Financial Officer.
(c) Promptly upon the request of any Lender from time to time, copies
of all material reports or letters submitted to Company or any of its
Subsidiaries by the Auditor or any other accountants in connection with any
annual, interim or special audit, including without limitation the comment
letter submitted to management in connection with any such audit;
(d) (i) Together with each set of financial statements delivered
pursuant to subsection (a) and (b) above, a duly executed and completed
Loan Compliance Certificate for such period, and (ii) in accordance with
the terms of Section 2.06 hereof, a monthly Borrowing Base Report;
(e) Immediately upon knowledge by an Authorized Financial Officer of
Company of (i) the occurrence of any Default or Event of Default, or (ii)
any material change in any material fact or circumstance represented or
warranted in any Loan Papers, or (iii) the occurrence of any event or the
existence of any circumstance which could reasonably be expected to cause a
Material Adverse Change, or (iv) any default or any breach of any material
provision or term under any material agreement, including without
limitation, any such notice relating to any documentation related to the
Subordinated Debt, a notice from an Authorized Financial Officer, setting
forth the details of such occurrence and the action being taken or proposed
to be taken with respect thereto;
(f) Immediately after knowledge thereof by an Authorized Financial
Officer of Company, notice of any Litigation pending or threatened against
Company or any Subsidiary which, if determined adversely, could reasonably
be expected to constitute a Material Adverse Change, together with a
statement of an Authorized Financial Officer, describing the allegations of
such Litigation, and the action being taken or proposed to be taken with
respect thereto;
(g) Immediately following notice or knowledge thereof by an
Authorized Financial Officer of Company, notice of any actual or threatened
loss or termination
38
of or refusal to grant or renew any material authorization or license,
together with a statement of an Authorized Financial Officer, describing
the circumstances surrounding the same, and the action being taken or
proposed to be taken with respect thereto;
(h) Promptly after filing or receipt thereof by an Authorized
Financial Officer of Company, copies of all reports and notices that
Company or any of its Subsidiaries (i) files or receives in respect of any
Plan with or from the Internal Revenue Service, the PBGC or the United
States Department of Labor, or (ii) furnishes to or receives from any
holders of any Debt, if in the case of clauses (i) and (ii), any
information or dispute referred to therein could reasonably be expected to
result in a Default or an Event of Default or cause a Material Adverse
Change;
(i) As soon as possible and in any event within 10 days after Company
knows that any Reportable Event has occurred with respect to any Plan of
Company or any Subsidiary, a statement of an Authorized Financial Officer,
describing such Reportable Event and the action being taken or proposed to
be taken with respect thereto;
(j) As soon as possible, and in any event within 10 days after
receipt by Company, a copy of (a) any notice or claim to the effect that
Company or any Subsidiary is or may be liable to any Person as a result of
the Release by Company, any of its Subsidiaries, or any other Person of any
hazardous substance or hazardous waste into the environment, and (b) any
notice alleging any violation of any Environmental Law by Company or any
Subsidiary, which could, in either case, reasonably be expected to cause a
Material Adverse Change; and
(k) Promptly upon request, such other information concerning the
condition or operations of any of Company, its Subsidiaries, the
Guarantors, and any of their Affiliates, financial or otherwise, as
Administrative Lender or any Lender may from time to time reasonably
request.
Section 6.02 PERFORMANCE OF OBLIGATIONS. Company will duly and
punctually cause to be paid and performed each of the Obligations, including,
without limitation, its obligations under this Agreement and each of the other
Loan Papers, as the same may be amended or modified from time to time.
Section 6.03 PRESERVATION OF EXISTENCE AND FRANCHISES AND CONDUCT OF
BUSINESS. Subject to the actions permitted by Section 7.05 hereof, Company
will, and will cause each Subsidiary to, do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights, leases, patents, and all other licenses or rights necessary to comply
with all laws, regulations, rules, statutes, or other provisions applicable to
Company or such Subsidiary in the operation of its business, and Company will,
and will cause each Subsidiary to, continue to conduct and operate its business
39
substantially as conducted and operated during the preceding calendar year
including without limitation the right to enforce all rights and remedies it may
have against franchisees, tenants and subtenants as specified in any franchise
agreement, lease or sublease.
Section 6.04 MAINTENANCE OF PROPERTIES. Company will, and will cause
each Subsidiary to, cause all of the material properties used or useful in the
conduct of the business of Company or such Subsidiary to be maintained and kept
in satisfactory condition, repair and working order, and supplied with all
necessary equipment, and cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as Company may
reasonably deem to be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
Section 6.05 PAYMENT OF TAXES AND OTHER CHARGES. Company will, and will
cause each Subsidiary to, promptly pay and discharge, or cause to be paid and
discharged, all lawful taxes, assessments, and governmental charges or services
imposed upon Company or such Subsidiary or upon the property, real, personal or
mixed, belonging to Company or such Subsidiary or upon any part thereof, before
the payment thereof shall be in default, as well as all lawful claims for labor,
materials and supplies which, if unpaid, might become a lien or charge upon such
property, or upon any part thereof; provided, however, that Company or such
Subsidiary shall not be required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge, levy or claim, (i) so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings diligently pursued, if appropriate reserves have been provided
therefor, or (ii) as to which adequate bonds have been obtained; and further
provided that, with respect to liens or charges securing an amount less than
$500,000, Company shall have thirty days grace to accomplish such discharge.
Section 6.06 INSURANCE. Company will, and will cause each Subsidiary to,
keep adequately insured either (a) by financially sound and reputable insurers
such assets, business, and property of Company and each Subsidiary as are
customarily insured by owners of similar property against loss or damage of the
kinds customarily insured against by owners of similar property, or (b) pursuant
to a plan of self-insurance established in accordance with sound and appropriate
practices and in accordance with Applicable Law. Company will promptly notify
Administrative Lender of any proposed cancellation or substantial modification
of any material insurance policies, and/or the implementation of any plan of
self-insurance.
Section 6.07 MAINTENANCE OF BOOKS AND RECORDS. Company will, and will
cause each Subsidiary to, maintain proper books of record and account in which
entries in accordance with GAAP will be made of all dealings and transactions in
relation to its business and activities.
40
Section 6.08 INSPECTION OF PROPERTIES, BOOKS AND RECORDS. Company will,
and will cause each Subsidiary to, permit any Lender and/or its representatives
to visit and inspect any of the properties of Company or such Subsidiary, to
examine all books, records, reports, accounts and other papers, including but
not limited to financial and accounting records and other contracts and records
of Company or such Subsidiary, to make copies and extracts therefrom, and to
discuss the affairs, finances and accounts of Company or such Subsidiary with
the officers, employees, directors and auditors of Company or such Subsidiary,
all at such reasonable times and with reasonable notice under the circumstances,
as any Lender may reasonably request. Company will, and will cause each
Subsidiary to, permit an inspection of the inventory of Company and its
Subsidiaries, at the request of Majority Lenders, but no more often than once
each fiscal year of Company.
Section 6.09 COMPLIANCE WITH LAW. Company will, and will cause each
Subsidiary to, comply with all Law applicable to its or their business, the
failure to comply with which could reasonably be expected to cause a Material
Adverse Change.
Section 6.10 EXPENSES AND LEGAL FEES. Company agrees to pay (a) all
reasonable out-of-pocket expenses of Administrative Lender, Special Counsel and
other counsel to Administrative Lender in connection with the negotiation,
preparation and interpretation of this Agreement and the Loan Papers, including
schedules, exhibits and amendments hereto and thereto, the making of the Loan
and Advances hereunder, the issuance of any Letters of Credit as issuing Lender
hereunder, the review of any documents, the negotiation and preparation of any
amendments, consents and waivers to this Agreement or any Loan Papers from time
to time requested or required, the release of any security for the Obligation,
the review and interpretation of any of the Loan Papers deemed advisable by
Administrative Lender from time to time, the negotiation, preparation and
interpretation of this Agreement and the Loan Papers (and any new Loan Papers)
in connection with a "work-out", the collection of the Obligation or enforcement
of any Loan Papers, and the reasonable fees and expenses of Special Counsel to
Administrative Lender and other counsel to Administrative Lender from time to
time in connection with any of the foregoing, including the consideration of
legal questions relevant thereto, and (b) all such out-of-pocket expenses, and
fees and expenses of counsel, incurred by each Lender in connection with the
collection of the Obligation or enforcement of any Loan Papers. The obligation
of Company under this Section 6.10 shall continue after the Maturity Date, and
survive any termination of this Agreement.
Section 6.11 COMPLIANCE WITH ERISA. Company will, and will cause each
Subsidiary to, comply with all applicable minimum funding requirements and all
other applicable and material requirements of ERISA so as not to give rise to
any liability thereunder. Promptly after the filing thereof Company shall
furnish to each Lender with regard to each employee benefit plan maintained by
it or any of its Subsidiaries a copy of each annual report required to be filed
pursuant to Section 103 of ERISA in connection with each such plan for each plan
year. Company will notify Administrative Lender immediately of any fact,
including, but not limited to, any Reportable Event arising in
41
connection with any such plan which might constitute grounds for the termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such plan, and will furnish to any
Lender promptly upon its request therefor such additional information concerning
any such plan as may be reasonably requested.
Section 6.12 FURTHER ASSURANCES. Company will on request of any Lender
promptly correct any defect, error or omission which may be discovered in the
contents of any of the Loan Papers or in the execution or acknowledgment
thereof, and will execute, acknowledge and deliver such further instruments and
do such further acts as may be necessary or as may be reasonably requested by
any Lender to carry out more effectively the purposes of this Agreement and the
Loan Papers. Company will, promptly upon the request of Administrative Lender
on behalf of any Lender, furnish to Administrative Lender copies of all such
instruments, documents, and other information as Administrative Lender may
reasonably request from time to time.
Section 6.13 SYNDICATION. Company agrees to use its reasonable efforts
to assist Administrative Lender in its syndication efforts of this facility. In
such regard, Company agrees to make its senior management available at
reasonable times to meet with prospective lenders and to provide Administrative
Lender and any potential assignees or participants with all reasonable
information deemed necessary to complete the syndication. Company further
agrees to attend meetings and make presentations regarding the business and
prospects of Company with prospective assignees. Administrative Lender and
Lenders agree to cause any such prospective lender or participant to agree to
treat any such information delivered to them pursuant to this Section 6.13
(which is otherwise not publicly available) with the same degree of
confidentiality as it treats such information relating to its borrowers.
Section 6.14 SUBORDINATED DEBT. Company agrees to notify the Trustee of
the existence of the Obligations and Company's designation of the Obligations
and the Loan as Senior Indebtedness (as defined in the Indenture), and agrees
further to provide the Trustee from time to time during the term of this
Agreement with all information regarding Lenders, this facility and the
Obligations as is reasonably required or appropriate under the terms of the
Indenture. Company agrees to promptly deliver to Administrative Lender copies
of all material letters and notices, and other material information received
under or pursuant to the Indenture or the Subordinated Debt.
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ARTICLE VII
NEGATIVE COVENANTS
Company covenants and agrees that as long as Company may borrow hereunder
and until payment in full of all the Obligations:
Section 7.01 FINANCIAL COVENANTS. Company will comply with the following
financial covenants and demonstrate such compliance as of the end of each fiscal
quarter of Company pursuant to a Loan Compliance Certificate delivered to
Lenders in accordance with the terms of Section 6.01(d)(i) hereof:
(a) RATIO OF TOTAL LIABILITIES TO NET WORTH. Company will not permit
the ratio of Total Liabilities to Net Worth at any time during Company's
(i) second and third fiscal quarters each year during the term of this
Agreement to be greater than 2.25 to 1.00, and (ii) first and fourth fiscal
quarters each year during the term of this Agreement to be greater than
1.25 to 1.00.
(b) FIXED CHARGES COVERAGE RATIO. Company will not permit the Fixed
Charges Coverage Ratio at any time to be less than 1.30 to 1.00.
(c) CURRENT RATIO. Company will not permit the ratio of (a) Current
Assets to (b) the sum of (i) Current Liabilities plus (ii) amounts
outstanding under this Agreement as Advances, at any time to be less than
1.50 to 1.00.
Section 7.02 ADDITIONAL DEBT. Company will not, and will not permit any
Subsidiary to, incur or otherwise become liable in respect of or permit to exist
any Debt except (a) existing Debt shown on SCHEDULE 7.02, including the
Subordinated Debt, and (b) accounts payable and accrued liabilities incurred in
the ordinary course of business. So long as there exists no Default or Event of
Default in existence on any such date and the incurrence of such Debt does not
cause any Default or Event of Default, Michaels of Canada, Inc. may incur
unsecured Debt in an aggregate amount not to exceed an amount equal to the
Canadian Dollar equivalent of five million Dollars outstanding at any one time,
and additionally Company and its Subsidiaries may incur or permit to exist
(i) Debt secured by Permitted Liens; (ii) capitalized lease obligations existing
as of the date hereof plus up to an aggregate of $10,000,000 in new capitalized
leases over the term of this Agreement for Company and its Subsidiaries;
(iii) Debt in the form of stand-by letters of credit from an issuing bank other
than a Lender in an amount not in excess of $5,000,000 in the aggregate for
Company and its Subsidiaries; (iv) Debt in the form of guaranties of
indebtedness of any Subsidiary (except indebtedness of any Subsidiary which is
secured as permitted in Section 7.03(b) below, provided that, if Company's
obligations under such guaranty are subordinated to the Obligations upon terms
and conditions acceptable to Majority Lenders, Company may guaranty indebtedness
of any such Subsidiary) not in excess of $10,000,000 at any one time
outstanding; and (v) unsecured Debt (or secured Debt to the extent Liens
43
are permitted under Section 7.03 below) owed by any Person (other than an
Affiliate of Company) acquired by Company or any Subsidiary in a transaction
permitted under Section 7.09(b) below, so long as (A) such Debt was not incurred
by such Person in anticipation of such Acquisition, (B) the aggregate amount of
such Debt outstanding at any time shall never exceed the lesser of (I) an amount
equal to 15% of the consolidated equity base of Company and its Subsidiaries and
(II) $75,000,000, and (C) if such Debt is revolving in nature, Company shall,
within a reasonable period of time, use any Available Advance Amount to reduce
such Debt. Any such Debt permitted to exist under Section 7.02(v) hereof may
not be increased. Company shall make a prepayment on Debt permitted under
Section 7.02(v) above, on any date and to the extent that (a) the aggregate of
such Debt exceeds the maximum permitted levels under Section 7.02(v) above
immediately, and (b) to the extent that any such Debt is revolving in nature, if
and to the extent there becomes any Available Advance Amount, within a
reasonable period of time thereafter.
Section 7.03 PERMITTED LIENS. Company will not, and will not permit any
Subsidiary to, create, assume, or permit to exist any Lien of any kind against
any of the property of any character of Company or such Subsidiary, including
without limitation all fixed assets and leasehold improvements, whether owned as
of the date of this Agreement or hereafter acquired, except:
(a) Company and its Subsidiaries may create, assume or permit to
exist:
(i) Permitted Liens,
(ii) Liens on real property acquired directly or indirectly by
Company in accordance with the terms and provisions of Section 7.09(b)
hereof securing Debt permitted to exist in accordance with the
provisions of Section 7.02(v) hereof that were previously existing, so
long as (A) such Liens are not securing Debt of Company in excess of
the fair market value of the real property and (B) such Liens are not
incurred in anticipation of such Acquisition, and
(iii) Liens (other than blanket Liens on Company's or its
Subsidiaries' equipment, inventory, accounts or other receivables,
provided that a blanket Lien on an individual Subsidiary's assets is
permitted) securing Debt of Company and its Subsidiaries in the
aggregate not in excess of $15,000,000 at any one time outstanding;
and
(b) any Subsidiary acquired by Company in accordance with the terms
of Section 7.09(b) hereof, may permit to exist Liens securing any
indebtedness of such Subsidiary existing in accordance with the terms of
Section 7.02(v) hereof, provided that (i) such Liens were not incurred in
anticipation of such Acquisition and (ii) no such Lien shall extend to or
cover any other property or assets of Company or of any other Subsidiary.
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Section 7.04 CASH DIVIDENDS, REDEMPTION, AND RESTRICTED PAYMENTS. Company
will not, and will not permit any Subsidiary to, declare or pay, or set aside
funds to declare or pay, any Dividend with respect to any Capital Stock of
Company, or make any Restricted Payment, provided that (a) any Subsidiary may
declare and/or pay any Dividend to Company, (b) so long as there exists no
Default or Event of Default at any time of such payment and immediately
thereafter, Company may (i) declare or pay any Dividend so long as Dividends
paid in the aggregate during any 12-month period are not in excess of 50% of the
sum of (A) Company's net income for the most recently completed 12-month period
plus (B) Company's non-recurring charges for the most recently completed 12-
month period and (ii) make any Restricted Payment pursuant to the terms of
Company's Stock Option Plans.
Section 7.05 MERGERS, SALES OF ASSETS AND DISSOLUTIONS. Company will not,
and will not permit any Subsidiary to, (a) dissolve or liquidate; or (b) become
a party to any merger or consolidation; provided that
(i) any Subsidiary may merge or consolidate with or into Company or
any other Subsidiary, or
(ii) Company may merge or consolidate with another Person, provided
that
(A) Company is the surviving entity, and
(B) there shall have occurred no Default or Event of Default
prior to such action and, after giving effect to such transaction, no
Default or Event of Default shall have occurred, and a majority of the
Board of Directors of Company for a period of six months after the
effective date of such merger or consolidation consists of individuals
who were directors of Company three months prior to such effective
date; or
(iii) Company may merge or consolidate with another Person (the Person
formed by such consolidation or into which Company is merged, being the
"M/A Entity"), provided that
(A) the M/A Entity shall be a corporation organized and existing
under the laws of the United States of America or any State thereof or
the District of Columbia, and shall execute and deliver to the
Administrative Lender, concurrently with the consummation of any such
transaction, an agreement, in form and substance satisfactory to the
Administrative Lender, containing an assumption by the M/A Entity of
the due and punctual performance and observance of each obligation,
covenant and condition of Company under the Notes, this Agreement and
the Loan Papers, and
45
(B) there shall have occurred no Default or Event of Default
prior to such action and, after giving effect to such transaction, no
Default or Event of Default shall have occurred, and a majority of the
Board of Directors of the M/A Entity for a period of six months after
the effective date of such merger or consolidation consists of
individuals who were directors of Company three months prior to such
effective date; and
(C) Company shall have delivered to the Administrative Lender a
certificate signed by the President of Company, and an opinion of
Messrs. Jackson & Walker, L.L.P., or other counsel satisfactory to the
Administrative Lender, each stating that such consolidation or merger,
and such assumption agreement comply with this Section, and that all
conditions precedent provided in this Section 7.05(iii) for relating
to such transaction have been complied with; PROVIDED, HOWEVER, that
any such opinion of counsel need not opine as to the matters set forth
in Section 7.05(iii)(B) above; and
(D) the holders of Company's voting securities immediately
before the merger or consolidation hold in excess of 50% of the voting
securities of the M/A Entity; and
(E) within 10 Business Days after the consummation of such
transaction, Administrative Lender shall have received, in the form
existing as executed by Company on the Closing Date, new Notes, a new
Credit Agreement and all other Loan Papers requested by the
Administrative Lender to be delivered, all duly completed and executed
by the M/A Entity; or
(c) sell, transfer, convey or lease all or any part of the property or assets
of Company or any Subsidiary other than in the ordinary course of business,
except, if at the time of such sale, transfer, conveyance or lease, there exists
no Default or Event of Default before and after giving effect to such sale,
transfer, conveyance or lease, (i) any Subsidiary may sell, transfer, convey or
lease all or any part of the property or assets of such Subsidiary, and
(ii) Company may sell, transfer, convey or lease any part of its property or
assets (but not all or substantially all of its property or assets).
Section 7.06 CHANGES IN BUSINESS. Company will not, and will not permit
any Subsidiary to, substantially change the nature of the business in which each
is presently engaged.
Section 7.07 SUBSIDIARIES. Company will not (directly or indirectly)
create or acquire, in any manner whatsoever, any new Subsidiaries; provided,
however, that Company or any Subsidiary may create Subsidiaries, so long as
(i) there exists no Default or Event of Default at the time of each creation or
after giving effect thereto; (ii) each new
46
United States Subsidiary shall execute a Guaranty of the Obligations hereunder;
(iii) Company and each new United States Subsidiary shall execute and deliver
such other certificates, agreements and documents as Administrative Lender or
any Lender may reasonably require; and (iv) no United States Subsidiary shall
issue any new stock, of any classification, without Lenders' prior written
consent, except issuance to Company or any Subsidiary.
Section 7.08 SUBORDINATED DEBT. Company will not make any payment of
principal, interest, premium, fee or otherwise with respect to Subordinated Debt
except in strict accordance with the terms of the Indenture and other
Subordinated Debt documentation. Company will not prepay or defease, or set
aside funds for the prepayment or defeasance of, and will not permit any
Subsidiary to prepay or defease, or set aside funds for the prepayment or
defeasance of all or any portion of the Subordinated Debt, provided however, so
long as there exists no Default or Event of Default immediately before and after
such prepayment, Company may prepay Subordinated Debt in a maximum amount equal
to 5% of the aggregate face amount of such Subordinated Debt, but only if such
prepayment is made pursuant to a call for redemption of such Subordinated Debt
which Company believes will result in the holders of Subordinated Debt
converting such indebtedness to Company's common stock. Company will not make
an election under Article 15 of the Indenture to defease all or any portion of
the Subordinated Debt.
Section 7.09 INVESTMENTS AND ACQUISITIONS. Company will not, nor will it
permit any Subsidiary to,
(a) make any Investment except investments in trade receivables
incurred by Company in the ordinary course of business, endorsements of
negotiable instruments for collection in the ordinary course of Company's
business; provided that, so long as there exists no Default or Event of
Default at the time of such Investment and none is caused thereby, Company
may (i) invest in Cash Equivalents, (ii) invest up to $50,000,000 in
publicly traded debt and equity securities listed on national exchanges,
provided that (A) any such Investment shall not cause any representation or
warranty under Section 5.07 hereof to be untrue and (B) Company shall not
violate any Applicable Law, (iii) invest up to $25,000,000 in Investments,
(iv) invest in any Canadian or United States Subsidiary that has executed a
Guaranty in the form of EXHIBIT D hereto, and (v) invest in any foreign
organized Subsidiary that has executed a Guaranty in the form of EXHIBIT D
hereto in an amount not to exceed in the aggregate at any time $15,000,000,
provided, however, such limitation shall not apply to (I) Investments in
Canadian Subsidiaries or (II) Investments in foreign organized Subsidiaries
otherwise approved by the prior written consent of Majority Lenders; or
(b) make any Acquisition, provided that, so long as there exists no
Default or Event of Default on such date before and after giving effect to
such transactions and Company complies with the terms and conditions of
Section 7.07 hereof if
47
applicable, Company may make an Acquisition of (i) any Person or Persons
engaged in businesses similar to, related to, or constituting a natural
extension of, the business of Company, (ii) any Person or Persons in which
Company's aggregate cash consideration does not exceed $20,000,000 over the
term of this Agreement (provided that such limitation shall not apply to
transactions permitted by (b)(i) above and (b)(iii) below) and/or (iii) any
Person or Persons if the consideration for such Acquisition is common stock
of Company.
Section 7.10 BORROWING BASE. Company will not permit the sum of the
aggregate Advances outstanding under the Loan hereunder to exceed the Borrowing
Base for a period of five consecutive Business Days after its knowledge thereof.
Section 7.11 AMENDMENT TO MATERIAL AGREEMENTS. Company shall not amend or
change (or take any action or fail to take any action the result of which is an
effective amendment or change) or accept any waiver or consent with respect to,
the Indenture, the securities issued pursuant to the Indenture, or any other
document or instrument in connection with either of them or the Subordinated
Debt that would result in (a) an increase in the outstanding principal amount of
the Subordinated Debt, (b) a change in any principal, interest, fees, or other
amounts payable under the Subordinated Debt or the Indenture (including without
limitation a waiver or action that results in the waiver of any payment default
under the Subordinated Debt or the Indenture), (c) a change in any date fixed
for any payment of principal, interest, fees, or other amounts payable under the
Subordinated Debt or the Indenture (including, without limitation, as a result
of any redemption, defeasance or otherwise), (d) a change in any percentage of
holders of the Subordinated Debt under the Indenture and the securities issued
pursuant thereto required under the terms of such documents to take (or refrain
from taking) any action, (e) a change in any financial covenant, (f) a change in
any remedy or right of the holders of the Subordinated Debt, (g) a change in the
definition of "Change in Control" in the Indenture and the securities issued
thereunder, (h) a change in any covenant, term or provision which would result
in such term or provision being more restrictive than the terms of this
Agreement and the Loan Papers, (i) a change that grants or permits the granting
of any security interest or Lien on any asset or property of Company or any
Subsidiary to secure the Subordinated Debt, or (j) a change in any term or
provision of the Indenture, the securities issued pursuant thereto or other
document or instrument in connection with the Subordinated Debt that could have,
in any material respect, an adverse effect on the interests of Lenders.
Section 7.12 SALE AND LEASEBACK. None of Company or any Subsidiary shall
enter into any arrangement whereby any of Company or any Subsidiary shall sell
or transfer all or any part of its assets then owned by it the fair market value
of which is in excess of ten percent of the book value of Company's and its
Subsidiaries' consolidated assets, to any Person other than to Company or
another wholly-owned Subsidiary, and thereafter rent or lease such material
assets sold or transferred.
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Section 7.13 TRANSACTIONS WITH AFFILIATES. Notwithstanding any other
provision of this Agreement, neither Company nor any Subsidiary shall carry on
any transaction with an Affiliate (other than Company or any other Subsidiary,
or transactions with officers and directors of Company or any Subsidiary in
their capacity as such or in their capacity as a consultant, including, without
limitation, salary, bonuses, stock options, fees and other forms of
compensation) except (a) to the extent that all such transactions do not exceed
an amount equal to $1,000,000 per annum or (b) to the extent that any such
transaction is on terms no less favorable to Company or such Subsidiary than
otherwise obtainable in the marketplace generally.
ARTICLE VIII
DEFAULT
Section 8.01 EVENTS OF DEFAULT. Each of the following shall be deemed an
"Event of Default," the occurrence of which shall, at the option of Lenders,
(i) terminate Lenders' obligation to make Advances or issue Letters of Credit
and/or (ii) if any Obligations are then outstanding, cause all Obligations to
become immediately due and payable on demand:
(a) PAYMENTS. Failure to pay (i) any installment of interest on any
of the Notes or any fees after the expiration of five days after the due
date thereof, or (ii) any installment of principal on any of the Notes or
any other portion of the Obligations (including payments of maturing drafts
in accordance with Article III hereof and any fees), or any renewals
thereof, as the same shall become due and payable, as therein or herein
expressed, whether at maturity, by declaration as authorized in the Notes
or by this Agreement, or otherwise;
(b) NEGATIVE COVENANTS. Company or any Subsidiary shall refuse or
fail to observe or perform any of the negative covenants contained in
Article VII of this Agreement or shall fail to comply with Section 6.01(e)
hereof;
(c) OTHER COVENANTS. Company or any Subsidiary shall refuse or fail
to observe or perform, or breach, any of the covenants, warranties,
representations, conditions and agreements contained in this Agreement, the
Notes and the Loan Papers (except those described in Section 8.01(b) above)
and such failure continues unremedied for a period of ten Business Days
after the earlier of (i) the giving of notice to Company by any Lender of
such failure, or (ii) Company's actual knowledge of such failure or breach;
(d) MISREPRESENTATION. Any representation or warranty made by
Company in any of the Loan Papers is untrue in any material respect, or any
schedule, statement, report, notice or writing (other than financial
projections prepared in good faith) furnished by Company to any Lender is
untrue in any material respect on the
49
date as of which the facts set forth are stated or certified, or
information is omitted from such schedules, statements, reports, notices,
or writings and the omission of such information would cause the
representations and warranties contained therein to be misleading in any
material respect;
(e) DEBTOR RELIEF. Company or any Subsidiary shall have had an order
for relief entered against it under the Bankruptcy Reform Act of 1978 (the
"Code"), or a trustee or receiver shall be appointed for Company or any
Subsidiary or of all or a substantial part of its property in any
involuntary proceeding under the Code or otherwise, or any court shall have
taken jurisdiction of all or a substantial part of the property of Company
or any Subsidiary in any involuntary proceeding for the reorganization,
dissolution, liquidation or winding up of Company or any Subsidiary, and
such trustee or receiver shall not be discharged or such jurisdiction
relinquished or vacated or stayed on appeal within 30 days; or an
involuntary petition for relief under the Code which is filed against
Company or any Subsidiary is not challenged by Company or such Subsidiary
or has not been dismissed within 30 days from the date of its filing; or
Company or any Subsidiary shall execute an assignment for the benefit of
creditors or voluntarily seek the benefit of, or become a party to any
proceeding under, any liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, insolvency, reorganization or similar debtor relief law; or
Company or any Subsidiary shall become insolvent or shall admit in writing
its inability to pay its debts generally as they become due, or shall
generally not be paying its debts as such debts become due, or shall
consent to the appointment of a receiver or trustee or liquidator of all of
its property or a substantial part thereof, or shall have failed within 30
days to pay or bond or otherwise discharge any attachment of a material
item of property which is unstayed on appeal;
(f) LOAN PAPERS. An event of default or breach of any term or
condition shall occur and be continuing under any of the Loan Papers, and
any applicable period allowed to cure such event of default or breach shall
have expired;
(g) OTHER DEBT.
(i) Company or Subsidiary shall fail to make any payment in
excess of $5,000,000 in respect of any obligation when due (whether by
scheduled maturity, mandatory prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such obligation; or Company or Subsidiary shall fail to make any
payment in respect of any Debt in excess of $5,000,000 when due
(whether by scheduled maturity, mandatory prepayment, acceleration,
demand or otherwise), which failure has caused or could cause an
acceleration of said Debt, and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default shall
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occur under any agreement or instrument relating to any Debt in excess
of $5,000,000, which default has caused or could cause or permit an
acceleration of such Debt and which default shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; provided, however, that any failure
to make a payment on or any other breach of or default under an
obligation other than for borrowed money by Company or Subsidiary
described in the foregoing portion of this subsection (g) shall not be
an Event of Default if and so long as (a) Company's or Subsidiary's
failure to make such payment, or its action or inaction giving rise to
such breach or other default, is based upon Company's or Subsidiary's
good faith, reasonable opinion that the creditor has failed to perform
its obligations pursuant to the contract or arrangement with Company
or Subsidiary and such payment is not justly due, (b) Company or
Subsidiary has provided adequate reserves therefore in accordance with
GAAP and (c) Company or Subsidiary is diligently contesting its
obligation to make such payment, or if, in lieu of (b) and (c),
Company or Subsidiary has adequately bonded such obligation; or
(ii) Company shall breach any covenant or condition under any
instrument or agreement governing Debt, and such breach shall cause
Debt in excess of $5,000,000 to be required to be prepaid;
(h) JUDGMENTS. Company shall have rendered against it a final
judgment in an aggregate amount in excess of $1,000,000, and such judgment
has been outstanding for more than 60 days from the date of its entry and
has not been bonded or discharged in full or stayed;
(i) SUBORDINATED DEBT. There shall exist any "Event of Default" as
defined in the Indenture;
(j) ENFORCEABILITY OF LOAN PAPERS. Any provision of the Loan Papers
shall at any time for any reason (other than any act or inaction on the
part of Administrative Lender or any Lender or any representative thereof
with respect to a matter solely within the control of Administrative Lender
or any Lender or any representative thereof) cease to be valid and binding
upon Company or any Guarantor, or shall be declared to be null and void, or
the validity or enforceability thereof shall be contested by Company or any
Guarantor, or a proceeding shall be commenced by or in any Tribunal having
jurisdiction over Company or any Guarantor seeking to establish the
invalidity or unenforceability thereof, and such proceeding shall remain
undismissed or unstayed for a period of 60 days, or Company or any
Guarantor shall deny that it has any or further liability or obligation
thereunder;
(k) ERISA.
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(i) Any Termination Event with respect to a Plan shall have
occurred, and, 30 days after notice thereof shall have been given to
Company by any Lender, (a) such Termination Event (if correctable)
shall not have been corrected and (b) the then-present value of such
Plan's vested benefits exceeds the then-current value of assets
accumulated in such Plan by more than the amount of $500,000 (or in
the case of a Termination Event involving the withdrawal of a
"substantial employer" as defined in Section 4001(a)(2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed
such amount; or
(ii) Company or any Subsidiary as employer under a Multi-Employer
Plan shall have made a complete or partial withdrawal from such
Multi-Employer Plan and the Plan's sponsor of such Multi-Employer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal penalty in an annual amount exceeding $100,000;
or
(l) CHANGE IN CONTROL. There shall occur any Change in Control of
Company.
Section 8.02 REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Administrative Lender may, at its election
or shall, at the direction of all Lenders, do any one or more of the following
(and, with respect to (d) below, any Lender may):
(a) Declare the entire unpaid balance of the Obligations, or any part
thereof, immediately due and payable without prior notice of any kind
whatsoever including, without limitation, notice of intent to accelerate,
demand, presentment, notice of dishonor or protest, whereupon it shall be
due and payable and Administrative Lender shall notify Company of such
declaration;
(b) Terminate the Commitment and their obligation to make any
Advances thereunder in their entirety or as to any portion thereof, and
terminate their obligations to issue Letters of Credit hereunder to the
extent Administrative Lender or Lenders may deem appropriate;
(c) Reduce any claim to judgment;
(d) Exercise the rights of offset and/or banker's lien against the
interest of Company in and to every account and other property of Company
which are in the possession of any Lender to the extent of the full amount
of the Obligations (after each offset such Lender shall promptly notify
Administrative Lender and Company thereof; provided that the failure of
Administrative Lender or any Lender to furnish
52
such notification shall in no way impair, invalidate or prejudice
Administrative Lender's or any Lender's offset and application so made);
(e) Foreclose any and all liens in favor of Lenders and/or otherwise
realize upon any and all of the rights Lenders may have in and to any
assets of Company, or any part thereof;
(f) Demand immediate payment in cash of an amount equal to the sum of
(or any portion thereof) the aggregate outstanding amounts of all Letters
of Credit to retain as collateral against payment of such amounts by
Company; and/or retain, as collateral for the payment of all Obligations
with respect to the Letters of Credit, any amounts received upon
foreclosure, or in lieu of foreclosure, through offset, as proceeds of any
collateral or otherwise; and
(g) Exercise any and all other Rights afforded by any Applicable
Laws, or by the Loan Papers, at Law, in equity or otherwise, including, but
not limited to, the rights to bring Litigation before any Tribunal, either
for specific performance of any covenant or condition contained in the Loan
Papers or in aid of the exercise of any Right granted to Lenders in the
Loan Papers, all as Lenders shall deem appropriate in their sole
discretion.
Provided, however, that upon the occurrence of an Event of Default
described in Section 8.01(e) hereof, the obligation of Lenders to make Advances
or issue Letters of Credit hereunder shall automatically terminate, and the
Obligations, without any action by Administrative Lender or any Lender, shall
become immediately due and payable without diligence, notice, demand,
presentment, notice of dishonor, protest or notice of intent to accelerate, or
notice of any other kind, all of which are hereby expressly waived, and all
outstanding Borrowings shall, at the option of Administrative Lender or at the
direction of Lenders, be automatically converted to Base Rate Borrowings. Upon
the occurrence of any Event of Default, Lenders may exercise all Rights
available to them at law or in equity, under the Loan Papers and otherwise and
all such Rights shall be cumulative.
Section 8.03 WAIVERS. The acceptance by any Lender at any time and from
time to time of part payment on the Obligations shall not be deemed to be a
waiver of any Event of Default then existing. No waiver by any Lender of any
Event of Default shall be deemed to be a waiver of any other then-existing or
subsequent Event of Default. No delay or omission by any Lender in exercising
any Rights under the Loan Papers shall impair such Rights or be construed as a
waiver thereof of any acquiescence with respect thereto, nor shall any single or
partial exercise or any such Rights preclude other or further exercise thereof,
or the exercise of any other Rights or remedies under the Loan Papers or
otherwise.
Section 8.04 PERFORMANCE BY ADMINISTRATIVE LENDER. Should any covenant,
duty or agreement of Company fail to be performed in all material respects in
accordance with the
53
terms of the Loan Papers, Administrative Lender may, at its option, perform, or
attempt to perform, such covenant, duty or agreement on behalf of Company. In
such event, Company agrees, at the request of Administrative Lender, to pay
promptly any amount expended by Administrative Lender in such performance or
attempted performance to Administrative Lender at Administrative Lender's
principal office, together with interest thereon at the Highest Lawful Rate from
the date of such expenditure by Administrative Lender until paid.
Notwithstanding the foregoing, it is expressly understood that neither
Administrative Lender nor any Lender assumes, or shall ever have, except by
express written consent of Administrative Lender or such Lender, any liability
or responsibility for the performance of any duties of Company hereunder.
Section 8.05 LENDERS NOT IN CONTROL. None of the covenants or other
provisions contained in this Agreement shall, or shall be deemed to, give
Lenders the Rights or power to exercise control over the affairs and/or
management of Company, the power of Lenders being limited to the Right to
exercise the remedies provided in the other subparagraphs and subsections of
this Article VIII; provided, however, that if any Lender becomes the owner of
any stock, or other equity interest in, any Person whether through foreclosure
or otherwise, such Lender shall be entitled (subject to requirements of Law) to
exercise such legal Rights as it may have by being an owner of such stock, or
other equity interest in, such Person.
Section 8.06 CUMULATIVE RIGHTS. All Rights available to Administrative
Lender and Lenders under the Loan Papers shall be cumulative of and in addition
to all other Rights granted to Administrative Lender and Lenders at Law or in
equity, whether or not the Obligations shall be due and payable and whether or
not Administrative Lender or any Lender shall have instituted any suit for
collection or other action in connection with the Loan Papers.
Section 8.07 EXPENDITURES BY LENDERS. Any sums spent by Administrative
Lender or any Lender pursuant to the exercise of any Right provided hereof shall
become part of the Obligations and shall bear interest at the Highest Lawful
Rate from the date spent until the date repaid by Company.
ARTICLE IX
AGREEMENT AMONG LENDERS
Section 9.01 AGREEMENT AMONG LENDERS. Lenders agree among themselves
that:
(a) ADMINISTRATIVE LENDER. Each Lender hereby appoints NationsBank
of Texas, N.A. as its nominee in its name and on its behalf, to receive all
documents, monies and other items to be furnished hereunder; to act as
nominee for and on behalf of all Lenders under the Loan Papers; to take
such action as may be requested by any
54
Lender, provided that, unless and until Administrative Lender shall have
received such requests, Administrative Lender may take such action, or
refrain from taking such action, as it may deem advisable and in the best
interests of Lenders; to arrange the means whereby the proceeds of Advances
of Lenders are to be made available to Company; to distribute promptly to
each Lender, at such Lender's principal office, information, requests,
documents and items received from Company and others, and its Pro Rata Part
of each payment with respect to any Loan, Reimbursement Obligation, fee or
other amount; and to deliver to Company and others requests, demands,
approvals and consents received from Lenders.
(b) REPLACEMENT OF ADMINISTRATIVE LENDER. Should NationsBank of
Texas, N.A. or any successor Administrative Lender ever cease to be a
Lender hereunder, or should NationsBank of Texas, N.A. or any successor
Administrative Lender ever resign as Administrative Lender, or should
NationsBank of Texas, N.A. or any successor Administrative Lender ever be
removed by unanimous action of all Lenders (other than Lender then acting
as Administrative Lender), then Lender appointed by the other Lenders shall
forthwith become Administrative Lender, and Company and Lenders shall
execute such documents as any Lender may reasonably request to reflect such
change. Any resignation or removal of NationsBank of Texas, N.A. or any
successor Administrative Lender shall become effective upon the appointment
by Lenders of a successor Administrative Lender; provided, however, that if
Lenders fail for any reason to appoint a successor within 60 days after
such removal or resignation, NationsBank of Texas, N.A. or any successor
Administrative Lender (as the case may be) shall thereafter have no
obligation to act as Administrative Lender hereunder.
(c) EXPENSES. Each Lender shall pay its Pro Rata Part of any
expenses incurred by Administrative Lender in connection with any of the
Loan Papers if Administrative Lender does not receive reimbursement
therefor from other sources within 60 days after the date incurred. Any
amount so paid by Lenders to Administrative Lender shall be returned by
Administrative Lender Pro Rata to each paying Lender to the extent later
paid by Company to Administrative Lender.
(d) DELEGATION OF DUTIES. Administrative Lender may execute any of
its duties hereunder by or through officers, directors, employees,
attorneys or agents, and shall be entitled to (and shall be protected in
relying upon) advice of counsel concerning all matters pertaining to its
duties hereunder.
(e) RELIANCE BY ADMINISTRATIVE LENDER. Administrative Lender and its
officers, directors, employees, attorneys and agents shall be entitled to
rely and shall be fully protected in relying on any writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telex
or teletype message, statement, order, or other document or conversation
believed by it or them to be genuine and correct and to have been signed or
made by the proper person and, with respect to legal matters,
55
upon opinions of counsel selected by Administrative Lender. Administrative
Lender may deem and treat the payee of any Note as the owner thereof for
all purposes hereof.
(f) LIMITATION OF ADMINISTRATIVE LENDER'S LIABILITY. Neither
Administrative Lender nor any of its officers, directors, employees,
attorneys or agents shall be liable for any action taken or omitted to be
taken by it or them hereunder in good faith and believed by it or them to
be within the discretion or power conferred by the Loan Papers or be
responsible for the consequences of any error of judgment. Except as
aforesaid, Administrative Lender shall be under no duty to enforce any
Rights with respect to the Loan, Advances, Reimbursement Obligations, other
Obligations or any collateral therefor. Administrative Lender shall not be
compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or
defend any suit in respect hereof, unless indemnified to its satisfaction
against loss, cost, liability and expense. Administrative Lender makes no
warranty or representation to Lenders and shall not be responsible in any
manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Papers or Letters of Credit or
for any representation, warranty, document, certificate, report or
statement made herein or furnished in connection with any Loan Papers, or
be under any obligation to any Lender to ascertain or to inquire as to the
performance or observation of any of the terms, covenants or conditions of
any Loan Papers on the part of Company. Each Lender jointly and severally
agrees to indemnify and hold harmless Administrative Lender, to the extent
of such Lender's Pro Rata Part, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and/or disbursements of any kind or nature whatsoever which may be
imposed on, asserted against, or incurred by Administrative Lender in any
way with respect to or arising out of (i) any Loan Papers or any action
taken or omitted by Administrative Lender under the Loan Papers, except and
only to the extent the same result from gross negligence or wilful
misconduct by Administrative Lender, and (ii) in its capacity as issuing
bank of a Letter of Credit, any failure by any Lender to comply with
Article III or IV hereof.
(g) LIABILITY AMONG LENDERS. No Lender shall incur any liability to
any other Lender except for acts or omissions in bad faith, and except as
provided in the last sentence of subparagraph (f) of this Section 9.01.
(h) RIGHTS AS LENDER. With respect to its Commitment, Advances made
by it, Notes issued to it and Letters of Credit issued by it,
Administrative Lender shall have and enjoy the same Rights as a Lender and
may exercise the same as though it were not Administrative Lender, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Administrative Lender in its individual capacity. Administrative
Lender may accept deposits from, act as trustee under indentures of, and
generally engage in any kind of business with, Company and any Person who
56
may do business with or own securities of Company all as if Administrative
Lender were not Administrative Lender hereunder and without any duty to
account therefor to Lenders.
Section 9.02 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon Administrative Lender or any other
Lender and based upon the financial statements referred to in Section 5.02
hereof and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
Administrative Lender or any other Lender and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
Section 9.03 BENEFITS OF ARTICLE. None of the provisions of this Article
IX shall inure to the benefit of Company or any Person other than Lenders;
consequently, neither Company nor any other Person shall be entitled to rely
upon, or to raise as a defense, in any manner whatsoever, the failure of any
Lender to comply with such provisions.
ARTICLE X
MISCELLANEOUS
Section 10.01 NO ORAL MODIFICATIONS. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged, or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought.
Section 10.02 BENEFIT; ASSIGNMENTS AND PARTICIPATIONS.
(a) Company may not transfer or assign its rights and obligations
hereunder, and, subject to such restriction, the provisions hereof shall
extend to and be binding upon Company's respective successors and assigns.
All covenants and agreements made by or on behalf of any of the parties
hereto shall bind and inure to the benefit of, and be enforceable by, the
respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall inure to the benefit of, and be
enforceable by, the holder or holders of all or any portion of the Notes.
(b) Administrative Lender may assign any portion of its rights to any
Person with the prior written consent of Company, such consent not to be
unreasonably withheld; provided that, after the occurrence of a Default or
Event of Default which is continuing, Administrative Lender shall not be
required to obtain the
57
consent of Company. Each Lender may assign its Rights and obligations as a
Lender under the Loan Papers to any Affiliate of such Lender, and, with the
prior written consent of Administrative Lender and pursuant to an
Assignment and Acceptance Agreement, to one or more Eligible Assignees, so
long as (i) each assignment shall be of a constant, and not a varying
percentage of all Rights and obligations thereunder, (ii) no such
assignment shall be in an amount less than $15,000,000 unless it is the
remaining amount of such Lender's total committed amount, (iii) no Lender
shall assign any amount which would result in such Lender holding an amount
less than $10,000,000 immediately after any such assignment, (iv) Company
has given its prior written consent, provided that, after the occurrence of
an Event of Default and during the continuance thereof, no Lender shall be
required to obtain the prior written consent of Company.
(c) The assigning Lender (the "Assignor") shall give at least ten
Business Days notice to Administrative Lender and Company of such proposed
assignment, together with the date such assignment shall become effective,
the new Specified Percentage of the Assignor and the new assignee, and the
name, address and funding office of the assignee. On the effective date of
any assignment, the Assignor shall deliver to Administrative Lender and
Company a copy of the Assignment and Acceptance Agreement and all related
documents, together with, for Administrative Lender, the processing fee
described in subsection (e) below. Within five Business Days after notice
of any such assignment, Company shall execute and deliver to the Assignor,
in exchange for the Notes issued to the Assignor new Notes to the order of
the Assignor and its assignee in amounts equal to their respective
Specified Percentages, dated as of the effective date of the assignment.
It is specifically acknowledged and agreed that on and after the effective
date of each assignment, the assignee shall be a party hereto, included in
the definition of "Lender" and shall have the Rights and obligations of a
Lender under the Loan Papers.
(d) Each Lender may sell participations to one or more banks or other
entities in all or any of its Rights and obligations under the Loan Papers;
provided, however, that (i) such Lender's obligations under the Loan Papers
shall remain unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of its Note for all purposes of
the Loan Papers, (iv) under the terms of any such participation, such
Lender's right to consent or agree to any amendment or waiver of any
provision of this Agreement or any other Loan Paper, or to consent to any
departure by any party therefrom, shall not be subject to or require any
consent or agreement of the participant, except in connection with matters
described in subsections (a) through (d) of Section 10.10 hereof to the
extent it is affected thereby, and (v) Company, Administrative Lender, and
other Lenders shall continue to deal solely and directly with such Lender
in connection with its Rights and obligations under the Loan Papers.
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(e) Administrative Lender may maintain at its address set forth
herein a copy of each assignment agreement received by it from each
Assignor and a register (the "Register") for the recordation of the names
and addresses of Lenders and the commitments of, and principal amount of
Advances owing to, each Lender from time to time. The entries in the
Register shall be conclusive absent demonstrable error, and Company,
Administrative Lender and Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. Upon Administrative Lender's receipt of an
executed Assignment and Acceptance Agreement, together with a payment to
Administrative Lender of a registration and processing fee of $2500,
Administrative Lender shall (i) promptly accept such assignment and (ii) on
the effective date thereof, record the information contained therein in the
Register.
(f) Any Lender may, in connection with any assignment or
participation, or proposed assignment or participation, disclose to the
assignee or participant, or proposed assignee or participant, any
information relating to Company or any of its Subsidiaries furnished to
such Lender by or on behalf of Company or its Subsidiaries.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion
of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
Section 10.03 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or in any other instrument
contemplated hereby shall survive the execution and delivery of this Agreement,
the Notes and all other Loan Papers, and no investigation by any Lender nor any
closing shall affect the representations and warranties or the right of
Administrative Lender and each Lender to rely on and enforce them.
Section 10.04 NOTICES. Except as otherwise expressly provided herein, any
and all notices or demands which must or may be given hereunder or under any
other instrument contemplated hereby shall be given by delivery in person or by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
59
To Administrative Lender:
NationsBank of Texas, N.A.
Corporate Banking Group
901 Main Street
67th Floor
Dallas, Texas 75202
Attention: Joseph G. Taylor
Senior Vice President
With a copy to:
Donohoe Jameson & Carroll, P.C.
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Melissa Ruman Stewart
To Company:
Michaels Stores, Inc.
5931 Campus Circle Drive
Las Colinas Business Park
Irving, Texas 75063
Attention: Kristen L. Magnuson
Vice President - Finance and Business Planning
With a copy to:
Michaels Stores, Inc.
5931 Campus Circle Drive
Las Colinas Business Park
Irving, Texas 75063
Attention: Mark Beasley, Esq.
All such communications, notices, or presentations and demands provided for
herein shall be deemed to have been delivered when actually delivered in person
to the respective parties, or if mailed, then three days after the date of
mailing, provided that such mailing is by registered or certified mail, return
receipt requested, with postage prepaid. Either party
60
may change its address hereunder upon 30 days' notice to the other party in
compliance with this Section 10.04.
SECTION 10.05 APPLICABLE LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER
LOAN PAPERS TO WHICH EACH LENDER IS A PARTY SHALL BE DEEMED TO HAVE BEEN MADE
AND TO BE PERFORMABLE IN DALLAS, DALLAS COUNTY, TEXAS, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA; PROVIDED THAT, IF ANY LAW
APPLICABLE TO ANY LENDER PERMITS SUCH LENDER TO CHARGE A HIGHER MAXIMUM RATE OF
INTEREST THAN THAT PERMITTED BY THE LAWS OF THE STATE OF TEXAS, THAT RIGHT OF
SUCH LENDER TO CHARGE, TAKE OR RECEIVE INTEREST WITH RESPECT TO ADVANCES AND
OTHER OBLIGATIONS DUE AND OWING UNDER THIS AGREEMENT SHALL BE GOVERNED BY SUCH
LAWS APPLICABLE TO SUCH LENDER.
Section 10.06 SEVERABILITY. Any Section, clause, Subsection, sentence,
paragraph, or provision of this Agreement held by a court of competent
jurisdiction to be invalid, illegal, or ineffective shall not impair, invalidate
or nullify the remainder of this Agreement, but the effect thereof shall be
confined to the Section, clause, Subsection, sentence, paragraph or provision so
held to be invalid, illegal or ineffective.
Section 10.07 NON-APPLICATION OF CHAPTER 15 OF TEXAS CREDIT CODE. The
provisions of Chapter 15 of the Texas Credit Code (Texas Revised Civil Statutes,
Article 5069-15) are specifically declared by the parties hereto not to be
applicable to this Agreement or any of the Loan Papers or to the transactions
contemplated hereby.
Section 10.08 EXCEPTIONS TO COVENANTS. Company shall not be deemed to be
permitted to take any action or fail to take any action that is permitted as an
exception to any of the covenants herein or which is within the permissible
limits of any of the covenants herein if such action or omission would result in
the breach of any other covenant herein.
SECTION 10.09 INDEMNITY. COMPANY AGREES TO AND DOES INDEMNIFY AND HOLD
HARMLESS EACH LENDER AND ITS OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS
AND SHAREHOLDERS (THE "INDEMNIFIED PARTIES") AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS
(WHETHER MADE OR THREATENED), COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER, INCLUDING WITHOUT LIMITATION THE REASONABLE OUT-OF-POCKET
FEES AND EXPENSES OF COUNSEL WHICH MAY BE IMPOSED ON OR INCURRED BY ANY LENDER
OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS OR
SHAREHOLDERS IN ANY WAY RELATING TO, OR ARISING OUT OF, ANY OF THE LOAN PAPERS
OR ANY OTHER ACT, OMISSION, EVENT OR OTHER TRANSACTION CONTEMPLATED THEREBY OR
THEREIN, TO THE EXTENT THAT ANY OF THE SAME RESULTS,
61
DIRECTLY OR INDIRECTLY, FROM ANY CLAIMS (WHETHER SUCH CLAIMS ARE MADE OR
THREATENED AND INCLUDING WITHOUT LIMITATION, CLAIMS RESULTING FROM THE
NEGLIGENCE OF SUCH INDEMNIFIED PARTY) OR ACTIONS, SUITS OR PROCEEDINGS (WHETHER
MADE OR THREATENED AND INCLUDING, WITHOUT LIMITATION, ACTIONS, SUITS OR
PROCEEDINGS RESULTING FROM THE NEGLIGENCE OF SUCH INDEMNIFIED PARTY) BY OR ON
BEHALF OF ANY PERSON OTHER THAN A CLAIM BY ANY LENDER (INCLUDING ADMINISTRATIVE
LENDER) OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
ATTORNEYS OR SHAREHOLDERS, AGAINST ANY SUCH INDEMNIFIED PARTY. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, SUCH INDEMNITY SHALL EXTEND TO ANY AND ALL
COSTS AND EXPENSES WHATSOEVER INCURRED BY ANY LENDER AND ITS OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS OR SHAREHOLDERS, INCLUDING WITHOUT
LIMITATION THE REASONABLE OUT-OF-POCKET FEES AND EXPENSES OF COUNSEL IN
CONNECTION WITH INVESTIGATING, PREPARING FOR OR DEFENDING AGAINST OR PROVIDING
EVIDENCE, PRODUCING DOCUMENTS OR TAKING ANY ACTION WITH RESPECT TO ANY SUCH
ACTION, CLAIM (WHETHER MADE OR THREATENED), SUIT, LIABILITY, DAMAGE OR LOSS,
WHETHER OR NOT RESULTING IN ANY LIABILITY ON THE MERITS. EACH LENDER MAY SELECT
ITS OWN LEGAL COUNSEL IN CONNECTION WITH ANY MATTERS INDEMNIFIED AGAINST
HEREUNDER. THE OBLIGATION OF COMPANY UNDER THIS SECTION SHALL SURVIVE
EXECUTION, DELIVERY, CONSUMMATION AND ANY TERMINATION OF THIS AGREEMENT.
COMPANY'S OBLIGATIONS UNDER THIS SECTION ARE AND SHALL REMAIN ABSOLUTE AND
UNCONDITIONAL, ENFORCEABLE AGAINST COMPANY WHETHER OR NOT ANY ADVANCE IS EVER
MADE, ANY LETTER OF CREDIT IS EVER ISSUED, OR ANY OTHER OBLIGATION EVER ARISES
OR ANY CONDITIONS OF LENDING ARE EVER MET AND, EXCEPT AS PROVIDED IN THE LAST
SENTENCE OF THIS SECTION, WITHOUT REGARD TO ACT, OMISSION, BREACH, KNOWLEDGE,
INVESTIGATION OR EVENT BY, ATTRIBUTABLE TO, OR IN ANY MANNER INVOLVING ANY
LENDER OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
ATTORNEYS OR SHAREHOLDERS. PAYMENT BY COMPANY IN RESPECT OF A CLAIM MADE BY ANY
LENDER OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, EMPLOYEES,
ATTORNEYS OR SHAREHOLDERS PURSUANT TO THIS SECTION SHALL BE MADE WITHIN 30 DAYS
AFTER DEMAND THEREFOR. IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY
BE UNENFORCEABLE FOR ANY REASON, COMPANY HEREBY AGREES TO MAKE THE MAXIMUM
CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE FOREGOING AMOUNTS
THAT IS PERMISSIBLE UNDER APPLICABLE LAW. NOTWITHSTANDING ANYTHING IN THIS
SECTION TO THE CONTRARY, COMPANY'S INDEMNITY OBLIGATION SHALL NOT EXTEND TO
LIABILITY, DAMAGE, COST OR LOSS RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ADMINISTRATIVE LENDER OR ANY LENDER OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, ATTORNEYS, OR SHAREHOLDERS, OR FROM A
MATERIAL BREACH BY ADMINISTRATIVE LENDER OR ANY LENDER OF ITS OBLIGATIONS
PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN PAPERS, OR FROM THE FAILURE OF
ADMINISTRATIVE LENDER OR ANY LENDER TO COMPLY WITH ANY LAW APPLICABLE TO THEM OR
THE LOAN PAPERS. THE INDEMNIFIED PARTIES WILL UNDERTAKE TO GIVE COMPANY
REASONABLE NOTICE OF THE ASSERTION OF ANY CLAIM AGAINST THEM WITHIN COMPANY'S
INDEMNITY OBLIGATION UNDER THIS SECTION, BUT THE FAILURE OF ANY INDEMNIFIED
PARTY TO GIVE NOTICE TO COMPANY HEREUNDER SHALL NOT IMPAIR SUCH INDEMNIFIED
PARTY'S RIGHT TO INDEMNITY PURSUANT TO THIS SECTION UNLESS COMPANY IS MATERIALLY
PREJUDICED BY SUCH FAILURE.
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Section 10.10 AMENDMENT. No amendment or waiver of any provision of this
Agreement or any other Loan Papers, nor consent to any departure by Company or
any of its Subsidiaries therefrom (including, without limitation, any provision
of this Agreement specifically requiring the consent of Lenders), shall be
effective unless the same shall be in writing and signed by the Majority Lenders
(unless, in any such case, the text thereof specifically requires "each Lender"
or "all Lenders"), and then any such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by each of Lenders affected thereby, (a) increase the Commitment or the
Letter of Credit Commitment, (b) reduce any principal, interest, fees or other
amounts payable to such Lenders hereunder, or waive or result in the waiver of
any Event of Default under Section 8.01(a) hereof, (c) postpone any date fixed
for any payment of principal, interest, fees or other amounts payable to such
Lenders hereunder, (d) release any collateral (if any) or Guaranties securing
the Obligations hereunder except as specifically provided for in the Loan Papers
on the Closing Date, (e) change the meaning of Specified Percentage or the
number of Lenders required to take any action hereunder, or (f) amend this
Section. No amendment, waiver or consent shall affect the Rights or duties of
Administrative Lender under any Loan Papers, unless it is in writing and signed
by Administrative Lender in addition to the requisite number of Lenders. This
Agreement embodies the entire agreement among the parties hereto, supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof, and may be amended only as provided above. Company acknowledges and
agrees that all Loan Papers evidence the Obligation.
SECTION 10.11 WAIVER OF TRIAL BY JURY. ADMINISTRATIVE LENDER, LENDERS,
COMPANY AND SUBSIDIARIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN PAPERS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ADMINISTRATIVE LENDER, LENDERS,
COMPANY OR ANY SUBSIDIARY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
ADMINISTRATIVE LENDER AND LENDERS ENTERING INTO THIS AGREEMENT.
Section 10.12 COUNTERPARTS. This Agreement and the other Loan Papers may
be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, but in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
SECTION 10.13 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER
WRITTEN DOCUMENTS DESCRIBED HEREIN OR CONTEMPLATED HEREBY REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
63
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
Section 10.14 SURVIVAL AND APPLICATION OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made under this Agreement and the other Loan
Papers shall be deemed to be made as of the Closing Date and as provided in
Section 4.02 and Section 4.03 hereof, and each shall be true and correct when
made, except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) subsequently inapplicable, or (c) waived in writing by
Administrative Lender and Majority Lenders with respect to any particular
factual circumstance. In addition, all such representations and warranties
relating to Company's Subsidiaries shall be deemed to be made with respect to
any newly formed or acquired Subsidiary as of its formation or acquisition, and
shall be true and correct on such date. All representations and warranties made
under this Agreement shall survive, and not be waived by, the execution of the
Loan Papers by Administrative Lender and Lenders, any investigation or inquiry
by Administrative Lender or any Lender, or any disbursement of an Advance
hereunder.
Section 10.15 RATE PROVISION. It is not the intention of any party to any
Loan Papers to make an agreement violative of the Laws of any applicable
jurisdiction relating to usury. Regardless of any provision in any of the Loan
Papers, no Lender shall ever be entitled to receive, collect or apply, on the
Obligation, any amount deemed to constitute interest in excess of the Maximum
Amount. If any Lender ever receives, collects or applies any such excess, such
amount which would be excessive interest shall be deemed a partial repayment of
principal and treated hereunder as such; and if principal is paid in full, any
remaining excess shall be paid to Company. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Maximum
Amount, Company and Lenders shall, to the maximum extent permitted under
Applicable Laws, (a) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (b) exclude voluntary prepayments and the
effect thereof, and (c) amortize, prorate, allocate and spread in equal parts,
the total amount of interest throughout the entire contemplated term of the
Obligation so that the interest rate is uniform throughout the entire term of
the Obligation; provided, however, that if the Obligation is paid and performed
in full prior to the end of the full contemplated term thereof, and if the
interest received for the actual period of existence thereof exceeds the Maximum
Amount, Lenders shall refund to Company the amount of such excess or credit the
amount of such excess against the total principal amount owing, and, in such
event, no Lender shall be subject to any penalties provided by any Laws for
contracting for, charging or receiving interest in excess of the Maximum Amount.
This Section shall control every other provision of all agreements among the
parties to this Agreement pertaining to the transactions contemplated by or
contained in the Loan Papers.
64
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first above written.
MICHAELS STORES, INC.
By: /s/ Kristen L. Magnuson
-------------------------------
Kristen L. Magnuson
Vice President - Finance and
Business Planning
SPECIFIED PERCENTAGE: NATIONSBANK OF TEXAS N.A., as
Administrative Lender, and
individually as a Lender
100.00% By: /s/ Joseph G. Taylor
-------------------------------
Joseph G. Taylor
Senior Vice President
C:\DMS\STEMEL.DIR\0005456.09
65
EXHIBIT A
THE OBLIGATIONS OF MICHAELS STORES, INC. EVIDENCED BY THIS NOTE ARE SENIOR AND
SUPERIOR IN RIGHT OF PAYMENT TO THE OBLIGATIONS OF MICHAELS STORES, INC. UNDER
THOSE CERTAIN 4-3/4%/6-3/4% STEP-UP CONVERTIBLE SUBORDINATED NOTES DUE 2003, AS
THEY MAY BE AMENDED, RESTATED, EXTENDED, REPLACED OR SUBSTITUTED FROM TIME TO
TIME.
REVOLVING LOAN NOTE
$____________________ Dallas, Texas ________________, _____
FOR VALUE RECEIVED, MICHAELS STORES, INC., a Delaware corporation
("Borrower"), promises to pay to the order of ___________________________
("Lender"), at the banking house of NATIONSBANK OF TEXAS, N.A., as
Administrative Lender ("Administrative Lender") in Dallas, Texas, the principal
sum of ______________________________ DOLLARS AND NO CENTS ($____________), or
such lesser sums as may be advanced and due and payable from time to time
hereunder, in lawful money of the United States of America, together with
interest prior to default or maturity on the unpaid principal balance from time
to time outstanding at a rate per annum equal to the rate selected by Borrower
in accordance with the terms and provisions of the Credit Agreement (as
hereinafter defined); provided, however, that in no event shall interest accrue
hereunder at a rate in excess of the Highest Lawful Rate. Subject to the
provisions hereof limiting interest to the Maximum Amount, interest on (a)
Eurodollar Rate Borrowings shall be calculated at a daily rate equal to 1/360th
of the rate selected by the Borrower in accordance with the terms of the Credit
Agreement, and (b) Base Rate Borrowings shall be calculated at a daily rate
equal to 1/365th or 1/366th, as the case may be, of the rate selected by the
Borrower in accordance with the terms of the Credit Agreement. Each Advance made
by Lender to Borrower pursuant to the Credit Agreement may be recorded by Lender
and, with respect to any transfer hereof, endorsed on the grid attached hereto
which is part of this Note. Any failure by Lender to endorse the grid attached
hereto shall not impair the obligation of Borrower to pay any amount due and
owing hereunder.
All capitalized terms used herein, but not specifically defined, shall have
the same meanings as set forth in the Credit Agreement.
Principal and all accrued interest hereunder shall be due and payable upon
the terms and on the dates provided for in the Credit Agreement. Subject to the
terms of the Credit Agreement, Borrower may borrow, repay and reborrow
hereunder.
Any amounts remaining unpaid after the maturity of this Note (whether
maturity shall occur by default, lapse of time or otherwise) shall bear interest
as provided in the Credit Agreement.
If at any time the rate selected by the Borrower shall exceed the Highest
Lawful Rate, thereby causing the interest hereon to be limited to the Maximum
Amount, then notwithstanding any subsequent reduction in such rate below the
Highest Lawful Rate, interest shall accrue hereunder at the Highest Lawful Rate
until such time as the total amount of interest accrued hereon equals the amount
of interest which would have accrued hereon (including the amount of such
interest which would have so accrued hereon prior to the time of repayment of
any of the principal hereof) if the rate selected by the Borrower had been in
effect at all times.
This Note is issued pursuant to and evidences the Loan under that certain
Credit Agreement among Borrower, NationsBank of Texas, N.A. for itself and as
Administrative Lender thereunder, and certain other Lenders ("Lenders") party
thereto, dated as of June 17, 1994, as the same may be amended from time to time
("Credit Agreement"), to which reference is made for a statement of the rights
and obligations of Administrative Lender and Lenders, and the duties and
obligations of Borrower in relation thereto.
If an Event of Default under the Credit Agreement shall occur, the unpaid
principal of and accrued interest on this Note may be declared due and payable
in the manner and with the effect provided in the Credit Agreement.
The Borrower, signers, guarantors, sureties and indorsers of this Note
severally waive demand, presentment, notice of dishonor, notice of intent to
demand payment hereof, notice of intent to accelerate payment hereof, notice of
acceleration, diligence in collecting, grace, notice and protest, the bringing
of any suit against any party and any notice of or defense on account of any
extensions, renewals, partial payments of or changes in any manner in this Note
or in any of its Terms, provisions, and covenants, or any releases or
substitutions of any security, or any delay, indulgence or other act of the
holder hereof, whether before or after maturity; provided, however, that
Borrower does not waive any notice or grace periods to which it may be entitled
under the express provisions of the Credit Agreement. If this Note is placed in
the hands of an attorney for collection after an Event of Default, or if all or
any part of the indebtedness represented by this Note is proved, established or
collected in any court or in any bankruptcy, receivership, debtor relief,
probate or other court proceedings, Borrower and all indorsers, guarantors and
sureties of this Note jointly and severally agree to pay reasonable attorneys'
fees (including the reasonable allocated cost of staff counsel) and all
collection costs to the holder hereof in addition to the principal, interest and
any other sums payable hereunder.
-2-
This Note may not be terminated orally, but only by a discharge in writing
signed by the holder of this Note at the time such discharge is sought.
It is not the intention of the parties hereto to make an agreement
violative of the laws of any applicable jurisdiction relating to the maximum
lawful rate of interest a lender may charge. Regardless of any provision in this
Note, the Credit Agreement or any other document or instrument securing or
evidencing the indebtedness represented hereby, no holder hereof shall ever be
entitled to receive, collect or apply, as interest hereon, any amount in excess
of the Maximum Amount. If any holder hereof ever receives, collects or applies,
as interest, any such excess, such amount which would be excessive interest
shall be deemed a partial repayment of principal and treated hereunder as such;
and if principal is paid in full, any remaining excess shall be paid to
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds the Maximum Amount, Borrower and the holder hereof
shall, to the extent permitted under Applicable Law, (i) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effect thereof and (iii) to the extent
permitted by Applicable Law, amortize, prorate, allocate and spread the total
amount of interest throughout the entire term hereof until payment in full of
the principal hereof so that the interest hereon for such period shall not
exceed the Maximum Amount; provided that if this Note is paid in full prior to
the contemplated maturity, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, the holder hereof shall refund to
Borrower the amount of such excess or credit the amount of such excess against
the total principal amount owing, and, in any event, the holder hereof shall not
be subject to any penalties provided by any laws for contracting for, charging
or receiving interest in excess of the Maximum Amount. This paragraph shall
control every other provision of this Note, the Credit Agreement or any other
agreements, instruments or documents between the holder hereof and Borrower
pertaining to the indebtedness evidenced hereby.
This Note shall be construed and enforced in accordance with the laws of
the State of Texas and the laws of the United States applicable to transactions
in Texas.
MICHAELS STORES, INC.
By:
------------------------------------
Its:
-----------------------------------
-3-
ADVANCES, MATURITIES, AND PAYMENTS OF PRINCIPAL
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Amount of Unpaid
Type of Amount of Maturity Principal Paid Principal Notation
Date Advance Advance of Advance or Prepaid Balance Made By
- - - - - --------------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------------
- - - - - --------------------------------------------------------------------------------
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-4-
EXHIBIT B
NOTICE OF BORROWING/CONVERSION
NationsBank of Texas, N.A.,
as Administrative Lender
Corporate Banking
Post Office Box 83100
Dallas, Texas 75283-1000
Attention: Mr. Joseph G. Taylor
Senior Vice President
Gentlemen:
The undersigned is an Authorized Financial Officer of Michaels Stores, Inc.
("Borrower"), and, as such, is authorized to make and deliver this Notice of
Borrowing/Conversion pursuant to Section 2.04 or 2.22 of that certain Credit
Agreement dated as of June 17, 1994, among Borrower, NationsBank of Texas, N.A.
for itself and as Administrative Lender, and certain other Lenders party thereto
as the same may hereafter be amended from time to time (the "Agreement"). All
terms defined in the Agreement shall have the same meanings herein.
In connection with the foregoing and pursuant to the terms and provisions
of the Agreement, the undersigned hereby certifies that:
(i) Borrower hereby [gives you] [confirms that it has orally given
you*] irrevocable notice that Borrower requests an Advance under
the Commitment in accordance with Sections 2.01, 2.04 or 2.22 of
the Agreement.
(ii) The representations and warranties contained in Article V of the
Agreement are true at and as of the date hereof as though made as
of the date hereof.
(iii) No Default or Event of Default has occurred and is continuing.
(vi) The amount of the Advance made or to be made pursuant to this
request, when added to the principal amount of all outstanding
advances, will not exceed the Available Advance Amount.
- - - - - ---------------
* Strike bracketed language as appropriate.
(v) Any Eurodollar Rate Borrowing shall be in the principal amount of
$1,000,000, and in integral multiples of $100,000 in excess
thereof.
(vi) All conditions precedent under Section 4.02(d) have been complied
with.
(vii) All information supplied below is true and accurate as of the
date hereof.
Amount of Borrowing $_________________
Selected rate of Borrowing
(select one of the following:)
___________________________ Base Rate
___________________________ Eurodollar Rate
Borrowing Date $_________________
Interest Period*
* Not applicable to Base Rate Borrowing
WITNESS the execution hereof this ____ day of ______________, 19___.
MICHAELS STORES, INC.
By: ______________________________
Its: ______________________________
-2-
EXHIBIT C
BORROWING BASE REPORT
This Borrowing Base Report ("Report") for the Fiscal Month ending ________,
199__, and as of such date, is executed and delivered by MICHAELS STORES, INC.
("Borrower") to NATIONSBANK OF TEXAS, N.A. ("Administrative Lender"), pursuant
to that certain Credit Agreement dated as of June 17, 1994, among Borrower,
NationsBank of Texas, N.A. for itself and as Administrative Lender, and certain
other Lenders party thereto ("Lenders") as the same may hereafter be amended
from time to time ("Credit Agreement"). All terms used herein shall have the
meanings ascribed to them in the Credit Agreement.
In order to induce Administrative Lender and Lenders now and from time to
time during the term of the Credit Agreement to make Advances to Borrower under
the Commitment, and to issue Letters of Credit, Borrower warrants and represents
to Administrative Lender and Lenders that this Report and all information
attached hereto or contained herein is true and correct and that the total
Eligible Inventory referred to below represents the Eligible Inventory which
qualifies for the purposes of determining the Borrowing Base under the Credit
Agreement.
LINE OF CREDIT COMMITMENT
INVENTORY:
1. Eligible Inventory $_________________
2. Accounts Payable $_________________
3. Borrowing Base Determination _
50% of line 1 - line 2 $_________________
AVAILABLE CREDIT DETERMINATION:
4. Lesser of $150,000,000 or
the Borrowing Base (line 3) $_________________
5. Outstanding Letters of Credit $_________________
6. Net Borrowing Base $_________________
(line 4 minus line 5)
7. Outstanding Advances $_________________
8. Available Credit Amount $_________________
(line 6 minus line 7)
Borrower further represents and warrants to Administrative
Lender and Lenders that the representations and warranties contained in
Article V of the Credit Agreement are true at and as of the date of this Report
as if made as of the date hereof, and that no Default or Event of Default has
occurred and is continuing.
MICHAELS STORES, INC.
By: ______________________________
Its: ______________________________
-2-
EXHIBIT D
GUARANTY AGREEMENT
WHEREAS, the execution of this Guaranty Agreement is a condition to
MICHAELS STORES, INC., a Delaware corporation ("Borrower"), borrowing pursuant
to that certain Credit Agreement dated June 17, 1994, among Borrower,
NationsBank of Texas, N.A. for itself and as Administrative Lender, and certain
other Lenders party thereto as the same may hereafter be amended from time to
time (the "Credit Agreement");
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned __________________, a __________
corporation and [wholly owned] subsidiary of Borrower, the address of which is
________________________ (the "Guarantor"), hereby irrevocably and
unconditionally guarantees to Lenders the prompt payment of the Guaranteed
Indebtedness (hereinafter defined), and the due performance of all terms and
conditions of the Credit Agreement and other Loan Papers (as defined in the
Credit Agreement, and all other capitalized terms not otherwise defined herein
shall have the meanings specified in the Credit Agreement), this Guaranty
Agreement being upon the following terms:
1. Notwithstanding anything herein or in any other Loan Papers to the
contrary, the maximum liability of Guarantor shall in no event exceed the
Maximum Guaranteed Amount. The term "Guaranteed Indebtedness" as used herein
means all of the "Obligations", as defined in the Credit Agreement and the Loan
Papers. "Maximum Guaranteed Amount" as used herein shall mean the greater of
(a) the amount of any Guaranteed Indebtedness used to make a Valuable Transfer
to Guarantor, and (b) the greater of 95% of Guarantor's Adjusted Net Worth (i)
at the date hereof (if appropriate under applicable Law), (ii) at the time the
Guaranteed Indebtedness was incurred, and (iii) on the date of enforcement
hereof. "Adjusted Net Worth" as used herein shall mean as of the date of
determination, (a) the value of the assets of Guarantor as of such date, minus
(b) all liabilities of Guarantor, contingent or otherwise, as of such date
(excluding Guarantor's liability hereunder), as such concepts are determined in
accordance with applicable Laws governing determinations of the insolvency of
debtors. "Valuable Transfer" as used herein shall mean (a) all loans, advances
or capital contributions made to Guarantor with proceeds of any Guaranteed
Indebtedness, (b) all debt securities or other obligations of Guarantor acquired
from Guarantor or retired by Guarantor with proceeds of any Guaranteed
Indebtedness, (c) the fair market value of all property acquired with proceeds
of any Guaranteed Indebtedness, and transferred, absolutely and not as
collateral, to Guarantor, and (d) all equity securities of Guarantor acquired
from Guarantor with proceeds of any Guaranteed Indebtedness.
2. This instrument shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance and not a guaranty of
collection, and Guarantor shall
remain liable on its obligations hereunder until the payment in full of the
Guaranteed Indebtedness.
3. If Guarantor becomes liable for any indebtedness owing by Borrower to
any of Lenders by endorsement or otherwise, other than under this Guaranty
Agreement, such liability shall not be in any manner impaired or affected
hereby, and the Rights of Lenders hereunder shall be cumulative of any and all
other Rights that Lenders may ever have against Guarantor. The exercise by
Administrative Lender or Lenders of any Right or remedy hereunder or under any
other instrument, at Law or in equity, shall not preclude the concurrent or
subsequent exercise of any other Right or remedy.
4. Upon the occurrence of an Event of Default, Guarantor shall, on demand
and without further notice of dishonor, and without any notice having been given
to Guarantor previous to such demand of the acceptance by Lenders of this
Guaranty Agreement, pay the Guaranteed Indebtedness to Administrative Lender or
Lenders as provided in the Credit Agreement and it shall not be necessary for
Administrative Lender or Lenders, in order to enforce such payment by Guarantor,
first to institute suit or exhaust their remedies against Borrower or others
liable on such Guaranteed Indebtedness, or to enforce any rights against any
security which shall ever have been given to secure such Guaranteed
Indebtedness. In the event such payment is made by Guarantor, then Guarantor
shall be subrogated to the rights then held by Administrative Lender and Lenders
with respect to the Guaranteed Indebtedness to the extent to which the
Guaranteed Indebtedness was discharged by Guarantor and, in addition, upon
payment by Guarantor of any sums to Lenders hereunder, all rights of Guarantor
against Borrower arising as a result therefrom by way of right of subrogation or
otherwise shall in all respects be subordinate and junior in right of payment to
the prior indefeasible payment in full of the Guaranteed Indebtedness.
5. Guarantor hereby agrees that its obligations under the terms of this
Guaranty Agreement shall not be released, diminished, impaired, reduced, or
affected by the occurrence of any reason or event, including without limitation,
one or more of the following events: (a) the taking or accepting of any other
security of any or all of the Guaranteed Indebtedness or the release, surrender,
exchange or subordination of any security now or hereinafter securing all or any
portion of the Guaranteed Indebtedness; (b) any partial release of the liability
of Guarantor hereunder, or the release of any other guarantor of all or any
portion of the Guaranteed Indebtedness; (c) the change in corporate existence,
ownership, or structure of, lack of corporate power of, or the insolvency or
bankruptcy of, Borrower, Guarantor, or any party at any time liable for the
payment of any or all of the Guaranteed Indebtedness, whether now existing or
hereafter occurring; (d) any renewal, extension, modification, settlement,
waiver, amendment, and/or rearrangement of the payment of any or all of the
Guaranteed Indebtedness with or without notice to or consent of Guarantor, or
any adjustment, indulgence, forbearance, or compromise that may be granted or
given by Administrative Lender or Lenders to Borrower or Guarantor; (e) any
renewal, extension, modification, waiver, or amendment of the Credit Agreement
or any of the Loan Papers; (f) any neglect, delay, omission, failure, or refusal
of Administrative Lender or Lenders to take or prosecute any action for the
collection of any of
-2-
the Guaranteed Indebtedness or to foreclose or take or prosecute any action in
connection with any instrument or agreement evidencing or securing all or any
part of the Guaranteed Indebtedness; (g) the invalidity or unenforceability of
all or any part of the Guaranteed Indebtedness; (h) any payment by Borrower to
Administrative Lender or Lenders is held to constitute a preference under the
bankruptcy laws or if for any other reason Administrative Lender or Lenders are
required to refund such payment or pay the amount thereof to someone else; (i)
the settlement or compromise of any of the Guaranteed Indebtedness; (j) the
existence of any claim, defense, set-off or other rights which Borrower or any
Guarantor may have at any time against Borrower, any of the Lenders, any other
Guarantor or any other person, whether in connection with this Guaranty
Agreement, the Loan Papers, the transactions contemplated thereby or any other
transaction; (k) the failure of Administrative Lender or Lenders to perfect, or
the release, exchange, substitution, or invalidity of, any security interest or
Lien securing all or any portion of the Guaranteed Indebtedness; (l) the failure
of Administrative Lender or Lenders to sell any Collateral securing all or any
portion of the Guaranteed Indebtedness in a commercially reasonable manner or as
otherwise required by Law; or (m) any other circumstance or happening
whatsoever, whether or not similar to the foregoing.
6. Guarantor hereby represents and warrants that all representations and
warranties set forth in Article V of the Credit Agreement with respect to it are
true and correct as of the date hereof, and are incorporated herein by
reference. In addition, Guarantor represents and warrants to Administrative
Lender and Lenders as follows:
(a) Except as previously disclosed to Administrative Lender or Lenders in
writing, Guarantor is a corporation duly organized, validly existing and in good
standing under the Laws of the State of its incorporation, and is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure to so qualify would
have a material adverse effect on its business, financial condition, or
operations.
(b) Guarantor has the corporate power and authority to execute, deliver
and perform its obligations under this Guaranty Agreement, and this Guaranty
Agreement constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its respective terms, except as
limited by bankruptcy, insolvency, or other laws of general application relating
to the enforcement of creditors rights and subject to the qualification that
general equitable principles may limit the availability of equitable remedies,
including without limitation, the remedy of specific performance.
(c) The execution, delivery, and performance by Guarantor of this Guaranty
Agreement have been duly authorized by all requisite action on the part of
Guarantor and will not violate the articles of incorporation or bylaws of
Guarantor or any Law or any order of any Tribunal and will not conflict with,
result in a breach of, or constitute a default under, or result in the
imposition of any Lien upon any assets of Guarantor pursuant to the provisions
of any indenture, mortgage, deed of trust, security agreement, franchise,
permit, license, or other instrument or agreement to which Guarantor or its
properties is bound.
-3-
(d) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority or third party is necessary
for the execution, delivery or performance by Guarantor of this Guaranty
Agreement or the validity or enforceability hereof.
(e) The value of the consideration received and to be received by
Guarantor as a result of Advances or other extensions of credit under the Credit
Agreement and Guarantor's execution and delivery of this Guaranty Agreement is
reasonably worth at least as much as the liability and obligation of Guarantor
hereunder, and such liability and obligation and the Credit Agreement may
reasonably be expected to benefit Guarantor directly or indirectly.
7. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or Administrative Lender or
Lenders have any commitment under the Credit Agreement:
(a) Guarantor will comply with the covenants applicable to any Subsidiary
contained in Articles VI and VII of the Credit Agreement.
(b) Guarantor will furnish to Administrative Lender as soon as available
one copy of each financial statement, report, notice or proxy statement sent by
Guarantor to its stockholders generally and one copy of each regular, periodic
or special report, registration statement, or prospectus filed by Guarantor with
any securities exchange or the Securities and Exchange Commission or any
successor agency, and any order issued by any court, governmental authority or
arbitrator in any material proceeding to which Guarantor is a party.
(c) Guarantor will furnish promptly to Administrative Lender written
notice of the occurrence of any default under this Guaranty Agreement or an
Event of Default of which Guarantor has knowledge.
(d) Guarantor will furnish promptly to Administrative Lender such
additional information concerning Guarantor as Administrative Lender or any
Lender may reasonably request.
(e) Guarantor will obtain at any time and from time to time all
authorizations, licenses, consents or approvals as shall now or hereafter be
necessary or desirable under all applicable Law or regulations or otherwise in
connection with the execution, delivery and performance of this Guaranty
Agreement and will promptly furnish copies thereof to Administrative Lender.
8. Upon the occurrence of an Event of Default under the Credit Agreement,
Administrative Lender and Lenders shall have the right to set off and apply
against the Guaranty Agreement or the Guaranteed Indebtedness or both, without
notice to Guarantor, any and all deposits (general or special, time or demand,
provisional or final) or other sums at any time credited by or owing from any of
Lenders to Guarantor irrespective of whether or not Administrative Lender or
Lenders shall have made any demand under this Guaranty Agreement.
-4-
The rights and remedies of Administrative Lender and Lenders hereunder are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which Administrative Lender and Lenders may have. After each
setoff and application, Administrative Lender or the appropriate Lender shall
promptly give notice to guarantor of such event; provided that the failure of
Administrative Lender or the appropriate Lender to furnish such notification
shall in no way impair, invalidate or prejudice Administrative Lender's or
Lenders' setoff and application so made.
9. No amendment or waiver of any provision of this Guaranty Agreement or
consent to any departure by Guarantor therefrom shall in any event be effective
unless the same shall be in writing and signed by Administrative Lender. No
failure on the part of Administrative Lender or Lenders to exercise, and no
delay in exercising, any Right hereunder shall operate as a waiver thereof; no
shall any single or partial exercise of any Right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
Law.
10. Any acknowledgment or new promise, whether by payment or principal or
interest or otherwise and whether by Borrower or others (including Guarantor),
with respect to any of the Guaranteed Indebtedness shall, if the statute of
limitations in favor of the Guarantor against Lenders shall have commenced to
run, toll the running of such statute of limitations and, if the period of such
statute of limitations shall have expired, prevent the operation of such statute
of limitations.
11. Any indebtedness of Borrower now or hereafter held by Guarantor is
hereby subordinated to the Obligations, and if Administrative Lender so requests
shall be collected, enforced and received by Guarantor as trustee for Lenders
and be paid over to Administrative lender on account of the Obligations, but
without reducing or affecting in any manner the liability of Guarantor under the
other provisions of the is Guaranty Agreement; provided, however, that unless
and until an Event of Default has occurred and is continuing, Guarantor may
continue to receive and collect amounts pursuant to such subordinated
indebtedness. Upon request by Administrative Lender on behalf of Lenders, any
instruments now or hereafter evidencing such indebtedness of Borrower to
Guarantor shall be marked with a legend that the same are subject to this
Guaranty Agreement and, if Administrative Lender so requests, shall be delivered
to Administrative Lender. Guarantor will from time to time execute financing
statements and continuation statements and such other documents and take other
action as Administrative Lender deems necessary or appropriate to perfect,
preserve and enforce Lenders' Rights hereunder.
12. Guarantor waives, to the fullest extent permitted by Law, all
presentments, demands for performance, protests, notices of protest, notices of
dishonor and notices of acceptance of this Guaranty Agreement and of the
existence, creation or incurring of new or additional indebtedness, diligence in
bringing suits against any person liable on any Guaranteed Indebtedness, and all
other notices of any kind whatsoever (including without limitation notice of
acceleration and notice of intent to accelerate). Guarantor agrees that the
Guaranteed
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Indebtedness and Loan Papers may be extended or renewed, and Loans repaid and
reborrowed in whole or in part, without notice to or assent by Guarantor, and
that it will remain bound upon this Guaranty Agreement notwithstanding any
extension, renewal or other alteration of any Guaranteed Indebtedness and Loan
Papers, or any repayment and reborrowing of Loans;
13. If Guarantor shall make any payment hereunder (whether voluntary,
involuntary, due to set-off or otherwise), it shall have a right of contribution
against any other Guarantor to the extent that such payment caused the
Guaranteed Indebtedness to exceed the Maximum Guaranteed Amount.
14. No obligations of Guarantor shall be altered, limited or affected by
any proceeding against Borrower, any other Guarantor or any other person
pursuant to any bankruptcy, insolvency, reorganization or similar Laws relating
to the relief of debtors. This Guaranty Agreement shall continue to be
effective, or shall be reinstated, as the case may be, if at any time payment,
or any part thereof, of any Guaranteed Indebtedness is rescinded or must
otherwise be restored or returned by the Administrative Lender or Lenders in
connection with any proceeding involving Borrower, any Guarantor or any other
Person under any bankruptcy, insolvency, reorganization or similar Laws relating
to the relief of debtors.
15. As a separate undertaking from similar provisions contained in the
Loan Papers, Guarantor agrees to pay reasonable attorneys' fees and all other
costs and expenses which may be incurred by Administrative Lender or Lenders in
the enforcement or collection of this Guaranty Agreement.
16. Unless otherwise provided herein, all notices, requests, consents and
demands shall be given to Guarantor c/o _______________________, Attention:
President, in compliance with the terms of the Credit Agreement.
17. This Guaranty Agreement is for the benefit of Lenders and their
successors and assigns, and in the event of an assignment of the Guaranteed
Indebtedness, or any part thereof, the Rights and benefits hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty Agreement is binding not only on Guarantor, but on
Guarantor's successors and assigns.
18. Guarantor acknowledges that it expects to receive significant
financial benefits, either directly or indirectly, from the proceeds of the
Loans made by Lenders to Borrower pursuant to the Credit Agreement, and further
acknowledges that Lenders are relying upon this Guaranty Agreement and the
undertakings of Guarantor hereunder in making Advances and other extensions of
credit to Borrower under the Credit Agreement and that the execution and
delivery of this Guaranty Agreement is a material inducement to Lenders to
continue the Commitment pursuant to the Credit Agreement.
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19. Each payment on the Guaranteed Indebtedness shall be deemed to have
been made by Borrower unless express written notice is given to the
Administrative Lender at the time of such payment that such payment is made by
Guarantor.
20. This Guaranty Agreement is executed and delivered as an incident to a
lending transaction negotiated, consummated, and performable in Dallas County,
Texas, and shall be construed according to the laws of the State of Texas.
21. The Credit Agreement, and all of the terms thereof, are incorporated
herein by reference, the same as if stated verbatim herein, and Guarantor agrees
that Administrative Lender and Lenders may exercise any and all rights granted
to them under the Credit Agreement and other Loan Papers without affecting the
validity or enforceability of this Guaranty Agreement.
22. This Guaranty Agreement is for the ratable benefit of Lenders, each of
which shall share any proceeds hereof pursuant to the terms of the Credit
Agreement.
23. WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE GUARANTOR AGREES THAT
THE FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE JURISDICTION
OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE GUARANTOR AGREES THAT THE FEDERAL
COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE JURISDICTION OVER
PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN PAPERS.
EXECUTED as of the ______ day of _______________, 19___.
GUARANTOR:
___________________________________
By: ______________________________
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EXHIBIT E
LOAN COMPLIANCE CERTIFICATE
This Loan Compliance Certificate ("Certificate") is executed and delivered
by MICHAELS STORES, INC. ("Borrower") for the fiscal quarter ending __________,
19__, and is being given as of such date to NATIONSBANK OF TEXAS, N.A.
("Administrative Lender") pursuant to and in accordance with the terms and
provisions of that certain Credit Agreement dated June 17, 1994, among Borrower,
NationsBank of Texas, N.A. for itself and as Administrative Lender, and certain
other Lenders party thereto ("Lenders") as the same may hereafter be amended
from time to time ("Agreement"). All terms used herein shall have the
respective meaning ascribed to them in the Agreement.
1. There has been no Default or Event of Default pursuant to the terms of
the Agreement or the other Loan Papers that has occurred during the preceding
fiscal quarter, or is continuing at the date hereof, nor has any event occurred
which upon notice or lapse of time or both would constitute such an Event of
Default.
2. The financial statements required by Section 6.01 of the Agreement, as
the case my be, which are attached hereto as Schedule 1, present fairly the
financial condition and results of operations of Borrower and its Subsidiaries
at the date thereof and for the periods indicated therein.
3. Borrower has complied with the covenants contained in Sections 7.01 as
detailed below:
A. RATIO OF TOTAL LIABILITIES TO
NET WORTH (Section 7.01(a))
1. Net Worth as determined in
accordance with GAAP $_________________
2. Total Liabilities
including guaranties, reimbursement
obligations and incremental indebtedness $_________________
Ratio of Total Liabilities
to Net Worth
(Ratio of #2 to #1) ________ to 1.0
REQUIRED RATIO OF TOTAL LIABILITIES
TO NET WORTH:
2.25 to 1.00 at any time during each of the second and third
fiscal quarters of each fiscal year; and
1.25 to 1.00 at any time during each of the first and fourth
fiscal quarters of each fiscal year.
B. FIXED CHARGES COVERAGE
RATIO (Section 7.01(b))
1. Consolidated Income before
income taxes and excluding
extraordinary gains & losses $_________________
2. Operating Lease Expense $_________________
3. Interest Expense $_________________
4. Total of Lines 1, 2 and 3 $_________________
5. Operating Lease Expense $_________________
6. Plus Interest Expense $_________________
7. Fixed Charges $_________________
(Total of Lines 5 and 6)
8. Fixed Charges Ratio
(Ratio of Line 4 to Line 7) $_________________
REQUIRED FIXED CHARGES COVERAGE RATIO:
1.30 to 1.0 at any time
C. CURRENT RATIO (Section 7.01(c))
1. Current Assets $_________________
2. Current Liabilities plus
amounts outstanding under
this Agreement $_________________
3. Current Ratio
(ratio of line 1 to line 2) ________ to 1.0
REQUIRED CURRENT RATIO:
1.50 to 1.0 at any time
4. If Borrower has any Subsidiaries as of the date hereof, there are
attached hereto as Schedule 3 the quarterly financial statements of each such
Subsidiary.
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The information contained herein is true and correct as of the date hereof.
MICHAELS STORES, INC.
By: ______________________________
Title: ______________________
Date: __________________
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EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
Dated ________________
Reference is made to the Credit Agreement dated as of June 17, 1994, among
Michaels Stores, Inc. ("Company"), NationsBank of Texas, N.A. for itself and as
Administrative Lender ("Administrative Lender"), and certain other Lenders party
thereto ("Lenders") as the same may hereafter be amended from time to time
("Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meaning.
____________________________ ("Assignor") and _____________________________
("Assignee") agree as follows:
1. Assignor hereby sells and assigns to Assignee without recourse or
warranty, and Assignee hereby purchases and assumes from Assignor, a ____%
interest in and to all of Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as defined below), with respect to such
percentage interest in Assignor's portion of the Commitment as in effect on the
Effective Date, the principal amount of Advances owing to Assignor on the
Effective Date, and the Notes held by Assignor, and the Letters of Credit issued
pursuant to the Credit Agreement, subject to the terms and conditions of this
Assignment and Acceptance.
2. Assignor (a) represents and warrants that as of the date hereof
(i) the aggregate amount of its portion of the Commitment (without giving effect
to assignments thereof which have not yet become effective) is $_______________
as of the date hereof, (ii) the outstanding principal amount of the Advances
owing to it (without giving effect to assignments thereof which have not yet
become effective) is $_______________ and $_______________, and (iii) it is the
legal and beneficial owner of the interest being assigned by it hereunder;
(b) makes no representation or warranty and assumes no responsibility with
respect to (i) any statements, warranties, or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency, or value of the Credit Agreement,
the Loan Papers, or any other instrument or document furnished pursuant
thereto or (ii) the financial condition of the Company or the performance
or observance by the Company of any of its obligations under the Credit
Agreement, the Loan Papers, or any other instrument or document furnished
pursuant thereto; and (c) attaches the Notes referred to in Paragraph 1 above
to exchange such Notes for new Notes as follows: ____________________________.
3. Assignee (a) confirms that it has received a copy of the Credit
Agreement and the other Loan Papers (except Fee Letters specifically relating to
the Administrative Lender or any other Lender), together with copies of the
financial statements referred to in the Credit Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (b) agrees
that it will, independently and without reliance upon the Administrative Lender,
Assignor, or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement and the other Loan
Papers; (c) appoints and authorizes the Administrative Lender to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement, the other Loan Papers, and this Assignment and Acceptance as are
delegated to the Administrative Lender by the terms thereof and hereof, together
with such powers as are reasonably incidental thereto and hereto; (d) agrees
that it will perform in accordance with its terms all of the obligations which
by the terms of the Credit Agreement, the other Loan Papers, and this Assignment
and Acceptance are required to be performed by it as a Lender; (e) specifies the
addresses set forth in Schedule I attached hereto as its address for the
receipt of notices; and (f) if it is not a United States Person, attaches the
forms prescribed by the Internal Revenue Service certifying as to Assignee's
status for purposes of determining exception from United States withholding
taxes with respect to all payments to be made to Assignee under the Credit
Agreement, the other Loan Papers, and this Assignment and Acceptance or such
other documents as are necessary to indicate that all such payments are subject
to such taxes at a rate reduced by an applicable tax treaty.
4. The effective date for this Assignment and Acceptance shall be
_____________ (the "Effective Date").
5. Upon remittance of the $2,500 processing fee to the Administrative
Lender and from and after the Effective Date, (a) Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (b)
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish is rights and be released from its obligations under the Credit
Agreement.
6. From and after the Effective Date, whenever the Administrative Lender
shall receive a payment, or whenever the Administrative Lender shall make an
application of funds, in respect of any aggregate outstanding principal amount
of the Advances or in respect of any aggregate amount of interest accrued on the
Advances, or in respect of the commitment fee (other than a payment or an
application of funds in respect of any amount due and owing and payable directly
to any Lender or the Administrative
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Lender under the Credit Agreement), the Administrative Lender shall, subject to
the terms of the Credit Agreement, pay to each of the Lenders an amount equal to
(i) such Lender's Specified Percentage of the Commitment of such aggregate
amount of principal, (ii) such Lender's Specified Percentage of the Commitment
of such aggregate amount of interest, and (iii) such Lender's Specified
Percentage of aggregate amount of commitment fees.
7. In the event that, after the Administrative Lender has paid to any
Lender its share of any such payment received by the Administrative Lender or
any such application made by the Administrative Lender, such payment or
application is rescinded or must otherwise be returned or must be paid over
by the Administrative Lender for any reason, such Lender shall, upon notice
by the Administrative Lender, forthwith pay back to the Administrative Lender
such Lender's share of the amount so rescinded or so returned or paid over.
8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, ASSIGNEE AGREES THAT THE COURTS OF
TEXAS WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
9. Assignee's Specified Percentage shall be _______%.
10. This Assignment and Acceptance may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
[ASSIGNOR]
By: ______________________________
______________________________
______________________________
[ASSIGNEE]
By: ______________________________
Its: ______________________________
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Accepted this ____ day of _____________
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By: ______________________________
Its: ______________________________
MICHAEL'S STORES, INC.
By: ______________________________
Its: ______________________________
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Schedule I
ASSIGNEE'S ADDRESS
1. ADDRESS FOR THE ADVANCES AND RECEIPT OF NOTICES
2. INITIAL LIBOR LENDING OFFICE
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