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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended January 29, 1994 or
Commission File No. 0-17871
EAGLE FOOD CENTERS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 36-3548019
incorporation or organization) (IRS Employer
Identification No.)
Rt. 67 & Knoxville Road, Milan, Illinois 61264
(Address of principal executive offices)
Registrant's telephone number including area code (309) 787-7730
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form K.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $20,785,034 as of April 25, 1994.
The number of shares of the Registrant's Common Stock, par value one cent
(0.01) per share, outstanding April 25, 1994 was 11,051,994.
Documents incorporated by reference include:
1) Portions of the definitive Proxy Statement to be filed with the
Commission on or before May 10, 1994 with respect to the annual
meeting of shareholders are incorporated by reference into Part
III.
1 of Pages
Exhibit Index appears on page
FISCAL YEAR ENDED JANUARY 29, 1994
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1 Business............................................ 3
Item 2 Properties.......................................... 9
Item 3 Legal Proceedings................................... 10
Item 4 Submission of Matters to a Vote of Security Holders. 10
Executive Officers of the Registrant................ 11
PART II
Item 5 Market for the Registrant's Common Equity and
Related Shareholder Matters......................... 13
Item 6 Selected Financial Data............................. 14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 16
Item 8 Financial Statements and Supplementary Data......... 22
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 37
PART III
Item 10 Directors and Executive Officers of the Registrant.. 37
Item 11 Executive Compensation.............................. 37
Item 12 Security Ownership of Certain Beneficial Owners
and Management...................................... 37
Item 13 Certain Relationships and Related Transactions...... 37
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................ 38
PART I
ITEM 1: BUSINESS
GENERAL
Eagle Food Centers, Inc. (the "Company" or "Eagle"), is a Delaware Corportion.
It is a leading regional supermarket chain which owns and operates 102
supermarkets in the Quad Cities area of Illinois and Iowa, northern Illinois,
central Illinois, eastern Illinois, eastern Iowa, and the Chicago/Fox Valley
and northwestern Indiana area under the trade names "Eagle Food Centers",
"Eagle Country Markets", "Eagle Country Warehouse", and "BOGO's." Eagle
supermarkets offer a full line of groceries, meats, fresh produce, dairy
products, delicatessen and bakery products, health and beauty aids and other
general merchandise, as well as video rental and floral service.
STORE DEVELOPMENT AND EXPANSION
Eagle currently operates stores in the general four formats discussed below.
Eagle Country Markets use a unique format introduced by management in
1991. Since that time, seven new Eagle Country Market stores have been opened
and 63 Eagle Food Centers have been remodeled in the Eagle Country Market
format. Management initiated this repositioning program to distinguish its
retail presentation from that of its competitors. The first Eagle Country
Market store was selected by Chain Store Age Executive as its "1991 Retail
Store of the Year." The Eagle Country Market format includes flooring designed
to resemble wooden slats, old-fashioned street lamps, country artifacts and
wood display tables. Displays and department presentations give the impression
of having entered a turn-of-the-century main street in a midwestern country
town. A small sign beneath the Eagle Country Market banner says "since 1893,"
a reference to how long Eagle, through its predecessors, has been in business
and a further reinforcement of the store's "country image." Extra space has
been devoted to expanded perishable departments, tying together produce,
full-service delicatessen, service bakery, service seafood and meat
departments, and, in certain stores, floral and video rental departments and
an Eagle Country Cafe offering high quality products that are ready to eat,
heat or cook. All newly-built Eagle Country Markets are designed to encourage
shoppers to walk through the higher margin "Power Aisle," which includes
extensive perishable offerings in the Eagle Country Harvest, Eagle Country Oven
and Eagle Country Smokehouse departments, and ready-to-eat prepared foods in
the Eagle Country Cafe. Eagle Country Markets tend to be larger stores ranging
from 38,000 square feet to 56,000 square feet for new stores. The pricing
strategy in the Eagle Country Markets is the same as in Eagle Food Centers--
namely, to offer overall lower prices than comparable supermarket competition.
Eagle Country Warehouse, an extension of the Eagle Country Market
concept, was introduced in 1992 to capitalize on an expanding high volume,
lower price market niche. The Company currently has four such warehouse-type
stores in operation. These 53,000 or larger square foot stores contain the
full complement of perishable and specialty departments and are currently
located in metropolitan areas where the Company believes it can capitalize on
popular demand for the warehouse shopping experience while providing a greater
variety of perishables and more customer services than the traditional
warehouse club. The pricing strategy at the Eagle Country Warehouses is to
price products at a discount to conventional supermarkets but at a premium to
traditional warehouse clubs.
Eagle Food Centers use a traditional supermarket format ranging in size
from 16,500 square feet to 42,000 square feet. The Company currently has 27
stores operating under this format. These stores offer a full range of
groceries, meats, fresh produce, dairy products, delicatessen and bakery
products, health and beauty aids and other general merchandise and many stores
offer video rental and floral departments as well. Eagle Food Centers offer
overall low prices while providing high quality products and a service-oriented
shopping experience.
BOGO's Food and Deals uses an experimental, limited assortment format
covering approximately 2,000 stock-keeping units of groceries, produce, meat,
health and beauty aids, and general merchandise. The purpose of these stores
is to take advantage of consumer demand for deep discount stores in less
densely populated markets. The Company currently operates one BOGO's store
opened in a previous Eagle Food Center location. BOGO's operates on three
pricing themes: BOGO (buy one-get one free), buy one-get the second at half
price, and BOGO everyday low price.
Management intends to build its future store development strategy around
the Eagle Country Market/Eagle Country Warehouse formats. As part of its store
development program, management continuously reviews the performance of all its
stores and expects to implement a variety of strategies, including converting
or modifying certain store formats as well as selling, subleasing or closing
underperforming stores, to improve profitability.
The Company has undertaken a more aggressive store development program
to identify markets for new stores and obtain the best potential new store
locations available in any target market. In this effort, it has contracted
with Oakridge Properties, Ltd. to manage and direct its real estate activities,
including the identification and acquisition of new store sites and disposal
of closed or underproductive facilities. Management intends to focus the
Company's expansion within existing markets or new markets within 200 miles of
its central distribution facility in Milan, Illinois where the utilization of
existing distribution, marketing and support systems is advantageous to its
cost structure. Within these markets, the Company expects to select sites for
its stores based upon factors such as existing competition, demographic
composition and available locations. Traditionally, the Company has preferred
to lease stores from local developers and it has continued this strategy
wherever appropriate and cost-effective. Developers have encountered
difficulty in obtaining financing in the recent past, and it has been necessary
for the Company to purchase land and build stores itself, which the Company
will attempt to finance by sale/leasebacks or mortgage financing. The
Company's engineering department establishes specifications and prepares plans
for all Company construction projects as well as supervises all work performed
on those projects.
STORE OPERATIONS
The Company's geographic market is divided into six areas, each having
an Area Vice President of Operations who is responsible for approximately
eighteen stores. Areas and stores operate with a certain degree of autonomy
to take advantage of local market and consumer needs. Areas and stores are
responsible for store operations, employee recruitment and development,
community affairs and other functions relating to local operations.
Store managers are given relatively broad discretion in tailoring
merchandise and services to the diverse needs of customers in the particular
community. Employee involvement and participation has been encouraged through
town hall meetings with senior management, district advisory boards and store
management team incentive bonus programs for sales and earnings improvement.
COMPUTER AND INFORMATION SYSTEMS
Management uses technology as a means of enhancing productivity,
controlling costs, providing an easier shopping experience for customers and
learning more about shoppers' buying habits. The Company owns a royalty-free
license from its former parent, Lucky Stores, Inc. to use or modify all
computer software programs used for information processing, including the
merchandising information system which links the Company's head office, its
central distribution facility and individual stores. This system facilitates
purchasing and receiving, inventory management, warehouse reordering, accounts
payable and store point-of-sale processing and also evaluates sales and
purchasing trends, economical order size, delivery lead times and other
factors.
In order to perform time and attendance reporting, labor scheduling and
shelf label printing applications, the Company has installed IBM AS-400's in
each store and is preparing plans for a direct store delivery application. The
Company has upgraded its point-of-sale systems to IBM 4680 generation equipment
through a $10.0 million capital lease. The new systems provide increased
productivity and service, improved financial controls, the ability to offer
electronic couponing, and a platform for developing the Eagle Savers' Card, a
customer-specific identification card designed to facilitate targeted marketing
and frequent shopper programs.
The Company has implemented several programs providing various banking
and funds transfer services in certain of its stores. All of its Quad Cities
and Iowa stores have electronic funds transfer machines ("EFT") at the checkout
counters. This program allows customers to use bank debit cards (automated
teller machine cards) to pay for their purchases. Implementation of EFT at the
Company's stores has reduced costs by eliminating the delay between receipt of
cash or checks at store locations and the depositing of useable funds in the
Company's bank accounts. Seventeen of the Company's stores have installed
Automated Teller Machines ("ATMs"), providing customers with access to the full
range of banking services associated with ATMs. Additionally, fourteen other
stores have bank debit card reading equipment situated at customer service
counters, allowing customers, with the assistance of customer service
representatives, to access bank accounts to effect a full range of banking
transactions. These same fourteen stores have electronic check authorization
terminals at each checkout lane. Also, the Company leases space to branch
banks in five of its stores. Management anticipates expanding these programs
into additional stores.
During fiscal 1993, the Company installed the equipment to accept credit
cards in all stores. During fiscal 1992 only three stores and all of the
Company's 15 individual pharmacy departments were able to allow customers to
pay for their purchases with MasterCard, Visa or Discover credit cards.
MERCHANDISING STRATEGY
Eagle's strategy is to maintain its position as a price leader compared
to other supermarket competitors and to strengthen its image as a high quality,
service-oriented supermarket chain and a provider of high quality perishables.
The Company strives to offer its customers one-stop shopping convenience and
price value for all of their food shopping needs.
Customer Service
Eagle delivers a wide variety of customer services. Most stores
provide customer services such as video rental, check cashing, film
processing, lottery ticket and money order sales, and UPS shipping. All
stores provide quick, friendly checkout service. Management intends as
part of its current strategy to further enhance customer service through
training of in-store employees.
Selection
A typical Eagle store carries over 23,000 items, including food and
general merchandise. The Company carries nationally advertised brands,
an extensive selection of top quality private label products and a
variety of generic products. The Company believes that it currently
offers a wider selection of private label products than any of its
competitors. All stores carry a full line of dairy, frozen food, health
and beauty aids and selected general merchandise. In addition, most
stores have service delicatessens and bakeries and some stores provide
additional specialty departments such as ethnic food items, floral
service, seafood service, salad bars and in-store banking facilities.
The Company has recently developed a range of premium quality Eagle
Country Market products such as ice cream, chocolate milk, carrot cake,
bacon and ham.
Promotion
The Company's promotion and merchandising strategy focuses on its
image as a high-quality, service-oriented supermarket chain while
reinforcing its reputation for price leadership and high quality
perishables. Eagle has an aggressive couponing policy and at times
offering double and triple couponing. Through its store personnel, the
Company takes an active interest in the communities in which it operates.
The Company also contributes funds, products and services to local
charities and civic groups.
Consumer Research
The Company utilizes consumer research to track customer attitudes
and the market shares of the Company and its competitors. The Company
also has a continuous program of soliciting customer opinions in all of
its market areas through the use of in-store customer comment cards.
This data enables management to respond to changing consumer needs,
direct advertising to specific customer perceptions and evaluate store
services and product offerings.
ADVERTISING STRATEGY
The Company utilizes a broad range of print and broadcast advertising in
the markets it serves. In addition, the Company seeks additional co-op
advertising reimbursements from major vendors. The additional co-op
advertising has allowed the Company to broaden its exposure in various media.
The Company eliminated its in-house advertising department in December
of 1993. These services are now being purchased from third party providers.
This allowed the Company to make use of technology in a quicker fashion.
PURCHASING AND DISTRIBUTION
The Company's stores are located an average of approximately 120 miles
from the Company's central distribution facility located in Milan, Illinois.
This complex includes the Company's executive offices, warehouse, areas used
for receiving, shipping and trailer storage and a truck repair facility. The
complex is located adjacent to the interstate highway system and is also served
by a rail spur which runs into an enclosed rail dock.
The Company supplies approximately 70% of its stores' inventory
requirements from its 935,332 square foot central distribution facility (which
contains approximately 189,072 square feet of refrigerated and freezer space).
The remaining 30% of the stores' inventory requirements are supplied through
orders placed with outside suppliers by individual stores. The Company's
purchasing and distribution functions are managed through its central
merchandising system.
The Company's purchasing and distribution operations permit rapid
turnover at its central distribution facility, allowing its stores to offer
consistently fresh, high-quality dairy products, meats, produce, bakery items
and frozen foods. Also, centralized purchasing and distribution reduces the
Company's cost of merchandise and related transportation costs by allowing the
Company to take advantage of volume buying opportunities and manufacturers'
promotional discounts and allowances and by minimizing vendor distribution
costs. The Company engages in forward buying programs to take advantage of
price discounts. Due to its proximity to Chicago and other major markets, the
Company is able to reduce cost of goods sold by "backhauling" merchandise to
its Milan central distribution facility.
COMPETITION
The food retailing business is highly competitive. The Company is in
direct competition with national, regional and local chains as well as
independent supermarkets, warehouse stores, membership warehouse clubs,
hypermarkets, limited assortment stores, discount drug stores and convenience
stores. The Company also competes with local food stores, specialty food
stores (including bakeries, fish markets and butcher shops), restaurants and
fast food chains. The principal competitive factors include store location,
price, service, convenience, product quality and variety. The number and type
of competitors vary by location, and the Company's competitive position varies
according to the individual markets in which the Company does business. The
Company's principal competitors operate under the trade names of Jewel, Hy-Vee,
Dominicks, Kroger, Cub and Sam's. Management believes that the Company's
principal competitive advantages are its low price perception, the attractive
new Eagle Country Market store format, concentration in certain markets and
expanding service and product offerings.
TRADEMARKS, TRADE NAMES AND LICENSES
The Company uses various trademarks and service marks in its business,
the most important of which are the "Eagle Country Market ", "5-Star Meats ",
"Lady Lee " and "Harvest Day " trademarks and the "Eagle" and "Eagle Country
Market" service marks. Each such trademark is federally registered. Pursuant
to a trademark license agreement (the "Trademark License Agreement") entered
into with the Company's former parent, Lucky Stores, Inc., the Company has been
granted the royalty-free use of the "5-Star Meats ", "Lady Lee " and "Harvest
Day " trademarks until November 30, 2007. The Trademark License Agreement
permits the Company to use the licensed trademarks only in the states of
Illinois, Indiana, Iowa, Michigan, Ohio, Wisconsin, Kentucky and Minnesota.
Lucky Stores, Inc. has agreed not to grant to any other person the right to use
such trademarks in the states of Illinois, Indiana and Iowa during the period
of the license to the Company.
EMPLOYEES AND LABOR RELATIONS
At the end of fiscal 1993, the Company had 8,364 employees, 548 of whom
were management and administrative employees and 7,816 of whom were hourly
employees. Of the Company's hourly employees, 7,735 are represented by 19
separate locals which are associated with five international unions. Store
employees are represented by several locals of the United Food and Commercial
Workers; warehouse employees, warehouse and bakery drivers and office and
clerical workers are represented by Teamsters Local 371; bakery plant workers
are represented by Bakery and Confectionery Workers Union Local 36; and bakery
plant operating engineers are represented by Operating Engineers Local 150.
A total of eleven collective bargaining contracts are currently in
negotiations and an additional six contracts will expire in 1994 covering
employees in approximately 90% of the Company's stores.
The Company values its employees and believes that its relationship with
them is good. Several employee relations programs have been introduced,
including measures that allow employees to participate in store level
decisions, safety incentive programs, store and area level advisory boards and
store management team incentive bonus programs. In addition, the Company
continued its employee stock purchase program and scholarship program
established for employees' children.
ITEM 2: PROPERTIES
STORES
The Company currently operates 102 stores, ranging in size from 16,500 to
67,500 square feet, with an average size of 35,520 square feet. Eighteen of
the Company's stores are owned in fee by the Company. The Company is the
lessee or sublessee for the remaining 84 stores.
Selected statistics on Eagle retail food stores are presented below:
Fiscal Year Ended
January 29, January 30, February 1,
1994 1993 1992
Average total sq. ft. per store . 35,520 34,023 33,015
Average total sq. ft. selling
space per store . . . . . . . . 26,245 25,187 24,481
Stores beginning of year. . . . . 108 109 107
Opened during year. . . . . . . . 3 5 5
Major remodels(1) . . . . . . . . 13 18 7
Closed during year. . . . . . . . 9 6 3
Stores end of year. . . . . . . . 102 108 109
Size of stores at end of year:
Less than 25,000 sq. ft.. . . . . 5 6 7
25,000--29,999 sq. ft.. . . . . . 37 43 48
30,000--34,999 sq. ft.. . . . . . 7 9 9
35,000--44,999 sq. ft.. . . . . . 43 44 43
45,000 sq. ft. or greater . . . . 10 6 2
Types of Stores
Eagle Country Markets . . . . . . 70 52 17
Eagle Country Warehouses. . . . . 4 1 0
Eagle Food Centers. . . . . . . 27 53 92
BOGO's Food and Deals . . . . . . 1 2 0
(1) A remodeling project which costs $100,000 or more.
Eagle stores contain various specialty departments such as full service
delicatessen (99 stores), bakery (92 stores), floral (63 stores), video rentals
(57 stores), pharmacy (19 stores), seafood (22 stores), alcoholic beverages
(78 stores) and Eagle Country Cafe (22 stores).
Most of the leases and subleases for the stores contain renewal options
for periods ranging from five to thirty years. The Company is required to pay
fixed rent and a percentage (ranging from 0.75% to 1.5%) of its gross sales in
excess of stated minimum gross sales amounts under 87 of the leases and
subleases. The Company also has subleases on approximately 35 former store
locations and has eight vacant former store properties with continuing rent
obligations which the Company is attempting to sublease. For additional
information on leased premises, see Note H in the notes to the Company's
consolidated financial statements included elsewhere in this document.
CENTRAL DISTRIBUTION AND BAKERY FACILITIES
The Company leases its central distribution facility under a lease
expiring in 1997 with a 10-year renewal option. The Company's central
distribution facility contains a total of 935,332 square feet of space.
The Company's central bakery is a 49,000 square foot facility located in
Rock Island , Illinois, three miles from the central distribution facility.
The Company's lease for the bakery facility expires in 1996 and has three
five-year renewal options.
The Company is the sublessee of a distribution facility located in
Westville, Indiana which was closed in 1985. In 1988, the Company entered
into an agreement with a sub-sublessee under which the Company is recovering
a portion of its rent obligations for this facility. For more information, see
"Reserve for Closed Stores and Warehouse" in Note B of the notes to the
Company's consolidated financial statements included elsewhere in this
document.
For the most part, store fixtures and equipment, leasehold improvements
and transportation and office equipment are owned by the Company. The total
cost of the Company's ownership of property and equipment is shown in Note E
of the notes to the Company's consolidated financial statements .
ITEM 3: LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings other than
routine litigation incidental to the Company's business.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
persons who are executive officers of the Company. Each director serves until
a successor is elected and qualified.
Name Age Position(s) Held
Pasquale V. Petitti (1) 64 Chief Executive Officer, President and
Director
Herbert T. Dotterer 49 Senior Vice President--Finance and
Administration, Chief Financial Officer,
Secretary and Director
Philip B. Murphy 45 Senior Vice President--Marketing
Robert L. Jaynes 46 Senior Vice President--Operations
(1) Mr. Petitti succeeded Gerald E. Barber as President and Chief Executive
Officer as of April 13, 1994.
The business experience of each of the executive officers during the past
five years is as follows:
Mr. Petitti served as Director from June 1989 until April 1993 and
President and Chief Executive Officer from September 1989 through April 1992
when he retired as an officer of the Company. Mr. Petitti resumed the
positions of Director, President and Chief Executive Officer in April 1994.
Previously, Mr. Petitti had been with the Company or its predecessor since
1957.
Mr. Dotterer, who was named Secretary and a Director of the Company in
February 1992, served as Controller from August 1988 until June 1990 when he
became Vice President--Finance, Chief Financial Officer. He became Senior Vice
President, Finance and Administration in January, 1994. Prior to August 1988,
Mr. Dotterer held various positions with The Kroger Co. and Jewel Companies,
Inc. Mr. Dotterer has 32 years of experience in the supermarket industry.
Mr. Murphy has served as Senior Vice President--Marketing since May 1991.
Most recently, Mr. Murphy was employed by Twin County Grocers as Director of
Merchandising. He was previously Vice President of Procurement/Marketing for
Kraft Food Services and has held various positions with Jewel Companies and The
National Tea Company. Mr. Murphy has 26 years of experience in the
supermarket industry.
Mr. Jaynes has served as Senior Vice-President--Operations since
September 1993. Prior to September 1993, Mr. Jaynes served as Vice President
of Azar Nut Company from November 1989 until August 1993. Mr. Jaynes was
previously President, Chief Executive Officer and Chairman of the Board of
Quality Plus Stores, a food retailer located in El Paso, Texas. Mr. Jaynes has
30 years experience in the supermarket industry.
The Company's directors are elected annually to serve until the next
annual meeting of shareholders and until their successors have been elected and
qualified. None of the directors or executive officers listed herein is
related to any other director or executive officer.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the two fiscal years ended January 29, 1994 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on the NASDAQ National Market System under
the symbol "EGLE". The stock began trading on July 27, 1989. The following
table sets forth, by fiscal quarter, the high and low sale prices reported by
the NASDAQ National Market System for the periods indicated. As of April 1,
1994, there were approximately 1,800 beneficial holders of shares.
Year Ended
January 29, 1994
High Low
First Quarter $8 1/4 $6 1/4
Second Quarter 8 6
Third Quarter 6 3/4 5 1/2
Fourth Quarter 6 1/2 5
Year Ended
January 30, 1993
High Low
First Quarter $8 3/4 $6
Second Quarter 8 1/2 6 1/4
Third Quarter 7 1/2 6
Fourth Quarter 8 1/4 6
There were no dividends paid in 1993 or 1992. The Indenture underlying the
Company's Senior Notes and the Revolving Credit Agreement contain
restrictions on the payment of dividends. (See Note F of the notes to the
Company's financial statements). The Company does not intend to pay dividends
in the foreseeable future.
ITEM 6: SELECTED FINANCIAL DATA
The following table represents selected financial data of the Company on a
consolidated basis for the five fiscal years ended January 29, 1994.
The selected historical financial data for the five fiscal years ended
January 29, 1994 are derived from the consolidated financial statements of the
Company which have been audited by Deloitte & Touche accountants.
The selected financial data set forth below should be read in conjunction with
the Company's consolidated financial statements and related notes included
elsewhere in this document.
Year Ended Year Ended Year Ended Year Ended Year Ended
January 29, January 30, February 1, February 2, February 3,
1994 1993 1992 1991 1990
(53 Weeks)
(dollars in thousands, except per share data)
Consolidated Operating Data:
Sales. . . . . . . . . . . . $1,062,348 $1,081,538 $1,112,203 $1,124,930 $1,130,355
Gross margin . . . . . . . . 269,188 269,967 278,636 283,062 279,854
Selling, general and
administrative expenses. . 225,123 218,874 231,090 234,178 225,708
Store closing and asset
revaluation(1) . . . . . . 17,015 -- -- 19,674 --
Depreciation and
amortization . . . . . . . 22,748 21,381 18,450 18,382 21,693
---------- ---------- ---------- ---------- ----------
Operating income . . . . . . 4,302 29,712 29,096 10,828 32,453
Interest expense . . . . . . 14,244 16,451 13,743 13,925 15,104
---------- ---------- ---------- ---------- ----------
Earnings (loss) before
income taxes &
extraordinary charge . . . (9,942) 13,261 15,353 (3,097) 17,349
Income taxes
(benefit)(2) . . . . . . . (3,779) 5,039 6,126 (1,237) 6,801
Extraordinary charge(3). . . 3,969 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) . . . . $ (10,132) $ 8,222 $ 9,227 $ (1,860) $ 10,548
========== ========== ========== ========== ==========
Earnings (loss) per common
share. . . . . . . . . . . $ (.91) $ .74 $ .82 $ (.16) $ .92
OTHER DATA:
EBITDA (4) . . . . . . . . . $ 44,065 $ 51,093 $ 47,546 $ 48,884 $ 54,146
Capital expenditures
(including capital
leases). . . . . . . . . . $ 32,008 $ 33,000 $ 40,300 $ 32,600 $ 16,900
EBITDA as percentage
of sales . . . . . . . . . 4.15% 4.72% 4.27% 4.35% 4.79%
Ratio of EBITDA to
interest expense . . . . . 3.09x 3.11x 3.46x 3.51x 3.58x
Ratio of total debt
(including capital
leases) to EBITDA. . . . . 2.86x 2.29x 2.09x 1.85x 1.70x
CONSOLIDATED BALANCE
SHEET DATA
(at period end):
Total assets . . . . . . . . $ 335,165 $ 331,809 $ 307,351 $ 283,413 $ 272,604
Total debt (including
capital leases). . . . . . 126,126 116,990 99,368 90,357 91,919
Total shareholders'
equity . . . . . . . . . . 61,746 71,389 64,696 55,469 58,934
(1) Represents a charge of $17.0 million in fiscal 1993 and $19.7 million
in fiscal 1990 to provide for costs of closing certain stores and asset
revaluations in connection therewith. See Notes B and D of the notes
to the Company's consolidated financial statements included elsewhere
in this document.
(2) Income taxes for the fiscal year ended February 3, 1990 are on a pro
forma basis as if the Company had filed Federal, State and local tax
returns as a taxable corporate entity retroactive to November 10, 1987.
(3) The extraordinary charge of $4.0 million is related to the early
retirement of debt.
(4) Earnings before interest, income taxes, depreciation, amortization and,
with respect to fiscal 1993 and 1990, store closing charges and, with
respect to fiscal 1993, extraordinary charges.
PAGE
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain key operating statistics as a percentage of
sales for the periods indicated:
Year Ended Year Ended Year Ended Year Ended Year Ended
January 29, January 30, February 1, February 2, February 3,
1994 1993 1992 1991 1990
Operations Statement Data:
Sales. . . . . . . . . . . 100.00% 100.00% 100.00% 100.00% 100.00%
Gross margin . . . . . . . 25.34 24.96 25.05 25.16 24.76
Selling, general and
administrative expenses . 21.20 20.24 20.77 20.82 19.97
Depreciation and
amortization expenses . . 2.14 1.98 1.66 1.63 1.92
Operating income before
store closing and
asset revaluation . . . . 2.00 2.75 2.62 2.71 2.87
Provision for store
closing and asset
revaluation . . . . . . . 1.60 -- -- 1.75 --
Interest expense . . . . . 1.34 1.52 1.24 1.24 1.34
Earnings (loss) before
income taxes and
extraordinary charge. . . (0.94) 1.23 1.38 (0.28) 1.53
Income taxes (benefit) . . (0.36) 0.47 0.55 (0.11) 0.60
Extraordinary charge . . . 0.37 -- -- -- --
Net earnings (loss). . . . (0.95)% 0.76% 0.83% (0.17)% 0.93%
RESULTS OF OPERATIONS
SALES
Year Ended Year Ended Year Ended
1/29/94 1/30/93 2/1/92
Sales. . . . . $1,062,348 $1,081,538 $1,112,203
Percent Change . . . . (1.8)% (2.8)% (1.1)%
Sales for fiscal 1993 were $1.062 billion, a decrease of $19.2 million or
1.8 % from fiscal 1992. Same store sales declined 3.4% from fiscal 1992 to
fiscal 1993. The sales decline was primarily attributable to increased
competition, including new store openings and expansions by competitors, and
adverse weather conditions in the midwest during the summer.
Sales for fiscal 1992 were $1.082 billion, a decrease of $30.7 million or
2.8% from fiscal 1991. Same store sales declined 5.3% from fiscal 1991 to
fiscal 1992. The sales decline was primarily attributable to increased
competition, including new store openings and expansions by competitors, and
the continuation of adverse general economic conditions, offset to some
extent by improving sales in certain of the Eagle Country Market stores.
GROSS MARGIN
Gross margin as a percentage of sales increased to 25.34% in fiscal 1993
from 24.96% in fiscal 1992 and 25.05% in fiscal 1991. Margin rates
increased in fiscal 1993 due to improved product mix and margin, and a
reduction in warehousing and distribution costs. Margin rates were
adversely affected in fiscal 1992 and fiscal 1991 by competitive and
economic conditions that required increased promotional discount activity,
partially offset by improved sales in higher-margin perishable departments,
reductions in inventory shrinkage and improved buying practices. Gross
margin included a slight charge for LIFO in fiscal 1993 and a LIFO credit of
0.03% of sales in fiscal 1992 and a LIFO charge of 0.04% of sales in fiscal
1991.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of sales were
21.20% in fiscal 1993 and 20.24% in fiscal 1992 compared to 20.77% in fiscal
1991. Total selling, general and administrative expenses were $6.3 million
higher in fiscal 1993 than fiscal 1992, primarily due to employee benefits
and service related hours. Selling, general and administrative expenses were
$12.2 million or 5.3% lower in fiscal 1992 than fiscal 1991. Reductions in
advertising, administrative overhead and workers' compensation costs
resulted in the improvement in the expense rate in fiscal 1992 and more than
offset increased occupancy and employee benefit costs.
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION
("EBITDA")
EBITDA for fiscal 1993 declined to $44.1 million or 4.15% of sales (before
the store closing charge) from fiscal 1992 of $51.1 million or 4.72% of
sales and $47.5 million or 4.27% of sales in fiscal 1991. Despite decreases
in sales and gross margins, EBITDA increased by 7.5% in fiscal 1992 as
compared with fiscal 1991, primarily due to reduction in selling, general
and administrative expenses.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense as a percentage of sales was 2.14% in
fiscal 1993 as compared to 1.98% in fiscal 1992 and 1.66% in fiscal 1991.
Both the fiscal 1993 and fiscal 1992 increases reflected higher investment
in new stores and Eagle Country Market conversions.
STORE CLOSING AND ASSET REVALUATION
The Company provided a $17.0 million charge in the fourth quarter of fiscal
1993 to cover the costs of store closings and asset revaluations to write
down potentially unrealizable book values. The store closing charge also
provides for the closing costs, writedown of assets to estimated net
realizable values and estimated occupancy costs until disposition for 13
stores intended to be closed in fiscal 1994. The annualized losses on the
five stores closed at the end of fiscal 1993 and the thirteen to be closed
in fiscal 1994 are approximately $2.9 million before overhead charges.
Approximately one-half of the charge was to write down book values of
property and equipment to estimated realizable values. This plan is designed
to increase the overall profitability of the Company by closing these
locations that have not met profitability expectations or which will be
replaced by a new store. See Notes B and D of the notes to the Company's
consolidated financial statements.
OPERATING INCOME
Operating income for fiscal 1993 was $4.3 million or .40% of sales. Before
the store closing charge, operating income would have been $21.3 million or
2.00% of sales. Operating income was $29.7 million or 2.75% of sales in
fiscal 1992, and $29.1 million or 2.62% of sales in fiscal 1991. Improved
margins were not enough to offset lower sales and increased selling, general
and administrative expenses in fiscal 1993. Store wages and related
benefits and taxes increased $4.4 million from fiscal 1992 to 1993. The
reduction in selling, general and administrative expenses more than offset
sales declines and declining gross margins for fiscal 1992.
INTEREST EXPENSE
Interest expense decreased to 1.34% of sales in fiscal 1993 from 1.52% of
sales in fiscal 1992 compared to 1.24% of sales in fiscal 1991. In fiscal
1993 the interest declined due to the restructuring of the long term debt.
The 13 1/2% Senior Subordinated Notes were retired and replaced with 8 5/8%
Senior Notes during Fiscal 1993. In fiscal 1992, there was a one time,
non-recurring charge of $960,000, or 0.09% of sales, in interest expense for
an incentive payment to the holders of the 13 1/2% Senior Subordinated Notes
to waive a restrictive covenant to allow the Company to repurchase up to
$20 million of its Common Stock. Included in the increase in interest
expense for fiscal 1993 was $667,000 or 0.06% of sales, attributable to
increased average borrowings under the Revolving Credit Agreement during
fiscal 1992.
EXTRAORDINARY CHARGE
An extraordinary charge of approximately $4.0 million or $.36 per share was
related to the early retirement of the 13 1/2% Senior Subordinated Notes in
the first quarter of fiscal 1993. See Note L.
NET EARNINGS (LOSS)
The Company incurred a net loss for fiscal 1993 of $10.1 million or $.91 per
share. Before the store closing charge and extraordinary charge net
earnings would have been $4.4 million or $.40 per share for fiscal 1993.
These results for 1993 should be compared with net earnings for fiscal 1992
of $8.2 million, or $0.74 per share ($9.0 million, or $0.80 per share before
non-recurring charges related to the solicitation of the holders of the 13
1/2% Subordinated Notes to waive a restrictive covenant to allow the Company
to repurchase up to $20 million of its Common Stock). Net earnings for
fiscal 1991 were $9.2 million, or $0.82 per share, in fiscal 1991. The
average shares outstanding were reduced to 11,103,276 shares in fiscal 1993
from 11,175,129 shares in fiscal 1992 and 11,227,600 shares in fiscal 1991
resulting from the Company's stock repurchase program, which occurred during
fiscal 1993 and fiscal 1992. The effective tax rate of 38.0% for fiscal
1993 and fiscal 1992 was down from 39.9% in fiscal 1991.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased to $24.5 million in fiscal
1993 from $12.9 million in fiscal 1992 but decreased from $37.8 million in
fiscal 1991. Working capital changes provided $4.9 million of cash in fiscal
1991 compared to a use of $23.8 million in fiscal 1992 when inventories and
accounts receivable increased and a use of $10.5 million in fiscal 1993.
Capital expenditures totaled $32.0 million in fiscal 1993 and $33.0 million
in fiscal 1992 and $40.3 million in fiscal 1991. An additional $13.8
million was invested in land and building for new stores which will be part
of sale/leseback financing in 1994. Included in the fiscal 1991 total was
$6.6 million of capital lease additions and $33.7 million for cash capital
expenditures.
The following table summarizes store development:
Planned
Fiscal Fiscal Fiscal
1994 1993 1992
New Eagle Country Markets. . . . . . . 1 0 2
New Eagle Country Warehouses . . . . . 3 3 1
New BOGO's Food and Deals. . . . . . . 0 0 2
Store Closings . . . . . . . . . . . . 13 9 6
Expansions and Major Remodels. . . . . 10 13 18
Store Count, end of year . . . . . . . 93 102 108
The Company expects capital expenditures in fiscal 1994 to total
approximately $27.0 million, which is expected to be funded primarily from
internally generated cash flow and reductions in inventory and accounts
receivable levels and a sale/leaseback transaction on certain current
company owned property.
Developer financing for real estate projects has been extremely difficult to
obtain. As a result, certain projects have been delayed, certain others
have been cancelled, and the Company has elected to develop several store
locations itself. The Company owned 18 of its 102 stores as of January 29,
1994 and leased or subleased the remainder. The Company entered into a
capital lease of $10.0 million in fiscal 1991 to finance the rollout of the
IBM 4680 point-of-sale equipment which was fully implemented by June 1992 in
all stores.
The Company has a Revolving Credit Agreement, which is secured by
inventories located at the Company's central distribution facility and
stores to provide for the Company's short-term liquidity needs. The Company
had $3.0 million borrowed at January 29, 1994. The maximum amount
outstanding during fiscal 1993 was $21.0 million, which was prior to the
debt restructuring. The average amount outstanding during fiscal 1993 was
$5.5 million. The Company had $21.0 million borrowed at January 30, 1993
with a maximum amount outstanding of $33.0 million and average amount
outstanding of $13.4 million during fiscal 1992. There were no borrowings
outstanding on February 1, 1992.
Working capital (current assets minus current liabilities) and the current
ratio (current assets divided by current liabilities) were as follows:
Working Current
Capital Ratio
January 29, 1994 $25.7 million 1.25 to 1
January 30, 1993 $35.8 million 1.36 to 1
February 1, 1992 $19.1 million 1.19 to 1
Management believes that working capital is adequate for the Company's
reasonably foreseeable needs and that the Company is in compliance with all
of the covenants in its debt agreements.
During fiscal 1992, the holders of the 13 1/2% Subordinated Notes waived to
the extent of up to $20 million a covenant that restricted the Company from
repurchasing its Common Stock. During fiscal 1993 the Company purchased
120,500 shares at a total cost of $841,000 for an average price of $6.98 per
share. Additionally, during fiscal 1993, 183,442 shares of treasury stock
were used to satisfy awards to the participants of the Performance Equity
Plan. These shares were taken out of treasury stock at the average cost of
$6.14 per share. The difference between $7.25 issue price and $6.14
treasury stock cost was recorded as Capital in excess of par value. During
fiscal 1992, the Company commenced a stock repurchase program, pursuant to
which it repurchased 238,600 shares at a total cost of $1.5 million, for an
average price of $6.41 per share. From November 21, 1990 to February 2,
1991, the Company also repurchased 272,400 shares at a total cost of
$1.6 million, for an average price of $5.89 per share. Total treasury
shares at January 29, 1994 were 448,006 at an average cost of $6.36 per
share. The Company intends to continue its stock repurchase program to
purchase shares of Common Stock from time to time pursuant to open market,
privately negotiated or other transactions, as the Company's Board of
Directors may approve, subject to the availability of shares at prices
deemed appropriate.
On April 26, 1993 the Company completed a public offering and sale of $100
million principal amount of 8 5/8% Senior Notes due April 15, 2000. In
addition, the Company entered into a new $35 million credit facility to
replace its existing $85 million facility.
The net proceeds of the offering were approximately $96.5 million, of which
approximately $92.5 million was used to defease and retire the Senior
Subordinated Notes and the Bank Revolving Credit Facility. The balance was
used for general corporate purposes.
INFLATION
Inflation has had only a minor effect on the operations of the Company and
its internal and external sources of liquidity and working capital.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Eagle Food Centers, Inc.:
We have audited the accompanying consolidated balance sheets of Eagle
Food Centers, Inc. as of January 29, 1994 and January 30, 1993, and the
related consolidated statements of operations, equity and cash flows for
each of the three years in the period ended January 29, 1994. Our audits
also included the financial statement schedules listed in the index at Item
14. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Eagle Food Centers, Inc.
as of January 29, 1994 and January 30, 1993, and the results of its
operations and its cash flows for each of the three years in the period
ended January 29, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE
Chicago, Illinois
March 16, 1994
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
ASSETS
January 29, January 30,
1994 1993
Current Assets:
Cash and cash equivalents . . . $ 8,056 $ 11,554
Accounts receivable . . . . . . 18,195 15,408
Inventories . . . . . . . . . . 101,010 107,051
Prepaid expenses and other. . . 2,992 897
-------- --------
Total current assets . . . . 130,253 134,910
Property and equipment (net). . . 194,777 188,607
Other assets:
Deferred debt issuance costs. . 3,409 2,251
Excess of cost over fair
value of net assets acquired . 2,731 2,812
Other . . . . . . . . . . . . . 3,995 3,229
-------- --------
Total other assets 10,135 8,292
-------- --------
Total assets . . . . . . . . $ 335,165 $ 331,809
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . $ 60,831 $ 62,312
Payroll and employee benefits 13,850 16,480
Accrued liabilities . . . . . . 19,272 10,546
Accrued taxes . . . . . . . . . 7,762 7,096
Current portion of
long-term debt . . . . . . . . 2,799 2,657
-------- --------
Total current liabilities . . 104,514 99,091
Long-term debt:
Senior Notes. . . . . . . . . . 100,000 --
Bank revolving credit loan. . . 3,000 21,000
Senior Subordinated Notes . . . -- 69,060
Capital lease obligations . . . 20,152 24,036
Other . . . . . . . . . . . . . 175 237
-------- --------
Total long-term debt . . . . 123,327 114,333
Other liabilities:
Reserve for closed stores
and warehouse . . . . . . . . 33,669 28,693
Deferred income taxes . . . . . -- 1,456
Other deferred liabilities. . . 11,909 16,847
-------- --------
Total other liabilities . . . 45,578 46,996
Shareholders' equity:
Preferred stock, $.01 par
value, 100,000 shares
authorized. . . . . . . . . . -- --
Common stock, $.01 par value,
18,000,000 shares authorized,
11,500,000 shares issued . . . 115 115
Capital in excess of
par value. . . . . . . . . . . 53,541 53,336
Common stock in treasury,
at cost, 448,006 and
510,948 shares. . . . . . . . (2,850) (3,134)
Retained earnings . . . . . . . 10,940 21,072
-------- --------
Total shareholders' equity. . 61,746 71,389
-------- --------
Total liabilities and
shareholders' equity. . . $ 335,165 $ 331,809
======== ========
See notes to consolidated financial statements.
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Year Ended Year Ended Year Ended
January 29, January 30, February 1,
1994 1993 1992
Sales . . . . . . . . . . . . . . $ 1,062,348 $ 1,081,538 $ 1,112,203
Cost of goods sold. . . . . . . . 793,160 811,571 833,567
---------- ----------- -----------
Gross margin . . . . . . . . . 269,188 269,967 278,636
Operating expenses:
Selling, general and
administrative . . . . . . . . 225,123 218,874 231,090
Store closing and
asset revaluation . . . . . . 17,015 -- --
Depreciation and amortization . 22,748 21,381 18,450
---------- ---------- ----------
Operating income. . . . . . . 4,302 29,712 29,096
Interest expense. . . . . . . . . 14,244 16,451 13,743
---------- ---------- ----------
Earnings (loss) before income
taxes and extraordinary charge . (9,942) 13,261 15,353
Income taxes (benefit) . . . . . (3,779) 5,039 6,126
---------- ---------- ----------
Earnings (loss) before
extraordinary charge . . . . . . (6,163) 8,222 9,227
Extraordinary charge. . . . . . . 3,969 -- --
---------- ---------- ----------
Net earnings (loss) . . . . . . . $ (10,132) $ 8,222 $ 9,227
========== ========== ==========
Weighted average common shares
outstanding . . . . . . . . . . 11,103,276 11,175,129 11,227,600
Earnings (loss) per share
Earnings (loss) before
extraordinary charge. . . . . . $ (0.55) $ 0.74 $ 0.82
Extraordinary charge . . . . . . (0.36) -- --
----------- ---------- ----------
Net earnings (loss). . . . . . . $ (0.91) $ 0.74 $ 0.82
=========== ========== ==========
See notes to the consolidated financial statements.
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands)
Common Stock
----------------------------------------------
Capital in
Par Excess of Treasury
----------------- Retained
Shares Value Par Value Shares Dollars Earnings
---------- ----- --------- ------- -------- --------
Balance, February 2, 1991. . 11,500,000 $115 $53,336 272,348 $(1,605) $ 3,623
Net earnings. . . . . . 9,227
---------- ----- --------- ------- -------- --------
Balance, February 1, 1992. . 11,500,000 115 53,336 272,348 (1,605) 12,850
Net earnings. . . . . . 8,222
Purchase of treasury
shares . . . . . . . . 238,600 (1,529)
---------- ----- --------- ------- -------- --------
Balance, January 30, 1993. . 11,500,000 115 53,336 510,948 (3,134) 21,072
Net loss. . . . . . . . (10,132)
Distribution of
treasury shares to
performance share plan. 205 (183,442) 1,126
Purchase of treasury
shares. . . . . . . . . 120,500 (842)
---------- ----- --------- ------- -------- --------
Balance, January 29, 1994. . 11,500,000 $115 $53,541 448,006 $(2,850) $10,940
========== ===== ========= ======= ======== ========
See notes to the consolidated financial statements.
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended Year Ended Year Ended
January 29, January 30, February 1,
1994 1993 1992
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . $ (10,132) $ 8,222 $ 9,227
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Extraordinary charge before income
tax effect. . . . . . . . . . . . . 6,402 -- --
Depreciation and amortization. . . . 22,748 21,353 18,450
Store closing and asset revaluation. 17,015 -- --
Deferred income taxes. . . . . . . . (4,637) 415 (1,240)
LIFO (credit) charge . . . . . . . . 42 (339) 500
Stock compensation expense . . . . . -- 1,066 988
Deferred charges and credits . . . . 3,997 5,299 3,881
Loss (gain) on disposal of assets. . (451) 608 1,042
Changes in assets and liabilities:
Accounts receivable and
other assets . . . . . . . . . . . (4,191) (6,951) 242
Inventories. . . . . . . . . . . . . 5,999 (13,344) 896
Accounts payable . . . . . . . . . . (1,481) 2,521 5,214
Accrued and other liabilities. . . . (2,643) 644 4,318
Reserve for closed stores
and warehouse . . . . . . . . . . . (8,177) (6,635) (5,768)
--------- --------- ---------
Net cash provided by operating
activities. . . . . . . . . . . 24,491 12,859 37,750
Cash flows from investing activities:
Additions to property and equipment. (18,242) (33,027) (33,659)
Property held for sale/leaseback . . (13,766) -- --
Cash proceeds from dispositions of
property and equipment. . . . . . . 2,634 188 192
--------- --------- ---------
Net cash used in
investing activities. . . . . . . (29,374) (32,839) (33,467)
Cash flows from financing activities:
Proceeds from borrowings . . . . . . 100,000 -- 3,419
Deferred financing costs . . . . . . (3,861) -- --
Debt prepayment costs. . . . . . . . (4,239) -- --
Principal payments on
capital lease obligations . . . . . (2,558) (2,426) (936)
Retirement of debt . . . . . . . . . (69,116) (952) (86)
Net revolving credit
borrowing (repayment) . . . . . . . (18,000) 21,000 --
Purchase of treasury stock . . . . . (841) (1,529) --
--------- --------- ---------
Net cash provided by
financing activities . . . . . . 1,385 16,093 2,397
--------- --------- ---------
(Decrease) increase in cash
and cash equivalents. . . . . . . . . (3,498) (3,887) 6,680
Cash and cash equivalents at
beginning of year . . . . . . . . . . 11,554 15,441 8,761
--------- --------- ---------
Cash and cash equivalents at end of year . $ 8,056 $ 11,554 $ 15,441
========= ========= =========
See notes to the consolidated financial statements.
EAGLE FOOD CENTERS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended January 29, 1994, January 30, 1993
and February 1, 1992
NOTE A--ORGANIZATION
Eagle Food Centers, Inc. (the "Company"), a Delaware corporation, was
the General Partner of Eagle Food Centers, L.P. ("EFC"), a Delaware limited
partnership, which previously conducted the Eagle Food Centers business. On
July 27, 1989, the owners of all of the outstanding common limited
partnership interests in EFC exchanged their partnership interests for
8.3 million shares of Common Stock of the Company. As a result, and
following the consummation of the offering by the Company of 3.2 million
shares of Common Stock and the redemption by EFC of the preferred limited
partnership interests in EFC held by Lucky Stores, Inc. ("Lucky") on
August 3, 1989, the Company succeeded to the business and assets and assumed
the liabilities of EFC. The Company is engaged in the operation of retail
food stores.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to
January 31st. Fiscal 1993, fiscal 1992 and fiscal 1991 were 52 week years
ended January 29, 1994, January 30, 1993, and February 1, 1992,
respectively.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Eagle
Food Centers, Inc. and all subsidiaries. All significant intercompany
transactions have been eliminated.
INVENTORIES
Inventories are valued at the lower of cost or market; cost is
determined by the last-in, first-out (LIFO) method for substantially all
inventories. The current cost of the inventories was greater than the LIFO
value by $5.7 million at January 29, 1994 and at January 30, 1993.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed by using the
straight-line method over the estimated useful lives of buildings, fixtures
and equipment. Leasehold costs and improvements are amortized over their
estimated useful lives or the remaining lease term, whichever is shorter.
Leasehold interests are amortized over the lease term plus expected renewal
periods or 25 years, whichever is shorter.
Property acquired under capital leases is amortized on a straight-line
basis over the shorter of the life of the property or the lease term.
DEBT ISSUANCE COSTS
Debt issuance costs are amortized over the terms of the related debt
agreements.
ORGANIZATION COSTS
Organization costs were fully amortized by the end of fiscal 1992.
Organization costs, which were included in other assets, were amortized over
a five-year period.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
The Company amortizes this intangible asset using the straight-line
method over 40 years.
RESERVE FOR CLOSED STORES AND WAREHOUSE
The Company continually monitors underperforming stores and under-
utilized facilities and in the event their performance or utilization cannot
be improved, management may decide to close, sell or otherwise dispose of
such stores or facilities. The reserve for closed stores and a warehouse
arises primarily from the discounted value of future lease commitments in
excess of the discounted value of estimated sublease revenue on stores and a
warehouse which management has reached the decision to close, sell or
otherwise dispose within one year. Reserves are established in the year
such decisions are made by management and the costs can be reasonably
estimated. The discount rates used for these reserves is 10% for reserves
established prior to fiscal 1993. The reserves established in fiscal 1993
used a discount rate of 6%.
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's debt instruments is based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
RECLASSIFICATIONS
Certain reclassifications were made to prior years' balances for
comparative purposes.
EARNINGS (LOSS) PER SHARE
Net earnings(loss) per share of Common Stock, throughout the periods
presented, is based on the weighted average shares outstanding. Equivalent
shares in the form of contingent stock rights, stock appreciation rights and
stock options are excluded from the calculation since they are not
materially dilutive.
NOTE C--CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents. Cash paid for interest totaled
$ 15.1 million for 1993, $16.8 million for 1992, and $14.2 million for 1991.
Cash paid for income taxes totaled $1.2 million for 1993, $6.2 million for
1992, and $7.1 million for 1991. Non-cash transactions in fiscal 1993
include a capital lease retirement of $1.2 million and treasury stock issued
for Performance Share Plan participants of $1.3 million. Non-cash additions
to property and equipment included $6.6 million for capital leases in 1991.
NOTE D--RESERVE FOR CLOSED STORES AND WAREHOUSE
In fiscal 1993 the Company incurred a charge of $17.0 million to
provide for closing costs and continuing rental obligations, less
anticipated sublease rentals, and to revalue certain related fixed assets to
estimated realizable values. The store closing and asset revaluation charge
included additional amounts for continuing expenses for thirteen stores
closed prior to January 29, 1993 and included a provision for another
thirteen stores scheduled to be closed in fiscal 1994. The components of
the charge are summarized as follows:
Revalue related fixed assets to
estimated realizable values . . . . . . . . . $7,521
Present value of continuing rental
obligations less anticipated sublease rentals 6,783
Closing costs . . . . . . . . . . . . . . . . . 1,180
Change in estimate for prior
store closings. . . . . . . . . . . . . . . . 1,221
Other . . . . . . . . . . . . . . . . . . . . . 310
-------
Total . . . . . . . . . . . . . . . . . . . $17,015
=======
Approximately one half of the charge represents estimated future cash outflows.
NOTE E--PROPERTY AND EQUIPMENT
The investment in property and equipment is as follows:
January 29, January 30,
1994 1993
(In thousands)
Land . . . . . . . . . . . . . . . . . . . . $ 9,834 $ 10,405
Buildings. . . . . . . . . . . . . . . . . . 35,736 35,845
Property held for sale/leaseback . . . . . . 13,766 --
Leasehold costs and improvements . . . . . . 43,628 43,694
Fixtures and equipment . . . . . . . . . . . 127,843 114,936
Leasehold interests. . . . . . . . . . . . . 44,931 46,153
Property under capital lease . . . . . . . . 28,561 29,821
-------- --------
Total. . . . . . . . . . . . . . . . . . . . 304,299 270,449
Less accumulated depreciation
and amortization . . . . . . . . . . . . . 109,522 92,247
-------- --------
Property and equipment (net) . . . . . . . . $194,777 $188,607
======== ========
NOTE F--LONG-TERM DEBT
Long-term debt consists of the following:
January 29, January 30,
1994 1993
(In thousands)
Bank Revolving Credit Loan . . . . . . . . . $ 3,000 $ 21,000
8 5/8% Senior Notes. . . . . . . . . . . . . 100,000 - -
13 1/2% Senior Subordinated Notes. . . . . . - - 69,060
Capital leases (Note H). . . . . . . . . . . 22,890 26,637
Mortgage . . . . . . . . . . . . . . . . . . 236 293
-------- --------
126,126 116,990
Less current maturities. . . . . . . . . . 2,799 2,657
-------- --------
$123,327 $114,333
======== ========
The Company's 13 1/2% Senior Subordinated Notes due June 1, 1998 (the "13
1/2% Subordinated Notes") were retired on June 1, 1993 and were replaced with
$100 million of Senior Notes at 8 5/8%. The fair market value of the 13 1/2%
Notes as of January 30, 1993 was approximately $73.0 million. The 13 1/2%
Subordinated Notes were the joint and several obligation of the Company and
Eagle Capital Corporation II ("Capital"). Capital was a wholly-owned subsidiary
of the Company which was formed for the sole purpose of acting as co-obligor
under the 13 1/2% Senior Subordinated Notes. Capital was dissolved during
fiscal 1993.
The indenture relating to the 8 5/8% Senior Notes contains provisions as
well as certain restrictions relating to certain asset dispositions, sale and
leaseback transactions, payment of dividends, repurchase of equity interests,
incurrence of additional indebtedness and liens, and certain other restricted
payments. The Company's 8 5/8% Senior Notes are due April 15, 2000. The fair
market value of the 8 5/8% Notes as of January 29, 1994 was approximately
$99.5 million.
The Company had a Credit Agreement with Caisse Nationale De Credit
Agricole, Chicago branch ("CNCA") which provides for a syndicate of banks, with
CNCA as agent for such banks, to make available to the Company an aggregate
amount of $85 million for revolving credit loans, working capital loans and
letters of credit. This $85 million facility was replaced on April 26, 1993
with a new Credit Agreement with Caisse Nationale De Credit Agricole and The
First National Bank of Chicago as Co-Agents. The new agreement is a $35 million
facility which provides for revolving credit loans and letters of credit. No
more than an aggregate of $20.0 million of the total commitment may be drawn by
the Company as letters of credit. The Credit Agreement terminates on April 26,
1998 and is secured by a first priority security interest in all inventories of
the Company located in its stores and distribution center in Milan, Illinois.
Loans made pursuant to the Credit Agreement will bear interest at a fluctuating
interest rate based, at the Company's option, on a margin over the CNCA's base
interest rate or a margin over the London Interbank offered rate multiplied by
the applicable reserve requirement (the adjusted LIBOR Rate), which margins will
decrease as the Company's "leverage ratio" (as defined in the Credit Agreement)
decreases.
The Credit Agreement contains certain financial and other restrictive
covenants with respect to the Company relating to, among other things, minimum
financial ratios, minimum equity levels, the incurrence of indebtedness, the
creation of liens, sales of assets, capital expenditures, and the payment of
dividends on or the redemption, repurchase, acquisition or retirement of the
equity interests of the Company. At January 29, 1994 $3.6 million of the
Company's retained earnings were available for dividends.
At January 29, 1994, the Company had $3.0 million in revolving credit loans
outstanding and had outstanding letters of credit totaling $5.3 million
and thus had $26.7 million available under the Credit Agreement. The interest
rates on the outstanding amounts were 7.5% at January 29, 1994 and 5.46% at
January 30, 1993.
NOTE G--TREASURY STOCK
In the second quarter of fiscal 1993, the Company acquired 120,500 shares
of its Common Stock at a total cost of $0.8 million or an average price of
$6.98 per share. During the year the Company distributed 183,442 treasury
shares to the performance share plan participants. Total treasury shares at
January 29, 1994 were 448,006 at an average cost of $6.36 per share or a total
of $2.85 million.
In fiscal 1992, the Company made an incentive payment to holders of the 13
1/2% Senior Subordinated Notes to waive a restrictive covenant and to allow the
Company to repurchase up to $20 million of its Common Stock. The total cost of
obtaining this waiver was approximately $1.2 million.
The Company acquired 238,600 shares of its Common Stock during the third
and fourth quarters of fiscal 1992 at a total cost of $1.5 million or an average
price of $6.41 per share. Total treasury shares at January 30, 1993 were
510,948 at an average cost of $6.14 per share.
NOTE H--LEASES
Most of the retail stores are leased. Many of the leases have renewal
options for periods ranging from five to thirty years. Some provide the option
to acquire the property at certain times during the initial lease term for
approximately its estimated fair market value at that time, and some require the
Company to pay taxes and insurance on the leased property. Rent expense
consists of:
Year Ended
January 29, January 30, February 1,
1994 1993 1992
(In thousands)
Minimum rent under operating leases. . . . $21,526 $20,680 $20,202
Additional rent based on sales . . . . . . 213 399 768
Less rentals received on non-cancelable
subleases. . . . . . . . . . . . . (1,749) (2,171) (2,107)
-------- -------- --------
$19,990 $18,908 $18,863
======== ======== ========
Future minimum lease payments under operating and capital leases as of
January 29, 1994 are as follows:
Operating Capital
leases leases
(In thousands)
1994 . . . . . . . . . . . . . . . . . . $ 16,801 $ 4,351
1995 . . . . . . . . . . . . . . . . . . 16,300 4,353
1996 . . . . . . . . . . . . . . . . . . 14,117 4,127
1997 . . . . . . . . . . . . . . . . . . 12,727 1,804
1998 . . . . . . . . . . . . . . . . . . 12,304 1,804
Thereafter . . . . . . . . . . . . . . . 111,975 14,553
-------- -------
Total minimum lease payments . . . . . . $184,224 30,992
Less amount representing interest. . . . ======== 8,102
Present value of minimum capital lease -------
payments including $2.7 million
classified as current portion of
long-term debt . . . . . . . . . . . . $22,890
=======
The above future minimum lease payments do not include minimum commitments
of $69.7 million (exclusive of sublease income) the present value of which is
included in the balance sheet caption "Reserve for closed stores and warehouse".
NOTE I--INCOME TAXES
Prior to fiscal 1993, the Company recognized income taxes based on
Accounting Principals Board Opinion No. 11, Accounting For Income Taxes.
Effective January 31, 1993 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS 109).
The Company adopted the requirements of SFAS No. 109 via a cumulative
effect adjustment for prior years at the beginning of fiscal 1993 and,
therefore, has not restated prior years' financial statements. This adjustment
was not material to the financial statements at January 31, 1993 nor was there a
material effect to income for the year ended January 29, 1994.
The following summarizes significant components of the provision for
income taxes:
Year Ended
January 29, January 30, February 1,
1994 1993 1992
(In thousands)
Continuing Operations-
Income tax expense (benefit):
Federal . . . . . . . . . . . . . $ (3,084) $ 3,990 $ 4,907
State . . . . . . . . . . . . . . (695) 1,049 1,219
--------- -------- --------
$ (3,779) $ 5,039 $ 6,126
========= ======== ========
Income tax expense (benefit)
consists of the following:
Current:
Federal . . . . . . . . . . . . . $ (676) $ 3,690 $ 5,806
State . . . . . . . . . . . . . . (282) 934 1,560
--------- -------- --------
$ (958) $ 4,624 $ 7,366
========= ======== ========
Deferred:
Federal . . . . . . . . . . . . . $ (2,408) $ 300 $ (899)
State . . . . . . . . . . . . . . (413) 115 (341)
--------- ------- ---------
$ (2,821) $ 415 $ (1,240)
========= ======= =========
The differences between income tax expense (benefit) at the statutory
Federal income tax rate and income tax expense (benefit) reported in the
statements of operations are as follows:
Year Ended
January 29, January 30, February 1,
1994 1993 1992
(In thousands)
Income tax (credit) at statutory Federal
tax rate of 35% for 1993 and 34% for
1992 and 1991 . . . . . . . . . . . . . . $ (3,480) $ 4,509 $ 5,220
Surtax exemption . . . . . . . . . . . . . 99 -- --
State income taxes, net of Federal benefit (459) 692 805
Tax credits. . . . . . . . . . . . . . . . (83) (245) --
Other . . . . . . . . . . . . . . . . . . 144 83 101
--------- -------- --------
Total . . . . . . . . . . . . . . . . $ (3,779) $ 5,039 $ 6,126
========= ======== ========
Deferred tax assets and liabilities arise because of differences between
the financial accounting for assets and liabilities and their respective tax
bases. Deferred income tax assets and liabilities are comprised of the
following significant temporary differences:
Year Ended
January 29,
1994
(In thousands)
Deferred Tax Assets:
Store closing and asset revaluation . . . . . . . . . . $ 11,485
Accrued reserves. . . . . . . . . . . . . . . . . . . . 7,296
Deferred revenues . . . . . . . . . . . . . . . . . . . 2,319
Employee benefits . . . . . . . . . . . . . . . . . . . 1,067
Tax credit carryforwards . . . . . . . . . . . . . . . 2,593
--------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 24,760
========
Deferred Tax Liabilities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . $ 18,667
Other, net. . . . . . . . . . . . . . . . . . . . . . . 3,902
--------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 22,569
========
The amount of tax credit carryforwards available, primarily related to
alternative minimum tax, and expiration dates are as follows: 1997 - $333, 1998
- - $60, and unlimited - $2,200.
NOTE J--EMPLOYEE BENEFIT PLANS
RETIREMENT PLANS
Substantially all employees of the Company are covered by trusteed,
non-contributory retirement plans of the Company or by various multi-employer
retirement plans under collective bargaining agreements. The Company's defined
benefit plans covering salaried and hourly employees provide benefits that are
based on the employees' compensation during years of service. The Company's
policy is to fund no less than the minimum required under the Employee
Retirement Income Security Act of 1974. During the years ended January 29,
1994, January 30, 1993, and February 1, 1992, pension costs under the plans
totaled $885,000, $620,000, and $565,000, respectively.
Net periodic pension cost under the Milan office and non-foods warehouse
retirement plan (Milan plan) and the Eagle Food Centers, Inc. Employee Pension
Plan (Eagle Plan) includes the following benefit and cost components for the
years ended January 29, 1994, January 30, 1993, and February 1, 1992:
Year Ended
January 29, January 30, February 1,
1994 1993 1992
(In thousands)
Service cost . . . . . . . . . . . $ 671 $ 548 $ 484
Interest cost. . . . . . . . . . . 512 410 352
Actual return on plan assets . . . (282) (242) (457)
Net amortization and deferral. . . (16) (96) 186
------ ------ ------
Net periodic pension cost. . . . . $ 885 $ 620 $ 565
====== ====== ======
The funded status and amounts recognized in the Company's balance sheets
for the Milan plan and Eagle Plan, as of the measurement dates of December 31,
1993 and 1992, are as follows:
Dec. 31, Dec. 31,
1993 1992
(In thousands)
Plan assets at market value. . . . . . . . . . $ 5,196 $ 4,682
Actuarial present value of
projected benefit obligation. . . . . . . . . (7,669) (6,751)
--------- --------
Funded status. . . . . . . . . . . . . . . . . (2,473) (2,069)
Unrecognized net loss. . . . . . . . . . . . . 1,226 1,244
--------- --------
Accrued pension cost . . . . . . . . . . . . . $ (1,247) $ (825)
========= ========
The actuarial present value of the Company's vested benefit obligation for
the Milan Plan and Eagle Plan was $6.5 million and $5.7 million and the
accumulated benefit obligation was $6.8 million and $6.0 million at December 31,
1993 and 1992, respectively. Plan assets are held in a trust and include
corporate and U.S. government debt securities and common stocks.
Actuarial assumptions used to develop net periodic pension cost for the
fiscal years 1993, 1992 and 1991 were as follows:
1993 1992 1991
Discount rate. . . . . . . . . . . . . . . . . 7.5% 7.5% 8.0%
Expected long-term rate of return on assets. . 8.0% 8.0% 8.0%
Rate of increase in compensation levels. . . . 4.0% 5.0% 5.0%
The Company also participates in various multi-employer plans. The plans
provide for defined benefits to substantially all unionized workers. Amounts
charged to pension cost and contributed to the plans for the years ended January
29, 1994, January 30, 1993, and February 1, 1992, totaled $7.0 million,
$7.1 million, and $7.2 million, respectively. Under the provisions of the
Multi-employer Pension Plan Amendments Act of 1980, the Company would be
required to continue contributions to a multi-employer pension fund to the
extent of its portion of the plan's unfunded vested liability if it
substantially or totally withdraws from such plans. Management does not intend
to terminate operations that would subject the Company to such liability.
INCENTIVE COMPENSATION PLANS
The Company has incentive compensation plans for store management,
department heads and certain other management personnel. Incentive plans
included approximately 1,000 employees. Provisions for payments to be made
under the plans are based upon achievement of sales and earnings in excess of
specific performance targets. The aggregate provision under these plans was
$.8 million, $1.3 million and $1.3 million for the years ended January 29, 1994,
January 30, 1993 and February 1, 1992.
The Company had a performance share plan under which members of the
Company's senior management, selected by a committee of disinterested members of
the Board of Directors, were awarded contingent rights to receive up to an
aggregate of 415,000 shares of the Common Stock of the Company. The Company
awarded rights equivalent to 86,664 shares for fiscal 1992 and 77,000 shares for
fiscal 1991. The Company awarded rights equivalent to 412,664 shares for
the total five fiscal years of the program. The actual financial results
achieved over the life of the Plan which terminated January 30, 1993 met the
objective for an 80% and payout or 330,135 shares of which 183,442 actual
shares were issued and a cash payout of $1,063,524 distributed for the
remaining 146,693 shares. There was no provision under this plan for fiscal
1993. The aggregate provision under this plan was $1.1 million and
$1.0 million for the years ended January 30, 1993 and February 1, 1992,
respectively.
The Company has stock appreciation rights outstanding for 35,000 shares
with a grant price of $7.00 per share. Vesting occurs over a five-year period
ending June 1995. The aggregate provision under this plan was ($25,000),
$25,000 and $0 for the three years ended January 29, 1994, Janury 30, 1993 and
February 1, 1992, respectively.
A non-qualified stock option plan was ratified by stockholders and
implemented in 1990 for key management employees. As of January 29, 1994,
options for 31,250 and 31,900 shares were outstanding and exercisable with
option prices of $10.00 and $8.50 per share respectively. Options for 286,850
shares remained available for future grants. As of January 30, 1993, options
for 35,600 and 37,775 shares were outstanding and exercisable with option prices
of $10 and $8.50 per share, respectively. As of February 1, 1992, options of
42,025 and 39,325 shares were outstanding with an option price of $10 and $8.50
per share respectively.
POST RETIREMENT BENEFITS
In December 1990, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions (SFAS 106), which changes the
current practice of accounting for postretirement benefits on a cash basis by
requiring accrual, during the years the employees render necessary service, of
the expected cost of providing those postretirement benefits to employees. The
Company adopted SFAS 106 in fiscal 1993. The adoption of SFAS 106 did not have
a material effect on operating results or financial position.
The Company provides certain unfunded health care benefits for retired
employees. Benefits are limited to non-union hourly and salaried employees at
a maximum monthly Company contribution of $115 per participating retiree.
The amount charged to expense for fiscal 1993 was $331,000.
POST EMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112 Employers' Accounting for
Postemployment Benefits (SFAS 112). This statement requires accrual of post
employment benefits for former or inactive employees after employment but before
retirement. The Company is required to adopt SFAS 112 by fiscal 1994. Although
the Company has not quantified the effect of adoption, based on a preliminary
review, it is not anticipated that the adoption of SFAS 112 will have a material
impact on operating results or financial position.
NOTE K--QUARTERLY FINANCIAL DATA (Unaudited)
Net
Net Earnings
Gross Earnings (Loss)
Sales Margin (Loss) Per Share
(Dollars in thousands, except per share data)
1993
Quarter--First $ 267,402 $ 66,947 $( 1,554)(1) $(.14)(1)
--Second 265,364 67,203 559 .05
--Third 260,085 66,872 1,363 .12
--Fourth 269,497 68,166 (10,500)(2) (.94)(2)
---------- -------- --------- ------
Total $1,062,348 $269,188 $(10,132) $(.91)
========== ======== ========= ======
1992
Quarter--First $ 265,601 $ 66,796 $ 2,380 $ .21
--Second 271,835 67,246 1,291(3) .12(3)
--Third 268,416 66,938 1,997 .18
--Fourth 275,686 68,987 2,554(4) .23(4)
---------- -------- -------- ------
Total $1,081,538 $269,967 $ 8,222 $ .74
========== ======== ======== ======
1991
Quarter--First $ 280,068 $ 70,221 $ 2,261 $ .20
--Second 287,216 72,100 2,263 .20
--Third 270,959 66,037 2,015 .18
--Fourth 273,960 70,278 2,688(5) .24(5)
---------- -------- -------- ------
Total $1,112,203 $278,636 $ 9,227 $ .82
========== ======== ======== ======
(1) Net earnings were reduced by an after-tax extraordinary charge of $4.0
million or $.36 per share related to the early retirement of debt.
Earnings before the extraordinary charge were $2.4 million or $.22 per
share.
(2) Net earnings were reduced by a pretax store closing charge of $17.0
million or $.95 per share. Net earnings were increased by $0.5 million or
$.03 per share resulting from a LIFO credit.
(3) Net earnings were reduced by a one time after-tax charge of $0.7 million
or $.07 per share for an incentive payment to the bondholders to waive a
restrictive covenant, which waiver would permit the Company to repurchase
up to $20 million of its common stock.
(4) Net earnings were increased by $0.8 million or $.07 per share resulting
from a LIFO credit.
(5) Net earnings were increased by $1.0 million or $.09 per share resulting
from a LIFO credit.
NOTE L--EXTRAORDINARY CHARGE
The extraordinary charge in fiscal 1993 relates to the premium paid to
retire the Senior Subordinated Notes early of $4.2 million and the write-off of
related deferred financing costs of $2.2 million (net of applicable income
taxes of $2.4 million).
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements on accounting principles or practices
or financial statement disclosure between the Company and its independent
certified public accountants within the two fiscal years ended January 29,
1994.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item concerning directors is set forth
under "Election of Directors" in the definitive proxy statement filed by the
Company with the Securities and Exchange Commission and is hereby
incorporated by reference into this 10-K. Certain information concerning
the Company's executive officers is included in Item 4(a) of Part I of this
report.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this item is set forth in the section
entitled "Executive Compensation" in the definitive proxy statement filed by
the Company with the Securities and Exchange Commission and is hereby
incorporated by reference into this Form 10-K.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the tabulation
of the amount and nature of beneficial ownership of the Company's Common
Stock under the heading "Principal Shareholders and Election of Directors"
in the definitive proxy statement filed by the Company with the Securities
and Exchange Commission and is hereby incorporated by reference into this
Form 10-K.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the section
entitled "Compensation of Directors" in the definitive proxy statement filed
by the Company with the Securities and Exchange Commission and is hereby
incorporated by reference into this Form 10-K.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page
(a) The following documents are filed as a part of this report:
1. Financial Statements:
- Independent Auditors' Report 21
- Consolidated Balance Sheets as of January 29, 1994
and January 30, 1993 22
- Consolidated Statements of Operations for the years
ended January 29, 1994, January 30, 1993, and
February 1, 1992 23
- Consolidated Statements of Equity for the years ended
January 29, 1994, January 30, 1993, and
February 1, 1992 24
- Consolidated Statements of Cash Flows for the years
ended January 29, 1994, January 30, 1993,
and February 1, 1992 25
- Notes to the Consolidated Financial Statements 26
2. Financial Statement Schedules:
Schedule V -- Property and Equipment 41
Schedule VI -- Accumulated Depreciation and Amortization
of Property and Equipment 42
Schedule VIII -- Valuation and Qualifying Accounts 43
Schedule X -- Supplemental Income Statement Information 44
All other schedules are omitted because they are not applicable or not
required, or because the information required therein is included in the
financial statements or the notes thereto.
3. Exhibits - see Exhibit Index on page 45
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of fiscal 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
EAGLE FOOD CENTERS, INC.
By: /s/ Pasquale V. Petitti
Pasquale V. Petitti
President, Chief Executive Officer
DATED: April 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
and on the dates indicated:
Signature Title Date
/s/ Martin J. Rabinowitz
Martin J. Rabinowitz Chairman, and Director April 29, 1994
/s/ Pasquale V. Petitti President and Director
Pasquale V. Petitti (Principle Executive Officer) April 29, 1994
/s/ Herbert T. Dotterer Senior Vice President - Finance and
Herbert T. Dotterer Administration, Chief Financial
Officer, Secretary and Director
(Principal Financial Officer) April 29, 1994
/s/ Peter B. Foreman Director April 29, 1994
Peter B. Foreman
/s/ Steven M. Friedman Director April 29, 1994
Steven M. Friedman
/s/ Michael J. Knilans Director April 29, 1994
Michael J. Knilans
/s/ William J. Snyder Director April 29, 1994
William J. Snyder
/s/ Robert C. Grayson Director April 29, 1994
Robert C. Grayson
SCHEDULE V
EAGLE FOOD CENTERS INC.
SCHEDULE V--PROPERTY AND EQUIPMENT
(Dollars in thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Other Balance
beginning Additions Retire- changes-- at end
Classification of period at cost ments add(deduct) of period
Fiscal year ended January 29, 1994
Buildings $ 35,845 $ 294 $ (288) $ (115) $ 35,736
Leasehold costs and
improvements 43,694 778 (798) (46) 43,628
Fixtures and equipment 115,140(4) 16,722 (4,181) 162 127,843
Leasehold interests 46,153 -- (1,222) -- 44,931
Property under capital leases 29,821 44 (1,304) -- 28,561
Land 10,405 404 (975) -- 9,834
Property held for sale/leasback -- 13,766 -- -- 13,766
-------- ------- --------- ------ --------
Total $281,058 $32,008 $ (8,768) $ 1 $304,299
======== ======= ========= ====== ========
Fiscal year ended January 30, 1993
Buildings $ 26,052 $ 6,838 $ -- $2,955 (3) $ 35,845
Leasehold costs and
improvements 52,226 1,272 (372) (9,432)(3) 43,694
Fixtures and equipment 96,971 21,233 (9,632) 6,364 (3) 114,936
Leasehold interests 47,761 -- (1,608) -- 46,153
Property under capital leases 28,932 1,201 -- (312)(3) 29,821
Land 7,497 2,483 -- 425 (3) 10,405
-------- ------- --------- ------- --------
Total $259,439 $33,027 $(11,612) $ 0 $280,854
======== ======= ========= ======= ========
Fiscal year ended February 1, 1992
Buildings $ 25,995 $ 57 $ -- $ -- $ 26,052
Leasehold costs and
improvements 34,652 17,739 (185) 20 (2) 52,226
Fixtures and equipment 83,369 16,121 (2,241) (278)(1) 96,971
Leasehold interests 48,710 -- (949) -- 47,761
Property under capital leases 22,318 6,303 -- 311 (1) 28,932
Land 7,497 -- -- -- 7,497
-------- ------- --------- ------- --------
Total $222,541 $40,220 $ (3,375) $ 53 $259,439
======== ======= ========= ======= ========
(1) Amount represents transfers from fixtures and equipment to property under
capital leases.
(2) Amount represents transfers from property held for resale.
(3) Amount represents transfers from construction in progress.
(4) Beginning balance includes relamping of $204,200.
SCHEDULE VI
EAGLE FOOD CENTERS INC.
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(Dollars in thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions
Balance at charged to Other Balance
beginning costs and Retire- changes-- at end
Description of period expenses ments add(deduct) of period
Fiscal year ended January 29, 1994
Buildings $ 4,508 $ 1,586 $ (13) $ ( 2) $ 6,079
Leasehold costs and
improvements 17,215 3,249 (746) 2 19,720
Fixtures and equipment 50,054 12,585 (3,478) -- 59,161
Leasehold interests 12,571 2,787 (702) -- 14,656
Property under capital leases 7,899 2,459 (452) -- 9,906
------- ------- -------- ------- --------
Total $92,247 $22,666 $(5,391) $ 0 $109,522
======= ======= ======== ======= ========
Fiscal year ended January 30, 1993
Buildings $ 2,942 $ 1,378 $ -- $ 188 $ 4,508
Leasehold costs and
improvements 14,654 2,920 (291) (68) 17,215
Fixtures and equipment 47,215 11,449 (8,837) 227 50,054
Leasehold interests 10,020 2,915 (364) -- 12,571
Property under capital leases 5,689 2,186 -- 24 7,899
------- ------- -------- ------- --------
Total $80,520 $20,848 $(9,492) $ 371 $ 92,247
======= ======= ======== ======= ========
Fiscal year ended February 1, 1992
Buildings $ 2,009 $ 932 $ -- $ 1 $ 2,942
Leasehold costs and
improvements 11,455 3,272 (72) (1) 14,654
Fixtures and equipment 39,358 9,652 (1,798) 3 47,215
Leasehold interests 7,254 3,036 (270) -- 10,020
Property under capital leases 4,282 1,407 -- -- 5,689
------- ------- -------- ------- --------
Total $64,358 $18,299 $(2,140) $ 3 $ 80,520
======= ======= ======== ======= ========
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets. The useful lives of the various
classes of assets are as follows:
Buildings 10-25 years Leasehold Interests 3-25 years
Fixtures and
Equipment 3-12 years Capital Leases Shorter of economic
life or lease term
Leasehold
Improvements 5-23 years
SCHEDULE VIII
EAGLE FOOD CENTERS INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Beginning Interest End of
Classification of Year Payments Costs Adjustments Year(1)
Fiscal year ended January 29, 1994
Store closing reserve $16,220 $(5,046) $ 525 $17,015(2) $28,714
Westville warehouse reserve 16,638 (3,131) 1,695 -- 15,202
------- -------- ------ ------- -------
$32,858 $(8,177) $2,220 $17,015 $43,916
======= ======== ====== ======= =======
Fiscal year ended January 30, 1993
Store closing reserve $19,440 $(3,498) $ 278 $ -- $16,220
Westville warehouse reserve 17,920 (3,137) 1,855 -- 16,638
------- -------- ------ ------- -------
$37,360 $(6,635) $2,133 -- $32,858
======= ======== ====== ======= =======
Fiscal year ended February 1, 1992
Store closing reserve $22,839 $(3,648) $ 249 $ -- $19,440
Westville warehouse reserve 18,102 (2,120) 1,938 -- 17,920
------- -------- ------ ------- -------
$40,941 $(5,768) $2,187 $ -- $37,360
======= ======== ====== ======= =======
(1) Amount includes $10,247, $4,165 and $4,024 in accrued liabilities at January 29,
1994, January 30, 1993, and February 1, 1992, respectively.
(2) Represents provision of $17.0 million to provide for cost of closing certain stores
and asset revaluations therewith.
SCHEDULE X
EAGLE FOOD CENTERS INC.
SCHEDULE X--SUPPLEMENTAL INCOME STATEMENT INFORMATION
(Dollars in thousands)
Col. A Col. B
------------------- -------------------------------------
Charged to Costs & Expenses
-------------------------------------
Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended
January 29, January 30, February 1,
Item 1994 1993 1992
Advertising costs $ 19,624 $ 19,964 $ 24,192
Less: Cooperative advertising
allowances (15,757) (15,721) (16,653)
---------- --------- ---------
Net advertising expense $ 3,867 $ 4,243 $ 7,539
========== ========= =========
Exhibit
Number Description
3.1-- Certificate of Incorporation of the Company (filed as Exhibit 3.1
to the Registration Statement on Form S-1 No. 33-29404 and
incorporated herein by reference).
3.2-- By-laws of the Company (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 No. 33-29404 and
incorporated herein by reference).
4.1-- Form of Note (filed as Exhibit 4.3 to the Registration
Statement on Form S-1 No. 33-59454 and incorporated herein by
reference).
4.2-- Form of Indenture, dated as of April 26, 1993, between the
Company and First Trust National Association, as trustee (filed
as Exhibit 4.4 to the Registration Statement on Form S-1 No.
33-59454 and incorporated herein by reference).
10.1-- Transaction Agreement, dated as of October 9, 1987, between EFC
and Lucky Stores, Inc. (filed as Exhibit 10.8 to the
Registration Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.2-- Assignment and Assumption Agreement, dated November 10, 1987,
among EFC, Lucky Stores, Inc. and Pasquale V. Petitti regarding
the Deferred Compensation Agreement (filed as Exhibit 10.11 of
the Registration Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.3-- Trademark License Agreement, dated November 10, 1987, between
Lucky Stores, Inc. and EFC (filed as Exhibit 10.19 to the
Registration Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.4-- Letter Agreement, dated June 10, 1988, between the Company's
predecessor and Lucky Stores, Inc. amending the Trademark
License Agreement (filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended January 28, 1989
(the "1988 10-K") and incorporated herein by reference).
10.5-- Management Information Services Agreement, dated November 10,
1987, between Lucky Stores, Inc. and the Company's predecessor
(filed as Exhibit 10.20 to the Registration Statement on Form
S-1 No. 33-20450 and incorporated herein by reference).
10.6-- Letter Agreement, dated June 10, 1988, between the Company's
predecessor and Lucky Stores, Inc. Stores, Inc.amending the
Management Information Services Agreement (filed as
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended January 28, 1989 and incorporated herein by
reference).
10.7-- Non-Competition Agreement, dated November 10, 1987, between the
Company's predecessor and Lucky Stores, Inc. (filed as
Exhibit 10.21 to the Registration Statement on Form S-1 No.
33-20450 and incorporated herein by reference).
10.8*-- Credit Agreement, dated as of April 26, 1993, among the
Company, as borrower, the lenders party thereto and Caisse
Nationale de Credit Agricole, Chicago Branch, and the First
National Bank of Chicago as co-agents; as amended by First
Amendment to Credit Agreement dated as of October 15, 1993, a
Second Amendment to Credit Agreement and Waiver dated as of
January 28, 1994 and a Third Amendment to Credit Agreement
dated April 26, 1994.
10.9-- Letter Agreement, dated April 28, 1988, among American Stores
Company, the Company's predecessor and Odyssey Partners (filed
as Exhibit 10.29 to the Registration Statement on Form S-1 No.
33-20450 and incorporated herein by reference).
10.10-- Eagle Food Centers, Inc. Stock Incentive Plan, adopted in
June 1990 (filed as Exhibit 19 to the Company's Annual Report
on Form 10-K for the year ended February 1, 1992 and
incorporated herein by reference).
10.11-- Agreement, dated as of February 8, 1993, by and between the
Company and Oakridge Properties, Ltd. (filed as Exhibit 10.17
to the Registration Statement on Form S-1 No. 33-59454 and
incorporated herein by reference).
10.12-- Form of Irrevocable Trust Agreement, to be dated as of April
26, 1993, among the Company, Eagle Capital Corporation II and
Shawmut Bank Connecticut, National Association, as trustee
(filed as Exhibit 10.18 to the Registration Statement on Form
S-1 No. 33-59454 and incorporated herein by reference).
10.13-- Performance Equity Plan of the Company as amended March 12,
1992. (Filed as Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the year ended January 30, 1993 and
incorporated herein by reference.)
12.1-- Computation of Ratio of Earnings to Fixed Charges (filed as
Exhibit 12.1 to the Registration Statement on Form S-1 No. 33-
59454 and incorporated herein by reference).
22.*-- Subsidiaries of the Registrant.
*Filed herewith.
Exhibit 22
EAGLE FOOD CENTERS, INC.
SUBSIDIARIES
Eagle Pharmacy Co.
Milan Distributing Co.
Eagle Country Markets, Inc.
BOGO'S, Inc.
Talon Insurance Company, Inc.
EXHIBIT 10.8
CREDIT AGREEMENT
This Credit Agreement (this "Agreement") is entered into as of
April 26, 1993 among EAGLE FOOD CENTERS, INC., a Delaware corporation (the
"Borrower"), CAISSE NATIONALE DE CREDIT AGRICOLE ("CNCA") and THE FIRST
NATIONAL BANK OF CHICAGO ("FNBC"), as co-agents, the Banks (as herein
defined), and CNCA, acting through its Chicago Branch, as Agent for the
Banks.
In consideration of the mutual covenants, conditions, and
provisions hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"Affiliate" shall mean, with respect to any Person, any other
Person (including any member of the immediate family of any such natural
person) which (i) directly or indirectly beneficially owns or controls 10%
or more of the total voting power of shares of capital stock of such person
having the right to vote for directors under ordinary circumstances, (ii)
any Person controlling, controlled by or under common control with any such
Person (within the meaning of Rule 405 under the Securities Act of 1933), or
(iii) any director or executive officer of any such person.
"Agent" shall mean (i) CNCA, acting through its Chicago Branch,
(ii) any other branch or agency of CNCA to which the rights and
responsibilities of the Agent hereunder may be transferred from time to time
or (iii) such other bank as shall have subsequently been appointed as the
successor Agent pursuant to Section 8.04.
"Agent Letter" shall have the meaning specified in Section
2.12(c).
"Assignment and Acceptance" shall mean an agreement of
assignment and acceptance in the form of Exhibit D attached hereto entered
into by and between a Bank and an assignee of such Bank in accordance with
Section 9.03.
"Banks" shall mean each of CNCA and FNBC and each assignee that
becomes a Bank pursuant to Section 9.03, and their respective successors.
"Base Loan" shall mean any Loan with respect to which the
Borrower shall have selected an interest rate based on the Base Rate in
accordance with the provisions of Article II.
"Base Rate" shall mean a fluctuating rate per annum on any date
equal to the higher of (i) the rate of interest most recently designated by
the Agent as its base rate, and (ii) a rate of interest equal to the sum of
(A) the Federal Funds Rate, plus (B) 0.5%. The Base Rate is not necessarily
intended to be the lowest rate of interest charged by the Agent in
connection with extensions of credit. Any change in such rate of interest
shall be effective on and as of the date of each such change. The applicable
Base Rate shall be determined by the Agent, and such determination shall be
conclusive absent manifest error. The Agent shall promptly (but in any event
by the end of the Business Day occurring immediately after any such change)
advise the Borrower and each Bank in writing of such determination.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"BOGOs" shall mean the Borrower's Subsidiary, BOGO's, Inc., an
Illinois corporation.
"Borrower's Properties" shall mean all real or personal
property, including fixtures, owned or leased or otherwise occupied or
operated by Borrower or any of its Subsidiaries.
"Borrowing" shall mean a borrowing consisting of Loans made on
the same day by the Banks ratably in accordance with their Percentages and
on which interest is calculated on the same basis and for the same Interest
Period.
"Business Day" shall mean any day other than a Saturday, Sunday
or legal holiday in the State of Illinois on which banks are open for
business in Chicago, Illinois except that, if any determination of a
"Business Day" shall relate to a Eurodollar Loan, the term "Business Day"
shall in addition exclude any day on which banks are not open for dealings
in dollar deposits in the London Interbank Market.
"Capital Expenditures" shall mean, for any period the sum of
(i) all expenditures (except interest capitalized during construction) made
by the Borrower and its Subsidiaries during such period for the acquisition,
construction or improvement of property, plant and equipment or that
otherwise have been or should be classified as capital expenditures in
accordance with generally accepted accounting principles and (ii) all
expenditures made by the Borrower and its Subsidiaries during such period
under Capital Leases.
"Capital Expenditure Ratio" shall mean, as of any date, the
ratio for the most recent four quarters of (i) the sum of (A) Capital
Expenditures for such period minus (B) the Net Proceeds for such period to
(ii) EBITDA for such period.
"Capital Leases" shall mean, with respect to any Person, any
and all leases of property by such Person as lessee which, in accordance
with generally accepted accounting principles, have been or should be
classified as capitalized leases on a balance sheet of such Person and shall
not include leases that are classified as operating leases in accordance
with generally accepted accounting principles.
"Change in Control" shall mean the occurrence of either (a) any
Person or any Persons (other than Odyssey or any Subsidiary of Odyssey, so
long as such Subsidiary remains a Subsidiary of Odyssey) acting together
that would constitute a "group" (for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, or any successor provision
thereto) (a "Group"), together with any Affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended, or any successor provision thereto) at least 50% of the
Voting Stock of the Borrower; or (b) any Person (other than Odyssey or any
Subsidiary of Odyssey, so long as such Subsidiary remains a Subsidiary of
Odyssey), or Group, together with any Affiliates thereof, shall succeed in
having sufficient of its nominees elected to the Board of Directors of the
Company such that such nominees, when added to any existing director
remaining on the Board of Directors of the Company after such election who
is an Affiliate of such Group, will constitute a majority of the Board of
Directors of the Borrower.
"Closing Date" shall mean the date of the first Loan made by
the Banks to the Borrower hereunder.
"Co-Agents" shall mean CNCA and FNBC in their capacities as co-
agents for the Banks hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute together with the regulations thereunder,
as the same may be amended from time to time.
"Collateral" shall have the meaning assigned to such term in
the Security Agreement.
"Commitment" shall mean the commitment of the Banks to make
Loans to the Borrower aggregating up to $35,000,000 at any one time
outstanding, as the same may be reduced from time to time pursuant to
Section 2.05. The Commitment shall automatically and permanently terminate
on the Maturity Date.
"Commitment Fee" shall have the meaning specified in Section
2.12(a).
"Consolidated Interest Expense" shall mean for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of the Borrower and its consolidated
Subsidiaries for such period calculated on a consolidated basis in
accordance with generally accepted accounting principles, including without
limitation or duplication (or, to the extent not so included, with the
addition of), (i) the amortization of Indebtedness discounts; (ii) any
payments or fees with respect to letters of credit, bankers' acceptances or
similar facilities; (iii) fees with respect to interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements; and
(iv) the portion of any rental obligation in respect of obligations under
Capital Leases allocable to interest expenses in accordance with generally
accepted accounting principles.
"Current Assets" shall mean, as of any date, all assets of the
Borrower and its Subsidiaries that would, in accordance with generally
accepted accounting principles, be classified as consolidated current
assets.
"Current Liabilities" shall mean, as of any date, all
liabilities of the Borrower and its Subsidiaries that would, in accordance
with generally accepted principles, be classified as consolidated current
liabilities, except that Current Liabilities shall not include current
maturities of long-term Indebtedness.
"Current Ratio" shall mean, as of any date, the ratio of
Current Assets to Current Liabilities as of such date.
"Debt" shall mean all Indebtedness of the Borrower and its
Subsidiaries.
"Debt Rating" shall mean, at any time, the Borrower's senior
long-term debt rating as published by Moody's or S&P, as applicable.
"Disqualified Interests" shall mean any equity interest that,
by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise, or redeemable at the option of the holder thereof, in whole or
in part on, or prior to, the Maturity Date.
"Dollars" and the symbol "$" shall mean the lawful currency of
the United States of America.
"EBITDA" shall mean, for any period, the Net Income (or Loss)
for such period plus (without duplication) (i) the sum of (A) the
depreciation, amortization and other noncash items deducted in calculating
such Net Income (or Loss) (other than amortization of Indebtedness discounts
included in Consolidated Interest Expense), (B) Consolidated Interest
Expense for such period and (C) total Federal, State and local income and
franchise tax expense of the Borrower and its Subsidiaries for such period
and minus (ii) the sum of all noncash items added in calculating such Net
Income (or Loss).
"EBITDAR" shall mean, for any period, the sum of (i) EBITDA for
such period, plus (ii) all lease, rental or similar charges for the use of
any real or personal property not owned by the Borrower or any of its
Subsidiaries paid or required to be paid or accrued by the Borrower or any
of its Subsidiaries for such period as determined in accordance with
generally accepted accounting principles.
"Effective Date" shall mean the date upon which a Bank becomes
a party hereto pursuant to Section 9.03.
"Existing Letters of Credit" shall mean the letters of credit
now outstanding that have been issued by CNCA for the account of the
Borrower and are described in Schedule 1.01A hereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, or any successor statute, together with the regulations thereunder,
as the same may be amended from time to time.
"ERISA Affiliate" shall mean the Borrower and any trade or
business (whether or not incorporated) that is a member of a group of which
the Borrower is a member and which is treated as a single employer under
Section 414 of the Code.
"Eurodollar Loan" shall mean any Loan with respect to which the
Borrower shall have selected an interest rate based on the LIBO Rate in
accordance with the provisions of Article II.
"Event of Default" shall have the meaning specified in Section
7.01 hereof.
"Existing Loan Documents" shall mean the Credit Agreement dated
as of May 25, 1988, as amended, by and among the Borrower, CNCA, Chicago
Branch, certain other commercial banking institutions and CNCA, Chicago
Branch, as agent, and all other Loan Documents (as defined therein).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to (i) the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York or (ii) if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by
it.
"Fees" shall mean all of the fees payable by the Borrower to
the Agent or the Banks under Sections 2.12 or 2A.03 of this Agreement.
"Financial Officer" shall mean the chief accounting officer or
chief financial officer of the Borrower.
"Fixed Charges" shall mean for any period, without duplication,
the sum of (i) the Consolidated Interest Expense for such period, plus (ii)
scheduled payments due in such period for principal of any Indebtedness of
the Borrower and its Subsidiaries (excluding scheduled principal payments
under Capital Leases), plus (iii) all lease, rental or similar charges
(after deduction of any sublease revenue and other than amounts payable
under Capital Leases) for the use of any real or personal property not owned
by the Borrower or any of its Subsidiaries paid or required to be paid or
accrued in such period.
"Fixed Charge Coverage Ratio" shall mean as of any date, the
ratio of (i) EBITDAR to (ii) Fixed Charges, in each case for the four most
recent fiscal quarters of the Borrower.
"Foreign Bank" shall mean a Bank organized under the laws of
any jurisdiction other than the United States or any state thereof.
"Guarantee" shall mean any obligation, contingent or otherwise,
of any Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person in any manner, whether directly or
indirectly, and including, without limitation, any obligation of such
Person, direct or indirect, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or
to advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (ii) to purchase property, securities or services for
the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness, or (iii) to maintain working capital, equity capital or
other financial condition of the primary obligor so as to enable the primary
obligor to pay such Indebtedness (including, without limitation, any
obligation to make capital contributions, loans or other payments pursuant
to a keepwell guaranty or similar instrument); provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit,
in either case in the ordinary course of business.
"Hazardous Materials" shall mean (i) any chemical, material or
substance defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," "medical waste," "toxic pollutants,"
"contaminants," "pollutants," "toxic substances" or words of similar import
under any applicable Hazardous Substance Law, (ii) any oil, petroleum,
petroleum product or petroleum derived substance, any flammable substances
or explosives, any radioactive materials, (iii) asbestos and asbestos
containing materials in any form which is or could become friable, (iv)
radon gas, urea formaldehyde foam insulation, dielectric fluid and
polychlorinated biphenyls and (v) any other chemical, material or substance
which is prohibited, limited or regulated under any Hazardous Substance
Laws.
"Hazardous Substance Laws" shall mean all federal, state and
local laws, ordinances and rules of common law relating to environmental,
safety or health matters, including those relating to fines, orders,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the release or threatened release of
Hazardous Materials (as defined above) and the generation, use, storage,
transportation, or disposal of Hazardous Materials, in any manner applicable
to the Borrower or the Borrower's Properties, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
1801 et seq.), the Resource Conservation and Recovery Act of 1976 (42
U.S.C. 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
1251 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic
Substances Control Act of 1976 (15 U.S.C. 2601 et seq.), the Safe Drinking
Water Act (42 U.S.C. 300f-300j-11 et seq.), the Occupational Safety and
Health Act of 1970 (29 U.S.C. 651 et seq.) and the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. 11001 et seq.), each as heretofore
and hereafter amended or supplemented, and any analogous present or future
federal, state or local statutes, rules and regulations promulgated
thereunder or pursuant thereto, and any other present or future law,
ordinance, rule, regulation, permit or permit condition, order or directive
addressing environmental, safety or health issues of or by the federal
government, any state or political subdivision thereof, or any agency, court
or body of the federal government or any state or political subdivision
thereof.
"Indebtedness" shall mean, with respect to any Person, without
duplication, whether recourse is to all or a portion of the assets of a
Person and whether or not contingent, (i) all obligations of such Person for
borrowed money, or with respect to deposits or advances of any kind,
including (without limitation) obligations incurred in connection with the
acquisition of property, assets or businesses, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iii)
all obligations of such Person upon which interest charges are customarily
paid, (iv) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person,
(v) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (other than accounts payable to
suppliers incurred in the ordinary course of business and paid when due),
(vi) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (vii) all obligations of
such Person under Capital Leases, (viii) all Guarantees of such Person, (ix)
all obligations of such Person under or with respect to letters of credit,
bankers acceptances or similar facilities and (x) all obligations of such
Person under interest rate swap or similar agreements or under foreign
currency hedge, exchange or similar agreements.
"Interest Payment Date" shall mean, with respect to any Loan,
the last day of the Interest Period applicable thereto and, in the case of a
Eurodollar Loan with an Interest Period of 6 months, the day that would have
been the Interest Payment Date for such Loan had an Interest Period of 3
months been applicable to such Loan.
"Interest Period" shall mean (i) as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan or continuation
thereof and ending on the numerically corresponding day (or if there is no
numerically corresponding day, on the last day) in the calendar month that
is 1, 2, 3 or 6 months thereafter, as the Borrower may elect and (ii) as to
any Base Loan, the period commencing on the date of such Base Loan or
continuation thereof and ending on the earlier of (A) the last day of each
calendar month next following the date of such Loan or continuation thereof
and (B) the Maturity Date, as applicable; provided, however, that (1) in no
event shall any Interest Period end after the Maturity Date and (2) if any
Interest Period would end on a day that shall not be a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
unless, with respect to Eurodollar Loans only, such next succeeding Business
Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day. Interest shall accrue
from and including the first day of an Interest Period to but excluding the
last day of such Interest Period.
"Issuing Bank" shall mean, with respect to any Letter of
Credit, CNCA, FNBC or any other Bank approved by the Co-Agents and the
Borrower, each in its capacity as issuer of such Letter of Credit.
"L/C Commitment" shall mean the commitment of the Banks to
extend credit by acquiring L/C Participating Interests in Letters of Credit
issued by an Issuing Bank in aggregate of up to a Stated Amount outstanding
at any one time equal to the lesser of (i) the Commitment and (ii)
$20,000,000.
"L/C Participating Interest" shall mean, with respect to any
Letter of Credit, (i) in the case of the Issuing Bank, its interest in such
Letter of Credit and the Letter of Credit Application relating thereto after
giving effect to the granting of any participating interests therein and
(ii) in the case of each Participating Bank, its undivided participating
interest in such Letter of Credit and the Letter of Credit Application
relating thereto.
"Letter of Credit" shall mean an Issuing Bank's standard
irrevocable letter of credit issued for the account of the Borrower pursuant
to Article IIA.
"Letter of Credit Application" shall have the meaning specified
in Section 2A. 02.
"Level I Status" exists on any date if, on such date, the
Borrower has a Debt Rating of BBB+ or better by S&P or a Debt Rating of Baa+
or better by Moody's.
"Level II Status" exists on any date if, on such date, (i)
Level I Status does not exist and (ii) the Borrower has a Debt Rating of
BBB- or better by S&P or a Debt Rating of Baa- or better by Moody's.
"Level III Status" exists on any date if, on such date, (i)
neither Level I Status nor Level II Status exists and (ii) the Borrower has
a Debt Rating of BB+ or better by S&P or a Debt Rating of Ba+ or better by
Moody's.
"Level IV Status" exists on any date if, on such date, none of
Level I Status, Level II Status or Level III Status exists.
"Leverage Ratio" shall mean, as of any date, the ratio of (i)
the Debt as of such date, to (ii) EBITDA, in each case for the four most
recent fiscal quarters.
"LIBO Rate" shall mean, with respect to any Eurodollar Loan for
any Interest Period, an interest rate per annum (rounded upwards if
necessary, to the next higher 1/100 of 1%) equal to the average of the rates
at which dollar deposits approximately equal in principal amount to such
Eurodollar Loan and for a maturity equal to the applicable Interest Period
are offered in immediately available funds by the Agent to leading banks in
the interbank market for Dollar deposits at approximately 11:00 a.m.,
Chicago time, two Business Days prior to the commencement of such Interest
Period. The LIBO Rate for each Interest Period shall be determined by the
Agent, and such determination shall be conclusive absent manifest error.
The Agent shall promptly advise the Borrower and each Bank of such
determination.
"LIBOR Reserves" shall mean with respect to an Interest Period,
a fraction (expressed as a decimal), the numerator of which is the number
one and the denominator of which is the number one minus the daily average
during such Interest Period of the stated maximum percentages scheduled to
be in effect on each day of such Interest Period, as prescribed by the
Board, for determining reserve requirements applicable to "Eurocurrency
Liabilities" pursuant to Regulation D of the Board or any other applicable
Board regulation which prescribes reserve requirements applicable to
"Eurocurrency Liabilities" as presently defined in Regulation D of the
Board.
"Lien" shall mean, with respect to any asset, any lien,
mortgage, deed of trust, security interest, pledge, hypothecation, deposit
arrangement, assignment, preference, priority, charge or encumbrance of any
kind, including, without limitation, the rights of a vendor, lessor, or
similar party under any conditional sale agreement or other title retention
agreement or lease substantially equivalent thereto, any production or
advance payment and any other right of or arrangement with any creditor to
have his claim satisfied out of any property or assets, or the proceeds
therefrom, prior to the general creditors of the owner thereof.
"Loan" shall mean any loan made by any Bank hereunder pursuant
to Sections 2.01 and 2.02.
"Loan Documents" shall mean collectively this Agreement, the
Agent Letter, the Notes, the Security Agreement, the Letter of Credit
Applications and the reports, certificates, financial statements and other
agreements and instruments delivered by the Borrower in connection herewith
or therewith.
"Margin Stock" shall have the meaning assigned such term in
Regulation U.
"Material Adverse Effect" shall mean (i) a material adverse
effect on the ability of the Borrower and its Subsidiaries, taken as a
whole, to conduct their business substantially as now conducted or on the
business, assets, operations or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, (ii) a material adverse
effect on the validity or enforceability of or the ability of the Borrower
and its Subsidiaries, taken as a whole, to perform any of their obligations
under this Agreement or any of the other Loan Documents, (iii) a material
impairment of any material right of the Agent or any Bank under this
Agreement or any of the other Loan Documents or (iv) an impairment of
greater than $5,000,000 in the aggregate amount of the Liens of the Agent in
the Collateral (other than as permitted by Section 6.02 hereof or Section
7.04 of the Security Agreement).
"Maturity Date" shall mean April 26, 1998.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a Pension Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the
Borrower or any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Net Income (or Loss)" shall mean, for any period, the
consolidated earnings (or loss) before distributions of the Borrower and its
Subsidiaries for such period (after elimination of any intercompany
transactions and transactions with or between the Borrower or any of its
Affiliates) computed in accordance with generally accepted accounting
principles; provided, however, that, (i) there shall be excluded from any
such computation any gain included in computing such earnings that arises
from (A) the sale or other disposition of any fixed or capital asset or
other asset not disposed of in the ordinary course of business or from the
write-up of assets or (B) any item classified as an extraordinary item in
accordance with generally accepted accounting principles, (ii) the net
income of any Person that is not a Subsidiary of the Borrower or is
accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions actually paid to the
Borrower or any of its Subsidiaries by such Person, (iii) the net income of
any Person that is a Subsidiary of the Borrower (other than a Subsidiary of
which at least 80% of the capital stock having ordinary voting power for the
election of directors or other governing body of such Subsidiary is owned by
the Borrower directly or indirectly through one or more Subsidiaries) shall
be included only to the extent of the lesser of (A) the amount of dividends
or distributions actually paid to the Borrower or a Subsidiary thereof by
such Person and (B) the net income of such Person; (iv) the net income of
any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded; and (v) up to
$4,000,000 of extraordinary charges deducted during the fiscal year
commencing January 31, 1993 in connection with the Transactions shall be
excluded in computing the Net Income for such year.
"Net Proceeds" shall mean, with respect to any sale or other
disposition, cash (freely convertible into dollars) received by Borrower or
any Subsidiary of the Borrower from the sale or other disposition of assets
outside of the ordinary course of business, after (i) provision for all
income or other taxes measured by or resulting from such sale or other
disposition, (ii) payment of all brokerage commissions and other fees and
Pension Plan expenses related to such sale or other disposition, (iii)
deduction of appropriate amounts to be provided by the Borrower or any of
its Subsidiaries as a reserve, in accordance with generally accepted
accounting principles, against any liabilities associated with such
transferred assets and retained by the Borrower or any of its Subsidiaries
after such sale or other disposition thereof, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related
to environmental matters or against any indemnification obligations
associated with the sale or other disposition of transferred assets and (iv)
all payments made by the Borrower and its Subsidiaries on any Indebtedness
which is secured by such assets in accordance with the terms of any
agreements creating such Lien upon such assets.
"Note" or "Notes" shall mean the Notes of the Borrower in
substantially the form of Exhibit A hereto executed as provided in Section
2.07 and any replacement Notes delivered pursuant to Section 9.03.
"Odyssey" shall mean Odyssey Partners, L.P., a Delaware limited
partnership.
"Participating Bank" shall mean any Bank (other than the
Issuing Bank) with respect to its L/C Participating Interest in each Letter
of Credit.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean any employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) that is (i) subject to the
minimum funding requirements of Section 412 of the Code or Title IV of ERISA
and (ii) sponsored by the Borrower or any ERISA Affiliate or that covers any
employees or former employees of the Borrower or any ERISA Affiliate or to
which the Borrower or any ERISA Affiliate makes any contributions.
"Percentage" shall mean, with respect to any Bank, the
Percentage set forth opposite its name in Schedule 1.01B hereto, as such may
be amended by the Agent pursuant to Section 9.03(e).
"Permitted Investments" shall mean purchases of (i) readily
marketable obligations of or obligations guaranteed by the United States of
America or issued by any agency thereof and backed by the full faith and
credit of the United States of America, (ii) readily marketable direct
obligations issued by any state of the United States of America or any
political subdivision thereof having the highest rating obtainable from
either Moody's or S&P or having the highest rating obtainable from a
nationally recognized rating agency if both of the two named agencies cease
publishing ratings of investment, (iii) commercial paper having a rating in
one of the two highest rating categories of Moody's or S&P, (iv)
certificates of deposit issued by, bankers' acceptances and deposit accounts
of, and time deposits with, any Bank or commercial banks of recognized
standing chartered in the United States of America with capital, surplus and
undivided profits aggregating in excess of $500,000,000, and (v) shares of
money market funds that invest solely in Permitted Investments of the kind
described in clause (i) through (iv) above.
"Person" shall mean and include any natural person, company,
partnership, joint venture, corporation, business trust, unincorporated
organization or any government or any department or agency thereof.
"Potential Default" shall mean an event which with notice or
lapse of time or both would constitute an Event of Default hereunder.
"Pro Forma Financial Statements" shall mean the Borrower's
forecast of its consolidated balance sheets and consolidated statements of
operation and consolidated statements of cash flows for the fiscal period
ended February 3, 1996 certified by a Financial Officer.
"Regulation G, T, U or X" shall mean Regulation G, T, U or X,
respectively, of the Board, as the same are from time to time in effect, and
all official rulings and interpretations thereunder or thereof.
"Reportable Event" shall mean any Reportable Event within the
meaning of Section 4043 of Title IV of ERISA.
"Required Banks" shall mean, at any time, Banks having
aggregate Percentages of 51% or more.
"Restricted Payment" shall mean (i) any dividend or
distribution of whatever kind or nature, whether direct or indirect and
whether in cash, property, securities or a combination thereof, with respect
to (whether by reduction of capital or otherwise) any partnership interests
or shares of capital stock of the Borrower or any of its Subsidiaries, or
(ii) any redemption, purchase, retirement or other acquisition of whatever
kind or nature, whether direct or indirect, of (A) any partnership interest
or any share of capital stock the Borrower or any of its Subsidiaries, (B)
any securities convertible or exchangeable into any such partnership
interest or capital stock or (C) any options, warrants or rights to purchase
or acquire any such partnership interest or capital stock or securities
convertible or exchangeable into any such partnership interest or capital
stock.
"S&P" shall mean Standard & Poor's Corporation.
"Security Agreement" shall mean a security agreement executed
by the Borrower in favor of the Banks substantially in the form of Exhibit C
hereto, as amended, supplemented or otherwise modified from time to time.
"Senior Note Indenture" shall mean (i) the Indenture entered
into between the Borrower and First Trust National Association dated as of
April 19, 1993 and (ii) any Indenture governing any subsequent Senior Notes,
in each case as supplemented with the consent of the Required Banks in
accordance with the terms of Section 6.07 of this Agreement.
"Senior Notes" shall mean (i) those 8 5/8% Senior Notes due
2000 of the Borrower issued pursuant to the Senior Note Indenture in the
original principal amount of $100,000,000 ("Initial Senior Notes") and (ii)
any unsecured Indebtedness ("New Senior Notes") incurred to redeem, defease,
refinance or repurchase the Initial Senior Notes so long as such New Senior
Notes (A) are in an aggregate principal amount of not more than the Initial
Senior Notes then outstanding, (B) bear interest at a rate that is equal to
or less than the Initial Senior Notes, (C) have no scheduled payments (other
than interest payments) prior to the maturity date of the Initial Senior
Notes and (D) have other terms and provisions (including, without
limitation, covenants, repurchase obligations and events of default) that
are no less favorable to the Borrower and the Banks than the Initial Senior
Notes.
"Stated Amount" shall mean, with respect to a Letter of Credit,
the amount available from time to time to be drawn by a beneficiary under
such Letter of Credit, regardless of whether any conditions to such drawing
are then satisfied.
"Subordinated Note Indenture" shall mean the indenture dated as
of June 1, 1988 entered into among Eagle Food Centers, Inc., Eagle Capital
Corporation II and Shawmut Bank Connecticut, National Association (formerly
known as The Connecticut National Bank), as trustee relating to the
Borrower's 13 1/2% Senior Subordinated Notes due 1998, as heretofore
supplemented.
"Subsidiary" shall mean, with respect to any Person (the
"parent"), any corporation, association or other business entity of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is
being made, owned or controlled by the parent or one or more Subsidiaries of
the parent or by the parent and one or more Subsidiaries of the parent.
"Tangible Net Worth" shall mean, as of any date, (without
duplication) an amount equal to shareholders' equity of the Borrower, less
(i) consolidated Intangible Assets and plus (ii) the amount reported on the
Borrower's most recent balance sheet with respect to preferred stock (other
than Disqualified Interests) that by its terms is not entitled to the
payment of dividends or the making of any distributions with respect thereto
unless such dividends or distributions may be declared and paid only out of
net earnings in respect of the year of such declaration and payment but only
to the extent of any cash received by the Borrower in consideration of the
issuance of such preferred stock, all determined in accordance with
generally accepted accounting principles. For purposes of this definition,
"Intangible Assets" means the amount (to the extent reflected in determining
such Tangible Net Worth) of (i) all write-ups after the date hereof in the
book value of any asset owned by the Borrower or one of its Subsidiaries,
(ii) all investments in unconsolidated subsidiaries and in Persons that are
not Subsidiaries of the Borrower (other than marketable securities or other
Permitted Investments), and (iii) all unamortized debt discount and expense,
goodwill, patents, trademarks, service marks, trade names, copyrights,
organization and developmental expenses and other intangible items (other
than expenses incurred in connection with the issuance of the Senior Notes
and the execution and delivery of this Agreement), all of the foregoing as
determined in accordance with generally accepted accounting principles.
"Transactions" shall mean collectively the execution, delivery
and performance by the Borrower and its Subsidiaries of this Agreement and
each of the other Loan Documents to which the Borrower or any such
Subsidiary is or will be a party, the borrowings hereunder by the Borrower,
the grant of security interests in the Collateral pursuant to the Security
Agreement and the issuance of the Senior Notes pursuant to the Senior Note
Indenture.
"Uniform Customs" shall mean the Uniform Customs and Practice
for Documentary Credits (1983 Revision), International Chamber of Commerce
Publication No. 400, or any later revision which may be in effect from time
to time.
"Voting Stock" of any Person means the capital stock of such
person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times
or only so long as no senior class of securities has such voting power by
reason of any contingency.
"Working Capital" shall mean, as of any date, the excess, if
any, of Current Assets over Current Liabilities as of such date.
SECTION 1.02. Accounting Terms. Except as otherwise herein
specifically provided, each accounting term used herein shall have the
meaning given it under generally accepted accounting principles in effect
from time to time in the United States applied on a consistent basis;
provided, however, that each reference in Articles V and VI hereof, or in
the definition of any term used in Articles V and VI hereof, to generally
accepted accounting principles shall mean generally accepted accounting
principles as in effect in the United States on the date hereof.
ARTICLE II
THE LOANS
SECTION 2.01. Commitment. (a) Subject to the terms and
conditions and relying upon the representations and warranties herein set
forth, each Bank, severally and not jointly, agrees to make Loans to the
Borrower, at any time and from time to time from the date hereof to the
Maturity Date, or until the earlier termination of the Commitment in
accordance with the terms hereof, in an aggregate principal amount at any
time outstanding not to exceed such Bank's Percentage of the Commitment.
(b) Within the foregoing limits, the Borrower may borrow, repay
and reborrow, on or after the date hereof and prior to the Maturity Date,
all or any portion of the aggregate amount of the Commitment subject to the
terms, provisions and limitations set forth herein, including, without
limitation, the requirement that no Borrowing shall be made hereunder if
after giving effect thereto the sum of (i) the aggregate principal amount of
the Loans outstanding hereunder plus (ii) the aggregate Stated Amount of
Letters of Credit outstanding hereunder would exceed the amount of the
Commitment.
SECTION 2.02. Loans. (a) The aggregate principal amount of
Borrowings made by the Banks on any date shall be in a minimum principal
amount of $1,000,000 and integral multiples of $1,000,000. Loans shall be
made ratably by the Banks in accordance with their respective Percentages;
provided, that the failure of any Bank to make any Loan shall not in itself
relieve any other Bank of its obligation to lend hereunder, but no Bank
shall be responsible for the failure of any other Bank to make any Loan to
be made by such other Bank. The initial Loan made by each Bank shall be made
against delivery to such Bank of a Note, payable to the order of such Bank,
as referred to in Section 2.07.
(b) Each Loan shall be either a Base Loan or a Eurodollar Loan
as the Borrower may request pursuant to Section 2.03. Each Bank may fulfill
its commitment with respect to any Eurodollar Loan by causing, at its
option, any domestic or foreign branch or affiliate of such Bank to make
such Loan, provided that the exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms
of the applicable Note.
(c) Each Bank shall make its Loans on the proposed date thereof
by paying the amount required to the Agent not later than 11:00 a.m.,
Chicago time, and the Agent shall by 2:00 p.m., Chicago time, credit the
amounts so received to such account as the Borrower may designate from time
to time by notice to the Agent or, if Loans are not made on such date
because any condition precedent to a Loan herein specified shall not have
been met, promptly return the amounts received to the respective Banks.
(d) Unless the Agent shall have been notified by telephone,
confirmed in writing, by any Bank prior to a Borrowing that such Bank will
not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Agent may assume that such
Bank has made such amount available to the Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is made available by such Bank to the Agent on a date after the date
of such Borrowing, such Bank shall pay to the Agent, on demand, interest on
such amount at the daily average Federal Funds Rate quoted by the Agent for
the number of days from and including the date of such Borrowing to but
excluding the date on which such amount becomes immediately available to the
Agent. A certificate of the Agent submitted to any Bank with respect to any
amounts owing under this paragraph shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to the Agent
by such Bank within three Business Days after the date of such Borrowing,
the Agent shall be entitled to recover such amount, with interest thereon at
the rate per annum then applicable to the Loans comprising such Borrowing,
within five Business Days after demand from the Borrower. Nothing contained
in this paragraph shall be construed so as to relieve any Bank from its
obligation under Section 2.02(c) to make available its ratable portion of
each Borrowing.
SECTION 2.03. Notice of Borrowings. In order to effect a
Borrowing, the Borrower shall give the Agent irrevocable written or telex
notice or telephone notice (immediately confirmed by written notice) (a) in
the case of Eurodollar Loans, not later than 10:00 a.m., Chicago time, two
Business Days before a proposed Borrowing, and (b) in the case of Base
Loans, not later than 11:00 a.m., Chicago time, one Business Day before a
proposed Borrowing. Such notice shall in each case be in substantially the
form of Exhibit B hereto and specify (i) whether such Borrowing is to be
comprised of Eurodollar Loans or Base Loans, (ii) the date of such Borrowing
(which shall be a Business Day), (iii) in the case of a Eurodollar Loan, the
Interest Period with respect thereto and (iv) amount thereof. If no
election as to type of Loans is specified in such notice, such Loans shall
be Base Loans and, in the case of Eurodollar Loans, if no election as to
Interest Period is specified in such notice, the Borrower shall be deemed to
have selected an Interest Period of one month's duration. The Agent shall
promptly advise the Banks of any notice given pursuant to this Section and
of each Bank's portion of the requested Borrowing.
SECTION 2.04. Loan Repayment. The principal amount of each
Loan shall be payable on the Maturity Date. All principal payments in
respect of any Loan shall be accompanied by accrued unpaid interest on the
principal amount being repaid to the date of payment.
SECTION 2.05. Termination and Reduction of Commitments. Upon
at least three Business Days' prior irrevocable written or telex notice to
the Agent, the Borrower may at any time in whole permanently terminate, or
from time to time in part permanently reduce, the Commitment; provided,
however, that the Commitment may not be reduced to an amount less than the
aggregate Stated Amounts of all outstanding Letters of Credit, except where
the principal of and all accrued interest on the outstanding Loans have been
or are then being paid in full, together with all other amounts then payable
by the Borrower hereunder, and cash collateral has been deposited with the
Agent in an amount equal to such aggregate Stated Amounts. Each partial
reduction of the Commitment shall be in an aggregate minimum principal
amount of $5,000,000 and an integral multiple of $1,000,000.
SECTION 2.06. Conversion and Continuation of Loans. (a) The
Borrower shall have the right at any time on three Business Days' prior
irrevocable written or telex notice to the Agent (i) to convert Eurodollar
Loans into Base Loans, (ii) to convert Base Loans into Eurodollar Loans
(specifying the Interest Period to be applicable thereto), (iii) to convert
the Interest Periods with respect to any Eurodollar Loan to another
permissible Interest Period and (iv) to continue any Loan into a subsequent
Interest Period of the same duration, subject to the following:
(A) if less than all Loans at the time outstanding shall be
converted or continued, such conversion or continuation shall
be made pro rata among the Banks in accordance with the
respective principal amounts of the Loans held by the Banks
immediately prior to such conversion or continuation;
(B) in the case of a conversion or continuation of less than all
Loans, the aggregate principal amount of Loans converted or
continued shall not be less than $1,000,000 and integral
multiples of $1,000,000;
(C) each conversion shall be effected by each Bank by applying
the proceeds of the new Base Loan or Eurodollar Loan, as the
case may be, to the Loan (or portion thereof) being converted;
accrued interest on a Loan (or portion thereof) being converted
or continued shall be paid by the Borrower at the time of
conversion or continuation;
(D) Eurodollar Loans may only be converted or continued at the
end of the Interest Period applicable thereto;
(E) a Loan may not be converted into or continued as a
Eurodollar Loan during the existence of a Default or an Event
of Default; and
(F) any portion of a Loan maturing or required to be repaid in
less than one month may not be converted into, or continued as,
a Eurodollar Loan.
(b) The Interest Period applicable to any Eurodollar Loan
resulting from a conversion shall be specified by the Borrower in the
irrevocable notice of conversion delivered pursuant to this Section;
provided, however, that if no such Interest Period shall be specified, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. If the Borrower shall not have given notice to continue any Loan
into a subsequent Interest Period (and shall not otherwise have given notice
to convert such Loan), the Borrower will be deemed to have elected to
convert or continue such Loan as a Base Loan.
SECTION 2.07. Notes. (a) The Loans made by each Bank shall be
evidenced by a Note duly executed on behalf of the Borrower, dated the
Closing Date, in substantially the form of Exhibit A hereto payable to such
Bank in a principal amount equal to such Bank's Percentage of the
Commitment. Each Note shall bear interest from the date of the first Loan
on the outstanding principal balance thereof as set forth in Sections 2.08
and 2.09.
(b) Each Bank shall, and is hereby authorized by the Borrower
to, endorse on the schedule attached to the Note delivered to such Bank (or
on a continuation of such schedule attached to such Note and made a part
thereof), or otherwise record in such Bank's internal records, an
appropriate notation evidencing the date and amount of each Loan from such
Bank, each payment and prepayment of principal of any Loan, each payment of
interest on any Loan and the other information provided for on such
schedule; provided, however, that the failure of any Bank to make such a
notation or any error in such a notation shall not affect the obligation of
the Borrower to repay the Loans made by such Bank in accordance with the
terms of the Note and this Agreement.
SECTION 2.08. Interest on Loans. (a) Subject to the
provisions of Section 2.09, each Base Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such Loan
is made until but excluding the date it becomes due, at a rate per annum
(computed on the basis of actual number of days elapsed over a year of 365
or 366 days, as the case may be) equal to the sum of (i) the Base Rate plus
(ii) (A) 0.25% if Level I Status exists on such day, (B) 0.50% if Level II
Status exists on such day, (C) 1.0% if Level III Status exists on such day
and (D) 1.50% if Level IV Status exists on such day. Such interest shall be
payable on each applicable Interest Payment Date.
(b) Subject to the provisions of Section 2.09, each Eurodollar
Loan shall bear interest on the outstanding principal amount thereof, for
each day from the date such Loan is made until but excluding the date it
becomes due, at a rate per annum (computed upon the basis of actual number
of days elapsed over a year of 360 days) equal to the sum of (i) the LIBO
Rate plus (ii) (A) 1.25% if Level I Status exists on the first day of the
Interest Period applicable thereto, (B) 1.50% if Level II Status exists on
the first day of the Interest Period applicable thereto, (C) 2.00% if
Level III Status exists on the first day of the Interest Period applicable
thereto, and (D) 2.50% if Level IV Status exists on the first day of the
Interest Period applicable thereto. Such interest shall be payable on each
applicable Interest Payment Date.
SECTION 2.09. Interest on Overdue Amounts. If the Borrower
shall default in the payment of the principal of or interest on any Loan or
any other amount becoming due hereunder, by scheduled maturity, notice of
prepayment, acceleration or otherwise, the Borrower shall on demand from
time to time from the Agent pay interest, to the extent permitted by law, on
such defaulted amount up to (but not including) the date of actual payment
(after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days,
as the case may be) equal to the Base Rate plus 3% per annum.
SECTION 2.10. Prepayment of Loans. (a) Subject to the
provisions of Section 2.17, the Borrower shall have the right at any time
and from time to time to prepay any Loan, in whole or in part, without
premium or penalty, (i) upon at least three Business Days' prior written or
telex notice to the Agent in the case of Eurodollar Loans and (ii) upon at
least one Business Day's prior written or telex notice to the Agent in the
case of Base Loans; provided, however, that each partial prepayment of
principal shall be in an integral multiple of $500,000.
(b) On the date of any termination or reduction of the
Commitment pursuant to Section 2.05, the Borrower shall pay or prepay so
much of the Loans as shall be necessary in order that the aggregate
principal amount of the Loans outstanding will not exceed the Commitment
following such termination or reduction. The Loans shall also be subject to
prepayment in accordance with the terms and provisions of Section 6.03
hereof. All prepayments under this paragraph shall be subject to Section
2.17.
(c) Each notice of prepayment shall specify the prepayment date
and the principal amount of each Loan (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Borrower to prepay such Loan by
the amount stated therein on the date stated therein. All prepayments shall
be accompanied by accrued interest on the principal amount being prepaid to
the date of prepayment.
SECTION 2.11. Payments. All payments by the Borrower pursuant
to this Agreement, the Notes, or any other Loan Document, whether in respect
of principal, interest, or otherwise, shall be made in same day funds by the
Borrower to the Agent for the account of Agent and the Banks, as the case
may be, without set-off or counterclaim. All such payments required to be
made to the Agent shall be made not later than 11:00 a.m., Chicago time, on
the date due, by wire transfer to such account as the Agent shall specify
from time to time by notice to the Borrower. Funds received after that time
shall be deemed to have been received by the Agent on the next succeeding
Business Day. The Agent shall promptly remit in same day funds to each Bank
its share of such payments received by the Agent for the account of such
Bank. Whenever any payment to be made shall otherwise be due on a day which
is not a Business Day, such payment shall (except as otherwise required by
the proviso of the first sentence of the definition of the term "Interest
Period" with respect to payments on Eurodollar Loans) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.
SECTION 2.12. Fees. (a) The Borrower agrees to pay to each
Bank, through the Agent, on each March 31, June 30, September 30, December
31 and on the earlier of the Maturity Date and the termination of the
Commitment as provided herein, in same day funds, a commitment fee (a
"Commitment Fee") on such Bank's Percentage of the average daily unused
amount of the Commitment of (i) 0.50% per annum for each day on which
Level IV Status exists and (ii) 0.375% per annum for each day on which
Level IV Status does not exist. All Commitment Fees shall be computed on
the basis of the actual number of days elapsed in a year of 360 days. The
Commitment Fee due to each Bank shall commence to accrue on the date hereof
and shall cease to accrue on the earlier of the Maturity Date and the
termination of the Commitment as provided herein. For purposes of this
paragraph, the unused Commitment on any date shall be reduced by the
aggregate Stated Amount of all Letters of Credit outstanding on such day.
(b) The Borrower agrees to pay each Co-Agent on the Closing
Date, in same day funds, an arrangement fee in an amount specified in the
letter agreement dated the date hereof among the Borrower and the Co-Agents.
(c) The Borrower agrees to pay the Agent on the Closing Date and
on each subsequent anniversary thereof during the term of this Agreement, a
nonrefundable agent's fee in an amount specified in that letter agreement
dated the date hereof between the Borrower and the Agent (the "Agent
Letter").
SECTION 2.13. LIBOR Deposits Unavailable. In the event, and
on each occasion, that on the day two Business Days prior to the
commencement of any Interest Period for a Eurodollar Loan, the Agent shall
have determined that dollar deposits in the amount of the requested
principal amount of such Eurodollar Loan are not generally available in the
London Interbank Market to the Required Banks, or that reasonable means do
not exist for ascertaining the LIBO Rate or that the rate at which dollar
deposits are being offered will not adequately and fairly reflect the cost
to the Required Banks of making the principal amount of such Eurodollar Loan
during such Interest Period, the Agent shall, as soon as practicable
thereafter, give written or telex notice of such determination to the
Borrower and the Banks and any request by the Borrower for a Eurodollar Loan
shall, until the circumstances giving rise to such notice no longer exist,
be deemed a request for a Base Loan. Each determination by the Agent
hereunder shall be conclusive absent manifest error.
SECTION 2.14. Taxes. (a) All payments by the Borrower of
principal of, and interest on, Loans of any type and all other amounts
payable hereunder shall be made free and clear of, and without deduction for
any setoff or counterclaims for, any taxes, fees, or other charges in the
nature of (or in respect of) a tax imposed by any taxing authority, except
for (i) franchise taxes and taxes imposed on or measured by any Bank's net
income, or (ii) other taxes which the Borrower would not have been required
to withhold but for such Bank, if it is organized under the laws of any
jurisdiction other than the United States or any state thereof, having
failed to comply with paragraph (b) below (all such taxes, fees and other
charges, other than those referred to in clauses (i) and (ii) above, being
hereinafter referred to as "Taxes" and those referred to in clauses (i) and
(ii) above being hereinafter referred to as "Excluded Taxes"). In the event
that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule, or regulation, then the Borrower will: (A) pay to any
relevant taxing authority the full amount required to be so withheld or
deducted, (B) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority, and (C) pay to the Agent for the account of such Bank such
additional amount as is necessary to ensure that the net amount actually
received by such Bank will equal the full amount such Bank would have
received had no such withholding or deduction been required.
(b) On the Closing Date and, with respect to Banks that become
such pursuant to Section 9.03 hereof, immediately before the Effective Date,
each Foreign Bank shall properly and duly execute and deliver in duplicate
to the Borrower a United States Internal Revenue Service Form 4224 or Form
1001 or successor applicable form, as the case may be, properly certifying
in each case that such Bank is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes. Each Bank which is required to deliver to the Borrower a Form
1001 or Form 4224 pursuant to the preceding sentence further undertakes to
duly execute and deliver to the Borrower in duplicate Form 1001 or Form
4224, or successor applicable forms, as the case may be, on or before the
date that any such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form previously delivered
by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower, properly certifying that such Bank
is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless any change in
treaty, law or regulation or in the interpretation or administration thereof
by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) has occurred
after the date the Bank has become such under this Agreement and prior to
the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent a Bank from duly
completing and delivering any such form with respect to it and such Bank
advises the Borrower that it is not capable of receiving payments without
deduction or withholding of United States federal income tax.
(c) If the Borrower is required to pay additional amounts to any
Bank pursuant to this Section 2.14, then such Bank shall use reasonable
efforts (consistent with legal and regulatory restrictions) to designate a
different lending office if such designation will thereafter eliminate any
such additional payment and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank.
SECTION 2.15. Change in Law. (a) Notwithstanding any other
provision herein, if after the date of this Agreement with respect to (other
than Excluded Taxes) any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not
having the force of law) shall change the basis of taxation of payments to
any Bank of the principal of or interest on any Eurodollar Loan made by such
Bank or any other fees or amounts payable hereunder, or shall impose, modify
or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, such Bank or shall impose on such Bank or the London interbank market
any other condition affecting this Agreement or the Eurodollar Loans made by
such Bank or the Letters of Credit issued hereunder, and the result of any
of the foregoing shall be to increase the cost to such Bank of making or
maintaining any Eurodollar Loan or increase the cost to any Bank of issuing
or maintaining any Letter of Credit or any L/C Participating Interest or to
reduce the amount of any sum received or receivable by such Bank hereunder
(whether of principal, interest or otherwise) in respect thereof by an
amount deemed by such Bank to be material, then such additional amount or
amounts as will compensate such Bank for such additional costs or reduction
(including increased costs applicable to additional sums paid under this
paragraph) will be paid by the Borrower to such Bank upon demand by such
Bank.
(b) If, after the date of this Agreement, any Bank shall have
determined that the adoption of any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by such Bank (or any lending office
or parent of such Bank) with any request or directive regarding capital
adequacy with respect to this Agreement (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Bank's or its
parent's capital as a consequence of its obligations hereunder to a level
below that which such Bank or its parent could have achieved but for such
adoption, change or compliance by an amount deemed by such Bank to be
material, then from time to time, the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such
reduction.
(c) A certificate of each Bank setting forth such amount or
amounts as shall be necessary to compensate such Bank (or participating
banks or other entities pursuant to Section 9.03) as specified in paragraph
(a) or (b) above, as the case may be, shall be delivered to the Borrower and
shall describe the calculation thereof, which shall be consistent with
similar calculations made in respect of loans to other borrowers by such
Bank. The Borrower shall pay each Bank the amount shown as due on any such
certificate upon demand by such Bank. If the Borrower is required to pay
additional amounts to any Bank pursuant to this Section 2.15, then such Bank
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different lending office if such designation
will thereinafter eliminate any such additional payment and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank.
(d) Failure on the part of any Bank to demand compensation for
any increased costs or reduction in amounts received or receivable or
reduction in return on capital with respect to any Interest Period which has
ended within the preceding 12 months shall not constitute a waiver of such
Bank's right to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital in such
Interest Period or in any other Interest Period. The protection of this
Section shall be available to each Bank regardless of any possible
contention of invalidity or inapplicability of the law, regulation or
condition which shall have been imposed. If any Bank shall receive as a
refund any moneys from any source that it had listed on the certificate
provided pursuant to paragraph (c) above as an increased cost, to the extent
that the Borrower has previously paid such increased cost to such Bank, such
Bank shall promptly forward such refund to the Borrower without interest.
(e) Without limiting (but without duplicating) the effect of the
foregoing provisions of this Section, the Borrower shall pay to each Bank
with respect to any Eurodollar Loan so long as such Bank may be required to
maintain reserves against "Eurocurrency liabilities" under Regulation D of
the Board (or so long as such Bank may be required to maintain reserves
against any other category of liabilities which includes deposits by
reference to which the interest rate on any Eurodollar Loan is determined as
provided in this Agreement or against any category of extensions of credit
or other assets of such Bank which includes any Eurodollar Loan) an
additional amount for each Interest Period equal to the product of the
following: (i) the principal amount of such affected Eurodollar Loan, (ii)
an amount equal to (A) the LIBOR Reserves for such Interest Period, minus
(B) one, (iii) the LIBO Rate for such Interest Period and (iv) a fraction,
(A) the numerator of which is the number of days in such Interest Period and
(B) the denominator of which is 360. The Borrower shall pay to each Bank
the amount owed under this paragraph (e) upon demand by a Bank and
presentation of a certificate setting forth the calculation of such amount.
SECTION 2.16. Change in Legality. (a) Notwithstanding
anything to the contrary herein contained, if any change in any law or
regulation or in the interpretation thereof or any new law, regulation or
interpretation by any governmental authority charged with the administration
or interpretation thereof shall make it unlawful for any Bank to make or
maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby (an "Illegality"), then, by written notice to the
Borrower, such Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by
such Bank hereunder, whereupon the Borrower shall be prohibited
from requesting Eurodollar Loans from such Bank hereunder
unless such declaration is subsequently withdrawn and prior to
the withdrawal of such declaration such Bank shall make its
Percentage of all Borrowings as Base Loans; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to Base Loans, in which event (A) all such Eurodollar
Loans shall be automatically converted to Base Loans as of the
effective date of such notice as provided in paragraph (b)
below and (B) all payments and prepayments of principal which
would otherwise have been applied to repay the converted
Eurodollar Loans shall instead be applied to repay the Base
Loans resulting from the conversion of such Eurodollar Loans.
(b) For purposes of Section 2.16(a), a notice to the Borrower by
any Bank shall be effective, if lawful, on the last day of the then-current
Interest Period; in all other cases, such notice shall be effective on the
date of receipt by the Borrower.
(c) If an Illegality occurs with respect to a Bank, prior to
making the declaration pursuant to paragraph (a) above, the affected Bank
shall make all reasonable efforts (which shall not require such Bank to
incur a loss or otherwise suffer any disadvantage) to make within 30 days,
subject to the consent of the Borrower, an assignment of its rights and
delegation and transfer of its obligations hereunder to another of its
offices, branches or Affiliates for the purpose of causing such Illegality
to cease to exist so long as such assignment and delegation will not create
another Illegality and such Bank shall be permitted under applicable law to
continue to hold Eurodollar Loans pending such assignment and delegation.
SECTION 2.17. Funding Losses. If the Borrower makes any
payment of principal with respect to any Eurodollar Loan on any day other
than the last day of the Interest Period applicable thereto (including,
without limitation, as a result of the circumstances described in Section
2.16 or upon acceleration after the occurrence of an Event of Default), or
if the Borrower fails to borrow any Eurodollar Loan after notice has been
given to the Agent in accordance with the provisions of this Agreement (the
period of time from and including the date of repayment or the date of
failure to borrow until the last day of the Interest Period or proposed
Interest Period, as the case may be, hereinafter referred to as the
"Remaining Interest Period"), the Borrower shall pay promptly and directly
to each Bank an amount, if greater than zero, equal to:
A x (B-C) x D
360
where "A" equals such Bank's Percentage of the principal amount of such
repayment or failed borrowing; "B" equals the rate of interest (expressed as
a decimal) that was applicable to such Eurodollar Loan or would have been
applicable to such failed Eurodollar Loan pursuant to the terms of this
Agreement; "C" equals the rate (expressed as a decimal) in effect on or
about the date of such repayment or failure to borrow, based on the
applicable rates bid on or about such date for dollar deposits in the
interbank market in an amount equal approximately to such Bank's Percentage
of the principal amount of such repayment or failed borrowing with an
interest period commencing on the first day of the Remaining Interest Period
and ending on the last day of such Remaining Interest Period; and "D" equals
the number of days from and including the first day of the Remaining
Interest Period to, but excluding the last day of such Remaining Interest
Period. A certificate of each such Bank giving a reasonably detailed
calculation of the amount of any such payment shall be submitted by each
such Bank to the Borrower, with a copy to the Agent, and shall be presumed
to be correct in the absence of manifest error.
SECTION 2.18. Pro Rata Treatment. Except as required under
Section 2.16, each Borrowing under each type of Loan, each payment or
prepayment of principal of the Loans, each payment of interest on the Loans,
each payment of the Commitment Fees and each reduction of the Commitment
shall be made pro rata among the Banks in accordance with their respective
Percentages.
SECTION 2.19. Sharing of Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower, including, but not limited to, a secured
claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim,
received by such Bank under any applicable bankruptcy, insolvency or other
similar law or otherwise, or for any other reason, obtain payment (voluntary
or involuntary) in respect of any Loan made by it as a result of which the
unpaid principal portion of the Loans made by it shall be proportionately
less than the unpaid principal portion of the Loans made by any other Bank,
it shall be deemed to have simultaneously purchased from such other Bank a
participation in the Loans made by such other Bank, so that the aggregate
unpaid principal amount of the Loans and participations in Loans made by
each Bank shall be in the same proportion to the aggregate unpaid principal
amount of all Loans then outstanding as the principal amount of the Loans
made by it prior to such exercise of banker's lien, setoff or counterclaim
or the obtaining of such payment was to the principal amount of all Loans
outstanding prior to such exercise of banker's lien, setoff or counterclaim;
provided, however, that if any such purchase or purchases or adjustments
shall be made pursuant to this Section and the payment giving rise thereto
shall thereafter be recovered, such purchase or purchases or adjustments
shall be rescinded to the extent of such recovery and the purchase price or
prices or adjustment restored without interest. The Borrower expressly
consents to the foregoing arrangements and agrees that any Bank holding a
participation in a Loan deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with respect to any
and all moneys owing by the Borrower to such Bank as fully as if such Bank
had made a Loan directly to the Borrower in the amount of such
participation.
ARTICLE IIA
LETTERS OF CREDIT
SECTION 2A.01. Commitment to Issue Letters of Credit. Subject
to the terms and conditions hereof and relying upon the representations and
warranties herein set forth, each Bank severally, and not jointly, agrees to
extend credit by acquiring an L/C Participating Interest in each Letter of
Credit issued by any Issuing Bank for the account of the Borrower from time
to time during the period commencing on the date hereof and ending on the
Maturity Date or the earlier termination of the Commitment in accordance
with Section 2.05, in an aggregate amount at any one time outstanding not to
exceed such Bank's Percentage of the L/C Commitment. During such period,
the Borrower may use the Commitment by having any Issuing Bank issue Letters
of Credit, having such Letters of Credit expire undrawn upon or, if drawn
upon, reimbursing such Issuing Bank for such drawing, and having any Issuing
Bank issue new Letters of Credit, all in accordance with the terms and
conditions hereof; provided, that, after giving effect to the issuance of
each Letter of Credit, the sum of (a) the aggregate Stated Amounts of
outstanding Letters of Credit plus (b) the then aggregate outstanding
principal amount of the Loans shall not exceed the aggregate amount of the
Commitment. The Banks and the Borrower agree that the Existing Letters of
Credit shall constitute Letters of Credit for all purposes of this Agreement
and that each Bank has an L/C Participating Interest therein equal to such
Bank's Percentage.
SECTION 2A.02. Requests for Issuance of Letters of Credit.
(a) The Borrower may request any Issuing Bank to issue a Letter of Credit
for the account of the Borrower by delivering to the Agent at its address
specified in Section 9.01, such Issuing Bank's standard form of a commercial
letter of credit application and agreement (a "Letter of Credit
Application"), completed to the satisfaction of such Issuing Bank, and such
other certificates, documents and other papers and information as such
Issuing Bank may reasonably request.
(b) Each Letter of Credit issued hereunder shall, among other
things, (i) provide for the payment of sight drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein and (ii) have a term of no more than one year
and in no event have an expiry date occurring later than the Maturity Date.
Each Letter of Credit Application and each Letter of Credit shall be subject
to the Uniform Customs and, to the extent not inconsistent therewith, the
laws of the State of Illinois.
SECTION 2A.03. Letter of Credit Fees. The Borrower shall pay
in advance to the applicable Issuing Bank a letter of credit fronting fee of
0.25% of the Stated Amount of any Letter of Credit on the Closing Date (with
respect to Existing Letters of Credit) and on the date of issuance of each
Letter of Credit and on each March 31, June 30, September 30 and December 31
thereafter. On March 31, June 30, September 30 and December 31, the
Borrower shall pay to the Agent for the account of each Bank a letter of
credit fee equal to the "Letter of Credit Rate" for the quarter then ending
of such Bank's Percentage of the Stated Amount of such Letter of Credit.
For purposes of the preceding sentence, "Letter of Credit Rate" means, with
respect to any quarter, a rate per annum equal to (a) 1.25% if Level I
Status exists on the first day of such quarter, (b) 1.50% if Level II Status
exists on the first day of such quarter, (c) 2.00% if Level III Status
exists on the first day of such quarter and (d) 2.50% if Level IV Status
exists on the first day of such quarter.
SECTION 2A.04. Participating Interests. Effective in the case
of each Letter of Credit as of the date of the issuance thereof (which in
the case of the Existing Letters of Credit shall be deemed to be the date
hereof), each Issuing Bank agrees to allot and does allot, to itself and
each other Bank, and each Bank severally and irrevocably agrees to take and
does take an L/C Participating Interest in such Letter of Credit and the
related Letter of Credit Application in a percentage equal to such Bank's
Percentage. Each Participating Bank hereby agrees that its obligation to
participate in each Letter of Credit issued by any Issuing Bank hereunder
and the drafts drawn thereunder shall be irrevocable and unconditional.
SECTION 2A.05. Procedure for Issuance of Letters of Credit.
Upon receipt of any Letter of Credit Application from the Borrower, the
applicable Issuing Bank will promptly notify each Bank thereof and such
Issuing Bank will process such Letter of Credit Application, and the other
certificates, documents and other papers delivered to such Issuing Bank in
connection therewith, in accordance with its customary procedures and shall
promptly issue such Letter of Credit to the beneficiary thereof and shall
furnish a copy thereof to the Borrower and the other Banks.
SECTION 2A.06. Payments. Upon each drawing under a Letter of
Credit, the applicable Issuing Bank shall promptly notify the Borrower
thereof and such drawing shall be repaid on the date on which such drawing
is made. If such drawing is not repaid on such date, (a) interest will
accrue thereon from and after the date thereof at the rate specified in
Section 2.09 above and (b) such Issuing Bank will promptly notify each other
Bank and, upon its receipt of any such notice, each other Bank will transfer
to such Issuing Bank, in immediately available funds, an amount equal to
such other Bank's Percentage of such drawing, together with interest on such
amount at the daily average Federal Funds Rate quoted by such Issuing Bank
for the number of days from and including the date of such drawing to but
excluding the date on which such amount becomes immediately available to
such Issuing Bank from such other Bank.
SECTION 2A.07. Further Assurances. The Borrower hereby
agrees, from time to time, to do and perform any and all acts and to execute
any and all further instruments reasonably requested by any Issuing Bank to
more fully effect the purposes of this Agreement and the issuance of the
Letters of Credit hereunder.
SECTION 2A.08. Unavailability and Market Conditions. In the
event of volatile or other adverse market conditions with respect to the
Letters of Credit (such as conditions in the nature of those set forth in
Article 19 of the Uniform Customs), any Issuing Bank shall have the right in
the exercise of its good faith judgment to suspend the commitment to issue
Letters of Credit, provided that any such suspension shall be lifted as soon
as such adverse market conditions cease.
SECTION 2A.09. Obligations Absolute. (a) The payment
obligations of the Borrower under Section 2A.06 shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the
following circumstances:
(i) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against any
beneficiary, or any transferee, of any Letter of Credit issued
for its account (or any Persons for whom any such beneficiary
or any such transferee may be acting), any Issuing Bank, the
Agent or any other Bank, or any other Person, whether in
connection with this Agreement, the transactions contemplated
herein, or any unrelated transaction;
(ii) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iii) payment by any Issuing Bank under any Letter of Credit
against presentation of a draft or certificate which does not
comply with the terms of such Letter of Credit, except payment
resulting from the gross negligence or willful misconduct of
such Issuing Bank; or
(iv) any other circumstances or happening whatsoever, whether or
not similar to any of the foregoing, except circumstances or
happenings resulting from the gross negligence or willful
misconduct of any Issuing Bank.
(b) The Borrower agrees that no Issuing Bank shall be liable or
responsible for the acts or omissions of a beneficiary with respect to its
use of a Letter of Credit. None of the Issuing Banks nor any of their
respective officers, directors, employees or agents shall be liable or
responsible for: (i) the use which may be made of a Letter of Credit or for
any acts or omissions of the beneficiary of such Letter of Credit, (ii) the
validity, sufficiency or genuineness of documents, or of any endorsements(s)
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged, (iii) the validity or
sufficiency of any endorsements, delay in giving or failure to give notice
of arrival or any other notice, or failure of any instrument to bear any
reference or adequate reference to a Letter of Credit or of documents to
accompany any instrument at negotiation, or failure of any Person to note
the amount of any instrument on the reverse of a Letter of Credit or to
surrender or take up a Letter of Credit or to forward documents under a
Letter of Credit, (iv) payment by any Issuing Bank against presentation of
documents which do not comply with the terms of a Letter of Credit or (v)
any other circumstances whatsoever in making or failing to make a payment
under a Letter of Credit, except where the foregoing is attributable to
gross negligence or willful misconduct of any Issuing Bank; and an Issuing
Bank shall be liable to the Borrower, to the extent but only to the extent,
of any direct, as opposed to consequential, damages suffered by the Borrower
which the Borrower proves were caused by (A) such Issuing Bank's gross
negligence or willful misconduct in determining whether documents presented
under a Letter of Credit comply with the terms of such Letter of Credit or
(B) such Issuing Bank's willful failure to pay under a Letter of Credit
after the presentation to it by a beneficiary of a sight draft and all
certificates and other documents strictly complying with the terms and
conditions of such Letter of Credit. In furtherance and not in limitation
of the foregoing, each Issuing Bank acting through its responsible officers,
employees and agents, may accept documents and certificates that appear on
their face to be in order, without responsibility for further investigation.
SECTION 2A.10. Letter of Credit Application. The provisions
of this Article IIA in respect of any Letter of Credit are supplemental to,
and not in derogation of, any rights and remedies of any Issuing Bank and
the Banks under the Letter of Credit Application related to such Letter of
Credit and under other applicable law. To the extent that any provisions
contained in a Letter of Credit Application are inconsistent with the
provisions of this Agreement, the terms and provisions contained in this
Agreement shall control.
SECTION 2A.11. Role of Issuing Banks. Each Bank agrees that
in paying any drawing under a Letter of Credit, none of the Issuing Banks
shall have any responsibility to obtain any document (other than the sight
draft and certificates required by such Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority
of the Person delivering any such document. None of the Issuing Banks nor
any of their respective directors, officers, employees, or agents shall be
liable to any Bank for (i) any action taken or omitted in connection with
any Letter of Credit at the request or with the approval of the Required
Banks, (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct, or (iii) the execution, effectiveness, genuineness,
validity or enforceability of any Letter of Credit or any other document
contemplated hereby or thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Banks that:
SECTION 3.01. Organization; Powers. The Borrower and each of
its Subsidiaries are each a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation,
has the requisite power and authority, including, without limitation, all
licenses, permits, franchises, patents, copyrights, trademarks, trade names,
consents and approvals, to own its property and assets and to carry on its
business as now conducted and is qualified to do business and in good
standing in every jurisdiction where such qualification is required, except
where the failure to so qualify or be in good standing would not have a
Material Adverse Effect. The Borrower and each of its Subsidiaries have the
full corporate power to consummate the Transactions.
SECTION 3.02. Authorization. The consummation of the
Transactions (a) have been duly authorized by all requisite corporate action
and (b) will not (i) violate (A) any provision of the certificate of
incorporation or by-laws of the Borrower or any of its Subsidiaries or any
provision of any applicable law, statute, rule or regulation (including,
without limitation, Regulations G, T, U or X), (B) any order of any court,
or any rule, regulation or order of any other agency of government binding
upon the Borrower or any of its Subsidiaries or (C) any provisions of any
indenture, agreement or other instrument to which the Borrower or any of its
Subsidiaries is a party, or by which the Borrower or any of its
Subsidiaries, or any of their respective properties or assets is or may be
bound, (ii) be in conflict with, result in a breach of or constitute (alone
or with notice or lapse of time or both) a default under any indenture,
agreement or other instrument referred to in clause (b)(i)(C) above or (iii)
result in the creation or imposition of any Lien (other than in favor of the
Agent for the benefit of the Banks as contemplated by this Agreement) upon
any property or assets of the Borrower or any of its Subsidiaries.
SECTION 3.03. Governmental Approval. Except for the financing
statements referred to in Section 4.02(e), no registration with or consent
or approval of, or other action by, any Federal, state or other governmental
agency, authority or regulatory body is or will be required in connection
with the consummation of the Transactions.
SECTION 3.04. Enforceability. This Agreement constitutes, and
the Security Agreement and the Notes when duly executed and delivered by the
Borrower will constitute, legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting creditors' rights generally).
SECTION 3.05. Financial Statements. (a) The Borrower has
heretofore furnished to the Banks a balance sheet and the related statements
of operations and cash flows of the Borrower as of and for the fiscal years
ended February 2, 1991, February 1, 1992 and January 30, 1993, which are
audited by and accompanied by the unqualified opinion of independent
certified public accountants of recognized national standing. Such balance
sheets and the related statements of operations and cash flows present
fairly in all material respects the financial position and results of
operations of the Borrower as of the dates and for the periods indicated.
Such balance sheets and the notes thereto disclose all material liabilities,
direct or contingent, of the Borrower, as of the dates thereof. The
financial statements referred to in this Section have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis.
(b) Except as fully reflected in Schedule 3.05(b) hereto, as of
the Closing Date, neither the Borrower nor any of its Subsidiaries will have
any material liabilities or obligations of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether or not due) which are
not set forth and described in the information referenced in Section 3.05(a)
hereof. Except as reflected in Schedule 3.05(b) hereto, as of the Closing
Date, the Borrower does not know of any basis for the assertion against the
Borrower or any of its Subsidiaries of any material liability or obligation
of any nature whatsoever which is not set forth and described in the
information referenced in Section 3.05(a) hereof.
(c) The Borrower has heretofore furnished to the Banks the Pro
Forma Financial Statements in the form of Schedule 3.05(c) hereto. There
are no statements or conclusions in the Pro Forma Financial Statements that
are based upon or include information known to the Borrower to be misleading
or which fail to take into account material information regarding the
matters reported therein. The Borrower believes the Pro Forma Financial
Statements have been prepared in good faith and are based on reasonable
assumptions.
SECTION 3.06. No Material Adverse Change. Since January 30,
1993, there has been no material adverse change in the business, assets,
operations or condition (financial or otherwise), of the Borrower and its
Subsidiaries taken as a whole.
SECTION 3.07. Title to Properties; Possession Under Lease.
(a) The Borrower and each of its Subsidiaries have good and marketable title
to, or valid leasehold interests in, all its material properties and assets
and title to all such properties and assets is held in its respective name
and not in any other Person's name as nominee, except for such properties as
are no longer used or useful in the conduct of its business or as have been
disposed of in the ordinary course of business and except for minor defects
in title that do not interfere with the ability of the Borrower, or any of
its Subsidiaries, as the case may be, to conduct its business as now
conducted. All such assets and properties are free and clear of all Liens
other than those created on behalf of the Banks or those otherwise permitted
by Section 6.02. All of the material properties and assets of the Borrower
and each of its Subsidiaries are in good repair, working order and
condition, ordinary wear and tear excepted.
(b) The Borrower owns in its name, and the Collateral includes,
all inventory held for resale in its business or the business of any of its
Subsidiaries, provided that, (i) the Borrower may sell certain General
Electric and L'Eggs inventory on consignment and (ii) BOGOs may own up to
$2,000,000 of inventory that is held for resale in the ordinary course of
business. Attached hereto as Schedule 3.07(b) is a list of all stores of
the Borrower and its Subsidiaries that are located in the State of Iowa, the
approximate inventory of each such store as of January 30, 1993 and the
aggregate rentals for the fiscal year ended January 30, 1993 under each
store lease relating thereto.
(c) The Borrower and each of its Subsidiaries have complied with
all material obligations under all material leases to which each is a party
and under which each is in occupancy, and all such leases are in full force
and effect. The Borrower and each of its Subsidiaries enjoy peaceful and
undisturbed possession under all such leases. To the best of the Borrower's
knowledge, there is not any material default by any other party under any
such lease except as set forth in Schedule 3.07(c) hereto.
SECTION 3.08. Litigation. There are no actions, suits or
proceedings at law or in equity or by or before any governmental
instrumentality or other agency or regulatory authority now pending or, to
the knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries or the businesses, assets or rights of the Borrower or any of
its Subsidiaries (a) which involve this Agreement or any of the other Loan
Documents or any of the transactions contemplated hereby or thereby or (b)
as to which there is a significant possibility of an adverse determination
and which, if adversely determined, could, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.09. Compliance with Laws. Neither the Borrower nor
any of its Subsidiaries is in violation of any law or in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or governmental agency or instrumentality, where such violation or
default could have a Material Adverse Effect.
SECTION 3.10. Hazardous Materials. Neither Borrower, nor any
of its Subsidiaries, nor any of their respective agents, employees or
representatives, nor any other Person, has transported, used, generated,
handled, stored, released, emitted, leached, discharged, dumped or disposed
of any Hazardous Materials (i) onto, into or from the Borrower's Properties,
or any part thereof, or (ii) from the Borrower's Properties onto or into any
property adjacent to the Borrower's Properties or (iii) from the Borrower's
Properties onto or into any other property in violation of any Hazardous
Substance Laws, except for such activities that could not give rise to a
Material Adverse Effect. No Hazardous Materials are currently or have been
located at, in, on, under or about the Borrower's Properties in a manner
which violates any Hazardous Substance Laws or which requires response,
cleanup or corrective action of any kind under any Hazardous Substance Laws,
other than Hazardous Materials the presence of which could not give rise to
a Material Adverse Effect. No notice of violation, lien, complaint, suit,
order or other notice with respect to the environmental condition of the
Borrower's Properties is outstanding or has been received by Borrower, or
any of its Subsidiaries (except for matters that could not give rise to a
Material Adverse Effect), nor has any such notice been issued which has not
been complied with in all material respects so as to bring the Borrower's
Properties into material compliance with all Hazardous Substance Laws. No
investigation is pending or to the Borrower's knowledge, threatened with
respect to the environmental condition of the Borrower's Properties. Except
for four existing underground storage tanks located at the Milan, Illinois
distribution facility that are being maintained in material compliance with
all Hazardous Substance Laws, no underground storage tanks are or at any
time have been located on the Borrower's Properties that have not been
removed in accordance with applicable Hazardous Substance Laws. No
Hazardous Materials are used in the operation of the Borrower's Properties
or business other than in material compliance with applicable Hazardous
Substance Laws. All licenses, permits or registrations (or any extensions
thereof) required under any Hazardous Substance Law for the Borrower's
Properties or the business of the Borrower or any of its Subsidiaries as
conducted have been obtained and the Borrower is in material compliance
therewith, except where the failure to have such licenses, permits and
registrations could not give rise to a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) The Borrower
is not engaged principally, or as of one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying
Margin Stock.
(b) No part of the proceeds of the Loans will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately,
(i) to purchase or carry Margin Stock or to extend credit to others for the
purpose of purchasing or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose, or (ii) for any purpose which entails
a violation of, or which is inconsistent with, the provisions of Regulations
of the Board, including, without limitation, Regulations G, T, U or X
thereof.
SECTION 3.12. Taxes. The Borrower and each of its
Subsidiaries has filed or caused to be filed all material Federal, state and
local tax returns which are required to be filed by it, and has paid or
caused to be paid all taxes shown to be due and payable on such returns or
on any assessments received by it, other than any taxes or assessments, the
validity of which the Borrower or any such Subsidiary is contesting in good
faith by appropriate proceedings, and with respect to which the Borrower or
any such Subsidiary shall have set aside on its books adequate reserves in
accordance with generally accepted accounting principles.
SECTION 3.13. ERISA Matters. (a) Each Pension Plan is in
compliance in all material respects with all applicable requirements of
ERISA and the Age Discrimination in Employment Act and published
interpretations thereunder. Each Pension Plan that is intended to qualify
for special tax treatment under Sections 401(a) or 403(a) of the Code is in
compliance in all material respects with the applicable requirements of the
Code for such qualification. Neither the Borrower nor any of its
Subsidiaries nor any Pension Plan has engaged in any transaction that is
prohibited by (and not otherwise exempted from) Section 406 of ERISA or that
would subject the Borrower or any of its Subsidiaries to a material tax
under Section 4975 of the Code. The Borrower and each of its ERISA
Affiliates have made full payment of all amounts that the Borrower or such
ERISA Affiliate is required under the terms of any Pension Plan, or the
terms of any collective bargaining agreement relating to a Pension Plan, to
have paid as a contribution to, or otherwise in respect of, each Pension
Plan as of the last day of the fiscal year of such Pension Plan ended before
the date hereof, where nonpayment could have a Material Adverse Effect.
(b) No Pension Plan has incurred an accumulated funding
deficiency (as defined in Section 412 of the Code or Section 302 of ERISA)
whether or not waived. No Reportable Event has occurred, been waived or
exists in connection with any Pension Plan as to which the Borrower or any
ERISA Affiliate was or is required to file or report with the PBGC or to
notify the Plan administrator. None of the Borrower or any ERISA Affiliate
has incurred any material withdrawal (or partial withdrawal) liability under
subtitle E of Title IV of ERISA to a Pension Plan that is a Multiemployer
Plan. None of the Borrower or any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer
Plan is reasonably expected to be in reorganization or to be terminated
where such reorganization or termination has resulted or could reasonably be
expected to result, through increases in the contributions required to be
made to such Plan or otherwise, in a Material Adverse Effect.
(c) As of the date of this Agreement, the present value of the
future cost to the Borrower and its Subsidiaries of post-retirement medical
benefits that the Borrower or any of its Subsidiaries are obligated to
provide, calculated on the basis of actuarial factors the Borrower considers
reasonable estimates of future experience, does not exceed $3,000,000.
SECTION 3.14. Labor Relations. There are no (a) unfair labor
practice complaints pending before the National Labor Relations Board, (b)
grievance or arbitration proceedings arising out of or under collective
bargaining agreements pending against the Borrower or (c) any strikes, labor
disputes, slowdowns or stoppages pending against the Borrower or any of its
Subsidiaries which could have a Material Adverse Effect. The hours worked
by and payment made to employees of the Borrower and each of its
Subsidiaries have not been in violation of the Fair Labor Standards Act or
any other applicable Federal, state, local or foreign law dealing with such
matters, where such violations could result in a Material Adverse Effect.
The consummation of the Transactions will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower is a party or by which
the Borrower is bound on the Closing Date.
SECTION 3.15. Investment Company Act; Public Utility Holding
Company Act. The Borrower is not an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended.
The Borrower is not a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935, as
amended.
SECTION 3.16. Security Interests. The Security Agreement,
when duly executed and delivered by the Borrower and upon the filing of the
requisite financing statements, will create and grant to the Agent for the
benefit of the Banks a valid and perfected first priority security interest
in all the Collateral securing the payment of all Obligations (as defined in
the Security Agreement) and the Collateral will not be subject to any other
Lien.
SECTION 3.17. Trademarks and Licenses. Except as set forth in
Schedule 3.17 hereto, the Borrower owns or has the right to use as licensee
all material patents, copyrights, trademarks, trade names, know-how, trade
secrets and other proprietary rights necessary to conduct its business as
presently conducted. Except as set forth in Schedule 3.17, (a) the Borrower
conducts its business without infringement or claim of infringement of any
license, patent, trade name, trademark, copyright, trade secret or other
industrial property rights of others and (b) there is no infringement or
claim of infringement by others of any material patent, trade name,
trademark, copyright, trade secret or other intellectual property right of
the Borrower.
SECTION 3.18 Solvency. After giving effect to the
Transactions and the borrowing of the maximum amount available under this
Agreement (i) the fair saleable value of the total assets of the Borrower
and each of its Subsidiaries is not less than its total liabilities, (ii)
the Borrower and each of its Subsidiaries will not incur debts beyond its
ability to pay such debts as they mature and (iii) the Borrower and each of
its Subsidiaries will not be left with unreasonably small capital.
SECTION 3.19. Subsidiaries. Except as set forth in Schedule
3.19 hereto, the Borrower has no Subsidiaries. The Borrower owns all the
issued and outstanding capital stock of each of its Subsidiaries and such
stock is fully paid and nonassessable, and duly and validly authorized and
issued, free and clear of all liens. None of the Borrower's Subsidiaries
conduct any business operations or own any assets, except as described in
Section 6.11 hereof.
SECTION 3.20. No Material Misstatements. No written
information, report, financial statement, exhibit or schedule prepared or
furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Banks in connection with this Agreement or the other Loan Documents or
included therein or delivered pursuant thereto contained or contains any
material misstatement of fact or omitted or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
ARTICLE IV
CONDITIONS TO LOANS AND LETTERS OF CREDIT
SECTION 4.01. All Loans and Letters of Credit. The obligation
of (x) the Banks to make Loans hereunder on the date of each Loan and (y)
any Issuing Bank to issue a Letter of Credit hereunder, are subject to the
satisfaction of the following conditions precedent:
(a) In the case of a Loan, the Agent shall have received a
notice of borrowing as required by Section 2.03.
(b) The representations and warranties set forth in Article III
hereof shall be true and correct in all material respects with the same
effect as though made on and as of such date, except to the extent that any
such representation or warranty relates to an earlier date.
(c) The Borrower shall be in compliance with all the terms and
provisions contained herein and in the other Loan Documents and the Senior
Note Indenture on its part to be observed or performed, and at the time of
and immediately after such Borrowing or the issuance of such Letter of
Credit no Event of Default or Potential Default shall have occurred and be
continuing.
(d) The Agent shall have received all such documents and
instruments relating to this Agreement, the other Loan Documents, the Loans
to be made on such date (or the Letter of Credit to be issued on such date)
and the transactions contemplated hereby or thereby as it shall reasonably
request and such documents and instruments shall be in form and substance
reasonably satisfactory to the Agent.
The acceptance by the Borrower of the proceeds of any Loan hereunder or the
issuance of a Letter of Credit hereunder shall be deemed to constitute a
representation and warranty by the Borrower on the date of such Loan or the
date of the issuance of such Letter of Credit as to the matters specified in
this Section (other than paragraph (d) hereof).
SECTION 4.02. First Loan. The obligations of each of the
Banks to make initial Loans hereunder are subject to the following
additional conditions precedent:
(a) The Agent shall have received from Weil, Gotshal, & Manges,
counsel to the Borrower (i) a favorable written opinion to the effect set
forth in Exhibit E hereto and (ii)(x) a letter addressed to the Agent, the
Co-Agent and the Banks indicating that they may rely upon the opinion of
Weil, Gotshal & Manges delivered to Shawmut Bank Connecticut National
Association, as Trustee under the Subordinated Note Indenture in connection
with the defeasance of the Subordinated Notes and (y) a letter addressed to
the Agent, the Co-Agent and the Banks indicating that they may rely upon the
opinion of Weil, Gotshal & Manges delivered to the underwriters in
connection with the offering of the Senior Notes.
(b) The Agent shall have received (i) with respect to the
Borrower and each of its Subsidiaries, a copy of the certificate of
incorporation of the Borrower and each of its Subsidiaries, including all
amendments thereto, certified by the Secretary of State of the state of its
incorporation, and a good standing certificate from such Secretary of State,
each as of a date not more than 30 days prior to the Closing Date, (ii) a
certificate as of a date not more than 30 days before the Closing Date from
the Secretary of State in each state in which the Borrower or such
Subsidiary conducts material business or owns material assets, as to the
qualification of the Borrower or such Subsidiary to do business and its good
standing in such state and (iii) such other documents as the Agent may
reasonably request.
(c) The Agent shall have received (i) a certificate of the
Secretary or any Assistant Secretary of the Borrower and each of its
Subsidiaries, dated the Closing Date, and certifying that (A) attached
thereto is a true and complete copy of the by-laws of the Borrower or such
Subsidiary each as in effect on the date of such certificate and at all
times prior to the date of the resolutions described in clause (B) below,
(B) in the case of the Borrower, attached thereto is a true and complete
copy of resolutions duly adopted by the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Agreement and
the other Loan Documents to be executed and delivered by the Borrower and
the borrowings by the Borrower hereunder, (C) the certificate of
incorporation of the Borrower or such Subsidiary has not been amended since
the date of the last amendment thereto shown in the certificate of good
standing furnished pursuant to clause(b)(i) above and (D) in the case of the
Borrower, that such resolutions referred to in clause (B) above have not
been modified, rescinded or amended and are in full force and effect; (ii) a
certificate of the Secretary or an Assistant Secretary of the Borrower,
certifying as to the signatures and incumbency of the officers of the
Borrower authorized to execute this Agreement and the other Loan Documents
on behalf of the Borrower; and (iii) a certificate of another officer of the
Borrower and each of its Subsidiaries as to the incumbency and specimen
signature of such Secretary or Assistant Secretary executing the certificate
pursuant to clause (i) above.
(d) Each Bank shall have received a Note duly executed by the
Borrower payable to its order and otherwise complying with the provisions of
Section 2.07.
(e) The Agent shall have received the duly executed Security
Agreement and such financing statements, assignments and other instruments
as may be necessary to create the first priority security interests to be
created thereunder.
(f) The Agent shall have received recently dated reports
prepared by examiners approved by the Agent describing all Lien filings with
respect to the Borrower and each of its Subsidiaries reflected in the
records of (i) the State of Illinois, (ii) the State of Iowa, (iii) the
State of Indiana and (iv) the counties listed in Schedule 4.02(f) hereto.
No such report shall list any Lien other than (i) Liens permitted by Section
6.02 below and (ii) Liens released on or before the Closing Date pursuant to
such termination statements, releases and other documents as are acceptable
to the Agent.
(g) The Agent shall have received evidence verifying that all
obligations and liabilities of the Borrower under the Existing Loan
Documents and Subordinated Note Indenture shall have been (i) satisfied and
paid in full, (ii) defeased pursuant to the irrevocable deposit of U.S.
Government Obligations (as such term is defined in the Subordinated Note
Indenture) or (iii) otherwise provided for in a manner reasonably
satisfactory to the parties thereto.
(h) The Agent shall have received evidence verifying that the
Senior Notes shall have been sold or are simultaneously being sold for gross
proceeds of $100,000,000.
(i) The Agent shall have received a true and complete copy of
the executed Senior Note Indenture and each of the other documents delivered
in connection with the sale of the Senior Notes.
(j) The Agent shall have received an acknowledgement from the
Borrower's certified independent accountants as to the matters specified in
Section 5.06(e)(ii) with respect to the Borrower's financial statements
provided pursuant to Section 3.05(a).
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with the Banks that, so long
as this Agreement shall remain in effect, any Letter of Credit is
outstanding or the principal of or interest on any Loan, any Fee or any
other expense or amount payable hereunder shall be unpaid, unless the
Required Banks shall otherwise consent in writing, it will, and will cause
each of its Subsidiaries that is engaged in any material business or which
has or obtains any material assets, to:
SECTION 5.01. Existence. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its corporate
existence, except as otherwise permitted by Section 6.04.
SECTION 5.02. Businesses and Properties. At all times do or
cause to be done all things necessary to preserve, renew and keep in full
force and effect the rights, licenses, permits, franchises, leases, patents,
copyrights, trademarks and trade names material to the conduct of its
business; maintain and operate such business in substantially the manner in
which it is presently conducted and operated; comply in all material
respects with all laws and regulations applicable to the operation of such
business whether now in effect or hereafter enacted and with all other
applicable laws and regulations; take all action which may be required to
obtain, preserve, renew and extend all licenses, permits and other
authorizations which may be material to the operation of such business;
subject to Section 6.11, hold title to all property material to the
operation of such business in its own name and not in the name of any other
Person as nominee; and at all times maintain, preserve and protect all
property material to the conduct of such business and keep such property in
good repair, working order and condition and from time to time make, or
cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times.
SECTION 5.03. Insurance. Maintain insurance, to such extent
and against such risks, including fire and other risks insured against by
extended coverage, as is customary with companies similarly situated and in
the same or similar business, which in any event shall be at least of such
types and in such amounts as are now maintained by the Borrower; maintain in
full force and effect public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by
the Borrower or any of its Subsidiaries, in such amount as the Borrower or
any such Subsidiary shall reasonably deem necessary; maintain such other
insurance as may be required by law or as may be reasonably requested by the
Required Banks for purposes of assuring compliance with this Section; and
notify the Banks of any material change in the insurance coverage of the
Borrower or any such Subsidiary.
SECTION 5.04. Obligations and Taxes. Pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid,
might give rise to liens or charges upon such properties or any part
thereof; provided, however, that the Borrower and its Subsidiaries shall not
be required to pay and discharge or to cause to be paid and discharged any
such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate legal or
administrative proceedings and the Borrower or any such Subsidiary shall
have set aside on its books adequate reserves with respect thereto in
accordance with generally accepted accounting principles.
SECTION 5.05. Hazardous Substance Laws. Conduct, and cause to
be conducted, the ongoing operations of the Borrower and its Subsidiaries in
a manner that will (a) comply in all material respects with all Hazardous
Substance Laws, and (b) not give rise to the imposition of any Lien on any
of the Collateral or any material liability, or require any material
expenditures, or (c) create a material risk of personal injury to Persons at
or about the Borrower's Properties under or in connection with any Hazardous
Substance Laws.
SECTION 5.06. Financial Statements, Reports, etc. Furnish to
the Agent and each of the Banks:
(a) within 90 days after the end of each fiscal year of the
Borrower, consolidated balance sheets and consolidated income statements of
the Borrower and its Subsidiaries showing the consolidated financial
position of Borrower and its Subsidiaries as of the close of such fiscal
year and the results of operations during such year, a consolidated
statement of shareholders' equity and a consolidated statement of cash flows
of the Borrower, as of the close of such fiscal year, all of which are
audited by independent accountants of recognized national standing
acceptable to the Banks (without any qualification for year-end audit
adjustments);
(b) within 45 days after the end of the first three fiscal
quarters of each fiscal year, unaudited consolidated balance sheets and
consolidated income statements and statements of cash flows showing the
consolidated financial position and results of operations of the Borrower
and its Subsidiaries as of the end of each such quarter and for the then
elapsed portion of the fiscal year, which shall be certified by a Financial
Officer as presenting fairly in all material respects the consolidated
financial position and results of operations of the Borrower and as having
been prepared in accordance with generally accepted accounting principles
consistently applied subject to normal year-end audit adjustments;
(c) within 30 days after the end of each month or accounting
period, as the case may be, unaudited consolidated balance sheets and
consolidated income statements showing the consolidated financial position
and results of operations of the Borrower and its Subsidiaries as of the end
of each such month or accounting period and for the then elapsed portion of
the fiscal year, which shall be certified by a Financial Officer as
presenting fairly in all material respects the consolidated financial
position and results of operations of the Borrower and as having been
prepared in accordance with generally accepted accounting principles
consistently applied subject to normal year-end audit adjustments;
(d) promptly after the same become publicly available, copies of
(i) all operating reports and other information delivered to the
stockholders of the Borrower and the holders of the Senior Notes and (ii)
such annual, periodic and other reports, and such proxy statements and other
information, as shall be filed by the Borrower or any of its Subsidiaries
with the Securities and Exchange Commission pursuant to the requirements of
the Securities Exchange Act of 1934, as amended;
(e) concurrently with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, (i) a compliance
letter of the firm or person referred to therein (which compliance letter
furnished by the independent certified public accountants referred to in
paragraph (a) above may be limited to accounting matters and disclaim
responsibility for legal interpretations) certifying that to the best of its
or his knowledge no Event of Default or Potential Default has occurred, and,
if such an Event of Default or Potential Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed to
be taken with respect thereto and (ii) (with respect to the financial
statements referred to in paragraph (a)) an acknowledgement by such
accountants in substantially the form of Exhibit F hereto;
(f) concurrently with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above a certificate of a
Financial Officer (i) demonstrating compliance, as of the dates of the
financial statements being furnished at such time, with the covenants set
forth in Sections 5.10 through and including 5.14 and 6.06, 6.07, 6.08 and
6.13 and 6.14 and (ii) specifying the Leverage Ratio as of the dates of such
financial statements;
(g) concurrently with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, such financial
statements and other financial information relating to the Borrower's
Subsidiaries as the Co-Agents may from time to time reasonably request;
(h) promptly, from time to time, such other information
regarding the compliance by the Borrower with the terms of this Agreement
and the other Loan Documents or the affairs, operations or condition
(financial or otherwise) of the Borrower and the Borrower's Subsidiaries as
any Bank may reasonably request and which is capable of being obtained,
produced or generated by the Borrower or any of such Subsidiaries or of
which any of them has knowledge;
(i) within 30 days after the end of each fiscal quarter of the
Borrower, an inventory report in the form of Schedule 5.06(h) hereto; and
(j) within 30 days after the end of each fiscal year a
certificate of the Financial Officer disclosing for the previous fiscal year
the information on Schedule 3.07(b).
SECTION 5.07. Litigation and Other Notices. Give each Bank
prompt written notice of the following:
(a) the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint prohibiting,
or having the effect of prohibiting, the making of the Loans or the
initiation of any litigation or similar proceeding seeking any such
injunction, order or other restraint;
(b) the filing or commencement of any action, suit or proceeding
against the Borrower or any of its Subsidiaries, whether at law or in equity
or by or before any governmental instrumentality or other agency or
regulatory authority as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined against the
Borrower or any such Subsidiary, could have a Material Adverse Effect;
(c) any notice or claim to the effect that the Borrower or any
of its Subsidiaries is or may be liable to any Person as a result of the
release or threatened release by the Borrower or any of its Subsidiaries or
any other Person of any Hazardous Materials at, in, or under or about the
Borrower's Properties, and any notice alleging any violation of any
Hazardous Substance Law, in each case where the liability or potential
liability of the Borrower involves amounts in excess of $500,000, whether or
not such liability is covered by insurance and the Borrower shall promptly
forward copies of all such notices or claims to each Bank;
(d) if and when the Borrower or any of its Subsidiaries (i)
incurs any material increase in the present value of the future cost of the
post-retirement medical benefits that are described in Section 3.13(c)
above, notice of the amount of such increase, (ii) gives or is required to
give notice to the PBGC of any fact, including any Reportable Event, with
respect to any Pension Plan which might constitute grounds for a termination
of such Pension Plan under Title IV of ERISA, or knows that the plan
administrator of any Pension Plan has given or is required to give notice of
any such Reportable Event, a copy of the notice of such Reportable Event
given or required to be given to the PBGC, (iii) receives notice of complete
or partial withdrawal liability under Title IV of ERISA respecting a Pension
Plan that is a Multiemployer Plan, a copy of such notice, (iv) receives
notice that a Pension Plan that is a Multiemployer Plan is, or is expected
to be, terminated or is in reorganization, in each case within the meaning
of Title IV of ERISA, a copy of such notice, (v) gives or is required to
give notice to the PBGC of any failure to make a required installment or
other payment under Section 302 of ERISA or Section 412 of the Code, a copy
of the notice of such failure given or required to be given to the PBGC,
(vi) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any Pension Plan, a copy of
such notice, or (vii) has actual knowledge without independent investigation
that any other ERISA Affiliate has given or is required to give or has
received with respect to any Pension Plan a notice of the type described in
clauses (ii), (iii), (iv), (v) or (vi) above, such information about such
notice as is known to Borrower; provided that the Borrower shall not be
required to deliver a copy of or provide information about any notice under
this clause (d) if the notice or notices or information not so delivered
during any period of twelve (12) consecutive months relate to a Pension Plan
or Plans that in the aggregate do not have as of most recent valuation
date(s) preceding the date on which any such notice or information would
otherwise have been delivered any amount of unfunded benefit liabilities, as
defined in Section 4001(a) (18) of ERISA;
(e) from time to time such additional information regarding the
financial condition or prospects of any Pension Plan as any Bank may
reasonably request through the Agent;
(f) any Event of Default (including, without limitation,
pursuant to paragraphs (h) or (i) of Section 7.01 hereof ), specifying the
nature and extent thereof and the action (if any) which is proposed to be
taken with respect thereto;
(g) any development in the business or affairs of the Borrower
or any of its Subsidiaries which has resulted in or which is likely, in the
reasonable judgment of the Borrower, to have a Material Adverse Effect; and
(h) any amendments, modifications or other changes to or the
grant of any waivers under the Senior Note Indenture.
SECTION 5.08. Compliance with ERISA and Funding of Pension
Plans. (a) Make contributions to or in respect of each Pension Plan in a
timely manner and in sufficient amount to comply with the terms of such
Pension Plan, the terms of any collective bargaining agreement relating to
such Pension Plan, or where applicable to a Pension Plan, the minimum
funding requirements of Section 302 of ERISA and Section 412 of the Code;
(b) not terminate any Pension Plan having any amount of unfunded benefit
liabilities, as defined in Section 4001(a) (18) of ERISA; (c) maintain and
operate each Pension Plan in compliance with applicable requirements of
ERISA and the Age Discrimination in Employment Act in all material respects,
and in compliance in all material respects with applicable requirements of
the Code for each Pension Plan intended to qualify for special tax treatment
under Section 401(a) or 403(a) of the Code; and (d) not withdraw (wholly or
partially) from any Multiemployer Plan if such withdrawal or partial
withdrawal would subject the Borrower or Subsidiary to material liability
under subtitle E of Title IV of ERISA.
SECTION 5.09. Maintaining Records; Access to Properties and
Inspections. Maintain financial records in accordance with generally
accepted accounting practices and, upon reasonable notice, at all reasonable
times and as often as any Bank may reasonably request through the Agent,
permit any authorized representative designated by such Bank to visit and
inspect the properties, and financial records of the Borrower or any of its
Subsidiaries, and to make extracts from such financial records at such
Bank's expense, and permit any authorized representative designated by such
Bank to discuss the affairs, finances and condition of the Borrower or any
such Subsidiary with the Borrower's or any such Subsidiary's chief financial
officer and such other officers as the Borrower or any such Subsidiary shall
deem appropriate and the Borrower's or any such Subsidiary's independent
public accountants.
SECTION 5.10. Use of Proceeds. Use the proceeds of Loans only
for working capital and general corporate purposes.
SECTION 5.11. Ownership of Inventory. At all times own in the
name of the Borrower all the inventory used in its business or in the
business of any of its Subsidiaries, except that BOGOs may own up to
$2,000,000 of inventory.
SECTION 5.12. Tangible Net Worth. During fiscal year 1993,
maintain a Tangible Net Worth of not less than $62,000,000 at the end of
each of the first and second fiscal quarters, $65,000,000 at the end of the
third fiscal quarter and $69,000,000 at the end of fiscal year 1993 and
thereafter, maintain a Tangible Net Worth at the end of each fiscal quarter
during each fiscal year of not less than the amount specified below with
respect to such year:
Fiscal Year Ending
On Or Near
January 31, Amount
1995 $72,000,000
1996 75,000,000
1997 79,000,000
1998 83,000,000
SECTION 5.13. Current Ratio. Maintain a Current Ratio at the end of
each quarter in excess of 1.03:1.
SECTION 5.14. Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage Ratio at the end of each quarter of at least 1.80:1.
SECTION 5.15. Clean-Up of Loans. Cause the aggregate outstanding
principal amount of the Loans to be zero for at least 30 consecutive days
during each of the Borrower's fiscal years.
SECTION 5.16. Landlord Waivers. Within 30 days after the Closing
Date, the Borrower shall deliver to the Agent a landlord waiver in form and
substance acceptable to the Agent with respect to the warehouse facility
located in Milan, Illinois, and from time to time after the Closing Date the
Borrower shall deliver to the Agent such landlord waivers (each in form and
substance acceptable to the Agent) as may be necessary to prevent the
aggregate rentals for all store leases with respect to stores located in the
State of Iowa that are not subject to such landlord waivers from exceeding
$2,500,000 for any fiscal year.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with the Banks that, so long as this
Agreement shall remain in effect, any Letter of Credit is outstanding or the
principal of or interest on any Loan, any Fee or any other expense or amount
payable hereunder shall be unpaid, unless the Required Banks shall otherwise
consent in writing, it will not, and it will not cause or permit any of its
Subsidiaries to, either directly or indirectly:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, including pursuant to Guarantees, except (a) Indebtedness
incurred pursuant to this Agreement, (b) Indebtedness arising under the
Borrower's 13-1/2% Senior Subordinated Notes; provided, however, that such
Indebtedness has been irrevocably defeased in accordance with the terms and
conditions of the Subordinated Note Indenture, (c) obligations in respect of
Capital Leases outstanding on the date hereof set forth on Schedule 6.01(c)
hereto, (d) Indebtedness arising under the Senior Notes, (e) Indebtedness
incurred with respect to Capital Leases permitted Sections 6.08 and 6.14,
(f) Indebtedness incurred with respect to the mortgages permitted by Section
6.02(d) and Indebtedness incurred hereafter of not more than $10,000,000 in
any fiscal year with respect to mortgages permitted by Section 6.02(k), (g)
Indebtedness of BOGOs permitted by Section 6.11 below and (h) other
unsecured Indebtedness of the Borrower having an aggregate outstanding
principal amount of not more than $2,000,000.
SECTION 6.02. Negative Pledge. Create, incur, assume or permit to
exist any Lien on any property or assets now owned or hereafter acquired by
it or on any income or rights in respect of any thereof, except:
(a) Liens created pursuant to the Security Agreement;
(b) Liens created pursuant to the Irrevocable Trust Agreement dated
as of the date hereof among the Borrower, Eagle Capital Corporation II and
Shawmut Bank Connecticut, National Association (formerly known as the
Connecticut National Bank), as trustee;
(c) Liens created in connection with Capital Leases permitted by
Sections 6.08 and 6.13 as long as such Liens relate solely to the property
subject to such Capital Leases;
(d) Liens existing on the date of this Agreement and listed on
Schedule 6.02(d) hereto;
(e) Liens incurred and pledges and deposits made in the ordinary
course of business in connection with workmen's compensation, unemployment
insurance, old-age pensions and other social security benefits;
(f) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety, customs and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of business;
(g) Liens created by law securing the payment of taxes, assessments
and governmental charges or levies created by law or the claims or demands
of materialmen, mechanics, carriers or other like persons, either (A) not
yet due and payable or (B) being contested in good faith by appropriate
legal or administrative proceedings and as to which the Borrower or any of
its Subsidiaries, as the case may be, shall have set aside on its books
adequate reserves in accordance with generally accepted accounting
principles;
(h) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of
property or minor irregularities of title (and with respect to leasehold
interests, mortgages, obligations, liens and other encumbrances incurred,
created, assumed or permitted to exist and arising by, through or under a
landlord or owner of the leased property, with or without consent of the
lessee), none of which materially impairs the use of any parcel of property
material to the operation of the business of the Borrower or any of its
Subsidiaries or the value of such property for the purpose of such business;
(i) Liens upon equipment or any other property (other than
inventory) acquired by the Borrower which are created or incurred
contemporaneously with such acquisition to secure or provide for the payment
of any part of the purchase price of such property (but no other amounts);
provided that (i) any such Lien shall not apply to any other property of the
Borrower, (ii) the principal amount of any Indebtedness secured by such Lien
does not exceed such purchase price or cost and (iii) the incurrence of such
Indebtedness is permitted by Sections 6.01 and 6.14;
(j) Liens on equipment or any other property (other than inventory)
existing at the time such property is acquired by the Borrower; provided, in
each case, that such Liens were not created in contemplation of such
acquisition by the Borrower;
(k) Mortgages upon real property owned by the Borrower on the
Closing Date or hereafter acquired by the Borrower, provided that (i) the
principal amount of the Indebtedness secured by such Lien does not exceed
the fair market value of the real property to which such Lien relates and
(ii) the incurrence of such Indebtedness is permitted by Section 6.01 and
Section 6.14; and
(l) extensions, renewals and replacements of Liens referred to in
paragraphs (a) through (k) of this Section; provided, that any such
extension, renewal or replacement Lien shall be limited to the property or
assets covered by the Lien extended, renewed or replaced and that the
obligations secured by any such extension, renewal or replacement Lien shall
be in an amount not greater than the amount of the obligations secured by
the Lien extended, renewed or replaced.
SECTION 6.03. Sale of Assets. Sell, transfer or otherwise dispose of
any assets, properties, rights or interests (other than sales of inventory
in the ordinary course of business); provided, however, that this provision
shall not prohibit (a) the sale of the Borrower's Westville, Indiana
warehouse facility in consideration for the release of all associated
liabilities, (b) sale and leaseback transactions permitted by Section 6.08
below or (c) sales of assets in any fiscal year having an aggregate net book
value of not more than $8,000,000, with any one transaction or series of
related transactions having an aggregate net book value of not more than
$2,000,000.
SECTION 6.04. Consolidations and Mergers. Merge into or consolidate
or combine with any other Person; provided, that this provision shall not
prohibit the merger or consolidation or combination of wholly owned
Subsidiaries of the Borrower into the Borrower.
SECTION 6.05. Investments, Loans and Advances. Purchase, or hold
beneficially any stock, other securities or evidences of Indebtedness of, or
make or permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person (including, without
limitation, the formation or acquisition of any Subsidiary), except (a)
Permitted Investments, (b) loans from the Borrower to BOGOs in the ordinary
course of business with respect to trade payables and (c) loans to landlords
in the ordinary course of business in connection with improvements made to
property leased to the Borrower, not to exceed an aggregate amount of
$3,000,000 at any one time outstanding.
SECTION 6.06. Restricted Payments. (a) Declare or pay, directly or
indirectly, any Restricted Payment or set apart any sum for such purpose,
except that Restricted Payments in an aggregate amount of $10,000,000 may be
made if, immediately after giving effect to each such payment no Event of
Default or Potential Default shall exist and on a pro forma basis as if such
payment had been made immediately prior to the end of the last fiscal
quarter, the Borrower would have been in compliance with all the covenants
of this Agreement.
(b) Permit or place, or permit any of its Subsidiaries to permit or
place, any restriction, directly or indirectly, on the payment of dividends
or other distributions of cash or property by any Subsidiary or the making
of loans, advances or other cash payments by any Subsidiary to the Borrower.
SECTION 6.07. Senior Notes. (a) Make, directly or indirectly, any
principal, interest or other payment with respect to the Senior Notes
(including, without limitation, any prepayment, redemption, purchase,
retirement or other acquisition), or set aside any sum for such purposes,
except that the Borrower may pay scheduled interest payments on the Senior
Notes.
(b) Permit any amendments, modifications or other changes to be made
with respect to the Senior Notes or the Senior Note Indenture without the
prior consent of the Required Banks.
SECTION 6.08. Leasebacks. Enter into, or permit any of its
Subsidiaries to enter into, any arrangement with any financial institution
or other lender or investor providing for the leasing to the Borrower or any
Subsidiary of property which at the time has been or is to be sold or
transferred by the Borrower or any Subsidiary to such lender or investor,
except for (a) any such sale and leaseback transaction which relates solely
to a new store acquired, opened or constructed by the Borrower after the
date hereof and is entered into on or before the expiration of 24 months
after such store is first opened for business to the general public and (b)
sale and leaseback transactions (other than those referred to in clause (a)
above) where the aggregate fair market value of all property subject to such
transactions occurring on or after the date hereof would exceed Twenty Five
Million Dollars ($25,000,000).
SECTION 6.09. Transactions with Affiliates. Sell or transfer any
assets to, or purchase or acquire any assets of, or otherwise engage in any
material transaction with, or permit any Affiliate to sell or transfer
assets to, or purchase or acquire any assets of, or otherwise engage in any
other material transaction with any other Affiliate except (a) in the
ordinary course of business, (b) in all cases, upon fair and reasonable
terms no less favorable than the Borrower or any of its Subsidiaries could
obtain or could become entitled to in an arm's-length transaction with a
Person which was not an Affiliate, and (c) only if no Event of Default or
Potential Default shall have occurred and be continuing.
SECTION 6.10. Line of Business. Engage, or permit any of its
Subsidiaries to engage, directly or indirectly, in any business that is
substantially different from or not connected with the business in which the
Borrower is presently engaged.
SECTION 6.11. Activities of Subsidiaries. Permit any of its
Subsidiaries (a) to engage in the operation of any business or own or hold
any assets in its name or (b) to incur or suffer to exist any Indebtedness
or issue any preferred stock, except that BOGOs may operate stores in its
own name and own assets and incur Indebtedness to the Borrower and its
employees in the ordinary course of business in connection therewith.
SECTION 6.12. Fiscal Year, Accounting. Change its fiscal year or
method of accounting (other than immaterial changes and methods) except as
required by generally accepted accounting principles, the Internal Revenue
Service or the Code.
SECTION 6.13. Limitations on Sale of Assets. Permit or place, or
permit any of its Subsidiaries to permit or place, any material restriction,
directly or indirectly, on the sale, pledge, transfer or other disposition
of any asset, including any stock (other than such restrictions as
ordinarily appear in contracts entered into in the ordinary course of
business, examples of which include restrictions on the ability to assign
leases or contract rights and obligations).
SECTION 6.14. Capital Expenditures. (a) Commencing with the fiscal
quarter ending April 30, 1994 and for each fiscal quarter thereafter, permit
the aggregate Capital Expenditures for the four most recent fiscal quarters
to exceed the amount specified below with respect to the Fixed Charge
Coverage Ratio for such four fiscal quarters:
Fixed Charge Maximum Aggregate
Coverage Ratio Capital Expenditures
Greater than or equal to 2.10 $40,000,000
Greater than or equal to 2.00 $36,000,000
and less than 2.10
Greater than or equal to 1.85 $32,000,000
and less than 2.00
Greater than or equal to 1.80 $30,000,000
and less than 1.85
For purposes of computing aggregate Capital Expenditures under this
paragraph (a), (i) all Capital Expenditures made during each quarter of the
fiscal year ending January 29, 1994 shall be multiplied by 0.8 and (ii) all
Carryover Capital Expenditures (as hereinafter defined) shall be excluded.
(b) Permit the Capital Expenditures for the fiscal year ending
January 29, 1994 to exceed $50,000,000.
(c) Permit Capital Expenditures for any fiscal year to be less than
$15,000,000.
(d) To the extent that the aggregate Capital Expenditures computed
as of the end of the last quarter of any fiscal year are less than the
Maximum Expenditures for such year, Capital Expenditures in an amount equal
to such deficiency may be made in subsequent years in excess of the maximum
Capital Expenditures otherwise permissible in such subsequent years
("Carryover Capital Expenditures"); provided, however that in no event shall
the Capital Expenditures for any fiscal year exceed $50,000,000. For
purposes hereof, the "Maximum Expenditures" shall mean, with respect to any
fiscal year, (i) for the fiscal year ending January 29, 1994, $50,000,000,
and (ii) for each fiscal year thereafter, the maximum aggregate Capital
Expenditures permitted under paragraph (a) above computed as of the end of
the last quarter of such fiscal year for the four fiscal quarters comprising
such fiscal year.
SECTION 6.15. Leverage Ratio. Permit the Leverage Ratio to equal or
exceed (a) 2.75 at the end of any quarter during the fiscal year ending
January 29, 1994 and (b) 2.50 at the end of any quarter thereafter.
SECTION 6.16. Tax Returns. File or consent to the filing of any
consolidated income tax return with any Person other than a consolidated
return for the Borrower and its existing Subsidiaries.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. Each of the following events shall
constitute an event of default ("Events of Default") hereunder:
(a) any representation or warranty made in connection with this
Agreement or the other Loan Documents or the Borrowings hereunder shall
prove to have been false or misleading in any material respect when made;
(b) default shall be made in the payment of any principal of any
Loan, when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise, and such default shall continue for a period of five
days;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or any other amount (other than an amount referred to in (b)
above) due under this Agreement, or the other Loan Documents, when and as
the same shall become due and payable, and such default shall continue for a
period of five days;
(d) default shall be made in the due observance of (i) any covenant,
condition or agreement on the part of the Borrower contained in Sections
5.01, 5.06, 5.07(f), 5.10, 5.15 or Article VI or (ii) any covenant,
condition or agreement on the part of the Borrower contained in Sections
5.11 through and including 5.14 and (with respect to the defaults referred
to in this clause (ii)) such default shall continue unremedied for a period
of five days;
(e) default shall be made in the due observance or performance of
any other covenant, condition or agreement to be observed or performed by
the Borrower pursuant to the terms of this Agreement or the other Loan
Documents and such default shall continue unremedied for a period of 30
days;
(f) the Borrower or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code or any other Federal or state bankruptcy,
insolvency or similar law, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any such proceeding or the
filing of any such petition, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator or similar official for the
Borrower or any of such Subsidiaries or for a substantial part of its
property or assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable generally, or
admit in writing its inability, to pay its debts as they become due or (vii)
take corporate action for the purpose of effecting any of the foregoing;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Borrower or any of its Subsidiaries or of a
substantial part of any of its property or assets, under Title 11 of the
United States Code or any other Federal or state bankruptcy, insolvency or
similar law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for the Borrower or any such Subsidiary or
for a substantial part of its property or (iii) the winding-up or
liquidation of the Borrower or any of its Subsidiaries; and such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall continue unstayed and in
effect for 60 days;
(h) an "Event of Default" shall occur under the Senior Note
Indenture;
(i) a default shall be made with respect to any Indebtedness of the
Borrower or any of its Subsidiaries if the effect of any such default shall
be to accelerate, or to permit the holder or obligee of any Indebtedness (or
any trustee or agent on behalf of such holder or obligee) to accelerate
(with or without notice or lapse of time or both), the maturity of
Indebtedness in an aggregate amount in excess of $1,000,000; or any payment
of principal or interest, regardless of amount, on any Indebtedness of the
Borrower or any of its Subsidiaries in an aggregate principal amount in
excess of $1,000,000 shall not be paid when due, whether at maturity, by
acceleration or otherwise (after giving effect to any period of grace
specified in the instrument evidencing or governing such Indebtedness);
(j) the Borrower or any of its Subsidiaries incurs or is reasonably
expected to incur an extraordinary pension liability (which shall include
any liability to a Pension Plan pursuant to Section 302(f) of ERISA, or to
the PBGC pursuant to Title IV of ERISA, or to any multi-employer plan, as
defined in Section 3(37) of ERISA, pursuant to subtitle E of Title IV of
ERISA, but shall not include routine liability for contributions to or PBGC
premiums respecting a Pension Plan to be paid in the ordinary course of
business) respecting one or more Pension Plans in an aggregate principal
amount in excess of $1,000,000;
(k) the Borrower or any ERISA Affiliate or any other Person
(including, but not limited to, the PBGC) announces or commences any action
to terminate any Pension Plan(s) if the aggregate amount of unfunded benefit
liabilities, as defined in Section 4001(a)(18) of ERISA, of all such Pension
Plans exceeds $1,000,000;
(l) a final judgment for the payment of money in excess of
$1,000,000 shall be rendered by a court or other tribunal against the
Borrower or any of its Subsidiaries and shall remain undischarged for a
period of 30 consecutive days during which execution of such judgment shall
not have been stayed effectively or final judgments for the payment of money
aggregating in excess of $1,000,000 shall be rendered against the Borrower
and its Subsidiaries and such judgments shall remain undischarged for a
period of 30 consecutive days during which execution of such judgments shall
not have been stayed effectively;
(m) a Change in Control shall have occurred or any Offer to Purchase
(as defined in the Senior Note Indenture) shall have been made; or
(n) the Security Agreement shall cease to be in full force and
effect, enforceable in accordance with its terms, or the Borrower shall
assert the invalidity of such instrument, or any security interest or lien
purported to be created thereby.
SECTION 7.02. Remedies Upon Default. Upon the occurrence of any
Event of Default (other than an event described in paragraph (f) or (g) of
Section 7.01), and at any time thereafter during the continuance of such
event, the Agent may, or upon the request of the Required Banks shall, by
written or telegraphic notice to the Borrower, take either or both of the
following actions at the same or different times: (i) terminate forthwith
the Commitment of the Banks hereunder and (ii) declare the Notes then
outstanding to be forthwith due and payable, whereupon (A) the principal of
the Notes, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrower accrued hereunder and under
the other Loan Documents, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which
are hereby expressly waived by the Borrower, anything contained herein or in
any Note or other Loan Document to the contrary notwithstanding and (B) the
Borrower shall pay to the Agent an amount equal to the current aggregate
Stated Amount of all outstanding Letters of Credit as cash collateral to
secure the obligations of the Borrower hereunder with respect to such
Letters of Credit. Upon the occurrence of any event described in paragraph
(f) or (g) of Section 7.01, (x) the Commitment of the Banks shall
automatically terminate, (y) the principal amount outstanding under the
Notes, together with all accrued interest thereon and any accrued unpaid
Fees and all other liabilities of the Borrower accrued hereunder and under
the other Loan Documents, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein
or in any Note or other Loan Document to the contrary notwithstanding and
(z) the Borrower shall pay to the Agent an amount equal to the current
aggregate Stated Amount of all outstanding Letters of Credit as cash
collateral to secure the obligations of the Borrower hereunder with respect
to such Letters of Credit.
ARTICLE VIII
THE AGENT AND CO-AGENTS
SECTION 8.01. Actions. Each Bank authorizes the Agent to act on
behalf of such Bank under this Agreement, the Notes, each Letter of Credit
and each other Loan Document and, in the absence of written instructions
from the Required Banks to the Agent (with respect to which the Agent agrees
that it will, subject to the last two sentences of this Section, comply
except as it shall otherwise determine in good faith upon advice of counsel
and shall have promptly notified all Banks) to the contrary, to exercise
such powers hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Bank agrees (which
agreement shall survive any termination of this Agreement) to reimburse the
Agent or the Co-Agents, pro rata according to such Bank's Percentage, for
all reasonable out-of-pocket expenses (including attorneys' fees) incurred
by the Agent or the Co-Agents hereunder or in connection herewith or in
enforcing the obligations of the Borrower under this Agreement, the Notes or
any other Loan Document for which the Agent and the Co-Agents are not
reimbursed by the Borrower. Each Bank shall indemnify and hold harmless the
Agent and each of the Co-Agents and their respective directors, officers,
employees and agents on demand, pro rata according to such Bank's
Percentage, from and against, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent or such Co-Agent in its capacity
as the Agent or a Co-Agent or any of them in any way relating to or arising
out of this Agreement, any Note, any Letter of Credit or any other Loan
Documents; provided, however, that no Bank shall be liable to the Agent or
either Co-Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements, resulting solely from the gross negligence or willful
misconduct of the Agent or such Co-Agent or any of its directors, officers,
employees or agents. The Agent shall not be required to take any action
under this Agreement, the Notes, or any other Loan Document, or to prosecute
or defend any suit in respect of this Agreement, the Notes, or any other
Loan Document, unless indemnified to its satisfaction by the Banks against
loss, costs, liability, and expense. If any indemnity furnished by the
Banks to the Agent or Co-Agents shall become impaired, the Agent or the Co-
Agents may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given.
SECTION 8.02. Fees. The Borrower shall pay the Agent for its
individual account for its services hereunder agent fees in the amounts and
on the dates provided for in the Agent Letter. The Banks other than the
Agent shall have no interest in any fees described in this Section.
SECTION 8.03. Exculpation. Neither the Agent or either Co-Agent, nor
any of their respective directors, officers, employees, or agents shall be
liable to any Bank for any action taken or omitted to be taken by it or them
under this Agreement, any Note, any Letter of Credit, or any other Loan
Document, or in connection herewith or therewith, except for its or their
own willful misconduct or gross negligence, nor be responsible for any
recitals, representations or warranties herein or therein or in any
certificate, financial statement or other document referred to or provided
for in, or received by the Agent or such Co-Agent under or in connection
with, this Agreement or any other Loan Document, nor for the effectiveness,
enforceability, validity, due execution, genuineness or validity of this
Agreement, any Note, or any other Loan Document, nor for any failure of the
Borrower to perform its obligations hereunder or thereunder, nor for the
failure to make any inquiry respecting the observance or performance by the
Borrower of its obligations hereunder or thereunder. The Agent and each of
the Co-Agents shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement, or
writing which it believes to be genuine and to have been presented by a
proper Person.
SECTION 8.04. Successor. The Agent may resign as such at any time
upon at least 30 days' prior written notice to the Borrower and all the
Banks. If the Agent at any time shall resign, the Required Banks may, with
the consent of the Borrower (which consent shall not be unreasonably
withheld), appoint another Bank as a successor Agent which shall thereupon
become the Agent hereunder. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving notice of resignation, then
the retiring Agent may, on behalf of the Banks, with the consent of the
Borrower (which consent shall not be unreasonably withheld), appoint a
successor Agent, which shall be a commercial bank organized under the laws
of the United States of America or of any State thereof and having a
combined capital and surplus of at least $50,000,000. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall be entitled to receive from the prior Agent such documents of
transfer and assignment as such successor Agent may reasonably request, and
shall thereupon succeed to and become vested with all rights, powers,
privileges, and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations under this Agreement. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent.
SECTION 8.05. Loans by the Agent or Co-Agents. The Agent and each of
the Co-Agents, in its capacity as a Bank hereunder or otherwise, shall have
the same rights and powers with respect to the Loans made (and the Notes
held), by it or any of its Affiliates as any Bank and may exercise the same
as if it were not also the Agent or a Co-Agent. The Agent and each of the
Co-Agents and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Affiliate
thereof as if it were not the Agent or a Co-Agent.
SECTION 8.06. Credit Decisions. Each Bank acknowledges that it has,
independently of the Agent or either Co-Agent and each other Bank and based
on the financial information referred to in Sections 3.05 and 5.06 and such
other documents, information and investigations as it has deemed
appropriate, made its own credit decision to extend its commitment
hereunder. Each Bank also acknowledges that it will, independently of the
Agent or either Co-Agent, and each other Bank and based on such other
documents, information, and investigations as it shall deem appropriate at
any time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and-privileges available to it under
this Agreement or any other Loan Document.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. (a) Unless otherwise specified herein, all
notices and other communications provided for herein shall be in writing and
shall be delivered or mailed, by certified or registered mail (or in the
case of telegraphic communication, delivered by telex, graphic scanning or
other telegraphic communications equipment) addressed:
(i) if to the Borrower:
Route 67 and Knoxville Road
Milan, Illinois 61264
Attention: Herbert T. Dotterer
Vice President - Finance
and Chief Financial Officer
(Telephone: (309) 787-7700)
(Telecopy: (309) 787-7895)
with a copy to Odyssey:
31 West 52nd Street
New York, New York 10019
Attention: Mr. Salem D. Shuchman
(Telephone: (212) 708-0600)
(Telecopy: (212) 708-0750)
(ii) if to the Agent or CNCA as Co-Agent:
55 East Monroe Street
Chicago, Illinois 60603
Attention: Shonagh Aylsworth
(Telephone: (312) 372-9200)
(Telex: 190063 AGRICO UT)
(Telecopy: (312) 726-7670)
(iii) if to FNBC as Co-Agent:
One First National Plaza
Suite 0086
Chicago, Illinois 60670
Attention: Tara J. Walker
Vice President
(Telephone: (312) 732-7473)
(Telex: 4330253 FNBCUI)
(Telecopy: (312) 732-1117)
(iv) if to a Bank, to an address specified on the signature
pages hereto.
(b) All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be deemed to have
been given on the date of receipt, in each case addressed to such party as
provided in this Section or in accordance with the latest unrevoked
direction from such party.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower herein and in the other
Loan Documents shall be considered to have been relied upon by the Banks and
shall survive the making by the Banks of Loans and the execution and
delivery to the Banks of the Notes evidencing such Loans and the issuance by
the Issuing Bank of any Letter of Credit and shall continue in full force
and effect as long as the principal of or any accrued interest on any Note
or any Fees or any other fee or amount payable under the Notes, this
Agreement, or the other Loan Documents is outstanding and unpaid and so long
as the Commitment has not been terminated and so long as any Letter of
Credit is outstanding.
SECTION 9.03. Successors and Assigns. (a) Whenever in this Agreement
or any other Loan Document any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such
party; provided however, that the Borrower may not assign or delegate any of
its duties, obligations or responsibilities hereunder or under the Notes or
any other Loan Document without the prior written consent of the Required
Banks. All covenants, promises and agreements by or on behalf of the
Borrower which are contained in this Agreement or any other Loan Document to
which the Borrower is a party shall inure to the benefit of the successors
and assigns of the Agent, the Co-Agents and the Banks.
(b) Each Bank may assign to one or more banks or other
financial institutions regularly engaged in making or acquiring loans all or
a portion of its interest, rights and obligations under this Agreement
(including all or a portion of its Commitment hereunder and the Loans at the
time owing to it and the Notes held by it); provided, however, that (i)
except in the case of an assignment to a Bank or an Affiliate of a Bank, the
Borrower and the Agent must consent to such assignment (which consent shall
not be unreasonably withheld), (ii) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights
and obligations under this Agreement, (iii) the aggregate amount of the
Loans and Commitment of the assigning Bank subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to
such assignment is delivered to the Agent) shall not be less than
$3,000,000, (iv) the parties to each such assignment shall execute and
deliver to the Agent an Assignment and Acceptance, together with the Notes
subject to such assignment and a processing and recordation fee of $2,000
and (v) in no event shall the sum of the commitments held by CNCA and FNBC
be less than 51% of the Commitment after giving effect to any such
assignment. Upon acceptance and recording pursuant to paragraph (d) of this
Section 9.03, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five Business Days
after the execution thereof, (A) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have
the rights and obligations of a Bank under this Agreement and (B) the
assigning Bank thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under this Agreement, such Bank
shall cease to be a party hereto).
(c) By executing and delivering an Assignment and
Acceptance, the assigning Bank thereunder and the assignee thereunder shall
be deemed to confirm to and agree with each other and the other parties
hereto as follows: (i) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document; (ii) such
assigning Bank makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or
the performance or observance by the Borrower of any of its obligations
under this Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.06 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will independently and without reliance upon the Agent or
either Co-Agent, such assigning Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on it behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement are required to be
performed by it as a Bank.
(d) The Agent shall maintain at its office in the City
of Chicago, Illinois a copy of each Assignment and Acceptance delivered to
it and a register for the recordation of the names and addresses of the
Banks, and the Percentage and portion of the Commitment of, and principal
amount of the Loans owing to, each Bank pursuant to the terms hereof from
time to time (the "Register"). The entries in the Register shall be
conclusive in the absence of manifest error and the Borrower, the Agent and
the Banks may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower
and any Bank, at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Bank and assignee together with the
Notes subject to such assignment and the processing and recording fee
referred to in paragraph (b) above, the Agent shall (subject to the consents
to such assignment, if required by paragraph (b) above), (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in
the Register and, with respect to any Assignment and Acceptance and
allocation of commitments under this Agreement by the Agent, record such
information on Schedule 1.01B hereto and (iii) give prompt notice thereof to
the Borrower and the Banks. Within five Business Days after receipt of
notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered Note, a new Note to the order of such
assignee in a principal amount equal to the applicable Percentage assumed by
it pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained a Percentage, a new Note to the order of such assigning Bank in a
principal amount equal to the applicable Percentage retained by it. Such
new Note shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note; such new Note shall be dated the
date of the surrendered Note which it replaces and shall otherwise be in
substantially the form of Exhibit A hereto. Each canceled Note shall be
returned to the Borrower.
(f) Each Bank may without the consent of the Borrower or
the Agent or the Co-Agents sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its commitment hereunder and the
Loans owing to it and the Notes held by it); provided however, that (i) such
Bank's obligations under this Agreement shall remain unchanged, (ii) such
Bank shall remain solely responsible to the Borrower for the performance of
such obligations, (iii) no such grant of a participation shall, without the
consent of the Borrower, require the Borrower to file a registration
statement with the Securities and Exchange Commission or apply to qualify
the Loans or the Notes under the blue sky laws of any State, (iv) the
participating banks or other entities shall be entitled to the benefit of
the cost protection provisions contained in Sections 2.14 through 2.17 and
2.19 and set-off provision in Section 9.05 to the same extent that the Bank
from which such participating bank or other entity acquired its
participation would be entitled to the benefit of such provisions had such
Bank not sold such participation(s) (but only to the extent that the
participating bank continues to satisfy any and all conditions of such
provisions) and (v) the Borrower shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations under
this Agreement, and such Bank shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans and to approve any
amendment, modification or waiver or any provision of this Agreement (other
than amendments, modifications or waivers with respect to any Fees payable
hereunder or the amount of principal of or the rate at which interest is
payable on the Loans, or the extension of fixed maturity of principal of or
interest on the Loans.)
SECTION 9.04. Expenses of the Agent and the Banks; Indemnity. (a)
The Borrower agrees to pay all out-of-pocket expenses reasonably incurred by
the Agent and the Co-Agents in connection with the preparation and
administration of this Agreement and the other Loan Documents, the issuance
of any Letter of Credit or with any amendments, modifications or waivers of
the provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or reasonably incurred by the Agent or
any Bank in connection with the enforcement or protection of its rights in
connection with this Agreement or the other Loan Documents or with the Loans
made or the Notes or Letters of Credit issued hereunder, including, but not
limited to, the reasonable fees and disbursements of counsel for the Agent.
The Borrower further agrees that it shall indemnify each Bank from and hold
it harmless against any documentary taxes, assessments or charges made by
any governmental authority by reason of the execution and delivery of this
Agreement or any of the other Loan Documents.
(b) The Borrower agrees to defend and indemnify each Bank and its
directors, officers, employees and agents against, and to hold such Bank and
such persons harmless from, any and all losses, claims, damages,
settlements, fines, penalties, liabilities and related expenses, including
reasonable counsel and consultants' fees and expenses, incurred by or
asserted against such Bank or any such persons arising out of, in any way
connected with, or as a result of (i) this Agreement or the other Loan
Documents, the performance by the parties hereto and thereto of their
respective obligations hereunder and thereunder (including but not limited
to the making of the Commitment) and consummation of the transactions
contemplated hereby and thereby, (ii) the execution and delivery or transfer
of, or payment or failure to pay under, any Letter of Credit, or (iii) any
claim, litigation, investigation or proceedings relating to any of the
foregoing, whether or not such Bank or any such person is a party thereto,
(iv) the presence, disposal, spillage, discharge, transporting, emission,
leakage, release or threatened release ("Presence or Release") of any
Hazardous Materials which is at, in, on, under, about, from or affecting the
Borrower's Properties, including any damage or injury resulting from any
such Hazardous Materials to or affecting the Borrower's Properties or the
soil, water, air, vegetation, buildings, personal property, persons or
animals located on the Borrower's Properties or on any other property or
otherwise, regardless of the source of such Presence or Release or when such
Presence or Release occurred or is discovered, (v) any personal injury
(including wrongful death) or property damage (real or personal) arising out
of or related to any such Hazardous Materials, (vi) any lawsuit brought or
threatened, settlement reached, or order or directive of or by any
governmental authority relating to such Hazardous Materials, and (vii) any
violation of any Hazardous Substance Law; provided, however, that such
indemnity shall not, as to any Bank, apply to any such losses, claims,
damages, liabilities or related expenses arising from (A) the gross
negligence or wilful misconduct of such Bank or (B) the matters described in
clauses (A) and (B) of Section 2A.09(b).
(c) The provisions of this Section shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the other Loan Documents, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the invalidity or
unenforceability of any term or provision of this Agreement or any of the
other Loan Documents, or any investigation made by or on behalf of any Bank.
All amounts due under this Section shall be payable on written demand
therefor.
SECTION 9.05. Right of Setoff. Each Bank is hereby authorized at any
time and from time to time after the occurrence and during the continuance
of an Event of Default to setoff and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the
account of the Borrower now or hereafter existing under this Agreement and
the Notes held by such Bank, irrespective of whether or not such Bank shall
have made any demand under this Agreement or any of the other Loan Documents
and although such obligations may be unmatured. Each Bank agrees promptly
to notify the Borrower after any such setoff and application made by such
Bank, but the failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Banks under this Section are
in addition to other rights and remedies (including, without limitation,
other rights of setoff) which any Bank may have under applicable law.
SECTION 9.06. Applicable Law. This Agreement and the Notes shall be
construed in accordance with and governed by the laws of the State of
Illinois without giving effect to the choice of law doctrine.
SECTION 9.07. Waivers, Amendments. (a) No failure or delay of either
Co-Agent or any Bank in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and
remedies of the Agent, each Co-Agent and the Banks hereunder are cumulative
and not exclusive of any rights or remedies which they would otherwise have.
No waiver of any provision of this Agreement or the Notes or consent to any
departure by the Borrower therefrom shall in any event be effective unless
the same shall be authorized as provided in paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Banks; provided, however, that
no such agreement shall (i) change the principal amount of, or extend or
advance the maturity of or any date for the payment of any principal of or
interest on, any Loan or any payment due under Section 2A.06, or waive or
excuse any such payment or any part thereof, or change the rate of interest
on any Loan or the rate of interest provided for under Section 2A.06, (ii)
increase the commitment of any Bank hereunder without the written consent of
such Bank, or change the Commitment Fees or the fees payable under Section
2A.03 without the written consent of each Bank, (iii) extend the Maturity
Date or (iv) amend or modify the provisions of this Section, Sections 2.14
through 2.17 and 2.19, Section 9.04 or the definition of "Required Banks,"
without the written consent of each Bank or amend, modify or otherwise
affect the rights or duties of the Agent hereunder without the written
consent of the Agent. Notwithstanding the foregoing, the Agent may amend
Schedule 1.01B hereto to reflect assignments made pursuant to Section 9.03
without the consent of any other party hereto.
(c) Each holder of any of the Notes shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or
not such Note shall have been marked to indicate such amendment,
modification, waiver or consent.
SECTION 9.08. Severability. In the event any one or more of the
provisions contained in this Agreement or in the Notes should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall
not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close
as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.09. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement, and shall
become effective when copies hereof which, when taken together, bear the
signatures of each of the parties hereto shall be delivered or mailed to the
Agent and the Borrower.
SECTION 9.10. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only and are not to
affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 9.11. Consent to Jurisdiction. The Borrower hereby
irrevocably agrees that any suit, action, proceeding or claim ("proceeding")
against it arising out of or in any way relating to this Agreement or any of
the other Loan Documents, or any judgment entered by any court in respect
thereof, may be brought or enforced in the Courts of the United States of
America for the Northern District of Illinois or the State of Illinois
located in Chicago, as the case may be, and the Borrower hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may
now or hereafter have to the venue of any proceeding brought in any such
court and further irrevocably waives any claims that any such proceeding has
been brought in an inconvenient forum.
SECTION 9.12. Prior Agreements. This Agreement and the other Loan
Documents encompass all agreements between or among the Borrower, any Bank
and the Agent relating to the subject matter hereof and supersede all prior
agreements and understandings between or among the Borrower, any Bank and
the Agent relating hereto.
SECTION 9.13. Remedies Cumulative. No right, power or remedy herein
conferred upon or reserved to the Agent, the Co-Agents or any Bank is
intended to be exclusive of any other right, power or remedy, and each and
every right, power and remedy of the Agent, the Co-Agents or any Bank
pursuant to this Agreement or any other Loan Document or now or hereafter
existing at law or in equity or by statute or otherwise shall, to the extent
permitted by law, be cumulative and concurrent and shall be in addition to
every other right, power or remedy pursuant to this Agreement or any other
Loan Document or now or hereafter existing at law or in equity or by statute
or otherwise, and the exercise or beginning of the exercise by the Agent,
the Co-Agents or any Bank of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by the Agent,
the Co-Agents or any Bank of any or all such other rights, powers or
remedies.
SECTION 9.14. Waiver of Jury Trial. Each party hereto hereby waives,
to the fullest extent permitted by applicable law, any right it may have to
a trial by jury in respect of any litigation directly or indirectly arising
out of, under or in connection with this Agreement or any other Loan
Document. Each party hereto (a) certifies that no representative or
attorney of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto
have been induced to enter into this Agreement and the other Loan Documents,
as applicable, by, among other things, the mutual waivers and certifications
in this Section.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers, all as of the day and year
first above written.
EAGLE FOOD CENTERS, INC.
By:/s/Herbert T. Dotterer
Title Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE
CHICAGO BRANCH, as Agent
By:/s/ David Bouhl
Title Head of Corporate Banking
CAISSE NATIONALE DE CREDIT AGRICOLE, as
Co-Agent and Bank
By: /s/ David Bouhl
Title Head of Corporate Banking
THE FIRST NATIONAL BANK OF CHICAGO, as Co-
Agent and a Bank
By: Tara J. Walker
Title Vice President
CREDIT AGREEMENT
Dated as of April 26, 1993
Among
EAGLE FOOD CENTERS, INC.,
CAISSE NATIONALE DE CREDIT AGRICOLE,
and THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agents
and
CAISSE NATIONALE DE CREDIT AGRICOLE,
Chicago Branch,
as the Agent
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . 1
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms. . . . . . . . . . . . . . . . . . . . 14
ARTICLE II
THE LOANS . . . . . . . . . . . . . . 14
SECTION 2.01. Commitment. . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.03. Notice of Borrowings. . . . . . . . . . . . . . . . . . 15
SECTION 2.04. Loan Repayment. . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.05. Termination and Reduction of Commitments. . . . . . . . 16
SECTION 2.06. Conversion and Continuation of Loans. . . . . . . . . . 16
SECTION 2.07. Notes . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.08. Interest on Loans . . . . . . . . . . . . . . . . . . . 17
SECTION 2.09. Interest on Overdue Amounts . . . . . . . . . . . . . . 18
SECTION 2.10. Prepayment of Loans . . . . . . . . . . . . . . . . . . 18
SECTION 2.11. Payments. . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.12. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.13. LIBOR Deposits Unavailable. . . . . . . . . . . . . . . 19
SECTION 2.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.15. Change in Law . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.16. Change in Legality. . . . . . . . . . . . . . . . . . . 22
SECTION 2.17. Funding Losses. . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.18. Pro Rata Treatment. . . . . . . . . . . . . . . . . . . 24
SECTION 2.19. Sharing of Setoffs. . . . . . . . . . . . . . . . . . . 24
ARTICLE IIA
LETTERS OF CREDIT . . . . . . . . . . . . 24
SECTION 2A.01. Commitment to Issue Letters of Credit . . . . . . . . . 24
SECTION 2A.02. Requests for Issuance of Letters of Credit. . . . . . . 25
SECTION 2A.03. Letter of Credit Fees . . . . . . . . . . . . . . . . . 25
SECTION 2A.04. Participating Interests . . . . . . . . . . . . . . . . 25
SECTION 2A.05. Procedure for Issuance of Letters of Credit . . . . . . 26
SECTION 2A.06. Payments. . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2A.07. Further Assurances. . . . . . . . . . . . . . . . . . . 26
SECTION 2A.08. Unavailability and Market Conditions. . . . . . . . . . 26
SECTION 2A.09. Obligations Absolute. . . . . . . . . . . . . . . . . . 26
SECTION 2A.10. Letter of Credit Application. . . . . . . . . . . . . . 27
SECTION 2A.11. Role of Issuing Banks . . . . . . . . . . . . . . . . . 28
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . 28
SECTION 3.01. Organization; Powers. . . . . . . . . . . . . . . . . . 28
SECTION 3.02. Authorization . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.03. Governmental Approval . . . . . . . . . . . . . . . . . 29
SECTION 3.04. Enforceability. . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.05. Financial Statements. . . . . . . . . . . . . . . . . . 29
SECTION 3.06. No Material Adverse Change. . . . . . . . . . . . . . . 30
SECTION 3.07. Title to Properties; Possession Under Lease . . . . . . 30
SECTION 3.08. Litigation. . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.09. Compliance with Laws. . . . . . . . . . . . . . . . . . 30
SECTION 3.10. Hazardous Materials . . . . . . . . . . . . . . . . . . 31
SECTION 3.11. Federal Reserve Regulations . . . . . . . . . . . . . . 31
SECTION 3.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.13. ERISA Matters . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.14. Labor Relations . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.15. Investment Company Act; Public
Utility Holding Company Act . . . . . . . . . . . . . . 33
SECTION 3.16. Security Interests. . . . . . . . . . . . . . . . . . . 33
SECTION 3.17. Trademarks and Licenses.. . . . . . . . . . . . . . . . 33
SECTION 3.18 Solvency. . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.19. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.20. No Material Misstatements . . . . . . . . . . . . . . . 34
ARTICLE IV
CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . . . 34
SECTION 4.01. All Loans and Letters of Credit . . . . . . . . . . . . 34
SECTION 4.02. First Loan. . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
AFFIRMATIVE COVENANTS . . . . . . . . . . . 36
SECTION 5.01. Existence . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.02. Businesses and Properties . . . . . . . . . . . . . . . 36
SECTION 5.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.04. Obligations and Taxes . . . . . . . . . . . . . . . . . 37
SECTION 5.05. Hazardous Substance Laws. . . . . . . . . . . . . . . . 37
SECTION 5.06. Financial Statements, Reports, etc. . . . . . . . . . . 38
SECTION 5.07. Litigation and Other Notices. . . . . . . . . . . . . . 39
SECTION 5.08. Compliance with ERISA and Funding of Pension Plans. . . 41
SECTION 5.09. Maintaining Records; Access to Properties and Inspections 41
SECTION 5.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.11. Ownership of Inventory. . . . . . . . . . . . . . . . . 41
SECTION 5.12. Tangible Net Worth. . . . . . . . . . . . . . . . . . . 41
SECTION 5.13. Current Ratio . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.14. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . 42
SECTION 5.15. Clean-Up of Loans . . . . . . . . . . . . . . . . . . . 42
SECTION 5.16. Landlord Waivers. . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . . 42
SECTION 6.01. Indebtedness. . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.02. Negative Pledge . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.03. Sale of Assets. . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.04. Consolidations and Mergers. . . . . . . . . . . . . . . 44
SECTION 6.05. Investments, Loans and Advances . . . . . . . . . . . . 44
SECTION 6.06. Restricted Payments . . . . . . . . . . . . . . . . . . 45
SECTION 6.07. Senior Notes. . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.08. Leasebacks. . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.09. Transactions with Affiliates. . . . . . . . . . . . . . 45
SECTION 6.10. Line of Business. . . . . . . . . . . . . . . . . . . . 46
SECTION 6.11. Activities of Subsidiaries. . . . . . . . . . . . . . . 46
SECTION 6.12. Fiscal Year, Accounting . . . . . . . . . . . . . . . . 46
SECTION 6.13. Limitations on Sale of Assets . . . . . . . . . . . . . 46
SECTION 6.14. Capital Expenditures. . . . . . . . . . . . . . . . . . 46
SECTION 6.15. Leverage Ratio. . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.16. Tax Returns . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
DEFAULTS. . . . . . . . . . . . . . . 47
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . 47
SECTION 7.02. Remedies Upon Default . . . . . . . . . . . . . . . . . 49
ARTICLE VIII
THE AGENT AND CO-AGENTS. . . . . . . . . . . 50
SECTION 8.01. Actions . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.02. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.03. Exculpation . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.04. Successor . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.05. Loans by the Agent or Co-Agents . . . . . . . . . . . . 51
SECTION 8.06. Credit Decisions. . . . . . . . . . . . . . . . . . . . 52
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . 52
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.02. Survival of Agreement . . . . . . . . . . . . . . . . . 53
SECTION 9.03. Successors and Assigns. . . . . . . . . . . . . . . . . 53
SECTION 9.04. Expenses of the Agent and the Banks; Indemnity. . . . . 56
SECTION 9.05. Right of Setoff . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.06. Applicable Law. . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.07. Waivers, Amendments . . . . . . . . . . . . . . . . . . 57
SECTION 9.08. Severability. . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.09. Counterparts. . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.10. Headings. . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.11. Consent to Jurisdiction . . . . . . . . . . . . . . . . 58
SECTION 9.12. Prior Agreements. . . . . . . . . . . . . . . . . . . . 59
SECTION 9.13. Remedies Cumulative . . . . . . . . . . . . . . . . . . 59
SECTION 9.14. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . 59
Exhibits
Form of Note Exhibit A
Form of Borrowing Notice Exhibit B
Form of Security Agreement Exhibit C
Form of Assignment and Acceptance Exhibit D
Form of Opinion of Borrower's Counsel Exhibit E
Form of Reliance Letter Exhibit F
Schedules
Schedule 1.01A Existing Letters of Credit
Schedule 1.01B Bank Percentages
Schedule 3.05(b) Material Liabilities
Schedule 3.05(c) Pro Forma Financials
Schedule 3.07(b) Iowa Properties
Schedule 3.07(c) Title to Properties
Schedule 3.17 Trademarks and Licenses
Schedule 3.19 Subsidiaries and Business
Schedule 4.02(f) Counties
Schedule 5.06(i) Inventory Report
Schedule 6.01(c) Capital Leases
Schedule 6.02(d) Existing Liens
SCHEDULE 1.01A
Existing Letters of Credit
LC#
ISSUE
EXPIRY
AUTO-EXTENDED
TOTAL AMOUNT
30012 - Stdby
01/05/90
10/31/93
Yes
3,071,169.00
30077 - Stdby
10/31/90
07/31/93
Yes
3,683,000.00
30173 - Stdby
12/14/92
07/31/94
Yes
1,438,500.00
20088 - Doc
12/29/92
04/30/93
No
425,463.60
Total Aggregate $ 8,618,132.60
SCHEDULE 1.01B
Bank Percentages
Percentage
50.00%
CAISSE NATIONALE DE CREDIT AGRICOLE
55 East Monroe Street
Chicago, Illinois 60603
Telecopy: (312) 726-7670
Telex: 190063 AGRICO UT
Attention: Shonagh Aylsworth
THE FIRST NATIONAL BANK OF CHICAGO
50.00%
One First National Plaza
Suite 0086
Chicago, Illinois 60602
Telecopy: (312) 732-1117
Telex: 4330253 FNBCUI
Attention: Tara J. Walker
SCHEDULE 3.05(b)
Material Liabilities
None
SCHEDULE 3.05(c)
Pro Forma Financials
SCHEDULE 3.07(b)
Iowa Leased Properties
SCHEDULE 3.07(c)
Title to Properties
NONE
SCHEDULE 3.17
Trademarks and Licenses
The Borrower received a letter dated October 28, 1992, from JBN
Enterprises, Inc. of Bethlehem, Pennsylvania, relative to the use of "BOGO's,"
which is the name of two stores currently operated by Borrower's wholly-owned
subsidiary, BOGO'S, INC., as an experimental format for the sale of a limited
assortment of grocery items. JBN Enterprises alleged it has used the mark
B-O-G-O in connection with mail order services for the sale of bulk foods,
drinks, nutritional supplements and cosmetics since at least May 1990, and
demanded the Borrower cease and desist using the mark on or before
November 11, 1992. The Borrower responded on November 5, 1992, by requesting
additional information regarding JBN Enterprises' use of its mark. Borrower
has received no further correspondence in this matter. The Borrower has a
pending federal service mark application. JBN Enterprises has registered the
mark.
SCHEDULE 3.19
Subsidiaries and Business
SCHEDULE 4.02(f)
Counties
Counties in which lien searches were conducted:
Illinois:
Bureau
Will
McHenry
Cook
Rock Island
Winnebago
Knox
Du Page
Lake
Stephenson
Logan
Iroquois
DeKalb
Henry
Ogle
Lee
Champaign
Macon
St. Claire
Kane
Kendall
Peoria
Sangamon
Kankakee
La Salle
Whiteside
Grundy
Morgan
Tazewell
McLean
Warren
Vermillion
Boone
McDonough
Iowa:
Boone
Scott
Des Moines
Dubuque
Clinton
Johnson
Indiana:
Lake
La Porte
Porter
SCHEDULE 5.06(i)
Inventory Report
SCHEDULE 6.01(c)
Capital Leases
Store #
Location
Capital Lease
Obligation 1/29/93
025
Waukegan, IL
$ 0
029
Lindenhurst, IL
1,346,386
086
Montgomery, IL
2,039,142
087
Carpentersville, IL
1,334,981
121
Portage, IN
893,585
145
Round Lake Beach, IL
976,686
230
Galesburg, IL
59,885
245
St. Charles, IL
253,902
256
Pekin, IL
306,260
259
Bloomington, IL
1,213,213
262
Crest Hill, IL
1,236,158
267
Aurora, IL
1,357,790
307
Davenport, IA
975,939
324
Orland Park, IL
929,787
326
Valparasio, IN
637,750
331/615
Niles, IL
1,342,527
332/616
Arlington Heights, IL
1,411,977
333/617
Lombard, IL
1,208,062
229/660
Cedar Rapids, IA
8,097
319/663
Cedar Falls, IA
890,072
IBM4680
Cedar Falls, IA
8,215,213
$18,422,199
SCHEDULE 6.02(d)
Existing Liens
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (this "Amendment"), dated as of this
15th day of October, 1993, is entered into among Eagle Food Centers, Inc., a
Delaware corportation (the "Borrower"), Caisse National De Credit Agricole
("CNCA") and The First National Bank of Chicago ("FNBC"), as co-agents (the
"Co-Agents"), the Banks (as hereafter defined), and CNCA, acting through its
Chicago Branch, as agents for the Banks (the "Agent").
WITNESSETH:
Whereas, the Borrower, certain lenders (the "Banks"), the Agent and the
Co-Agents are parties to a Credit agreement dated as of April 26, 1993 (the
"Credit Agreement"), pursuant to which the Banks established various credit
facilities for the benefit of the Borrower; and
Whereas, the parties hereto desire to amend the Credit Agreement with respect
to certain matters as hereafter specifically provided;
Now, therefore, the parties hereto agree as follows;
1. Unless otherwise specified herein, all capitalized terms used herein shall
have the meanings specified in the Credit Agreement.
2. The first sentence of Section 2A.03 of the Credit Agreement is hereby
amended and restated to read as follows:
The Borrower shall pay in advance to the applicable Issuing Bank a letter of
credit fronting fee of 0.25% of the Stated Amount of any Existing Letter of
Credit, payable on the Closing Date, and of 0.25% of each Letter of Credit
issued on or after the Closing Date, payable on the date of issuance of such
Letter of Credit.
3. Section 5.06(i) of the Credit Agreement is hereby amended and restated to
read as follows:
(i) within 45 days after the end of each fiscal quarter of the Borrower,
an inventory report in hte form of Schedule 5.06(i) hereto; and
4. Section 6.13 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 6.13. LIMITATIONS ON SALE OF ASSETS. Permit or place, or permit any
of its Subsidiaries to permit or place, any material restriction, directly or
indirectly, on the sale, pledge, transger of other disposition of any asset,
including any stock, other than (a) such restricitions as ordinarily appear
in contracts entered into in the ordinary course of business, examples of
which include restrictions on the ability to assign leases or contract rights
and obligations, (b) restrictions contained in the Senior Note Indenture as
in effect on the date hereof or as from time to time amended in accordance
with Section 6.07(b) hereof, and (c) restrictions contained in agreements
relating to (i) the sale and leaseback transactions permitted under Section
6.08 hereof and (ii) Capital Leases and mortgages permitted under Section
6.01 hereof, to the extent such restrictions relate solely to the property
subject to such sale and leaseback transaction, Capital Lease of mortgage.
5. Section 9.07(b) of the Credit Agreement is hereby amended by (a) adding
the words "(other than letter of credit fronting fees)" after the reverence to
Section 2A.03 in clause (ii) thereof, and (b) adding the following as the final
sentence thereof:
No provision of this Agreement regarding letter of credit fronting fees or
any rights of duties of an Issuing Bank shall be waive, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Borrower and the Issuing Banks.
6. Except as amended and modified by this Amendment, the Credit Agreement
shall continue in full force and effect.
7. This Amendment may be executed in one or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
8. This Amendment shall become effective when copies hereof which, when
taken together, bear the signature of the Borrower, the Agent, the Co-Agents
and all of the Banks shall be delivered or mailed to the Agent, the Co-Agents
and the Borrower.
9. This Amendment shallbe construed in accordance with and governed by the
laws of the State of Illinois withour giving effect to choice of law doctrine.
In Witness Whereof, the parties hereto have caused the Amendment to be duly
executed by their duly authorized officers, all as of the day and year first
written above.
EAGLE FOOD CENTERS, INC.
By: /s/ Herbert T. Dotterer
Title: Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Agent
By: /s/ David Bouhl
Title: Head of Corporate Banking
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Co-Agent and a Bank
By:/s/ David Bouhl
Title: Head of Corporate Banking
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent and a Bank
By: /s/John D. Runger
Title: Vice President
NATIONAL BANK OF CANADA
By:/s/
Title: Vice President
BERLINER HANDELS-UND
FRANKFURTER BANK
By:
Title: Vice President
NORWEST BANK IOWA, NATIONAL
ASSOCIATION, f/k/a
DAVENPORT BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By: Larry E. Brandt
Title: Vice President
SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER
This Second Amendment to Credit Agreement and Waiver (this "Amendment"),
dated as of this 28th day of January, 1994, is entered into among Eagle Food
Centers, Inc., a Delaware corporation (the "Borrower"), Caisse Nationale De
Credit Agricole ("CNCA") and The First National Bank of Chicago ("FNBC"), as
co-agents (the "Co-Agents"), the Banks (as hereafter defined), and CNCA, acting
through its Chicago Branch, as agent for the Banks (the "Agent").
WITNESSETH:
Whereas, the Borrower, certain lenders (the "Banks"), the Agent and the
Co-Agents are parties to a Credit Agreement dated as of April 26, 1993 as
amended by a First Amendment to Credit Agreement dated as of October 15, 1993
(the "Credit Agreement"), pursuant to which the Banks established various credit
facilities for the benefit of the Borrower; and
Whereas, the parties hereto desire to amend the Credit Agreement with
respect to certain matters as hereafter specificall provided;
Now, Therefore, the parties hereto agree as follows:
1. Unless otherwise specified herin, all capitalized terms used herein shall
have the meanings spedified in the Credit Agreement.
2. Section 5.12 of the Credit Agreement is hereby amedned by changing the
reference to "$69,000,000" in the introductory paragraph to "$55,000,000",
which change will lower the minimum Tangible Net Worth requirement for the
fourth quarter of the 1993 fiscal year.
3. Section 6.15 of the Credit Agreement is hereby amended and restated to
read in its entirety as follows:
SECTION 6.15 LEVERAGE RATIO. Permit the Leverage Ratio to equal or
exceed (a) 2.75 at the end of any of the first three fiscal quarters during
the fiscal year ending January 29, 1994, (b) 3.15 at the end of fiscal year
ending January 29, 1994 and (c) 2.50 at the end of any quarter thereafter.
4. The undersigned Banks hereby waive compliance with the provisions of
Section 6.03 of the Credit Agreement to the extent, and only to the extent
necessary permit the sale on or before February 28, 1994 for a purchase price
resulting in net cash proceeds of at least $450,000 of the stores listed in
Exhibit A hereto (the "Stores").
5. In order to induce the Banks and the Agent to enter into this Amendment,
the Borrower represents and warrants that:
(a) The execution and delivery of this Amendment by the Borrower and the
performance of the Credit Agreement as amended by this Amendment (the "Amended
Agreement") (i) have been duly authorized by all requisite corporate action and
(ii)will not (A)violate (1)any provision of the certificate of incorporation
or by-laws of the Borrower or any of its Subsidiaries or any provision of any
applicable law, statute, rule or regulation (including, without limitation,
Regulations G, T, U or X), (2) any order of any court, or any rule, regulation
or order of any other agency of government binding upon the Borrower or any of
it Subsidiaries or (3) any provisions of any indenture, agreement or other
instrument to which the Borrower or any of its Subsidiaries is a party, or by
which the Borrower or any of its Subsidiaries, or any of their respective
properties or assets is or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to in
clause (ii)(A)(3) above or (C) result in the creation or imposition of any Lien
(other than in favor of the Agent for the benefit of the Banks as contemplated
by the Amended Agreement) upon any property or assets of the Borrower or any
its Subsidiaries.
(b) No registration with or consent or approval of, or other action by,
any Federal, state or other governmental agency, authority or regulatory body
is or will be required in connection with the executor and delivery by the
Borrower of this Amendment or the performance by the Borrower of the Amended
Agreement.
(c) This Amendment and the Amended Agreement constitute legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting creditors' rights generally).
(d) The representations and warranties set forth in Article III of the
Credit Agreement are true and correct in all material respects with the same
effect as though made on and as of the date hereof, except to the extent that
any such representation or warranty relates to an earlier date.
(e) The Borrower is in compliance with all the terms and provisions
contained in the Credit Agreement and in other Loan Documents and the Senior
Note Indenture on its part to be observed or performed and no Event of Default
or Potential Default has occurred and is continuing.
(f) The aggregate book value of the Stores as of December 31, 1993 was
approxiametly $2,800,000.
6. Except as amended and modified by this Amendment, the Credit Agreement
shall continue in full force and effect.
7. This Amendment may be executed in ore or more counterparts, each of which
shall constitute an original but all of which when taken together shall
constitute but one agreement.
8. On the effective date of this Agreement, the Borrower shall pay to the
Agent an amendment fee payable to each Bank that executes a counterpart of this
Amendment prior to 5:00 P.M.(Chicago time) on January 28, 1994 in amount equal
to one-eighth of one percent (0.125%) of such Bank's Percentage of the
Commitment.
9. This Amendment shall become effective when copies (a) hereof which, when
taken together, bear the signatures of the Borrower and the Required Banks
shall be delivered or mailed to the Agent, (b) the Borrower shall have paid to
the Agent for distribution to the Banks the amendment fee specified in Paragraph
8 above, (c) the Borrower shall have delivered to the Agent resolutions of the
Board of Directors of the Borrower approving and authorizing the execution,
delivery and performance of this Amendment, certified by the Borrower's
secretary or an assistant secretary as being in full force and effect without
modification or amendment and (d) such other information, approvals, documents
or instruments as the Agent may reasonably request.
10. This Amendment shall be construed in accordance with and governed by the
lows of the State of Illinois without giving effect to choice of law doctrine.
IN WITNESS WHEREOF, the parties hereto have caused the Amendment to be duly
executed by their duly authorized officers, all as of the day and year first
written above.
Signatures
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement (this "Amendment"), dated as of
this 28th day of April, 1994 is entered into among Eagle Food Centers, Inc.,
a Delaware corporation (the "Borrower"), Caisse Nationale De Credit Agricole
("CNCA") and The First National Bank of Chicago ("FNBC"), as co-agents (the
"Co-Agents"), the Banks (as hereafter defined), and CNCA, acting through its
Chicago Branch, as agent for the Banks (the "Agent").
WITNESSETH:
Whereas, the Borrower, certain lenders (the "Banks"), the Agent and the
Co-Agents are parties to a Credit Agreement dated as of April 26, 1993, as
amended by a First Amendment to Credit Agreement dated as of October 15, 1993
and a Second Amendment to Credit Agreement and Waiver dated as of January 28,
1994 (the "Credit Agreement"), pursuant to which the Banks established various
credit facilities for the benefit of the Borrower; and
Whereas, the parties hereto desire to amend the Credit Agreement with
respect to certain matters as hereafter specifically provided;
Now, therefore, the parties hereto agree as follows:
1. Unless otherwise specified herein, all capitalized terms used herein shall
have the meanings specified in the Credit Agreement.
2. Section 1.01 of the Credit Agreement is hereby amended by adding the
following definitions in the appropriate alphabetical order:
"Borrowing Base" shall mean at any time the sum of (i) 50% of the
aggregate amount of inventory located in the Borower's warehouse at Route 67
and Knoxville Road, Milan, Illinois and (ii) 40% of the aggregate amount of
inventory located in the Borrower's stores or in transit to any of the
Borrower's stores, with the amount of all such inventory being computed on
the lower of cost (on a first-in, first-out basis) or fair market value.
"Employee Buyout Expenses" shall mean, with respect to any period, all
costs and expenses deducated in computing Net Income for such period with
respect to severance payments made on or before July 30, 1994 to members of
U.F.C.S. Locals 881 and 1540; provided, that the aggregate amount of Employee
Buyout Expenses may not exceed $8,000.00.
"Insurance Subsidiary" shall mean Talon Insurance Company, Inc., a
Vermont corporation that is wholly-owned subsidiary of the Borrower.
3. Section 1.01 of the Credit Agreement is hereby amended by adding the
following sentence to the end of the "EBITDA" definition contained therein:
Notwithstanding the foregoing, EBITDA for any period ending on or before
April 29, 1995 shall be increased by the aggregate amount of any
Employee Buyout Expenses applicable to such period.
4. Section 1.01 of the Credit Agreement is hereby amended by deleting
the words "the issuance of the Senior Notes and" from the parenthetical
contained in clause (iii) of the second sentence of such definition and by
adding the following sentence to the end of "Tanglible Net Worth" definition
contained therein:
Notwithstanding the foregoing, Tangible Net Worth at any time on or
before April 29, 1995 shall be increased by the aggregate amount of all
Employee Buyout Expenses applicable to any period ending on or before
the date of determination.
5. Section 2.01 (b) of the Credit Agreement is hereby amended and
restated to read as follows:
(b) Within the foregoing limits, the Borrower may borrow,
repay and reborrow, on or after the date hereof and prior to the
Maturity Date, all or any portion of the aggregate amount of the
Commitment subject to the terms, provisions, and limitations set
forth herein, including, without limitation, the requirement that
no Borrowing shall be made hereunder if after giving effect thereto
(i) the sum of (A) the aggregate principal amount of the Loans
outstanding hereunder plus (B) the aggregate Stated Amount of Letters
of Credit outstanding hereunder, would exceed (ii) he lesser of (A)
the amount of the Commitment, and (B) the Borrowing Base.
6. Section 2.10(b) of the Credit Agreement is hereby amended by
deleting the second sentence of such paragraph and adding the following
sentences immediately prior to the last sentence of such paragraph;
The Loans shall also be subject to prepayment (i) in accordance with
the terms and provisions of Section 6.03 hereof and (ii) on each date
and to the extent that (A) the sum of (1) the aggregate principal amount
of Loans outstanding hereunder plus (2) the aggregate Stated Amount of
Letters of Credit outstanding hereunder, exceeds (B) the Borrowing Base
on such date. At any time that the aggregate Stated Amount of Letters
of Credit outstanding hereunder, after payment in full of the
outstanding Loans, exceeds the Borrowing Base, the Borrower shall pay
to the Agent an amount equal to such excess as cash collateral to secure
the obligations of the Borrower hereunder with respect to such Letters
of Credit.
7. Section 2A.01 the Credit Agreement is hereby amended by restating
the proviso of the second sentence of such Section to read as follows:
; provided, that after giving effect to the issuance of each Letter
of Credit, (a) the sum of (i) the aggregate Stated Amount of Letters
of Credit outstanding hereunder plus (ii) the then aggregate
outstanding principal amount of the Loans, shall not exceed (b)
the lesser of (i) the aggregate amount of the Commitments and (ii)
the Borrowing Base on such date.
8. Section 4.01 of the Credit Agreement is hereby amended by adding the
following clause immediately prior to the last sentence of such Section:
(e) The Agent shall have received a certificate in a form acceptable
to it as to the Borrowing Base as of the most recent date inventory
information is available, which in no event will be more than [10] days
prior to the date such Loan is to be made or Letter of Credit issued.
9. Section 5.06(i) of the Credit Agreement is hereby amended and restated
to read as follows:
(i) within 30 days after the end of each month or accounting period,
as the case may be, an inventory report in the form of Schedule 5.06(i)
hereto;
10. Section 5.06 of the Credit Agreement is hereby amended by adding the
following clause to the end of such Section:
(k) As soon as available and in any event within 90 days after the
end of each fiscal year, projections in a form satisfactory to the Agent
(including projected consolidated balance sheets and consolidated income
statements and statements of cash flows) prepared by the Borrower for each
fiscal quarter of the current and the next two fiscal years, in each case
prepared in reasonable detail, with appropriate presentation and
discussion of the principal assumptions upon which such projections are
based.
11. Section 5.11 of the Credit Agreement is hereby amended and restated
to read as follows:
SECTION 5.11 Ownership of Inventory. At all times own in the name
of the Borrower all the inventory used in its business or in the business
of any of its Subsidiaries except that (a) BOGOs may own up to $2,000,000
of inventory and (b) the Borrower and its Subsidiaries may sell panty hose
and light bulbs on consignment.
12. Section 5.12 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 5.12 Tangible Net Worth. Maintain a Tangible Net Worth
at the end of the fiscal quarter or not less than (a) $55,000,000,
at all times to and including the end of the third fiscal quarter
of the 1994 fiscal year; (b) $57,000,000, thereafter to and including
the end of the third fiscal quarter of the 1995 fiscal year; (c)
$61,000,000, thereafter to and including the end of the third fiscal
quarter of the 1996 fiscal year; (d) $65,000,000, thereafter to and
including the end of the third fiscal quarter of the 1997 fiscal year;
and (e) $69,000,000, at all times thereafter. For the purposes hereof,
the 1994 fiscal year shall mean the fiscal year ending on January 28,
1995.
13. Section 5.14 of the Credit Agreement is hereby amended and restated
to read as follows:
SECTION 5.14. Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage Ratio at the end of each fiscal quarter of at least (a) 1.80:1
for all fiscal quarters ending on or before January 29, 1994 ad (b)
1.70:1 for all fiscal quarters ending thereafter.
14. Section 6.05 of the Credit Agreement is hereby amended by deleting
the "and" at the end of the clause (b) of such Section and adding the following
immediately prior to the end of such Section:
and (d) investments in an aggregate amount of up to $1,000,000 in the
Insurance Subsidiary.
15. Section 6.03 of the Credit Agreement is hereby amended by (a) changing
the reference to "$8,000,000" in clause (c) thereof to "$15,000,000" and (b)
changing the reference to $2,000,000" in clause (c) thereof to "$5,000,000."
16. Section 6.11 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 6.11. Activities of Subsidiaries. Permit any of its
Subsidiaries (a) to engage in the operation of any business or own
or hold any assets in its name or (b) to incur or suffer to exist
any Indebtedness or issue any preferred stock, except that (i) BOGOs
may operate stores in its own name and own assets and incur Indebtedness
to the Borrower and its employees in the ordinary course of business
in connection therewith (ii) the Insurance Subsidiary may provide
workmen's compensation, general liability and automobile insurance
coverage to the Borrower but not to any other Person.
17. Section 6.14(a) of the Credit Agreement is hereby amended by restating
the chart contained therein to read as follows:
Fixed Charge Coverage Ratio Maximum Aggregate Capital Expenditures
Greater than or equal to 2.10 $40,000,000
Greater than or equal to 2.00 $36,000,000
and less than 2.10
Greater than or equal to 1.85 $32,000,000
and less than 2.00
Greater than or equal to 1.70 $30,000,000
and less than 1.85
18. Section 6.14(d) of the Credit Agreement is hereby amended by amending
and restating the proviso at the end of the first sentence thereof to read as
follows:
; provided, however that in no event shall the Carryover Capital
Expenditures applied in any fiscal year exceed $5,000,000.
19. Section 6.15 of the Credit Agreement is hereby amended and restated
to read as follows:
SECTION 6.15 Leverage Ratio. Permit the Leverage Ratio to equal or
exceed 3.15 at the end of any quarter ending on or before January 28, 1995;
(b) 3.00 at the end of any quarter during the fiscal year ending
February 3, 1996; and (c) 2.75 at the end of any fiscal quarter thereafter.
20. In order to induce the Banks and the Agent to enter into this
Amendment, the Borrower represents and warrants that:
(a) The execution and delivery of this Amendment by the Borrower and
the performance of the Credit Agreement as amended by this Amendment (the
"Amended Agreement") (i) have been duly authorized by all requisite corporate
action and (ii) will not (A) violate (1) any provision of the certificate of
incorporation or by-laws of the Borrower or any of its Subsidiaries or any
provision of any applicable law, statute, rule or regulation (including, without
limitation, Regulations G, T, U or X), (2) any order of any court, or any rule,
regulation or order of any other agency of government binding upon the Borrower
or any of its Subsidiaries or (3) any provisions of any indenture, agreement or
other instrument to which the Borrower or any of its Subsidiaries is a party,
or by which the Borrower or any of its Subsidiaries, or any of their respective
properties or assets is or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to in
clause (ii)(A)(3) above or (C) result in the creation or imposition of any Lien
(other than in favor of the Agent for the benefit of the Banks as contemplated
by the Amended Agreement) upon any property or assets of the Borrower or any of
its Subsidiaries.
(b) No registration with or consent or approval of, or other action
by, any Federal, state or other governmental agency, authority or regulatory
body is or will be required in connection with the execution and delivery by
the Borrower of this Amendment or the performance by the Borrower of the Amended
Agreement.
(c) This Amendment and the Amended Agreement constitute legal, valid
and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights generally).
(d) The representations and warranties set forth in Article III of the
Credit Agreement are true and correct in all material respects with the same
effect as though made on and as of the date hereof, except to the extent that
any such representation or warranty relates to an earlier date.
(e) The Borrower is in compliance with all the terms and provisions
contained in the Credit Agreement and in other Loan Documents and the Senior
Note Indenture on its part to be observed or performed and no Event of Default
or Potential Default has occurred and is continuing.
21. Except as amended and modified by this Amendment, the Credit Agreemnt
shall continue in full force and effect.
22. This Amendment may be executed in one or more counterparts, each of
which shall constitute an original but all of which then taken together shall
constitute but one agreement.
23. On the effective date of this Amendment, the Borrower shall (a) pay
to the Agent an amendment fee payable to each Bank that executes a counterpart
of this Amendment prior to 5:00 P.M. (Chicago time) on April 29, 1994 in an
amount equal to one-quarter of one percent (0.25%) of such Bank's Percentage
of the Commitment and (b) pay to the Co-Agents such administration fees as have
been agreed to in writing by the Borrower.
24. This Amendment shall become effective when (a) copies hereof which,
when taken together, bear the signature of the Borrower and the Required Banks
shall be delivered or mailed to the Agent, (b) the Borrower shall have paid to
the Agent for distribution to the Banks and to the Co-Agents the amendment fees
referred to in Paragraph 23 above, (c) the Borrower shall have delivered to the
Agent resolutions of the Board of Directors of the Borrower approving and
authorizing the execution, delivery and performance of this Amendment, certified
by the Borrower's secretary or an assistant secretary as being in full force
and effect without modification or amendment and (d) such other information,
approvals, documents or instruments as the Agent may reasonably request.
25. This Amendment shall be construed in accordance with and governed by
the laws of the State of Illinois without giving effect to choice of law
doctrine.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first written above.
Signatures