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EXHIBIT 10.9
NOTE AGREEMENT FOR $40,000,000 7.2% SENIOR NOTES
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EXHIBIT 10.9 : NOTE AGREEMENT FOR $40,000,000 7.2% SENIOR NOTES
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WILLIAMS-SONOMA, INC.
NOTE AGREEMENT
Dated as of August 1, 1995
Re: $40,000,000 7.20% Senior Notes
Due August 8, 2005
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WILLIAMS-SONOMA, INC.
3250 VanNess Avenue
San Francisco, California 94109
NOTE AGREEMENT
Re:
$40,000,000 7.20% Senior Notes
Due August 8, 2005
Dated as of
August 1, 1995
To the Purchasers named in Schedule I
to this Agreement
Ladies and Gentlemen:
The undersigned, Williams-Sonoma, Inc., a California corporation (the
"Company"), agrees with the purchasers named in Schedule I to this Agreement
(the "Purchasers") as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the
issue and sale of $40,000,000 aggregate principal amount of its 7.20% Senior
Notes (the "Notes") to be dated the date of issue, to bear interest from such
date at the rate of 7.20% per annum, payable semiannually on the eighth day of
February and August in each year (commencing February 8, 1996) and at maturity
and to bear interest on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the extent
legally enforceable) on any overdue installment of interest at the Overdue Rate
after the date due, whether by acceleration or otherwise, until paid, to be
expressed to mature on August 8, 2005, and to be substantially in the form
attached hereto as Exhibit A. Interest on the Notes shall be computed on the
basis of a 360-day year of twelve 30-day months. The Notes are not subject to
prepayment or redemption at the option of the Company prior to their expressed
maturity date except on the terms and
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conditions and in the amounts and with the premium, if any, set forth in SECTION
2 of this Agreement. The term "Notes" as used herein shall include each Note
delivered pursuant to this Agreement. The terms which are capitalized herein
shall have the meanings set forth in SECTION 8.1 unless the context shall
otherwise require.
Section 1.2. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to each Purchaser,
and such Purchaser agrees to purchase from the Company, Notes in the principal
amount set forth opposite such Purchaser's name on Schedule I hereto at a price
of 100% of the principal amount thereof on the Closing Date hereafter mentioned.
Delivery of the Notes will be made at the offices of Chapman and
Cutler, 111 West Monroe, Chicago, Illinois 60603, against payment therefor in
Federal Reserve or other funds current and immediately available at the
principal office of Bank of America National Trust and Savings Association in
the amount of the purchase price at 10:00 A.M., Chicago, Illinois time, on
August 8, 1995 or such later date (not later than August 15, 1995) as shall
mutually be agreed upon by the Company and the Purchasers (the "Closing Date").
The Notes delivered to each Purchaser on the Closing Date will be delivered to
such Purchaser in the form of a single registered Note in the form attached
hereto as Exhibit A for the full amount of such Purchaser's purchase (unless
different denominations are specified by such Purchaser), registered in such
Purchaser's name or in the name of such Purchaser's nominee, as may be specified
in Schedule I attached hereto.
Section 1.3. Several Commitments. The obligations of the Purchasers
shall be several and not joint and no Purchaser shall be liable or responsible
for the acts or defaults of any other Purchaser.
Section 1.4. Guaranty of Notes. The payment by the Company of all
amounts due with respect to the Notes and the performance by the Company of its
obligations under this Agreement are fully and unconditionally guaranteed by
Williams-Sonoma Stores, Inc., The Pottery Barn East, Inc., Gardener's Eden,
Inc., Hold Everything, Inc., and Chambers Catalog Company, Inc. (collectively,
the "Initial Subsidiary Guarantors") pursuant to the Guaranty Agreement, dated
as of August 1, 1995 (the "Guaranty Agreement"), substantially in the form
attached hereto as Exhibit C.
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SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Company agrees that on August 8 in each year, commencing
August 8, 1999 and ending August 8, 2004, both inclusive, it will prepay and
apply and there shall become due and payable on the principal indebtedness
evidenced by the Notes an amount equal to the lesser of (a) $5,714,285 or (b)
the principal amount of the Notes then outstanding. The entire remaining
principal amount of the Notes shall become due and payable on August 8, 2005. No
premium shall be payable in connection with any required prepayment made
pursuant to this SECTION 2.1.
In the event that the Company shall prepay less than all of the
Notes pursuant to SECTION 2.2, the amounts of the prepayments required by this
SECTION 2.1 shall be reduced by an amount which is the same percentage of such
required prepayment as the percentage that the principal amount of Notes prepaid
pursuant to SECTION 2.2 is of the aggregate principal amount of outstanding
Notes immediately prior to such prepayment.
Section 2.2. Optional Prepayment with Premium. In addition to the
payments required by SECTION 2.1, upon compliance with SECTION 2.3, the Company
shall have the privilege, at any time and from time to time of prepaying the
outstanding Notes, either in whole or in part (but if in part then in a minimum
principal amount of $1,000,000), by payment of the principal amount of the
Notes, or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, together with a premium equal to the Make-Whole Amount,
determined as of two Business Days prior to the date of such prepayment pursuant
to this SECTION 2.2.
Section 2.3. Notice of Optional Prepayments. The Company will give
notice of any prepayment of the Notes pursuant to SECTION 2.2 to each Holder not
less than 30 days nor more than 60 days before the date fixed for such optional
prepayment specifying (a) such date, (b) the principal amount of such Holder's
Notes to be prepaid on such date, (c) that a premium may be payable, (d) the
date when such premium will be calculated, (e) the estimated premium, together
with a reasonably detailed computation of such estimated premium, and (f) the
accrued interest applicable to the prepayment. Such notice of prepayment shall
also certify all facts, if any, which are conditions precedent to any such
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with accrued interest
thereon and the premium, if any, payable with respect thereto shall, subject to
the satisfaction or
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occurrence of the conditions precedent specified in such notice, if any, become
due and payable on the prepayment date specified in said notice. Two Business
Days prior to the prepayment date specified in such notice, the Company shall
provide each Holder written notice of the premium, if any, payable in connection
with such prepayment and, whether or not any premium is payable, a reasonably
detailed computation of the Make-Whole Amount.
Section 2.4. Application of Prepayments. All partial prepayments
made pursuant to SECTION 2.1 or SECTION 2.2 shall be applied on all outstanding
Notes ratably in accordance with the unpaid principal amounts thereof.
Section 2.5. Direct Payment. Notwithstanding anything to the
contrary contained in this Agreement or the Notes, in the case of any Note owned
by any Holder that is a Purchaser or any other Institutional Holder which has
given written notice to the Company requesting that the provisions of this
SECTION 2.5 shall apply, the Company will punctually pay when due the principal
thereof, interest thereon and premium, if any, due with respect to said
principal, without any presentment thereof, directly to such Holder at its
address set forth in Schedule I hereto or such other address as such Holder may
from time to time designate in writing to the Company or, if a bank account with
a United States bank is so designated for such Holder, the Company will make
such payments in immediately available funds to such bank account, no later than
12:00 p.m., New York City time, on the date due, marked for attention as
indicated, or in such other manner or to such other account in any United States
bank as such Holder may from time to time direct in writing. If for any reason
whatsoever the Company does not make any such payment by such 12:00 p.m.
transmittal time, such payment shall be deemed to have been made on the next
following Business Day and such payment shall bear interest at the Overdue Rate.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents
and warrants that all representations and warranties set forth in Exhibit B are
true and correct as of the date hereof and are incorporated herein by reference
with the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchasers. (a) Each Purchaser
represents, and in entering into this Agreement the Company understands, that
such Purchaser is acquiring the Notes for the purpose of investment and not with
a view to the
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distribution thereof, and that such Purchaser has no present intention of
selling, negotiating or otherwise disposing of the Notes; it being understood,
however, that the disposition of such Purchaser's property shall at all times be
and remain within its control.
(b) Each Purchaser further represents that either: (1) such Purchaser
is acquiring the Notes with assets from such Purchaser's general account and not
with the assets of any separate account in which any employee benefit plan has
any interest; (2) the source of funds to be used by such Purchaser to pay the
purchase price of the Notes is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Class Exemption 95-60
(issued July 12, 1995) and there is no "employee benefit plan" (within the
meaning of Section 3(3) of ERISA or Section 4975(e)(1) of the Code), treating as
a single plan, all plans maintained by the same employer or employee
organization, with respect to which the amount of the general account reserves
and liabilities for all contracts held by or on behalf of such plan, exceed ten
percent (10%) of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth in the
NAIC Annual Statement filed with such Purchaser's state of domicile; or (3) all
or a part of such funds constitute assets of one or more separate accounts,
trusts or a commingled pension trust maintained by such Purchaser, and such
Purchaser has disclosed to the Company the names of such employee benefit plans
whose assets in such separate account or accounts or pension trusts exceed 10%
of the total assets or are expected to exceed 10% of the total assets of such
account or accounts or trusts as of the date of such purchase and the Company
has advised such Purchaser in writing (and in making the representations set
forth in this clause (3) such Purchaser is relying on such advice) that the
Company is not a party-in-interest nor are the Notes employer securities with
respect to the particular employee benefit plan disclosed to the Company by such
Purchaser as aforesaid (for the purpose of this clause (3), all employee benefit
plans maintained by the same employer or employee organization are deemed to be
a single plan). As used in this SECTION 3.2(b), the terms "separate account",
"party-in-interest", "employer securities" and "employee benefit plan" shall
have the respective meanings assigned to them in ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. The obligation of each Purchaser to
purchase the Notes on the Closing Date shall be subject to the performance by
the Company of its agreements hereunder which by the terms hereof are to be
performed at or prior to the time of delivery of the Notes and to the following
further conditions precedent:
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(a) Closing Certificate. Such Purchaser shall have received a
certificate dated the Closing Date, signed by the President or a Vice
President of the Company, the truth and accuracy of which shall be a
condition to such Purchaser's obligation to purchase the Notes proposed
to be sold to such Purchaser and to the effect that (1) the
representations and warranties of the Company set forth in Exhibit B
hereto are true and correct on and with respect to the Closing Date,
(2) the Company has performed all of its obligations hereunder which
are to be performed on or prior to the Closing Date, and (3) no Default
or Event of Default has occurred and is continuing.
(b) Guaranty Agreement; Intercreditor Agreement. The Guaranty
Agreement and the Intercreditor Agreement shall be in form and
substance satisfactory to such Purchaser, shall have been duly executed
and delivered by the parties thereto and shall be in full force and
effect and such Purchaser shall have received true, correct and
complete copies of each thereof.
(c) Legal Opinions. Such Purchaser shall have received from
Chapman and Cutler, who are acting as special counsel to the Purchasers
in this transaction, and from Irell & Manella, counsel for the Company
and the Initial Subsidiary Guarantors, their respective opinions dated
the Closing Date, in form and substance satisfactory to such Purchaser,
and covering the matters set forth in Exhibits E and F, respectively,
hereto.
(d) Company's Existence and Authority. On or prior to the
Closing Date, such Purchaser shall have received, in form and substance
reasonably satisfactory to such Purchaser and special counsel to the
Purchasers, such documents and evidence with respect to the Company as
special counsel to the Purchasers may reasonably request in order to
establish the existence and good standing of the Company and the
authorization of the transactions contemplated by this Agreement.
(e) Initial Subsidiary Guarantors' Existence and Authority.
On or prior to the Closing Date, such Purchaser shall have received, in
form and substance reasonably satisfactory to such Purchaser and
special counsel to the Purchasers, such documents and evidence with
respect to the Initial Subsidiary Guarantors as special counsel to the
Purchasers may reasonably request in order to establish the existence
and good standing of the Initial Subsidiary Guarantors and the
authorization of the transactions contemplated by the Guaranty
Agreement.
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(f) Related Transactions. The Company shall have consummated
the sale of the entire principal amount of the Notes scheduled to be
sold on the Closing Date pursuant to this Agreement.
(g) Private Placement Number. On or prior to the Closing
Date, special counsel to the Purchasers shall have duly made the
appropriate filings with Standard & Poor's CUSIP Service Bureau, as
agent for the National Association of Insurance Commissioners, in order
to obtain a private placement number for the Notes.
(h) Funding Instructions. At least three Business Days prior
to the Closing Date, such Purchaser shall have received written
instructions executed by a Responsible Officer of the Company directing
the manner of the payment of funds and setting forth (1) the name and
address of the transferee bank, (2) such transferee bank's ABA number,
(3) the account name and number into which the purchase price for the
Notes is to be deposited, and (4) the name and telephone number of the
account representative responsible for verifying receipt of such funds.
(i) Special Counsel Fees. Concurrently with the delivery of
the Notes to such Purchaser on the Closing Date, the reasonable and
invoiced charges and disbursements of Chapman and Cutler, special
counsel to the Purchasers, shall have been paid by the Company.
(j) Legality of Investment. The Notes to be purchased by such
Purchaser shall be a legal investment for such Purchaser under the laws
of each jurisdiction to which such Purchaser may be subject (without
resort to any so-called "basket provisions" to such laws).
(k) Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to such Purchaser and special
counsel to the Purchasers, and such Purchaser shall have received a
copy (executed or certified as may be appropriate) of all legal
documents or proceedings taken in connection with the consummation of
said transactions.
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Section 4.2. Waiver of Conditions. If on the Closing Date the
Company fails to tender to any Purchaser the Notes to be issued to such
Purchaser on such date or if the conditions specified in SECTION 4.1 have not
been fulfilled, such Purchaser may thereupon elect to be relieved of all further
obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in SECTION 4.1 have not been fulfilled, such Purchaser may
waive compliance by the Company with any such condition to such extent as such
Purchaser may in its sole discretion determine. Nothing in this SECTION 4.2
shall operate to relieve the Company of any of its obligations hereunder or to
waive any Purchaser's rights against the Company.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will at all
times preserve and keep in full force and effect its corporate existence. The
Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Restricted Subsidiaries (unless merged into
the Company or a Restricted Subsidiary, or dissolved after transfer of all or
substantially all of its assets as otherwise permitted under this Agreement) and
all rights and franchises of the Company and its Restricted Subsidiaries unless,
in the good faith judgment of the Company, the termination of or failure to
preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
Section 5.2. Insurance. The Company will and will cause each of its
Restricted Subsidiaries to maintain, with financially sound and reputable
insurers, insurance with respect to their respective properties and businesses
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is customary in the
case of entities of established reputation engaged in the same or a similar
business and similarly situated.
(a) The Company will and will cause each of its Restricted Subsidiaries to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or
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franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Restricted Subsidiary, provided that neither the Company nor any
Restricted Subsidiary need pay any such tax or assessment or claims if (i) the
amount, applicability or validity thereof is contested by the Company or such
Restricted Subsidiary on a timely basis in good faith and by appropriate
proceedings, and the Company or a Restricted Subsidiary has established adequate
reserves therefor in accordance with GAAP on the books of the Company or such
Restricted Subsidiary or (ii) the nonpayment of all such taxes and assessments
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
(b) The Company will and will cause each of its Restricted
Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws and ERISA, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 5.4. Maintenance, Etc. The Company will and will cause each
of its Restricted Subsidiaries to maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
this SECTION 5.4 shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 5.5. Nature of Business. Neither the Company nor any
Restricted Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be
engaged in by the Company and its Restricted Subsidiaries would be substantially
changed from the general nature of the business engaged in by the Company and
its Restricted Subsidiaries on the date of this
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Agreement. For purposes of this SECTION 5.5, the term "substantially changed"
shall mean less than 90% of the Company's revenues are generated by lines of
business related to the Company's business as of the Closing Date.
Section 5.6. Consolidated Tangible Net Worth. The Company will at
all times keep and maintain Consolidated Tangible Net Worth at an amount not
less than $90,000,000.
Section 5.7. Fixed Charges Coverage Ratio. The Company will keep
and maintain the ratio of Consolidated Net Income Available for Fixed Charges to
Consolidated Fixed Charges for the average of any six of the immediately
preceding eight fiscal quarters at not less than 1.5 to 1.0.
Section 5.8. Limitations on Current Debt and Funded Debt. (a) The
Company will not, and will not permit any Restricted Subsidiary to, create,
assume, guarantee or otherwise incur or in any manner be or become liable in
respect of any Current Debt or Funded Debt, except:
(1) Funded Debt evidenced by the Notes and by the Guaranty
Agreement;
(2) Funded Debt of the Company and its Restricted
Subsidiaries outstanding as of the date of this Agreement and described
on Schedule II hereto;
(3) Funded Debt of the Company and its Restricted
Subsidiaries, provided that at the time of creation, issuance,
assumption, guarantee or incurrence thereof and after giving effect
thereto and to the application of the proceeds thereof:
(i) Consolidated Funded Debt shall not exceed 50% of
Consolidated Total Capitalization, and
(ii) in the case of the issuance of any Funded Debt
of the Company secured by Liens permitted by SECTION 5.9(h)
and any Funded Debt of a Restricted Subsidiary other than
Funded Debt of a Restricted Subsidiary secured by Liens
permitted by SECTION 5.9(g), the sum (without duplication) of
(A) the aggregate amount of all Funded Debt secured by Liens
permitted by SECTION 5.9(h) (including Funded Debt secured by
Liens permitted by SECTION 5.9(h)
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and extended, renewed or refunded pursuant to SECTION 5.9(i))
plus (B) the aggregate amount of all Funded Debt of Restricted
Subsidiaries other than (x) Funded Debt of a Restricted
Subsidiary secured by Liens permitted by SECTION 5.9(g), (y)
Funded Debt of a Restricted Subsidiary to the Company or to a
Wholly-owned Restricted Subsidiary, and (z) Funded Debt
evidenced by the Permitted Subsidiary Guaranties, plus (C) the
aggregate amount of the present value of all Rentals of the
Company and its Restricted Subsidiaries incurred in connection
with sale and leaseback transactions permitted by SECTION
5.10, shall not exceed 10% of Consolidated Tangible Net Worth;
(4) Current Debt of the Company and its Restricted
Subsidiaries, provided that during the twelve-month period immediately
preceding the date of incurrence thereof, there shall have been a
period of 28 consecutive days during which (i) the Company and its
Restricted Subsidiaries shall have been free of all Current Debt or
(ii) the largest aggregate principal amount of all Current Debt
outstanding on each day of such 28-day period did not exceed the
amount of additional Funded Debt which could have been issued or
incurred by the Company or any Restricted Subsidiary within the
limitations of SECTION 5.8(a)(3) on each day of such period and which
Current Debt shall during each day of such 28-day period be deemed to
constitute outstanding Funded Debt for purposes of any determination
of additional Funded Debt to be issued or incurred within the
limitations of said SECTION 5.8(a)(3); and
(5) Funded Debt of a Restricted Subsidiary to the Company or
to a Wholly-owned Restricted Subsidiary.
(b) The renewal, extension or refunding of any Funded Debt, issued,
incurred or outstanding pursuant to SECTION 5.8(a)(2) shall not constitute the
issuance of additional Funded Debt subject to the limitations of the applicable
provisions of this SECTION 5.8 provided that the principal amount of such Funded
Debt outstanding immediately before giving effect to such extension, renewal or
refunding is not increased.
(c) Any Person which becomes a Restricted Subsidiary after the
Closing Date shall for all purposes of this SECTION 5.8 be deemed to have
created, assumed or incurred at the time it becomes a Restricted Subsidiary and
which shall be subject to the terms and limitations set forth in SECTION
5.8(a)(3), all Debt of such Person existing immediately after it becomes a
Restricted Subsidiary.
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Section 5.9. Limitation on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, create or incur, or suffer to be
incurred or to exist, any Lien on its or their property or assets, whether now
owned or hereafter acquired, or upon any income or profits therefrom, or
transfer any property for the purpose of subjecting the same to the payment of
obligations in priority to the payment of its or their general creditors, or
acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any
property or assets upon conditional sales agreements or other title retention
devices, except:
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required
by SECTION 5.3;
(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Restricted Subsidiary
shall at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured within 60 days
after the entry of such judgment or award;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection with
worker's compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens) and
Liens to secure the performance of bids, tenders or trade contracts, or
to secure statutory obligations, surety or appeal bonds or other Liens
of like general nature and not incurred in connection with the
borrowing of money, provided in each case, the obligation secured is
not overdue or, if overdue, is being contested in good faith by
appropriate actions or proceedings;
(d) survey and title exceptions, encumbrances, easements,
encroachments, covenants or reservations, or rights of others for
rights-of-way, utilities and other similar purposes, or zoning or other
restrictions as to the use of real properties, which do not in any
event materially impair their use in the operation of the business of
the Company and its Restricted Subsidiaries;
(e) Liens securing Debt of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary;
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(f) Liens existing as of the Closing Date and described on
Schedule II hereto;
(g) (A) Liens created or incurred after the Closing Date
given to secure the payment of the purchase price or incurred in
connection with the acquisition or purchase of property, or the cost of
construction or improvement of new or existing property, including
Liens existing on such property at the time of acquisition thereof
whether or not such existing Liens were given to secure the payment of
the purchase price thereof, and (B) Liens on property existing on such
property at the time of acquisition thereof, whether or not the Debt
secured thereby is assumed by the Company or any Restricted Subsidiary;
but specifically excluding from clauses (A) and (B) Liens existing on
such property or outstanding shares or Debt of a Person at the time
such Person is merged into or consolidated with the Company or any
Restricted Subsidiary or at the time of a sale, lease or other
disposition of the properties or outstanding shares or Debt of such
Person as an entirety to the Company or any Restricted Subsidiary,
provided that, for purposes of clauses (A) and (B), (1) the Lien shall
attach solely to the property acquired, purchased or being constructed
or improved, (2) with respect to Liens described in clause (A) above,
such Lien shall have been created or incurred within 180 days of the
date of acquisition or purchase or the completion of the construction
or improvement of such property, and (3) all such Funded Debt shall
have been incurred within the applicable limitations provided in
SECTION 5.8(a)(3)(i);
(h) Liens created or incurred after the Closing Date given to
secure Funded Debt of the Company or any Restricted Subsidiary in
addition to the Liens permitted by the preceding clauses (a) through
(g) hereof, provided that all Funded Debt secured by such Liens shall
have been incurred within the applicable limitations provided in
SECTION 5.8(a)(3);
(i) any extension, renewal or refunding of any Lien permitted
by the preceding clauses of this SECTION 5.9 in respect of the same
property theretofore subject to such Lien in connection with the
extension, renewal or refunding of the Debt secured thereby; provided
that (1) such extension, renewal or refunding of Debt shall be without
increase in the principal amount remaining unpaid as of the date of
such extension, renewal or refunding, (2) such Lien shall attach solely
to the same such property, and (3) at the time of such extension,
renewal or refunding no Event of Default shall have occurred or be
continuing after giving effect to such extension, renewal or refunding;
and
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(j) unperfected Liens arising by operation of law under
Article 2 of the Uniform Commercial Code in favor of unpaid sellers or
prepaying buyers of goods relating to amounts that are not past due in
accordance with their respective terms of sale.
Section 5.10. Limitation on Sale and Leasebacks. The Company will not,
and will not permit any Restricted Subsidiary to, enter into any arrangement
whereby the Company or any Restricted Subsidiary shall sell or transfer any
property owned by the Company or any Restricted Subsidiary to any Person other
than the Company or a Restricted Subsidiary and thereupon the Company or any
Restricted Subsidiary shall lease, as lessee, the same property, unless the
lease is executed within 180 days following the sale or transfer of such
property and the present value of all Rentals of the Company and/or its
Restricted Subsidiaries under the leases resulting from such sale and leaseback
transactions made pursuant to this SECTION 5.10 shall have been incurred within
the applicable limitations provided in SECTION 5.8(a)(3)(ii).
Section 5.11. Dividends, Stock Purchases, Restricted Investments. (a)
The Company will not and the Company will not permit any of its Restricted
Subsidiaries to, directly or indirectly, or through any Affiliate, declare or
make or incur any liability to declare or make any Distribution and neither the
Company nor any of its Restricted Subsidiaries will declare, make or authorize
any Restricted Investment, unless, immediately after giving effect to the
proposed Distribution or Restricted Investment, the aggregate amount of
Distributions declared in the case of dividends or made in the case of other
Distributions plus the aggregate amount of Restricted Investments then held by
the Company and its Restricted Subsidiaries (valued immediately after the making
of such Restricted Investment as provided in the definition thereof) during the
period from and after the Closing Date to and including the date of declaration
in the case of a dividend, the date of payment in the case of any other
Distribution and the date such Investment is committed to in the case of a
Restricted Investment, would not exceed the sum of:
(1) $15,000,000; plus
(2) 50% of Consolidated Net Income (or if such Consolidated
Net Income is a deficit figure, then minus 100% of such deficit) for
such period determined on a cumulative basis commencing on July 31,
1995, to and including the date of such declaration, payment or
commitment; plus
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(3) an amount equal to the aggregate net cash proceeds
received by the Company from the sale on or after the Closing Date of
shares of its common stock, warrants and Preferred Stock and an amount
equal to the cash savings realized from the conversion of Debt of the
Company to capital stock of the Company; plus
(4) an amount equal to the net return of capital, in cash,
from Restricted Investments made after the Closing Date.
(b) For the purposes of making computations under paragraph (a) of this
SECTION 5.11, the amount of any Distribution declared, paid or distributed or
Restricted Investment made in property or assets of the Company or a Restricted
Subsidiary shall be deemed to be the greater of the book value or fair market
value (as determined in good faith by the Company's Board of Directors) of such
property or assets as of the date of declaration in the case of a dividend, the
date of payment in the case of any other Distribution and the date the
Investment is committed to in the case of any Restricted Investment.
Any corporation which becomes a Restricted Subsidiary after the date of
this Agreement shall be deemed to have made, at the time it becomes a Restricted
Subsidiary, all Restricted Investments of such corporation existing immediately
after it becomes a Restricted Subsidiary.
(c) The Company will not authorize a Distribution on its capital stock
which is not payable within 60 days of authorization.
(d) The Company will not authorize or make a Distribution on its
capital stock and neither the Company nor any Restricted Subsidiary will make
any Restricted Investment if after giving effect to the proposed Distribution or
Restricted Investment:
(1) a Default or an Event of Default would exist; or
(2) the Company could not incur at least $1.00 of additional
Funded Debt pursuant to SECTION 5.8(a)(3).
Section 5.12 Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Restricted Subsidiary to, consolidate
with or be a party
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to a merger with any other Person, or sell, lease or otherwise dispose of all or
substantially all of its assets; provided that:
(1) any Restricted Subsidiary may merge or consolidate with
or into the Company or any Wholly-owned Restricted Subsidiary so long
as in any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation;
(2) the Company may consolidate or merge with or into any
other corporation if (i) the corporation which results from such
consolidation or merger (the "surviving corporation") is organized
under the laws of any state of the United States or the District of
Columbia, (ii) the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes, according to their
tenor, and the due and punctual performance and observation of all of
the covenants in the Notes and this Agreement to be performed or
observed by the Company are expressly assumed in writing by the
surviving corporation (if other than the Company) and the surviving
corporation shall furnish to the Holders an opinion of counsel
satisfactory to such Holders to the effect that the instrument of
assumption has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of the
surviving corporation enforceable in accordance with its terms, except
as enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles, and
(iii) at the time of such consolidation or merger and immediately after
giving effect thereto, (A) no Default or Event of Default would exist
and (B) the surviving corporation would be permitted by the provisions
of SECTION 5.8(a)(3) to incur at least $1.00 of additional Funded Debt;
(3) the Company may sell or otherwise dispose of all or
substantially all of its assets (other than stock and Indebtedness of a
Restricted Subsidiary, which may only be sold or otherwise disposed of
pursuant to SECTION 5.12(c)) to any Person for consideration which
represents the fair market value of such assets (as determined in good
faith by the Board of Directors of the Company, a copy of which
determination, certified by the Secretary or an Assistant Secretary of
the Company, shall have been furnished to the Holders) at the time of
such sale or other disposition if (i) the acquiring Person is a
corporation organized under the laws of any state of the United States
or the District of Columbia, (ii) the due and punctual payment of the
principal of and premium, if any, and interest on all the
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Notes, according to their tenor, and the due and punctual performance
and observance of all of the covenants in the Notes and in this
Agreement to be performed or observed by the Company are expressly
assumed in writing by the acquiring corporation and the acquiring
corporation shall furnish to the Holders an opinion of counsel
satisfactory to such Holders to the effect that the instrument of
assumption has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of such
acquiring corporation enforceable in accordance with its terms, except
as enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles, and
(iii) at the time of such sale or disposition and immediately after
giving effect thereto, (A) no Default or Event of Default would exist
and (B) the acquiring corporation would be permitted by the provisions
of SECTION 5.8(a)(3) to incur at least $1.00 of additional Funded Debt.
(b) The Company will not, and will not permit any Restricted Subsidiary
to, sell, lease, transfer or otherwise dispose of assets (except assets sold in
the ordinary course of business and except as provided in SECTION 5.12(a)(3) or
SECTION 5.12(c)); provided that the foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of assets
between the Company and a Wholly-owned Restricted Subsidiary and
between Wholly-owned Restricted Subsidiaries; or
(2) the sale of assets for cash or other property to a Person
or Persons if all of the following conditions are met:
(i) such assets (valued at net book value) do not,
together with all other assets of the Company and its
Restricted Subsidiaries previously disposed of during the
same fiscal year (other than (A) in the ordinary course of
business, (B) Underperforming Store Disposals, (C) Excepted
Disposals and (D) dispositions of worn-out items, or items
which have become obsolete as determined with respect to the
business of the Company and its Restricted Subsidiaries),
exceed 10% of Consolidated Total Assets determined as of the
end of the fiscal quarter immediately preceding such sale;
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(ii) in the opinion of a Responsible Officer, the
sale is for fair value and is in the best interests of the
Company; and
(iii) immediately after the consummation of the
transaction and after giving effect thereto, (A) no Default
or Event of Default would exist, and (B) the Company would be
permitted by the provisions of SECTION 5.8(a)(3) to incur at
least $1.00 of additional Funded Debt;
provided, however, that for purposes of the foregoing calculation of
SECTION 5.12(b)(2)(i), there shall not be included any assets the net
proceeds of which were or are (x) in connection with a Gardener's
Eden/Chambers Sale, invested in Permitted Gardener's Eden/Chambers
Notes or (y) applied within 12 months of the date of sale of such
assets to (A) the acquisition of assets for the business and/or related
businesses of the Company or any Restricted Subsidiary and/or (B) the
prepayment at any applicable prepayment premium of Funded Debt of the
Company which ranks pari passu with the Notes. It is understood and
agreed by the Company that any such proceeds paid and applied to the
prepayment of the Notes as hereinabove provided shall be prepaid as and
to the extent provided in SECTION 2.2.
Computations pursuant to this SECTION 5.12(b) shall include
dispositions made pursuant to SECTION 5.12(c) and computations pursuant to
SECTION 5.12(c) shall include dispositions made pursuant to this SECTION
5.12(b).
(c) The Company will not, and will not permit any Restricted Subsidiary
to, sell, pledge or otherwise dispose of any shares of the stock (including as
"stock" for the purposes of this SECTION 5.12(c) any options or warrants to
purchase stock or other Securities exchangeable for or convertible into stock)
of a Restricted Subsidiary (said stock, options, warrants and other Securities
herein called "Subsidiary Stock") or any Indebtedness of any Restricted
Subsidiary, nor will any Restricted Subsidiary issue, sell, pledge or otherwise
dispose of any shares of its own Subsidiary Stock, provided that the foregoing
restrictions do not apply to:
(1) the issue of directors' qualifying shares; or
(2) the issue of Subsidiary Stock to the Company or to a
Wholly-owned Restricted Subsidiary; or
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(3) the sale or other disposition at any one time to a Person
of the entire Investment of the Company and its other Restricted
Subsidiaries in any Restricted Subsidiary if all of the following
conditions are met:
(i) the assets (valued at net book value) of such
Restricted Subsidiary do not, together with all other assets
of the Company and its Restricted Subsidiaries previously
disposed of during the same fiscal year (other than (A) in
the ordinary course of business, (B) Underperforming Store
Disposals, (C) Excepted Disposals and (D) dispositions of
worn-out items, or items which have become obsolete as
determined with respect to the business of the Company and
its Restricted Subsidiaries), exceed 10% of Consolidated
Total Assets determined as of the end of the fiscal quarter
immediately preceding such sale or other disposition;
(ii) in the opinion of a Responsible Officer, the
sale or other disposition is for fair value and is in the
best interests of the Company;
(iii) immediately after the consummation of the
transaction and after giving effect thereto, such Restricted
Subsidiary shall have no Indebtedness of or continuing
Investment in the capital stock of the Company or of any
Restricted Subsidiary and any such Indebtedness or Investment
shall have been discharged or acquired, as the case may be,
by the Company or a Restricted Subsidiary; and
(iv) immediately after the consummation of the
transaction and after giving effect thereto, (A) no Default
or Event of Default would exist, and (B) the Company would be
permitted by the provisions of SECTION 5.8(a)(3) to incur at
least $1.00 of additional Funded Debt;
provided, however, that for purposes of the foregoing calculation of
SECTION 5.12(c)(3)(i), there shall not be included any shares of the
stock of a Restricted Subsidiary the net proceeds of which were or are
(x) in connection with a Gardener's Eden/Chambers Sale, invested in
Permitted Gardener's Eden/Chambers Notes or (y) applied within 12
months of the date of sale of such shares of the stock of a Restricted
Subsidiary to either (A) the acquisition of assets for the business
and/or related businesses of the Company or any Restricted Subsidiary
and/or (B) the prepayment at any applicable prepayment premium of
Funded Debt of the Company which ranks pari passu with the Notes. It is
understood and agreed by
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the Company that any such proceeds paid and applied to the prepayment
of the Notes as hereinabove provided shall be prepaid as and to the
extent provided in SECTION 2.2.
Computations pursuant to this SECTION 5.12(c) shall include
dispositions made pursuant to SECTION 5.12(b) and computations pursuant to
SECTION 5.12(b) shall include dispositions made pursuant to this SECTION
5.12(c).
(d) Except as otherwise permitted pursuant to this SECTION 5.12, the
Company shall at all times own 100% of the capital stock of each Initial
Subsidiary Guarantor and each Subsidiary Guarantor.
Section 5.13. Guaranties. The Company will not, and will not permit any
Restricted Subsidiary to, become or be liable in respect of any Guaranty except
(a) Guaranties by the Company which are limited in amount to a stated maximum
dollar exposure or which constitute Guaranties of obligations incurred by any
Restricted Subsidiary in compliance with the provisions of this Agreement and
(b) the execution and delivery by Restricted Subsidiaries of Permitted
Subsidiary Guaranties.
Section 5.14. Repurchase of Notes. Neither the Company nor any
Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or
make any offer to repurchase any Notes unless an offer has been made to
repurchase Notes, pro rata, from all Holders at the same time and upon the same
terms. In case the Company or any Subsidiary or Affiliate repurchases or
otherwise acquires any Notes, such Notes shall immediately thereafter be
canceled and no Notes shall be issued in substitution therefor. Without limiting
the foregoing, upon the purchase or other acquisition of any Notes by the
Company, any Subsidiary or any Affiliate, such Notes shall no longer be
outstanding for purposes of any section of this Agreement relating to the taking
by the Holders of any actions with respect hereto, including, without
limitation, SECTION 6.3, SECTION 6.4 and SECTION 7.1.
Section 5.15. Transactions with Affiliates. The Company will not, and
will not permit any Restricted Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except on terms which, when taken as a whole
with other transactions between such Affiliate and the Company and/or its
Restricted Subsidiaries are no less favorable to the Company or such Restricted
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
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Section 5.16. Termination of Pension Plans. The Company will not and
will not permit any Subsidiary to withdraw from any Multiemployer Plan or permit
any employee benefit plan maintained by it to be terminated if such withdrawal
or termination could result in withdrawal liability (as described in Part 1 of
Subtitle E of Title IV of ERISA) or the imposition of a Lien on any property of
the Company or any Subsidiary pursuant to Section 4068 of ERISA.
Section 5.17. Reports and Rights of Inspection. The Company will keep,
and will cause each Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of,
or in relation to, the business and affairs of the Company or such Subsidiary,
so that the consolidated records of the Company and its Subsidiaries are
maintained in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to the Holders pursuant to this
SECTION 5.17 and concurred in by the independent public accountants referred to
in SECTION 5.17(b)), and will furnish to each Institutional Holder (in duplicate
if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any
event within 60 days after the end of each fiscal quarter (except the
last) of each fiscal year, copies of:
(1) a consolidated balance sheet of the Company and
its Subsidiaries as of the close of such fiscal quarter,
setting forth in comparative form the consolidated figures for
the fiscal year then most recently ended,
(2) a consolidated statement of income of the
Company and its Subsidiaries for such fiscal quarter and for
the portion of the fiscal year ending with such fiscal
quarter, in each case setting forth in comparative form the
consolidated figures for the corresponding period of the
preceding fiscal year, and
(3) a consolidated statement of cash flow of the
Company and its Subsidiaries for such fiscal quarter and for
the portion of the fiscal year ending with such fiscal
quarter, in each case setting forth in comparative form the
consolidated figures for the corresponding period of the
preceding fiscal year,
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all in reasonable detail and certified as complete and correct in all
material respects by an authorized financial officer of the Company;
(b) Annual Statements. As soon as available and in any
event within 120 days after the close of each fiscal year of the
Company, copies of:
(1) a consolidated balance sheet of the Company and
its Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income, retained
earnings and cash flow of the Company and its Subsidiaries for
such fiscal year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied
by a report thereon of a firm of independent public accountants of
recognized national standing selected by the Company to the effect that
the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the end of the fiscal year being reported on and the
consolidated results of the operations and cash flow for said year in
conformity with GAAP and that the examination of such accountants in
connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such
tests of the accounting records and such other auditing procedures as
said accountants deemed necessary in the circumstances;
(c) Audit Reports. Promptly upon the request of any
Holder, one copy of each interim or special audit made by independent
accountants of the books of the Company or any Subsidiary and any
management letter received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to its creditors and stockholders
generally and of each regular or periodic report, and any registration
statement or prospectus filed by the Company or any Subsidiary with any
securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which
the Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company
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or any of its Subsidiaries which such orders could reasonably be
expected to have a Material Adverse Effect;
(e) Officer's Certificates. Within the periods provided
in paragraphs (a) and (b) above, a certificate of the chief financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (1) the information and
computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of SECTIONS
5.6 through 5.12 at the end of the period covered by the financial
statements then being furnished, and (2) whether there existed as of
the date of such financial statements and whether, to the best of such
officer's knowledge, there exists on the date of the certificate or
existed at any time during the period covered by such financial
statements any Default or Event of Default and, if any such condition
or event exists on the date of the certificate, specifying the nature
and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(f) Accountant's Certificates. Within the period provided
in paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further whether, in making
their audit, such accountants have become aware of any Default or Event
of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence
thereof;
(g) Unrestricted Subsidiaries; Additional Financial
Statements. At all times during which the Company has designated any
Subsidiary as an Unrestricted Subsidiary, within the respective periods
provided in paragraphs (a) and (b) above, consolidated financial
statements of the character and for the dates and periods as in said
paragraphs (a) and (b) provided covering (1) the Company and its
Restricted Subsidiaries and (2) the Unrestricted Subsidiaries of the
Company; and
(h) Requested Information. With reasonable promptness,
such other data and information as any Institutional Holder may
reasonably request.
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Without limiting the foregoing, the Company will permit each Institutional
Holder (or such Persons as such Institutional Holder may designate), upon
reasonable prior notice to the Company and at reasonable times and intervals, to
visit and inspect, under the Company's guidance (provided that the failure of
the Company to attend such inspection upon delivery of reasonable advance notice
by such Holder shall not restrict or affect such Holder's visitation and/or
inspection rights hereunder), any of the properties of the Company or any
Subsidiary, to examine all of their books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss their respective
affairs, finances and accounts with their respective officers, employees, and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss with any Institutional Holder the finances and
affairs of the Company and its Subsidiaries) (so long as in connection with any
meeting with the independent public accountants of the Company prior to the
occurrence of a Default or Event of Default, the Holders shall forward
reasonable advance notice of such proposed meeting to the Company and such
notice shall afford the Company the opportunity to attend such meeting, it being
understood that the failure of the Company to attend such meeting shall not
preclude the Holders from proceeding with such meeting), all at such reasonable
times and upon reasonable advance notice and as often as may be reasonably
requested. Any visitation shall be at the sole expense of such Institutional
Holder, unless an Event of Default shall have occurred and be continuing, in
which case the out-of-pocket expenses incurred by each such Institutional Holder
in connection with any such visitation or inspection shall be at the sole
expense of the Company.
For the purposes of this SECTION 5.17, "Confidential Information" means
information delivered to any Holder by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by any
Holder as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly
known or otherwise known to such Holder prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by such
Holder or any person acting on such Holder's behalf, (c) otherwise becomes
known to such Holder other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to such Holder
under this SECTION 5.17 that are otherwise publicly available. Each Holder will
maintain the confidentiality of such Confidential Information in accordance
with procedures adopted by it in good faith to protect confidential information
of third parties delivered to it, provided that such Holder may deliver or
disclose Confidential Information to (i) its directors, trustees, officers,
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employees, agents, attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment represented by the
Notes), (ii) its financial advisors and other professional advisors who agree to
hold confidential the Confidential Information substantially in accordance with
the terms of this SECTION 5.17, (iii) any other Holder, (iv) any Institutional
Investor to which it sells or offers to sell such Note or any part thereof or
any participation therein (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
SECTION 5.17), (v) any Person from which it offers to purchase any debt security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this SECTION
5.17), (vi) any Federal or state regulatory authority having jurisdiction over
it, (vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about such Holder's investment portfolio or (viii) any other Person
to which such delivery or disclosure may be necessary or appropriate (w) to
effect compliance with any law, rule, regulation or order applicable to it, (x)
in response to any subpoena or other legal process, (y) in connection with any
litigation to which it is a party or (z) if an Event of Default has occurred and
is continuing, to the extent it may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under the Notes and this Agreement. Each
Holder, by its acceptance of a Note, will be deemed to have agreed to be bound
by and to be entitled to the benefits of this SECTION 5.17 as though it were a
party to this Agreement. On reasonable request by the Company in connection with
the delivery to any Holder of information required to be delivered to such
Holder under this Agreement or requested by such Holder (other than a Holder
that is a party to this Agreement or its nominee), such Holder will enter into
an agreement with the Company embodying the provisions of this SECTION 5.17.
Section 5.18. Redesignation of Subsidiaries. The Company may
designate any Restricted Subsidiary as an Unrestricted Subsidiary if,
immediately after giving effect thereto, (a) no Default or Event of Default
would exist, (b) the Company would be permitted by the provisions of SECTION
5.8(a)(3) to incur at least $1.00 of additional Funded Debt and (c) such
Subsidiary would not have a continuing Investment in the capital stock or other
Securities of the Company or any other Restricted Subsidiary; provided, however,
that once a Subsidiary has its designation as a Restricted Subsidiary withdrawn,
such Subsidiary may no longer be designated as a Restricted Subsidiary. Each
change in the designation of a Subsidiary shall be made by a Responsible Officer
of the Company and the Company shall within 30 days after such action give
written notice thereof to the Holders.
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Section 5.19. Additional Subsidiary Guarantors. (a) In the event
that Subsidiaries of the Company are to become Additional Permitted
Subsidiary Guarantors subsequent to the Closing Date, the Company shall cause
each such Additional Permitted Subsidiary Guarantor to guarantee the payment of
all amounts payable by the Company hereunder and under the Notes and the
performance of all obligations of the Company hereunder and under the Notes and
to deliver a guaranty substantially in the form of the Guaranty Agreement (the
"Additional Note Guaranty") and the following documentation at the time of its
becoming an Additional Permitted Subsidiary Guarantor: (1) such documents and
evidence with respect to such Additional Permitted Subsidiary Guarantor as any
Holder may reasonably request in order to establish the existence and good
standing of such Additional Permitted Subsidiary Guarantor and evidence that
the Board of Directors of such Additional Permitted Subsidiary Guarantor has
adopted resolutions authorizing the execution and delivery of the Additional
Note Guaranty to which such Additional Permitted Subsidiary Guarantor is a
party, (2) a secretarial certificate, dated the date of the delivery of such
Additional Note Guaranty, signed by the Secretary or an Assistant Secretary of
such Additional Permitted Subsidiary Guarantor in substantially the form
thereof delivered by the Initial Subsidiary Guarantors on the Closing Date, (3)
an opinion of independent counsel (which opinion and counsel shall be
reasonably satisfactory to the Holders) covering the matters set forth in
paragraphs 2, 5, 6, 8, 9, 11 and 12 in the form of Exhibit F hereto which
relate to such Subsidiary Guarantor and the delivery of such Additional Note
Guaranty (provided that such opinion may be delivered on the assumption that
California law is selected as the governing law of such Additional Note
Guaranty), (4) all other documents and showings reasonably requested by the
Holders in connection with the execution and delivery of the Additional Note
Guaranty to which such Additional Permitted Subsidiary Guarantor is a party in
the same form as and to the same effect as if such Additional Note Guaranty and
related documents, agreement, certificates and opinions were delivered on the
Closing Date, which documents shall be satisfactory in form and substance to
the Holders and their special counsel, and each Holder shall have received a
copy (executed or certified as may be appropriate) of all of the foregoing
legal documents, (5) a certificate to the Holders signed by an authorized
officer of such Additional Permitted Subsidiary Guarantor containing all
representations and warranties, if any, delivered by such Additional Permitted
Subsidiary Guarantor to any lender or creditor under the Bank of America Credit
Facility, such Successor Bank Facility or such Additional Debt Facility which
are not contained in the Additional Note Guaranty delivered pursuant to this
SECTION 5.19; provided that such representations and warranties, if any, are
delivered and shall be deemed made only as of the date of the delivery of the
related Additional Note Guaranty, and (6) an agreement or amendment evidencing
the undertaking by each lender or creditor which is a party to such Successor
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Bank Facility or such Additional Debt Facility to become a party to and to
undertake and perform the duties, rights and obligations of a party under the
Intercreditor Agreement, which agreement or amendment shall be reasonably
satisfactory to the Holders and their special counsel.
(b) It is the intent of this SECTION 5.19 that at all times the
Company shall cause all Restricted Subsidiaries which have executed and
delivered Guaranties to holders of Debt of the Company under and pursuant to the
Bank of America Credit Facility, any Successor Bank Facility and any Additional
Debt Facility to be Subsidiary Guarantors in accordance with and pursuant to the
provisions of this SECTION 5.19.
(c) All reasonable out-of-pocket fees and expenses of the Holders,
including, without limitation, the reasonable fees and expenses of special
counsel to the Holders, incurred in connection with the execution and delivery
of the Additional Note Guaranties and the related agreements and opinions
described above shall be borne by the Company.
(d) In the event that a Subsidiary Guarantor is sold, transferred or
disposed of in its entirety by the Company pursuant to SECTION 5.12, the Holders
will, upon receipt of evidence reasonably acceptable to them which evidence may
include certification by the Company that the Company has complied with the
terms and conditions of this SECTION 5.19, terminate the obligations of such
Subsidiary Guarantor under the Guaranty Agreement or the Additional Note
Guaranty to which such Subsidiary Guarantor is a party.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following
shall constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any
Note when the same shall have become due and such default shall
continue for more than five Business Days; or
(b) Default shall occur in the making of any required
prepayment on any of the Notes as provided in SECTION 2.1; or
(c) Default shall occur in the making of any other payment of
the principal of any Note or premium, if any, thereon at the expressed
or any accelerated maturity date or at any date fixed for prepayment;
or
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(d) Default shall occur in the observance or performance of
any covenant or agreement contained in SECTION 5.6 through SECTION
5.12; or
(e) Default shall occur in the observance or performance of
any other provision of this Agreement which is not remedied within 30
days after the earlier of (1) the day on which a Responsible Officer of
the Company first obtains knowledge of such default, or (2) the day on
which written notice thereof is given to the Company by any Holder; or
(f) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Debt (other than the Notes) of the
Company or any Restricted Subsidiary aggregating in excess of
$3,000,000 and such default shall continue beyond the period of grace,
if any, allowed with respect thereto; or
(g) Default or the happening of any event shall occur under
any indenture, agreement or other instrument under which any Debt
(other than the Notes) of the Company or any Restricted Subsidiary
aggregating in excess of $3,000,000 may be issued and such default or
event shall continue for a period of time sufficient to permit the
acceleration of the maturity of any such Debt of the Company or any
Restricted Subsidiary outstanding thereunder or the Company or such
Restricted Subsidiary defaults in the payment of any principal,
interest or premium on such Debt at maturity; or
(h) Any representation or warranty made by the Company herein
or by any Subsidiary Guarantor in the Guaranty Agreement or any
Additional Note Guaranty, or made by the Company or any Subsidiary
Guarantor in any statement or certificate furnished by the Company or
any Subsidiary Guarantor in connection with the consummation of the
issuance and delivery of the Notes or furnished by the Company pursuant
hereto or by any Subsidiary Guarantor in the Guaranty Agreement or any
Additional Note Guaranty, is untrue in any material respect as of the
date of the issuance or making thereof; or
(i) Final judgment or judgments for the payment of money
aggregating in excess of $2,500,000 is or are outstanding against the
Company or any Restricted Subsidiary or against any property or assets
of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 30 days
from the date of its entry; or
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(j) The Guaranty Agreement or any Additional Note Guaranty
shall cease to be in full force and effect for any reason whatsoever
(other than as permitted by SECTION 5.1 or SECTION 5.19(d)), including,
without limitation, a determination by any governmental body or court
that the Guaranty Agreement or any Additional Note Guaranty is invalid,
void or unenforceable insofar as any Person which is a party thereto is
concerned or any Subsidiary Guarantor shall contest or deny in writing
the validity or enforceability of any of its respective obligations
under the Guaranty Agreement or any Additional Note Guaranty; or
(k) A custodian, liquidator, trustee or receiver is appointed
for the Company or any Restricted Subsidiary or for the major part of
the property of either and is not discharged within 60 days after such
appointment; or
(l) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Restricted Subsidiary and, if instituted
against the Company or any Restricted Subsidiary, are consented to or
are not dismissed within 60 days after such institution.
Section 6.2. Notice to Holders. When any Event of Default described
in the foregoing SECTION 6.1 has occurred, or if any Holder or the holder of any
other evidence of Debt of the Company or any Restricted Subsidiary gives any
notice or takes any other action with respect to a claimed default, the Company
agrees to give notice within three Business Days of such event to all Holders.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of SECTION 6.1 has happened and is
continuing, any Holder may, by notice in writing sent to the Company in the
manner provided in SECTION 9.6, declare the entire principal and all interest
accrued on the Notes held by such Holder to be, and such Notes shall thereupon
become forthwith due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are hereby
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expressly waived. When any Event of Default described in paragraphs (a) through
(j), inclusive, of said SECTION 6.1 has happened and is continuing, any Holder
or Holders holding at least 25% in aggregate principal amount of the outstanding
Notes may, by notice in writing to the Company in the manner provided in SECTION
9.6, declare the entire principal and all interest accrued on all Notes to be,
and all Notes shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph (k) or
(l) of SECTION 6.1 has occurred, then the entire principal of and all interest
accrued on all outstanding Notes shall immediately become due and payable
without presentment, demand or notice of any kind. Upon the Notes becoming due
and payable as a result of any Event of Default as aforesaid, the Company will
forthwith pay to the Holders the entire principal and interest accrued on the
Notes and, to the extent not prohibited by applicable law, an amount as
liquidated damages for the loss of the bargain evidenced hereby (and not as a
penalty) equal to the Make-Whole Amount, determined as of the date on which the
Notes shall so become due and payable. No course of dealing on the part of a
Holder or any delay or failure on the part of any Holder to exercise any right
shall operate as a waiver of such right or otherwise prejudice such Holder's
rights, powers and remedies. The Company further agrees, to the extent permitted
by law, to pay to each Holder all costs and expenses incurred by them in the
collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such Holder's or Holders' attorneys for all services
rendered in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of SECTION 6.3
are subject to the condition that if the principal of and accrued interest on
all outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(j), inclusive, of SECTION 6.1, the Holders holding at least 76% in aggregate
principal amount of the outstanding Notes may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under SECTION 6.3) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to SECTION 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
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SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall have
obtained the consent in writing of the Holders holding at least 51% in
aggregate principal amount of the outstanding Notes; provided that without the
written consent of all of the Holders, no such amendment or waiver shall be
effective (a) which will change the time of payment (including any prepayment
required by SECTION 2.1) of the principal of or the interest on any Note or
change the principal amount thereof or change the rate of interest thereon or
change the maturity date on any Note, or (b) which will change any of the
provisions with respect to optional prepayments, or (c) which will change the
percentage of Holders required to consent to any such amendment or waiver of
any of the provisions of this SECTION 7 or SECTION 6.
Section 7.2. Solicitation of Holders. So long as there are any
Notes outstanding, the Company will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each Holder (irrespective of the amount of
Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any Holder as consideration for or as an
inducement to entering into by such Holder of any waiver or amendment of any of
the terms and provisions of this Agreement or the Notes unless such remuneration
is concurrently offered, on the same terms, ratably to all Holders whether or
not each Holder consents to such proposed waiver or amendment. Promptly and in
any event within 30 days of the date of execution and delivery of any such
waiver or amendment, the Company shall provide a true, correct and complete copy
thereof to each of the Holders.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the Holders and shall be binding upon them,
upon each future Holder and upon the Company, whether or not such Note shall
have been marked to indicate such amendment or waiver. No such amendment or
waiver shall extend to or
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affect any obligation not expressly amended or waived or impair any right
consequent thereon.
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Additional Debt Facility" shall mean Debt of the Company incurred
within the limitations of SECTION 5.8(a)(3) or SECTION 5.8(a)(4) other than the
Bank of America Credit Facility, any Successor Bank Facility or the Notes.
"Additional Note Guaranty" shall have the meaning assigned thereto in
SECTION 5.19.
"Additional Permitted Subsidiary Guaranties" shall mean Guaranties
delivered by Additional Permitted Subsidiary Guarantors which are also
Subsidiary Guarantors.
"Additional Permitted Subsidiary Guarantors" shall mean any Restricted
Subsidiary of the Company (other than the Initial Subsidiary Guarantors) which
guarantees Debt of the Company under or pursuant to the Bank of America Credit
Facility, a Successor Bank Facility or an Additional Debt Facility pursuant to
and in accordance with the terms and conditions set forth in SECTION 5.19.
"Affiliate" shall mean any Person (other than a Restricted Subsidiary)
(a) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (c) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agreement" shall mean this Note Agreement dated as of August 1, 1995
among the Company and the Purchasers.
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"Bank Guaranties" shall mean those certain guaranties delivered by the
Initial Subsidiary Guarantors in favor of Bank of America National Trust and
Savings Association under and pursuant to the Bank of America Credit Facility.
"Bank of America Credit Facility" shall mean the Amended and Restated
Credit Agreement dated as of October 13, 1994 between the Company and Bank of
America National Trust and Savings Association, as such agreement may be
amended, modified, renewed or replaced (other than by a Successor Bank
Facility), including any increase in the amount thereof.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in New York, New York or San Francisco, California are
required by law to close or are customarily closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Chambers" shall mean Chambers Catalog Company, Inc., a California
corporation.
"Closing Date" shall have the meaning set forth in SECTION 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations from time to time promulgated thereunder.
"Company" shall mean Williams-Sonoma, Inc., a California corporation,
and any Person who succeeds to all, or substantially all, of the assets and
business of Williams-Sonoma, Inc.
"Consolidated Fixed Charges" for any period shall mean on a
consolidated basis the sum of (a) all Rentals (other than Rentals on Capitalized
Leases) payable on or with respect to Long-Term Leases during such period by the
Company and its Restricted
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Subsidiaries, and (b) all Interest Expense on all Indebtedness (including the
interest component of Rentals on Capitalized Leases) of the Company and its
Restricted Subsidiaries.
"Consolidated Funded Debt" shall mean, without duplication, all Funded
Debt of the Company and its Restricted Subsidiaries, determined on a
consolidated basis after eliminating intercompany items.
"Consolidated Intangible Assets" shall mean as of the date of any
determination thereof the total amount of all good will, patents, trade names,
trade marks, copyrights, franchises, experimental expense, organization expense,
unamortized debt discount and expense, deferred assets other than prepaid
insurance and prepaid taxes, the excess of cost of shares acquired over book
value of related assets and such other assets of the Company and its Restricted
Subsidiaries determined on a consolidated basis as are properly classified as
"intangible assets" in accordance with GAAP.
"Consolidated Net Income" for any period shall mean the gross revenues
of the Company and its Restricted Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets other than in the ordinary
course of business, but with respect to losses, net of any tax
deductions, credits or other tax reducing effect on account of any such
excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary;
(d) net earnings and losses of any corporation (other than a
Restricted Subsidiary), substantially all the assets of which have been
acquired in any manner by the Company or any Restricted Subsidiary,
realized by such corporation prior to the date of such acquisition;
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(e) net earnings and losses of any corporation (other than a
Restricted Subsidiary) with which the Company or a Restricted
Subsidiary shall have consolidated or which shall have merged into or
with the Company or a Restricted Subsidiary and which is realized prior
to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Restricted Subsidiary) in which the Company or any Restricted
Subsidiary has an ownership interest unless such net earnings shall
have actually been received by the Company or such Restricted
Subsidiary in the form of cash distributions, or other distributions
readily convertible into cash;
(g) any portion of the net earnings of any Restricted
Subsidiary which for any reason is unavailable for payment of dividends
to the Company or any other Restricted Subsidiary;
(h) gains resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities
of the Company or any Restricted Subsidiary;
(k) any reversal of any contingency reserve which reversals
in the aggregate exceed $1,000,000 during the period of determination
thereof, except to the extent that provision for such contingency
reserve shall have been made from income arising during such period;
and
(l) any other extraordinary gain or loss.
"Consolidated Net Income Available for Fixed Charges" for any period
shall mean the sum of (a) Consolidated Net Income during such period plus (to
the extent deducted in determining Consolidated Net Income), (b) all provisions
for any Federal, state or other income taxes made by the Company and its
Restricted Subsidiaries during such period and (c) Consolidated Fixed Charges
during such period.
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"Consolidated Tangible Net Worth" shall mean, as of the date of any
determination thereof the amount of the capital stock accounts (net of treasury
stock, at cost) plus (or minus in the case of a deficit) the surplus in retained
earnings of the Company and its Restricted Subsidiaries as determined in
accordance with GAAP minus Consolidated Intangible Assets, other than
Consolidated Intangible Assets existing as of the Closing Date.
"Consolidated Total Assets" shall mean as of the date of any
determination thereof the total amount of all assets of the Company and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"Consolidated Total Capitalization" shall mean as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt plus (b)
Consolidated Tangible Net Worth.
"Current Debt" of any Person shall mean as of the date of any
determination thereof (a) all Debt of such Person other than Funded Debt of such
Person and (b) Guaranties by such Person of Current Debt of others.
"Debt" of any Person shall mean, without duplication, (a) all
Indebtedness of such Person for borrowed money, (b) all Capitalized Rentals of
such Person, (c) all Guaranties by such Person of Debt of others, (d) all
Indebtedness secured by a Lien on property of such Person and (e) the redemption
obligations in respect of such Person's Redeemable Preferred Stock.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Distribution" in respect of the Company and its Restricted
Subsidiaries shall mean:
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(a) dividends or other distributions on capital stock
(including, without limitation, preferred stock) of a corporation
(except (i) dividends or other distributions payable solely in shares
of common stock of such corporation and (ii) dividends or other
distributions to the extent paid to the Company or a Wholly-owned
Subsidiary); and
(b) redemption, acquisition or retirement of any shares of
its capital stock or warrants, rights or other options to purchase any
shares of its capital stock.
"Environmental Law" shall mean any international, Federal, state or
local statute, law, regulation, order, consent decree, judgment, permit,
license, code, covenant, deed restriction, common law, treaty, convention,
ordinance or other requirement relating to public health, safety or the
environment, including, without limitation, those relating to releases,
discharges or emissions to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, or Hazardous Substances or crude oil, or any fraction thereof, or
to exposure to toxic or hazardous materials, to the handling, transportation,
discharge or release of gaseous or liquid Hazardous Substances and any
regulation, order, notice or demand issued pursuant to such law, statute or
ordinance, in each case applicable to the property of the Company and its
Subsidiaries or the operation, construction or modification of any thereof,
including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous
and Solid Waste Amendments of 1984, the Hazardous Materials Transportation Act,
as amended, the Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1976, the Safe Drinking Water Control Act, the Clean Air Act of
1966, as amended, the Toxic Substances Control Act of 1976, the Emergency
Planning and Community Right-to-Know Act of 1986, the National Environmental
Policy Act of 1975, the Oil Pollution Act of 1990 and any similar or
implementing state law, and any state statute and any further amendments to
these laws providing for financial responsibility for cleanup or other actions
with respect to the release or threatened release of Hazardous Substances or
crude oil, or any fraction thereof, and all rules, regulations, guidance
documents and publications promulgated thereunder.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in SECTION 6.1.
"Excepted Disposals" shall mean the sale, transfer or other disposal of
individual assets of the Company and its Restricted Subsidiaries which have a
net book value of less than $1,000,000 for each asset, provided that the
aggregate net book value of all assets sold, transferred or disposed of pursuant
to this provision does not exceed $5,000,000 in any fiscal year of the Company.
"Funded Debt" of any Person shall mean all Debt of such Person having a
final maturity of one or more than one year from the date of determination
thereof, including all payments in respect thereof that are required to be made
within one year from the date of any determination of Funded Debt whether or not
the obligation to make such payments shall constitute a current liability of the
obligor under GAAP.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States.
"Gardener's Eden" shall mean Gardener's Eden, Inc., a California
corporation.
"Gardener's Eden/Chambers Sale" shall mean the sale, transfer or other
disposition of all the Company's and its Subsidiaries' entire interest in
Gardener's Eden or Chambers
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement,
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contingent or otherwise, by such Person: (a) to purchase such Indebtedness or
obligation or any property or assets constituting security therefor, (b) to
advance or supply funds (1) for the purchase or payment of such Indebtedness or
obligation, or (2) to maintain working capital or any balance sheet or income
statement condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, (c) to lease property or
to purchase Securities or other property or services primarily for the purpose
of assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (d)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal amount
of such Indebtedness for borrowed money which has been guaranteed, and a
Guaranty in respect of any other obligation or liability or any dividend shall
be deemed to be Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend. It is understood that leases entered into by
the Company or its Subsidiaries as lessee in the ordinary course of business
which are security or support for such lessor's obligations (e.g., a mortgage on
the related property) shall not be deemed to be a "Guaranty" for the purposes
hereof.
"Guaranty Agreement" shall have the meaning assigned thereto in SECTION
1.4.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
Federal authority having jurisdiction over the property of the Company and its
Subsidiaries or its use, including but not limited to any material, substance or
waste which is: (a) defined as a hazardous substance under the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976; (b) regulated
as a hazardous waste under the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984; (c) defined as a hazardous substance under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986; or (d) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
"Holder" shall mean any Person which is, at the time of reference, the
registered Holder of any Note.
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"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include all (a) obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (b)
obligations secured by any Lien upon property or assets owned by such Person,
even though such Person has not assumed or become liable for the payment of such
obligations, (c) obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (d) Capitalized Rentals and (e) Guaranties of
obligations of others of the character referred to in this definition.
"Initial Subsidiary Guarantors" shall have the meaning assigned thereto
in SECTION 1.4.
"Institutional Holder" shall mean any Holder which is a Purchaser or
any of the following: (a) a bank, savings and loan association, savings
institution, trust company or national banking association, acting for its own
account or in a fiduciary capacity, (b) a charitable foundation, (c) an
insurance company, (d) a fraternal benefit society, (e) a pension, retirement or
profit-sharing trust or fund within the meaning of Title I of ERISA or for which
any bank, trust company, national banking association or investment adviser
registered under the Investment Advisers Act of 1940, as amended, is acting as
trustee or agent, (f) an investment company or business development company, as
defined in the Investment Company Act of 1940, as amended, (g) a small business
investment company licensed under the Small Business Investment Act of 1958, as
amended, (h) a broker or dealer registered under the Securities Exchange Act of
1934, as amended, or any investment adviser registered under the Investment
Advisers Act of 1940, as amended, (i) a government, a public employees' pension
or retirement system, or any other government agency supervising the investment
of public funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the definition
of "qualified institutional buyer" as such term is used in Rule 144A, as from
time to time in effect, promulgated under the Securities Act of 1933, as
amended. For purposes of SECTION 2.5 hereof, the foregoing definition shall
include any nominee of any such Holder.
"Intercreditor Agreement" shall mean the Intercreditor Agreement dated
as of August 1, 1995 among the Purchasers and Bank of America National Trust and
Savings Association substantially in the form attached hereto as Exhibit D.
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"Interest Expense" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Debt (including,
without limitation, payment-in-kind, zero coupon and other like Securities) for
which such calculations are being made. Computations of Interest Expense on a
pro forma basis for Indebtedness having a variable interest rate shall be
calculated at the rate in effect on the date of any determination.
"Investments" shall mean all investments, in cash or by delivery of
property, made directly or indirectly in any Person or any property, whether by
acquisition of shares of capital stock, Indebtedness or other obligations or
Securities or by loan, advance, capital contribution or otherwise; provided that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"Investment Grade" shall mean a long term debt rating of either "BBB-"
or better by Standard & Poor's Ratings Group or a "Baa3" or better by Moody's
Investors Service, Inc.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
Capitalized Lease or other arrangement pursuant to which title to the property
has been retained by or vested in some other Person for security purposes and
such retention or vesting shall constitute a Lien.
"Long-Term Lease" shall mean any lease of real or personal property
(other than a Capitalized Lease) having an original term, including any period
for which the lease may be renewed or extended at the option of the lessor, of
more than three years.
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"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (a) the aggregate present
value as of the date of such prepayment or payment of each dollar of principal
being prepaid or paid (taking into account the application of such prepayment
or payment required by SECTION 2.1) and the amount of interest (exclusive of
interest accrued to the date of prepayment or payment) that would have been
payable in respect of such dollar if such prepayment or payment had not been
made, determined by discounting such amounts at the Reinvestment Rate from the
respective dates on which they would have been payable, over (b) 100% of the
principal amount of the outstanding Notes being prepaid or paid. If the
Reinvestment Rate is equal to or higher than 7.20%, the Make-Whole Amount shall
be zero. For purposes of any determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean 0.50% plus the yield to
maturity of the United States Treasury obligations with a maturity (as
compiled by and published on page "USD" of the Bloomberg Financial
Market Services two Business Days immediately preceding the payment
date at 11:00 A.M. New York City time) most nearly equal to the
Weighted Average Life to Maturity of the Notes being prepaid or paid.
If such rate shall not have been so published, the Reinvestment Rate in
respect of such payment date shall mean the yield to maturity of the
United States Treasury obligations with a maturity (as compiled by and
published on Telerate Page 500 or its successor two Business Days
immediately preceding the payment date at 11:00 A.M. New York City
time) most nearly equal to the Weighted Average Life to Maturity of the
Notes being prepaid or paid. If neither of such rates shall have been
so published, the Reinvestment Rate in respect of such payment date
shall mean the mean of yields to maturity of United States Treasury
obligations (as compiled by and published in the Statistical Release
for each of the two weeks immediately preceding the payment date) with
a constant maturity most nearly equal to the Weighted Average Life to
Maturity of the Notes being prepaid or paid. If no maturity exactly
corresponding to such Weighted Average Life to Maturity shall appear
therein, yields for the next longer and the next shorter published
maturities shall be calculated pursuant to the foregoing sentence and
the Reinvestment Rate shall be interpolated from such yields on a
straight-line basis (rounding to the nearest month).
"Statistical Release" shall mean the then most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System and
which establishes yields on actively traded United States Treasury
obligations adjusted to constant maturities
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or, if such statistical release is not published at the time of any
determination hereunder, then such other reasonably comparable index
which shall be designated by the Holders holding at least 66-2/3% in
aggregate principal amount of the outstanding Notes and reasonably
acceptable to the Company.
"Weighted Average Life to Maturity" of the principal amount of
the Notes being prepaid or paid shall mean, as of the time of any
determination thereof, the number of years obtained by dividing the
then Remaining Dollar-Years of such principal by the aggregate amount
of such principal. The term "Remaining Dollar-Years" of such principal
shall mean the amount obtained by (1) multiplying (i) the remainder of
(A) the amount of principal that would have become due on each
scheduled payment date if such prepayment or payment had not been made,
less (B) the amount of principal on the Notes scheduled to become due
on such date after giving effect to such prepayment or payment and the
application thereof in accordance with the provisions of SECTION 2.1,
by (ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between the date of determination and such scheduled
payment date, and (2) totalling the products obtained in (1).
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, affairs, financial condition, assets or properties of
the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability
of the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"Minority Interests" shall mean any shares of stock of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
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"Overdue Rate" shall mean the lesser of (a) the maximum interest rate
permitted by law and (b) 9.20% per annum.
"Permitted Gardener's Eden/Chambers Notes" shall mean any promissory
note or other similar instrument or agreement received by the Company or its
Subsidiaries in connection with a Gardener's Eden/Chambers Sale, provided that
such note or other instrument is issued by a Permitted Issuer and provided
further that such note or other instrument ranks pari passu with the long term
senior debt of such Permitted Issuer which is accorded the required Investment
Grade rating.
"Permitted Issuer" shall mean a corporation which is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended and
whose long term senior debt is accorded an Investment Grade rating.
"Permitted Subsidiary Guaranties" shall mean the Guaranty Agreement,
the Bank Guaranties, the Additional Note Guaranties and the Additional Permitted
Subsidiary Guaranties.
"Person" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Preferred Stock" shall mean, in respect of any corporation, shares of
the capital stock of such corporation that are entitled to preference or
priority over any other shares of the capital stock of such corporation in
respect of payment of dividends or distribution of assets upon liquidation.
"Purchasers" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Redeemable" shall mean, with respect to the capital stock of any
Person, each share of such Person's capital stock that is: (a) redeemable,
payable or required to be purchased or otherwise retired or extinguished, or
convertible into Debt of such Person (i)
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at a fixed or determinable date, whether by operation of a sinking fund or
otherwise, (ii) at the option of any Person other than such Person, or (iii)
upon the occurrence of a condition not solely within the control of such Person;
or (b) convertible into other Redeemable capital stock.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company or a Restricted Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Responsible Officer" shall mean any officer of the Company other than
any officer who is an officer of the Company solely by reason of being the
Secretary or an Assistant Secretary.
"Restricted Investments" shall mean all Investments, other than:
(a) Investments by the Company and/or its Restricted
Subsidiaries in and to Restricted Subsidiaries, including any
Investment in a corporation which, after giving effect to such
Investment, will become a Restricted Subsidiary;
(b) Investments representing loans or advances in the usual
and ordinary course of business to officers, directors and employees
for expenses (including moving expenses related to a transfer)
incidental to carrying on the business of the Company or any Restricted
Subsidiary;
(c) Investments in property or assets to be used in the
ordinary course of the business of the Company and/or its Restricted
Subsidiaries as described in SECTION 5.5 of this Agreement;
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(d) Investments in Securities resulting from the settlement
of obligations of other Persons created in the ordinary course of
business and owing to the Company or a Subsidiary or resulting from the
foreclosure or other method of enforcement of any Lien held by the
Company or any Subsidiary securing an obligation of any other Person
created in the usual and ordinary course of business and owing to the
Company or such Subsidiary;
(e) Investments of the Company and/or its Restricted
Subsidiaries existing as of the Closing Date and described on Schedule
II hereto;
(f) receivables and trade credits arising from the sale of
goods and services in the ordinary course of business of the Company
and its Restricted Subsidiaries;
(g) Investments in commercial paper of corporations organized
under the laws of the United States or any state thereof maturing in
270 days or less from the date of issuance which, at the time of
acquisition by the Company or any Subsidiary, is accorded a rating of
"A-2" or better by Standard & Poor's Ratings Group or "P-2" or better
by Moody's Investors Service, Inc.;
(h) Investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of
America, the payment or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case,
maturing within twelve months from the date of acquisition thereof;
(i) Investments in certificates of deposit, time deposits and
banker's acceptances, either (1) issued by Bank of America National
Trust and Savings Association or (2) another commercial bank or trust
company organized under the laws of the United States or any State
thereof having capital, surplus and undivided profits aggregating at
least $100,000,000, provided that at the time of acquisition thereof by
the Company or a Subsidiary, (x) the senior unsecured long-term debt of
such bank or trust company or of the holding company of such bank or
trust company is rated "A" or better by Standard & Poor's Ratings Group
or "A" or better by Moody's Investors Service, Inc. or (y) or such
certificate of deposit or time deposit is issued by any bank or trust
company organized under the laws of the United States or any state
thereof to the extent that such Investments are fully insured by the
Federal Depository Insurance Corporation;
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(j) Investments in repurchase agreements with respect to any
Security described in clause (h) of this definition entered into with a
depository institution or trust company acting as principal described
in clause (i)(1) or clause (i)(2)(x) of this definition if such
repurchase agreements are by their terms to be performed by the
repurchase obligor and such repurchase agreements are deposited with a
bank or trust company of the type described in clause (i)(1) or clause
(i)(2)(x) of this definition;
(k) Investments in any money market instrument program which
is classified as a current asset in accordance with GAAP, the aggregate
asset value of which "marked to market" is at least $100,000,000 and
which is managed by a fund manager of recognized national standing, and
which invests substantially all of its assets in obligations described
in clauses (g) through (i) above and which fund has a policy of
maintaining net asset value of $1.00 per share;
(l) Investments in obligations of indebtedness of any State
of the United States or any municipality organized under the laws of
any State of the United States or any political subdivision thereof
which, at the time of acquisition by the Company or any Subsidiary, are
accorded either of the two highest ratings by Standard & Poor's Ratings
Group, Moody's Investors Service, Inc. or another nationally recognized
credit rating agency which in any such case mature no later than one
year after the date of acquisition thereof;
(m) Investments for cash management purposes in accordance
with the Company's investment policies in Securities with maturities
not to exceed one year from the date of acquisition, provided that the
aggregate amount of all such Investments shall not at any time exceed
2.5% of Consolidated Total Assets;
(n) Investments of the Company not described in the foregoing
clauses (a) through (n), provided that such Investments are made in or
to joint ventures, Subsidiaries or other business ventures engaged in
activities related to the Company's ordinary course of operations and
provided further that the aggregate amount of all such Investments
shall not at any time exceed 5% of Consolidated Total Assets; and
(o) deposits for utilities, security deposits under leases
and prepaid expenses incurred in the ordinary course of business.
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In valuing any Investments for the purpose of applying the limitations
set forth in SECTION 5.11, Investments shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein.
"Restricted Subsidiary" shall mean any Subsidiary which has not been
designated as an Unrestricted Subsidiary in accordance with the provisions of
SECTION 5.18.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
The term "subsidiary" shall mean as to any particular parent
corporation any corporation of which more than 50% (by number of votes) of the
Voting Stock shall be beneficially owned, directly or indirectly, by such parent
corporation. The term "Subsidiary" shall mean a subsidiary of the Company.
"Subsidiary Guarantors" shall mean the Initial Subsidiary Guarantors
and each Subsidiary of the Company which executes and delivers an Additional
Note Guaranty pursuant to and in accordance with the terms and conditions set
forth in SECTION 5.19.
"Successor Bank Facility" shall mean Debt of the Company incurred
within the limitations of SECTION 5.8(a)(3) or SECTION 5.8(a)(4) which is a
successor credit facility to the Bank of America Credit Facility or any
successor credit facility to such successor credit facility as the same may be
modified, amended, renewed or replaced, including any increase in the amount
thereof.
"Underperforming Store Disposals" shall mean the sale, transfer or
other disposition of store operations and/or locations of the Company or a
Restricted Subsidiary which have been determined by management to be
underperforming, which determination has been made by management in the exercise
of management's good faith business judgment using some or all of the criteria
set forth in Schedule III hereto.
"Unrestricted Subsidiary" shall mean each Subsidiary which is not a
Restricted Subsidiary including each Subsidiary which has been designated as an
Unrestricted Subsidiary in accordance with the provisions of SECTION 5.18.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
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"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by the Company
and/or one or more of its Wholly-owned Subsidiaries.
Section 8.2. Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
Section 8.3. Certain Changes in Accounting Principles. Notwithstanding
the provisions of SECTION 8.2, if a change after the date of this Agreement in
GAAP affects the classification of items on the balance sheet or statements of
earnings of the Company for the purpose of any computation or definition (the
"Affected Computation") under this Agreement which is governed by GAAP and, in
the good faith judgment of the chief financial officer of the Company,
compliance by the Company with any financial covenant or covenants contained in
this Agreement would be affected as a result of the application of the change in
accounting principles to the Affected Computation, then:
(a) the Company shall give notice of such determination to
the Holders not later than 30 days after the date on which the change
in GAAP is adopted or is required to be adopted by the Company (the
"Effective Date"), which notice shall be accompanied by a certificate
of the chief financial officer of the Company:
(i) describing the change in GAAP in question and the
particular covenant or covenants which will be affected by
such change;
(ii) setting forth in reasonable detail (including
detailed calculations) the manner and extent to which the
covenant or covenants listed in the certificate are affected
by the change in accounting principles;
(iii) setting forth in reasonable detail (including
detailed calculations) the information required in order to
establish that the Company would be in compliance with the
requirements of the covenant or covenants listed in the
certificate if the change in accounting principles
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were not effective and if GAAP in force and effect as of the
date of this Agreement governed the Affected Computation; and
(iv) confirming the determination by the chief
financial officer of the Company that compliance with the
covenant or covenants would be affected as a result of the
application of the change in accounting principles to the
Affected Computation;
(b) the Holders will enter into good faith negotiations with
the Company to amend such covenant or covenants pursuant to SECTION 7.1
so as to equitably reflect the change in GAAP, with the desired result
that the underlying criteria for evaluating the Company's financial
condition shall remain unchanged; and
(c) for the period from the Effective Date until the earlier
of (i) the effective date of an amendment to this Agreement pursuant to
SECTION 7.1, and (ii) 180 days after the Effective Date, the Company
shall be deemed to be in compliance with the covenant or covenants
listed in the certificate if and so long as the Company would be in
compliance with such covenant or covenants if GAAP in force and effect
immediately before the Effective Date governed the Affected
Computation.
Section 8.4. Directly or Indirectly. Where any provision in this
Agreement prohibits the taking of any action by any Person, such provision shall
be applicable whether the action in question is taken directly or indirectly by
such Person, it being acknowledged and agreed that this SECTION 8.4 shall not be
interpreted to apply to the actions of the Company respecting an Unrestricted
Subsidiary.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at
its principal office a register for the registration and transfer of the Notes,
and the Company will register or transfer or cause to be registered or
transferred, as hereinafter provided, any Note issued pursuant to this
Agreement.
At any time and from time to time any Holder which has been duly
registered as hereinabove provided may transfer its Note upon surrender thereof
at the principal office
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of the Company duly endorsed or accompanied by a written instrument of transfer
duly executed by such Holder or its attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof and a Holder for all purposes of
this Agreement. Payment of or on account of the principal, premium, if any, and
interest on any Note shall be made to or upon the written order of such Holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon
not less than five days' notice to that effect given by a Holder holding any
Note initially delivered or any Note substituted therefor pursuant to SECTION
9.1, this SECTION 9.2 or SECTION 9.3, and, upon surrender of such Note at its
office, the Company will deliver in exchange therefor, without expense to such
Holder, except as set forth below, a Note for the same aggregate principal
amount as the then unpaid principal amount of the Note so surrendered, or Notes
in the denomination of $100,000 (or such lesser amount as shall constitute 100%
of the Notes of such Holder) or any amount in excess thereof as such Holder
shall specify, dated the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated the date of issue, registered in the name of such Person or
Persons as may be designated by such Holder, and otherwise of the same form and
tenor as the Notes so surrendered for exchange. The Company may require the
payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the Holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If an Institutional Holder is the owner of any such lost, stolen
or destroyed Note, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction and of its ownership of
such Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Company.
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Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of the Purchasers' out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable and invoiced
charges and disbursements of Chapman and Cutler, special counsel to the
Purchasers, duplicating and printing costs and charges for shipping the Notes,
adequately insured to each Purchaser's home office or at such other place as
such Purchaser may designate, and all such expenses of the Holders relating to
any amendments, waivers or consents pursuant to the provisions hereof (whether
or not the same are actually executed and delivered), including, without
limitation, any amendments, waivers, or consents resulting from any work-out,
renegotiation or restructuring relating to the performance by the Company of its
obligations under this Agreement and the Notes. The Company also agrees to pay,
within five Business Days of receipt thereof, the reasonable and invoiced
supplemental statements of Chapman and Cutler for disbursements unposted or not
incurred as of the Closing Date. The Company further agrees that it will pay and
save each Purchaser harmless against any and all liability with respect to stamp
and other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Agreement or the
Notes, whether or not any Notes are then outstanding. The Company agrees to
protect and indemnify each Purchaser against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this Agreement. Without
limiting the foregoing, the Company agrees to pay the cost of obtaining the
private placement number for the Notes and authorizes the submission of such
information as may be required by Standard & Poor's CUSIP Service Bureau for the
purpose of obtaining such number.
No delay or failure on the part of any Holder in the exercise of any power
or right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of each Holder
are cumulative to, and are not exclusive of, any rights or remedies any such
Holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall
be in writing and, if to a Holder, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to such Holder at its address appearing on Schedule I to this
Agreement or such other address as such Holder may designate to the Company in
writing, and if to the Company, delivered or mailed by registered or certified
mail or overnight air courier, or by facsimile
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communication, to the Company at 3250 VanNess Avenue, San Francisco, CA 94109,
Attention: Russell Solt, Chief Financial Officer, or to such other address as
the Company may in writing designate to the Holders; provided, however, that a
notice to a Holder by overnight air courier shall only be effective if delivered
to such Holder at a street address designated for such purpose in accordance
with this Section, a notice to a Holder by facsimile communication shall only be
effective if confirmed by transmission of a copy thereof by prepaid overnight
air courier as set forth above and a notice to a Holder by registered or
certified mail shall only be effective upon actual receipt thereof.
Section 9.7. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of each Purchaser and its successors and assigns, including each successive
Holder. Any such transferee shall make the representation set forth in SECTION
3.2(b) as of the effective date of the transfer to it of any Note or shall
provide a representation reasonably acceptable to the Company to the effect that
the purchase by or assignment to such transferee of any such Note shall not
involve any prohibited transaction within the meaning of ERISA or Section 4975
of the Code.
Section 9.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
Section 9.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated.
Section 9.10. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with New York
law, including all matters of construction, validity and performance.
Section 9.11. Submission to Jurisdiction. Any legal action or
proceeding with respect to this Agreement or the Notes or any document related
thereto may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, the Company hereby accepts for itself and in respect
of its property generally and unconditionally, the
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non-exclusive jurisdiction of the aforesaid courts. The Company hereby
irrevocably and unconditionally waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have to the bringing of any
action or proceeding in such respective jurisdiction.
Section 9.12. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
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The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth, and this Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
agreement.
Williams-Sonoma, Inc.
By /s/Russell Solt
--------------------------
Its Senior Vice President,
CFO
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Accepted as of August 8, 1995.
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF
AMERICA
By /s/Nancy Freund Heller
----------------------
Its Director-Private
Placements
TRANSAMERICA LIFE
INSURANCE & ANNUITY
COMPANY
By /s/John M. Casparian
----------------------
Its Investment Officer
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE
COMPANY
By /s/John M. Casparian
----------------------
Its Investment Officer
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59
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY
By /s/Frances Shedd Fisher
-----------------------
Its Investment Officer
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PRINCIPAL AMOUNT
OF NOTES
TO BE PURCHASED
TEACHERS INSURANCE AND ANNUITY $20,000,000
ASSOCIATION OF AMERICA
730 Third Avenue
New York, New York 10017-3263
Attention: Securities Division, Private Placements
Telephone Number: (212) 916-4720 (Haifen Tao)
or (212) 490-9000 (general number)
Telecopier Number: (212) 916-6583
Payments
All payments on account of the Notes shall be made in immediately available
funds at the opening of business on the due date by electronic funds transfer
through the Automated Clearing House System (identifying each payment as
"Williams-Sonoma, Inc., 7.20% Senior Notes Due August 8, 2005, PPN 969904 A* 2,
principal, premium or interest") to:
Morgan Guaranty Trust Company of New York (ABA #021000238)
23 Wall Street
New York, New York 10015
for credit to: Teachers Insurance and Annuity Association of America
Account Number 121-85-001
On order of: Williams-Sonoma, Inc.
Notices
Contemporaneous with the above electronic funds transfer, written confirmation
of each such payment shall be mailed or sent by facsimile to the address set
forth below including the following information: (1) the full name, private
placement number, interest rate and maturity date of the Notes; (2) allocation
of payment between principal, interest, premium and any special payment; and (3)
name and address of the bank from which such electronic funds transfer was sent,
to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, NY 10017
Attention: Securities Accounting Division
Telephone Number: (212) 916-4188
Facsimile Number: (212) 916-6199
-and-
Attention: Securities Division, Private Placements
Schedule I
(to Note Agreement)
61
Haifen Tao
Telephone Number: (212) 916-4720
Facsimile Number: (212) 916-6583
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1624203
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PRINCIPAL AMOUNT
OF NOTES
TO BE PURCHASED
TRANSAMERICA LIFE INSURANCE $9,000,000
& ANNUITY COMPANY
c/o Transamerica Investment Services
1150 South Olive Street
Suite 2700
Los Angeles, California 90015
Attention: John Casparian
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Williams-Sonoma, Inc., 7.20% Senior Notes Due August 8, 2005, PPN 969904 A* 2,
principal, premium or interest") to:
Bank of America NT & SA (ABA #121-000-358)
Corporate Service Center #1233
1850 Gateway Blvd.
Concord, California 94520
Attention: Terry Peach
for credit to: Transamerica Life Insurance and Annuity Company
Account Number 12353-04395
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment,
to:
Transamerica Securities Accounting
P. O. Box 2101
Los Angeles, California 90051-0101
Attention: Elaine S. Farrell, Manager
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63
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 95-6140222
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64
PRINCIPAL AMOUNT
OF NOTES
TO BE PURCHASED
TRANSAMERICA OCCIDENTAL LIFE $1,000,000
INSURANCE COMPANY
c/o Transamerica Investment Services
1150 South Olive Street
Suite 2700
Los Angeles, California 90015
Attention: John Casparian
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Williams-Sonoma, Inc., 7.20% Senior Notes Due August 8, 2005, PPN 969904 A* 2,
principal, premium or interest") to:
Bank of America NT & SA (ABA #121-000-358)
Corporate Service Center #1233
1850 Gateway Blvd.
Concord, California 94520
Attention: Terry Peach
for credit to: Transamerica Occidental Life Insurance Company
Account Number 12353-04390
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment,
to:
Transamerica Securities Accounting
P. O. Box 2101
Los Angeles, California 90051-0101
Attention: Elaine S. Farrell, Manager
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Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 95-1060502
I-6
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PRINCIPAL AMOUNT
OF NOTES
TO BE PURCHASED
NEW ENGLAND MUTUAL LIFE INSURANCE $10,000,000
COMPANY
501 Boylston Street
Boston, Massachusetts 02117
Attention: Private Placements Group
Telecopier No.: (617) 578-4473
Payments
All payments on or in respect of the Notes to be made prior to 12:00 p.m., New
York City time, by bank wire transfer or interbank transfer of Federal or other
immediately available funds (identifying each payment as "Williams-Sonoma, Inc.,
7.20% Senior Notes Due August 8, 2005, PPN 969904 A* 2, principal, premium or
interest") to:
Chemical Bank
4 New York Plaza -- ABA Routing No. 021-000-128
New York, New York
for credit to: New England Mutual Life Insurance Company
Account Number 144025987
With instructions to give advice of payment to Chemical's Money Transfer
Department setting forth the following information:
Private Placement Number: 969904 A*2
Borrower: Williams-Sonoma, Inc.
Issue (loan rate and maturity): 7.20% Senior Notes Due August 8, 2005
Due date of Current Payment: ________
Confirmation of each such payment setting forth the same information shall be
sent concurrently with such payment to:
New England Mutual Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Attention: Securities Accounting Department
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Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment, and written confirmation of each such payment,
to be addressed Attention: Securities Accounting Department.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1662730
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DESCRIPTION OF DEBT AND LEASES
1. The Funded Debt (other than Capitalized Rentals) of the Company and its
Restricted Subsidiaries outstanding on the Closing Date is as follows:
$6,874,600 outstanding under that certain Promissory Note dated March
9, 1994 in the principal amount of $7,000,000 made by the Company in
favor of Bank of America National Trust and Savings Association ("Bank
of America") and the related Standing Loan Agreement dated as of March
9, 1994 between the Company and Bank of America.
2. Rentals on Leases of the Company and its Restricted Subsidiaries
outstanding on the Closing Date are as follows:
For the month ended June 25, 1995, the aggregate monthly
Rentals of the Company and its Restricted Subsidiaries under
all leases of real and personal property was $2,809,000.
3. Capitalized Leases of the Company and its Restricted Subsidiaries
outstanding on the Closing Date are as follows:
None
4. Liens of the Company and its Restricted Subsidiaries outstanding on the
Closing Date are as follows:
A. Deed of Trust, Assignment of Rents and Fixture Filing
dated as of March 9, 1994 made by the Company in
favor of Equitable Deed Company, as trustee for the
benefit of Bank of America, and the related
California UCC-1 Financing Statement (File No.
94070510) dated March 9, 1994 executed by the Company
in favor of Bank of America.
B. See attached schedule of UCC Liens.
Schedule II
(to Note Agreement)
69
C. Each of the Subsidiaries has executed a Continuing
Guaranty dated August 7, 1995 in favor of Bank of
America. These Guarantees grant Bank of America a
security interest in all moneys, securities and other
property in the possession of Bank of America, and
all deposit accounts of the Subsidiaries maintained
with Bank of America.
D. Under the terms of that certain Joint Venture
Agreement dated May 6, 1988 between Tokyu Department
Store Co., Ltd. and the Company, the Company may not
assign, convey, pledge or encumber the shares of
stock described below in Investments.
E. Under the terms of the Standing Loan Agreement
described above in Funded Debt, the Company has
granted Bank of America a security interest in the
checking account from which Bank of America is
authorized to deduct payments on the Promissory Note.
5. Investments of the Company and its Restricted Subsidiaries outstanding
on the Closing Date are as follows:
A. Negotiable Promissory Note dated August 12, 1994 in
the original principal amount of $2,100,000 issued by
Bill Levine in favor of the Company.
B. 700 shares of the common stock of Williams-Sonoma
Japan Co., Ltd.
C. 9,258 shares of capital stock of II Fornio "America"
Corporation.
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SUBSIDIARIES OF THE COMPANY
1. Restricted Subsidiaries:
Percentage of
Voting Stock Owned
Jurisdiction of by Company and
Name of Subsidiary Incorporation each Other Subsidiary
Williams-Sonoma Stores, Inc. CA 100%
The Pottery Barn East, Inc. CA 100%
Gardener's Eden, Inc. CA 100%
Hold Everything, Inc. CA 100%
Chambers Catalog Company, Inc. CA 100%
2. Subsidiaries (other than Restricted Subsidiaries):
Percentage of
Voting Stock Owned
Jurisdiction of by Company and
Name of Subsidiary Incorporation each Other Subsidiary
NONE
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STORE CLOSING CRITERIA
1. The economic performance of shopping malls.
2. The economic health of the developer.
3. The economic strength of the mall retail anchors.
4. The closing of a department store anchor.
5. The loss of parking and/or parking ramp.
6. Fire, earthquake or like occurrences resulting in disruption of operations.
7. Perception of or actual increase in criminal activity in a mall.
8. Sales performance of a store such that the gross margin on the sales is not
greater than the direct expense (four wall expense).
9. Store operating income or contribution toward headquarters expenses being
negative.
10. Contribution percentage of store is less than 5% of sales.
11. "Kick out" opportunity under lease may cause election to close a slightly
profitable store within the period allowed in the kick out clause if the
company believes the store's sales will not improve.
12. Tax benefits resulting when store is closed and the construction costs are
written off over 39 years for tax purposes as opposed to the life of the
lease which is used for book purposes.
SCHEDULE III
(to Note Agreement)
72
WILLIAMS-SONOMA, INC.
7.20% Senior Note Due August 8, 2005
No. ____________, ____
$ PPN: 969904 A* 2
WILLIAMS-SONOMA, INC., a California corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the eighth day of August, 2005
the principal amount of
Dollars ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.20% per annum from the date hereof until maturity, payable
semiannually on the eighth day of February and August in each year (commencing
on February 8, 1996) and at maturity. The Company agrees to pay interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest, at the Overdue Rate after the due date, whether
by acceleration or otherwise, until paid. "Overdue Rate" shall mean the lesser
of (a) the maximum interest rate permitted by law and (b) 9.20% per annum.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in San Francisco, CA in coin or currency of the
United States of America which at the time of payment shall be legal tender for
the payment of public and private debts. If any amount of principal, premium, if
any, or interest on or in respect of this Note becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the
immediately preceding Business Day. "Business Day"
EXHIBIT A
(to Note Agreement)
73
means any day other than a Saturday, Sunday or other day on which banks in New
York, New York or San Francisco, California are required by law to close or are
customarily closed.
This Note is one of the 7.20% Senior Notes due August 8, 2005 (the
"Notes") of the Company in the aggregate principal amount of $40,000,000 issued
or to be issued under and pursuant to the terms and provisions of the Note
Agreement, dated as of August 1, 1995 (the "Note Agreement"), entered into by
the Company with the original Purchasers therein referred to and this Note and
the holder hereof are entitled equally and ratably with the holders of all other
Notes outstanding under the Note Agreement to all the benefits provided for
thereby or referred to therein. Reference is hereby made to the Note Agreement
for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may
be declared or otherwise become due prior to their expressed maturity dates and
certain prepayments are required to be made thereon, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
The payment of all principal of, premium, if any, and interest on this
Note and the other Notes outstanding under the Note Agreement has been
unconditionally guaranteed by the Initial Subsidiary Guarantors (as defined in
the Note Agreement) pursuant to the Guaranty Agreement (as defined in the Note
Agreement) and under the circumstances described in the Note Agreement shall be
guaranteed pursuant to Additional Note Guaranties (as defined in the Note
Agreement). Reference is hereby made thereto for a statement of the rights and
benefits accorded thereby.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized
A-2
74
in writing. Payment of or on account of principal, premium, if any, and interest
on this Note shall be made only to or upon the order in writing of the
registered holder.
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This Note and said Note Agreement are governed by and construed in
accordance with the laws of New York, including all matters of construction,
validity and performance.
WILLIAMS-SONOMA, INC.
By
Its
A-4
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REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Purchaser as follows:
1. Subsidiaries. Schedule II attached to the Agreement states the
name of each of the Company's Subsidiaries, its jurisdiction of incorporation
and the percentage of its Voting Stock owned by the Company and/or its
Subsidiaries. Those Subsidiaries listed in Section 1 of said Schedule II
constitute Restricted Subsidiaries. The Company and each Subsidiary has good and
marketable title to all of the shares it purports to own of the stock of each
Subsidiary, free and clear in each case of any Lien. All such shares have been
duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each
Restricted Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted, except where the failure to have the same could not
reasonably be expected to have a Material Adverse Effect; and
(c) is duly licensed or qualified and is in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified and in good standing could not
reasonably be expected to have a Material Adverse Effect.
3. Financial Statements. (a) The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of January 29, 1995, January 30,
1994, January 31, 1993, February 2, 1992 and February 3, 1991 and the statements
of income and retained earnings and cash flow for the fiscal years ended on said
dates, each accompanied by a report thereon
EXHIBIT B
(to Note Agreement)
77
containing an opinion unqualified as to scope limitations imposed by the Company
and otherwise without qualification except as therein noted, by Deloitte &
Touche, have been prepared in accordance with GAAP consistently applied except
as therein noted, are correct and complete in all material respects and present
fairly the financial position of the Company and its consolidated Subsidiaries
as of such dates and the results of their operations and cash flow for such
periods. The unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as of April 30, 1995, and the unaudited statements of
income and retained earnings and cash flow for the three-month period ended on
said date prepared by the Company have been prepared in accordance with GAAP
consistently applied, are correct and complete in all material respects and
present fairly the financial position of the Company and its consolidated
Subsidiaries as of said date and the results of their operations and cash flows
for such period.
(b) Since January 29, 1995, there has been no change in the
condition, financial or otherwise, of the Company and its consolidated
Subsidiaries as shown on the consolidated balance sheet as of such date except
changes, none of which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
4. Indebtedness Schedule II attached to the Agreement correctly
describes all Funded Debt, Capitalized Leases, Investments and Rentals on
Leases of the Company and its Restricted Subsidiaries outstanding on the
Closing Date.
5. Full Disclosure. Neither the financial statements referred to
in paragraph 3 hereof nor the Agreement nor any other written statement
furnished by the Company to such Purchaser in connection with the negotiation of
the sale of the Notes, contains any untrue statement of a material fact or omits
a material fact necessary to make the statements contained therein or herein not
misleading. There is no fact peculiar to the Company or its Subsidiaries, either
actually known or which reasonably should be known by the following officers in
the diligent performance of his/her duties: the Chairman, the President, the
Executive Vice President, the Treasurer, the chief executive officer, the chief
financial officer, the controller or the chief legal officer, which the Company
has not disclosed to
B-2
78
such Purchaser in writing which could reasonably be expected to have a Material
Adverse Effect.
6. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Restricted Subsidiary in any court or before any governmental authority or
arbitration board or tribunal which, if adversely determined against the Company
or a Restricted Subsidiary, could reasonably be expected to have a Material
Adverse Effect.
7. Title to Properties; Leases. The Company and each Restricted
Subsidiary has good and marketable title to all material parcels of real
property and has good title to all the other material items of property it
purports to own, including that reflected in the most recent balance sheet
referred to in paragraph 3 hereof, except as sold or otherwise disposed of in
the ordinary course of business and except for Liens permitted by the Agreement.
All leases that individually or in the aggregate are material are valid and
subsisting and are in full force and effect in all material respects.
8. Patents and Trademarks. The Company and each Restricted
Subsidiary owns or possesses all the patents, trademarks, trade names, service
marks, copyrights, licenses and rights with respect to the foregoing necessary
for the present and planned future conduct of its business, without any known
conflict with the rights of others, which the failure to so own or possess could
reasonably be expected to have a Material Adverse Effect.
9. Sale is Legal and Authorized; Other Instruments. The execution
and delivery of the Agreement and the Notes by the Company, the sale of the
Notes and compliance by the Company with all of the provisions of the Agreement
and the Notes --
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Articles or By-laws
of the Company or any Restricted Subsidiary or any indenture,
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79
mortgage, deed of trust, loan, purchase or credit agreement, lease or
other agreement or instrument to which the Company or any Restricted
Subsidiary is a party or by which it may be bound or result in the
imposition of any Liens or encumbrances on any property of the Company;
and
(c) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Articles or By-laws of the Company or
otherwise), and the Agreement and the Notes have been executed and
delivered by the Company and the Agreement and the Notes constitute the
legal, valid and binding obligations, contracts and agreements of the
Company enforceable in accordance with their respective terms.
10. No Defaults. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Debt and is not in default under any instrument or instruments
or agreements under and subject to which any Debt has been issued and no event
has occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
11. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of the
Agreement or the issuance, sale or delivery of the Notes or compliance by the
Company with any of the provisions of the Agreement or the Notes.
12. Taxes. All tax returns required to be filed by the Company or
any Restricted Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Restricted Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have been
paid, unless being contested in accordance with this Agreement. For all taxable
years ending on or before February 2, 1992, the Federal income tax liability of
the Company and its Restricted Subsidiaries has been satisfied and either the
period of limitations on assessment of
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additional Federal income tax has expired or the Company and its Restricted
Subsidiaries have entered into an agreement with the Internal Revenue Service
closing conclusively the total tax liability for the taxable year. Except for
items being contested in accordance with this Agreement, the Company does not
know of any proposed additional tax assessment against it for which adequate
provision has not been made on its accounts, and no material controversy in
respect of additional Federal or state income taxes due since said date is
pending or to the knowledge of the Company threatened. The provisions for taxes
on the books of the Company and each Restricted Subsidiary are adequate for all
open years, and for its current fiscal period.
13. Use of Proceeds. The net proceeds from the sale of the Notes
will be used to refinance existing indebtedness and for general corporate
purposes. None of the transactions contemplated in the Agreement (including,
without limitation thereof, the use of proceeds from the issuance of the Notes)
will violate or result in a violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulation issued pursuant thereto, including,
without limitation, Regulations G, T and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II. Neither the Company nor any
Subsidiary owns or intends to carry or purchase any "margin stock" within the
meaning of said Regulation G. None of the proceeds from the sale of the Notes
will be used to purchase, or refinance any borrowing the proceeds of which were
used to purchase, any "security" within the meaning of the Securities Exchange
Act of 1934, as amended.
14. Private Offering. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Notes, the Guaranty
Agreement or any similar Security to or has solicited or will solicit an offer
to acquire the Notes, the Guaranty Agreement or any similar Security from or has
otherwise approached or negotiated or will approach or negotiate in respect of
the Notes, the Guaranty Agreement or any similar Security with any Person other
than the Purchasers and not more than 11 other institutional investors, each of
whom was offered a portion of the Notes and the Guaranty Agreement at private
sale for investment. Neither the Company, directly or indirectly, nor any agent
on its behalf has offered or will offer the Notes, the Guaranty Agreement or any
similar Security to or
B-5
81
has solicited or will solicit an offer to acquire the Notes, the Guaranty
Agreement or any similar Security from any Person so as to bring the issuance
and sale of the Notes and the Guaranty Agreement within the provisions of
Section 5 of the Securities Act of 1933, as amended.
15. ERISA. Assuming the validity of the Purchasers' representations
in SECTION 3.2(b) of the Agreement, the consummation of the transactions
provided for in the Agreement and compliance by the Company with the provisions
thereof and the Notes issued thereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code. Each Plan
complies in all material respects with all applicable statutes and governmental
rules and regulations, and (a) no Reportable Event has occurred and is
continuing with respect to any Plan, (b) neither the Company nor any ERISA
Affiliate has withdrawn from any Plan or Multiemployer Plan or instituted steps
to do so, and (c) no steps have been instituted to terminate any Plan. No
condition exists or event or transaction has occurred in connection with any
Plan which could result in the incurrence by the Company or any ERISA Affiliate
of any material fine or penalty, and no claims other than claims for benefits in
the ordinary course of Plan administration have been made against any Plan. No
Plan maintained by the Company or any ERISA Affiliate, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA nor does the present value of all benefits vested under all
Plans exceed, as of the last annual valuation date, the value of the assets of
the Plans allocable to such vested benefits. Neither the Company nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA).
16. Compliance with Law. (a) Neither the Company nor any Restricted
Subsidiary (1) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (2) has failed to obtain any
license, permit, franchise or other governmental authorization necessary to the
ownership of its property or to the conduct of its business, which violation or
failure to obtain could reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Restricted Subsidiary is in default with
respect to any order of any court or governmental authority or arbitration board
or tribunal which default could reasonably be expected to have a Material
Adverse Effect.
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(b) Without limiting the provisions of clause (a) of this paragraph
16, the Company is in compliance with all applicable Environmental Laws, the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.
17. Investment Company Act. The Company is not, and is not directly
or indirectly controlled by or acting on behalf of any Person which is, required
to register as an "investment company" under the Investment Company Act of 1940,
as amended.
18. Foreign Assets Control Regulations, etc. Neither the Company
nor any Affiliate of the Company is, by reason of being a "national" of a
"designated foreign country" or a "specially designated national" within the
meaning of the Regulations of the Office of Foreign Assets Control, United
States Treasury Department (31 C.F.R., Subtitle B, Chapter V), or for any other
reason, subject to any restriction or prohibition under, or is in violation of,
any Federal statute or Presidential Executive Order, or any rules or regulations
of any department, agency or administrative body promulgated under any such
statute or order, concerning trade or other relations with any foreign country
or any citizen or national thereof or the ownership or operation of any
property.
19. Solvency. The Company is solvent, has capital not unreasonably
small in relation to its business or any contemplated or undertaken transaction
and has assets having a value both at fair valuation and at present fair salable
value greater than the amount required to pay its debts as they become due and
greater than the amount that will be required to pay its probable liability on
its existing debts as they become absolute and matured. The Company does not
intend to incur, or believes or should have believed that it will incur, debts
beyond its ability to pay such debts as they become due. The Company will not be
rendered insolvent by the execution and delivery of, and performance of its
obligations under, the Agreement or the Notes. The Company does not intend to
hinder, delay or defraud its creditors by or through the execution and delivery
of, or performance of its obligations under, the Agreement or the Notes.
20. Transactions with Affiliates. Except for the "Related Party
Lease Transactions" described in Note F of Notes to Consolidated Financial
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Statements of the Company as at January 29, 1995, the Company and its Restricted
Subsidiaries have neither entered into nor are a party to any transaction or
arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except on terms which when taken as a whole with other
transactions as between such Affiliate and the Company and/or its Restricted
Subsidiaries are no less favorable to the Company or such Restricted Subsidiary
than would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
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DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by SECTION 4.1 of the Note Agreement, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. Assuming the Note Agreement has been duly authorized by
all necessary corporate action on the part of the Company, has been
duly executed and delivered by the Company and constitutes the legal,
valid and binding contract of the Company, the Note Agreement is
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
2. Assuming the Notes have been duly authorized by all
necessary corporate action on the part of the Company, have been duly
executed and delivered by the Company and constitute the legal, valid
and binding obligations of the Company, the Notes are enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law).
3. Assuming the Guaranty Agreement has been duly authorized
by all necessary corporate action on the part of the Initial Subsidiary
Guarantors, has been duly executed and delivered by the Initial
Subsidiary Guarantors and constitutes the legal, valid and binding
contract of the Initial Subsidiary Guarantors, the Guaranty Agreement
is enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
EXHIBIT E
(to Note Agreement)
85
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreement does not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Irell & Manella is satisfactory in scope and form to Chapman and Cutler and
that, in their opinion, the Purchasers are justified in relying thereon.
Chapman and Cutler may rely solely upon the opinion of Irell & Manella
with respect to all matters governed by California law. The opinion of Chapman
and Cutler is limited to the laws of the State of New York, and the Federal laws
of the United States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company.
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DESCRIPTION OF CLOSING OPINION OF COUNSEL
TO THE COMPANY AND THE INITIAL SUBSIDIARY GUARANTORS
The closing opinion of Irell & Manella, counsel for the Company, which
is called for by SECTION 4.1 of the Note Agreement, shall be dated the Closing
Date and addressed to the Purchasers, shall be satisfactory in scope and form to
the Purchasers and shall be to the effect that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of
California, has the corporate power and the corporate authority to
execute and perform the Note Agreement and to issue the Notes and has
the full corporate power and the corporate authority to conduct the
activities in which it is now engaged and is duly licensed or qualified
and is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it or the
nature of the business transacted by it makes such licensing or
qualification necessary.
2. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified and is in good standing
in each jurisdiction in which the character of the properties owned or
leased by it or the nature of the business transacted by it makes such
licensing or qualification necessary and all of the issued and
outstanding shares of capital stock of each such Subsidiary have been
duly issued, are fully paid and non-assessable and are owned by the
Company, by one or more Subsidiaries, or by the Company and one or more
Subsidiaries. Each Initial Subsidiary Guarantor has the corporate power
and the corporate authority to execute and perform the Guaranty
Agreement.
3. The Note Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the legal, valid
and binding contract of the Company enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent
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conveyance or similar laws affecting creditors' rights generally, and
general principles of equity (regardless of whether the application of
such principles is considered in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
5. The Guaranty Agreement has been duly authorized by all
necessary corporate action on the part of the Initial Subsidiary
Guarantors, has been duly executed and delivered by the Initial
Subsidiary Guarantors and constitutes the legal, valid and binding
obligations of the Initial Subsidiary Guarantors enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law).
6. No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any
governmental body, Federal, state or local, is necessary in connection
with the execution, delivery and performance of the Note Agreement, the
Guaranty Agreement or the Notes.
7. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Note Agreement do not
conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation or imposition of
any Lien upon any of the property of the Company pursuant to the
provisions of the Articles or By-laws of the Company or any agreement
or other instrument known to such counsel to which the Company is a
party or by which the Company may be bound.
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8. The execution, delivery and performance by the Initial
Subsidiary Guarantors of the Guaranty Agreement do not conflict with or
result in any breach of any of the provisions of or constitute a
default under or result in the creation or imposition of any Lien upon
any of the property of the Initial Subsidiary Guarantors pursuant to
the provisions of the Articles or By-laws of the Initial Subsidiary
Guarantors or any agreement or other instrument known to such counsel
to which the Initial Subsidiary Guarantors are a party or by which the
Initial Subsidiary Guarantors may be bound.
9. The issuance, sale and delivery of the Notes and the
execution and delivery of the Guaranty Agreement under the
circumstances contemplated by the Note Agreement does not, under
existing law, require the registration of the Notes or the Guaranty
Agreement under the Securities Act of 1933, as amended, or the
qualification of an indenture under the Trust Indenture Act of 1939, as
amended.
10. The issuance of the Notes and the use of the proceeds of
the sale of the Notes in accordance with the provisions of and
contemplated by the Note Agreement do not violate or conflict with
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
11. There is no litigation pending or, to the best knowledge
of such counsel, threatened which in such counsel's opinion could
reasonably be expected to have a materially adverse effect on the
Company's or the Initial Subsidiary Guarantors' business or assets or
which would impair the ability of the Company to issue and deliver the
Notes or to comply with the provisions of the Note Agreement or the
ability of the Initial Subsidiary Guarantors to comply with the
Guaranty Agreement.
12. The choice of New York as the governing law of the Note
Agreement, the Notes and the Guaranty Agreement is valid and will be
upheld and applied by the courts of the State of California.
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The opinion of Irell & Manella shall cover such other matters relating
to the sale of the Notes as the Purchasers may reasonably request. With respect
to matters of fact on which such opinion is based, such counsel shall be
entitled to rely on appropriate certificates of public officials and officers of
the Company and the Initial Subsidiary Guarantors.
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