1
EXHIBIT 4.6
REVOLVING CREDIT AGREEMENT
DATED as of August 11, 1995
among
ZALE CORPORATION,
ZALE DELAWARE, INC.,
the LENDERS listed on Schedule 1 hereto,
and
THE FIRST NATIONAL BANK OF BOSTON,
as Agent for such Lenders
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TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION.............................................. 1
1.1. Definitions............................................................... 1
1.2. Rules of Interpretation................................................... 22
2. THE REVOLVING CREDIT FACILITY........................................................ 23
2.1. Commitment to Lend........................................................ 23
2.2. Commitment Fee............................................................ 23
2.3. Reduction of Total Commitment............................................. 24
2.4. The Notes................................................................. 24
2.5. Interest on Loans......................................................... 25
2.6. Requests for Loans........................................................ 25
2.7. Conversion Options........................................................ 26
2.7.1. Conversion to Different Type of Loan........................... 26
2.7.2. Continuation of Type of Loan................................... 26
2.7.3. Eurodollar Rate Loans.......................................... 27
2.8. Funds for Loans........................................................... 27
2.8.1. Funding Procedures............................................. 27
2.8.2. Advances by Agent.............................................. 27
2.9. Settlements; Failure to Make Funds Available.............................. 28
2.10. Change in Borrowing Base.................................................. 29
3. REPAYMENT OF THE LOANS............................................................... 29
3.1. Maturity.................................................................. 29
3.2. Mandatory Repayments of Loans............................................. 30
3.3. Optional Repayments of Loans.............................................. 30
4. LETTERS OF CREDIT.................................................................... 30
4.1. Letter of Credit Commitments.............................................. 31
4.1.1. Commitment to Issue Letters of Credit.......................... 31
4.1.2. Letter of Credit Applications.................................. 31
4.1.3. Terms of Letters of Credit..................................... 31
4.1.4. Reimbursement Obligations of Lenders........................... 31
4.1.5. Participations of Lenders...................................... 32
4.2. Reimbursement Obligation of the Borrowers................................. 32
4.3. Letter of Credit Payments................................................. 33
4.4. Obligations Absolute...................................................... 33
4.5. Reliance by Issuer........................................................ 34
4.6. Letter of Credit Fees..................................................... 34
4.7. Cash Collateral for Letters of Credit..................................... 34
5. CERTAIN GENERAL PROVISIONS........................................................... 35
5.1. Fee Letters............................................................... 35
5.2. Agent's Fee............................................................... 35
5.3. Funds for Payments........................................................ 35
5.3.1. Payments to Agent.............................................. 35
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5.3.2. No Offset, etc................................................. 35
5.3.3. Foreign Lenders................................................ 37
5.3.4. Applicable Lending Office...................................... 38
5.4. Computations.............................................................. 38
5.5. Inability to Determine Eurodollar Rate.................................... 38
5.6. Illegality................................................................ 39
5.7. Additional Costs, etc..................................................... 39
5.8. Capital Adequacy.......................................................... 41
5.9. Certificate............................................................... 42
5.10. Indemnity................................................................ 42
5.11. Interest After Default................................................... 42
5.12. Interest Limitation...................................................... 42
5.13. Performance Adjustments.................................................. 43
5.14. Concerning Joint and Several Liability of the Borrowers.................. 44
6. COLLATERAL SECURITY.................................................................. 48
6.1. Security of Borrowers..................................................... 48
6.2. ZFT Receivables........................................................... 48
6.3. Releases of Security...................................................... 49
7. REPRESENTATIONS AND WARRANTIES....................................................... 50
7.1. Corporate Authority....................................................... 50
7.1.1. Incorporation; Good Standing................................... 50
7.1.2. Authorization.................................................. 51
7.1.3. Enforceability................................................. 51
7.2. Governmental Approvals.................................................... 51
7.3. Title to Properties; Leases............................................... 51
7.4. Financial Statements and Projections...................................... 52
7.4.1. Financial Statements........................................... 52
7.4.2. Projections.................................................... 52
7.5. No Material Changes, etc.................................................. 52
7.6. Franchises, Patents, Copyrights, etc...................................... 53
7.7. Litigation................................................................ 53
7.8. No Materially Adverse Contracts, etc...................................... 53
7.9. Compliance with Other Instruments, Laws, etc.............................. 53
7.10. Tax Status............................................................... 54
7.11. No Event of Default...................................................... 54
7.12. Holding Company and Investment Company Acts.............................. 54
7.13. Absence of Financing Statements, etc..................................... 54
7.14. Perfection of Security Interest.......................................... 54
7.15. Certain Transactions..................................................... 55
7.16. Employee Benefit Plans................................................... 55
7.16.1. In General.................................................... 55
7.16.2. Terminability of Welfare Plans................................ 55
7.16.3. Guaranteed Pension Plans...................................... 56
7.16.4. Multiemployer Plans........................................... 56
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7.17. Regulations U and X...................................................... 56
7.18. Environmental Compliance................................................. 57
7.19. Subsidiaries, etc........................................................ 59
7.20. Bank Accounts............................................................ 59
7.21. Asset Locations.......................................................... 59
8. AFFIRMATIVE COVENANTS OF THE BORROWERS............................................... 59
8.1. Punctual Payment.......................................................... 59
8.2. Maintenance of Office..................................................... 59
8.3. Records and Accounts...................................................... 60
8.4. Financial Statements, Certificates and Information........................ 60
8.5. Notices................................................................... 62
8.5.1. Defaults....................................................... 62
8.5.2. Environmental Events........................................... 62
8.5.3. Notification of Claims against Collateral...................... 63
8.5.4. Notice of Litigation and Judgments............................. 63
8.5.5. Permitted Inventory Locations.................................. 64
8.6. Corporate Existence; Maintenance of Properties............................ 64
8.7. Insurance................................................................. 64
8.7.1. Insurance...................................................... 64
8.7.2. Evidence of Insurance.......................................... 65
8.8. Taxes..................................................................... 65
8.9. Inspection of Properties and Books, etc................................... 65
8.9.1. General........................................................ 65
8.9.2. Collateral Reports............................................. 66
8.9.3. Communications with Accountants................................ 66
8.10. Compliance with Laws, Contracts, Licenses, and Permits................... 66
8.11. Employee Benefit Plans................................................... 67
8.12. Use of Proceeds.......................................................... 67
8.13. Bank Accounts............................................................ 67
8.14. Inventory Restrictions................................................... 69
8.15. Further Assurances....................................................... 69
8.16. Cleandown................................................................ 69
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.......................................... 69
9.1. Restrictions on Indebtedness.............................................. 69
9.2. Restrictions on Liens..................................................... 72
9.3. Restrictions on Investments............................................... 75
9.4. Distributions............................................................. 77
9.5. Merger, Consolidation and Disposition of Assets........................... 78
9.5.1. Mergers and Acquisitions....................................... 78
9.5.2. Disposition of Assets.......................................... 78
9.6. Sale and Leaseback........................................................ 79
9.7. Compliance with Environmental Laws........................................ 79
9.8. Employee Benefit Plans.................................................... 79
9.9. Bank Accounts............................................................. 80
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9.10. Transactions with Affiliates............................................. 80
9.11. Receivables Securitization Facility Documents............................ 81
9.12. Zale Puerto Rico; JFS.................................................... 81
9.13. Negative Pledges......................................................... 82
9.14. Indenture................................................................ 82
10. FINANCIAL COVENANTS OF THE BORROWERS................................................ 82
10.1. Consolidated EBITDA...................................................... 82
10.2. Consolidated Funded Debt to Consolidated Adjusted EBITDA................. 82
10.3. Debt Service............................................................. 83
10.4. Consolidated Tangible Net Worth.......................................... 83
10.5. Consolidated Capital Expenditures........................................ 84
10.6. Receivables Advance Rate under Receivables Purchase Agreement............ 84
11. CLOSING CONDITIONS.................................................................. 84
11.1. Loan Documents........................................................... 84
11.2. Certified Copies of Charter Documents and Other Documents................ 84
11.3. Corporate Action......................................................... 85
11.4. Incumbency Certificate................................................... 85
11.5. Validity of Liens........................................................ 85
11.6. Perfection Certificates; UCC Search Results; Form of Other
Financing Statements............................................................ 85
11.7. Certificates of Insurance................................................ 85
11.8. Bank Agency Agreements................................................... 86
11.9. Borrowing Base Report.................................................... 86
11.10. Receivables Purchase Report............................................. 86
11.11. Opinion of Counsel...................................................... 86
11.12. Payment of Fees......................................................... 86
11.13. Financial Statements, Etc............................................... 86
11.14. Receivables Securitization Facility Documents;.......................... 86
11.15. Materially Adverse Changes.............................................. 87
11.16. Payoff and Termination of Prior Credit Agreement........................ 87
11.17. Proceedings and Documents............................................... 87
11.18. Further Assurances...................................................... 87
12. CONDITIONS TO ALL BORROWINGS........................................................ 87
12.1. Representations True; No Event of Default................................ 88
12.2. No Legal Impediment...................................................... 88
12.3. Governmental Regulation.................................................. 88
12.4. Borrowing Base Report.................................................... 88
12.5. Payment of Fees.......................................................... 88
13. EVENTS OF DEFAULT; ACCELERATION; ETC................................................ 88
13.1. Events of Default and Acceleration....................................... 88
13.2. Termination of Commitments............................................... 93
13.3. Remedies................................................................. 93
13.4. Cash Collateral to Secure Outstanding Letters of Credit.................. 93
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13.5. Repayments of Loans and Distribution of Collateral Proceeds After
Event of Default................................................................ 94
14. SETOFF.............................................................................. 95
15. THE AGENT........................................................................... 95
15.1. Authorization............................................................ 95
15.2. Employees and Agents..................................................... 96
15.3. No Liability............................................................. 96
15.4. No Representations....................................................... 96
15.5. Payments................................................................. 97
15.5.1. Payments to Agent............................................. 97
15.5.2. Distribution by Agent......................................... 97
15.5.3. Delinquent Lenders............................................ 97
15.6. Holders of Notes......................................................... 98
15.7. Indemnity................................................................ 98
15.8. Agent as Lender.......................................................... 98
15.9. Resignation; Removal..................................................... 99
15.10. Notification of Defaults and Events of Default.......................... 99
15.11. Duties in the Case of Enforcement....................................... 99
16. EXPENSES............................................................................ 100
17. INDEMNIFICATION..................................................................... 101
18. SURVIVAL OF COVENANTS, ETC.......................................................... 102
19. ASSIGNMENT AND PARTICIPATION........................................................ 102
19.1. Conditions to Assignment by Lenders...................................... 102
19.2. Certain Representations and Warranties; Limitations; Covenants........... 103
19.3. Register................................................................. 104
19.4. New Notes................................................................ 105
19.5. Participations........................................................... 105
19.6. Confidentiality.......................................................... 105
19.7. Assignee or Participant Affiliated with the Borrowers.................... 106
19.8. Miscellaneous Assignment Provisions...................................... 106
19.9. Assignment by Borrowers.................................................. 107
19.10. Additional Commitment Amounts. (a)..................................... 107
20. NOTICES, ETC........................................................................ 108
21. GOVERNING LAW....................................................................... 109
22. HEADINGS............................................................................ 109
23. COUNTERPARTS........................................................................ 109
24. ENTIRE AGREEMENT, ETC............................................................... 110
25. WAIVER OF JURY TRIAL................................................................ 110
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.................................................. 110
27. SEVERABILITY........................................................................ 111
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REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of August 11, 1995 by and
among ZALE CORPORATION, a Delaware corporation having its principal place of
business at 901 W. Walnut Hill Lane, Irving, Texas 75038-1003 ("Zale"), ZALE
DELAWARE, INC., a Delaware corporation having its principal place of business at
901 W. Walnut Hill Lane, Irving, Texas 75038-1003 ("Zale Delaware" and together
with Zale, the "Borrowers"), THE FIRST NATIONAL BANK OF BOSTON, a national
banking association, and the other lending institutions listed on Schedule 1 and
THE FIRST NATIONAL BANK OF BOSTON as agent for itself and such other lending
institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings set
forth in this Section 1 or elsewhere in the provisions of this Credit
Agreement referred to below:
Acceleration. See Section 13.1.
Additional Commitment Amount. See Section 19.10.
Advance Rate Percentage. Forty-five percent (45%).
Affiliate. Any Person directly or indirectly controlling, controlled by
or under direct or indirect common control with Zale (or another specified
Person) and shall include (a) any Person who is an officer, director or
beneficial holder of at least ten percent (10%) of the outstanding capital stock
of Zale (or another specified Person) and the mother, father, spouse or child
("Family Members") of any such officer, director or holder, (b) any Person of
which Zale (or another specified Person) or an Affiliate (as defined in clause
(a) above) of Zale (or another specified Person) shall, directly or indirectly
beneficially own at least ten percent (10%) of the outstanding equity securities
or constitute at least a ten percent (10%) equity participant, and (c) in the
case of a specified Person who is an individual, Family Members of such Person.
Agent. The First National Bank of Boston acting as agent for the
Lenders.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location in the Boston
Massachusetts area as the Agent may designate from time to time.
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Agent's Special Counsel. Bingham, Dana & Gould or such other counsel as
may be approved by the Agent.
Amortization Commencement Date. As defined in the Receivables
Securitization Facility Documents as in effect on the Closing Date or as such
term is defined in any replacement, successor or additional Receivables
Securitization Facility Document.
Applicable Lending Office. With respect to each Lender, its Domestic
Lending Office in the case of a Base Rate Loan, and its Eurodollar Lending
Office in the case of a Eurodollar Rate Loan.
Assignment and Acceptance. See Section 19.1.
Balance Sheet Date. March 31, 1994.
Bankruptcy Court. The United States Bankruptcy Court for the Northern
District of Texas, Dallas Division.
Base Rate. The higher of (i) the annual rate of interest announced from
time to time by FNBB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal 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 New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
Base Rate Applicable Margin. At all times from the Closing through the
first Performance Adjustment Date, 0.75%, and thereafter, the percentage
determined by reference to the provisions of Section 5.13.
Base Rate Loans. Loans bearing interest calculated by reference to the
Base Rate.
Borrower(s). As defined in the preamble hereto.
Borrowing Base. At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Lenders and the Agent pursuant to Section 8.4, which is equal
to:
I. at any time prior to the Collateral Release Date:
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(a) the Advance Rate Percentage of the result of:
(i) Eligible Inventory minus the Generic SKU
Reserve; minus
(ii) (A)(1) Eligible Inventory minus (2) the Generic
SKU Reserve multiplied by (B) the Inventory Shrink Reserve
Percentage calculated with respect to ongoing operations;
minus
(b) all amounts received by the Borrowers on account of
Eligible Inventory which has been sold under any installment sale or
"lay away" plan (other than pursuant to the Borrowers' proprietary
credit cards); minus
(c) $1,000,000 representing a reserve for landlord liens as
such amount may by adjusted by the Agent based upon its reasonable
determination.
II. after the Collateral Release Date, the Advance Rate Percentage of
the aggregate book value of finished goods and inventory (excluding any
reduction resulting from the Borrowers' general valuation reserves)
owned by the Borrowers and the Designated Subsidiaries (determined in
accordance with generally accepted accounting principles at the lesser
of cost or fair market value on a first-in-first-out basis).
For purposes of this Credit Agreement and the other Loan Documents, the
Agent may assume, subject to adjustment based upon the provisions of this Credit
Agreement, that the Borrowing Base in effect on any given date is the Borrowing
Base as indicated on the most recent Borrowing Base Report delivered on a timely
basis to the Lenders and the Agent in accordance with the provisions of Section
8.4 hereof.
Borrowing Base Report. A Borrowing Base Report signed by a Financial
Officer of each of the Borrowers and in substantially the form of Exhibit A
hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, Dallas, Texas, Philadelphia, Pennsylvania and New York, New York
are open for the transaction of banking business and, in the case of Eurodollar
Rate Loans, also a day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Cash Collateral Agreement. See Section 4.7.
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CERCLA. See Section 7.18.
Closing Date. The first date on which the conditions set forth in
Section 11 have been satisfied.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. All of the property, rights and interests of the Borrowers
and the Designated Subsidiaries that are or are intended to be subject to the
security interests created by the Security Documents.
Collateral Agency Agreement. The Collateral Agency Agreement dated as
of July 30, 1993, among the Collateral Agent, the Agent, the Trustee, and the
Borrowers, as the same has been or may be amended, restated or otherwise
modified and in effect from time to time.
Collateral Agent. FNBB, in its capacity as collateral agent for the
benefit of (a) (i) the Lenders and the Agent, and (ii) the holders of Debentures
and the Trustee, under and with respect to any of the Security Documents other
than the Lender Security Agreement, and (b) the Agent, and the Lenders under and
with respect to the Lender Security Agreement.
Collateral Release Date. See Section 6.3.
Commitment. With respect to each Lender, (a) the amount set forth on
Schedule 1 hereto as the amount of such Lender's commitment to make Loans to,
and to participate in the issuance, extension and renewal of Letters of Credit
for the account of, the Borrowers, as the same may be reduced from time to time
in accordance with the provisions of this Credit Agreement; or if such
commitment is terminated pursuant to the provisions hereof, zero, or, (b) if
such Lender has entered into one or more Assignment and Acceptances, or if such
Lender has become a party to this Credit Agreement pursuant to Section 19.10
or has increased its Commitment pursuant to such Section 19.10, then the
amount set forth for such Lender in the Register maintained by the Agent as
the amount of such Lender's commitment to make Loans to, and to participate in
the issuance, extension and renewal of Letters of Credit for the account of,
the Borrowers, as the same may be reduced from time to time; or if such
commitment is terminated pursuant to the provisions hereof, zero.
Commitment Fee Rate. At all times from the Closing through the first
Performance Adjustment Date, 0.375%, and thereafter, the percentage determined
by reference to the provisions of Section 5.13.
Commitment Percentage. With respect to each Lender, the percentage set
forth on Schedule 1, as the same may be amended from time to time as set forth
in
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the Register maintained by the Agent, as such Lender's percentage of the
aggregate Commitments of all of the Lenders.
Concentration Account Agreement. The Second Amended and Restated
Concentration Account Agreement, dated or to be dated on or prior to the Closing
Date, among CoreStates Bank, N.A., the Borrowers, the Receivables Purchase
Agent, and the Agent, or any other concentration account agreement in form and
substance reasonably satisfactory to the Agent, entered into by the Borrowers,
the Receivables Purchase Agent, the Agent and a depository institution
reasonably satisfactory to the Agent.
Confirmation Order. The order, entered on May 20, 1993, pursuant to
which the Bankruptcy Court confirmed the Consolidated Plan of Reorganization of
Zale Corporation and Its Affiliated Debtors dated March 24, 1993, as
subsequently modified by order, entered May 19, 1993, and confirmed by order,
entered May 20, 1993, as further amended by two (2) orders, entered July 27,
1993.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of Zale and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Adjusted EBITDA. Consolidated EBITDA for any period, but
excluding the "net credit income" (consisting of income from proprietary credit
cards net of all expenses associated with the management of such proprietary
credit cards (which expenses shall exclude the bad debt reserve provision) of
Zale and its Subsidiaries, as determined in a manner consistent with that used
for the audited consolidated statement of income for the fiscal year ended as of
the Balance Sheet Date.
Consolidated Capital Expenditures. Amounts paid or indebtedness
incurred by Zale or any of its Subsidiaries in connection with the purchase or
lease by Zale or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles, but excluding, to the
extent otherwise applicable, the Master Equipment Lease Number 03725, dated as
of December 6, 1989, between Zale and AT&T Credit Corporation, as amended and/or
supplemented, as of December 6, 1989, July 1, 1990, and February 1, 1993, and as
in effect as of July 30, 1993.
Consolidated Capitalized Leases. Leases under which Zale or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
Consolidated EBITDA. Consolidated Net Income for any period in
accordance with generally accepted accounting principles plus (a) without
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duplication, the sum of the following expenses of Zale and its Subsidiaries for
such period, in each case to the extent included in determining said
Consolidated Net Income, and, in each case without duplication, (i) depreciation
expenses, (ii) amortization expense, (iii) interest expense, (iv) total federal,
state and local income tax expense, and (v) charges during such period relating
to the valuation of inventory by the application of the LIFO (last in/first out)
method of inventory valuation less (b) without duplication, the sum of (i)
amortization of fresh start credit, (ii) income earned during such period
relating to the valuation of inventory by the application of the LIFO method of
inventory valuation, (iii) interest income, and (iv) total federal, state and
local income tax benefits provided during such period.
Consolidated Funded Debt. As at any date of determination, an amount
(without duplication) equal to the aggregate amount of all Indebtedness relating
to the borrowing of money of Zale and its Subsidiaries, on a consolidated basis,
whether absolute or contingent, including, to the extent not included in such
Indebtedness, all Consolidated Capitalized Leases and all Indebtedness
guaranteed by any of Zale or its Subsidiaries, but excluding, to the extent
otherwise included in such Indebtedness, all Indebtedness incurred in respect of
the Receivables Securitization Facility Documents.
Consolidated Net Income. The consolidated net income (or loss) of Zale
and its Subsidiaries, after deduction of all expenses, taxes, and other proper
charges, determined in accordance with generally accepted accounting principles,
after eliminating therefrom all extraordinary items of income or loss.
Consolidated Rental Obligations. All present or future obligations of
Zale or any of its Subsidiaries under any rental agreements or leases of real or
personal property, other than (a) obligations that can be terminated by the
giving of notice without liability to Zale or such Subsidiary in excess of the
liability for rent due as of the date on which such notice is given and under
which no penalty or premium is paid as a result of any such termination, and (b)
obligations of Zale or such Subsidiary in respect of Consolidated Capitalized
Leases.
Consolidated Tangible Net Worth. The excess of Consolidated Total
Assets over Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of Zale and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the
foregoing; plus
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(b) all amounts representing any write-up in the book value of
any assets of Zale or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date; plus
(c) all amounts representing the deferred fresh start credit
as of the date of determination.
Consolidated Total Assets. All assets of Zale and its Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles.
Consolidated Total Debt Service. With respect to any period, an amount
equal to the sum of all payments on Indebtedness that were required to be paid
or accrued during such period (including interest but excluding any amounts
accrued during a prior period) pursuant to any agreement or instrument to which
Zale or any of its Subsidiaries is a party relating to the borrowing of money or
the obtaining of credit or in respect of Consolidated Capitalized Leases. Demand
obligations shall be deemed to be due and payable during any fiscal year during
which such obligations are outstanding; provided, however, that the promissory
note from Zale to the corporate general partner of the Litigation Entity in the
original principal amount of $500,000 shall be deemed to be due in the fiscal
period during which demand is made.
Consolidated Total Liabilities. All liabilities of Zale and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles, including without duplication, all liabilities
of Zale and its Subsidiaries, whether or not so classified, under the
Receivables Securitization Facility Documents; provided, however, that any
deferred fresh start credit as of the date of determination shall not be
considered to be a liability.
Conversion Request. A notice given by the Borrowers to the Agent of the
Borrowers' election to convert or continue a Loan in accordance with Section
2.7.
Corporate Depository Accounts. See Section 8.13(a).
Credit Agreement. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
Debenture Debt. As defined in the Collateral Agency Agreement.
Debentures. The 11% Second Priority Senior Secured Notes Due 2000
previously issued by Zale Delaware pursuant to the Indenture.
Default. See Section 13.1.
Delinquent Lender. See Section 15.5.3.
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Designated Subsidiaries. Zale Puerto Rico, Dobbins and JFS.
Director Indemnity Agreement. Those Indemnification Agreements dated as
of July 21, 1993, between Zale and/or Zale Delaware and their directors, as in
effect on July 30, 1993, and renewals or extensions thereof and similar
agreements entered into by the Borrowers with other directors from time to time
in substantially similar form.
Disclosure Statement. The Disclosure Statement of Zale and of its
affiliated debtors, dated March 24, 1993, as filed with the Bankruptcy Court and
as amended through the conclusion of the hearing which resulted in the entry of
the Confirmation Order.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of Zale (or other specified
Person), other than dividends payable solely in shares of common stock of Zale
(or other specified Person); the purchase, redemption, or other retirement of
any shares of any class of capital stock of Zale (or other specified Person),
directly or indirectly through a Subsidiary of Zale (or other specified Person)
or otherwise; the return of capital by Zale (or other specified Person) to its
shareholders as such; or any other distribution on or in respect of any shares
of any class of capital stock of Zale (or other specified Person).
Dobbins. Dobbins Jewelers, Inc., a Guam corporation.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of such
Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans.
Drawdown Date. The date on which any Loan (other than pursuant to
Section 2.6(b)) is made or is to be made, and the date on which any Loan is
converted or continued in accordance with Section 2.7.
Effective Date. As defined in the Plan.
Eligible Assignee. Any of the following which has an office or branch
located in the United States of America: (a) a commercial bank or commercial
finance company organized under the laws of the United States, or any state
thereof or the District of Columbia, 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 or the District of
Columbia, and having a net worth of at least $100,000,000, calculated in
accordance with generally accepted accounting principles; (c) a commercial bank
organized under the laws of any other country
15
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which is a member of the Organization for Economic Cooperation and Development
(the "OECD"), 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 also a member of the OECD; (d) the central bank of any country
which is a member of the OECD; and (e) if, but only if, any Event of Default has
occurred and is continuing, any other bank, insurance company, commercial
finance company or other financial institution or other Person which other
Person is not a competitor of the Borrowers and the Designated Subsidiaries, or
any of them, in each case approved by the Agent, such approval not to be
unreasonably withheld or delayed.
Eligible Inventory. With respect to the Borrowers and the Designated
Subsidiaries, the aggregate book value of finished goods and inventory owned by
the Borrowers and the Designated Subsidiaries (determined in accordance with
generally accepted accounting principles at the lesser of cost or fair market
value on a first-in-first-out basis but excluding any reduction resulting from
the Borrowers' general valuation reserves); provided that Eligible Inventory
shall not include any inventory (a) held on consignment, or not otherwise owned
by the Borrowers or the Designated Subsidiaries, or of a type no longer sold by
the Borrowers or the Designated Subsidiaries, (b) which is damaged, refurbished,
not first quality saleable or subject to any legal encumbrance other than
Permitted Liens securing obligations which, together with such legal
encumbrance, are expressly subordinate as to liens and in right of payment to
the Obligations and are subject to an intercreditor arrangement entered into by,
and acceptable to, the Agent, (c) which is not in the possession of the
Borrowers or the Designated Subsidiaries unless the Agent has received a waiver
from the party in possession of such inventory in form and substance
satisfactory to the Agent, (d) as to which appropriate Uniform Commercial Code
financing statements or other applicable documents showing the Borrowers or the
Designated Subsidiaries as debtor and the Collateral Agent as secured party have
not been filed or continued in the proper filing office or offices in a manner
and form sufficient to perfect the Collateral Agent's first priority (other than
as to statutory landlord's liens) security interest therein, (e) which has been
shipped to a customer of any of the Borrowers or the Designated Subsidiaries
regardless of whether such shipment is on a consignment basis, (f) which is not
located at a Permitted Inventory Location within the United States of America,
Puerto Rico or Guam, or (g) which has been segregated and is no longer offered
for sale by the Borrowers or the Designated Subsidiaries to be returned to the
applicable vendor for credit.
Employee Benefit and Compensation Accounts. See Section 9.9.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained of contributed to by either of the Borrowers
or any ERISA Affiliate, other than a Multiemployer Plan.
16
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Environmental Laws. See Section 7.18(a).
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate. Any Person which is treated as a single employer with
either of the Borrowers under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Applicable Margin. At all times from the Closing through the
first Performance Adjustment Date, 2.00%, and thereafter, the percentage
determined by reference to the provisions of Section 5.13.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in such
eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of such
Lender, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (i) the rate per annum for FNBB
(rounded upwards to the nearest 1/16 of one percent) of the rate at which FNBB's
Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business
Days prior to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan of FNBB to which
such Interest Period applies, divided by (ii) a number equal to 1.00 minus the
Eurocurrency Reserve Rate, if applicable.
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Eurodollar Rate Loans. Loans bearing interest calculated by reference to
the Eurodollar Rate.
Event of Default. See Section 13.1.
Excluded Assignee. Any otherwise Eligible Assignee which at the time of
any proposed assignment is:
(i) subject to any unrescinded finding of any court, agency or
supervisory authority of competent jurisdiction, or has made any
unrevoked admission in writing, that any of the following conditions
exist: (A) such institution's assets are less than its obligations to
others, (B) such institution's assets or earnings are substantially
dissipated due to violations of law, rules or regulations or to unsafe or
unsound practices, (C) such institution is in an unsafe or unsound
condition to transact business, (D) such institution has concealed its
records or assets or refuses to submit its records or affairs for
inspection to an examiner or lawful agent of any agency of supervisory
authority of competent jurisdiction, or (E) such institution is
insolvent;
(ii) under or in conservatorship, receivership, trusteeship or
similar supervision by a Person appointed by a court, agency or
supervisory authority of competent jurisdiction in connection with any
insolvency, readjustment of debt, marshalling of assets, bankruptcy,
reorganization or similar proceeding of or relating to all, or
substantially all, of its property, or for the winding-up or liquidation
of its affairs;
(iii) the subject of proceedings under any law relating to
bankruptcy, insolvency or the reorganization or relief of debtors;
(iv) subject to a plan for dissolution authorized or ratified
(and not revoked) by a majority vote of its Board of Directors; or
(v) if such otherwise Eligible Assignee is of a type described
in clause (c) of the definition of Eligible Assignee, without a license
to conduct banking business from the applicable foreign agency or
supervisory authority of competent jurisdiction.
Excluded Proceeds. Proceeds of consigned inventory (up to the cost
thereof to either of the Borrowers or to a Designated Subsidiary), and ZFT
Receivables.
Excluded Subsidiaries. Zale Life Insurance Company, Zale Indemnity
Company, Diamond Guaranty Insurance Company, Jewel Re-Insurance, Ltd., Zale
Acquisition Corporation, JHC Holding Corporation, Zale Holding Corporation, ZHCL
Corp. Zale Employees' Child Care Association, Inc., ZFT, Diamond Funding Corp.,
Jewel Recovery, Inc. and Jewel Recovery, L.P.
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Fee Letters. See Section 5.1.
Financial Officer. The chief administrative officer, Executive Vice
President-Finance and Administration, chief financial officer, controller or
treasurer.
FNBB. The First National Bank of Boston, a national banking association,
in its individual capacity.
FNBB Fee Letter. See Section 5.1.
FNBB Concentration Accounts. See Section 8.13.
generally accepted accounting principles. (a) When used in Section 10,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board ("FASB") and
its predecessors or, to the extent not inconsistent with the principles
promulgated by FASB, by the American Institute of Certified Public Accountants
("AICPA") or other nationally recognized organization composed of expert
accountants, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
Zale reflected in its financial statements for the period ended on the Balance
Sheet Date, and (b) when used in general, other than as provided above, means
principles that (i) are consistent with the principles promulgated or adopted by
FASB and its predecessors or, to the extent not inconsistent with the principles
promulgated by FASB, by the AICPA or other nationally recognized organization
composed of expert accountants, as in effect from time to time, and (ii) are
consistently applied with past financial statements of Zale and its consolidated
Subsidiaries adopting the same principles, provided that in each case referred
to in this definition of "generally accepted accounting principles" a certified
public accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been properly applied.
Generic SKU Inventory. Any units of inventory as to which the Borrowers
have assigned (or would have assigned using criteria existing as of the date
hereof) any "SKU" number starting with the number nine (9).
Generic SKU Reserve. At any time of determination, a reserve based upon
Generic SKU Inventory which shall initially be equal to $6,500,000 and shall be
subject to review and reasonable modification by the Agent based upon future
examinations of the Borrowers' and the Designated Subsidiaries' Generic SKU
Inventory.
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Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by either of the
Borrowers or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
Hazardous Substances. See Section 7.18(b).
Increasing Lender. See Section 19.10.
Indebtedness. All monetary and other financial obligations, contingent
and otherwise, that in accordance with generally accepted accounting principles
should be classified upon the obligor's balance sheet as liabilities, excluding
any deferred fresh start credit as of the date of determination, or to which
reference should be made by footnotes thereto, including in any event and
whether or not so classified: (a) all debt and similar monetary obligations,
whether direct or indirect; (b) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property owned
or acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
Indenture. The Indenture dated as of July 30, 1993 among the Borrowers
and the Trustee, under which the Trustee acts for the holders of the Debentures
in the form delivered to the Agent on the date hereof.
Instrument of Adherence. See Section 19.10.
Interest Payment Date. (i) As to any Base Rate Loan, the first Business
Day of the calendar month following the calendar month which includes the
Drawdown Date thereof; and (ii) as to any Eurodollar Rate Loan in respect of
which the Interest Period is (A) three (3) months or less, the last day of such
Interest Period and (B) more than three (3) months, the date that is three (3)
months from the first day of such Interest Period, and, in addition, the last
day of such Interest Period.
Interest Period. With respect to each Loan, (i) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrowers in a Loan Request
(A) for any Base Rate Loan, the last day of the calendar month; and (B) for any
Eurodollar Rate Loan, 1, 2, 3 or 6 months; and (ii) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on
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the last day of one of the periods set forth above, as selected by the Borrowers
in a Conversion Request; provided that all of the foregoing provisions relating
to Interest Periods are subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would
end on a day that is not a Business Day, that Interest Period shall end
on the next succeeding Business Day;
(c) if the Borrowers shall fail to give notice as provided in
Section 2.7, the Borrowers shall be deemed to have requested a conversion
of the affected Eurodollar Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day of
the then current Interest Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Eurodollar Business Day of a calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Maturity Date shall end on the Maturity
Date.
Inventory Shrink Reserve Percentage. At the time of reference thereto,
one percent (1.0%) or such other percentage reasonably determined by the Agent
from time to time based upon future examinations of the Borrowers and their
inventory.
Investments. All expenditures made and all liabilities incurred
(contingent or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment,
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liquidating dividend or liquidating distribution); (iv) there shall not be
deducted in respect of any Investment any amounts received as earnings on such
Investment, whether as dividends, interest or otherwise, except that accrued
interest included as provided in the foregoing clause (ii) may be deducted when
paid; and (v) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
JFS. Jewelers Financial Services, Inc., a Delaware corporation.
Joint Collateral Security Agreement. The Joint Collateral Security
Agreement dated as of July 30, 1993, among Zale, Zale Delaware and certain of
their Subsidiaries and the Collateral Agent, as the same has been or may be from
time to time amended, restated or otherwise modified and in effect.
Lenders. FNBB and the other lending institutions listed on Schedule 1
hereto and any other Person who becomes a New Lender or an assignee of any
rights and obligations of a Lender pursuant to Section 19.
Lender Security Agreement. The Amended and Restated Lender Security
Agreement, dated or to be dated on or prior to the Closing Date, among the
Borrowers and the Collateral Agent, in form and substance satisfactory to the
Borrowers, the Lenders, the Collateral Agent and the Agent.
Letter of Credit. See Section 4.1.1.
Letter of Credit Application. See Section 4.1.1.
Letter of Credit Cash Collateral Account. See Section 4.7.
Letter of Credit Fee. See Section 4.6.
Letter of Credit Fee Rate. At all times from the Closing through the
first Performance Adjustment Date, 1.25%, and thereafter, the percentage
determined by reference to the provisions of Section 5.13.
Letter of Credit Participation. See Section 4.1.4.
Litigation Entity. As defined in the Plan.
Loan Documents. This Credit Agreement, the Notes, the Fee Letters, the
Letter of Credit Applications, the Letters of Credit and the Security Documents.
Loan Request. See Section 2.6(a).
Loans. Revolving credit loans made or to be made by the Lenders to the
Borrowers pursuant to Section 2.
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Local Depository Accounts. See Section 8.13.
Majority Lenders. As of any date, the Lenders holding at least fifty-one
percent (51%) of the outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Lenders whose aggregate Commitments
constitutes at least fifty-one percent (51%) of the Total Commitment. For
purposes of this definition, the aggregate principal amount of each Lender shall
be determined by assuming that a Settlement has occurred.
Maturity Date. August 11, 1998.
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Maximum Rate. See Section 5.12.
Mortgages. The several mortgages and deeds of trust, dated as of July 30,
1993, from the Borrowers and their Subsidiaries to the Collateral Agent with
respect to the fee and leasehold interests of the Borrowers and their
Subsidiaries in the Real Estate (other than Zale Delaware's leasehold interest
with respect to retail stores).
Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by either of the Borrowers or any
ERISA Affiliate.
New Lender. See Section 19.10.
Notes. See Section 2.4.
Obligations. All indebtedness, obligations and liabilities of either of
the Borrowers to any of the Lenders, the Collateral Agent and the Agent,
individually or collectively, existing on the date of this Credit Agreement or
arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans made or Reimbursement Obligations incurred or any of
the Notes, Letter of Credit Applications, Letters of Credit or other instruments
at any time evidencing any thereof.
Operating Accounts. See Section 2.6(b).
outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
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PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of
ERISA and any successor entity or entities having similar responsibilities.
Perfection Certificates. The Perfection Certificates as defined in the
Lender Security Agreement.
Performance Adjustment. See Section 5.13.
Performance Adjustment Date. See Section 5.13.
Permitted Inventory Locations. The retail stores and distribution centers
of Zale Delaware and the Designated Subsidiaries located in the United States of
America, Puerto Rico and Guam and listed on Schedule 2 hereto, as well as any
location used by Zale Delaware or any Designated Subsidiary for trade shows or
similar purposes so long as appropriate Uniform Commercial Code financing
statements or other applicable documents showing Zale Delaware or such
Designated Subsidiary as debtor and the Collateral Agent as secured party have
been filed or continued in the proper filing office or offices in a manner and
form sufficient to perfect the Collateral Agent's first priority (other than as
to statutory landlord liens) security interest in inventory of Zale Delaware and
the Designated Subsidiaries located at such stores, distribution centers and
other locations.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 9.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Plan. The Consolidated Plan of Reorganization of certain affiliates of
Zale Delaware attached as Exhibit A to the Disclosure Statement dated March 24,
1993, as amended through the conclusion of the hearing which resulted in the
entry of the Confirmation Order, as further amended and/or modified through and
including the Effective Date.
Prior Agents. See Section 11.16.
Prior Credit Agreement. The Revolving Credit and Gold Consignment
Agreement dated as of July 30, 1993 among (a) the Borrowers, (b) FNBB, Rhode
Island Hospital Trust National Bank ("RIHT"), ABN AMRO Bank, N.V., New York
Branch and Societe Generale, New York Branch, as Co-Agents, (c) FNBB and RIHT,
as Administrative Agents, and (d) FNBB and certain other financial institutions
party thereto (collectively with FNBB, the "Prior Lenders"), as the same has
been amended or modified prior to the date hereof.
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Prior Lenders. As defined in the definition of Prior Credit Agreement.
Puerto Rican Security Documents. The separate Assignments of Accounts
Receivable from each of Zale Delaware and Zale Puerto Rico to the Collateral
Agent, the separate Statements of Assignment of Accounts Receivable from each of
Zale Delaware and Zale Puerto Rico to the Collateral Agent, the separate
Factor's Lien Agreements from each of Zale Delaware and Zale Puerto Rico to the
Collateral Agent and the separate Personal Property Mortgages from each of Zale
Delaware and Zale Puerto Rico to the Collateral Agent, each dated as of July 30,
1993, as amended or otherwise modified and in effect from time to time.
Purchase Termination Date. As defined in the Receivables Securitization
Facility Documents as in the form delivered to the Agent on the date hereof.
Rabbi Trust. Any trust established for the satisfaction of obligations of
any of Zale or its Subsidiaries for deferred compensation, the terms of which
trust will not, at any time, result in such obligations being treated as funded
under applicable Department of Labor and Internal Revenue Service guidelines as
of the date hereof.
Real Estate. All real property owned or leased (as lessee or sublessee)
by Zale or any of its Subsidiaries.
Receivables Advance Rate. The Advance Rate as defined in the Receivables
Securitization Facility Documents as in the form delivered to the Agent on the
date hereof.
Receivables Purchase Agent. The Indenture Trustee, as defined in the
Receivables Securitization Facility Documents as in the form delivered to the
Agent on the date hereof.
Receivables Purchase Agreement. The Purchase and Servicing Agreement
dated as of July 1, 1994 among ZFT, Zale Delaware, Diamond Funding Corp., and
JFS, and their respective successors and assigns, as the same may be from time
to time amended or modified.
Receivables Purchase Payment Instructions. The written instructions from
each of Zale Delaware and Zale (and acknowledged by Zale Puerto Rico and
Dobbins) to ZFT, or any subsequent Receivables Securitization Subsidiary, JFS
and the Receivables Purchase Agent, in form and substance satisfactory to the
Agent, directing that payment of all amounts to which Zale Delaware may be
entitled pursuant to the terms of the Receivables Securitization Facility
Documents be made directly into the FNBB Concentration Accounts.
Receivables Purchase Report. See Section 8.4(g).
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Receivables Release Termination Date. The earlier to occur of (a) the
Purchase Termination Date and (b) one day following receipt by the Receivables
Purchase Agent of notice from the Agent of an Acceleration or the Borrower's
failure to pay at the Maturity Date all of the Obligations outstanding.
Receivables Securitization Facility Documents. (a)(i) The Receivables
Purchase Agreement and (ii) the Facilities Documents, as defined therein, as any
of the same may be from time to time amended and/or modified; (b) (i) any other
agreement or agreements governing Indebtedness incurred by any Receivables
Securitization Subsidiary to facilitate the provision of funds for working
capital or other general corporate purposes through the sale or pledge of
receivables created by Zale, Zale Delaware or their Subsidiaries (or of
instruments received in consideration of receivables transferred pursuant to the
Receivables Securitization Facility Documents), and (ii) any agreement or
agreements governing Indebtedness incurred to refund, refinance, replace,
supplement or increase all or any portion of the Indebtedness incurred under
clauses (a) or (b)(i).
Receivables Securitization Subsidiary. Any Subsidiary of Zale, the
principal purpose of which is to provide funds for working capital or other
general corporate purposes to Zale Delaware and its Subsidiaries through the
transfer of receivables created by Zale, Zale Delaware or their Subsidiaries (or
of instruments received in consideration of receivables transferred pursuant to
the Receivables Securitization Facility Documents).
Record. The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Lender
with respect to any Loan referred to in such Note.
Reference Date. See Section 5.3.2.
Register. See Section 19.3.
Reimbursement Obligation. The Borrowers' obligation to reimburse the
Agent and the Lenders on account of any drawing under any Letter of Credit as
provided in Section 4.2.
Security Documents. (a) At all times prior to the payment in full in cash
of the Debenture Debt, the Joint Collateral Security Agreement, the Lender
Security Agreement, the Mortgages, the Trademark Assignments, the Trademark
Security Agreement, the Stock Pledge Agreements, the Puerto Rican Security
Documents, the Receivables Purchase Payment Instructions and the Concentration
Account Agreement, and (b) following the payment in full in cash of the
Debenture Debt and prior to the Collateral Release Date, the Lender Security
Agreement, the Receivables Purchase Payment Instructions and the Concentration
Account Agreement.
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Settlement. The making of, or receiving of payments, in immediately
available funds, by the Lenders, to the extent necessary to cause each Lender's
actual share of the outstanding amount of Loans (after giving effect to any Loan
Request) to be equal to such Lender's Commitment Percentage of the outstanding
amount of such Loans (after giving effect to any Loan Request), in any case
where, prior to such event or action, the actual share is not so equal.
Settlement Amount. See Section 2.9(a).
Settlement Date. (a) the Business Day immediately following the Agent's
becoming aware of the existence of an Event of Default, (b) any Business Day on
which the amount of Loans outstanding from FNBB plus FNBB's Commitment
Percentage of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement
Obligations is equal to or greater than FNBB's Commitment Percentage of the
Total Commitment, (c) any Business Day on which the amount of Loans outstanding
from FNBB plus FNBB's Commitment Percentage of the sum of the Maximum Drawing
Amount and any Unpaid Reimbursement Obligations exceeds FNBB's Commitment
Percentage of the amount of Loans outstanding plus FNBB's Commitment Percentage
of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement
Obligations by more than $10,000,000, (d) the Business Day immediately following
written notice given by the Agent to the Lenders of the Agent's desire to effect
a Settlement, or (e) any Business Day on which (i) the amount of outstanding
Loans decreases and (ii) the amount of the Agent's Loans outstanding equals Zero
Dollars ($0).
Settling Lender. See Section 2.9(a).
Stock Pledge Agreements. The several Stock Pledge Agreements, dated as of
July 30, 1993, between Zale, JHC Holding Corporation or Zale Delaware and the
Collateral Agent.
Store Concentration Accounts. See Section 8.13.
Subordinated Notes. As defined in the Receivables Securitization Facility
Documents as in the form delivered to the Agent on the date hereof.
Subsidiary. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Taxes. See Section 5.3.2.
Tax Sharing Agreements. The tax sharing agreements set forth on Schedule
3 hereto.
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Total Commitment. The sum of the Commitments of the Lenders, as in effect
from time to time which as of the Closing Date shall be $150,000,000 and which
may be increased from time to time to an amount not to exceed $180,000,000 in
accordance with the provisions of Section 19.10.
Trademark Assignments. The several Trademark Assignments, dated as of
July 30, 1993, made by the Borrowers and the Designated Subsidiaries in favor of
the Collateral Agent.
Trademark Security Agreement. The Trademark Collateral Security and
Pledge Agreement dated as of July 30, 1993, among the Borrowers and certain of
their Subsidiaries and the Collateral Agent, pursuant to which security
interests are granted for the benefit of the Lenders and the Agent and the
holders of the Debentures and the Trustee.
Trust Certificates. As defined in the Receivables Securitization Facility
Documents as in the form delivered to the Agent on the date hereof.
Trustee. IBJ Schroder Bank & Trust Company, as trustee under the
Indenture, and any successor thereto.
Trust Interest. As defined in the Receivables Securitization Facility
Documents as in the form delivered to the Agent on the date hereof.
Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate
Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Agent in the ordinary course of its business as a letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
the Borrowers do not reimburse the Agent and the Lenders in accordance with
Section 4.2.
Vendor Memo Accounts. Deposit accounts of the Borrowers, Zale Puerto Rico
and/or Dobbins into which the proceeds of consignment inventory may be deposited
following deposit into the FNBB Concentration Accounts.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of
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the corporation, association, trust or other business entity involved, whether
or not the right so to vote exists by reason of the happening of a contingency.
Zale. As defined in the preamble hereto.
Zale Delaware. As defined in the preamble hereto.
Zale Puerto Rico. Zale Puerto Rico, Inc., a Puerto Rican corporation.
ZFT. Zale Funding Trust, a Delaware business trust.
ZFT Receivables. Any Receivables (as defined in the Receivables
Securitization Facility Documents), all monies due or to become due thereon and
all collateral security therefor, all proceeds of the foregoing, including
Insurance Proceeds (as defined in the Receivables Securitization Facility
Documents) relating thereto, all Recoveries (as defined in the Receivables
Securitization Facility Documents) and all other interests, rights and assets
that have been transferred by either of the Borrowers or any Subsidiary of Zale
to ZFT or any other Receivables Securitization Subsidiary pursuant to the
Receivables Securitization Facility Documents; provided, however, that "ZFT
Receivables" shall not include (a) any account transferred after the occurrence
of any Receivables Release Termination Date, or (b) any of Zale's, Zale
Delaware's or any other Subsidiary of Zale's rights under the Receivables
Securitization Facility Documents; and provided, further, that nothing contained
herein or in the Security Documents shall be deemed to constitute a release of
or in any way negate the security interest of the Agent, for the benefit of the
Lenders, in any accounts, or any proceeds or products thereof, transferred to
ZFT following the occurrence of any Receivables Release Termination Date.
1.2. RULES OF INTERPRETATION.
(a) Unless otherwise indicated, reference to any document or
agreement shall include such document or agreement as amended, modified
or supplemented from time to time in accordance with its terms and the
terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification
to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
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(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section " refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Lenders severally agrees to lend to the
Borrowers, or either of them, and the Borrowers, or either of them, may borrow,
repay, and reborrow from time to time between the Closing Date and the Maturity
Date upon notice by the Borrowers, or either of them, to the Agent given in
accordance with Section 2.6, such sums as are requested by the Borrowers, or
either of them, up to a maximum aggregate amount outstanding (after giving
effect to all amounts requested) at any one time equal to such Lender's
Commitment minus such Lender's Commitment Percentage of the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations, provided that the sum
of the outstanding amount of the Loans (after giving effect to all amounts
requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not at any time exceed the lesser of (i) the Total Commitment
and (ii) the Borrowing Base. The Loans shall be made pro rata in accordance with
each Lender's Commitment Percentage. Each request for a Loan hereunder shall
constitute a representation and warranty by the Borrowers that the conditions
set forth in Section 11 and Section 12, in the case of the initial Loans to be
made on the Closing Date, and Section 12, in the case of all other Loans, have
been satisfied on the date of such request.
2.2. COMMITMENT FEE. The Borrowers jointly and severally agree to pay to
the Agent for the accounts of the Lenders in accordance with their respective
Commitment Percentages a commitment fee calculated at the Commitment Fee Rate
per annum on the average daily amount during each calendar quarter or portion
thereof from the Closing Date to the Maturity Date by which the Total Commitment
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exceeds the sum of the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations plus the outstanding amount of Loans during such calendar quarter.
The commitment fee shall be payable quarterly in arrears on the first day of
each calendar quarter for the immediately preceding calendar quarter commencing
on the first such date following the date hereof, and on the date of any
reduction in the Commitments pursuant to Section 2.3, and with a final payment
on the Maturity Date or any earlier date on which the Commitments shall
terminate.
2.3. REDUCTION OF TOTAL COMMITMENT. The Borrowers shall have the right at
any time and from time to time upon three (3) Business Days prior written notice
to the Agent to reduce by $5,000,000 or an integral multiple of $1,000,000 in
excess thereof or terminate entirely the Total Commitment whereupon the
Commitments of the Lenders shall be reduced pro rata in accordance with their
respective Commitment Percentages of the amount specified in such notice or, as
the case may be, terminated. Promptly after receiving any notice of the
Borrowers delivered pursuant to this Section 2.3, the Agent will notify the
Lenders of the substance thereof. Upon the effective date of any such reduction
or termination, the Borrowers shall pay to the Agent for the respective accounts
of the Lenders the full amount of any commitment fee then accrued on the amount
of the reduction. No reduction or termination of the Commitments may be
reinstated, provided, that the foregoing shall not restrict the ability of the
Borrowers to obtain any Additional Commitment Amount from a New Lender or, as
the case may be, an Increasing Lender in accordance with the provisions of
Section 19.10 hereof.
2.4. THE NOTES. The Loans shall be evidenced by separate promissory notes
of the Borrowers in substantially the form of Exhibit B hereto (each a "Note"),
dated as of the Closing Date and completed with appropriate insertions. A Note
shall be payable to the order of each Lender in a principal amount equal to such
Lender's Commitment or, if less, the outstanding amount of all Loans made by
such Lender, plus interest accrued thereon, as set forth below. Each of the
Borrowers irrevocably authorizes each Lender to make or cause to be made, at or
about the time of the Drawdown Date of any Loan or at the time of receipt of any
payment of principal on such Lender's Note, an appropriate notation on such
Lender's Record reflecting the making of such Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Loans set forth on such
Lender's Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Lender, but the failure to record, or any error in so
recording, any such amount on such Lender's Record shall not limit or otherwise
affect the obligations of the Borrowers hereunder or under any Note to make
payments of principal of or interest on any Note when due.
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2.5. INTEREST ON LOANS. Except as otherwise provided in Section 5.11,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at a rate per annum equal to the
Base Rate Applicable Margin plus the Base Rate.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Applicable Margin plus the Eurodollar Rate determined for such
Interest Period.
(c) The Borrowers jointly and severally promise to pay interest on
each Loan in arrears on each Interest Payment Date with respect thereto.
2.6. REQUESTS FOR LOANS.
(a) The Borrowers, or either of them, shall give to the Agent
written notice in the form of Exhibit C hereto (or telephonic notice
confirmed in a writing in the form of Exhibit C hereto) of each Loan
requested hereunder (a "Loan Request") no later than (i) 11:30 a.m.
(Boston time) on the proposed Drawdown Date of any Base Rate Loan and
(ii) 10:00 a.m. (Boston time) at least three (3) Eurodollar Business Days
prior to the proposed Drawdown Date of any Eurodollar Rate Loan. Each
such notice shall specify (A) the principal amount of the Loan requested,
(B) the proposed Drawdown Date of such Loan, (C) the Interest Period for
such Loan and (D) the Type of such Loan. Promptly upon receipt of any
such notice, the Agent shall notify each of the Lenders thereof. Each
Loan Request shall be irrevocable and binding on the Borrowers and shall
obligate the Borrower requesting the Loan to accept the Loan requested
from the Lenders on the proposed Drawdown Date. Each Loan Request for a
Base Rate Loan shall be in a minimum aggregate amount of $100,000, and
each Loan Request for a Eurodollar Rate Loan shall be in a minimum
aggregate amount of $1,000,000 or an integral multiple of $500,000 in
excess thereof.
(b) Notwithstanding the notice and minimum amount requirements set
forth in Section 2.6(a) but otherwise in accordance with the terms and
conditions of this Credit Agreement, the Agent may, in its sole
discretion and without conferring with the Lenders, make Loans hereunder
(i) by entry of credits to Zale Delaware's operating account (No.
551-49011) or other account(s) with the Agent (the "Operating Accounts")
to cover checks or other charges which Zale Delaware has drawn or made
against such account or (ii) in an amount as otherwise requested by the
Borrowers. Each of the Borrowers hereby requests and authorizes the Agent
to make from time to time such Loans by means of
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appropriate entries of such credits sufficient to cover checks and other
charges then presented. Each of the Borrowers acknowledges and agrees
that the making of such Loans shall, in each case, be subject in all
respects to the provisions of this Credit Agreement as if they were Loans
covered by a Loan Request including, without limitation, the limitations
set forth in Section 2.1 and the requirements that the applicable
provisions of Sections 11 and 12, in the case of Loans made on the
Closing Date, and Section 12, in the case of all Loans, be satisfied. All
actions taken by the Agent pursuant to the provisions of this Section
2.6(b) shall be conclusive and binding on the Borrowers absent the
Agent's gross negligence or willful misconduct. Loans made pursuant to
this Section 2.6(b) shall be Base Rate Loans until converted in
accordance with the provisions of the Credit Agreement and, prior to a
Settlement, such interest shall be for the account of the Agent.
2.7. CONVERSION OPTIONS.
2.7.1. CONVERSION TO DIFFERENT TYPE OF LOAN. The Borrowers may
elect from time to time to convert any outstanding Loan to a Loan of
another Type, provided that (i) with respect to any such conversion of a
Loan to a Base Rate Loan, the Borrowers shall give the Agent, no later
than 2:00 p.m. (Boston time) on the proposed date of such conversion,
prior written notice of such election; (ii) with respect to any such
conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrowers
shall give the Agent, no later than 10:00 a.m. (Boston time) at least
three (3) Eurodollar Business Days prior to the proposed date of such
conversion, written notice of such election; (iii) with respect to any
such conversion of a Eurodollar Rate Loan into a Loan of another Type,
such conversion shall only be made on the last day of the Interest Period
with respect thereto and (iv) no Loan may be converted into a Eurodollar
Rate Loan when any Default or Event of Default has occurred and is
continuing. On the date on which such conversion is being made each
Lender shall take such action as is necessary to transfer its Commitment
Percentage of such Loans to its Domestic Lending Office or its Eurodollar
Lending Office, as the case may be. All or any part of outstanding Loans
of any Type may be converted into a Loan of another Type as provided
herein, provided that any partial conversion of a Eurodollar Rate Loan to
a Base Rate Loan shall be in an aggregate principal amount of at least
$100,000, and any partial conversion of a Base Rate Loan to a Eurodollar
Rate Loan shall be in an aggregate principal amount of at least
$1,000,000 or an integral multiple of $500,000 in excess thereof. Each
Conversion Request relating to the conversion of a Loan to a Eurodollar
Rate Loan shall be irrevocable by the Borrowers.
2.7.2. CONTINUATION OF TYPE OF LOAN. Any Loan of any Type may be
continued as a Loan of the same Type upon the expiration of an Interest
33
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Period with respect thereto by compliance by the Borrowers with the
notice provisions contained in Section 2.7.1; provided that no Eurodollar
Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, but shall be automatically converted to a
Base Rate Loan on the last day of the first Interest Period relating
thereto ending during the continuance of any Default or Event of Default
of which officers of the Agent active upon the Borrowers' account have
actual knowledge. In the event that the Borrowers fail to provide any
such notice with respect to the continuation of any Eurodollar Rate Loan
as such, then such Eurodollar Rate Loan shall be automatically converted
to a Base Rate Loan on the last day of the first Interest Period relating
thereto. The Agent shall notify the Lenders promptly when any such
automatic conversion contemplated by this Section 2.7 is scheduled to
occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
Rate Loans shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal
amount of all Eurodollar Rate Loans having the same Interest Period shall
not be less than $1,000,000 or a whole multiple of $500,000 in excess
thereof. The Borrower may not have more than five (5) Eurodollar Rate
Loans outstanding at any time.
2.8. FUNDS FOR LOANS.
2.8.1. FUNDING PROCEDURES. Not later than 1:30 p.m. (Boston time)
on the proposed Drawdown Date of any Loan, each of the Lenders will make
available to the Agent, at the Agent's Head Office, in immediately
available funds, the amount of such Lender's Commitment Percentage of the
amount of the requested Loans. Upon receipt from each Lender of such
amount, and upon receipt of the documents required by Sections 11
and 12 and the satisfaction of the other conditions set forth therein, to
the extent applicable, the Agent will make available to the Borrowers the
aggregate amount of such Loans made available to the Agent by the
Lenders. The failure or refusal of any Lender to make available to the
Agent at the aforesaid time and place on any Drawdown Date the amount of
its Commitment Percentage of the requested Loans shall not relieve any
other Lender from its several obligation hereunder to make available to
the Agent the amount of such other Lender's Commitment Percentage of any
requested Loans.
2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
contrary by any Lender on or prior to a Drawdown Date, assume that such
Lender has made available to the Agent on such Drawdown Date the amount
of such Lender's Commitment Percentage of the Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
34
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reliance upon such assumption, make available to the Borrowers a
corresponding amount. If any Lender makes available to the Agent such
amount on a date after such Drawdown Date, such Lender shall pay to the
Agent on demand an amount equal to the product of (i) the average
computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times (ii)
the amount of such Lender's Commitment Percentage of such Loans, times
(iii) a fraction, the numerator of which is the number of days that
elapse from and including such Drawdown Date to the date on which the
amount of such Lender's Commitment Percentage of such Loans shall become
immediately available to the Agent, and the denominator of which is 360.
A statement of the Agent submitted to such Lender with respect to any
amounts owing under this paragraph shall be prima facie evidence of the
amount due and owing to the Agent by such Lender. If the amount of such
Lender's Commitment Percentage of such Loans is not made available to the
Agent by such Lender within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from
the Borrowers on demand, with interest thereon at the rate per annum
applicable to the Loans made on such Drawdown Date.
2.9. SETTLEMENTS; FAILURE TO MAKE FUNDS AVAILABLE.
(a) On each Settlement Date, the Agent shall, not later than 10:00
a.m. (Boston time), give telephonic or facsimile notice (i) to the
Lenders and the Borrowers of the respective outstanding amount of Loans
made by the Agent on behalf of the Lenders from the immediately preceding
Settlement Date through the close of business on the prior day and the
amount of any Eurodollar Rate Loans to be made (following the giving of
notice pursuant to Section 2.6(a)(ii)) on such date pursuant to a Loan
Request and (ii) to the Lenders of the amount (a "Settlement Amount")
that each Lender (the "Settling Lender") shall pay to effect a Settlement
of any Loan. A statement of the Agent submitted to the Lenders and the
Borrowers with respect to any amounts owing under this Section 2.9 shall
be prima facie evidence of the amount due and owing. The Settling Lender
shall, not later than 3:00 p.m. (Boston time) on such Settlement Date,
effect a wire transfer of immediately available funds to the Agent in the
amount of the Settlement Amount. All funds advanced by any Lender as a
Settling Lender pursuant to this Section 2.9 shall for all purposes be
treated as a Loan made by such Settling Lender to the Borrowers and all
funds received by any Lender pursuant to this Section 2.9 shall for all
purposes be treated as repayment of amounts owed with respect to Loans
made by such Lender. In the event that any bankruptcy, reorganization,
liquidation, receivership or similar cases or proceedings in which either
of the Borrowers is a debtor prevent a Settling Lender from making any
Loan to effect a Settlement as contemplated hereby, such Settling Lender
will make such disposition and
35
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arrangements with the other Lenders with respect to such Loans, either by
way of purchase of participations, distribution, pro tanto assignment of
claims, subrogation or otherwise as shall result in each Lender's share
of the outstanding Loans being equal, as nearly as may be, to such
Lender's Commitment Percentage of the outstanding amount of the Loans.
(b) The Agent may, unless notified to the contrary by any Lender
prior to a Settlement Date, assume that such Lender has made or will make
available to the Agent on such Settlement Date the amount of such
Lender's Settlement Amount, and the Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the
Borrowers a corresponding amount. If any Lender makes available to the
Agent such amount on a date after such Settlement Date, such Lender shall
pay to the Agent on demand an amount equal to the product of (i) the
average computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds
acquired by such Agent during each day included in such period, times
(ii) the amount of such Settlement Amount, times (iii) a fraction, the
numerator of which is the number of days that elapse from and including
such Settlement Date to the date on which the amount of such Settlement
Amount shall become immediately available to such Agent, and the
denominator of which is 360. A statement of the Agent submitted to such
Lender with respect to any amounts owing under this paragraph shall be
prima facie evidence of the amount due and owing to the Agent by such
Lender. If such Lender's Settlement Amount is not made available to the
Agent by such Lender within three (3) Business Days following such
Settlement Date, the Agent shall be entitled to recover such amount from
the Borrowers on demand, with interest thereon at the rate per annum
applicable to the Loans as of such Settlement Date.
(c) The failure or refusal of any Lender to make available to the
Agent at the aforesaid time and place on any Settlement Date the amount
of its Settlement Amount (i) shall not relieve any other Lender from its
several obligations hereunder to make available to the Agent the amount
of such other Lender's Settlement Amount and (ii) shall not impose upon
such other Lender any liability with respect to such failure or refusal
or otherwise increase the Commitment of such other Lender.
2.10. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined
monthly by the Agent by reference to the Borrowing Base Report delivered to the
Lenders and the Agent pursuant to Section 8.4(f).
3. REPAYMENT OF THE LOANS.
3.1. MATURITY. The Borrowers jointly and severally promise to pay on the
Maturity
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Date, and there shall become absolutely due and payable on the Maturity Date,
all of the Loans outstanding on such date, together with any and all accrued and
unpaid interest thereon.
3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the sum of the
outstanding amount of the Loans, the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the lesser of (i) the Total Commitment and
(ii) the Borrowing Base, then the Borrowers shall immediately pay the amount of
such excess to the Agent for the respective accounts of the Lenders for
application: first, to any Unpaid Reimbursement Obligations; second, to the
Loans; and third, to provide to the Agent cash collateral for Reimbursement
Obligations as contemplated by Section 4.2(b) and (c). Each payment of any
Unpaid Reimbursement Obligations or prepayment of Loans shall be allocated among
the Lenders, in proportion to each Reimbursement Obligation or (as the case may
be) the respective unpaid principal amount of each Lender's Note, with
adjustments to the extent practicable to equalize any prior payments or
repayments not exactly in proportion.
3.3. OPTIONAL REPAYMENTS OF LOANS. The Borrowers shall have the right, at
their election, to repay the outstanding amount of the Loans, as a whole or in
part, at any time and from time to time without penalty or premium, provided
that any full or partial prepayment of the outstanding amount of any Eurodollar
Rate Loans pursuant to this Section 3.3 may be made only on the last day of the
Interest Period relating thereto. The Borrowers shall give the Agent written
notice of any proposed prepayment no later than (i) 2:00 p.m., Boston time, on
the date of any proposed prepayment pursuant to this Section 3.3 of Base Rate
Loans, and (ii) 10:00 a.m., Boston time, at least three (3) Eurodollar Business
Days prior to any proposed prepayment pursuant to this Section 3.3 of Eurodollar
Rate Loans, in each case specifying the proposed date of prepayment of Loans and
the principal amount to be prepaid. Each such partial prepayment of Base Rate
Loans shall be in a minimum amount of $100,000, and each such partial prepayment
of Eurodollar Rate Loans shall be in a minimum amount of $1,000,000 or an
integral multiple of $500,000 in excess thereof and shall be accompanied by the
payment of accrued interest on the principal prepaid to the date of prepayment.
In the absence of instruction by the Borrowers, each such partial prepayment of
the Loans shall be applied first to the principal of Base Rate Loans and then to
the principal of Eurodollar Rate Loans. Each partial prepayment shall be
allocated among the Lenders, in proportion to the respective unpaid principal
amount of each Lender's Note, with adjustments to the extent practicable to
equalize any prior repayments not exactly in proportion. Notwithstanding the
notice and minimum requirements set forth in this Section 3.3, the Agent may, in
its sole discretion, allow the Borrowers to repay Base Rate Loans made by the
Agent in amounts as otherwise requested by the Borrowers.
4. LETTERS OF CREDIT.
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4.1. LETTER OF CREDIT COMMITMENTS.
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
and conditions hereof and the execution and delivery by the Borrowers, or
either of them, of a letter of credit application on the Agent's
customary form (a "Letter of Credit Application"), the Agent on behalf of
the Lenders and in reliance upon the agreement of the Lenders set forth
in Section 4.1.4 and upon the representations and warranties of the
Borrowers contained herein, agrees, in its individual capacity, to issue,
extend and renew from time to time from the date hereof until but not
including the then scheduled Maturity Date, for the account of the
Borrowers, one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be requested
from time to time by the Borrowers and agreed to by the Agent; provided,
however, that, after giving effect to such request, (a) the sum of the
aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations
shall not exceed $30,000,000 at any one time and (b) the sum of (i) the
Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid
Reimbursement Obligations, and (iii) the amount of all Loans outstanding
shall not exceed the lesser of (A) the Total Commitment and (B) the
Borrowing Base. The letters of credit, if any, issued by the Agent for
the account of the Borrowers pursuant to the Prior Agreement and listed
on Schedule 4.1.1 hereto, shall, from and after the Closing Date,
constitute a Letter of Credit for all purposes of this Credit Agreement.
No Letter of Credit shall be issued, extended or renewed with an
expiration date occurring after the date which is 180 days following the
then scheduled Maturity Date or which provides for drafts which may be
paid after the date which is 180 days following the then scheduled
Maturity Date.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the reasonable satisfaction of the
Agent. In the event that any provision of any Letter of Credit
Application shall be inconsistent with any provision of this Credit
Agreement, then the provisions of this Credit Agreement shall, to the
extent of any such inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, be denominated
in Dollars and shall provide for the payment of sight drafts for honor
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein. Each Letter of Credit so
issued, extended or renewed shall be subject to the Uniform Customs.
4.1.4. REIMBURSEMENT OBLIGATIONS OF LENDERS. Each Lender severally
agrees that it shall be absolutely liable, without regard to the
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occurrence of any Default or Event of Default or any other condition
precedent whatsoever, to the extent of such Lender's Commitment
Percentage, to reimburse the Agent on demand for the amount of each draft
paid by the Agent under each Letter of Credit to the extent that such
amount is not reimbursed by the Borrowers pursuant to Section 4.2 (such
agreement for a Lender being called herein the "Letter of Credit
Participation" of such Lender).
4.1.5. PARTICIPATIONS OF LENDERS. Each such payment made by a
Lender shall be treated as the purchase by such Lender of a participating
interest in the Borrowers' Reimbursement Obligation under Section 4.2 in
an amount equal to such payment. Each Lender shall share in accordance
with its participating interest in any interest which accrues pursuant to
Section 4.2.
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWERS. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Lenders to
participate therein, each of the Borrowers hereby jointly and severally agrees
to reimburse or pay to the Agent, for the account of the Agent or (as the case
may be) the Lenders, with respect to each Letter of Credit issued, extended or
renewed by the Agent hereunder,
(a) except as otherwise expressly provided in Section 4.2(b) and
(c), no later than the Business Day following each date that any draft
presented under such Letter of Credit is honored by the Agent (or, if
later, one day after the Agent has notified the Borrowers of its
intention to honor such draft), or the Agent otherwise makes a payment
with respect thereto, (i) the amount paid by the Agent under or with
respect to such Letter of Credit, and (ii) the amount of any taxes, fees,
charges or other reasonable costs and expenses whatsoever incurred by the
Agent or any Lender in connection with any payment made by the Agent or
any Lender under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Commitment to an amount less than the Maximum Drawing Amount, an amount
equal to such difference, which amount shall be held by the Agent for the
benefit of the Lenders and the Agent as cash collateral for all
Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all Letters
of Credit in accordance with Section 13, an amount equal to the then
Maximum Drawing Amount on all Letters of Credit, which amount shall be
held by the Agent for the benefit of the Lenders and the Agent as cash
collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid by
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the Borrowers under this Section 4.2 at any time from the date such amounts
become due and payable (whether as stated in this Section 4.2, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Agent on demand at the rate specified in Section 5.11 for overdue
principal on the Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrowers of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrowers fail to reimburse the Agent as provided in
Section 4.2 on or before the Business Day following the date that such draft is
paid or other payment is made by the Agent, the Agent may at any time thereafter
notify the Lenders of the amount of any such Unpaid Reimbursement Obligation. No
later than 3:00 p.m. (Boston time) on the Business Day next following the
receipt of such notice, each Lender shall make available to the Agent, at the
Agent's Head Office, in immediately available funds, such Lender's Commitment
Percentage of such Unpaid Reimbursement Obligation, together with an amount
equal to the product of (i) the average, computed for the period referred to in
clause (iii) below, of the weighted average interest rate paid by the Agent for
federal funds acquired by the Agent during each day included in such period,
times (ii) the amount equal to such Lender's Commitment Percentage of such
Unpaid Reimbursement Obligation, times (iii) a fraction, the numerator of which
is the number of days that elapse from and including the date the Agent paid the
draft presented for honor or otherwise made payment to the date on which such
Lender's Commitment Percentage of such Unpaid Reimbursement obligation shall
become immediately available to the Agent, and the denominator of which is 360.
The responsibility of the Agent to the Borrowers and the Lenders shall be only
to determine that the documents (including each draft) delivered under each
Letter of Credit in connection with such presentment shall be in conformity in
all material respects with such Letter of Credit.
4.4. OBLIGATIONS ABSOLUTE. The Borrowers' obligations under this Section
4 shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrowers may have or have had against the Agent, any Lender or any
beneficiary of a Letter of Credit. Each of the Borrowers further agrees with the
Agent and the Lenders that the Agent and the Lenders shall not be responsible
for, and the Borrowers' Reimbursement Obligations under Section 4.2 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, fraudulent or forged, or any dispute between or
among the Borrowers, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrowers against the beneficiary of
any Letter of Credit or any such transferee. The Agent and the
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Lenders shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. Each of the Borrowers
agrees that any action taken or omitted by the Agent or any Lender under or in
connection with each Letter of Credit and the related drafts and documents, if
done in good faith and without gross negligence, shall be binding upon the
Borrowers and shall not result in any liability on the part of the Agent or any
Lender to the Borrowers.
4.5. RELIANCE BY ISSUER. To the extent not inconsistent with Section 4.4,
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it in good faith to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have received such advice or concurrence of the Majority Lenders
as it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of the
Majority Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Lenders and all future holders of the
Notes or of a Letter of Credit Participation.
4.6. LETTER OF CREDIT FEES. The Borrowers shall pay to the Agent (in each
case, a "Letter of Credit Fee") (a) for the accounts of the Lenders in
accordance with their respective Commitment Percentages, a commission on the
average daily aggregate Maximum Drawing Amount of all Letters of Credit then
outstanding at the Letter of Credit Fee Rate per annum payable quarterly in
arrears on the first Business Day of each quarter in which any Letters of Credit
shall have been or remain outstanding, and on the Maturity Date (including
Letter of Credit Fees relating to Letters of Credit expiring after the Maturity
Date), and (b) for the Agent's own account, such customary commissions, issuance
fees, transfer fees and other fees and charges in connection with the issuance
or administration of each Letter of Credit as the Borrowers and the Agent shall
agree.
4.7. CASH COLLATERAL FOR LETTERS OF CREDIT. Thirty days prior to the then
scheduled Maturity Date, the Borrowers shall, with respect to each Letter of
Credit then outstanding and pursuant to a cash collateral agreement (the "Cash
Collateral Agreement") in substantially the form of Exhibit D, (a) pay to the
Agent in cash for deposit into an interest bearing cash collateral account
established with the Agent (the "Letter of Credit Cash Collateral Account") an
amount equal to one hundred and
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two percent (102%) of the Maximum Drawing Amount of such Letter of Credit as of
such date, which amount shall be held by the Agent as cash collateral for any
Reimbursement Obligations or other obligations incurred with respect to such
Letter of Credit, or (b) deliver to the Agent a "back-to-back" letter of credit,
in form and substance reasonably satisfactory to the Agent, issued by a
financial institution reasonably satisfactory to the Agent and naming the Agent
as beneficiary in an amount equal to one hundred and two percent (102%) of the
Maximum Drawing Amount of such Letter of Credit as of such date. Any cash sums
deposited into the Letter of Credit Cash Collateral Account pursuant to clause
(a) and naming the Agent as beneficiary of this Section 4.7 shall be reduced or
released, and any back-to-back letter of credit issued pursuant to clause (b)
and naming the Agent as beneficiary of this Section 4.7 shall be reduced in
amount or returned, if and to the extent that the Maximum Drawing Amount with
respect to the applicable Letter of Credit has been reduced or such Letter of
Credit has expired or been cancelled and all Unpaid Reimbursement Obligations
and other amounts due or to become due with respect thereto have been paid.
5. CERTAIN GENERAL PROVISIONS.
5.1. FEE LETTERS. The Borrowers jointly and severally agree to pay (a)
all fees in accordance with the terms of the fee letter dated as of August 11,
1995 (the "FNBB Fee Letter"), among the Borrowers and FNBB, and (b) all fees in
accordance with the terms of each of the other fee letters entered into
separately by each of the other Lenders and the Borrowers on or about the
Closing Date (such other fee letters, together with the FNBB Fee Letter, the
"Fee Letters").
5.2. AGENT'S FEE. The Borrowers shall pay to the Agent annually in
advance, for the Agent's own account, on the Closing Date and on each
anniversary of the Closing Date, the Agent's fee in accordance with the terms of
the FNBB Fee Letter.
5.3. FUNDS FOR PAYMENTS.
5.3.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents
shall be made to the Agent, for the respective accounts of the Lenders
and the Agent, at the Agent's Head Office or at such other location in
the Boston, Massachusetts, area that the Agent may from time to time
designate, in each case in immediately available funds in Dollars.
5.3.2. NO OFFSET, ETC. All payments by the Borrowers hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by
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any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrowers are compelled by law to make such
deduction or withholding, excluding, (i) in the case of each Lender and
the Agent, taxes imposed on its gross or net income, and franchise taxes
imposed on it by the jurisdiction under the laws of which such Lender or
the Agent (as the case may be) is organized or by any political
subdivision thereof or, in the case of each Lender, taxes imposed on its
gross or net income, and franchise taxes imposed on it by the
jurisdiction of such Lender's Applicable Lending Office, or any political
subdivision thereof and (ii) in the case of each Lender, United States
income tax or withholding (a "withholding tax") payable with respect to
payments hereunder or under the other Loan Documents under laws
(including, without limitation, any statute, treaty, ruling, court
decision, determination or regulation) in effect and being applied on the
Reference Date (as hereinafter defined); provided, however, that any
United States withholding tax payable as a result of any change in such
laws occurring after the Reference Date shall not be so excluded; and
provided further that if any payment by the Borrowers to the Agent or the
Lenders is charged with any United States withholding tax not in effect
on the Reference Date or if such withholding tax is increased subsequent
to the Reference Date, such withholding tax or increased withholding tax
shall not be deemed to result from a change in law within the meaning of
the preceding proviso if such payment is effectively connected with a
United States trade or business of the recipient subject to United States
income taxes thereon (all such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions, withholdings and liabilities being
hereinafter referred to as "Taxes"). For purposes of this Section 5.3.2,
the term "Reference Date" shall mean, in the case of each Lender on the
Closing Date, the Closing Date and, in the case of each party who
subsequently becomes a Lender, the effective date of the Assignment and
Acceptance pursuant to which it became a Lender and, in the case of any
Lender that at any time changes its Applicable Lending Office for Base
Rate Loans or Eurodollar Rate Loans to a different nation from the nation
in which the Applicable Lending Office from which such Loans were made
prior to such time is located, the date of such change. If any Taxes
shall be required by law to be deducted from any amount payable hereunder
or under any other Loan Document, the Borrowers will pay to the Agent for
the account of the Lenders, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such additional
amount in Dollars as shall be necessary to enable such Lenders or the
Agent to receive the same net amount which such Lenders or the Agent
would have received on such due date had no such deduction been imposed
upon the Borrowers; provided, however, that the Borrowers shall not be
required to pay any amounts pursuant to the preceding sentence to the
Agent with respect to any Lender organized under the laws of a
jurisdiction outside of the United States, if such deductions are caused
by the failure of such Lender to execute and deliver to
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the Borrowers any certificates, forms or other documents reasonably
requested by the Borrowers, which can be furnished consistent with the
facts and which are reasonably necessary to assist the Borrowers in
applying for refunds of taxes remitted hereunder or determining amounts
payable by the Borrowers under this Section 5.3.2. If the Borrowers have
paid any increased amounts to any Lender pursuant to this Section 5.3.2,
each Lender agrees that to the extent such Lender receives a refund
attributed to the taxes remitted by the Borrowers hereunder, such Lender
shall forward such refund to the Borrowers within thirty (30) days after
receipt by the Lender. The Borrowers will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the Borrowers
hereunder or under such other Loan Document.
5.3.3. FOREIGN LENDERS. (a) Each Lender that is a party to this
Credit Agreement on the date hereof and that is not incorporated under
the laws of the United States of America or a state thereof agrees that
it will deliver to each of the Borrowers and the Agent, within seven (7)
Business Days after the Closing Date or, in the case of each Lender which
becomes a Lender pursuant to an Assignment and Acceptance, on the date
which such Assignment and Acceptance becomes effective, and only if it
can do so consistent with the facts, two duly completed copies of United
States Internal Revenue Service form 1001 or 4224 (or other applicable
form prescribed by the United States Internal Revenue Service), in each
case certifying whether such Lender is entitled to receive payments under
this Credit Agreement and the Notes without deduction or withholding of
any United States federal income taxes or at reduced withholding rates,
as applicable. Each such Lender which so delivers a Form 1001 or 4224 (or
other applicable form prescribed by the United States Internal Revenue
Service), and any lender that hereafter becomes a party to this Credit
Agreement, further undertakes to deliver to each of the Borrowers and the
Agent two additional copies of such form (or a successor form) on or
before the date that such form expires or becomes obsolete or as soon as
practicable after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by the
Borrowers or the Agent, in each case certifying whether such Lender is
entitled to receive payments under this Credit Agreement and the Notes
without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the
Borrowers and the Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax.
Unless the Borrowers and
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the Agent have received forms or other documents satisfactory to them
indicating that payments hereunder or under any of the other Loan
Documents are not subject to United States withholding tax or are subject
to such tax at a rate reduced by an applicable tax treaty, the Borrowers
or the Agent shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Lender organized
under the laws of a jurisdiction outside the United States. If the
Borrowers or the Agent have received such forms or other documents
satisfactory to the Borrowers and the Agent, the Borrowers or the Agent
shall withhold United States withholding taxes from such payments to such
Lender only to the extent appropriate.
(b) Each Lender which is not incorporated under the laws of the
United States of America or a state thereof shall deliver to the
Borrowers on the Closing Date and prior to the last day of each calendar
year thereafter a duly executed Internal Revenue Service Form W-8 or W-9
or other appropriate Internal Revenue Service form, effective for the
succeeding calendar year.
5.3.4. APPLICABLE LENDING OFFICE. Any Lender claiming any
additional amounts payable pursuant to this Section 5.3 shall, to the
extent it can do so without incurring material additional costs, endeavor
(consistent with legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the making of such a
change would avoid the need for, or reduce the amount of, any such
additional amounts which may thereafter accrue.
5.4. COMPUTATIONS. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 365 day year and paid for the actual
number of days elapsed; provided, however, that computations of interest on
Eurodollar Rate Loans shall be based on a 360 day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the records of the Agent from
time to time shall be considered prima facie evidence of the outstanding amount
of the Loans owing by the Borrowers to the Lenders.
5.5. INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest
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to be applicable to any Eurodollar Rate Loan during any Interest Period, the
Agent shall forthwith give notice of such determination (which shall be
conclusive and binding on the Borrowers and the Lenders) to the Borrowers and
the Lenders. In such event (i) any Loan Request or Conversion Request with
respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be
deemed a request for Base Rate Loans, (ii) each Eurodollar Rate Loan will
automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan, and (iii) the obligations of the Lenders to
make Eurodollar Rate Loans shall be suspended until the Agent determines that
the circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrowers and the Lenders.
5.6. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Rate Loans, such Lender shall forthwith give notice of such
circumstances to the Borrowers and the other Lenders and thereupon (i) the
commitment of such Lender to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Lender's Loans then outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period as
may be required by law. Each of the Borrowers hereby agrees promptly to pay the
Agent for the account of such Lender, upon demand by such Lender, any additional
amounts necessary to compensate such Lender for any costs reasonably incurred by
such Lender in making any conversion in accordance with this Section 5.6,
including any interest or fees payable by such Lender to lenders of funds
obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder;
provided, however, that the Borrowers shall have no obligation to pay any
portion of such costs incurred by the Agent or (as the case may be) such Lender
more than sixty (60) days prior to any notice, given by the Agent or (as the
case may be) such Lender to the Borrowers, of the incurrence of such costs.
5.7. ADDITIONAL COSTS, ETC. If any present or future applicable law,
which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect to
this Credit Agreement, any Letters of Credit, the other Loan Documents,
such Lender's
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Commitment or the Loans (other than taxes based upon or measured by the
income or profits of such Lender or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Lender of the principal of
or the interest on any Loans or any other amounts payable to any Lender
or the Agent under this Credit Agreement or any of the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or
other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by, or commitments of an office of any
Lender, or
(d) impose on any Lender or the Agent any other conditions or
requirements with respect to this Credit Agreement, any Letters of
Credit, the other Loan Documents, the Loans, such Lender's Commitment, or
any class of loans, letters of credit or commitments of which any of the
Loans or such Lender's Commitment forms a part, and the result of any of
the foregoing is
(i) to increase the cost to any Lender of making,
funding, issuing, renewing, extending or maintaining any of the
Loans or such Lender's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amounts payable to such Lender
or the Agent hereunder on account of such Lender's Commitment, any
Letter of Credit or any of the Loans, or
(iii) to require such Lender or the Agent to make any
payment or to forego any interest or Reimbursement Obligation or
other sum payable hereunder, the amount of which payment or
foregone interest or Reimbursement Obligation or other sum is
calculated by reference to the gross amount of any sum receivable
or deemed received by such Lender or the Agent from the Borrowers
hereunder,
then such Lender or the Agent (as the case may be) shall so notify the Borrowers
(which notice shall include a brief statement of the basis for the determination
thereof), and, to the extent that the costs of such change are not reflected in
the Base Rate, or other amounts charged to the Borrowers hereunder, the
Borrowers and such Lender or the Agent shall thereafter attempt to negotiate an
adjustment to the compensation payable hereunder which will adequately
compensate such Lender or the Agent for such additional cost, reduction, payment
or foregone interest or Reimbursement Obligation or other sum. If the Borrowers
and such Lender or the
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Agent (as the case may be) are unable to agree to such adjustment within
forty-five (45) days following the day on which the Borrowers receive such
notice (but not earlier than the effective date of any such change), then
commencing on the date of such notice, the amounts payable by the Borrowers
hereunder shall increase by an amount which will, in such Lender's or (as the
case may be) the Agent's reasonable determination, provide adequate compensation
for such additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum. In making any determinations contemplated
by this Section 5.7, any Lender or the Agent may make such reasonable estimates,
assumptions, allocations and the like as such Lender or the Agent in good faith
determines to be appropriate, and such Lender's or the Agent's selection thereof
and the determination made by it on the basis thereof, shall be final, binding
and conclusive on the Borrowers except, in the case of such determination, for
manifest errors in computations or transmission.
5.8. CAPITAL ADEQUACY. If after the date hereof any Lender or the Agent
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Lender or
the Agent or any corporation controlling such Lender or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Lender's or the Agent's commitment with
respect to any Loans to a level below that which such Lender or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or the Agent's then existing policies with respect
to capital adequacy and assuming full utilization of such entity's capital) by
any amount deemed by such Lender or (as the case may be) the Agent to be
material, then such Lender or the Agent may notify the Borrowers of such fact.
To the extent that the amount of such reduction in the return on capital is not
reflected in the Base Rate or in other amounts payable hereunder, the Borrowers
agree to pay such Lender or (as the case may be) the Agent for the amount of
such reduction in the return on capital as and when such reduction is determined
upon presentation by such Lender or (as the case may be) the Agent of a
certificate in accordance with Section 5.9 hereof (but not earlier than the
effective date of any reduction). Nothing contained in this Section 5.8 shall be
deemed to require the Borrowers to pay the amount of any reduction in the return
on capital to the extent that the Borrowers have compensated such Lender or the
Agent for such reduction by paying additional costs pursuant to Section 5.7;
provided, further, that the Borrowers shall have no obligation to pay any
portion of the amount of any reduction in the return on capital incurred by such
Lender or (as the case may be) the Agent more than sixty (60) days prior to any
notice, given by such Lender or (as the case may be) the Agent to the Borrowers,
of the incurrence of such reduction in the return on capital.
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5.9. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Section Section 5.7 or 5.8 and a brief explanation of such
amounts which are due, submitted by any Lender or the Agent to the Borrowers,
shall be conclusive, absent manifest error, that such amounts are due and owing.
5.10. INDEMNITY. The Borrowers jointly and severally agree to indemnify
each Lender and to hold each Lender harmless from and against any loss, cost or
expense (including loss of anticipated profits) that such Lender may sustain or
incur as a consequence of (i) default by the Borrowers in payment of the
principal amount of or any interest on any Eurodollar Rate Loans as and when due
and payable, including any such loss or expense arising from interest or fees
payable by such Lender to lenders of funds obtained by it in order to maintain
its Eurodollar Rate Loans, (ii) default by the Borrowers in making a borrowing
or conversion after the Borrowers have given (or are deemed to have given) a
Loan Request or a Conversion Request relating thereto in accordance with Section
2.6 or Section 2.7 or (iii) the making of any payment of a Eurodollar Rate Loan
or the making of any conversion of any such Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Lender to lenders of funds obtained
by it in order to maintain any such Loans.
5.11. INTEREST AFTER DEFAULT. During the continuance of an Event of
Default, overdue principal on the Loans, (to the extent permitted by applicable
law) interest on the Loans, other overdue amounts payable hereunder, and
principal of the Loans not overdue shall, until such Event of Default has been
cured or remedied or such Event of Default has been waived by the Majority
Lenders pursuant to Section 26, bear interest at a rate per annum equal to two
percent (2%) above the Base Rate.
5.12. INTEREST LIMITATION. Notwithstanding any other term of this Credit
Agreement, any Note or any other Loan Documents, the maximum amount of interest
which may be charged to or collected from any Person liable hereunder or under
any Note by the Lenders, shall be absolutely limited to, and shall in no event
exceed, the maximum amount of interest (the "Maximum Rate") which could lawfully
be charged or collected under applicable law (including, to the extent
applicable, the provisions of Section 5197 of the Revised Statutes of the United
States of America, as amended, 12 U.S.C. Section 85, as amended), so that the
maximum of all amounts constituting interest under applicable law, howsoever
computed, shall never exceed as to any Person liable therefor the Maximum Rate,
and any term of this Credit Agreement, any Note or any other Loan Document which
could be construed as providing for interest in excess of such lawful maximum
shall be and hereby is made expressly subject to and modified by the provisions
of this paragraph. If, in any month, the effective interest rate on any amounts
owing pursuant to this Credit Agreement, the Notes or any of the other Loan
Documents, absent the Maximum Rate limitation contained herein, would have
exceeded the Maximum Rate, and if in any future month, such effective interest
rate would otherwise be less than the Maximum Rate,
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then the effective interest rate for such month shall be increased to the
Maximum Rate until such time as the amount of interest paid hereunder equals the
amount of interest which would have been paid if the same had not been limited
by the Maximum Rate. In the event that a court of competent jurisdiction shall,
notwithstanding the provisions of this Section 5.12, determine that the Lenders
have received interest hereunder or under any of the Loan Documents in excess of
the Maximum Rate, such excess shall, to the extent permitted by applicable law,
be applied first to any interest not in excess of the Maximum Rate then due and
not yet paid, then to the outstanding principal of the Loans (without premium or
penalty), then to fees and any other unpaid Obligations and thereafter shall be
refunded to the Borrowers or as a court of competent jurisdiction may otherwise
order. In the event that, upon payment in full of the Obligations, the total
amount of interest paid or accrued under the terms of this Credit Agreement is
less than the total amount of interest which would have been paid or accrued had
the interest not been limited hereby to the Maximum Rate, then the Borrowers
shall, to the extent permitted by such applicable federal, state or other law,
pay to the Lenders hereunder or under the Notes an amount equal to the excess,
if any, of (a) the lesser of (i) the amount of interest which would have been
charged if the Maximum Rate had, at all times, been in effect with respect to
the Obligations hereunder or under the Notes and (ii) the amount of interest
which would have accrued had the applicable effective interest rate not been
limited hereunder by the Maximum Rate over (b) the amount of interest actually
paid or accrued under this Credit Agreement.
5.13. PERFORMANCE ADJUSTMENTS. Based upon, and following receipt by the
Lenders of (a) beginning with the Borrowers' financial statements as hereafter
described for the fiscal quarter of the Borrowers ending closest to July 31,
1996, (i) with respect to the first three fiscal quarters of each fiscal year,
the Borrowers' quarterly unaudited consolidated financial statements pursuant to
Section 8.4(b) and (ii) with respect to the last fiscal quarter of each fiscal
year, the Borrowers' annual audited consolidated financial statements pursuant
to Section 8.4(a), and (b) a certificate of the Borrowers setting forth
calculations of the financial information set forth below, (the Borrowers also
hereby agreeing to provide to the Agent, simultaneously with the delivery of
such certificate, telephonic notice of any Performance Adjustments based upon
such calculations), the Base Rate Applicable Margin, the Eurodollar Applicable
Margin, the Letter of Credit Fee Rate and the Commitment Fee Rate shall be
subject to possible adjustment in accordance with the provisions of this
paragraph (each such adjustment, a "Performance Adjustment"). Performance
Adjustments shall be effective (the date of the effectiveness of any Performance
Adjustment, a "Performance Adjustment Date") with respect to adjustments to the
Base Rate Applicable Margin, the Eurodollar Applicable Margin, the Letter of
Credit Fee Rate and the Commitment Fee Rate, three (3) Business Days following
receipt by the Agent of (x) (i) with respect to the first three fiscal quarters
of each fiscal year, the Borrowers'
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quarterly unaudited consolidated financial statements pursuant to Section 8.4(b)
and (ii) with respect to the last fiscal quarter of each fiscal year, the
Borrowers' annual audited consolidated financial statements pursuant to Section
8.4(a), and (y) a certificate of the Borrowers setting forth calculations of the
financial information set forth below (the Borrowers also hereby agreeing to
provide to the Agent, simultaneously with the delivery of such certificate,
telephonic notice of any Performance Adjustments based upon such calculations).
The Base Rate Applicable Margin, the Eurodollar Applicable Margin, the Letter of
Credit Fee Rate and the Commitment Fee Rate with respect to any period following
any Performance Adjustment Date until the next succeeding Performance Adjustment
Date shall be as set forth in the table below on the line furthest down in such
table with respect to which the Borrowers shall have equaled or exceeded, for
the period of four consecutive fiscal quarters most recently ended, both the
minimum amount of Consolidated EBITDA and the minimum ratio of Consolidated
EBITDA to Consolidated Total Debt Service, set forth on such line in such table:
CONSOLIDATED
EBITDA TO
CONSOLIDATED BASE RATE EURODOLLAR LETTER OF
CONSOLIDATED TOTAL DEBT APPLICABLE APPLICABLE CREDIT FEE COMMITMENT
EBITDA SERVICE RATIO MARGIN MARGIN RATE FEE RATE
- ------------ ------------- ---------- ---------- ---------- -----------
$70MM 2.0:1.0 1.00% 2.25% 1.50% 0.50%
$90MM 3.0:1.0 0.75% 2.00% 1.25% 0.375%
$100MM 3.5:1.0 0.25% 1.75% 1.00% 0.375%
$120MM 4.5:1.0 0.00% 1.50% 0.75% 0.250%
5.14. CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Lenders and the Agent
under this Credit Agreement, for the mutual benefit, directly and
indirectly, of each of the Borrowers and in consideration of the
undertakings of the other Borrower to accept joint and several liability
for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also
as a co-debtor, joint and several liability with the other Borrower, with
respect to the payment and performance of all of the Obligations
(including, without limitation, any Obligations arising under this
Section 5.14), it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of each of the
Borrowers without preferences or distinction among them.
(c) If and to the extent that either of the Borrowers shall fail
to make any payment with respect to any of the Obligations as and when
due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event the other Borrower will make such
payment with respect to, or perform, such Obligation.
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(d) The Obligations of each of the Borrowers under the provisions
of this Section 5.14 constitute the full recourse Obligations of each of
the Borrowers enforceable against each such corporation to the full
extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Credit Agreement or the other Loan
Documents or any other circumstance whatsoever as to the other Borrower.
(e) Except as otherwise expressly provided herein, each Borrower
hereby waives promptness, diligence, presentment, demand, protest, notice
of acceptance of its joint and several liability, notice of any and all
advances of the Loans made under this Credit Agreement and the Notes,
notice of occurrence of any Default or Event of Default (except to the
extent notice is expressly required to be given pursuant to the terms of
this Credit Agreement or any of the other Loan Documents), or of any
demand for any payment under this Credit Agreement, and notice of any
action at any time taken or omitted by the Agent or the Lenders under or
in respect of any of the Obligations hereunder. Each Borrower hereby
waives all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any
right to require the marshaling of assets of the Borrowers and any other
entity or Person primarily or secondarily liable with respect to any of
the Obligations, and all suretyship defenses generally. Each Borrower
hereby assents to, and waives notice of, any extension or postponement of
the time for the payment, or place or manner for payment, compromise,
refinancing, consolidation or renewals of any of the Obligations
hereunder, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by the Agent and the Lenders at
any time or times in respect of any default by either Borrower in the
performance or satisfaction of any term, covenant, condition or provision
of this Credit Agreement and the other Loan Documents, any and all other
indulgences whatsoever by the Agent and the Lenders in respect of any of
the Obligations hereunder, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security for
any of such Obligations or the addition, substitution or release, in
whole or in part, of either Borrower or any other entity or Person
primarily or secondarily liable for any Obligation. Such Borrower further
agrees that its Obligations shall not be released or discharged, in whole
or in part, or otherwise affected by the adequacy of any rights which the
Agent or any Lender may have against any collateral security or other
means of obtaining repayment of any of the Obligations, the impairment of
any collateral security securing the Obligations, including, without
limitation, the failure to protect or preserve any rights which the Agent
or any Lender may have in such collateral security or the substitution,
exchange, surrender, release, loss or destruction of any such collateral
security, any other act or omission which might in any manner or to any
extent vary the risk of such Borrower, or otherwise operate as a release
or
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discharge of such Borrower, all of which may be done without notice to
such Borrower; provided, however, that the foregoing shall in no way be
deemed to create commercially unreasonable standards as to the Agent's
duties as secured party under the Loan Documents (as such rights and
duties are set forth therein). If for any reason either of the Borrowers
has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become
irrecoverable from either of the Borrowers by reason of such Borrower's
insolvency, bankruptcy or reorganization or by other operation of law or
for any reason, this Credit Agreement and the other Loan Documents to
which it is a party shall nevertheless be binding on the other Borrower
to the same extent as if such Borrower at all times had been the sole
obligor on such Obligations. Without limiting the generality of the
foregoing, each Borrower assents to any other action or delay in acting
or failure to act on the part of the Agent and the Lenders, including,
without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder which might, but for the provisions of this
Section 5.14, afford grounds for terminating, discharging or relieving
such Borrower, in whole or in part, from any of its obligations under
this Section 5.14, it being the intention of each Borrower that, so long
as any of the Obligations hereunder remain unsatisfied, the obligations
of such Borrower under this Section 5.14 shall not be discharged except
by performance and then only to the extent of such performance. The
Obligations of each Borrower under this Section 5.14 shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with
respect to either Borrower, or any of the Lenders. The joint and several
liability of the Borrowers hereunder shall continue in full force and
effect notwithstanding any absorption, merger, amalgamation or any other
change whatsoever in the name, ownership, membership, constitution or
place of formation of either Borrower or the Lenders. Each of the
Borrowers acknowledges and confirms that it has itself established its
own adequate means of obtaining from the other Borrower on a continuing
basis all information desired by such Borrower concerning the financial
condition of the other Borrower and that each such Borrower will look to
the other Borrower and not to the Agent or any Lender in order for such
Borrower to keep adequately informed of changes in the other Borrower's
financial condition.
(f) The provisions of this Section 5.14 are made for the benefit
of the Lenders and the Agent and their respective successors and assigns,
and may be enforced by it or them from time to time against either or
both of the Borrowers as often as occasion therefor may arise and without
requirement on the part of the Lenders or the Agent or such successor or
assign first to marshall any of its or their claims or to exercise any of
its or their rights against the other Borrower or to exhaust any remedies
available to it or them
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against the other Borrower or to resort to any other source or means of
obtaining payment of any of the Obligations hereunder or to elect any
other remedy. The provisions of this Section 5.14 shall remain in effect
until all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made
in respect of any of the Obligations, is rescinded or must otherwise be
restored or returned by any Lender or the Agent upon the insolvency,
bankruptcy or reorganization of either of the Borrowers, or otherwise,
the provisions of this Section 5.14 will forthwith be reinstated in
effect, as though such payment had not been made.
(g) Each of the Borrowers hereby agrees that it will not enforce
any of its rights of reimbursement, contribution, subrogation or the like
against the other Borrower with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by
it to any of the Lenders or the Agent with respect to any of the
Obligations or any collateral security therefor until such time as all of
the Obligations have been irrevocably paid in full in cash. Any claim
which either Borrower may have against the other Borrower with respect to
any payments to the Lenders or the Agent hereunder or under any other
Loan Documents are hereby expressly made subordinate and junior in right
of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full of the
Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding
under the laws of any jurisdiction relating to either Borrower, its debts
or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full before any payment or distribution of any
character, whether in cash, securities or other property, shall be made
to the other Borrower therefor.
(h) Each of the Borrowers hereby agrees that the payment of any
amounts due with respect to the indebtedness owing by either Borrower to
the other Borrower is hereby subordinated to the prior payment in full in
cash of the Obligations. Each Borrower hereby agrees that after the
occurrence and during the continuance of any Default or Event of Default,
such Borrower will not demand, sue for or otherwise attempt to collect
any indebtedness of the other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by such Borrower as trustee for the Agent and be
paid over to the Agent for the pro rata accounts of the Lenders to be
applied to repay the Obligations.
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6. COLLATERAL SECURITY.
6.1. SECURITY OF BORROWERS. The Obligations shall be secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in the following assets, whether now
owned or hereafter acquired, pursuant to the terms of the Security Documents:
(a) at all times prior to the payment in full in cash of all of the Debenture
Debt, substantially all of the assets of the Borrowers and the Designated
Subsidiaries, whether now owned or hereafter acquired, but excluding (i)
inventory on consignment from trade vendors and proceeds of such inventory in
which such trade vendors have a perfected security interest, up to the cost
thereof to such Borrower or such Designated Subsidiary, (ii) subject to the
requirements of Section 6.2 below, all ZFT Receivables transferred by such
Borrower or such Designated Subsidiary to ZFT pursuant to the Receivables
Securitization Facility Documents, and (iii) retail store leases, and (b) at all
times following the payment in full in cash of all of the Debenture Debt, (i)
all inventory of the Borrowers (but excluding inventory on consignment from
trade vendors and proceeds of such inventory in which such trade vendors have a
perfected security interest, up to the cost thereof to the Borrowers), (ii) all
accounts, including accounts receivable, of the Borrowers (but excluding,
subject to the requirements of Section 6.2 below, all ZFT Receivables
transferred by the Borrowers to ZFT pursuant to the Receivables Securitization
Facility Documents) and (iii) all Indebtedness of the Designated Subsidiaries to
the Borrowers. In addition, without in any way limiting the foregoing, the
Borrowers may elect to have the Obligations secured, following the payment in
full in cash of the Debenture Debt, by first priority (subject only to Permitted
Liens entitled to priority under applicable law) perfected security interests in
the inventory of Zale Puerto Rico and/or Dobbins pursuant to collateral security
arrangements and documents reasonably satisfactory in form and substance to the
Agent, including without limitation, such documents which the Agent shall deem
necessary or advisable to obtain or perfect such security interests under the
laws of Puerto Rico and/or Guam, and the Agent agrees to take all reasonable
steps to cooperate with the Borrowers in establishing such collateral security
arrangements.
6.2. ZFT RECEIVABLES. As more fully described in the Security Documents,
the Lenders shall have no right, title or interest in or to any ZFT Receivables
which, prior to the occurrence of a Receivables Release Termination Date, have
been transferred to ZFT or any Receivables Securitization Subsidiary; provided,
however, that nothing contained herein or in the Security Documents shall be
deemed to constitute a release of or in any way negate the security interest of
the Agent, for the benefit of the Lenders, in (a) any rights which the Borrowers
may have under the Receivables Securitization Facility Documents, and (b) any
accounts, or any proceeds or products thereof, transferred to ZFT following the
occurrence of any Receivables Release Termination Date; and provided, further,
that the foregoing shall in no way limit the Agent's rights to, and the Agent
shall have a security interest in, all proceeds from the sale of ZFT Receivables
to ZFT or any other Receivables Securitization
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Subsidiary to which the Borrowers are entitled under the Receivables
Securitization Facility Documents.
6.3. RELEASES OF SECURITY.
(a) Upon the payment in full in cash of the Debenture Debt, so
long as no Default or Event of Default shall have occurred and be
continuing, the Joint Collateral Security Agreement, the Mortgages, the
Trademark Assignments, the Trademark Security Agreement, the Stock Pledge
Agreements, and the Puerto Rican Security Documents shall automatically,
and without the requirement for any action on the part of any party
thereto, terminate and thereafter be of no force or effect whatsoever,
and, within thirty (30) days following a request by the Borrowers to the
Collateral Agent following the payment in full in cash of the Debenture
Debt, so long as no Default or Event of Default shall have occurred and
be continuing, the Collateral Agent shall execute and deliver to the
Borrowers all such documents, agreements, instruments and releases and
take such other and further action as the Borrowers, or either of them,
may reasonably request and as are necessary to evidence the full and
final release of all liens, claims, charges, security interests,
mortgages and encumbrances which the Collateral Agent has in any property
of any of the Borrowers or the Designated Subsidiaries other than the
property which is intended to constitute security following the payment
in full of the Debenture Debt as provided by Section 6.1 hereof and by
the Lender Security Agreement, including, without limitation, execution,
delivery and filing of partial releases or amendments of Uniform
Commercial Code financing statements; redelivery of all certificates
representing pledged stock or trust certificates, notes and any other
instruments delivered to the Collateral Agent; execution, delivery and
filing of the appropriate document or documents to release the security
interest under the Trademark Assignments and the Trademark Security
Agreement; and execution, delivery and filing of mortgage discharges or
other documents sufficient to evidence the release of the Mortgages.
(b) The Agent, the Collateral Agent and the Lenders hereby agree,
so long as no Default or Event of Default shall have occurred and be
continuing, to release their security interests in any and all of the
agreed upon collateral described in Section 6.1 above within thirty days
after the Agent, the Collateral Agent and the Lenders shall have received
from the Borrowers evidence reasonably satisfactory to the Agent, the
Collateral Agent and the Lenders in all respects (the "Collateral Release
Date") of the occurrence of either of the following events:
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(i) the Borrowers shall have an implied Senior Debt Rating
of either BBB-, if rated by Standard & Poor's Corporation, or
Baa3, if rated by Moody's Investors Services, Inc.; or
(ii) as of two consecutive fiscal quarter ending dates,
with respect to the respective periods of four consecutive fiscal
quarters of Zale and its Subsidiaries ending on such fiscal
quarter ending dates, Zale and its Subsidiaries, on a consolidated
basis, shall have both (i) Consolidated EBITDA of at least
$100,000,000 for each of such two periods of four consecutive
fiscal quarters, and (ii) a ratio of Consolidated EBITDA to
Consolidated Total Debt Service of at least 3.5 to 1.0 for each of
such two periods of four consecutive fiscal quarters.
Following the occurrence of the Collateral Release Date, within thirty
(30) days of any request therefor of the Borrowers, or either of them,
the Collateral Agent shall execute and deliver to the Borrowers all such
documents, agreements, instruments and releases and take such other and
further action as the Borrowers, or either of them, may reasonably
request and as are necessary to evidence the full and final release of
all liens, claims, charges, security interests, mortgages and
encumbrances which the Collateral Agent has in any property of any of the
Borrowers or the Designated Subsidiaries, including, without limitation,
execution, delivery and filing of termination statements with respect to
Uniform Commercial Code financing statements.
Notwithstanding the foregoing provisions of this Section 6.3, following any such
releases of collateral security pursuant to this Section 6.3, the prohibition on
the Borrowers' and the Designated Subsidiaries' ability to grant liens or
encumbrances on any of their assets, as set forth more fully in Section 9.2
below, shall continue to apply.
7. REPRESENTATIONS AND WARRANTIES.
The Borrowers represent and warrant to the Lenders and the Agent as
follows:
7.1. CORPORATE AUTHORITY.
7.1.1. INCORPORATION; GOOD STANDING. Each of the Borrowers and the
Designated Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state or jurisdiction
of incorporation, (ii) has all requisite corporate power to own its
property and conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation and
is duly authorized to do business in each jurisdiction where such
qualification is necessary except where a failure to be so qualified
would not have a materially adverse effect
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on the business, assets or financial condition of the Borrowers and the
Designated Subsidiaries considered as a whole.
7.1.2. AUTHORIZATION. The execution, delivery and performance of
this Credit Agreement and the other Loan Documents to which either of the
Borrowers is or is to become a party and the transactions contemplated
hereby and thereby (i) are within the corporate authority of such Person,
(ii) have been duly authorized by all necessary corporate proceedings,
(iii) do not violate or result in any breach or contravention of any
provision of law, statute, rule or regulation to which either of the
Borrowers is subject or any judgment, order, writ, injunction, license or
permit applicable to either of the Borrowers, in each case where such
violation, breach or contravention would reasonably be expected to have a
materially adverse effect on the business or financial condition of the
Borrowers and the Designated Subsidiaries, considered as a whole, or on
the ability of either of the Borrowers to perform its obligations
hereunder or under any of the other Loan Documents, and (iv) do not
violate any provision of the corporate charter or bylaws of, or any
agreement or other instrument binding upon, either of the Borrowers.
7.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which either of the Borrowers
is or is to become a party will result in valid and legally binding
obligations of such Person enforceable against it in accordance with the
respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief
is subject to the discretion of the court before which any proceeding
therefor may be brought.
7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
the Borrowers of this Credit Agreement and the other Loan Documents to which
either of the Borrowers is or is to become a party and the transactions
contemplated hereby and thereby do not require the approval or consent of, or
filing with, any governmental agency or authority other than those already
obtained.
7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 7.3
hereto, the Borrowers and the Designated Subsidiaries own all of the assets
reflected in the consolidated balance sheet of Zale and its Subsidiaries as at
the Balance Sheet Date or acquired since that date (except property and assets
sold or otherwise disposed of in the ordinary course of business and other
property sold as permitted by Section 9.5.2 hereof since that date), subject to
no rights of others, including any mortgages, leases, conditional sales
agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
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7.4. FINANCIAL STATEMENTS AND PROJECTIONS.
7.4.1. FINANCIAL STATEMENTS. There have been furnished to each of
the Lenders (a) a consolidated balance sheet of Zale and its Subsidiaries
as at the Balance Sheet Date, and a consolidated statement of income and
consolidated statement of cash flow of Zale and its Subsidiaries for the
fiscal year then ended, certified by Arthur Andersen & Co. and (b) an
unaudited consolidated balance sheet of Zale and its Subsidiaries as at
April 30, 1995, and an unaudited consolidated statement of income and
consolidated statement of cash flow of Zale and its Subsidiaries for the
period of three fiscal quarters then ended. Such balance sheets,
statements of income and statements of cash flow have been prepared in
accordance with generally accepted accounting principles and fairly
present the financial condition of Zale and its Subsidiaries as at the
close of business on the dates thereof and the results of operations for
the periods then ended, subject, in the case of such unaudited
consolidated balance sheet, unaudited consolidated statement of income
and unaudited consolidated statement of cash flow, to year-end
adjustments, and except that there are no notes to such financial
statements. There are no contingent liabilities of Zale or any of its
Subsidiaries as of such dates involving material amounts, known to the
officers of either of the Borrowers, which were not disclosed in such
balance sheets and the notes related thereto.
7.4.2. PROJECTIONS. The projections of the annual operating
budgets of Zale and its Subsidiaries on a consolidated basis, balance
sheets and cash flow statements for the 1996 to 1998 fiscal years, copies
of which have been delivered to each Lender, have been prepared in good
faith, are based upon estimates and assumptions which the Borrowers deem
reasonable as of the date hereof, have been prepared on the basis of the
assumptions stated therein and reflect the reasonable estimates of Zale
and its Subsidiaries of the results of operations and other information
projected therein.
7.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition or business of
the Borrowers and the Designated Subsidiaries as shown on or reflected in the
consolidated balance sheet of Zale and its Subsidiaries as at the Balance Sheet
Date, or the consolidated statement of income for the fiscal year then ended,
other than changes in the ordinary course of business that have not had any
materially adverse effect on the business or financial condition of the
Borrowers and the Designated Subsidiaries considered as a whole. Except as
contemplated by the Plan and with respect to the Litigation Entity, since the
Balance Sheet Date, none of the Borrowers or the Designated Subsidiaries has
made any Distribution other than Distributions permitted by the Prior Credit
Agreement or by Section 9.4 hereof.
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7.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrowers and the
Designated Subsidiaries possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits, and rights in respect of the
foregoing, adequate for the conduct of its business substantially as now
conducted without known conflict with any rights of others except where the
failure to possess any such franchise, patent, copyright, trademark, trade name,
license, permit or right, or where such conflict, would not reasonably be
expected to have a materially adverse effect on the business or financial
condition of the Borrowers and the Designated Subsidiaries considered as a
whole.
7.7. LITIGATION. Except as set forth in Schedule 7.7 hereto or as
otherwise disclosed in writing by the Borrowers to the Agent and the Lenders,
there are no actions, suits, proceedings or investigations of any kind pending
or threatened against any of the Borrowers or the Designated Subsidiaries before
any court, tribunal or administrative agency or board that, if adversely
determined, (i) would reasonably be expected to, either in any case or in the
aggregate, materially adversely affect the properties, assets, financial
condition or business of the Borrowers and the Designated Subsidiaries,
considered as a whole, or materially impair the right of the Borrowers and the
Designated Subsidiaries, considered as a whole, to carry on business
substantially as now conducted by them, or (ii) would reasonably be expected to
result in the making of any cash payments by any of the Borrowers or the
Designated Subsidiaries or any combination of any of the Borrowers or the
Designated Subsidiaries in excess of $1,000,000 in any single case or $5,000,000
in the aggregate, which payment or payments is or are (A) not adequately covered
by insurance, (B) not adequately reserved against on the consolidated balance
sheet of Zale and its Subsidiaries, or (C) not able to be discharged in any
manner other than through the making of a cash payment, or (iii) which question
the validity of this Credit Agreement or any of the other Loan Documents, or any
action taken or to be taken pursuant hereto or thereto.
7.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Borrowers or any
Designated Subsidiary is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or is
expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Borrowers and the Designated Subsidiaries,
considered as a whole. None of the Borrowers or any Designated Subsidiary is a
party to any contract or agreement that has or is expected, in the judgment of
the Borrowers' officers, to have any materially adverse effect on the business
of the Borrowers and the Designated Subsidiaries considered as a whole.
7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the Borrowers
or any Designated Subsidiary is in violation of any provision of its charter
documents, bylaws, or any agreement or instrument to which it may be subject or
by which it or any of its properties may be bound or any decree, order,
judgment,
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statute, license, rule or regulation, in any of the foregoing cases in a manner
that would reasonably be expected to materially and adversely affect the
financial condition, properties or business of the Borrowers and the Designated
Subsidiaries considered as a whole.
7.10. TAX STATUS. Except as set forth on Schedule 7.10 hereto, each of
the Borrowers and the Designated Subsidiaries (i) have made or filed all federal
and state income and all other tax returns, reports and declarations required by
any jurisdiction to which any of them is subject, except where the failure to so
file would not reasonably be expected to have a materially adverse effect on the
business or financial condition of the Borrowers and the Designated Subsidiaries
considered as a whole, (ii) have paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate
proceedings and (iii) have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. Except as set forth on
Schedule 7.10 hereto, and except for those being contested in good faith by
appropriate proceedings for which adequate reserves have been taken, there are
no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Borrowers know of no basis for any
such claim.
7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Borrowers
or any Designated Subsidiary is a "holding company", or a "subsidiary company"
of a "holding company", or an affiliate" of a "holding company", as such terms
are defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
7.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement signed by any of the Borrowers
or the Designated Subsidiaries, security agreement, chattel mortgage, real
estate mortgage or other document filed or to be filed following the Closing
Date or recorded with any filing records, registry or other public office, that
purports to cover, affect or give notice of any present or possible future lien
on, or security interest in, any assets or property of any of the Borrowers or
the Designated Subsidiaries or any rights relating thereto.
7.14. PERFECTION OF SECURITY INTEREST. Other than filings, notices or
other actions which may be required to perfect the security interests granted by
the Security Documents in deposit accounts which are not Store Concentration
Accounts,
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all filings, assignments, pledges and deposits of documents or instruments have
been made and all other actions have been taken that are necessary, under
applicable law, to establish and perfect the Collateral Agent's security
interest in the Collateral. The Collateral and the Collateral Agent's rights
with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses, except, with respect to Collateral consisting of
accounts or "layaway inventory", for setoffs, claims, withholdings or other
defenses in the ordinary course of the Borrowers' business. The Borrowers and/or
the Designated Subsidiaries are the owners of the Collateral free from any lien,
security interest, encumbrance and any other claim or demand, except for
Permitted Liens.
7.15. CERTAIN TRANSACTIONS. Except for transactions set forth on Schedule
7.15 hereto and other arm's length transactions pursuant to which any of the
Borrowers or the Designated Subsidiaries makes payments in the ordinary course
of business upon terms no less favorable than such Borrower or such Designated
Subsidiary could obtain from third parties, none of the officers, directors, or
employees of any of the Borrowers or the Designated Subsidiaries is presently a
party to any transaction with any of the Borrowers or the Designated
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrowers, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
7.16. EMPLOYEE BENEFIT PLANS.
7.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained
and operated in compliance in all material respects with the provisions
of ERISA and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited transactions.
The Borrowers have heretofore delivered to the Agent the most recently
completed, prior to the date hereof, annual report, Form 5500, with all
required attachments, and actuarial statement required to be submitted
under Section 103(d) of ERISA, with respect to each Guaranteed Pension
Plan.
7.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee
Benefit Plan which is an employee welfare benefit plan within the meaning
of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless
the event giving rise to the benefit entitlement occurs prior to plan
termination (except as required by Title I, Part 6 of ERISA). One of the
Borrowers or an ERISA Affiliate, as appropriate, may terminate each such
Employee Benefit Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining
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agreement) in the discretion of such Borrower or such ERISA Affiliate
without liability to any Person, except for benefit entitlements which
have occurred prior to such termination.
7.16.3. GUARANTEED PENSION PLANS. Each contribution required to be
made to a Guaranteed Pension Plan to avoid the incurrence of an
accumulated funding deficiency or the notice or lien provisions of
Section 302(f) of ERISA, and each other material contribution required to
be made to a Guaranteed Pension Plan, has been timely made. No waiver of
an accumulated funding deficiency or extension of amortization periods
has been received with respect to any Guaranteed Pension Plan. No
liability to the PBGC (other than required insurance premiums, all of
which have been paid) has been incurred by either of the Borrowers or any
ERISA Affiliate with respect to any Guaranteed Pension Plan and there has
not been any ERISA Reportable Event, or any other event or condition
which presents a material risk of termination of any Guaranteed Pension
Plan by the PBGC. Based on the latest valuation of each Guaranteed
Pension Plan (which in each case occurred within twelve months of the
date of this representation), and on the actuarial methods and
assumptions employed for that valuation, the aggregate benefit
liabilities of all such Guaranteed Pension Plans within the meaning of
Section 4001 of ERISA did not exceed the aggregate value of the assets of
all such Guaranteed Pension Plans, disregarding for this purpose the
benefit liabilities and assets of any Guaranteed Pension Plan with assets
in excess of benefit liabilities, by more than $1,000,000.
7.16.4. MULTIEMPLOYER PLANS. Neither the Borrowers nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as
a result of a sale of assets described in Section 4204 of ERISA. Neither
the Borrowers nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within the
meaning of Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
7.17. REGULATIONS U AND X. The proceeds of the Loans shall be used to
refinance the Borrowers' obligations under the Prior Credit Agreement, for
repurchasing certain warrants with respect to the capital stock of Zale as
permitted hereby, for working capital and general corporate purposes, and, to
the extent necessary, to pay all or a portion of the outstanding amounts due in
respect of the Debentures (including prepayment premiums). The Borrowers will
obtain Letters of Credit solely for working capital and general corporate
purposes. Except with respect to repurchases by Zale of certain warrants with
respect to its capital stock as permitted by Section 9.4(b) hereof, no portion
of
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any Letter of Credit is to be obtained, for the purpose of purchasing or
carrying any "margin security" or "margin stock" as such terms are used in
Regulations U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R. Parts 221 and 224.
7.18. ENVIRONMENTAL COMPLIANCE.
The Borrowers have taken all reasonable steps to investigate the past
and present condition and usage of the Real Estate and the operations conducted
thereon and, based upon such diligent investigation, has determined that:
(a) none of the Borrowers, the Designated Subsidiaries or any
operator of the Real Estate or any operations thereon is in violation,
or alleged violation, of any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation,
ordinance, order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which violation would
reasonably be expected to have a materially adverse effect on the
business or financial condition of the Borrowers and the Designated
Subsidiaries considered as a whole;
(b) except as set forth on Schedule 7.18 attached hereto or in
the financial reports delivered to the Securities and Exchange
Commission and also provided to the Agent and the Lenders pursuant to
Section 8.4 or as otherwise disclosed in writing to the Agent and the
Lenders, none of the Borrowers or the Designated Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substances as defined by 42
U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that any of the Borrowers or the Designated
Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is
or shall be a
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named party to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(c) except as set forth on Schedule 7.18 attached hereto or in
the financial reports delivered to the Securities and Exchange
Commission and also provided to the Agent and the Lenders pursuant to
Section 8.4: (i) no portion of the Real Estate has been used, by either
Borrower or any Designated Subsidiary, or, to the Best of the
Borrowers' knowledge, any other Person, for the handling, processing,
storage or disposal of Hazardous Substances in violation of applicable
Environmental Laws which violation would reasonably be expected to have
a materially adverse effect on the business or financial condition of
the Borrowers and the Designated Subsidiaries considered as a whole;
and no underground tank or other underground storage receptacle for
Hazardous Substances is located on any portion of the Real Estate; (ii)
in the course of any activities conducted by the Borrowers, the
Designated Subsidiaries or operators of any of the Borrowers or the
Designated Subsidiaries' properties, no Hazardous Substances have been
generated or are being used on the Real Estate in violation of
applicable Environmental Laws which violation would reasonably be
expected to have a materially adverse effect on the business or
financial condition of the Borrowers and the Designated Subsidiaries
considered as a whole; (iii) there have been no releases (i.e. any past
or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of any of the Borrowers or the Designated Subsidiaries,
which releases would reasonably be expected to have a materially
adverse effect on the business or financial condition of the Borrowers
and the Designated Subsidiaries considered as a whole; (iv) to the best
of the Borrowers' knowledge, there have been no releases on, upon, from
or into any real property in the vicinity of any of the Real Estate
which, through soil or groundwater contamination, may have come to be
located on, and which would reasonably be expected to have a materially
adverse effect on the business or financial condition of the Borrowers
and the Designated Subsidiaries considered as a whole; and (v) in
addition, any Hazardous Substances that have been generated on any of
the Real Estate have, to the extent required by applicable law, been
transported offsite only by carriers having an identification number
issued by the EPA, treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable
Environmental Laws, which transporters and facilities have been and
are, to the best of the Borrowers' knowledge, operating in compliance
with such permits and applicable Environmental Laws; and
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(d) Based upon current or currently anticipated use of any
Real Estate, none of the Borrowers or the Designated Subsidiaries is
required under any applicable environmental law to perform Hazardous
Substances site assessments, or to undertake the removal or remediation
of Hazardous Substances at the Real Estate, or to give notice to any
governmental agency or undertake the recording or delivery to other
Persons of an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby, or as a
condition to the effectiveness of any other transactions contemplated
hereby.
7.19. SUBSIDIARIES, ETC. Schedule 7.19 hereto sets forth a true and
accurate description of the corporate structure and ownership of Zale and its
Subsidiaries. The Subsidiaries set forth on Schedule 7.19 hereto are the only
Subsidiaries of Zale and Zale Delaware. Except as set forth on Schedule 7.19
hereto, neither of the Borrowers nor any Subsidiary of either of the Borrowers
is engaged in any joint venture or partnership with any other Person.
7.20. BANK ACCOUNTS. Schedule 7.20 sets forth the Store
Concentration Accounts of each of the Borrowers and the Designated Subsidiaries.
7.21. ASSET LOCATIONS. Schedule 7.21 sets forth all locations other
than Permitted Inventory Locations at which assets, including inventory, of each
of the Borrowers and the Designated Subsidiaries are located. The aggregate book
value as of the Closing Date of all of the assets of Zale Puerto Rico and
Dobbins does not exceed $15,000,000.
8. AFFIRMATIVE COVENANTS OF THE BORROWERS.
Each of the Borrowers covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any
Lender has any obligation to make any Loans or the Agent has any obligation to
issue, extend or renew any Letters of Credit:
8.1. PUNCTUAL PAYMENT. The Borrowers will duly and punctually pay,
within any applicable grace periods, or cause to be paid the principal and
interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees,
the commitment fees, the Agent's fee and all other amounts provided for in this
Credit Agreement and the other Loan Documents to which either of the Borrowers
is a party, all in accordance with the terms of this Credit Agreement and such
other Loan Documents.
8.2. MAINTENANCE OF OFFICE. Each of the Borrowers will maintain its
chief executive office at 901 W. Walnut Hill Lane, Irving, Texas 75038-1003, or
at such other place in the United States of America as the Borrowers shall
designate upon 30 days' prior written notice to the Agent, where notices,
presentations and demands to
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or upon the Borrowers in respect of the Loan Documents to which either of the
Borrowers is a party may be given or made.
8.3. RECORDS AND ACCOUNTS. Each of the Borrowers will (i) keep, and
cause each of the Designated Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be made in
accordance with generally accepted accounting principles and (ii) maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of the Designated Subsidiaries, and contingencies.
8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. Each of the
Borrowers will deliver to each of the Agent and the Lenders:
(a) as soon as practicable, but in any event not later than
one hundred (100) days after the end of each fiscal year of Zale, (i)
the consolidated balance sheet of Zale and its Subsidiaries as at the
end of such year, and the related consolidated statement of income and
consolidated statement of cash flow for such year, each setting forth
in comparative form the figures for the previous fiscal year and all
such consolidated statements to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, and each of
such financial statements certified without qualification by Arthur
Andersen LLP or by another "big six" accounting firm or by other
independent certified public accountants reasonably satisfactory to the
Agent, and (ii) the annual 10-K reports of Zale filed with the
Securities and Exchange Commission;
(b) as soon as practicable, but in any event not later than
fifty (50) days after the end of each of the first three fiscal
quarters of each fiscal year of Zale, (i) copies of the unaudited
consolidated balance sheet of Zale and its Subsidiaries as at the end
of such quarter, and the related consolidated statement of income for
such quarter and for the portion of Zale's fiscal year then elapsed,
and the related consolidated statement of cash flow for the portion of
Zale's fiscal year then elapsed, all in reasonable detail and prepared
in accordance with generally accepted accounting principles, (ii) a
certification by such Financial Officer of each of the Borrowers that
the information contained in such management financial statements
fairly presents the financial position of Zale and its Subsidiaries on
the date thereof (subject to year-end adjustments), (iii) a narrative
discussion of the operating results of the Borrowers and each of their
divisions for the fiscal quarter most recently ended and the year to
date, as compared with the comparable period of the previous year, and
of the Borrowers' liquidity and capital resources at the end of such
period, and (iv) the quarterly 10-Q reports of Zale filed with the
Securities and Exchange Commission;
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(c) as soon as practicable, but in any event within thirty
(30) days after the end of each fiscal month which is not the last
month of a fiscal quarter of Zale, (i) unaudited monthly consolidated
balance sheet of Zale and its Subsidiaries as at the end of such fiscal
month, the related consolidated statement of income for such fiscal
month and for the portion of Zale's fiscal year then elapsed, and the
related consolidated statement of cash flow for the portion of Zale's
fiscal year then elapsed, each prepared by management of Zale on a
basis consistent with its method (existing as of the Closing Date) of
preparing management financial statements, and (ii) a certification by
a Financial Officer of each of the Borrowers that the information
contained in such management financial statements fairly presents the
financial condition of Zale and its Subsidiaries on the date thereof
(subject to year-end adjustments);
(d) (i) simultaneously with the delivery of the management
prepared financial statements referred to in subsections (b) and (c)
above, a variance report comparing, for each period (including the
portion of the fiscal year to date) covered by such financial
statements, such financial statements with (A) the annual budget of the
Borrowers, and (B) the financial statements of the Borrowers for the
comparable period during the prior fiscal year of the Borrowers, and
(ii) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by
a Financial Officer of each of the Borrowers in substantially the form
of Exhibit E hereto and setting forth in reasonable detail computations
evidencing compliance with the covenants contained in Section 10 (and
including calculations with respect to the financial information
required by Section 5.13 in connection with possible Performance
Adjustments) and (if applicable) reconciliations to reflect changes in
generally accepted accounting principles since the Balance Sheet Date;
(e) within ten (10) Business Days after the filing or mailing
thereof, copies of all material reports of a financial nature filed by
either of the Borrowers with the Securities and Exchange Commission or
sent to the stockholders of Zale (other than the annual 10-K reports
and the quarterly 10-Q reports of Zale delivered pursuant to Sections
8.4(a) and (b), respectively);
(f) monthly within thirty (30) days after the end of each
fiscal month, a Borrowing Base Report, in the form of Exhibit A hereto,
setting forth (i) the amount of Eligible Inventory and (ii) the
Borrowing Base, each as at the end of the fiscal month most recently
ended, together with supporting schedules and documentation, with each
such Borrowing Base Report to be accompanied by a certification by a
Financial Officer of each of the Borrowers that the information
contained in such Borrowing Base Report is true and accurate in all
material respects;
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(g) within thirty (30) days after the end of each fiscal
month, the monthly "Settlement Statement" of ZFT (the "Receivables
Purchase Report") for the immediately preceding fiscal month, prepared
in accordance with the requirements of the Receivables Securitization
Facility Documents and such other information with respect to purchase
and sale of ZFT Receivables pursuant to the Receivables Securitization
Facility Documents as the Agent shall request in the exercise of its
reasonable discretion;
(h) as soon as practicable and in any event by the fiftieth
(50th) day following the end of each fiscal quarter, the quarterly
performance package of JFS describing yields, delinquencies and such
other information relating to the performance of all accounts
receivable of Zale and its Subsidiaries, including ZFT Receivables, as
the Agent shall request;
(i) as soon as is practicable and in no event less frequently
than on an annual basis no later than sixty (60) days following the end
of each fiscal year of the Borrowers, the Borrowers shall deliver their
business plan, including the assumptions used in the preparation of
such business plan; and
(j) from time to time such other financial data and
information (including accountants and management letters) as the Agent
or any Lender may reasonably request.
8.5. NOTICES.
8.5.1. DEFAULTS. Each of the Borrowers will promptly notify
the Agent and each of the Lenders in writing of the occurrence of any
Default or Event of Default of which an officer of either of the
Borrowers has knowledge. If any Person shall give any notice or take
any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or under
any other note, evidence of indebtedness, indenture or other obligation
to which or with respect to which either of the Borrowers or any of the
Designated Subsidiaries is a party or obligor, whether as principal,
guarantor, surety or otherwise, and, in the case of any such other
note, evidence of indebtedness, indenture or other obligation, such
claimed default involves the payment of $250,000 or more, the Borrowers
shall forthwith give written notice thereof to the Agent and each of
the Lenders, describing the notice or action and the nature of the
claimed default.
8.5.2. ENVIRONMENTAL EVENTS. Each of the Borrowers will
give notice to the Collateral Agent, the Agent and each of the Lenders,
within thirty (30) days (i) of any violation of any Environmental Law
that any of the Borrowers or the Designated Subsidiaries reports in
writing or is reportable by such Person in writing (or for which any
written report supplemental to any oral report is made) to any federal,
state or local environmental agency which
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violation would reasonably be expected to have a materially adverse
effect on the business or financial condition of the Borrowers and the
Designated Subsidiaries considered as a whole and (ii) after an officer
of either of the Borrowers becomes or should have become aware thereof,
of any inquiry, proceeding, investigation, or other action, including a
notice from any agency of potential environmental liability, of any
federal, state or local environmental agency or board, that would
reasonably be expected to have a materially adverse effect on the
business or financial condition of the Borrowers and the Designated
Subsidiaries considered as a whole.
8.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. Each of
the Borrowers will, within fifteen (15) days after an officer of either
of the Borrowers becomes or should have become aware thereof, notify
the Collateral Agent, the Agent and each of the Lenders in writing of
any setoff, claims (including, with respect to the Real Estate,
environmental claims), withholdings or other defenses to which any of
the Collateral, or the Collateral Agent's rights with respect to the
Collateral, are subject other than any setoff, claim or other defense
in the ordinary course of the Borrowers' business with respect to the
Collateral which would not have a materially adverse effect on the
business or financial condition of the Borrowers and the Designated
Subsidiaries considered as a whole. Each of the Borrowers will,
promptly after an officer of either of the Borrowers becomes or should
have become aware thereof, notify each of the Collateral Agent, the
Agent and the Lenders in writing of any proposed sale or transfer of
any Permitted Inventory Location by the owner thereof.
8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. Each of the
Borrowers will, and will cause each of the Designated Subsidiaries to,
give notice to the Agent and each of the Lenders in writing within
fifteen (15) days after an officer of either of the Borrowers becomes
aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting any of the Borrowers or
the Designated Subsidiaries or to which any of the Borrowers or the
Designated Subsidiaries is or becomes a party involving an uninsured
claim against any of the Borrowers or the Designated Subsidiaries that
could reasonably be expected to have a materially adverse effect on the
Borrowers and the Designated Subsidiaries, considered as a whole, and
stating the nature and status of such litigation or proceedings. Each
of the Borrowers will, and will cause each of the Designated
Subsidiaries to, give notice to the Agent and each of the Lenders, in
writing, in form and detail reasonably satisfactory to the Agent,
within ten (10) days of any judgment not covered by insurance, final or
otherwise, against any of the Borrowers or the Designated Subsidiaries
in an amount in excess of $1,000,000.
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8.5.5. PERMITTED INVENTORY LOCATIONS. The Borrowers will
deliver to the Agent, within thirty (30) days following the end of each
fiscal month of the Borrowers, a supplement to Schedule 2 hereto,
updating the list of retail stores and distribution centers of Zale
Delaware and the Designated Subsidiaries located in the United States,
Puerto Rico and Guam, which supplement, together with Schedule 2 hereto
and any prior supplements, shall be deemed to constitute Schedule 2 for
all purposes of this Credit Agreement.
8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the
Borrowers will do or cause to be done all things necessary to preserve and keep
in full force and effect its (except as otherwise permitted by Section 9.5
hereof) corporate existence, and its rights and franchises and those of the
Designated Subsidiaries and will not, and will not cause or permit any of the
Designated Subsidiaries to, convert to a limited liability company. Each of the
Borrowers (i) will cause all of its material properties and those of the
Designated Subsidiaries used or useful in the conduct of its business or the
business of its Subsidiaries to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment, (ii) will, within
thirty (30) days of any need therefor, cause to be made or, if not practicable
to be completed within such thirty (30) day period, commenced (so long as such
Borrower or Designated Subsidiary diligently causes and continues to cause to be
made) all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Borrowers may be necessary
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times, and (iii) will, and will cause each of
the Designated Subsidiaries to, continue to engage primarily in the businesses
now conducted by them and in related businesses; provided that nothing in this
Section 8.6 shall prevent the Borrowers from discontinuing the operation and
maintenance of any of its properties or any of those of the Designated
Subsidiaries if such discontinuance is, in the judgment of either of the boards
of directors of the Borrowers, desirable in the conduct of its or their business
and that do not in the aggregate materially adversely affect the business of the
Borrowers and the Designated Subsidiaries on a consolidated basis.
8.7. INSURANCE.
8.7.1. INSURANCE. Each of the Borrowers will, and will
cause each of the Designated Subsidiaries to, maintain with
financially sound and reputable insurers insurance with respect to
its properties and business against such casualties and contingencies
as shall be in accordance with the general practices of businesses
engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as
may be reasonable and prudent and in accordance with the terms of the
Security Documents.
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8.7.2. EVIDENCE OF INSURANCE. Contemporaneously with the
execution of this Credit Agreement, and within fifteen (15) days of any
date when any additional or replacement insurance coverage is obtained
to the extent provided in the Lender Security Agreement, each of the
Borrowers and each of the Designated Subsidiaries, as the case may be,
shall deliver to the Collateral Agent true copies of certificates of
insurance with respect to such additional insurance or replacement
policies and, upon request and to the extent not previously delivered
to the Collateral Agent, copies of the original insurance policies
evidencing such additional or replacement insurance, which certificates
and policies (i) in the case of property and casualty policies, shall
contain an endorsement or rider naming the Collateral Agent, for the
benefit of the Lenders and the Agent, as a loss payee and additional
insured, and (ii) in the case of liability policies, shall contain an
endorsement or rider naming the Collateral Agent, for the benefit of
the Lenders and the Agent, as an additional insured, with each such
policy providing that such insurance shall not be canceled or amended
without thirty (30) days prior written notice to the Collateral Agent.
8.8. TAXES. Except as to amounts which, in the aggregate, are not
material in amount, each of the Borrowers will, and will cause each of the
Designated Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all federal, state, local and
foreign taxes, levies, assessments and other governmental charges imposed upon
it and its real properties, sales and activities, or any part thereof, or upon
the income or profits therefrom, as well as all claims for labor, materials, or
supplies that if unpaid might by law become a lien or charge upon any of its
property; provided that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if such Borrower or such Designated
Subsidiary shall have set aside on its books adequate reserves with respect
thereto; and provided further that, unless a stay is in effect, each of the
Borrowers and each Designated Subsidiary will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
8.9.1. GENERAL. Each of the Borrowers will permit the Agent
and its agents (including consultants), during regular business hours,
to visit the premises of any of the Borrowers or the Designated
Subsidiaries, confer with officers of any of the Borrowers or the
Designated Subsidiaries and representatives of any of the Borrowers or
the Designated Subsidiaries, review all of the books and records of any
of the Borrowers or the Designated Subsidiaries (to the extent not
privileged, and if any materials are privileged, subject to the Agent's
ability to discuss with any of the Borrowers or the
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Designated Subsidiaries and their professional advisors the matters
covered by such privileged materials) and conduct examinations and
verifications of the components of the Borrowing Base, the other assets
of any of the Borrowers or the Designated Subsidiaries and all systems
and procedures of any of the Borrowers or the Designated Subsidiaries,
including those relating to cash management.
8.9.2. COLLATERAL REPORTS. No more frequently than once
each calendar year, or more frequently as reasonably determined by the
Agent if an Event of Default shall have occurred and be continuing,
upon the request of the Agent, the Borrowers will obtain and deliver
to the Agent a report of an independent collateral auditor or appraiser
satisfactory to the Agent (which auditor or appraiser may be affiliated
with one of the Lenders) with respect to the inventory components
included in the Borrowing Base, which report shall indicate (i) whether
or not the information set forth in the Borrowing Base Report most
recently delivered is accurate and complete in all material respects
based upon a review by such auditor of the inventory (including
verification as to the value, location and respective types) or (ii) in
the case of an appraisal report by a collateral appraiser, shall state
the then current fair market, orderly liquidation and forced
liquidation values of all or any portion of the inventory owned by the
Borrowers. All such collateral value reports shall be conducted and
made at the expense of the Borrowers.
8.9.3. COMMUNICATIONS WITH ACCOUNTANTS. Each of the
Borrowers authorizes the Agent and, if accompanied by the Agent, the
Lenders to communicate directly with the Borrowers' independent
certified public accountants and authorizes such accountants to
disclose to the Agent and the Lenders any and all financial statements
and other supporting financial documents and schedules including copies
of any management letter with respect to the business and financial
condition of any of the Borrowers or the Designated Subsidiaries. At
the request of the Agent, the Borrowers shall deliver a letter
addressed to such accountants instructing them to comply with the
provisions of this Section 8.9.3.
8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
Each of the Borrowers will, and will cause each of the Designated Subsidiaries
to, (a) comply with (unless failure to so comply would not have a materially
adverse effect on the business or financial condition of the Borrowers and the
Designated Subsidiaries considered as a whole) (i) the applicable laws and
regulations wherever its business is conducted, including all Environmental
Laws, (ii) all agreements and instruments by which it or any of its properties
may be bound and (iii) all applicable decrees, orders, and judgments, and (b)
comply with the provisions of its charter documents and by-laws. If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or
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required in order that either of the Borrowers may fulfill any of its
obligations hereunder or under any of the other Loan Documents to which either
of the Borrowers is a party, the Borrowers will promptly take or cause to be
taken all reasonable steps within the power of the Borrowers to obtain such
authorization, consent, approval, permit or license and furnish the Agent and
the Lenders with evidence thereof.
8.11. EMPLOYEE BENEFIT PLANS. The Borrowers will (i) promptly upon
any request of the Agent therefor, furnish to the Agent a copy of the most
recent actuarial statement required to be submitted under Section 103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in respect of
each Guaranteed Pension Plan and (ii) within ten (10) days of receipt or
dispatch, furnish to the Agent any notice, report or demand sent or received in
respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063,
4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under
Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
8.12. USE OF PROCEEDS. The Borrowers will use the proceeds of the
Loans solely for refinancing the Borrowers' obligations under the Prior Credit
Agreement, for repurchasing certain warrants with respect to the capital stock
of Zale as permitted hereby, for working capital and general corporate purposes,
and, to the extent necessary, to pay all or a portion of the outstanding amounts
due in respect of the Debentures (including prepayment premiums). The Borrowers
will obtain Letters of Credit solely for working capital and general corporate
purposes.
8.13. BANK ACCOUNTS.
(a) The Borrowers will (i) maintain in place their existing
concentration accounts established in connection with the Prior Credit
Agreement (such accounts, other than existing concentration accounts
for the receipt of proceeds of ZFT Receivables, the "FNBB Concentration
Accounts") under the control of the Agent for the benefit of the
Lenders, in the name of Zale Delaware, (ii) direct Corestates Bank,
N.A. or another depository institution satisfactory to the Agent,
pursuant to the Concentration Account Agreement (whereby CoreStates
Bank, N.A. or such other depository institution shall, among other
things, waive any right of set off, other than for service charges and
returns incurred in connection therewith), following written notice
given by the Agent to such depository institution of the occurrence of
an Event of Default (with a copy of such notice being given to the
Borrowers), to cause all funds (other than proceeds of ZFT Receivables
which constitute Store Payments (as defined in the Receivables
Securitization Facility Documents)) held by Corestates Bank, N.A. or
such other depository institution in accounts for, or on behalf of,
either of the Borrowers (the "Store Concentration Accounts") in excess
of (A) during each period beginning on November 15 of each calendar
year and ending on (and including) January 15
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of the immediately following calendar year, $150,000, and (B) during
each period beginning on January 16 of each calendar year and ending on
(and including) November 14 of such calendar year, $75,000, to be
transferred daily to, and only to, the FNBB Concentration Accounts,
(iii) cause all proceeds from the sale of inventory and other amounts
obtained by either of the Borrowers to be deposited into the local
depository accounts of the Borrowers and the Designated Subsidiaries
(the "Local Depository Accounts") or into the corporate depository
accounts of the Borrowers (the "Corporate Depository Accounts"), (iv)
cause all funds in the Local Depository Accounts to be transferred, at
least every three (3) Business Days, to the Store Concentration
Accounts (excluding nominal amounts not in excess of $1,000 in any such
Local Depository Account and funds representing returned ACH
transfers), (v) cause all funds in (A) each Corporate Depository
Account with respect to which the depository institution shall have
entered into an agency agreement reasonably satisfactory in all
respects to the Agent and the Lenders, to be transferred, on each
Business Day following any written notice given by the Agent to such
depository institution of the occurrence of an Event of Default (with a
copy of such notice being given to the Borrowers), to the FNBB
Concentration Accounts (excluding funds up to an aggregate of $100,000
which were not transferred to the FNBB Concentration Accounts at the
close of business on such Business Day as a result of human or
mechanical error), and (B) each Corporate Depository Account not
subject to such an agency agreement described in clause (A) above, to
be transferred on each Business Day to the FNBB Concentration Accounts
(excluding funds up to an aggregate of $100,000 which were not
transferred to the FNBB Concentration Accounts at the close of business
on such Business Day as a result of human or mechanical error), (vi)
direct the Receivables Purchase Agent to comply with the Receivables
Purchase Payment Instructions, and (vii) at all times ensure that,
within eight (8) days following either Borrower's receipt of any cash
or cash equivalents or any other proceeds of Collateral, (A) following
notice given by the Agent to Corestates Bank, N.A. or another
depository institution of the occurrence of an Event of Default as
described in clause (ii) above, all amounts (other than proceeds of ZFT
Receivables) shall have been deposited in the FNBB Concentration
Accounts and (B) proceeds of ZFT Receivables shall have been
transferred to accounts other than the FNBB Concentration Accounts, the
Store Concentration Account or the Local Depository Accounts.
(b) Each of the Borrowers hereby agrees that all amounts
belonging to the Borrowers and received by the Agent in the FNBB
Concentration Accounts, other than proceeds of consigned inventory, may
be applied, following the occurrence and during the continuance of an
Event of Default, in accordance with Section 13.5.
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8.14. INVENTORY RESTRICTIONS. Each of the Borrowers shall cause all
Eligible Inventory to be located at all times solely at Permitted Inventory
Locations, and to be sold or otherwise disposed of in the ordinary course of
such Borrower's business, consistent with past practices or as required pursuant
to the terms of this Credit Agreement.
8.15. FURTHER ASSURANCES. Each of the Borrowers will cooperate with
the Collateral Agent, the Lenders and the Agent and execute such further
instruments and documents as the Collateral Agent, the Lenders or the Agent
shall reasonably request to carry out to their reasonable satisfaction the
transactions contemplated by this Credit Agreement and the other Loan Documents
(a) promptly following request therefor with respect to instruments and
documents reasonably deemed necessary or appropriate by the Collateral Agent to
cause or maintain the perfection or priority of the Collateral Agent's lien or
security interest in the Collateral, and (b) within fifteen (15) days following
request therefor with respect to any other documents or instruments reasonably
deemed necessary or appropriate by the Collateral Agent or the Agent to carry
out the transactions contemplated by this Credit Agreement and the other Loan
Documents.
8.16. CLEANDOWN. Following a Collateral Release Date, the Borrowers
shall, for a period of forty-five consecutive days between November 1 and
February 28 of each fiscal year of the Borrowers following such release, reduce
the outstanding Loans to an amount not in excess of $50,000,000.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS.
Each of the Borrowers covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any
Lender has any obligation to make any Loans or the Agent has any obligations to
issue, extend or renew any Letters of Credit:
9.1. RESTRICTIONS ON INDEBTEDNESS. The Borrowers will not, and will
not permit any of the Designated Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Lenders, the Agent and the
Collateral Agent arising under any of the Loan Documents;
(b) current liabilities of such Borrower or such Designated
Subsidiary incurred in the ordinary course of business, including,
without limitation, obligations owed to customers arising out of
layaway transactions, not incurred through (i) the borrowing of money,
or (ii) the obtaining of credit except for credit on an open account
basis customarily extended and in fact extended in connection with
normal purchases of goods and services;
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(c) with the consent of the Agent, upon consultation with the
Lenders, such consent not to be unreasonably withheld, Indebtedness in
respect of swap agreements, futures contracts, derivatives and the
like;
(d) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 8.8;
(e) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
any of the Borrowers or the Designated Subsidiaries shall at the time
in good faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending
such appeal or review;
(f) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(g) obligations under Consolidated Capitalized Leases and
guaranties thereof by the Borrowers, or either of them;
(h) Consolidated Rental Obligations and guaranties by the
Borrowers, or either of them, of any of the foregoing or of any other
operating leases;
(i) Indebtedness incurred in connection with the acquisition
after the date hereof of any personal property by any of the Borrowers
or the Designated Subsidiaries, provided that (i) such Indebtedness
shall be without recourse to any of the Borrowers or the Designated
Subsidiaries, (ii) the aggregate principal amount of such Indebtedness
of the Borrowers and the Designated Subsidiaries shall not exceed one
hundred percent (100%) of the cost to such Borrower or such Designated
Subsidiary of the personal property so acquired, and (iii) the
aggregate principal amount of the cost to the Borrowers and the
Designated Subsidiaries of the personal property so acquired during any
period set forth in the table in Section 10.5 hereof together with
(without duplication) the amount of Consolidated Capital Expenditures
made during such period, shall not, during such period, exceed the
amount of Consolidated Capital Expenditures set forth in such table for
such period;
(j) Indebtedness, consistent with the past practices of
either of the Borrowers owing to the other Borrower;
(k) Indebtedness, consistent with the past practices of (i)
any of the Borrowers to the Designated Subsidiaries in an aggregate
amount not to
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exceed $10,000,000, (ii) any of the Designated Subsidiaries to the
Borrowers in an aggregate amount not to exceed $10,000,000 and (iii)
any of the Borrowers or the Designated Subsidiaries, owing by any of
the Borrowers or the Designated Subsidiaries to any of the Excluded
Subsidiaries in an aggregate amount not to exceed $5,000,000;
(l) Indebtedness incurred in connection with the Receivables
Securitization Facility Documents;
(m) Indebtedness owed by any of the Borrowers or the
Designated Subsidiaries to trade vendors, in the amount of the cost to
such Borrower or such Designated Subsidiary of inventory on consignment
from such trade vendors;
(n) Indebtedness constituting any funded or unfunded pension
fund or other employee benefit plan obligations or liabilities, whether
insured or otherwise, but only to the extent that they are permitted to
remain unfunded pursuant to applicable law and to Section 9.8 hereof;
(o) other Indebtedness existing as of the Closing Date and
described on Schedule 9.1(o);
(p) Indebtedness, consistent with the Plan, owing by any of
the Borrowers or the Designated Subsidiaries (i) to the Litigation
Entity, in an aggregate amount not to exceed $3,500,000 minus the
aggregate amount of Investments made by the Borrowers and the
Designated Subsidiaries in the Litigation Entity or any corporate
general partner of the Litigation Entity as permitted by Section 9.3(n)
hereof or (ii) in respect of settlement agreements relating to
litigation claims arising prior to the date of the Plan and either
approved by the Bankruptcy Court prior to the Effective Date or
consented to by the Agent and the Lenders or disclosed on Schedule
9.1(p) hereto;
(q) the Debenture Debt;
(r) Indebtedness in respect of the Tax Sharing Agreements;
(s) Indebtedness incurred pursuant to the Director Indemnity
Agreement, not to exceed $1,000,000;
(t) other Indebtedness, to the extent not otherwise included
in subparagraphs (a) through (s) of this Section 9.1, in an aggregate
amount not to exceed $100,000,000 minus any aggregate outstanding
principal amount of the Debentures, which Indebtedness is subordinated
to the Obligations pursuant to subordination terms substantially
similar to those contained in the
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Collateral Agency Agreement or pursuant to subordination terms which
are otherwise acceptable to the Agent in all respects; and
(u) other Indebtedness, to the extent not otherwise included
in subparagraphs (a) through (t) of this Section 9.1, in an aggregate
amount not to exceed $1,000,000.
9.2. RESTRICTIONS ON LIENS. The Borrowers will not, and will not
permit any of the Designated Subsidiaries to, (i) create or incur or suffer to
be created or incurred or to exist any lien, encumbrance, mortgage, pledge,
charge, restriction or other security interest of any kind upon any of its
property or assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (ii) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (iii) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (iv)
suffer to exist for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or (v) sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; provided that any of the
Borrowers and the Designated Subsidiaries may create or incur or suffer to be
created or incurred or to exist:
(a) liens in favor of either Borrower on all or part of the
assets of any of the Designated Subsidiaries securing Indebtedness
owing by any of the Designated Subsidiaries to either Borrower;
(b) liens to secure taxes, assessments and other government
charges, or liens to secure claims for labor, material or supplies, in
each case in respect of obligations (i) not overdue or (ii) contested
in good faith, and with respect to which adequate reserves (in
accordance with generally accepted accounting principles) have been set
aside for the payment thereof on the books and records of such Borrower
or such Designated Subsidiary, so long as proceedings to enforce such
liens have not been commenced and are unstayed;
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) liens on properties in respect of judgments or awards,
the Indebtedness with respect to which is permitted by Section 9.1(e);
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(e) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties, in existence less than
120 days from the date of creation thereof in respect of obligations
not overdue or contested in good faith, and with respect to which
adequate reserves (in accordance with generally accepted accounting
principles) have been set aside for the payment thereof on the books
and records of such Borrower or such Designated Subsidiary, so long as
proceedings to enforce such liens have not been commenced and are
unstayed;
(f) encumbrances on Real Estate consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto, statutory
and contractual landlord's or lessor's liens under leases to which such
Borrower or such Designated Subsidiary is a party, and other liens or
encumbrances none of which in the reasonable opinion of the Borrowers
interferes materially with the use of the property affected in the
ordinary conduct of the business of any of the Borrowers and the
Designated Subsidiaries, which defects do not individually or in the
aggregate have a materially adverse effect on the business of the
Borrowers and the Designated Subsidiaries considered as a whole;
(g) liens and encumbrances existing on the date hereof and
listed on Schedule 9.2 hereto;
(h) purchase money security interests in or purchase money
mortgages on real or personal property, other than inventory, acquired
after the date hereof to secure purchase money Indebtedness of the type
permitted by Section 9.1(i), incurred in connection with the
acquisition of such property, which security interests or mortgages
cover only the real or personal property so acquired, and which
security interests or mortgages secure Indebtedness not in excess of
$60,000,000 in the aggregate at any time outstanding;
(i) liens in favor of the Collateral Agent, for the benefit
of the Lenders and the Agent, under the Loan Documents;
(j) liens on inventory and proceeds thereof (up to the cost to
such Borrower or such Designated Subsidiary of such inventory) held on
consignment from trade vendors securing obligations to return or pay
the purchase price of such inventory;
(k) deposits to secure the performance, by any of the
Borrowers and the Designated Subsidiaries, of tenders, bids and other
contracts, other than for the payment of borrowed money, arising in the
ordinary course of such Borrower's or such Designated Subsidiary's
business (including, without limitation, deposits made in connection
with any promotions, contests, sweepstakes or similar games or
competitions conducted by or on behalf of
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any of the Borrowers and the Designated Subsidiaries or any of their
respective Subsidiaries, which deposits described in this
parenthetical, but not those other deposits contemplated by this clause
(k), do not exceed $2,000,000 in the aggregate);
(l) (1) liens on ZFT Receivables and (2) liens on ZFT
Receivables following repurchase thereof for the recovery of state
sales taxes by any of the Borrowers and the Designated Subsidiaries,
which liens secure an interest in such repurchased ZFT Receivables, the
proceeds therefrom and any recoveries therefrom pursuant to Section
2.09 of the Receivables Purchase Agreement;
(m) voluntary options in favor of any of the Borrowers and
the Designated Subsidiaries to purchase real property subject to
operating leases;
(n) subject to the provisions of the Collateral Agency
Agreement, liens in favor of the Collateral Agent, for the benefit of
the Lenders, the Agent, the Trustee and the holders of the Debentures;
(o) liens on cash or one or more letters of credit securing
Zale's obligations pursuant to the Director Indemnity Agreement in an
aggregate amount not in excess of $1,000,000; and
(p) liens in favor of AT&T solely on equipment owned by AT&T
and leased to Zale and/or Zale Delaware to the extent permitted by
Section 9.1(g);
(q) transfers to any Rabbi Trust, or other similar trust or
similar arrangement or to any account, established for the benefit of
the employees of any of Zale and its Subsidiaries solely to the extent
that Zale's or, as the case may be, such Subsidiary's obligations in
respect thereof are permitted by Section 9.1(n);
(r) solely to the extent consented to in advance in writing by
the Agent, liens on assets existing at the time of acquisition from
another Person (provided that such acquisition is permitted by Section
9.5.1 hereof) and not incurred in anticipation of such acquisition;
(s) sales, assignments or transfers of assets to the extent
permitted by Section 9.5.2 hereof; and
(t) other liens on assets of the Borrowers and the Designated
Subsidiaries which are not Collateral, to the extent not otherwise
included in subparagraphs (a) through (s) of this Section 9.2, securing
Indebtedness in an aggregate amount not to exceed $500,000.
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9.3. RESTRICTIONS ON INVESTMENTS. The Borrowers will not, and will
not permit any of the Designated Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by such Borrower or such Designated Subsidiary;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
the Agent, or a corporation organized and existing under the laws of
the United States of America or any state thereof that at the time of
purchase have been rated and the ratings for which are not less than "P
1" if rated by Moody's Investors Services, Inc. or any successor
service thereto having a substantially similar rating system, or not
less than "A 1" if rated by Standard & Poor's Corporation or any
successor service thereto having a substantially similar rating system;
(d) demand notes issued by a corporation organized and
existing under the laws of the United States of America or any state
thereof that at the time of purchase have been rated and the ratings
for which are not less than "P 1" if rated by Moody's Investors
Services, Inc. or any successor service thereto having a substantially
similar rating system, or not less than "A 1" if rated by Standard &
Poor's Corporation or any successor service thereto having a
substantially similar rating system;
(e) repurchase agreements, purchased through the Agent, or a
corporation organized and existing under the laws of the United States
of America or any state thereof that at the time of purchase have been
rated and the ratings for which are not less than "P 1" if rated by
Moody's Investors Services, Inc. or any successor service thereto
having a substantially similar rating system, or not less than "A 1" if
rated by Standard & Poor's Corporation or any successor service thereto
having a substantially similar rating system, which repurchase
agreements are collateralized by securities of the United States of
America or any agency thereof in an amount equal to at least 102% of
the amount of such Investment;
(f) shares of any so-called "money market fund" advised,
serviced or sold by any of the Lenders or by any other financial
institution provided that such fund is registered under the Investment
Company Act of 1940, has net assets of at least $250,000,000, has an
investment portfolio with an average maturity of 365 days or less and
is not considered to be a "high-yield" fund;
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(g) Investments existing on the date hereof and listed on
Schedule 9.3 hereto;
(h) Investments by either Borrower in any Designated
Subsidiary or the other Borrower or by any Designated Subsidiary in
either Borrower or any other Designated Subsidiary, existing as of the
Closing Date;
(i) Investments after the date hereof by (i) any of the
Borrowers and the Designated Subsidiaries in (A) any of the Excluded
Subsidiaries other than Zale Acquisition Corp., JHC Holding
Corporation, Zale Holding Corporation or ZHCL Corp., not to exceed
$2,500,000 in the aggregate, and (B) Zale Acquisition Corp., JHC
Holding Corporation, Zale Holding Corporation or ZHCL Corp. in order to
enable such Subsidiaries to maintain their corporate existence and good
standing or for other similar purposes, in an aggregate amount not to
exceed $100,000, (ii) either of the Borrowers in any of the Designated
Subsidiaries (other than JFS) in an aggregate amount not to exceed
$12,000,000, (iii) any of the Designated Subsidiaries in either of the
Borrowers in an aggregate amount not to exceed $12,000,000, and (iii)
either of the Borrowers in JFS, solely in respect of operating expenses
of JFS and capital expenditures of JFS, in an aggregate amount not to
exceed $35,000,000 during any fiscal year of the Borrowers;
(j) Investments existing on the Closing Date by Zale in
Subsidiaries of Zale;
(k) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by Section 9.5.2;
(l) Investments consisting of loans and advances to employees
for moving, entertainment, travel and other similar expenses in the
ordinary course of business not to exceed $2,000,000 in the aggregate
at any time outstanding;
(m) Investments in the Trust Certificates, the Trust Interest
or similar Investments in any other Receivables Securitization
Subsidiary and Investments in the Subordinated Note;
(n) Investments in the corporate general partner of the
Litigation Entity in an aggregate amount not to exceed $3,500,000;
(o) Investments in a new Subsidiary of either of the
Borrowers constituting a credit card bank in an aggregate amount not
to exceed $10,000,000;
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(p) Investments in registered investment companies which
invest solely in Investments otherwise permitted by this Section 9.3;
(q) Investments consisting of the repurchase by Zale of
warrants in respect of its capital stock to the extent permitted by
Section 9.4;
(r) Investments consisting of acquisitions of stock or
assets to the extent permitted by Section 9.5.1;
(s) Investments in an amount up to the amount of funds under
any Rabbi Trust, similar trust arrangement or account established or
maintained by any of Zale and its Subsidiaries as permitted by Section
9.2(q), but in no event in excess of $5,000,000 in the aggregate;
(t) Investments in Zale stock, whether or not permitted under
Section 9.4, in connection with the satisfaction of the Borrowers'
obligations under the 401(k) plan and/or the Zale Omnibus Stock
Incentive Plan or similar employee benefit plans maintained by the
Borrowers, or either of them; and
(u) Investments consisting of guaranties of Indebtedness
permitted by Sections 9.1(f), (g), (h), (l), (q) and (s).
9.4. DISTRIBUTIONS. The Borrowers will not, and will not permit any
of the Designated Subsidiaries to, make any Distributions; provided, however,
that so long as no Default or Event of Default shall exist and be continuing,
and none would exist after giving effect thereto (a) the Designated Subsidiaries
may make Distributions to either of the Borrowers and either Borrower may make
Distributions to the other Borrower, (b) the Borrowers and the Designated
Subsidiaries may make Distributions of up to $11,000,000 in the aggregate solely
in respect of repurchases by the Borrowers and the Designated Subsidiaries of
certain equity instruments which will immediately be cancelled, (c)
Distributions permitted pursuant to Section 9.3(t), and (d) the Borrowers and
the Designated Subsidiaries may make Distributions in an aggregate amount during
any fiscal quarter not to exceed the sum of (i) 50% of the Consolidated Net
Income of Zale and its Subsidiaries for the fiscal year of Zale ending as of
July 31, 1995 plus (ii) 50% of the aggregate cumulative Consolidated Net Income
of Zale and its Subsidiaries for each fiscal quarter of Zale ending on or after
October 31, 1995 and prior to the date of such Distribution; provided, however,
that the aggregate amount of such Distributions pursuant to this clause (d)
during any fiscal year of Zale shall not exceed (A) for the fiscal year of Zale
ending prior to the first anniversary of the Closing Date, $20,000,000, (B) for
the fiscal year of Zale ending after the first anniversary but prior to the
second anniversary of the Closing Date, $30,000,000, and (C) for the fiscal year
of Zale ending after the second anniversary of the Closing Date, $40,000,000;
provided, further, that if the aggregate amount of Distributions made pursuant
to this clause (d) during any fiscal year of Zale shall be less than the
applicable permitted amount set forth in the foregoing
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proviso for such fiscal year, then up to $5,000,000 of such unutilized amount
may be utlilized in the next succeeding fiscal year (but not any other
succeeding fiscal year) so long as the limitations set forth in the foregoing
clauses (i) and (ii) of this paragraph are not exceeded.
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
9.5.1. MERGERS AND ACQUISITIONS. The Borrowers will not,
and will not permit or suffer any of the Designated Subsidiaries to,
become a party to any merger or consolidation, or agree to or effect
any asset acquisition or stock acquisition (other than the
acquisition of assets in the ordinary course of business consistent
with past practices) except (a) so long as no Default or Event of
Default would result therefrom, the merger or consolidation of (i) one
or more of the Designated Subsidiaries with and into one of the
Borrowers, (ii) one or more of the other Subsidiaries of either of the
Borrowers with and into one of the Borrowers, (iii) two or more of the
Designated Subsidiaries or (iv) a Borrower with and into the other
Borrower; provided, that the surviving entity in any such merger
permitted by this clause (a) shall be a Borrower or a Designated
Subsidiary, (b) acquisitions (exclusive of Consolidated Capital
Expenditures permitted by Section 10.5) of assets or stock not to
exceed $20,000,000 of consideration for any such single acquisition
and not to exceed $40,000,000 of consideration in the aggregate for
all such acquisitions so long as the Borrowers, or either of them,
take title to such assets, and (c) the repurchase of warrants with
respect to the capital stock of Zale referred to in Section 8.12,
acquisitions of Zale stock permitted by Section 9.3(t) or repurchases
of Zale stock otherwise permitted by Section 9.4.
9.5.2. DISPOSITION OF ASSETS. The Borrowers will not, nor
will the Borrowers permit or suffer any of the Designated Subsidiaries
to, become a party to or agree to or effect any disposition of assets,
except for (a) sales of inventory (including in connection with the
closing of stores) in the ordinary course of such Borrower's or such
Designated Subsidiary's business, consistent with past practices, (b)
sales of fixtures and equipment no longer used or useful in such
Borrower's or such Designated Subsidiary's business, (c) transfers of
ZFT Receivables to ZFT pursuant to the Receivables Securitization
Facility Documents prior to the occurrence of any Receivables Release
Termination Date, (d) the natural expiration of intellectual property
licenses in accordance with the terms thereof, (e) so long as no Event
of Default has occurred or is continuing, sales of surplus assets
listed on Schedule 9.5 hereto; (f) so long as no Event of Default has
occurred and is continuing, other sales or dispositions of assets not
exceeding $5,000,000 in the aggregate during any fiscal year minus the
aggregate amount of any sale and leaseback transactions entered into
during such fiscal year in accordance with Section 9.6.
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9.6. SALE AND LEASEBACK. Except for transactions not to exceed
$5,000,000 in the aggregate, the Borrowers will not, and will not permit any of
the Designated Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby any of the Borrowers or the Designated Subsidiaries shall
sell or transfer any property owned by it in order then or thereafter to lease
such property or lease other property that such Borrower or such Designated
Subsidiary intends to use for substantially the same purpose as the property
being sold or transferred.
9.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrowers will not, and
will not permit any of the Designated Subsidiaries to, (i) use any of the Real
Estate or any portion thereof for the handling, processing, storage or disposal
of Hazardous Substances in violation of any applicable Environmental Law, (ii)
cause or permit to be located on any of the Real Estate any underground tank or
other underground storage receptacle for Hazardous Substances which is not
listed on Schedule 7.18 or which is in violation of any applicable Environmental
Law, (iii) generate any Hazardous Substances on any of the Real Estate in
violation of any applicable Environmental Law, (iv) conduct any activity at any
Real Estate or use any Real Estate in any manner so as to cause a release (i.e.
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of
Hazardous Substances on, upon or into the Real Estate or (v) otherwise conduct
any activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law, which, in the case of any of clauses (i) through (v), would
reasonably be expected to have a materially adverse effect on the business,
financial condition or assets of the Borrowers and the Designated Subsidiaries
taken as a whole.
9.8. EMPLOYEE BENEFIT PLANS. Neither the Borrowers nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could
reasonably be expected to result in a material liability for the
Borrowers and the Designated Subsidiaries taken as a whole; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could reasonably be expected to result in the imposition of a
lien or encumbrance on the assets of any of the Borrowers or the
Designated Subsidiaries pursuant to Section 302(f) or Section 4068 of
ERISA; or
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(d) permit or take any action which would result in the
aggregate benefit liabilities (within the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Guaranteed Pension Plans, disregarding for
this purpose the benefit liabilities and assets of any such Guaranteed
Pension Plan with assets in excess of benefit liabilities, by more than
the amount set forth in Section 7.16.3.
9.9. BANK ACCOUNTS. The Borrowers will not, nor will the Borrowers
permit or suffer any of the Designated Subsidiaries to, (a) establish, without
the Agent's prior written consent, any bank accounts not listed on Schedule 7.20
except for (i) additional Local Depository Accounts opened in the ordinary
course of business from which all funds are transferred at least every three (3)
Business Days to the Store Concentration Accounts pursuant to arrangements
reasonably satisfactory to the Agent, (ii) additional Vendor Memo Accounts, and
(iii) bank accounts established for the purpose of depositing funds pertaining
to any Rabbi Trust or other similar trust or similar arrangement or account
established by any of Zale and its Subsidiaries solely to the extent that
Investments in respect thereof are permitted by Section 9.3(s) hereof; provided,
however, that such account shall be considered an Employee Benefit and
Compensation Account and shall be subject to the restrictions set forth in
clause (c) of this Section 9.9, (b) violate directly or indirectly the
Concentration Account Agreement or any other bank agency or lock box agreement
in favor of the Collateral Agent or the Agent, for the benefit of the Lenders
and the Agent, with respect to any such account, (c) deposit into any employee
benefit and compensation accounts (the "Employee Benefit and Compensation
Accounts") any amounts in excess of amounts which the Borrowers deem necessary
to pay current payroll, medical, dental or other employee benefit obligations
(whether current or not) from such Employee Benefit and Compensation Accounts,
provided that the Borrowers may permit up to $150,000 in excess of current
payroll obligations to be maintained in any Employee Benefit and Compensation
Account established primarily for the payment of payroll obligations for
employees of Dobbins, (d) allow any funds (other than nominal amounts not in
excess of $1,000 in any Local Depository Account and funds representing returned
ACH transfers) to remain in any Local Depository Account for over three (3)
Business Days, (e) except as permitted by Section 8.13(a), allow any funds to
remain in any Corporate Depository Account (excluding funds up to an aggregate
amount not to exceed $100,000 which were not transferred to the FNBB
Concentration Accounts at the close of any Business Day as a result of human or
mechanical error), or (f) allow the aggregate amount of any of the Operating
Accounts to exceed $100,000 on any day on which an Event of Default has occurred
and is continuing.
9.10. TRANSACTIONS WITH AFFILIATES. The Borrowers will not, nor will
the Borrowers permit or suffer any of the Designated Subsidiaries to, conduct
any transactions among themselves or with any Affiliates of the Borrowers, other
than (a) transactions in the ordinary course of such Borrower's or such
Designated
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Subsidiary's business, consistent with past practices, and upon terms not
materially less favorable to such Borrower or Designated Subsidiary than it
could obtain in a comparable arm's-length transaction with a party other than
such Borrower, such Designated Subsidiary or such Affiliate, (b) transactions
pursuant to documents and agreements contemplated by the Plan, (c) transactions
with ZFT or any other Receivables Securitization Subsidiary pursuant to the
Receivables Securitization Facility Documents, (d) transactions described on
Schedule 7.15; provided, however that such transactions shall in no event
include any Investments which are not permitted by Section 9.3, and (e)
Distributions made by the Borrowers and the Designated Subsidiaries to the
extent otherwise permitted by Section 9.4 hereof.
9.11. RECEIVABLES SECURITIZATION FACILITY DOCUMENTS. The Borrowers
will not, nor will the Borrowers permit or suffer any of the Designated
Subsidiaries to, amend, supplement, restate or otherwise modify, or renew or
extend, the terms of any of the Receivables Securitization Facility Documents as
in effect as of the Closing Date without the prior written consent (which
consent shall not be unreasonably withheld) of, and in form and substance
reasonably satisfactory to, the Agent; provided, however, that nothing herein
shall restrict or be deemed to restrict the issuance by the Borrowers or the
Designated Subsidiaries, or any of them, of additional tranches of Indebtedness
under the Receivables Securitization Facility Documents as in the form delivered
to the Agent on the date hereof; and provided, further, that so long as no
Default or Event of Default shall exist and be continuing, and so long as none
would result therefrom, with prior written notice given to the Agent, the
Borrowers and the Designated Subsidiaries may enter into such amendments,
supplements or other modifications to the Receivables Securitization Facility
Documents which do not have any adverse effect on the Agent and the Lenders'
collateral security and which are otherwise no less favorable to the Borrowers
and the Designated Subsidiaries. The parties to this Credit Agreement intend it
to refinance the obligations under the Prior Credit Agreement and agree that an
acceleration of the Obligations pursuant to the terms hereof shall constitute an
Early Amortization Event (as defined in the Receivables Purchase Agreement).
9.12. ZALE PUERTO RICO; JFS. Notwithstanding anything contained
herein to the contrary, the Borrowers will not permit the aggregate amount of
Indebtedness owed by Zale Puerto Rico to Persons other than the Lenders, the
Agent, or the Borrowers at any time to exceed $250,000; provided, however, that
Zale Puerto Rico may incur Indebtedness permitted by Section 9.1(d) and (g) in
respect of obligations owed to customers arising out of layaway transactions.
All obligations of Zale Puerto Rico to either of the Borrowers shall be
evidenced by promissory notes which shall be pledged to the Lenders and
delivered to the Collateral Agent in accordance with the terms of the Security
Documents. The Borrowers will not permit JFS to have assets with an aggregate
book value in excess of $300,000 in Puerto Rico.
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9.13. NEGATIVE PLEDGES. The Borrowers will not, and will not permit
any of the Designated Subsidiaries to, enter into any agreement or instrument
which shall prohibit any of the Borrowers or the Designated Subsidiaries from
granting security interests, mortgages, pledges or liens on, or otherwise
encumbering, any of its property or assets to secure the Borrowers' obligations
under this Credit Agreement or any refinancing, replacement, restatement,
modification, supplement or amendment of this Credit Agreement.
9.14. INDENTURE. Neither of the Borrowers will amend, supplement or
otherwise modify the terms of the Indenture or any of the Debentures; provided,
that the foregoing shall not prohibit the Borrowers, so long as no Default or
Event of Default shall have occurred and be continuing, from redeeming, in whole
or in part, the Debentures and terminating the Indenture.
10. FINANCIAL COVENANTS OF THE BORROWERS.
Each of the Borrowers covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any
Lender has any obligation to make any Loans or the Agent has any obligation to
issue, extend or renew any Letters of Credit:
10.1. CONSOLIDATED EBITDA. As of the end of each period of four
consecutive fiscal quarters ending closest to the dates set forth in the table
below, the Borrowers shall cause the Consolidated EBITDA for such period of four
consecutive fiscal quarters to be equal to or greater than the amount set forth
opposite such period in such table:
DATE: AMOUNT:
---- ------
10/31/95 $60,000,000
01/31/96 $63,500,000
04/30/96 $65,500,000
07/31/96 $67,500,000
10/31/96 $68,250,000
01/31/97 $78,250,000
04/30/97 $80,000,000
07/31/97 $86,250,000
10/31/97 $90,000,000
01/31/98 $94,750,000
04/30/98 $98,250,000
07/31/98 $104,000,000
10.2. CONSOLIDATED FUNDED DEBT TO CONSOLIDATED ADJUSTED EBITDA. As
of the end of each period of four consecutive fiscal quarters ending closest to
the dates set forth in the table below, the Borrowers will not permit the
ratio of (a) Consolidated Funded Debt as of each fiscal quarter ending date
occurring closest to such dates set forth in the table below to (b)
Consolidated Adjusted EBITDA for such
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period of four consecutive fiscal quarters ending on such fiscal quarter ending
date, to be greater than the ratio set forth opposite such date in such table:
DATE: RATIO:
---- -----
10/31/95 2.0:1.0
01/31/96 2.0:1.0
04/30/96 2.0:1.0
07/31/96 2.0:1.0
10/31/96 2.0:1.0
01/31/97 2.0:1.0
04/30/97 2.0:1.0
07/31/97 2.0:1.0
10/31/97 2.0:1.0
01/31/98 2.0:1.0
04/30/98 2.0:1.0
07/31/98 2.0:1.0
10.3. DEBT SERVICE. As of the end of each period of four consecutive
fiscal quarters ending closest to the dates set forth in the table below, the
Borrowers will not permit the ratio of (a) the difference of (i) Consolidated
EBITDA for such period of four consecutive fiscal quarters ending closest to the
dates set forth in the table below minus (ii) the aggregate amount of all
federal income taxes paid in cash by Zale and its Subsidiaries during such
period of four consecutive fiscal quarters to (b) Consolidated Total Debt
Service for such period of four consecutive fiscal quarters, to be less than the
ratio set forth opposite such date in such table:
DATE: RATIO:
---- -----
10/31/95 1.40:1.0
01/31/96 1.55:1.0
04/30/96 1.65:1.0
07/31/96 1.80:1.0
10/31/96 1.95:1.0
01/31/97 2.30:1.0
04/30/97 2.40:1.0
07/31/97 2.50:1.0
10/31/97 2.60:1.0
01/31/98 2.70:1.0
04/30/98 2.70:1.0
07/31/98 2.80:1.0
10.4. CONSOLIDATED TANGIBLE NET WORTH. The Borrowers will not permit
Consolidated Tangible Net Worth, as of each fiscal quarter ending date occurring
closest to the dates set forth in the table below, to be less than the amount
set forth opposite such date in such table:
DATE: AMOUNT:
---- ------
10/31/95 $365,000,000
01/31/96 $400,000,000
04/30/96 $400,000,000
07/31/96 $400,000,000
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10/31/96 $390,000,000
01/31/97 $445,000,000
04/30/97 $445,000,000
07/31/97 $445,000,000
10/31/97 $445,000,000
01/31/98 $500,000,000
04/30/98 $500,000,000
07/31/98 $500,000,000
10.5. CONSOLIDATED CAPITAL EXPENDITURES. The Borrowers will not
make, or permit any Subsidiary of either of the Borrowers to make, Consolidated
Capital Expenditures (excluding Consolidated Capital Expenditures incurred in
connection with acquisitions of stock or assets permitted by Section 9.5.1
hereof) in any fiscal year covering the period closest to the periods set forth
in the table below that exceed, in the aggregate, the amount set forth opposite
such period in such table; provided, however, that, if during any fiscal year
the amount of Consolidated Capital Expenditures permitted for that fiscal year
is not so utilized, up to $10,000,000 of such unutilized amount may be utilized
in the next succeeding fiscal year but not in any subsequent fiscal year;
provided, further, that in any fiscal year, any unutilized amounts carried
forward from the immediately preceding fiscal year shall be available as
permitted Consolidated Capital Expenditures first, prior to counting the actual
Consolidated Capital Expenditures for such fiscal year against the permitted
amount for such fiscal year set forth in the table below.
PERIOD: AMOUNT:
------ ------
08/01/95 - 07/31/96 $55,000,000
08/01/96 - 07/31/97 $60,000,000
08/01/97 - 07/31/98 $65,000,000
10.6. RECEIVABLES ADVANCE RATE UNDER RECEIVABLES PURCHASE AGREEMENT.
The Borrowers will not permit or suffer the Receivables Advance Rate to at any
time be less than sixty-five percent (65%).
11. CLOSING CONDITIONS.
The obligations of the Lenders to make the initial Loans and of the
Agent to issue any initial Letters of Credit shall be subject to the
satisfaction of the following conditions precedent on or prior to August 31,
1995:
11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory to each
of the Lenders. Each Lender shall have received a fully executed copy of each
such document and the original Note payable to such Lender.
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS AND OTHER DOCUMENTS.
Each of the Lenders shall have received from each of the Borrowers a
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copy, certified by a duly authorized officer of such Person to be true and
complete on the Closing Date, of each of (i) its charter or other incorporation
documents as in effect on such date of certification, (ii) its by-laws as in
effect on such date, (iii) the Receivables Securitization Facility Documents as
in effect on the Closing Date, and (iv) the Indenture and the Debentures as in
effect on the Closing Date.
11.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by each of the Borrowers of this Credit
Agreement and the other Loan Documents to which each is or is to become a party
shall have been duly and effectively taken, and evidence thereof satisfactory to
the Lenders shall have been provided to each of the Lenders.
11.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have
received from each of the Borrowers an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of such Borrower, and giving
the name and bearing a specimen signature of each individual who shall be
authorized: (i) to sign, in the name and on behalf of such Borrower, each of
the Loan Documents to which such Borrower is or is to become a party; (ii) to
make Loan Requests and Conversion Requests and to apply for Letters of Credit;
and (iii) to give notices and to take other action on its behalf under the Loan
Documents.
11.5. VALIDITY OF LIENS. The Security Documents shall be effective
to create in favor of the Collateral Agent, for the benefit of the Lenders and
the Agent, a legal, valid and enforceable first (except for Permitted Liens
entitled to priority under applicable law) security interest in and lien upon
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Collateral Agent to
protect and preserve such security interests and its priority as a first lien
and security interest shall have been duly effected. The Collateral Agent shall
have received evidence thereof in form and substance satisfactory to the
Collateral Agent and the Lenders.
11.6. PERFECTION CERTIFICATES; UCC SEARCH RESULTS; FORM OF OTHER
FINANCING STATEMENTS. The Collateral Agent shall have received from each of
the Borrowers a completed and fully executed Perfection Certificate and the
results of UCC searches with respect to the Collateral, indicating no liens
other than Permitted Liens and otherwise in form and substance satisfactory to
the Collateral Agent and the Lenders. The Collateral Agent shall have received
and shall be satisfied with the form and substance of (a) all consignment
financing statements filed or to be filed on behalf of trade vendors as
consignors and (b) all UCC-1 financing statements filed or to be filed pursuant
to the Receivables Securitization Facility Documents.
11.7. CERTIFICATES OF INSURANCE. The Agent shall have received
certificates of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and
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otherwise describing the insurance obtained in accordance with the provisions of
the Security Documents.
11.8. BANK AGENCY AGREEMENTS. The Agent shall have received the
Concentration Account Agreement and the Receivables Purchase Payment
Instructions, each duly executed and delivered by the respective parties
thereto, and such agreements shall be in full force and effect and in form and
substance satisfactory to the Agent and the Borrowers.
11.9. BORROWING BASE REPORT. The Agent and each of the Lenders shall
have received from the Borrowers the initial Borrowing Base Report dated as of
the last day of the calendar month immediately preceding the Closing Date, or,
if the Closing Date occurs within the first twenty-five (25) days of a calendar
month, the last day of the calendar month immediately preceding the calendar
month immediately preceding the Closing Date.
11.10. RECEIVABLES PURCHASE REPORT. The Agent shall have received
from the Borrowers the most recent Receivables Purchase Report.
11.11. OPINION OF COUNSEL. Each of the Lenders and the Agent shall
have received a favorable legal opinion addressed to the Lenders and the Agent,
dated as of the Closing Date, in form and substance satisfactory to the Lenders
and the Agent, from Troutman Sanders, counsel to the Borrowers and their
Subsidiaries
11.12. PAYMENT OF FEES. The Borrowers shall have paid to the Lenders
or the Agent, as appropriate, all fees, including the Agent's fee, due pursuant
to Sections 5.1 and 5.2 and the terms of the Fee Letters, and the fees of
counsel to the Agent incurred through and including the Closing Date.
11.13. FINANCIAL STATEMENTS, ETC. The Agent shall have received (a)
the consolidated balance sheet of Zale and its Subsidiaries as of the Balance
Sheet Date, (b) the unaudited consolidated statement of income and consolidated
statement of cash flow for Zale and its Subsidiaries, each for the fiscal
quarter ending April 30, 1995, and (c) such other financial and other
information as may be reasonably requested by the Agent.
11.14. RECEIVABLES SECURITIZATION FACILITY DOCUMENTS;. Each of the
Agent and the Lenders shall be satisfied that the Amortization Commencement Date
shall not have occurred. The Borrower shall have sent a notice to the
Receivables Purchase Agent, pursuant to a letter satisfactory to the Agent and
the Lenders in all respects, with respect to the effect of any notice given by
the Agent to the Receivables Purchase Agent of an Acceleration or of the failure
of the Borrowers to pay at the Maturity Date all of the Obligations outstanding.
The Agent shall have received from the Receivables Purchase Agent an
acknowledgment, satisfactory to the Agent and the Lenders in all respects, that
this Credit Agreement replaces, as of
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the Closing Date, the Prior Credit Agreement, and shall constitute for all
purposes the Working Capital Credit Agreement, as such term is defined in the
Receivables Securitization Facility Documents.
11.15. MATERIALLY ADVERSE CHANGES. There shall not have occurred or
become known to any of the Lenders or the Agent any materially adverse change in
the financial condition, operations or assets of the Borrowers and the
Designated Subsidiaries, taken as a whole, since the Balance Sheet Date.
11.16. PAYOFF AND TERMINATION OF PRIOR CREDIT AGREEMENT. The Agent
shall have received a payoff letter from the agents under the Prior Credit
Agreement (the "Prior Agents") indicating the amount of the loan obligations of
the Borrowers to the Prior Agents and the Prior Lenders to be discharged on the
Closing Date and an acknowledgment by such Prior Agents that upon receipt of
such funds such Prior Credit Agreement shall be terminated in its entirety.
11.17. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with
the transactions contemplated by this Credit Agreement, the other Loan Documents
and all other documents incident thereto shall be satisfactory in substance and
in form to the Lenders and to the Agent and the Agent's Special Counsel, and the
Lenders, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
11.18. FURTHER ASSURANCES. All corporate and judicial proceedings
and all instruments and agreements to be executed and/or delivered in connection
with the transactions among the Borrowers, the Agent and the Lenders
contemplated by the Loan Documents shall be reasonably satisfactory in form and
substance to the Agent and the Lenders, and the Agent and the Lenders shall
have received all such information and documents or papers reasonably requested
by the Agent and the Lenders (it being understood that certain accountants'
work papers and certain litigation-related materials may be privileged and not
disclosable to the Agent and the Lenders, but that the Agent and the Lenders
and their professional advisors shall be able to discuss with the Borrowers and
their professional advisors the matters covered by such privileged materials in
a manner sufficient to enable the Lenders to complete their due diligence).
12. CONDITIONS TO ALL BORROWINGS.
The obligations of the Lenders to make any Loan, including the initial
Loan, and of the Agent to issue, extend or renew any Letter of Credit, in each
case whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
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12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Borrowers and the Designated
Subsidiaries contained in this Credit Agreement, the other Loan Documents or in
any document or instrument required to be delivered pursuant to or in connection
with this Credit Agreement shall be true as of the date as of which they were
made and shall also be true at and as of the time of the making of such Loan or
the issuance, extension or renewal of such Letter of Credit, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit Agreement
and the other Loan Documents and changes occurring in the ordinary course of
business that singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.
12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law
or regulations thereunder or interpretations thereof that in the reasonable
opinion of any Lender would make it illegal for such Lender to make such Loan or
to participate in the issuance, extension or renewal of such Letter of Credit or
in the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.
12.3. GOVERNMENTAL REGULATION. Each Lender shall have received such
statements in substance and form reasonably satisfactory to such Lender as such
Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
12.4. BORROWING BASE REPORT. The Agent shall have received the most
recent Borrowing Base Report required to be delivered to the Agent in accordance
with Section 8.4(f) and the most recent Receivables Purchase Report required to
be delivered to the Agent in accordance with Section 8.4(g), in each case
including all supporting schedules and documentation reasonably required by the
Agent.
12.5. PAYMENT OF FEES. The Borrowers shall have paid all fees then
due and payable by them under this Credit Agreement, the Fee Letters or any
other Loan Document including the Agent's fees, the Letter of Credit Fees, and
the commitment fees.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
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(a) the Borrowers shall fail to pay any principal of the Loans
or any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) the Borrowers shall fail to pay any interest on the Loans,
the commitment fee, any Letter of Credit Fees, the Agent's fee, or
other sums due hereunder or under any of the other Loan Documents,
within two (2) days of the date when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(c) the Borrowers shall fail to comply with (i) any of their
covenants contained in Sections 8, 9 (other than Sections 9.1, 9.3,
9.4(d), 9.7, 9.8, 9.9) or 10 or any of the covenants contained in the
Security Documents; or (ii) any of their covenants contained in
Sections 9.1, 9.3, 9,7, 9.8 or 9.9 for more than five (5) days after
the occurrence of such failure to comply;
(d) the Borrowers shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other
than those specified elsewhere in this Section 13.1) for thirty (30)
days after written notice of such failure has been given to the
Borrowers by the Agent;
(e) any representation or warranty of the Borrowers in this
Credit Agreement or any of the other Loan Documents or in any other
document or instrument delivered pursuant to or in connection with this
Credit Agreement shall prove to have been false in any material respect
upon the date when made or deemed to have been made or repeated;
(f) any of the Borrowers or the Designated Subsidiaries shall
fail to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received in excess of
$5,000,000 in the aggregate, including, without limitation, the
Indenture and Debentures, or in respect of any Consolidated Capitalized
Leases, or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing
or securing borrowed money or credit received in excess of $5,000,000
in the aggregate, including, without limitation, the Indenture and
Debentures, or in respect of any Consolidated Capitalized Leases for
such period of time as would permit (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations
issued thereunder to accelerate the maturity thereof;
(g) either of the Borrowers or any Subsidiary of Zale shall
make an assignment for the benefit of creditors, or admit in writing
its inability to pay or generally fail to pay its debts as they mature
or become due, or shall
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petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of such Borrower, or such Subsidiary of Zale or
of any substantial part of the assets of such Borrower, or such
Subsidiary of Zale or shall commence any case or other proceeding
relating to such Borrower, or such Subsidiary of Zale under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall
be commenced against such Borrower, or such Subsidiary of Zale and such
Borrower, or such Subsidiary of Zale shall indicate its written
approval thereof, written consent thereto or formal acquiescence
therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating either of the
Borrowers or any Subsidiary of Zale bankrupt or insolvent, or approving
a petition in any such case or other proceeding, or a decree or order
for relief is entered in respect of either of the Borrowers or any
Subsidiary of Zale in any involuntary case under federal bankruptcy
laws as now or hereafter constituted or, if earlier, sixty (60) days
shall pass from the date of filing of such involuntary case without the
dismissal thereof;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive,
any final judgment against either of the Borrowers or any Subsidiary of
Zale that, with other outstanding final judgments, undischarged,
against either of the Borrowers or any Subsidiary of Zale exceeds in
the aggregate $1,000,000;
(j) if any of the Loan Documents shall be canceled,
terminated, revoked or rescinded otherwise than in accordance with the
terms thereof or Section 6.3 hereof or with the express prior written
agreement, consent or approval of the requisite Lenders in accordance
with Section 26, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Loan Documents shall
be commenced by or on behalf of either of the Borrowers party thereto
or any of their respective stockholders, or any court or any other
governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment,
order, decree or ruling to the effect that, any material provision of
one or more of the Loan Documents is illegal, invalid or unenforceable
in accordance with the terms thereof;
(k) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and such event would reasonably be
expected to result in liability of either Borrower or any Designated
Subsidiary
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to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $1,000,000 and such event in the circumstances occurring
reasonably would constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer
such Guaranteed Pension Plan; or a trustee shall have been appointed by
the United States District Court to administer such Guaranteed Pension
Plan; or the PBGC shall have instituted proceedings to terminate such
Guaranteed Pension Plan;
(l) either of the Borrowers or any Designated Subsidiary shall
be enjoined, restrained or in any way prevented by the order of any
court or any administrative or regulatory agency from conducting any
significant part of its domestic business in the continental United
States and such order shall continue in effect for more than thirty
(30) days;
(m) there shall occur any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or
public enemy, or other casualty, which in any such case causes, for
more than fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of either
of the Borrowers or any Designated Subsidiary if such event or
circumstance is not covered by business interruption insurance and
would have a materially adverse effect on the business or financial
condition of the Borrowers and the Designated Subsidiaries taken as a
whole;
(n) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by either of the Borrowers or any Designated Subsidiary if
such loss, suspension, revocation or failure to renew would have a
materially adverse effect on the business or financial condition of the
Borrowers and the Designated Subsidiaries taken as a whole;
(o) either of the Borrowers or any Designated Subsidiary shall
be indicted for a federal crime, a punishment for which, assuming a
conviction, would reasonably be expected to include the forfeiture of
any assets of Zale Delaware included in the Borrowing Base or any
assets of either Borrower or any Designated Subsidiary not included in
the Borrowing Base but having a fair market value in excess of
$5,000,000;
(p) Zale shall, at any time, legally or beneficially own less
than one hundred percent (100%) of the issued and outstanding shares of
the capital stock of Zale Delaware (unless Zale and Zale Delaware are
merged or consolidated as permitted by Section 9.5.1 hereof);
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(q) there shall occur, with respect to any of the Receivables
Securitization Facility Documents, any Purchase Termination Date, or
Amortization Commencement Date;
(r) any and all payments and other amounts to which any of the
Borrowers or the Designated Subsidiaries is entitled pursuant to the
Receivables Securitization Facility Documents (which shall not include
proceeds of ZFT Receivables not due to the Borrowers or the Designated
Subsidiaries), including amounts in respect of Zale Delaware's interest
in ZFT or any other Receivables Securitization Subsidiary or amounts
under the Subordinated Notes, shall not have been paid directly into
the FNBB Concentration Accounts or other depository accounts maintained
by the Borrowers, or either of them, and subject to agency agreements
reasonably satisfactory in all respects to the Agent, in accordance
with the terms and conditions of the Receivables Purchase Payment
Instructions; provided however, that no Event of Default shall occur
under this Section 13.1(r) if, within one (1) Business Day following
any unintended failure to pay such payments or other amounts into the
FNBB Concentration Accounts or such other accounts subject to such
agency agreements, all such amounts have been deposited into the FNBB
Concentration Accounts or such other accounts subject to such agency
agreements; or
(s) Any of the Borrowers or the Designated Subsidiaries shall
make Distributions during any fiscal year in excess of the limitations
set forth in Section 9.4(d), whether or not such Distributions were
permitted by the terms of such clause at the time when made; provided,
however, that any Distribution with respect to any fiscal year shall
not be an Event of Default because of losses occurring after the end of
the fiscal year in which such Distribution was made.
then, in any such event, so long as the same may be continuing, the Agent may,
and upon the request of the Majority Lenders shall, by notice in writing to the
Borrowers, declare all amounts owing with respect to this Credit Agreement, the
Notes and the other Loan Documents and all Reimbursement Obligations to be, and
they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by each of the Borrowers; provided that in the event of
any Event of Default specified in Sections 13.1(g) or 13.1(h), or if any of the
obligations of the Borrowers under the Debentures shall be declared due and
payable before the stated maturity thereof (other than pursuant to a voluntary
redemption thereof by the Borrowers, or either of them), all such amounts shall
become immediately due and payable automatically and without any requirement of
notice from the Agent or any Lender (any such requirement for payment pursuant
to this Section 13.1 being an "Acceleration").
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13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events
of Default specified in Section 13.1(g) or Section 13.1(h) shall occur, or if
any of the obligations of the Borrowers under the Debentures shall be declared
due and payable before the stated maturity thereof (other than pursuant to a
voluntary redemption thereof by the Borrowers, or either of them), any unused
portion of the credit hereunder shall forthwith terminate and each of the
Lenders shall be relieved of all further obligations to make Loans to the
Borrowers and the Agent shall be relieved of all further obligations to issue,
extend or renew Letters of Credit. If any other Event of Default shall have
occurred and be continuing, the Agent may and, upon the request of the Majority
Lenders shall, by notice to the Borrowers specifying the applicable Event of
Default or Events of Default, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and each of the Lenders shall be relieved
of all further obligations to make Loans and the Agent shall be relieved of all
further obligations to issue, extend or renew Letters of Credit. No termination
of the credit hereunder shall relieve the Borrowers of any of the Obligations
or, without in any way limiting any rights of any of the Agent or the Lenders
to exercise any remedies available to them hereunder or under any of the other
Loan Documents or at law or in equity, any Lender of common law, if any, or
contractual confidentiality obligations to the Borrowers.
13.3. REMEDIES. In case any one or more of the Events of Default
shall have occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to Section 13.1, each Lender, if
owed any amount with respect to the Loans or the Reimbursement Obligations, may,
with the consent of the Majority Lenders but not otherwise, proceed to protect
and enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Lender are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Lender. No remedy herein conferred upon any
Lender or the Agent or the holder of any Note or the purchaser of any Letter of
Credit Participation is intended to be exclusive of any other remedy, and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
13.4. CASH COLLATERAL TO SECURE OUTSTANDING LETTERS OF CREDIT. In
case any one or more Events of Default shall have occurred and be continuing,
and whether or not the Lenders shall have accelerated the maturity of the Loans
pursuant to Section 13.1, the Agent may, or at the request of the Majority
Lenders shall, require the Borrowers to furnish upon one day's notice cash
collateral to secure the Borrowers'
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Obligations with respect to any Letters of Credit at the time outstanding in an
amount equal to one hundred and two percent (102%) of the Maximum Drawing Amount
of each such Letter of Credit as of such date and according to a Cash Collateral
Agreement and such other terms as the Agent shall reasonably require.
13.5. REPAYMENTS OF LOANS AND DISTRIBUTION OF COLLATERAL PROCEEDS
AFTER EVENT OF DEFAULT. In the event that following the occurrence and during
the continuance of an Event of Default, the Agent, the Collateral Agent or any
Lender, as the case may be, receives any monies (other than Excluded Proceeds),
whether pursuant to Section 8.13 or Section 13.4 or otherwise with respect to
the realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent and the Collateral Agent for or in respect
of all reasonable costs, expenses, disbursements and losses which shall
have been incurred or sustained by the Agent and the Collateral Agent
in connection with the collection of such monies by the Agent and the
Collateral Agent, for the exercise, protection or enforcement by the
Agent and the Collateral Agent of all or any of the rights, remedies,
powers and privileges of the Agent and the Collateral Agent, for the
benefit of the Lenders, under this Credit Agreement or any of the other
Loan Documents or in respect of the Collateral or in support of any
provision of adequate indemnity to the Agent and the Collateral Agent
against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent and the Collateral Agent to such
monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Lenders may determine; provided, however,
that distributions in respect of such obligations shall be made (i)
pari passu among Obligations with respect to the Agents' fees payable
pursuant to Section 5.2 and all other Obligations and (ii) Obligations
owing to the Lenders with respect to each type of Obligation such as
interest, principal, fees and expenses, shall be made among the Lenders
pro rata; and provided, further, that the Agent may in its discretion
make proper allowance to take into account any Obligations not then due
and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to each of the Lenders, the
Collateral Agent and the Agent of all of the Obligations, to the
payment of any obligations required to be paid pursuant to Section
9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of
Massachusetts, including, so long as the Debentures are outstanding,
obligations to the Trustee for the benefit of the holders of
Debentures; and
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(d) Fourth, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto.
14. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any of
the Lender or the Agent to the Borrowers (but specifically excluding any
Excluded Proceeds which may come into the possession of any Lender or the Agent)
may be applied to or set off by such Lender against the payment of Obligations
and any and all other liabilities, direct, or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, of the Borrowers to
such Lender. Each of the Lenders agrees with each other Lender that (a) if an
amount to be set off is to be applied to Indebtedness of the Borrowers to such
Lender, other than Indebtedness evidenced by the Notes held by such Lender or,
as the case may be, constituting Reimbursement Obligations owed to, such Lender,
such amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Notes held by such Lender or, as the case may
be, constituting Reimbursement Obligations owed to such Lender, and (b) if such
Lender shall receive from either of the Borrowers, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of the
claim evidenced by the Notes held by, or, as the case may be, constituting
Reimbursement Obligations owed to, such Lender, by proceedings against the
Borrowers at law or in equity in accordance with the terms of this Credit
Agreement, or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, and shall retain and apply to
the payment of the Note or Notes held by or, as the case may be, Reimbursement
Obligations owed to, such Lender any amount in excess of its ratable portion of
the payments received by all of the Lenders with respect to the Notes held by
or, as the case may be, Reimbursement Obligations owed to, all of the Lenders,
such Lender will make such disposition and arrangements with the other Lenders
with respect to such excess, either by way of distribution, pro tanto assignment
of claims, subrogation or otherwise as shall result in each Lender receiving in
respect of the Notes held by it or, as the case may be, Reimbursement
Obligations owed it, its proportionate payment as contemplated by this Credit
Agreement; provided that if all or any part of such excess payment is thereafter
recovered from such Lender, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
15. THE AGENT.
15.1. AUTHORIZATION.
(a) The Agent is authorized to take such action on behalf of
each of the Lenders and to exercise all such powers as are hereunder
and under any of the other Loan Documents and any related documents
delegated to the Agent,
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together with such powers as are reasonably incident thereto, provided
that no duties or responsibilities not expressly assumed herein or
therein shall be implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the Lenders
is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention,
the independent contractual relationship between the Agent and each of
the Lenders. Nothing contained in this Credit Agreement nor the other
Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship between the Agent and any of the Lenders.
(c) As an independent contractor empowered by the Lenders to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, the Agent is nevertheless
a "representative" of the Lenders, as that term is defined in Article 1
of the Uniform Commercial Code, for purposes of actions for the benefit
of the Lenders and the Agent with respect to all collateral security
and guaranties contemplated by the Loan Documents. Such actions include
the designation of the Agent as "secured party", "mortgagee" or the
like on all financing statements and other documents and instruments,
whether recorded or otherwise, relating to the attachment, perfection,
priority or enforcement of any security interests, mortgages or deeds
of trust in collateral security intended to secure the payment or
performance of any of the Obligations, all for the benefit of the
Lenders and the Agent.
15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrowers.
15.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
15.4. NO REPRESENTATIONS. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the Notes, the
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Letters of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, or
for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to the
Notes, or for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of the Borrowers, or be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes or to
inspect any of the properties, books or records of the Borrowers or any of their
Subsidiaries. The Agent shall not be bound to ascertain whether any notice,
consent, waiver or request delivered to it by the Borrowers or any holder of any
of the Notes shall have been duly authorized or is true, accurate and complete.
The Agent has not made nor does it now make any representations or warranties,
express or implied, nor does it assume any liability to the Lenders, with
respect to the credit worthiness or financial conditions of the Borrowers or any
of their Subsidiaries. Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement.
15.5. PAYMENTS.
15.5.1. PAYMENTS TO AGENT. A payment by the Borrowers to
the Agent hereunder or any of the other Loan Documents for the
account of any Lender shall constitute a payment to such Lender. The
Agent agrees promptly to distribute to each Lender such Lender's pro
rata share of payments received by the Agent for the account of the
Lenders except as otherwise expressly provided herein or in any of the
other Loan Documents.
15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the
Agent the distribution of any amount received by it in such capacity
hereunder, under the Notes or under any of the other Loan Documents
might involve it in liability, it may refrain from making distribution
until its right to make distribution shall have been adjudicated by a
court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is
to be repaid, each Person to whom any such distribution shall have been
made shall either repay to the Agent its proportionate share of the
amount so adjudged to be repaid or shall pay over the same in such
manner and to such Persons as shall be determined by such court.
15.5.3. DELINQUENT LENDERS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan
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Documents, any Lender that fails (i) to make available to the Agent its
pro rata share of any Loan or to purchase any Letter of Credit
Participation or (ii) to comply with the provisions of Section 14 with
respect to making dispositions and arrangements with the other Lenders,
where such Lender's share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and
payable to all of the Lenders, in each case as, when and to the full
extent required by the provisions of this Credit Agreement, shall be
deemed delinquent (a "Delinquent Lender") and shall be deemed a
Delinquent Lender until such time as such delinquency is satisfied. A
Delinquent Lender shall be deemed to have assigned any and all payments
due to it from the Borrowers, whether on account of outstanding Loans,
Unpaid Reimbursement Obligations, interest, fees or otherwise, to the
remaining nondelinquent Lenders for application to, and reduction of,
their respective pro rata shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Lender hereby authorizes the
Agent to distribute such payments to the nondelinquent Lenders in
proportion to their respective pro rata shares of all outstanding Loans
and Unpaid Reimbursement Obligations. A Delinquent Lender shall be
deemed to have satisfied in full a delinquency when and if, as a result
of application of the assigned payments to all outstanding Loans and
Unpaid Reimbursement Obligations of the nondelinquent Lenders, the
Lenders' respective pro rata shares of all outstanding Loans and Unpaid
Reimbursement Obligations have returned to those in effect immediately
prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.
15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of
any Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
15.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and
hold harmless the Agent and the Collateral Agent from and against any and all
claims, actions and suits (whether groundless or otherwise), losses, damages,
costs, expenses (including any expenses for which the Agent or the Collateral
Agent has not been reimbursed by the Borrowers as required by Section 16), and
liabilities of every nature and character arising out of or related to this
Credit Agreement, the Notes, or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or the Agent's or the
Collateral Agent's actions taken hereunder or thereunder, except to the extent
that any of the same shall be directly caused by the Agent's willful misconduct
or gross negligence.
15.8. AGENT AS LENDER. In its individual capacity, FNBB shall have
the same obligations and the same rights, powers and privileges in respect to
its Commitment
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and the Loans made by it, and as the holder of any of the Notes and as the
purchaser of any Letter of Credit Participations, as it would have were it not
also the Agent and the Collateral Agent.
15.9. RESIGNATION; REMOVAL. The Agent may resign at any time by
giving sixty (60) days prior written notice thereof to the Lenders and the
Borrowers. Upon any such resignation, the Majority Lenders shall have the right
to appoint a successor Agent. Unless an Event of Default shall have occurred and
be continuing, such successor Agent shall be reasonably acceptable to the
Borrowers. If no successor Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, which shall be a
financial institution having a rating of not less than A or its equivalent by
Standard & Poor's Corporation and which, unless an Event of Default shall have
occurred and be continuing, shall be reasonably acceptable to the Borrowers.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Credit Agreement and the
other Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent. The
Agent may be removed by a vote of the Majority Lenders for cause or in the event
that FNBB shall have entered into assignments of its interest under this Credit
Agreement resulting in its Commitment being reduced to an amount less than
$10,000,000. In the event of any such removal of the Agent pursuant to the
foregoing sentence, the provisions of this Section 15.9 shall apply to the
appointment of a successor.
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Lender
hereby agrees that, upon learning of the existence of a Default or an Event of
Default, it shall promptly notify the Agent thereof, but it shall have no
liability for failure to do so. The Agent hereby agrees that upon receipt of any
notice under this Section 15.10 it shall promptly notify the other Lenders of
the existence of such Default or Event of Default.
15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events
of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (i) so
requested by the Majority Lenders and (ii) the Lenders have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other disposition
of all or any part of the Collateral and exercise all or any such other legal
and equitable and other rights or remedies as it may have in respect of such
Collateral. The Majority Lenders may direct the Agent in writing as to the
method
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and the extent of any such sale or other disposition, the Lenders hereby
agreeing to indemnify and hold the Agent harmless from all liabilities incurred
in respect of all actions taken or omitted in accordance with such directions,
provided that the Agent need not comply with any such direction to the extent
that the Agent reasonably believes the Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable jurisdiction.
16. EXPENSES.
The Borrowers jointly and severally agree to pay (i) the reasonable
costs of producing and reproducing this Credit Agreement, the other Loan
Documents and the other agreements and instruments mentioned herein, (ii) any
taxes (including any interest and penalties in respect thereto) payable by the
Agent or any of the Lenders (other than taxes based upon the Agent's or any
Lender's net income) on or with respect to the transactions contemplated by this
Credit Agreement (the Borrowers hereby agreeing to indemnify the Agent and each
Lender with respect thereto), (iii) the reasonable fees, expenses and
disbursements of the Agent's Special Counsel or any local counsel to the Agent
incurred in connection with the preparation, administration or interpretation of
the Loan Documents and other instruments mentioned herein, each closing
hereunder, and amendments, modifications, approvals, consents or waivers hereto
or hereunder, (iv) the reasonable fees, expenses and disbursements of the Agent
and the Collateral Agent incurred by the Agent and the Collateral Agent in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, (v) any reasonable fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by the Agent or the Collateral Agent in establishing, maintaining or
handling the FNBB Concentration Accounts and any agency accounts, lock box
accounts and other accounts for the collection of any of the Collateral; (vi)
all reasonable out-of-pocket expenses incurred by the Agent or the Collateral
Agent or any Lender in connection with periodic field examinations, monitoring
of Collateral and other assets, and otherwise in maintaining and monitoring the
transactions contemplated hereby, in each case in accordance with the terms of
this Credit Agreement; (vii) all reasonable out-of-pocket expenses (including
without limitation reasonable attorneys' fees and costs, which attorneys may be
employees of any Lender or the Agent or the Collateral Agent, and reasonable
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) incurred by the Agent or the Collateral Agent in connection
with (A) the enforcement of or preservation of rights under any of the Loan
Documents against the Borrowers or the administration thereof after the
occurrence of a Default or Event of Default and (B) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to the
Agent's or the Collateral Agent's relationship with the Borrowers or any of
their Subsidiaries and (viii) all reasonable fees, expenses and disbursements of
the Agent and the Collateral Agent incurred in connection with
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UCC searches or UCC filings. The covenants of this Section 16 shall survive
payment or satisfaction of all other Obligations.
17. INDEMNIFICATION.
The Borrowers jointly and severally agree to indemnify and hold
harmless the Agent, the Collateral Agent and the Lenders from and against any
and all claims, actions and suits whether groundless or otherwise, and from and
against any and all liabilities, losses, damages and expenses of every nature
and character arising out of (a) this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby or any actual or proposed use
by the Borrowers of the proceeds of any of the Loans or Letters of Credit, (b)
the reversal or withdrawal of any provisional credits granted by the Agent upon
the transfer of funds to the FNBB Concentration Accounts from Corestates Bank,
N.A. or any other depository institution satisfactory to the Agent or in
connection with the provisional honoring of checks or other items, (c) the
Borrowers entering into or performing this Credit Agreement or any of the other
Loan Documents, (d) with respect to the Borrowers, the Designated Subsidiaries
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), or (e) any sales, use,
transfer, documentary and stamp taxes (but excluding any taxes based upon or
measured by the income or profits of any Lender, the Collateral Agent or the
Agent) and any recording and filing fees paid by the Agent, the Collateral Agent
or the Lenders and which arise by reason of the transactions contemplated hereby
or by any of the Loan Documents, in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation or other
proceeding; provided, however, that such indemnity shall not apply to the
portion, if any, of any such losses, claims, damages, liabilities or related
expenses of any Person seeking indemnification that is determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the willful misconduct or gross negligence of such Person seeking
indemnification; and provided further that such indemnity shall not apply to the
portion, if any, of any losses, claims, damages, liabilities or related expenses
of any Lender resulting solely and directly from any breach by such Lender of
its obligations under this Credit Agreement. In litigation, or the preparation
therefor, the Lenders, the Collateral Agent and the Agent shall be entitled to
select counsel to act on behalf of the Lenders, the Collateral Agent and the
Agent and, in addition to the foregoing indemnity, the Borrowers jointly and
severally agree to pay promptly the reasonable fees and expenses of such
counsel; provided, however, that in the event of any conflict of interest
between or among any Lender, the Collateral Agent and the Agent, the Person or
Persons with such conflict
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of interest shall be entitled to select its or their own counsel (which counsel
may be the employee of such Person or Persons), and, in addition to the
foregoing indemnity, the Borrowers also jointly and severally agree to pay
promptly the reasonable fees and expenses of such counsel. If, and to the extent
that the obligations of the Borrowers under this Section 17 are unenforceable
for any reason, each of the Borrowers hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The covenants contained in this Section 17
shall survive payment or satisfaction in full of all other Obligations.
18. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrowers or any of the Designated
Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Lenders and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Lenders of any of the
Loans and the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any Letter
of Credit or any amount due under this Credit Agreement or the Notes or any of
the other Loan Documents remains outstanding or any Lender has any obligation to
make any Loans or the Agent has any obligation to issue, extend or renew any
Letter of Credit, and for such further time as may be otherwise expressly
specified in this Credit Agreement. All statements contained in any certificate
or other paper delivered to any Lender or the Agent at any time on or after the
Closing Date by or on behalf of the Borrowers or any of the Designated
Subsidiaries pursuant hereto or in connection with the transactions contemplated
hereby shall constitute representations and warranties by such Borrower or such
Designated Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION.
19.1. CONDITIONS TO ASSIGNMENT BY LENDERS. Except as provided
herein, each Lender may assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Credit Agreement
(including all or a portion of its Commitment Percentage and Commitment and the
same portion of the Loans at the time owing to it, the Notes held by it and its
participating interest in the risk relating to any Letters of Credit); provided
that (a) the Agent shall have given its prior written consent to such
assignment, (b)(i) so long as no Default or Event of Default has occurred and
is continuing, the Borrowers shall have given their prior written consent to
such assignment, which consent will not be unreasonably withheld or delayed,
and (ii) during the continuance of any Default or Event of Default, the
Borrowers shall have given their prior written consent in the case of any such
assignment to an Excluded Assignee, (c) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Lender's rights
and obligations
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under this Credit Agreement, (d) each assignment shall be in an amount that is
at least equal to $10,000,000, (e) no Lender shall enter into an assignment
which would result in such Lender's Commitment being reduced to less than
$10,000,000, except that any Lender may assign all of its rights and obligations
under this Credit Agreement and reduce its Commitment to $0, and (f) the parties
to such assignment shall execute and deliver to the Agent, for recording in the
Register (as hereinafter defined), an Assignment and Acceptance, substantially
in the form of Exhibit F hereto (an "Assignment and Acceptance"), together with
any Notes subject to such assignment. Upon such execution, delivery, acceptance
and recording, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five (5) Business Days
after the execution thereof, (i) the assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder, and (ii) the assigning Lender shall, to
the extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in Section 19.3, be released from its obligations
under this Credit Agreement. Notwithstanding the foregoing, any assigning Lender
shall retain its rights to be indemnified pursuant to Section 17 hereof with
respect to claims, actions and suits arising from events or circumstances
occurring prior to the date of such assignment.
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS.
By executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Lender makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition
of the Borrowers and their Subsidiaries or any other Person primarily
or secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrowers or any other Person
primarily or secondarily liable in respect of any of the Obligations of
any of their obligations under this Credit Agreement or any of the
other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto;
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(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in Section 7.4 and Section 8.4 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Lender, the Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Lender;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Lender satisfactory to such assignee with respect to
its pro rata share of Letter of Credit Fees in respect of outstanding
Letters of Credit.
19.3. REGISTER. The Agent shall maintain a copy of each Assignment
and Acceptance delivered to it and a register or similar list (the "Register")
for the recordation of the names and addresses of the Lenders and the Commitment
Percentage of, and principal amount of the Loans owing to and Letter of Credit
Participations purchased by, the Lenders from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrowers, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrowers and
the Lenders at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Lender agrees to pay to the
Agent a registration fee in the sum of $3,500.
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19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (i) record the information contained therein in
the Register, and (ii) give prompt notice thereof to the Borrowers and the
Lenders (other than the assigning Lender). Within five (5) Business Days after
receipt of such notice, the Borrowers, at their own expense, shall execute and
deliver to the Agent, in exchange for each surrendered Note, a new Note to the
order of such Eligible Assignee in an amount equal to the amount assumed by such
Eligible Assignee pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Lender in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be substantially in the form of the assigned Notes. Within five (5)
days of issuance of any new Notes pursuant to this Section 19.4, the Borrowers
shall deliver an opinion of counsel, addressed to the Lenders and the Agent,
relating to the due authorization, execution and delivery of such new Notes and
the legality, validity and binding effect thereof, in form and substance
satisfactory to the Lenders. The surrendered Notes shall be canceled and
returned to the Borrowers.
19.5. PARTICIPATIONS. Each Lender may sell participations to one or
more banks or other entities in all or a portion of such Lender's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (i) each such participation shall be in an amount of not less than
$10,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Lender hereunder to the Borrowers, (iii) such participants
shall not be entitled to the benefits of the yield protection and
indemnification provisions contained in Sections 5.3, 5.7, 5.8 and 5.10 hereof,
and (iv) the only rights granted to the participant pursuant to such
participation arrangements with respect to waivers, amendments or modifications
of the Loan Documents shall be the rights to approve waivers, amendments or
modifications that would reduce the principal of or the interest rate on any
Loans, extend the term or increase the amount of the Commitment of such Lender
as it relates to such participant, reduce the amount of any commitment fees or
Letter of Credit Fees to which such participant is entitled or extend any
regularly scheduled payment date for principal or interest.
19.6. CONFIDENTIALITY. Each of the Lenders and the Agent agrees (on
behalf of itself and each of its directors, officers, employees and
representatives) that it will treat in confidence the information obtained
pursuant to this Credit Agreement which is designated by the Borrowers, or
either of them, as confidential and will not, without the consent of the
Borrowers, disclose such information to any third party other than any employee,
director, agent, attorney, accountant or other professional
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advisor of such Lender or the Agent who has agreed to keep such information
confidential. Notwithstanding the foregoing, each of the Borrowers hereby
authorizes each of the Agent and the Lenders to disclose information obtained
pursuant to this Credit Agreement (a) to the Agent or any other Lender; (b) to
other banks or financial institutions who are assignees, participants or
potential assignees or participants in the Obligations, so long as each such
assignee or participant (or potential assignee or participant) first executes
and delivers to the Agent or, as the case may be, such Lender, for the benefit
of the Borrowers, a confidentiality agreement substantially in the form of
Exhibit G hereto; (c) in response to any request or order of any court or other
governmental or regulatory authority having jurisdiction over the Agent or such
Lender or as may be otherwise required pursuant to any statute, rule,
regulation, judicial process or other requirement of law; (d) to bank examiners,
auditors and accountants, or (e) where such information has been publicly
disclosed other than in breach of this Credit Agreement.
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWERS. If any
assignee Lender is an Affiliate of either of the Borrowers, then any such
assignee Lender shall have no right to vote as a Lender hereunder or under any
of the other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to Section
13.1 or Section 13.2, and the determination of the Majority Lenders shall for
all purposes of this Agreement and the other Loan Documents be made without
regard to such assignee Lender's interest in any of the Loans. If any Lender
sells a participating interest in any of the Loans or Reimbursement Obligations
to a participant, and such participant is either of the Borrowers or an
Affiliate of either of the Borrowers, then such transferor Lender shall promptly
notify the Agent of the sale of such participation. A transferor Lender shall
have no right to vote as a Lender hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Agent pursuant to Section 13.1 or Section
13.2 to the extent that such participation is beneficially owned by either of
the Borrowers or any Affiliate of either of the Borrowers, and the determination
of the Majority Lenders shall for all purposes of this Agreement and the other
Loan Documents be made without regard to the interest of such transferor Lender
in the Loans to the extent of such participation.
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Lender
shall retain its rights to be indemnified pursuant to Section 17 with respect
to any claims or actions arising prior to the date of such assignment. Anything
contained in this Section 19 to the contrary notwithstanding, any Lender may at
any time pledge all or any portion of its interest and rights under this Credit
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof
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shall release the pledgor Lender from its obligations hereunder or under any of
the other Loan Documents.
19.9. ASSIGNMENT BY BORROWERS. Neither of the Borrowers shall assign
or transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Lenders.
19.10. ADDITIONAL COMMITMENT AMOUNTS. (a) Upon request by the Agent,
the Borrowers, and the applicable New Lender (as defined below) at any time and
from time to time, so long as no Default or Event of Default shall have occurred
and be continuing, (i) any Person who would then qualify as an Eligible Assignee
hereunder may, prior to the Maturity Date, join this Credit Agreement as an
additional Lender (such Person being herein referred to as a "New Lender") and
be entitled to all the rights and interests and obligated to perform all of the
obligations and duties of a Lender with respect to a specified additional
Commitment hereunder and (ii) any existing Lender may increase the amount of its
Commitment hereunder (such Person being herein referred to as an "Increasing
Lender"), provided that (A) each of the Agent and the Borrowers shall, in its
reasonable discretion, have given its prior written consent to the addition of
such New Lender as a party to this Credit Agreement or, as the case may be, the
increasing of the Commitment of such Increasing Lender, (B) each New Lender or,
as the case may be, Increasing Lender, the Agent, and the Borrowers shall have
executed and delivered an instrument of adherence in the form of Exhibit H
hereto (the "Instrument of Adherence") pursuant to which such New Lender or, as
the case may be, Increasing Lender, shall agree to be bound as a Lender by the
terms and conditions hereof and the other Loan Documents, and to make Loans to
the Borrowers in accordance with this Credit Agreement, and which Instrument of
Adherence shall specify the new Commitment of such New Lender or, as the case
may be, Increasing Lender, (C) the additional Commitment provided by any New
Lender or, as the case may be, Increasing Lender (such additional Commitment,
the "Additional Commitment Amount") must be at least $10,000,000 for any New
Lender and $5,000,000 for any Increasing Lender, (D) such Additional Commitment
Amount, when aggregated with each other Additional Commitment Amount provided by
a New Lender or an Increasing Lender pursuant to this Section 19.10, shall not
exceed $30,000,000, and (E) such New Lender or Increasing Lender, as the case
may be, and the Agent shall have received such opinions of counsel to the
Borrowers, such evidence of proper corporate organization, existence, authority,
and appropriate corporate proceedings with respect to the Borrowers, and such
other certificates, instruments, and documents, as they shall have reasonably
requested in connection with such Instrument of Adherence.
(b) Upon any New Lender's or Increasing Lender's, as the case may be,
execution of an Instrument of Adherence and the Borrowers' and the Agent's
consent thereto, the Commitment Percentage of each Lender shall be recalculated
and the aggregate Total Commitment shall be adjusted appropriately so as to
reflect the
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addition of the Additional Commitment Amount. Promptly thereafter, the Agent
shall notify each of the Lenders of the joinder hereunder of such New Lender,
or, as the case may be, of the increase of the Commitment of such Increasing
Lender, the resulting increase in the Total Commitment and each Lender's new
Commitment Percentage, and shall also make appropriate notations in the Register
in accordance with Section 19.3 hereof.
(c) Upon the effective date of any Instrument of Adherence, the New
Lender, or, as the case may be, the Increasing Lender shall make all (if any)
such payments to the Agent, for delivery to the other Lenders as may be
necessary to result in the Loans made by such New Lender, or, as the case may
be, Increasing Lender, being equal to such New Lender's, or, as the case may be,
Increasing Lender's, Commitment Percentage (as then in effect) of the aggregate
principal amount of all Loans outstanding to the Borrowers as of such date. Each
of the Borrowers hereby agrees that any New Lender or Increasing Lender so
paying any such amount to the other Lenders pursuant to this Section 19.10 shall
be entitled to all the rights of a Lender hereunder and such payments to the
other Lenders shall constitute Loans held by such New Lender or, as the case may
be, Increasing Lender, hereunder and that such New Lender or, as the case may
be, Increasing Lender, may, to the fullest extent permitted by law, exercise all
of its rights of payment (including the right of set-off) with respect to such
amounts as fully as if such New Lender or, as the case may be, Increasing
Lender, had initially advanced the Borrowers the amount of such payments.
20. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to either of the Borrowers, at 901 W. Walnut Hill
Lane, Irving, Texas 75038-1003, Attention: Thomas E. Whiddon and Alan
P. Shor, or at such other address for notice as the Borrowers shall
last have furnished in writing to the Person giving the notice with a
copy to John C. Beane, Troutman Sanders, 600 Peachtree Street, N.E.,
Suite 5200, Atlanta, GA 30308-2216;
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Bethann R. Halligan, Managing
Director, or such other address for notice as the Agent shall last have
furnished in writing to the
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Person giving the notice with a copy to Robert A.J. Barry, Jr.,
Bingham, Dana & Gould, 150 Federal Street, Boston, MA 02110; and
(c) if to any Lender, at such Lender's address set forth on
Schedule 1 hereto, or such other address for notice as such Lender
shall have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
21. GOVERNING LAW.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE
BORROWERS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH
OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT. EACH OF THE BORROWERS HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
22. HEADINGS.
The captions in this Credit Agreement and in the table of contents
hereto are for convenience of reference only and shall not define or limit the
provisions hereof.
23. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Credit Agreement it shall not
be necessary to
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produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 26.
25. WAIVER OF JURY TRIAL.
THE PARTIES HERETO HEREBY WAIVE THEIR RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS
OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE BORROWERS HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE
PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF THE BORROWERS
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE
AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(B) ACKNOWLEDGES THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO
THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit Agreement
to be given by all of the Lenders may be given, and any term of this Credit
Agreement, the other Loan Documents or any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by the
Borrowers of any terms of this Credit Agreement, the other Loan Documents or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of each of the
Borrowers and the written consent of the Majority Lenders. Notwithstanding the
foregoing, the rate of interest on the Notes (other than
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interest accruing pursuant to Section 5.11 following the effective date of any
waiver by the Majority Lenders of the Default or Event of Default relating
thereto and except with respect to any automatic Performance Adjustments), the
definition of Maturity Date, all rates of interest (except with respect to any
automatic Performance Adjustments), the amount of the Commitments of the Lenders
(except as contemplated by Section 2.3 and Section 19.10), and, except with
respect to any automatic Performance Adjustments, the amount of commitment fee
or Letter of Credit Fees hereunder may not be changed without the written
consent of each of the Borrowers and the written consent of all of the Lenders;
the definition of Majority Lenders may not be amended without the written
consent of all of the Lenders; this Section 26 may not be amended without the
written consent of all of the Lenders; all or a material portion of the
Collateral may not be released (except pursuant to Section 6.3) without the
written consent of all of the Lenders; and the amount of the Agent's fee or any
Letter of Credit Fees payable for the Agent's account and Section 15 may not be
amended without the written consent of the Agent. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrowers
shall entitle the Borrowers to other or further notice or demand in similar or
other circumstances.
27. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
ZALE CORPORATION
By: /s/ MERRILL WERTHEIMER
-------------------------------------
Name: Merrill Wertheimer
Title: Executive Vice President -
Finance and Administration
By: /s/ THOMAS E. WHIDDON
-------------------------------------
Name: Thomas E. Whiddon
Title: Senior Vice President
and Treasurer
ZALE DELAWARE, INC.
By: /s/ MERRILL WERTHEIMER
-------------------------------------
Name: Merrill Wertheimer
Title: Executive Vice President -
Finance and Administration
By: /s/ THOMAS E. WHIDDON
-------------------------------------
Name: Thomas E. Whiddon
Title: Senior Vice President
and Treasurer
THE FIRST NATIONAL BANK
OF BOSTON, individually and as Agent
By: /s/ ELIZABETH A. RATTO
-------------------------------------
Name: Elizabeth A. Ratto
Title: Vice President
119
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ TIMOTHY C. HUBAN
-------------------------------------
Name: Timothy C. Huban
Title: Vice President
Commercial Finance
SHAWMUT BANK, N.A.
By: /s/ PETER F. SAMSON
-------------------------------------
Name: Peter F. Samson
Title: Assistant Vice President
ABN-AMRO BANK, N.V., NEW YORK BRANCH
By: /s/ JAMES OCCHIOGROSSO
-------------------------------------
Name: James Occhiogrosso
Title: Vice President
By: /s/ ANNA MARTIN
-------------------------------------
Name: Anna Martin
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ RANDALL D. SOUTHERN
-------------------------------------
Name: Randall D. Southern
Title: Vice President
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THE NIPPON CREDIT BANK, LTD.
By: /s/ LORI A. RAVIT
-------------------------------------
Name: Lori A. Ravit
Title:
BANK ONE, TEXAS, N.A.
By: /s/ DENISE PARKS
-------------------------------------
Name: Denise Parks
Title: Assistant Vice President