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Ames Department Stores Inc – ‘10-Q’ for 7/29/00

On:  Monday, 9/11/00, at 4:52pm ET   ·   For:  7/29/00   ·   Accession #:  6071-0-13   ·   File #:  1-05380

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  As Of                Filer                Filing    For·On·As Docs:Size

 9/11/00  Ames Department Stores Inc        10-Q        7/29/00    2:222K

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                     104    513K 
 2: EX-27       Financial Data Schedule                                1      5K 


10-Q   —   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
7Credit Agreement
13Item 3. Quantitative and Qualitative Disclosures about Market Risk
14Item 1. Legal Proceedings
"Item 4. Submission of Matters to a Vote of Security Holders
"Item 5. Other Information
15Item 6. Exhibits and Reports on Form 8-K
18Fixed Charges
20Amendment Agreement
30Commitment
42Third Amendment
53Fourth Amendment
54Applicable Margin
65Fifth Amendment
78Sixth Amendment
82Borrower
90Seventh Amendment
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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 29, 2000 ------------------------------------------------------------------------------ [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------------------------ ---------------------------------- Commission File Number 1-05380 AMES DEPARTMENT STORES, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-2269444 -------- ---------- (State or other jurisdiction of (I.R.S.Employer Identification Number) incorporation or organization) 2418 Main Street, Rocky Hill, Connecticut 06067 ----------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (860) 257-2000 ------------------------ 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 ----- ----- 29,407,557 shares of Common Stock were outstanding on August 25, 2000. Exhibit Index on page 15 Page 1 of 105 (including exhibits)
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AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED JULY 29, 2000 [Download Table] I N D E X Page Part I: FINANCIAL INFORMATION Item 1. Consolidated Condensed Statements of Operations 3 for the Thirteen and Twenty-Six Weeks ended July 29, 2000 and July 31, 1999 Consolidated Condensed Balance Sheets as of 4 July 29, 2000, January 29, 2000, and July 31, 1999 Consolidated Condensed Statements of Cash Flows 5 for the Twenty-Six Weeks ended July 29, 2000 and July 31, 1999 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 10 Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 Part II: OTHER INFORMATION Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 15 -2-
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PART I Item 1. [Enlarge/Download Table] FINANCIAL INFORMATION AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) (Unaudited) For the Thirteen For the Twenty-Six Weeks Ended Weeks Ended ------------------------------- ----------------------------------- July 29, July 31, July 29, July 31, 2000 1999 2000 1999 ------------- -------------- ---------------- --------------- Ames net sales $ 872,034 $ 731,800 $ 1,702,691 $ 1,299,017 Hills net sales - 128,175 - 377,117 ------------- -------------- ---------------- --------------- Total net sales 872,034 859,975 1,702,691 1,676,134 Leased department and other income 10,544 11,570 19,803 19,970 ------------- -------------- ---------------- --------------- Total revenue 882,578 871,545 1,722,494 1,696,104 Cost and expenses: Ames cost of merchandise sold 630,881 517,260 1,233,805 926,510 Hills cost of merchandise sold - 83,762 - 252,085 Ames selling, general and administrative expenses 248,166 221,366 495,581 397,537 Hills operating expenses and agency fees - 52,790 - 142,047 Depreciation and amortization expense, net 17,240 16,304 34,937 30,687 Interest and debt expense, net 21,953 13,621 40,745 25,543 ------------- -------------- ---------------- --------------- Net loss before income taxes (35,662) (33,558) (82,574) (78,305) Income tax benefit 13,551 12,080 31,378 28,188 ------------- -------------- ---------------- --------------- Net loss before cumulative effect adjustment (22,111) (21,478) (51,196) (50,117) Cumulative effect adjustment, net of tax - - - (1,107) ------------- -------------- ---------------- --------------- Net loss $ (22,111) $ (21,478) $ (51,196) $ (51,224) ============= ============== ================ =============== Basic net loss per common share: Before cumulative effect adjustment $ (0.75) $ (0.78) $ (1.74) $ (1.94) Cumulative effect adjustment - - - (0.04) ------------- -------------- ---------------- --------------- Net loss per share $ (0.75) $ (0.78) $ (1.74) $ (1.98) ============= ============== ================ =============== Basic weighted average number of common shares outstanding 29,404 27,706 29,365 25,914 ============= ============== ================ =============== (The accompanying Notes are an integral part of these consolidated condensed financial statements.) -3-
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[Enlarge/Download Table] AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands, Except Per Share Amounts) (Unaudited) (Unaudited) -------------- -------------- -------------- July 29, January 29, July 31, 2000 2000 1999 -------------- -------------- -------------- ASSETS Current Assets: Cash and short-term investments $ 31,305 $ 30,612 $ 36,404 Receivables 32,262 25,302 32,771 Merchandise inventories 885,894 831,387 807,357 Deferred taxes, net 60,232 28,854 28,188 Prepaid expenses and other current assets 41,402 36,772 31,147 -------------- -------------- -------------- Total current assets 1,051,095 952,927 935,867 Fixed Assets 706,522 629,979 527,345 Less - Accumulated depreciation and amortization (167,245) (128,229) (95,737) -------------- -------------- -------------- Net fixed assets 539,277 501,750 431,608 -------------- -------------- -------------- Other assets and deferred charges 60,850 57,256 63,232 Deferred taxes, net 346,055 346,055 102,406 Beneficial lease rights, net 54,899 56,280 57,507 Goodwill, net 59,750 61,026 197,471 -------------- -------------- -------------- $2,111,926 $ 1,975,294 $ 1,788,091 ============== ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable: Trade $ 227,834 $ 325,356 $ 343,981 Other 93,152 96,224 72,315 -------------- -------------- -------------- Total accounts payable 320,986 421,580 416,296 -------------- -------------- -------------- Current portion of capital lease and financing obligations 22,057 22,086 19,801 Self-insurance reserves 28,346 29,827 29,085 Accrued expenses and other current liabilities 112,144 133,110 229,101 Store closing reserves 52,667 55,468 56,130 -------------- -------------- -------------- Total current liabilities 536,200 662,071 750,413 -------------- -------------- -------------- Long-term debt 752,761 421,769 257,085 Capital lease and financing obligations 170,220 180,404 183,559 Other long-term liabilities 52,761 57,916 115,020 Excess of revalued net assets over equity under fresh-start reporting 14,791 17,868 20,944 Commitments and contingencies (see Note 8) Stockholders' Equity: Preferred stock (3,000,000 shares authorized; no shares issued or outstanding at July 29, 2000, January 29, 2000 and July 31, 1999; par value per share $.01) - - - Common stock (40,000,000 shares authorized; 29,404,587; 29,233,650 and 29,166,639 shares outstanding at July 29, 2000, January 29, 2000 and July 31, 1999, respectively; par value per share $.01) 296 293 292 Additional paid-in capital 531,872 530,744 424,900 Retained earnings 53,947 105,143 36,792 Treasury stock, at cost (922) (914) (914) -------------- -------------- -------------- Total stockholders' equity 585,193 635,266 461,070 -------------- -------------- -------------- $2,111,926 $1,975,294 $ 1,788,091 ============== ============== ============== (The accompanying Notes are an integral part of these consolidated condensed financial statements.) -4-
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[Enlarge/Download Table] AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) For the Twenty-Six Weeks Ended ---------------------------------------- July 29, July 31, 2000 1999 ------------------ -------------------- Cash flows from operating activities: Net loss $ (51,196) $ (51,224) Expenses not requiring the outlay of cash: Income tax benefit (31,378) (28,188) Depreciation and amortization of fixed and other assets 38,988 32,008 Amortization of debt discounts and deferred financing costs 2,400 2,610 ------------------ -------------------- Cash used by operations before changes in working capital and store closing activities (41,186) (44,794) Changes in working capital: Increase in receivables (6,960) (2,527) Increase in merchandise inventories (54,507) (157,516) (Decrease) increase in accounts payable (100,594) 15,539 (Decrease) increase in accrued expenses and other current liabilities (22,447) 3,782 Increase in other working capital and other, net (9,072) (13,984) Changes due to store closing activities: Payments of store closing costs (2,801) (3,386) ------------------ -------------------- Net cash used for operating activities (237,567) (202,886) ------------------ -------------------- Cash flows from investing activities: Purchases of fixed assets (76,574) (83,614) Purchases of leases (7,026) (42,835) ------------------ -------------------- Net cash used for investing activities (83,600) (126,449) ------------------ -------------------- Cash flows from financing activities: Borrowings (payments) under the revolving credit facility, net 333,844 (38,725) Payments on debt and capital lease obligations (10,256) (12,854) Repurchase of Hills Senior Notes (2,852) - Purchase of treasury stock (8) - Proceeds from the issuance of senior notes - 200,000 Proceeds from the issuance of common stock, net - 187,484 Payments of deferred financing costs - (6,712) Proceeds from the exercise of options and warrants 1,132 802 ------------------ -------------------- Net cash provided by financing activities 321,860 329,995 ------------------ -------------------- Increase in cash and short-term investments 693 660 Cash and short-term investments, beginning of period 30,612 35,744 ------------------ -------------------- Cash and short-term investments, end of period $ 31,305 $ 36,404 ================== ==================== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest and debt fees not capitalized $ 35,882 $ 19,305 Income taxes 1,654 1,735 (The accompanying Notes are an integral part of these consolidated condensed financial statements.) -5-
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AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation : In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Ames Department Stores, Inc. (a Delaware corporation) and subsidiaries (collectively "Ames" or the "Company") contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of such financial statements for the interim periods. Due to the seasonality of the Company's operations, the results of its operations for the interim period ended July 29, 2000 may not be indicative of total results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "SEC"). Certain prior year amounts have been reclassified to conform to the presentation used for the current year. Pursuant to the indenture governing the Ames Senior Notes (as defined in Note 5), all of Ames' subsidiaries have jointly and severally guaranteed the Ames Senior Notes on a full and unconditional basis. Separate financial statements of those subsidiaries have not been included herein because management has determined that they are not material to investors. The consolidated condensed balance sheet at January 29, 2000 was obtained from audited financial statements previously filed with the SEC in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2000 (the "1999 Form 10-K"). The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and Notes thereto included in the 1999 Form 10-K. In the fourth quarter of the year ended January 29, 2000 ("Fiscal 1999"), the Company adopted Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition" as promulgated by the staff of the SEC, effective retroactively to the first quarter of Fiscal 1999. Therefore, the consolidated condensed financial statements for the thirteen and twenty-six weeks ended July 31, 1999 have been adjusted accordingly. Reference can be made to the 1999 Form 10-K for additional discussion of the adoption of SAB No. 101 by the Company. 2. Acquisition and Agency Agreement: Acquisition of Hills Stores Company On December 31, 1998, HSC Acquisition Corp. ("HSC"), a wholly owned subsidiary of the Company, acquired in excess of 80% of the outstanding voting stock of Hills Stores Company ("Hills") and approximately 74% of the outstanding Hills 12 1/2% senior notes. Subsequently, Hills was merged with HSC and became a wholly owned subsidiary of Ames Department Stores, Inc. In April 1999, Hills was merged with and into Ames Department Stores, Inc. The acquisition has been recorded under the purchase method of accounting. Total cash consideration for the acquisition of Hills was $129 million. Reference can be made to the 1999 Form 10-K for further discussion of the Hills acquisition. At the time of the acquisition, Hills operated 155 discount department stores. During 1999, the Company remodeled and converted 151 of the Hills stores to Ames stores. The four remaining Hills stores, along with seven other Ames stores, were closed because they were in locations that were either competitive with or were under-performing other Hills or Ames stores. The remodeling and conversion process was conducted in three stages, each stage involving approximately one third of the Hills stores. The first stage was completed in late April 1999; the second stage was completed in late July 1999; and the third stage was completed in late September 1999. -6-
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Concurrent with the Hills acquisition, the Company entered into a transition and agency agreement (the "Agency Agreement") with Gordon Brothers Retail Partners, LLC and The Nassi Group, LLC (collectively the "Agent"), which provided that the Agent serve for a period of time to operate all of the acquired Hills stores and to conduct inventory liquidation sales at each of those stores prior to its scheduled remodeling or final closure. Accordingly, the Agent managed the sale of the inventory acquired in the Hills acquisition as well as certain other inventory identified in the Agency Agreement. The Agency Agreement entitled the Company to receive out of the sale proceeds a minimum amount equal to 40% of the initial retail value or ticketed selling price of the merchandise (the "Guaranteed Return"), with the possibility of a greater return if the sale proceeds exceeded a target percentage of initial retail value. The results of operations of Hills for the thirteen and twenty-six weeks ended July 31, 1999 have been included in the accompanying consolidated condensed financial statements. During the thirteen and twenty-six weeks ended July 31, 1999, the accounting treatment described below has been applied to recognize the results of the Hills stores prior to their conversion to Ames stores during Fiscal 1999. Hills net sales have been recorded as "Hills Net Sales" and represent net sales achieved by the Hills stores prior to their conversion to Ames stores. "Hills Cost of Merchandise Sold" represents the cost of merchandise sold in connection with the above referenced sales as adjusted for the Guaranteed Return. "Hills Operating Expenses and Agency Fees" include the following: the associated store expenses incurred while operating the Hills stores prior to their conversion to Ames stores, which were reimbursable to the Company out of the proceeds of Hills merchandise sales per the Agency Agreement; the Agency Fee due to the Agent for the period presented; and other expenses (e.g. non-store payroll, non-store rent, etc.) associated with supporting the Hills stores prior to their conversion to Ames stores, which were not reimbursable under the Agency Agreement. Acquisition of Goldblatt's Leases In April 2000, the Company consummated its purchase of the leases for seven stores from Goldblatt's Department Stores, Inc. for a cash purchase price of $7.0 million. Reference can be made to the 1999 Form 10-K for additional discussion of the Hills acquisition. 3. Net Loss Per Common Share: Net loss per share was determined using the weighted average number of common shares outstanding. Diluted net loss per share was equal to basic net loss per share because inclusion of common stock equivalents would have been anti-dilutive. During the quarter ended July 29, 2000, options representing 1,600 shares were exercised. During the quarter ended July 31, 1999, 28,690 options were exercised. 4. Inventories: Inventories are valued at the lower of cost, using the first-in, first-out (FIFO) method, or market and include the capitalization of transportation and distribution center costs. 5. Debt: Credit Agreement On December 31, 1998, in connection with the acquisition of Hills, certain of the Company's subsidiaries entered into an agreement (the "Credit Agreement") with a syndicate of banks and financial institutions for which Bank of America, N.A. is serving as agent. As of July 25, 2000, the Company entered into a Seventh Amendment and Waiver Agreement (the "Seventh Amendment") with its lenders which provided, among other things, for increasing the bank credit facility revolving line of credit to up to $705 million and which increased the advance rate on inventory. The Credit Agreement is in effect until June 30, 2002 and is secured by substantially all of the assets of the Company. Reference can be made to the 1999 Form 10-K and Part II, Item 5 of this Form 10-Q for additional discussion of the Credit Agreement and applicable amendments as well as descriptions of the Company's other obligations not discussed herein. -7-
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As of July 29, 2000, borrowings of $508.4 million were outstanding under the Credit Agreement. These borrowings are included in long-term debt in the accompanying consolidated condensed balance sheet as of July 29, 2000. In addition, $21.7 and $3.0 million of standby and trade letters of credit, respectively, were outstanding under the Credit Agreement. The weighted average interest rate on the borrowings for the twenty-six weeks ended July 29, 2000 was 7.94%. The peak borrowing level through July 29, 2000 was $519.0 million and occurred in July 2000. Senior Notes due 2006 On April 27, 1999, the Company completed the sale of $200 million of its 10% seven-year senior notes (the "Ames Senior Notes"). The net proceeds from the sale of the Ames Senior Notes, approximately $193.4 million, were used to reduce outstanding borrowings under the Credit Agreement. The Ames Senior Notes pay interest semi-annually in April and October and mature April 2006. Senior Notes due 2003 The 12.5% Senior Notes due 2003 (the "Hills Senior Notes") were, at the time of the acquisition of Hills, an unsecured obligation of Hills. The Hills Senior Notes pay interest in January and June and mature July 2003. Reference can be made to the 1999 Form 10-K for additional discussion of the Ames Senior Notes and Hills Senior Notes. 6. Stock Options: The Company has four stock option plans (the "Option Plans"): the 1994 Management Stock Option Plan, the 1994 Non-Employee Directors Stock Option Plan, the 1998 Management Stock Incentive Plan, as amended and restated and the 2000 Store Manager Stock Option Plan. In October 1995, the Financial Accounting Standard Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock Based Compensation," which established a fair-value based method of accounting for stock-based compensation. SFAS No. 123 did, however, allow entities to continue accounting for employee stock based compensation under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company elected to account for the Option Plans under APB Opinion No. 25, under which no compensation cost has been recognized and adopt SFAS No. 123 through disclosure. If the Company had elected to recognize compensation cost for the Option Plans based on the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS No. 123, net loss and basic net loss per common share would have approximated the pro forma amounts indicated below: [Enlarge/Download Table] For the Thirteen For the Twenty-Six Weeks Ended Weeks Ended ---------------------------- ----------------------------- ------------ -- ------------ ----------- -- -------------- (In Thousands) July 29, July 31, July 29, July 31, 2000 1999 2000 1999 ------------ ------------ ----------- -------------- Net loss: As reported $(22,111) $(21,478) $(51,196) $(51,224) Pro forma $(24,645) $(23,812) $(56,097) $(54,941) Basic net loss per common share: (a) As reported $(0.75) $(0.78) $(1.74) $(1.98) Pro forma $(0.84) $(0.86) $(1.91) $(2.12) <FN> (a) Common stock equivalent shares have not been included because the effect would be anti-dilutive. </FN> -8-
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The fair value of stock options used to compute pro forma net income and net income per diluted common share is the estimated present value as of the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield, expected option volatilities, a risk-free interest rate equal to U.S. Treasury securities with a maturity equal to the expected life of the option and an expected life from date of grant until option expiration date. 7. Income Taxes: The Company's estimated annual effective income tax rate for each year was applied to the loss before income taxes for the thirteen and twenty-six weeks ended July 29, 2000 and July 31, 1999 to compute a non-cash income tax benefit. The income tax benefit is included in current deferred taxes in the accompanying consolidated condensed balance sheet as of July 29, 2000 and July 31, 1999. In Note 8 to the Notes to Consolidated Financial Statements in the 1999 Form 10-K, the Company reported it had filed a $20 million refund claim under Section 172 (f) of the Internal Revenue Code and that the claim was under review by the Internal Revenue Service ("IRS"). The Company has recently received from the IRS an adverse Technical Advice Memorandum ("TAM"). The positions set forth in the TAM would have the effect of denying all or virtually all of the refund claim. The Company is presently considering what further action to take. 8. Commitments and Contingencies: Reference can be made to the 1999 Form 10-K (Item 3 - Legal Proceedings) for various litigation involving the Company, for which there were no material changes since the filing date of the 1999 Form 10-K. 9. Recently Issued Accounting Pronouncements: In June 1998, the FASB issued SFAS No. 133, "Accounting for derivative instruments and Hedging Activities." In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an amendment of SFAS No. 133. These statements establish accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statements also require that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The statements are effective, prospectively, for all fiscal quarters of all fiscal years beginning after June 15, 2000. Management is currently analyzing the impact of this new pronouncement on the Company's financial position and results of operations. -9-
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated condensed financial statements and footnotes presented in this report. Results of Operations --------------------- The consolidated results of operations for the thirteen weeks and twenty-six weeks ended July 31, 1999 include the results of the former Hills stores during the period they were operated by Gordon Brothers, LLC and The Nassi Group, LLC under an agency agreement. These firms were engaged to operate the Hills stores until their closure and to liquidate the merchandise inventories. During the quarter ended July 31, 1999, Gordon Brothers, LLC and The Nassi Group, LLC completed the merchandise liquidation sales in 103 of the Hills stores. Subsequent to the liquidation sales, we closed two of the stores and began remodeling the remaining 101 stores. In July of 1999, 54 of the 101 stores were re-opened as Ames stores. The remaining 47 stores were re-opened as Ames stores in September of 1999. The following tables illustrate the results of Ames' operations for the thirteen and twenty-six weeks ended July 29, 2000, as compared to the separate contributions of Ames' and Hills' operations and the other costs described below to the consolidated results of operations for the thirteen and twenty-six weeks ended July 31, 1999. [Enlarge/Download Table] For the Thirteen Weeks Ended For The Thirteen Weeks Ended July 29, 2000 July 31, 1999 ------------- --------------------------------------------- (In Thousands) Consolidated Ames Hills Other Total ------------ ---- ----- ----- ----- Net sales $872,034 $731,800 $128,175 $- $859,975 Leased department and other income 10,544 10,228 1,342 - 11,570 ------------------ --------------------------------------------- Total revenue 882,578 742,028 129,517 - 871,545 Costs and expenses: Cost of merchandise sold 630,881 517,260 83,762 - 601,022 Selling, general and administrative expenses 248,166 191,266 52,790 30,100 274,156 Depreciation and amortization expenses, net 17,240 10,606 3,813 1,885 16,304 Interest and debt expense, net 21,953 11,439 1,388 794 13,621 ------------------ --------------------------------------------- (Loss) income before income taxes (35,662) 11,457 (12,236) (32,779) (33,558) Income tax benefit (provision) 13,551 (4,124) 4,404 11,800 12,080 ------------------ --------------------------------------------- Net (loss) income $(22,111) $7,333 $(7,832) $(20,979) $(21,478) ================== ============================================= -10-
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[Enlarge/Download Table] For the Twenty-Six Weeks Ended For The Twenty-Six Weeks Ended July 29, 2000 July 31, 1999 ------------- ---------------------------------------------- (In Thousands) Consolidated Ames Hills Other Total ------------ ---- ----- ----- ----- Net sales $1,702,691 $1,299,017 $377,117 $- $1,676,134 Leased department and other income 19,803 16,602 3,368 - 19,970 ------------------------------------------------------------------ Total revenue 1,722,494 1,315,619 380,485 - 1,696,104 Costs and expenses: Cost of merchandise sold 1,233,805 926,510 252,085 - 1,178,595 Selling, general and administrative expenses 495,581 350,865 142,047 46,672 539,584 Depreciation and amortization expenses, net 34,937 16,523 10,393 3,771 30,687 Interest and debt expense, net 40,745 19,417 4,162 1,964 25,543 ------------------------------------------------------------------ Loss before income taxes and cumulative effect (82,574) 2,304 (28,202) (52,407) (78,305) Income tax benefit (provision) 31,378 (829) 10,151 18,866 28,188 ------------------------------------------------------------------ Loss before cumulative effect of accounting change (51,196) 1,475 (18,051) (33,541) (50,117) Cumulative effect of accounting change, net of tax - - - (1,107) (1,107) ------------------------------------------------------------------ Net loss $(51,196) $1,475 $(18,051) $(34,648) $(51,224) ================================================================== The Ames column, represents (a) the results of the Ames store base, (b) the results of the converted Hills stores and (c) certain expenses associated with the acquisition of Hills, including the interest expense on the acquired Hills senior notes and a pro-rata share of the amortization of the goodwill recorded in connection with the acquisition. The Hills column represents (a) the results of operations for the Hills stores during the period that these stores were operated pursuant to the Gordon Brothers/Nassi agency agreement, including depreciation and interest expense directly associated with such stores and (b) Hills corporate overhead expenses, principally the Canton, MA facility. The other column represents the expenses incurred during the period of remodeling the Hills stores (for example, pre-opening expenses incurred during the conversion or "dark" period) as well as certain other expenses. The unique circumstances under which Hills operations were conducted through the thirteen and twenty-six weeks ended July 31, 1999 distort any direct comparison of the principal components of Ames consolidated results for the thirteen and twenty-six weeks ended July 29, 2000 and July 31, 1999. In the discussion that follows, the Ames net sales, gross margin, and selling, general and administrative expenses for the thirteen and twenty-six weeks ended July 29, 2000 are compared to the Ames results for the thirteen and twenty-six weeks ended July 31, 1999, exclusive of the Hills results and other expenses. The comparison of the depreciation and amortization expense and interest and debt expense is on a consolidated basis. Ames' net sales increased $140.2 million or 19.2% during the second quarter of 2000 compared to the second quarter of 1999. Ames' net sales for the twenty-six weeks ending July 29, 2000 increased $403.7 million or 31.1% compared to the first half of 1999. Both increases are primarily the result of the inclusion of all 151 of the converted Hills stores in the Ames store base for the periods in fiscal 2000 compared to fifty-one stores for the entire second quarter in fiscal 1999 and an additional 54 stores for a portion of July in 1999. Comparable store sales decreased 2.5% for the second quarter and 0.9% for the twenty-six weeks ended July 29, 2000. Gross margin increased $26.6 million during the second quarter and $96.4 million for the twenty-six weeks ended July 29, 2000 compared to the same period in 1999. The increase is a result of the increased Ames store base as previously discussed. Gross margin as a percentage of sales declined from 29.3% to 27.7% during the second quarter and from 28.7 % to 27.5 % for the year-to-date period compared to the same period in 1999. The decrease is the result of higher markdowns and a lower markup percentage, partially reflecting changes in the merchandise mix. -11-
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Selling, general and administrative expenses increased $56.9 million and $144.7 million for the thirteen and twenty-six weeks ended July 29, 2000, respectively, primarily as a result of the expanded Ames store base. Expenses as a percentage of sales increased from 26.1% to 28.5% and 27.0% to 29.1 % for those periods versus the comparable periods in fiscal 1999. The increase was primarily a result of sales falling short of planned levels and $12.1 million of pre-opening expense included in this year's expense amount. Depreciation and amortization expense increased $0.9 million and $4.2 million for the thirteen and twenty-six weeks ended July 29, 2000, respectively, compared to the same periods in 1999. The increase was primarily the result of additional depreciation associated with the remodeling expenditures incurred during the conversion of the former Hills stores. Interest expense increased $8.3 million and $15.2 million for the thirteen and twenty-six weeks ended July 29, 2000, respectively, compared to the same periods in 1999. The increase is mainly attributable to a higher level of borrowings under our revolving credit facility as well as interest expense associated with the Ames Senior Notes issued in April of 1999. Our estimated annual effective income tax rate for each year was applied to the loss before income taxes for each period to compute a non-cash income tax benefit. The income tax benefits are included in current deferred taxes in the consolidated condensed balance sheet as of July 29, 2000 and July 31, 1999. Liquidity and Capital Resources ------------------------------- Our principal sources of operating funds are our bank credit facility, cash from operations and cash on hand. As of July 25, 2000, we entered into a Seventh Amendment and Waiver Agreement (the "Seventh Amendment") with our lenders which provided, among other things, for increasing the bank credit facility revolving line of credit to up to $705 million and which increased the advance rate on inventory. The Seventh Amendment was designed to give us increased flexibility and additional operating funds during the seasonal inventory build-up period beginning August and ending in November. Borrowings under the bank credit facility are secured by substantially all of our assets. The bank credit facility expires on June 20, 2002. Our borrowing rates for the credit facility are based on either the London Interbank Offered Rate or a reference rate announced by Bank of America, San Francisco, with an interest margin added to both. The interest rate margin was changed by the amendment and a fee of $0.8 million was charged. Under the terms of the agreement, we are required to meet certain covenants if our available borrowing power falls below specified levels. During the quarter ended July 29, 2000, our borrowings increased under the credit facility by approximately $79.1 million. As of the end of the second quarter, we were in compliance with the terms of the credit agreement. The peak borrowing level under the facility during the quarter was $519.0 million. We believe the company will have sufficient sources of cash to meet our financial obligations for the foreseeable future. Merchandise inventories decreased $102.0 million during the second quarter as we sold off an inventory build-up created by the below plan sales in the first quarter. Merchandise inventories increased $54.5 million from January 29, 2000 due to a seasonal merchandise build-up. Merchandise inventories increased $78.5 million from July 31, 1999 primarily as a result of fully stocking all of the converted Hills stores. Trade accounts payable decreased $97.5 million from January 29, 2000 and $116.1 million from July 31, 1999 primarily as a result of a slowdown in merchandise purchases in response to the first half sales shortfall. Purchases of property and equipment for the thirteen and twenty-six weeks ended July 29, 2000 totaled $36.2 million and $76.6 million, respectively. Such purchases for the balance of the year are estimated to be approximately $40 million. We adjust our plans for making such expenditures based on the amount of internally generated funds. Net fixed assets increased $37.5 million from January 29, 2000 as a result of $76.6 million in capital expenditures offset by $39.0 million in depreciation expense. Net fixed assets increased $107.7 million from July 31,1999 due primarily to capital expenditures associated with the converted Hills stores and other new stores. -12-
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Beneficial lease rights represent the excess of the fair market value of the acquired Hills leases over contract value of those leases. We are amortizing this amount over the terms of the related leases (which average approximately 25 years) using the straight-line method. Goodwill is being amortized over 25 years using the straight-line method. Long-term debt as of July 29, 2000 consisted of borrowings under our bank credit facility of $508.4 million, $200.0 million of the Ames senior notes issued in April 1999 and $44.4 million of the Hills senior notes that remained outstanding after the acquisition. The Hills senior notes became direct obligations of Ames as a result of the merger of Hills. Capital lease and financing obligations decreased $10.2 million from January 29, 2000 to July 29, 2000 due primarily to payments made on capital lease obligations. Capital lease and financing obligations decreased $11.1 million from July 31, 1999 to July 29, 2000, primarily as a result of payments exceeding new capital lease commitments. Federal income tax law allows taxpayers, including corporations, to use net operating losses in future years to reduce taxable income ("net operating loss carryovers"). Our net operating loss carryovers remaining after fiscal 1999 should offset income on which taxes would otherwise be payable in the next several years, subject to any limitations from federal income tax law (i.e., Internal Revenue Code Sec. 382). Note Concerning Forward-looking Statements ------------------------------------------ Statements other than those based on historical facts which address activities, events, or developments that we expect or anticipate may occur in the future are forward-looking statements which are based upon a number of assumptions concerning further conditions that may ultimately prove to be inaccurate. Actual events and results may differ materially from anticipated results described in any forward-looking statements. Our ability to achieve such results is subject to certain risks and uncertainties. Consequently, these cautionary statements qualify all of the forward-looking statements and there can be no assurance that the results or developments anticipated by us will be realized or that they will have the expected effects on Ames or its business or operations. Item 3. Quantitative and Qualitative Disclosures About Market Risk We have exposure to interest rate volatility primarily relating to interest rate changes applicable to revolving loans under our bank credit facility. These loans bear interest at rates which vary with changes in (i) the London Interbank Offered Rate (LIBOR) or (ii) a rate of interest announced publicly by Bank of America, N.A. We do not speculate on the future direction of interest rates. As of July 29, 2000 approximately $508.4 million of our debt bore interest at variable rates. We believe that the effect, if any, of reasonably possible near term changes in interest rates on our consolidated financial position, results of operations or cash flows would not be significant. -13-
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PART II OTHER INFORMATION Item 1. Legal Proceedings. Reference can be made to Item 3 - Legal Proceedings included in the Company's most recent Form 10-K for various litigation involving the Company, for which there were no material changes since the filing date of the Form 10-K. Item 4. Submission of Matters to a Vote of Security Holders. The Annual Meeting of Stockholders was held Wednesday, June 21, 2000, to consider and act upon the following matters: (a) The stockholders elected for one-year terms all persons nominated for directors as set forth in the Company's proxy statement filed May 18, 2000. Each nominee for director was elected as follows: [Download Table] For Withheld ---------------- ---------------- Election of directors as a slate Francis X. Basile 25,409,543 908,473 Paul Buxbaum 25,015,320 1,302,696 Alan Cohen 25,408,023 909,993 Joseph R. Ettore 25,409,063 908,953 Richard M. Felner 25,410,593 907,423 Sidney S. Pearlman 25,408,358 909,658 (b) The stockholders ratified and approved the appointment of Arthur Andersen LLP as independent certified public accountants and auditors for the Company for the fiscal year ending February 3, 2001 as follows: For Against Abstentions ----------------------- ------------------- ------------------- 26,206,639 96,271 15,106 ======================= =================== =================== (c) The stockholders ratified and approved the adoption of the Associate Stock Purchase Plan as set forth in the Company's proxy statement filed May 18, 2000 as follows: For Against Abstentions ----------------------- ------------------- ------------------- 19,823,184 890,351 544,049 ======================= =================== =================== (d) The stockholders ratified and approved the amendment and restatement of the 1998 Management Stock Incentive Plan (as amended and restated, the "1998 Incentive Plan") as set forth in the Company's proxy statement filed May 18, 2000 as follows: For Against Abstentions ----------------------- ------------------- ------------------- 16,624,308 4,327,043 306,233 ======================= =================== =================== Item 5. Other Information. As of April 16, 1999, June 1, 1999, October 15, 1999, January 18, 2000, January 27, 2000, May 8, 2000 and July 25, 2000, the Company amended the Credit Agreement with Bank of America, N.A., as agent, and a syndicate consisting of nineteen other banks and financial institutions, copies of which are filed as Exhibits hereto. -14-
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On August 21, 2000, the Company announced the election of Joseph A. Pollicino to its Board of Directors. Mr. Pollicino has served as Vice Chairman of the CIT Group, Inc.; President of the former CIT Factoring and Finance Group; President of the CIT Group/Business Credit unit; and, as a Vice President with Manufacturers Hanover. Item 6. Exhibits and Reports on Form 8-K. [Enlarge/Download Table] (a) Index to Exhibits Exhibit No. Exhibit Page No. 11 Schedule of computation of basic and diluted net income (loss) 17 per share 12 Ratio of Earnings to Fixed Charges 18 21 Subsidiaries of the Registrant 19 10.1 Credit Agreement amendment ("Amendment Agreement") dated April 20 16, 1999 among certain financial institutions, as lenders, Bank of America NT&SA, as Administrative agent, and Ames Merchandising Corporation ("AMC"), Ames FS, Inc. ("AFS"), Hills Department Store Company ("HDSC"). 10.2 Second Amendment, dated June 1, 1999, to the Second Amended 36 and Restated Credit Agreement, dated December 31, 1998 among Ames Department Stores, Inc. ("ADS"), AFS, AMC, and certain lenders including Bank of America NT&SA, as agent. 10.3 Third Amendment to the Credit Agreement, dated as of October 42 15, 1999, among certain lenders and Bank of America NT&SA, as agent, and AFS and AMC. 10.4 Fourth Amendment to the Credit Agreement, dated as of January 53 18, 2000, among certain lenders and Bank of America, N.A., as agent, and AFS and AMC. 10.5 Fifth Amendment to the Credit Agreement, dated as of January 65 27, 2000, among certain lenders and Bank of America, N.A., as agent, and AFS and AMC. 10.6 Sixth Amendment and Waiver to the Credit Agreement, dated as 79 of May 8, 2000, among certain lenders and Bank of America, N.A., as agent, and AMC. 10.7 Seventh Amendment and Waiver, dated as of July 25, 2000, among 91 certain lenders, Bank of America, N.A., as agent, and AMC, AmesPlace.com, Inc., Ames Realty II, Inc., Ames Transportation Systems, Inc., and ADS. (b) Reports on Form 8-K On May 19, 2000, the Company filed an employment agreement between the Company and Grant C. Sanborn, Executive Vice President - Operations, on Form 8-K. There were no other reports on Form 8-K filed with the Securities and Exchange Commission during the second quarter. -15-
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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. [Download Table] AMES DEPARTMENT STORES, INC. (Registrant) Dated: September 11, 2000 /s/ Joseph R. Ettore ---------------------------------------------------- Joseph R. Ettore, Chairman, Chief Executive Officer, and Director Dated: September 11, 2000 /s/ Rolando de Aguiar ---------------------------------------------------- Rolando de Aguiar, Senior Executive Vice President, Chief Financial and Administrative Officer -16-
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[Enlarge/Download Table] Exhibit 11 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE (In Thousands, Except Per Share Amounts) For the Thirteen For the Twenty-Six Weeks Ended Weeks Ended --------------------------- ----------------------------- July 29, July 31, July 29, July 31, 2000 1999 2000 1999 ----------- ------------ ------------- ------------ Loss before Cumulative Effect adjustment $(22,111) $(21,478) $(51,196) $(50,117) Cumulative Effect adjustment, net of tax - - - (1,107) ----------- ------------ ------------- ------------ Net loss (22,111) (21,478) (51,196) (51,224) =========== ============ ============= ============ For Basic Earnings Per Share: Weighted average number of common shares outstanding during the period (b) 29,404 27,706 29,365 25,914 Basic net loss per share: Basic net loss per share before Cumulative Effect adjustment (0.75) (0.78) (1.74) (1.94) Cumulative Effect Adjustment, net of tax - - - (0.04) ----------- ------------ ------------- ------------ Basic net loss per share $(0.75) $(0.78) $(1.74) $(1.98) =========== ============ ============= ============ For Diluted Earnings Per Share: Weighted average number of common shares outstanding during the period (b) 29,404 27,706 29,365 25,914 Add common stock equivalent shares represented by: Series B Warrants (a) (a) (a) (a) Series C Warrants (a) (a) (a) (a) Options under 1994 Management Stock Option Plan, 1998 Stock Incentive Plan, 1994 Non- Employee Director Stock Option Plan and 2000 Store Manager Stock Option Plan (a) (a) (a) (a) ----------- ------------ ------------- ------------ Weighted average number of common and common equivalent shares (b) 29,404 27,706 29,365 25,914 =========== ============ ============= ============ Diluted net loss per share before Cumulative Effect adjustment (0.75) (0.78) (1.74) (1.94) Cumulative Effect Adjustment, net of tax - - - (0.04) ----------- ------------ ------------- ------------ Diluted net loss per share $(0.75) $(0.78) $(1.74) $(1.98) =========== ============ ============= ============ <FN> (a) Common stock equivalents have not been included, because the effect would be anti-dilutive. (b) The weighted average number of common shares outstanding is net of treasury stock. </FN> -17-
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[Enlarge/Download Table] Exhibit 12 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (In Thousands, Except Ratio Data) Twenty-Six Weeks Ended Fiscal Year Ended ------------- ------------------------------------------------------------------------- July 29, January 29, January 30, January 31, January 25, January 27, 2000 2000 1999 1998 1997 1996 ------------- ------------ ------------ ------------- ------------ ------------ Income (loss) before income taxes, extraordinary item and cumulative effect adjustment (82,574) (31,355) 52,605 53,633 26,804 (1,618) Add: Interest expense 40,745 60,843 15,253 11,600 19,043 24,116 Interest component of rental expense 19,133 29,253 21,121 18,409 16,541 16,208 ------------- ------------ ------------ ------------- ------------ ------------ Earnings available for fixed charges (22,696) 58,741 88,979 83,642 62,388 38,706 Fixed Charges: Interest expense 40,745 60,843 15,253 11,600 19,043 24,116 Interest component of rental expense 19,133 29,253 21,121 18,409 16,541 16,208 ------------- ------------ ------------ ------------- ------------ ------------ Total fixed charges 59,878 90,096 36,374 30,009 35,584 40,324 Ratio of earnings to fixed charges (0.4)x 0.7x 2.4x 2.8x 1.8x 1.0x <FN> For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income before income taxes, extraordinary item and cumulative effect adjustment plus fixed charges (net of capitalized interest). Fixed charges consist of interest expense on all indebtedness and capitalized interest, amortized premiums, discounts and capitalized expenses related to indebtedness, and one-third of rent expense on operating leases representing that portion of rent expense deemed by us to be attributable to interest. For the twenty-six weeks ended July 29, 2000 and the fiscal year ended January 29, 2000, the amount of additional earnings that would have been required to cover fixed charges for these periods was $82.3 million and $31.4 million, respectively. </FN> -18-
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Exhibit 21 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT As of July 29, 2000, the subsidiaries of the Company were as follows: Name State of Incorporation ---- ---------------------- AmesPlace.com, Inc. .............................................. Delaware Ames Transportation Systems, Inc.................................. Delaware Ames Realty II, Inc............................................... Delaware Ames Merchandising Corporation.................................... Delaware -19-
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Exhibit 10.1 AMENDMENT AGREEMENT AMENDMENT AGREEMENT, dated as of April 16, 1999 (the "Amendment Agreement"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America NT&SA (formerly BankAmerica Business Credit, Inc. ("BABC")) as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames FS, Inc. ("AFS"), Ames Merchandising Corporation ("AMC"), and Hills Department Store Company ("HDSC", and together with AFS and AMC, each a "Borrower" and collectively, the "Borrowers"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998, (as previously amended and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrowers, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement. WHEREAS, the Borrowers have informed the Administrative Agent and the Lenders that they would like to effect a corporate reorganization pursuant to which the following will occur sequentially: (1) each of Hills Distributing Company, Canton Advertising, Inc., Corporate Vision, Inc., and HDS Transport, Inc. will be merged with and into HDSC and, as a result of such merger, the separate corporate existence of each of Hills Distributing Company, Canton Advertising, Inc., Corporate Vision, Inc., and HDS Transport, Inc. will cease, and HDSC shall assume all of the Obligations of each of Hills Distributing Company, Canton Advertising, Inc., Corporate Vision, Inc., and HDS Transport, Inc.; (2) HDSC will be merged with and into Hills Stores Company ("Hills"), and as a result of such merger, the separate corporate existence of HDSC will cease, and Hills shall assume all of the Obligations of HDSC; and (3) Hills will be merged with and into Ames Department Stores, Inc. ("Parent"), and as a result of such merger, the separate corporate existence of Hills will cease, and Parent shall assume all of the Obligations of Hills in addition to being a "Credit Party" and "Guarantor" under the Credit Agreement and a "Grantor" and "Pledgor", as such terms are defined in the Security Documents; WHEREAS, the Parent shall reaffirm the prior granting to the Administrative Agent of a security interest in all of its assets and in those assets it acquires as a result of the merger, and will execute and deliver such other documents and instruments necessary to carry out the terms of the Credit Agreement and the Security Documents; WHEREAS, after consummation of the mergers, the Parent will contribute all of the inventory and certain of the other assets of the former Hills Credit Parties to AMC, with all other assets of the former Hills Credit Parties to be distributed to other Credit Parties thereafter (all as set forth on Schedule I attached hereto), and the Credit Parties shall each reaffirm the prior granting to the Administrative Agent of a security interest in all of its assets, including (without limitation) those assets contributed, or to be contributed, to it by the Parent; WHEREAS, the Parent has informed the Administrative Agent and the Lenders that it proposes to issue up to $275,000,000 in unsecured senior debt under an Indenture among the Parent, the Credit Parties, and The Chase Manhattan Bank as trustee (such Indenture as attached hereto as Annex A, the "Ames Indenture") to be pari passu in right of payment with the Obligations and debt under the Indenture (as defined in the Credit Agreement) and to be guaranteed by the Credit Parties; WHEREAS, Section 9.2 of the Credit Agreement requires the Parent to, and to cause its Subsidiaries to, maintain their corporate existence (except for mergers permitted under Section 9.9); WHEREAS, Section 9.9 of the Credit Agreement prohibits the Parent or any of its Subsidiaries from, among other things, entering into any transaction of merger, reorganization, or consolidation, or transferring, selling, assigning, leasing, or otherwise disposing of all or any part of its property, or wind up, liquidate or dissolve, or agree to do any of the foregoing, except under certain circumstances enumerated in such section; -20-
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WHEREAS, Sections 9.12 and 9.13 of the Credit Agreement prohibits the incurrence or guarantee of the Debt proposed by the Ames Indenture; WHEREAS, Section 9.30 of the Credit Agreement prohibits the Parent and any Credit Party from entering into, or being subject to, any agreement prohibiting or restricting (1) incurrence, creation or assumption of any Debt, (2) incurrence or creation of any Lien, and (3) sale, disposition or pledge of any asset, all of the foregoing being negative covenants contained in the Ames Indenture; and WHEREAS, the Borrowers have requested that the Lenders agree to amend certain provisions of the Credit Agreement and the Security Documents to permit the mergers, the assumption of the Obligations, the contribution of assets to AMC, the issuance, guarantee and exchange of the notes under the Ames Indenture, and the change to the definition of Fiscal Year. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Each reference in the Credit Agreement to the Borrowers shall mean each of AFS and AMC, jointly and severally (unless otherwise specifically required by the context of such usage). The Parent shall remain a "Guarantor" and a "Credit Party", as such terms are defined in the Credit Agreement. Each reference to a Hills Credit Party in the Credit Agreement and the Security Documents shall be deemed a reference to AMC (unless otherwise required by the context). 1.2 The definition of "Change in Control" on Section 1.1 is hereby amended by adding immediately prior to the period at the end thereof the following: or (vi) there occurs any "Change of Control" as defined in the Ames Indenture 1.3 The definition of "Fiscal Year" in Section 1.1 is hereby amended by deleting the word "last" where it appears therein and adding the words "closest to the thirty-first" immediately following the word "Saturday" where it appears therein. 1.4 Section 1.1 is hereby amended by adding the following definitions in the proper alphabetical order therein: "Amendment Agreement" means that certain Amendment Agreement dated as of April 16, 1999 among the Borrowers, the Lenders, the Administrative Agent and the other Credit Parties. "Ames Indenture" means that certain Indenture, dated as of April 27, 1999, among the Parent, the Credit Parties, and The Chase Manhattan Bank as trustee, in the form attached as Annex A to the Amendment Agreement. "Subsidiaries Merger Documents" means any and all merger agreements, Certificates of Ownership and Merger, Certificates of Merger, Articles of Merger, and all agreements, documents and instruments pursuant to or in connection with the mergers of the Hills Credit Parties executed and delivered between March 30, 1999 and May 15, 1999. "Subsidiaries Merger Transaction" means the mergers of the Hills Credit Parties with and into the Parent with the Parent being the surviving corporation, all pursuant to the Subsidiaries Merger Documents. 1.5 Section 9.6 is hereby amended by replacing "Leases" with the word "leases" in the seventh line thereof. -21-
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1.6 Section 9.9 is hereby amended by adding at the beginning of clause (e) therein the words "the mergers in connection with the Subsidiaries Merger Transaction and," immediately prior to the words "subject to compliance". 1.7 Section 9.12 is hereby amended by (1) replacing the word "and" in the third line thereof with a comma, and (2) adding the phrase "and, (iii) Guaranties by any Credit Party of the Debt under the Ames Indenture" immediately prior to the period at the end thereof. 1.8 Section 9.13 is hereby amended by (1) adding ", landlords" to clause (b) immediately after the word "suppliers" therein; and (2) replacing clause (i) therein with the following new clause (i): (i) Debt under the Ames Indenture in a principal amount not to exceed $275,000,000, but not any increase in or refinancings, extensions, renewals, exchanges or replacements of such Debt, other than the exchange of Exchange Notes for Initial Notes and Additional Notes (all as defined in the Ames Indenture) in the limited circumstances and pursuant to the terms and conditions set forth in the Ames Indenture; 1.9 Section 9.14 is hereby amended by: (1) adding an "and" immediately before "(y)" therein and adding a closing parenthesis immediately after the first reference to "Section 9.13 therein; (2) replacing "(g)," with "or" in the tenth line thereof; (3) deleting "or (i)" in the tenth line thereof; (4) replacing the closing parenthesis and the word "and" in the eleventh line with a comma; and (5) adding immediately prior to the ending period thereof the following: , and (iv) regularly scheduled payments of interest under the Debt permitted by Section 9.13(i), in each case to the extent due and payable and permitted to be paid by the terms thereof 1.10 Section 9.30 is hereby amended by adding the words "(x) to the extent set forth in the Ames Indenture, and (y)" immediately after the word "except" where it appears in both clauses (i) and (ii) therein. 1.11 Clause (e) of Section 11.1 of the Credit Agreement is hereby amended by deleting the word "or" appearing at the very end thereof. 1.12 Clause (o) of Section 11.1 of the Credit Agreement is hereby amended by replacing the semi-colon that appears at the end thereof with a period. 1.13 Exhibit A to the Credit Agreement is hereby amended by deleting such exhibit in its entirety and by substituting, in lieu thereof the Exhibit A attached hereto as Annex B. 1.14 The schedules to the Credit Agreement are hereby amended to include the information on the schedules attached hereto as Annex C. SECTION 2. AMENDMENTS TO THE AMENDED AND RESTATED PATENT AND TRADEMARK AGREEMENT 2.1 Schedules A, B and C to the Amended and Restated Patent and Trademark Agreement are hereby amended by deleting such schedules in their entirety and by substituting, in lieu thereof, Schedules A, B and C attached hereto as Annex D. -22-
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SECTION 3. AMENDMENTS TO THE AMENDED AND RESTATED STOCK PLEDGE AGREEMENT 3.1 Schedules I and II to the Amended and Restated Stock Pledge Agreement are hereby amended by deleting such schedules in their entirety and by substituting, in lieu thereof, Schedules I and II attached hereto as Annex E. SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVE DATE This Amendment Agreement shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: 4.1 This Amendment Agreement shall have been executed by the Credit Parties, the Administrative Agent and the Majority Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Credit Agreement and in the other Loan Documents each as amended hereby. 4.2 The Administrative Agent shall have received: 4.2.1 Executed copies of proper financing statements, ready to be filed by the Administrative Agent on or before the Effective Date under the UCC of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Administrative Agent's Lien on the Collateral; 4.2.2 Stock certificates, together with stock powers executed in blank, and instruments, duly endorsed to the Administrative Agent, pledged and not previously delivered under the relevant Security Documents or reissued as a result of the Subsidiaries Merger Transaction (as defined in Section 1.4 hereinabove); 4.2.3 Such opinions of counsel for the Parent and its Subsidiaries as the Administrative Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; 4.2.4 (x) a certificate of the Secretary or Assistant Secretary of each Credit Party dated within three Business Days prior to the date hereof and certifying that (A) the copy of its By-laws attached to the certificate of its Secretary or Assistant Secretary delivered on the Closing Date is a true and complete copy of its By-laws as in effect on the date of the certificate delivered pursuant to this subsection and such By-laws have not been amended since the Closing Date, (B) attached thereto is a true and complete copy of the resolutions adopted by its Board of Directors authorizing the execution, delivery and performance of this Amendment Agreement, the Ames Indenture and the Subsidiaries Merger Transaction (as defined in Section 1.4 hereinabove), if applicable, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) its certificate or articles of incorporation has not been amended since the date of the last amendment thereto shown on the certificate of good standing from the Secretary of State of the state of its incorporation delivered on the Closing Date, and (D) the officers executing this Amendment Agreement or any other document to which it is a party delivered in connection herewith or therewith are the incumbent officers and their signatures are as set forth thereto; and (y) a certificate of another officer thereof attesting to the incumbency and signature of its Secretary or Assistant Secretary, as the case may be; 4.2.5 Such other approvals, opinions or documents as the Administrative Agent may reasonably request. 4.3 To the extent invoiced, the Borrowers shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Amendment Agreement and the transactions contemplated hereby. -23-
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4.4 All proceedings taken in connection with the execution of this Amendment Agreement, the Subsidiaries Merger Documents (as defined in Section 1.4 hereinabove) and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent and the Majority Lenders. 4.5 All representations and warranties contained in this Amendment Agreement or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. 4.6 No unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. The execution and delivery to the Administrative Agent by the Borrowers of a counterpart of this Amendment Agreement shall be deemed to be a representation and warranty made by the Credit Parties to the effect that the conditions precedent to the Effective Date set forth in 4.5 and 4.6 above have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of the Parent or the Borrowers, dated the Effective Date, to such effect. SECTION 5. ADDITIONAL COVENANTS 5.1 Within five Business Days of the consummation of the Subsidiaries Merger Transaction (as defined in Section 1.4 hereinabove), the Credit Parties shall deliver to the Administrative Agent executed copies of the Subsidiaries Merger Documents (as defined in Section 1.4 hereinabove) and evidence of the consummation of the Subsidiaries Merger Transaction. 5.2 Within two Business Days after execution of the Ames Indenture, the Credit Parties shall deliver to the Administrative Agent executed copies of the Ames Indenture. 5.3 Within two Business Days after the note issuance under the Ames Indenture, the Credit Parties shall deliver to the Administrative Agent copies of opinions of counsel for the Parent and its Subsidiaries delivered in connection with the issuance of the notes (such opinions to be in a form, scope, and substance satisfactory to the Administrative Agent and its counsel), accompanied by a letter of reliance thereon addressed to the Administrative Agent and the Lenders, and copies of certificates, government filings and consents required in connection therewith. SECTION 6. MISCELLANEOUS 6.1 Each Credit Party reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Credit Agreement, as amended by this Amendment Agreement, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Amendment Agreement and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment Agreement and the transactions contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Amendment Agreement and the other instruments and documents contemplated hereby, other than the filings contemplated by Section 4.2.1 hereof and the consents hereunder and filings in connection with the Subsidiaries Merger Transaction; (c) This Amendment Agreement and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Amendment Agreement and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. -24-
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6.2 Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Credit Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party reaffirms its prior grant under the Credit Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. 6.3 All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 6.4 This Amendment Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 6.5 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 6.6 This Amendment Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 6.7 The parties hereto shall, at any time and from time to time following the execution of this Amendment Agreement, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Amendment Agreement. -25-
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IN WITNESS WHEREOF, each Borrower, the Majority Lenders, the Administrative Agent, each Co-Agent and the other Credit Parties have caused this Amendment Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BANK OF AMERICA NT&SA (formerly BANKAMERICA BUSINESS CREDIT, INC.), as the Administrative Agent By: /s/ William J. Wilson ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 AMES MERCHANDISING CORPORATION, as a Borrower and Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES FS, INC., as a Borrower and Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -26-
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HILLS DEPARTMENT STORE COMPANY, as a Borrower and Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Executive Vice President and CFO Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 HILLS STORES COMPANY, as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -27-
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AMD, INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES REALTY II, INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -28-
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CANTON ADVERTISING, INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 HDS TRANSPORT, INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 CORPORATE VISION INC., as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -29-
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HILLS DISTRIBUTING COMPANY, as a Guarantor By: /s/ Rolando de Aguiar --------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 Commitment: $50,000,000 BANK OF AMERICA NT&SA (formerly BANKAMERICA BUSINESS CREDIT, INC.), as a Lender By: /s/ William J. Wilson ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 Commitment: $50,000,000 CONGRESS FINANCIAL CORPORATION, as a Lender By: /s/ Cindy B. Dennbaum --------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 Commitment: $50,000,000 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: /s/ Charles D. Chiodo ----------------------------------------- Name: Charles D. Chiodo Title: Authorized Signatory Address: 201 High Ridge Road Stamford, Connecticut 06927 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 -30-
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Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: /s/ Michael S. Burns ----------------------------------------- Name: Michael S. Burns Title: Vice President Address: 555 Theodore Fremd Avenue Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 Commitment: $30,000,000 THE CHASE MANHATTAN BANK, as a Lender By: /s/ James M. Dailey ----------------------------------------- Name: James M. Dailey Title: Vice President Address: 633 Third Avenue New York, New York 10017 Attn: Credit Deputy Telecopy No.: (212) 622-5218 Commitment: $25,000,000 FLEET BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC., as a Lender By: /s/ Lawrence P. Garni ----------------------------------------- Name: Lawrence P. Garni Title: First Vice President Address: 477 Madison Avenue 12th Floor New York, New York 10022 Attn: Mr. Corey Sclar Telecopy No.: (212) 371-2966 -31-
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Commitment: $25,000,000 FLEET NATIONAL BANK, as a Lender By: /s/ Linda Smyth --------------------------------- Name: Linda Smyth Title: Vice President Address: 777 Main Street MSN 240 Hartford, Connecticut 06115 Attn: Linda Smyth Telecopy No.: (860) 986-6919 Commitment: $25,000,000 NATIONAL CITY COMMERCIAL FINANCE, INC.,as a Lender By: /s/ Matthew D. Sheets ----------------------------------------- Name: Matthew D. Sheets Title:Account Executive Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 Commitment: $25,000,000 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ Janeann Fehrle ----------------------------------------- Name: Janeann Fehrle Title: Vice President Address: 1600 Market Street 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Janeann Fehrle Telecopy No.: (215) 585-4749 Commitment: $20,000,000 CITIZENS BUSINESS CREDIT COMPANY, as a Lender By: /s/ William H. Creaser ----------------------------------------- Name: William H. Creaser Title: Vice President Address: 237 Main Street Middletown, Connecticut Attn: Mr. William Creaser Telecopy No.: (860) 368-4444 -32-
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Commitment: $30,000,000 FOOTHILL CAPITAL CORPORATION, as a Lender By: /s/ Todd Nakamuto --------------------------------- Name: Todd Nakamuto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 Commitment: $20,000,000 AMSOUTH BANK, as a Lender By: /s/ Kevin P. Rogers ----------------------------------------- Name: Kevin P. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 Commitment: $15,000,000 IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: /s/ James M. Steffy ----------------------------------------- Name: James M. Steffy Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. James Steffy Telecopy No.: (212) 858-2151 Commitment: $50,000,000 BANKBOSTON RETAIL FINANCE INC., as a Lender By: /s/ Betsy Ratto --------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 -33-
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Commitment: $50,000,000 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: /s/ Kevin O'Hara --------------------------------- Name: Kevin O'Hara Title: Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Mr. Kevin O'Hara Telecopy No.: (212) 536-1295 Commitment: $25,000,000 TEXTRON FINANCIAL CORPORATION, as a Lender By: /s/ John M. Parrott ----------------------------------------- Name: John M. Parrott Title: Vice President Address: 4550 North Point Suite 400 Alpharetta, Georgia 30022 Attn: Ms. Christine MacKay Telecopy No.: (770) 360-1672 Commitment: $50,000,000 HELLER FINANCIAL, INC., as a Lender By: /s/ John Buff --------------------------------- Name: John Buff Title: Senior Vice President Address: 150 East 42nd Street 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 Commitment: $10,000,000 FREMONT FINANCIAL CORPORATION, as a Lender By: /s/ Ruth Yang ----------------------------------------- Name: Ruth Yang Title: Portfolio Administrator Address: 2020 Santa Monica Boulevard Suite 500 Santa Monica, California 90404 Attn: Ms. Ruth Yang Telecopy No.: (310) 264-7401 -34-
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Commitment: $25,000,000 BNY FINANCIAL CORPORATION, as a Lender By: /s/ Robert E. Nuytkens ----------------------------------------- Name: Robert E. Nuytkens Title: Vice President Address: 1290 Avenue of the Americas 3rd Floor New York, New York 10004 Attn: Mr. Frank Imperato Telecopy No.: (212) 408-4317 SCHEDULE I DISPOSITION OF ASSETS OF HILLS CREDIT PARTIES All inventory, fixtures, equipment and leasehold improvements of the Hills Credit Parties will be transferred to AMC. All leases and real property of the Hills Credit Parties will be transferred to Ames Realty II, Inc. All other assets of the Hills Credit Parties will remain as property of the Parent. -35-
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Exhibit 10.2 SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT SECOND AMENDMENT, dated as of June 1, 1999 (this "Amendment"), to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998 (as heretofore amended, supplemented or otherwise modified, the "Credit Agreement") among Ames Department Stores, Inc., Ames FS, Inc., Ames Merchandising Corporation and certain Affiliates thereof, the lenders listed on the signature pages hereto, who are parties to the Credit Agreement (the "Lenders"), and Bank of America National Trust and Savings Association as administrative agent (the "Administrative Agent"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the Borrowers (as that term is defined in the Credit Agreement), the Lenders and the Agent are parties to the Credit Agreement; WHEREAS, the Borrowers have requested that the Credit Agreement be amended and the Lenders are willing to amend the Credit Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein have the meanings set forth in the Credit Agreement. 2. Amendment to Section 3.5 of the Credit Agreement. Section 3.5 of the Credit Agreement is hereby amended by adding the following immediately before the period at the end of the first sentence thereof: "; provided, however, that so long as the outstanding amount of Loans and undrawn face amount of all outstanding Letters of Credit do not exceed $350,000,000 in any month, the unused line fee for such month shall be determined as if the Maximum Revolver Amount were $450,000,000." 3. Representations and Warranties. To induce Agent and Lenders to enter into this Amendment, each of the Credit Parties hereby represents and warrants as follows, with the same effect as if such representations and warranties were set forth in the Credit Agreement: (a) Each Credit Party has the power and authority to enter into this Amendment, and has taken all corporate action required to authorize its execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered by such Credit Party and the Credit Agreement, as amended hereby, constitutes the valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms. The execution, delivery, and performance of this Amendment and the Credit Agreement, as amended hereby, by such Credit Party, will not violate its certificate of incorporation or by-laws or any agreement or legal requirement binding on such Credit Party. (b) On the date hereof and after giving effect to the terms of this Amendment, (i) the Credit Agreement and the other Loan Documents are in full force and effect and, to the extent that a Credit Party is a party thereto, constitutes its binding obligation, enforceable against it in accordance with their respective terms; (ii) no Default or Event of Default has occurred and is continuing; and (iii) no Credit Party has any defense to or setoff, counterclaim or claim against payment of the Lender Debt and enforcement of the Loan Documents based upon a fact or circumstance existing or occurring on or prior to the date hereof. -36-
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(c) Each of the Credit Parties hereby restates, repeats, and reaffirms each of the representations and warranties contained in the Credit Agreement, provided that each reference in such representations and warranties to "this Agreement" shall be deemed to be a reference to the Credit Agreement as amended by this Amendment. 4. Conditions (a) Notwithstanding any term or provision of this Amendment to the contrary, no amendment, consent or other agreement contained herein shall become effective until the Administrative Agent shall have determined that each of the following conditions precedent shall have been satisfied: (i) All required corporate proceedings in connection with the execution and delivery of this Amendment shall have been taken, and each shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents, including without limitation, records of requisite corporate action and proceedings that the Administrative Agent may reasonably request, to be certified by the appropriate corporate person . (ii) All representations and warranties made by each of the Credit Parties contained in Paragraph 4 hereof shall be true and correct with the same effect as though such representations and warranties had been made on and as of effectiveness of the applicable provision or provisions hereof (unless any such representation or warranty speaks as of a particular date, in which case it shall be deemed repeated as of such date). (iii) counterparts of this Amendment shall have been duly executed and delivered on behalf of each of the Borrowers, the other Credit Parties party hereto and the Majority Lenders. 5. Limited Effect. Except as expressly amended hereby, all of the terms, covenants and provisions of the Credit Agreement and all liens, security interests and collateral granted by the Credit Parties are and shall continue to be unmodified and in full force and effect. 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK. 7. Counterparts; Effectiveness. This Amendment may be executed by the parties hereto in any number of separate counterparts, each of which shall be an original, and all of which taken together shall be deemed to constitute one and the same instrument. This Amendment shall not become effective unless and until Administrative Agent has received an executed counterpart of this Amendment from each of the Credit Parties and each of the Lenders. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. -37-
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"BORROWERS" AMES MERCHANDISING CORPORATION By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- AMES FS, INC. By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- "OTHER CREDIT PARTIES" AMES DEPARTMENT STORES, INC. By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- AMD, INC. By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- AMES REALTY II, INC. By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- AMES TRANSPORTATION SYSTEMS, INC. By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- "ADMINISTRATIVE AGENT" BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Administrative Agent By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- -38-
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"LENDERS" AMSOUTH BANK as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- BNY FINANCIAL CORPORATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- CITIZENS BUSINES CREDIT COMPANY, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- -39-
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FLEET CAPITAL CORP., as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- FLEET NATIONAL BANK, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- FOOTHILL CAPITAL CORPORATION By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- FREMONT FINANCIAL CORPORATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- HELLER FINANCIAL, INC. as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- -40-
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IBJ SCHRODER BUSINESS CREDIT CORPORATION as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- LASALLE BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- NATIONAL CITY COMMERCIAL FINANCE, INC. as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------------------------- Name: --------------------------------------------------------- Title: -------------------------------------------------------- -41-
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Exhibit 10.3 THIRD AMENDMENT THIRD AMENDMENT, dated as of October 15, 1999 (the "Third Amendment"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America NT&SA (formerly BankAmerica Business Credit, Inc. ("BABC")) as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames FS, Inc. ("AFS") and Ames Merchandising Corporation ("AMC", and together with AFS, each a "Borrower" and collectively, the "Borrowers"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998 and amended as of April 16, 1999 and as of June 1, 1999, (as previously amended and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrowers, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement. WHEREAS, the Parent has informed the Administrative Agent and the Lenders that it proposes to repurchase up to $50,880,000 in face amount of 12.5% Senior Notes due 2003 (the "Hills Notes") under an Indenture dated as of April 19, 1996 between Hills Stores Company and Fleet National Bank, as trustee (the "Indenture"); WHEREAS, Section 9.14 of the Credit Agreement prohibits the Parent or any of its Subsidiaries from making any payment or prepayment of principal or interest on account of, or purchase, defease, acquire or redeem, any Debt for Borrowed Money; WHEREAS, the Borrowers have requested that the Lenders agree to amend Section 9.14 of the Credit Agreement to permit the repurchase of the Hills Notes in an aggregate purchase amount not to exceed $54,500,000 plus accrued and unpaid interest. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Section 1.1 is hereby amended by adding the following definitions in the proper alphabetical order therein: "Hills Notes" means the 12.5% Senior Notes due 2003 issued under the Indenture. "Second Amendment" means that certain Second Amendment dated as of June 1, 1999 among the Borrowers, the Lenders, the Administrative Agent and the other Credit Parties. -42-
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"Third Amendment" means that certain Third Amendment dated as of October 15, 1999 among the Borrowers, the Lenders, the Administrative Agent and the other Credit Parties. 1.2 Section 9.14 is hereby amended by replacing it in its entirety with the following new Section 9.14: Redemptions and Other Payments. Neither the Parent nor any of its Subsidiaries shall make any payment or prepayment of principal or interest on account of, or purchase, defease, acquire or redeem, any Debt for Borrowed Money (or give any notice thereof or establish a sinking fund, reserve or like set aside of funds or other property therefor), except (i) the prepayment of Obligations in accordance with the terms of this Agreement, (ii) payments (other than (x) prepayments, except to the extent that Net Cash Proceeds with respect to any asset sales permitted by Section 9.9 are available therefor, and (y) prepayments in connection with the termination in the ordinary course of business of any real or personal property leases listed on Schedule 9.13) of Debt of any Credit Party permitted under clause (b), (d), or (h) of Section 9.13, in each case, to the extent due and payable, (iii) regularly scheduled payments of Debt of any Credit Party permitted under clause (c) of Section 9.13, in each case to the extent due and payable and permitted to be paid by the terms thereof, (iv) regularly scheduled payments of interest under the Debt permitted by Section 9.13(i), in each case to the extent due and payable and permitted to be paid by the terms thereof, and (v) repurchase of outstanding Hills Notes provided that the average weighted purchase price for all such repurchases shall not exceed 107% of the face amount thereof and the aggregate amount spent will not exceed $54,500,000 plus accrued and unpaid interest. SECTION 2. CONDITIONS PRECEDENT TO EFFECTIVE DATE This Third Amendment shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: 2.1 This Third Amendment shall have been executed by the Credit Parties, the Administrative Agent and the Majority Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Credit Agreement and in the other Loan Documents each as amended hereby. 2.2 The Administrative Agent shall have received: -43-
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2.2.1 Such opinions of counsel for the Parent and the Borrowers as the Administrative Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; 2.2.2 (x) a certificate of the Secretary or Assistant Secretary of each Credit Party, except in the case of (C) and (D) hereinafter in which case the Parent only, dated within three Business Days prior to the date hereof and certifying that (A) the copy of its By-laws attached to the certificate of its Secretary or Assistant Secretary delivered on the Closing Date is a true and complete copy of its By-laws as in effect on the date of the certificate delivered pursuant to this subsection and such By-laws have not been amended since the Closing Date, (B) its certificate or articles of incorporation has not been amended since the date of the last amendment thereto shown on the certificate of good standing from the Secretary of State of the state of its incorporation delivered on the Closing Date, (C) attached thereto is a true and complete copy of the resolutions adopted by its Board of Directors authorizing the execution, delivery and performance of this Third Amendment and the repurchase of the Senior Notes and that such resolutions have not been modified, rescinded or amended and are in full force and effect, and (D) the officers executing this Third Amendment or any other document to which it is a party delivered in connection herewith or therewith are the incumbent officers and their signatures are as set forth thereto; and (y) a certificate of another officer of the Parent and each Credit Party, as the case may be, attesting to the incumbency and signature of its Secretary or Assistant Secretary, as the case may be; 2.2.3 Such other approvals, opinions or documents as the Administrative Agent may reasonably request. 2.3 To the extent invoiced, the Borrowers shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Third Amendment and the transactions contemplated hereby. 2.4 All proceedings taken in connection with the execution of this Third Amendment and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent and the Majority Lenders. 2.5 All representations and warranties contained in this Third Amendment or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. 2.6 No unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. The execution and delivery to the Administrative Agent by the Borrowers of a counterpart of this Third Amendment shall be deemed to be a representation and warranty made by the Credit Parties to the effect that the conditions precedent to the Effective Date set forth hereinabove have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of the Parent or the Borrowers, dated the Effective Date, to such effect. SECTION 3. MISCELLANEOUS 3.1 Each Credit Party reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Credit Agreement, as amended by this Third Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Third Amendment and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Third Amendment and the transactions contemplated hereby; -44-
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(b) No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Third Amendment; (c) This Third Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Third Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 3.2 Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Credit Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party reaffirms its prior grant under the Credit Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. 3.3 All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 3.4 This Third Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 3.5 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 3.6 This Third Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 3.7 The parties hereto shall, at any time and from time to time following the execution of this Third Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Third Amendment. IN WITNESS WHEREOF, each Borrower, the Majority Lenders, the Administrative Agent, each Co-Agent and the other Credit Parties have caused this Third Amendment to be duly executed by their respective authorized officers as of the day and year first above written. -45-
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BANK OF AMERICA NT&SA, as the Administrative Agent By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 AMES MERCHANDISING CORPORATION, as a Borrower and Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES FS, INC., as a Borrower and Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Executive Vice President and CFO Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -46-
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AMD, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES REALTY II, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -47-
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Commitment: $50,000,000 BANK OF AMERICA NT&SA (formerly BANKAMERICA BUSINESS CREDIT, INC.), as a Lender By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 Commitment: $50,000,000 CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 Commitment: $50,000,000 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Steven Metivier Title: Authorized Signatory Address: 201 High Ridge Road Stamford, Connecticut 06927 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Michael S. Burns Title: Vice President Address: 555 Theodore Fremd Avenue Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 -48-
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Commitment: $30,000,000 THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------- Name: James M. Dailey Title: Vice President Address: 633 Third Avenue New York, New York 10017 Attn: Credit Deputy Telecopy No.: (212) 622-5218 Commitment: $25,000,000 FLEET BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Lawrence P. Garni Title: First Vice President Address: 477 Madison Avenue 12th Floor New York, New York 10022 Attn: Mr. Corey Sclar Telecopy No.: (212) 371-2966 Commitment: $25,000,000 FLEET NATIONAL BANK, as a Lender By: ----------------------------------------- Name: Linda Smyth Title: Vice President Address: 777 Main Street MSN 240 Hartford, Connecticut 06115 Attn: Linda Smyth Telecopy No.: (860) 986-6919 -49-
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Commitment: $25,000,000 NATIONAL CITY COMMERCIAL FINANCE, INC., as a Lender By: ----------------------------------------- Name: Matthew D. Sheets Title:Account Executive Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 Commitment: $25,000,000 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------- Name: Janeann Fehrle Title: Vice President Address: 1600 Market Street 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Janeann Fehrle Telecopy No.: (215) 585-4749 Commitment: $20,000,000 CITIZENS BUSINESS CREDIT COMPANY, as a Lender By: ----------------------------------------- Name: John Palermo Title: Vice President Address: 237 Main Street Middletown, Connecticut Attn: Mr. John Palermo Telecopy No.: (860) 368-4444 Commitment: $30,000,000 FOOTHILL CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Nakamoto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 -50-
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Commitment: $20,000,000 AMSOUTH BANK, as a Lender By: ----------------------------------------- Name: Kevin P. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 Commitment: $15,000,000 IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Andrew Sepe Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. Andrew Sepe Telecopy No.: (212) 858-2151 Commitment: $50,000,000 BANKBOSTON RETAIL FINANCE INC., as a Lender By: ----------------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 -51-
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Commitment: $50,000,000 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Evelyn Kusold Title: Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Ms. Evelyn Kusold Telecopy No.: (212) 536-1295 Commitment: $25,000,000 TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Runge Title: Vice President Address: 4550 North Point Suite 400 Alpharetta, Georgia 30022 Attn: Ms. Christine MacKay Telecopy No.: (770) 360-1672 Commitment: $50,000,000 HELLER FINANCIAL, INC., as a Lender By: ----------------------------------------- Name: John Buff Title: Senior Vice President Address: 150 East 42nd Street 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 Commitment: $10,000,000 FREMONT FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Ruth Yang Title: Portfolio Administrator Address: 2020 Santa Monica Boulevard Suite 500 Santa Monica, California 90404 Attn: Ms. Ruth Yang Telecopy No.: (310) 264-7401 Commitment: $25,000,000 GENERAL MOTORS ACCEPTANCE CORPORATION, as a Lender By: ----------------------------------------- Name: Robert E. Nuytkens Title: Vice President Address: 1290 Avenue of the Americas 3rd Floor New York, New York 10004 Attn: Mr. Frank Imperato Telecopy No.: (212) 408-4317 -52-
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Exhibit 10.4 FOURTH AMENDMENT FOURTH AMENDMENT, dated as of January 18, 2000 (the "Fourth Amendment"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A. (formerly BankAmerica Business Credit, Inc. ("BABC")) as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames FS, Inc. ("AFS") and Ames Merchandising Corporation ("AMC", and together with AFS, each a "Borrower" and collectively, the "Borrowers"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998 and amended as of April 16, 1999, as of June 1, 1999 and as of October 15, 1999, (as previously amended and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrowers, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement. WHEREAS, the Borrowers have requested that the Lenders agree to amend certain sections of the Credit Agreement to reduce the interest rate, replace the minimum availability and fixed charge coverage ratio covenants and permit the repurchase of public debt and equity in an aggregate purchase amount not to exceed $100,000,000 annually. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Section 1.1 is hereby amended by adding the following definitions in the proper alphabetical order therein: "Fourth Amendment" means that certain Fourth Amendment dated as of January 18, 2000 among the Borrowers, the Lenders, the Administrative Agent and the other Credit Parties. 1.2 The definition of "Applicable Margin" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Applicable Margin" means, with respect to any Loan, the amount set forth below which corresponds to the then current senior unsecured debt rating of the Parent by Moody's Investors Service (the "Debt Rating") set forth below. -53-
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[Download Table] Applicable Margin Debt Applicable Margin for for Rating LIBOR Rate Loans Base Rate Loans B2 (or higher) 1.50% zero (0) B3 1.75% .125% Caa1 2.00% .375% Caa2 (or lower) 2.25% .625% ; provided, however, that -------- ------- (i) on the Effective Date of the Fourth Amendment (as defined therein) the Applicable Margin for LIBOR Rate Loans shall be 1.50% and the Applicable Margin for Base Rate Loans shall be 0%; (ii) each increase in the Applicable Margin shall be automatically effective as of the date any downgrade to the Debt Rating is publicly announced by Moody's Investors Service; (iii) no decrease in the Applicable Margin shall occur in connection with any upgrade in the Debt Rating unless one or more downgrades have occurred; and (iv) if at any time no Debt Rating is provided by Moody's Investors Service, then the Administrative Agent and the Borrowers shall agree upon (x) a rating agency of similar status that provides debt ratings which are the equivalent of the Debt Ratings set forth above and (y) the Applicable Margin applicable to each such debt rating. Should no such debt rating agency be available or if the Administrative Agent and the Borrowers do not agree on a rating agency, the debt ratings or the Applicable Margins applicable thereto, then the Applicable Margin, immediately and without notice or further action, shall be the highest Applicable Margin provided herein. 1.3 Clause (D) in the definition of "EBITDA" in Section 1.1 is hereby amended by replacing it in its entirety with the following new clause (D): (D) all expenses and revenue relating to or resulting from the liquidation of Inventory of any Hills Credit Party or the conversion of Hills stores to Ames stores; 1.4 The definition of "EBITDA" in Section 1.1 is hereby further amended by replacing the phrase "The October 28, 1998 Projections." with the phrase "Fiscal 2000 Projections." where it appears in the proviso. 1.5 The definition of "Fixed Charges" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Fixed Charges" means, with respect to the Parent and its consolidated Subsidiaries for any period, the sum of (i) Cash Interest Expense for such period, (ii) Capital Expenditures made in such period (excluding all Capital Expenditures relating to or resulting from the conversion of Hills stores to Ames stores), (iii) all payments made in such period on account of the principal amount of Debt for Borrowed Money (other than the Obligations), (iv) all payments made in such period on account of repurchases of stock of the Parent permitted pursuant to Section 9.10 and (v) all payments made in such period on account of repurchases of publicly issued Debt for Borrowed Money permitted pursuant to Section 9.14. -54-
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1.6 The definition of "Individual Availability" in Section 1.1 is hereby amended by deleting the phrase "at any time during each period commencing on July 1 and ending on November 30 in each year, seventy five percent (75%), and at any other time" from clause (a)(ii)(x) of such definition. 1.7 Paragraph (c) of Section 7.2 is hereby amended by adding the following immediately prior to the period at the end thereof: and either (x) stating that because the Combined Availability was not less than $100,000,000 at any time during the month then ended Section 9.26 was not applicable during such month or (y) setting forth in reasonable detail the calculations required to establish that the Credit Parties were in compliance with the covenants set forth in Section 9.26 at the end of such month 1.8 Paragraph (d) of Section 7.2 is hereby amended by replacing it in its entirety with the following new paragraph (d): (d) With each of the annual audited Financial Statements delivered pursuant to Section 7.2(a), and within forty-five (45) days after the end of each fiscal quarter (or ninety (90) days in the case of the fourth quarter), a certificate of the chief financial officer of the Parent (i) stating that, except as explained in reasonable detail in such certificate, (A) all of the representations and warranties of the Credit Parties contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, (B) each Credit Party is, at the date of such certificate, in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, (C) no Default or Event of Default then exists or existed during the period covered by such Financial Statements, and (D) describing and analyzing in reasonable detail all material trends, changes, and developments in each and all Financial Statements, and (ii) with respect to the financial statements delivered for each fiscal quarter, stating that all such statements have been prepared in accordance with GAAP and present fairly, subject to normal year-end adjustments, the financial position of the Parent and its consolidated Subsidiaries as at the dates thereof and their results of operations for the periods then ended. If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action the Parent has taken or proposes to take with respect thereto. 1.9 Section 9.10 is hereby amended by replacing the last sentence thereof in its entirety with the following new sentence: In addition, the Parent may repurchase shares of its publicly traded common stock at market prices in one or more transactions; provided, that (a) the Fixed Charge Coverage Ratio for the rolling twelve month period most recently ended prior to any such repurchase is not less than 1.00:1.00; (b) after giving effect to any such repurchase the Combined Availability is not less than $100,000,000; and (c) the aggregate repurchase price of the shares, together with the repurchase of Debt permitted to be made pursuant to clause (vi) of Section 9.14 (excluding accrued interest), does not exceed $25,000,000 in the aggregate in any fiscal quarter or $100,000,000 in the aggregate in any Fiscal Year; provided, however, if such repurchases are less than the amount permitted in any fiscal quarter, then an amount equal to the unused portion may be carried forward and added to the $25,000,000 permitted for the immediately succeeding fiscal quarter; provided further that the amount spent in such immediately succeeding fiscal quarter shall not exceed $50,000,000 in the aggregate. -55-
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1.10 Section 9.14 is hereby amended by replacing it in its entirety with the following new Section 9.14: Redemptions and Other Payments. Neither the Parent nor any of its Subsidiaries shall make any payment or prepayment of principal or interest on account of, or purchase, defease, acquire or redeem, any Debt for Borrowed Money (or give any notice thereof or establish a sinking fund, reserve or like set aside of funds or other property therefor), except (i) the prepayment of Obligations in accordance with the terms of this Agreement, (ii) payments (other than (x) prepayments, except to the extent that Net Cash Proceeds with respect to any asset sales permitted by Section 9.9 are available therefor, and (y) prepayments in connection with the termination in the ordinary course of business of any real or personal property leases listed on Schedule 9.13) of Debt of any Credit Party permitted under clause (b), (d), or (h) of Section 9.13, in each case, to the extent due and payable, (iii) regularly scheduled payments of Debt of any Credit Party permitted under clause (c) of Section 9.13, in each case to the extent due and payable and permitted to be paid by the terms thereof, (iv) regularly scheduled payments of interest under the Debt permitted by Section 9.13(i), in each case to the extent due and payable and permitted to be paid by the terms thereof, and (v) repurchase of outstanding publicly issued Debt for Borrowed Money provided that (a) the Fixed Charge Coverage Ratio for the rolling twelve month period most recently ended prior to any such repurchase is not less than 1.00:1.00 (after giving effect to the cash interest to be paid in connection with each such repurchase); (b) after giving effect to any such repurchase the Combined Availability is not less than $100,000,000; and (c) the aggregate amount spent for all such repurchases (excluding accrued interest), together with the aggregate repurchase price of shares of the Parent repurchased pursuant to Section 9.10, does not exceed $25,000,000 in the aggregate in any fiscal quarter or $100,000,000 in the aggregate in any Fiscal Year; provided, however, if such repurchases are less than the amount permitted in any fiscal quarter, then an amount equal to the unused portion may be carried forward and added to the $25,000,000 permitted for the immediately succeeding fiscal quarter; provided further that the amount spent in such immediately succeeding fiscal quarter shall not exceed $50,000,000 in the aggregate. 1.11 Section 9.25 is hereby amended by replacing it in its entirety with the following new Section 9.25: [Intentionally Omitted] --------------------- 1.12 Section 9.26 is hereby amended by replacing it in its entirety with the following new Section 9.26: Fixed Charge Coverage Ratio. If during any month the Combined Availability is less than $100,000,000, the Parent shall maintain a Fixed Charge Coverage Ratio of not less than 1.20:1.00 for the twelve month period ending with the last day of such month. 1.13 Section 9.27 is hereby amended by replacing it in its entirety with the following new Section 9.27: [Intentionally Omitted] --------------------- 1.14 Paragraph (b) of Section 10.2 is hereby amended by replacing it in its entirety with the following new clause (b): (b) the amount of the Individual Availability of the relevant Borrower shall equal or exceed the amount of such Loan or cause the issuance or provision of such Letter of Credit or Credit Support; provided, however, that the foregoing conditions precedent are not conditions to each Lender participating in or reimbursing BABC or the Administrative Agent for such Lenders' Pro Rata Share of any BABC Loan or Administrative Agent Advance as provided in Sections 2.2(h), (i) and (j). -56-
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SECTION 2. CONDITIONS PRECEDENT TO EFFECTIVE DATE This Fourth Amendment shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: 2.1 This Fourth Amendment shall have been executed by the Credit Parties, the Administrative Agent and the Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Credit Agreement and in the other Loan Documents each as amended hereby. 2.2 All required corporate actions in connection with the execution and delivery of this Fourth Amendment shall have been taken, and each shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents, including, without limitation, records of requisite corporate action that the Administrative Agent may reasonably request, to be certified by the appropriate corporate person or government authorities. 2.3 To the extent invoiced, the Borrowers shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Fourth Amendment and the transactions contemplated hereby. 2.4 All proceedings taken in connection with the execution of this Fourth Amendment and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent and the Lenders. 2.5 All representations and warranties contained in this Fourth Amendment or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. 2.6 No unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. The execution and delivery to the Administrative Agent by the Borrowers of a counterpart of this Fourth Amendment shall be deemed to be a representation and warranty made by the Credit Parties to the effect that the conditions precedent to the Effective Date set forth hereinabove have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of the Parent or the Borrowers, dated the Effective Date, to such effect. SECTION 3. MISCELLANEOUS 3.1 Each Credit Party reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Credit Agreement, as amended by this Fourth Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Fourth Amendment and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Fourth Amendment and the transactions contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Fourth Amendment; -57-
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(c) This Fourth Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Fourth Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 3.2 Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Credit Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party reaffirms its prior grant under the Credit Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. 3.3 All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 3.4 This Fourth Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 3.5 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 3.6 This Fourth Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 3.7 The parties hereto shall, at any time and from time to time following the execution of this Fourth Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Fourth Amendment. IN WITNESS WHEREOF, each Borrower, each Lender, the Administrative Agent, each Co-Agent and each other Credit Party has caused this Fourth Amendment to be duly executed by its respective authorized officers as of the day and year first above written. BANK OF AMERICA NT&SA, as the Administrative Agent By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 -58-
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AMES MERCHANDISING CORPORATION, as a Borrower and Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES FS, INC., as a Borrower and Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Executive Vice President and CFO Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMD, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -59-
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AMES REALTY II, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 Commitment: $50,000,000 BANK OF AMERICA NT&SA (formerly BANKAMERICA BUSINESS CREDIT, INC.), as a Lender By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 Commitment: $50,000,000 CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 -60-
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Commitment: $50,000,000 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Steven Metivier Title: Authorized Signatory Address: 201 High Ridge Road Stamford, Connecticut 06927 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Michael S. Burns Title: Vice President Address: 555 Theodore Fremd Avenue Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 Commitment: $30,000,000 THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------- Name: James M. Dailey Title: Vice President Address: 633 Third Avenue New York, New York 10017 Attn: Credit Deputy Telecopy No.: (212) 622-5218 Commitment: $25,000,000 FLEET BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 -61-
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Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Lawrence P. Garni Title: First Vice President Address: 477 Madison Avenue 12th Floor New York, New York 10022 Attn: Mr. Corey Sclar Telecopy No.: (212) 371-2966 Commitment: $25,000,000 FLEET NATIONAL BANK, as a Lender By: ----------------------------------------- Name: Linda Smyth Title: Vice President Address: 777 Main Street MSN 240 Hartford, Connecticut 06115 Attn: Linda Smyth Telecopy No.: (860) 986-6919 Commitment: $25,000,000 NATIONAL CITY COMMERCIAL FINANCE, INC., as a Lender By: ----------------------------------------- Name: Matthew D. Sheets Title: Account Executive Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 Commitment: $25,000,000 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------- Name: Janeann Fehrle Title: Vice President Address: 1600 Market Street 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Janeann Fehrle Telecopy No.: (215) 585-4749 -62-
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Commitment: $20,000,000 CITIZENS BUSINESS CREDIT COMPANY, as a Lender By: ----------------------------------------- Name: John Palermo Title: Vice President Address: 237 Main Street Middletown, Connecticut Attn: Mr. John Palermo Telecopy No.: (860) 368-4444 Commitment: $30,000,000 FOOTHILL CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Nakamoto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 Commitment: $20,000,000 AMSOUTH BANK, as a Lender By: ----------------------------------------- Name: Kevin P. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 Commitment: $15,000,000 IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Andrew Sepe Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. Andrew Sepe Telecopy No.: (212) 858-2151 -63-
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Commitment: $50,000,000 BANKBOSTON RETAIL FINANCE INC., as a Lender By: ----------------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 Commitment: $50,000,000 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Evelyn Kusold Title: Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Ms. Evelyn Kusold Telecopy No.: (212) 536-1295 Commitment: $25,000,000 TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Runge Title: Vice President Address: 4550 North Point Suite 400 Alpharetta, Georgia 30022 Attn: Ms. Christine MacKay Telecopy No.: (770) 360-1672 Commitment: $50,000,000 HELLER FINANCIAL, INC., as a Lender By: ----------------------------------------- Name: John Buff Title: Senior Vice President Address: 150 East 42nd Street 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 Commitment: $10,000,000 FREMONT FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Ruth Yang Title: Portfolio Administrator Address: 2020 Santa Monica Boulevard Suite 500 Santa Monica, California 90404 Attn: Ms. Ruth Yang Telecopy No.: (310) 264-7401 -64-
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Commitment: $25,000,000 GMAC COMMERCIAL CREDIT LLC, as a Lender By: ----------------------------------------- Name: Robert E. Nuytkens Title: Vice President Address: 1290 Avenue of the Americas 3rd Floor New York, New York 10004 Attn: Mr. Robert E. Nuytkens Telecopy No.: (212) 408-4317 Exhibit 10.5 FIFTH AMENDMENT FIFTH AMENDMENT, dated as of January 27, 2000 (the "Fifth Amendment"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A. (formerly BankAmerica Business Credit, Inc. ("BABC")) as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames FS, Inc. ("AFS") and Ames Merchandising Corporation ("AMC", and together with AFS, each a "Borrower" and collectively, the "Borrowers"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998, and amended as of April 16, 1999, as of June 1, 1999, as of October 15, 1999, and as of January 18, 2000, (as previously amended and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrowers, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement. WHEREAS, the Borrowers have informed the Administrative Agent and the Lenders that they would like to effect a corporate reorganization pursuant to which the following will occur sequentially: (1) AMD, Inc. will be merged with and into AFS and, as a result of such merger, the separate corporate existence of AMD, Inc. will cease, and AFS shall assume all of the Obligations of AMD, Inc.; (2) all assets of AFS will be transferred to AMC; and (3) AFS will be merged with and into Ames Department Stores, Inc. ("Parent"), and as a result of such merger, the separate corporate existence of AFS will cease, and Parent shall assume all of the Obligations of AFS in addition to being a "Credit Party" and "Guarantor" under the Credit Agreement and a "Grantor" and "Pledgor", as such terms are defined in the Security Documents; WHEREAS, AMC shall reaffirm the prior granting to the Administrative Agent of a security interest in all of its assets and in those assets it acquires from AFS, and will execute and deliver such other documents and instruments necessary to carry out the terms of the Credit Agreement and the Security Documents; WHEREAS, the Borrowers and the Administrative Agent desire to enter into an interest rate protection agreement; and WHEREAS, the Borrowers have requested that the Lenders agree to amend certain provisions of the Credit Agreement and the Security Documents to permit the mergers, the transfer of assets, the assumption of the Obligations, and the inclusion of the interest rate agreement in the definition of Obligations. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: -65-
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SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Each reference in the Credit Agreement to the Borrower or the Borrowers shall mean AMC (unless otherwise specifically required by the context of such usage). The Parent shall remain a "Guarantor" and a "Credit Party", as such terms are defined in the Credit Agreement. Each reference to AFS in the Credit Agreement and the Security Documents shall be deemed a reference to AMC (unless otherwise required by the context). 1.2 The definition of "Administrative Agent's Liens" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Administrative Agent's Liens" means the Liens granted to the Administrative Agent, for the ratable benefit of the Lenders, BABC, the Administrative Agent and any other holder of an Obligation pursuant to this Agreement and the other Security Documents. 1.3 The definition of "Obligations" in Section 1.1 is hereby amended by replacing the last sentence thereof in its entirety with the following new sentence: "Obligations" includes, without limitation, all debts, liabilities, and obligations now or hereafter owing from any Borrower to the Administrative Agent and/or any Lender under or in connection with (i) the Letters of Credit and (ii) the Rate Protection Agreements. 1.4 The definition of "Rate Protection Agreements" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Rate Protection Agreements" means (a) any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, or (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Associations, Inc., or any other master agreement (any such master agreement, together with any related schedules, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, a "Master Agreement", including but not limited to any such obligations or liabilities under any Master Agreement. 1.5 Section 1.1 is hereby amended by adding the following definitions in the proper alphabetical order therein: "Fifth Amendment" means that certain Fifth Amendment dated as of January 27, 2000 among the Borrowers, the Lenders, the Administrative Agent and the other Credit Parties. "AFS Merger Documents" means any and all merger agreements, Certificates of Ownership and Merger, Certificates of Merger, Articles of Merger, asset sale agreements, bills of sale and all other agreements, documents and instruments executed and/or delivered pursuant to or in connection with the merger of AMD, Inc. into AFS, the transfer of all assets of AFS to AMC and the merger of AFS into the Parent. "AFS Merger Transaction" means collectively, (i) the merger of AMD, Inc. with and into AFS with AFS being the surviving corporation, (ii) the transfer of all assets of AFS to AMC and (iii) the merger of AFS with and into the Parent with the Parent being the surviving corporation, all pursuant to the AFS Merger Documents. -66-
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1.6 Paragraph (b) of Section 2.2 is hereby amended by deleting the phrase "and no less than $100,000,000 of Combined Availability" where it appears therein. 1.7 Paragraph (d) of Section 2.4 is hereby amended by deleting the phrase "or cause the Combined Availability to be less than $100,000,000" where it appears in clause (ii) thereof. 1.8 Section 4.1 is hereby amended by (1) deleting "(i)" where it appears therein and (2) deleting clause (ii)thereof in its entirety. 1.9 Section 6.8 is hereby amended by (1) deleting clause (y) thereof in its entirety and (2) renumbering clause (z) to be clause (y). 1.10 Section 9.9 is hereby amended by (1) deleting the word "and" before clause (g) and (2) adding the following new clause (h) immediately prior to the period at the end thereof: (h) the mergers and asset transfers consummated in connection with the AFS Merger Transaction 1.11 Section 9.15 is hereby amended by adding the following new sentence at the end thereof: Notwithstanding the foregoing, the Parent and its Subsidiaries may consummate the transfer of assets to be made in connection with the AFS Merger Transaction. 1.12 Exhibit A to the Credit Agreement is hereby amended by deleting such exhibit in its entirety and by substituting, in lieu thereof the Exhibit A attached hereto as Annex A. 1.13 The schedules to the Credit Agreement are hereby amended to include the information on the schedules attached hereto as Annex B. SECTION 2. AMENDMENTS TO THE AMENDED AND RESTATED STOCK PLEDGE AGREEMENT 2.1 Schedules I and II to the Amended and Restated Stock Pledge Agreement are hereby amended by deleting such schedules in their entirety and by substituting, in lieu thereof, Schedules I and II attached hereto as Annex C. SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVE DATE This Fifth Amendment shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: 3.1 This Fifth Amendment shall have been executed by the Credit Parties, the Administrative Agent and the Majority Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Credit Agreement and in the other Loan Documents each as amended hereby. 3.2 The Administrative Agent shall have received: 3.2.1 Executed copies of proper financing statements, ready to be filed by the Administrative Agent on or before the Effective Date under the UCC of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Administrative Agent's Lien on the Collateral; 3.2.2 Stock certificates, together with stock powers executed in blank, and instruments, duly endorsed to the Administrative Agent, pledged and not previously delivered under the relevant Security Documents or reissued as a result of the AFS Merger Transaction (as defined in Section 1.5 above); -67-
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3.2.3 Such opinions of counsel for the Parent and its Subsidiaries as the Administrative Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; 3.2.4 (x) a certificate of the Secretary or Assistant Secretary of each Credit Party certifying that (A) the copy of its By-laws attached to the certificate of its Secretary or Assistant Secretary delivered on the Closing Date is a true and complete copy of its By-laws as in effect on the date of the certificate delivered pursuant to this subsection and such By-laws have not been amended since the Closing Date, (B) all required corporate actions in connection with the execution, delivery and performance of this Fifth Amendment and the AFS Merger Transaction (as defined in Section 1.5 above), if applicable, have been taken and, if resolutions have been adopted by its Board of Directors or shareholders, that attached thereto is a true and complete copy of such resolutions and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) its certificate or articles of incorporation has not been amended since the date of the last amendment thereto shown on the certificate of good standing from the Secretary of State of the state of its incorporation delivered on the Closing Date, and (D) the officers executing this Fifth Amendment or any other document to which it is a party delivered in connection herewith or therewith are the incumbent officers and their signatures are as set forth thereto; and (y) a certificate of another officer thereof attesting to the incumbency and signature of its Secretary or Assistant Secretary, as the case may be; 3.2.5 Such other approvals, opinions or documents as the Administrative Agent may reasonably request. 3.3 To the extent invoiced, the Borrowers shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Fifth Amendment and the transactions contemplated hereby. 3.4 All proceedings taken in connection with the execution of this Fifth Amendment, the AFS Merger Documents (as defined in Section 1.5 above) and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent. 3.5 All representations and warranties contained in this Fifth Amendment or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. 3.6 No unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. The execution and delivery to the Administrative Agent by the Borrowers of a counterpart of this Fifth Amendment shall be deemed to be a representation and warranty made by the Credit Parties to the effect that the conditions precedent to the Effective Date set forth in 3.5 and 3.6 above have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of the Parent or the Borrowers, dated the Effective Date, to such effect. SECTION 4. ADDITIONAL COVENANTS 4.1 Within five Business Days of the consummation of the AFS Merger Transaction (as defined in Section 1.5 above), the Credit Parties shall deliver to the Administrative Agent executed copies of the AFS Merger Documents (as defined in Section 1.5 above) and evidence of the consummation of the AFS Merger Transaction. -68-
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SECTION 5. MISCELLANEOUS 5.1 Each Credit Party reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Credit Agreement, as amended by this Fifth Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Fifth Amendment and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Fifth Amendment and the transactions contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Fifth Amendment and the other instruments and documents contemplated hereby, other than the filings contemplated by Section 3.2.1 hereof and the consents hereunder and filings in connection with the AFS Merger Transaction; (c) This Fifth Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Fifth Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 5.2 Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Credit Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party reaffirms its prior grant under the Credit Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. 5.3 All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 5.4 This Fifth Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 5.5 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 5.6 This Fifth Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. -69-
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5.7 The parties hereto shall, at any time and from time to time following the execution of this Fifth Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Fifth Amendment. [REMAINDER OF PAGE INTENTIONALLY BLANK] -70-
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IN WITNESS WHEREOF, each Borrower, the Majority Lenders, the Administrative Agent and the other Credit Parties have caused this Fifth Amendment to be duly executed by their respective authorized officers as of the day and year first above written. BANK OF AMERICA, N.A., as the Administrative Agent By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 AMES MERCHANDISING CORPORATION, as a Borrower and Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES FS, INC., as a Borrower and Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Executive Vice President and CFO Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -71-
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AMD, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES REALTY II, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 Commitment: $50,000,000 BANK OF AMERICA, N.A. (formerly BANKAMERICA BUSINESS CREDIT, INC.), as a Lender By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 -73-
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Commitment: $50,000,000 CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 Commitment: $50,000,000 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Sean McWhinnie Title: Authorized Signatory Address: 800 Connecticut Avenue, 2 North Norwalk, Connecticut 06854 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Michael S. Burns Title: Vice President Address: 555 Theodore Fremd Avenue Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 Commitment: $30,000,000 THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------- Name: James M. Dailey Title: Vice President Address: 633 Third Avenue New York, New York 10017 Attn: Credit Deputy Telecopy No.: (212) 622-5218 -74-
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Commitment: $25,000,000 FLEET BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Lawrence P. Garni Title: First Vice President Address: 477 Madison Avenue 12th Floor New York, New York 10022 Attn: Mr. Corey Sclar Telecopy No.: (212) 371-2966 Commitment: $25,000,000 FLEET NATIONAL BANK, as a Lender By: ----------------------------------------- Name: Linda Smyth Title: Vice President Address: 777 Main Street MSN 240 Hartford, Connecticut 06115 Attn: Linda Smyth Telecopy No.: (860) 986-6919 Commitment: $25,000,000 NATIONAL CITY COMMERCIAL FINANCE, INC., as a Lender By: ----------------------------------------- Name: Matthew D. Sheets Title: Account Executive Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 -75-
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Commitment: $25,000,000 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------- Name: Janeann Fehrle Title: Vice President Address: 1600 Market Street 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Janeann Fehrle Telecopy No.: (215) 585-4749 Commitment: $20,000,000 CITIZENS BUSINESS CREDIT COMPANY, Commitment: $30,000,000 FOOTHILL CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Nakamoto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 Commitment: $20,000,000 AMSOUTH BANK, as a Lender By: ----------------------------------------- Name: Kevin P. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 -76-
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Commitment: $15,000,000 IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Andrew Sepe Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. Andrew Sepe Telecopy No.: (212) 858-2151 Commitment: $50,000,000 FLEET RETAIL FINANCE INC., as a Lender By: ----------------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 Commitment: $50,000,000 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Evelyn Kusold Title: Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Ms. Evelyn Kusold Telecopy No.: (212) 536-1295 Commitment: $25,000,000 TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Runge Title: Vice President Address: 4550 North Point Suite 400 Alpharetta, Georgia 30022 Attn: Ms. Christine MacKay Telecopy No.: (770) 360-1672 -77-
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Commitment: $50,000,000 HELLER FINANCIAL, INC., as a Lender By: ----------------------------------------- Name: John Buff Title: Senior Vice President Address: 150 East 42nd Street 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 Commitment: $10,000,000 FREMONT FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Ruth Yang Title: Portfolio Administrator Address: 2020 Santa Monica Boulevard Suite 500 Santa Monica, California 90404 Attn: Ms. Ruth Yang Telecopy No.: (310) 264-7401 Commitment: $25,000,000 GMAC COMMERCIAL CREDIT LLC, as a Lender By: ----------------------------------------- Name: Robert E. Nuytkens Title: Vice President Address: 1290 Avenue of the Americas 3rd Floor New York, New York 10004 Attn: Mr. Robert E. Nuytkens Telecopy No.: (212) 408-4317 -78-
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Exhibit 10.6 SIXTH AMENDMENT SIXTH AMENDMENT AND WAIVER, dated as of May 8, 2000 (the "Sixth Amendment"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A. (formerly BankAmerica Business Credit, Inc. ("BABC")) as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames Merchandising Corporation ("AMC" and "Borrower"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998, and amended as of April 16, 1999, as of June 1, 1999, as of October 15, 1999, as of January 18, 2000, and as of January 27, 2000 (as previously amended, the "Original Agreement", and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrower, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Original Agreement. WHEREAS, the Borrower has informed the Administrative Agent and the Lenders that a new Subsidiary of the Parent has been formed, namely AmesPlace.com, Inc., a Delaware corporation ("AP.com"); WHEREAS, pursuant to Section 9.21 of the Credit Agreement, no new Subsidiaries are permitted to be formed and the creation of AP.com is a violation thereof; WHEREAS, the Borrower has requested that the Lenders agree to waive the violation of Section 9.21 and to amend the Original Agreement for the inclusion of AP.com as a Credit Party and Guarantor thereunder and AP.com is desirous of becoming a Credit Party and Guarantor; and WHEREAS, AP.com shall grant to the Administrative Agent a security interest in all of its assets and will execute and deliver such other documents and instruments necessary to carry out the terms of the Credit Agreement and the Security Documents and to fulfill all its obligations as a Credit Party and a Guarantor; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: SECTION 1. AMENDMENTS TO THE ORIGINAL AGREEMENT 1.1 Each reference in the Original Agreement to a Credit Party or a Guarantor shall include AP.com (unless otherwise specifically required by the context of such usage). 1.2 Section 1.1 is hereby amended by adding the following definition in the proper alphabetical order therein: "Sixth Amendment" means that certain Sixth Amendment dated as of May 8, 2000 among the Borrower, the Lenders, the Administrative Agent and the other Credit Parties. 1.3 The schedules to the Original Agreement are hereby amended to include the information on the schedules attached hereto as Annex A. -79-
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SECTION 2. AMENDMENTS TO THE AMENDED AND RESTATED STOCK PLEDGE AGREEMENT 2.1 Schedules I and II to the Amended and Restated Stock Pledge Agreement are hereby amended by deleting such schedules in their entirety and by substituting, in lieu thereof, Schedules I and II attached hereto as Annex B. SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVE DATE This Sixth Amendment shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: 3.1 This Sixth Amendment shall have been executed by the Credit Parties, the Administrative Agent and the Majority Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Original Agreement and in the other Loan Documents each as amended hereby. 3.2 The Administrative Agent shall have received: 3.2.1 Executed copies of proper financing statements showing AP.com as debtor, ready to be filed by the Administrative Agent on or before the Effective Date under the UCC of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Administrative Agent's Lien on the Collateral; 3.2.2 Stock certificates issued by AP.com, together with stock powers executed in blank, and instruments, duly endorsed to the Administrative Agent, pledged and not previously delivered under the relevant Security Documents; 3.2.3 Such opinions of counsel for the Parent and the other Credit Parties as the Administrative Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; 3.2.4 (x) a certificate of the Secretary or Assistant Secretary of each Credit Party certifying that (A) the copy of its By-laws attached to the certificate of its Secretary or Assistant Secretary delivered on the Closing Date, or in the case of AP.com as delivered in connection herewith, is a true and complete copy of its By-laws as in effect on the date of the certificate delivered pursuant to this subsection and such By-laws have not been amended since the Closing Date, (B) all required corporate actions in connection with the execution, delivery and performance of this Sixth Amendment have been taken and, if resolutions have been adopted by its Board of Directors or shareholders, that attached thereto is a true and complete copy of such resolutions and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) its certificate or articles of incorporation has not been amended since the date of the last amendment thereto shown on the certificate of good standing from the Secretary of State of the state of its incorporation delivered on the Closing Date and in the case of AP.com, the date of the good standing certificate delivered in connection herewith and (D) the officers executing this Sixth Amendment or any other document to which it is a party delivered in connection herewith or therewith are the incumbent officers and their signatures are as set forth thereto; and (y) a certificate of another officer thereof attesting to the incumbency and signature of its Secretary or Assistant Secretary, as the case may be; 3.2.5 Such other approvals, opinions or documents as the Administrative Agent may reasonably request. 3.3 To the extent invoiced, the Borrower shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Sixth Amendment and the transactions contemplated hereby. -80-
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3.4 All proceedings taken in connection with the execution of this Sixth Amendment and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent. 3.5 All representations and warranties contained in this Sixth Amendment or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. 3.6 After the effectiveness of this Sixth Amendment, no unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. The execution and delivery to the Administrative Agent by the Credit Parties of a counterpart of this Sixth Amendment shall be deemed to be a representation and warranty made by each Credit Party to the effect that the conditions precedent to the Effective Date set forth in 3.5 and 3.6 above have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of each Credit Party, dated the Effective Date, to such effect. SECTION 4. AGREEMENTS BY AP.COM 4.1 AP.com hereby agrees to each and every provision of Article 15 of the Credit Agreement and assumes all responsibilities, duties and obligations of a Guarantor under the Credit Agreement. This Sixth Amendment shall constitute a counterpart to the Credit Agreement and AP.com's execution and delivery hereof shall effectuate its Guaranty under Article 15 of the Credit Agreement. 4.2 As security for all present and future Obligations, AP.com as a Guarantor and Credit Party, hereby grants to the Administrative Agent, for the ratable benefit of the Administrative Agent and the Lenders, a continuing first priority security interest in, lien on, and right of set-off against, all of its Collateral whether now owned or existing or hereafter acquired or arising, regardless of where located. 4.3 As security for all the Obligations, Ap.com shall simultaneously herewith execute a counterpart signature page to the Amended and Restated Security Agreement and Mortgage - Trademarks, Patents and Copyrights dated as of December 31, 1998 and agrees to be a Grantor thereunder, assumes all of the responsibilities, duties and obligations of a Grantor thereunder, and covenants to perform as set forth therein. SECTION 5. MISCELLANEOUS 5.1 Each Credit Party affirms, reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Original Agreement, as amended by this Sixth Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Sixth Amendment and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Sixth Amendment and the transactions contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Sixth Amendment and the other instruments and documents contemplated hereby; (c) This Sixth Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and -81-
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(d) The execution, delivery and performance of this Sixth Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 5.2 Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Original Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Original Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party affirms its prior grant under the Original Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. 5.3 All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 5.4 This Sixth Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 5.5 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 5.6 This Sixth Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 5.7 The parties hereto shall, at any time and from time to time following the execution of this Sixth Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Sixth Amendment. [REMAINDER OF PAGE INTENTIONALLY BLANK] -82-
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IN WITNESS WHEREOF, the Borrower, the Majority Lenders, the Administrative Agent and the other Credit Parties have caused this Sixth Amendment to be duly executed by their respective authorized officers as of the day and year first above written. BANK OF AMERICA, N.A., as the Administrative Agent By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 BORROWER: AMES MERCHANDISING CORPORATION By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Executive Vice President and CFO Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMESPLACE.COM, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -83-
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AMES REALTY II, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 Commitment: $50,000,000 BANK OF AMERICA, N.A. (formerly BANKAMERICA BUSINESS CREDIT, INC.), as a Lender By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 Commitment: $50,000,000 CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 -84-
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Commitment: $50,000,000 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Sean McWhinnie Title: Authorized Signatory Address: 800 Connecticut Avenue, 2 North Norwalk, Connecticut 06854 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Michael S. Burns Title: Vice President Address: 555 Theodore Fremd Avenue, Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 Commitment: $30,000,000 THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------- Name: James M. Dailey Title: Vice President Address: 633 Third Avenue New York, New York 10017 Attn: Credit Deputy Telecopy No.: (212) 622-5218 Commitment: $25,000,000 FLEET BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 -85-
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Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC., Commitment: $25,000,000 FLEET NATIONAL BANK, as a Lender Commitment: $25,000,000 NATIONAL CITY COMMERCIAL FINANCE, INC., as a Lender By: ----------------------------------------- Name: Matthew D. Sheets Title: Account Executive Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 Commitment: $25,000,000 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------- Name: Janeann Fehrle Title: Vice President Address: 1600 Market Street, 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Janeann Fehrle Telecopy No.: (215) 585-4749 -86-
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Commitment: $20,000,000 CITIZENS BUSINESS CREDIT COMPANY, as a Lender By: ----------------------------------------- Name: John Atanasoff Title: Vice President Address: 40 Court Street Boston, Massachusetts 02108 Attn: Mr. John Atanasoff Telecopy No.: (617) 695-4748 Commitment: $30,000,000 FOOTHILL CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Nakamoto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 Commitment: $20,000,000 AMSOUTH BANK, as a Lender By: ----------------------------------------- Name: Kevin P. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue, 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 Commitment: $15,000,000 IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Andrew Sepe Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. Andrew Sepe Telecopy No.: (212) 858-2151 -87-
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Commitment: $50,000,000 FLEET RETAIL FINANCE INC., as a Lender By: ----------------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street, 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 Commitment: $50,000,000 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Evelyn Kusold Title: Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Ms. Evelyn Kusold Telecopy No.: (212) 536-1295 Commitment: $25,000,000 TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Runge Title: Vice President Address: 4550 North Point, Suite 400 Alpharetta, Georgia 30022 Attn: Ms. Christine MacKay Telecopy No.: (770) 360-1672 Commitment: $50,000,000 HELLER FINANCIAL, INC., as a Lender By: ----------------------------------------- Name: John Buff Title: Senior Vice President Address: 150 East 42nd Street, 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 -88-
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Commitment: $10,000,000 FREMONT FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Ruth Yang Title: Portfolio Administrator Address: 2020 Santa Monica Boulevard, Suite 500 Santa Monica, California 90404 Attn: Ms. Ruth Yang Telecopy No.: (310) 264-7401 Commitment: $25,000,000 GMAC COMMERCIAL CREDIT LLC, as a Lender By: ----------------------------------------- Name: Robert E. Nuytkens Title: Vice President Address: 1290 Avenue of the Americas, 3rd Floor New York, New York 10004 Attn: Mr. Robert E. Nuytkens Telecopy No.: (212) 408-4317 -89-
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[Enlarge/Download Table] ANNEX B Replacement Schedules for the Pledge Agreement Amended Schedule I to Amended and Restated Pledge Agreement (Capital Stock) --------------------------------------------------------------------------- Attached to and forming part of that certain Amended and Restated Pledge Agreement (Capital Stock) dated as of December 31, 1998 by List and Description of Pledged Securities Description of Pledged Securities: Issuer Class of Certificate Number of Percentage of of Stock Stock Number Shares total shares -------- ---------- ----------- --------- ------------ Ames Merchandising common 2 1,000 100% Corporation Ames Realty II, Inc. common 1 1,000 100% Ames Transportation common 1 1,000 100% Systems, Inc. AmesPlace.com, Inc. common 1 _____ 100% Amended Schedule II to Amended and Restated Pledge Agreement (Capital Stock) ---------------------------------------------------------------------------- Attached to and forming part of that certain Amended and Restated Pledge Agreement (Capital Stock) dated as of December 31, 1998 by AMES DEPARTMENT STORES, INC., as Pledgor to BANKAMERICA BUSINESS CREDIT, INC., as Administrative Agent Jurisdiction of Organization of Issuers Jurisdiction of Name of Issuer Organization Ames Merchandising Corporation Delaware (formerly known as Zayre Central Corp. and successor-in-interest to Ames Stores and Zayre New England Corp.) Ames Realty II, Inc. Delaware Ames Transportation Delaware Systems, Inc. AmesPlace.com, Inc. Delaware -90-
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Exhibit 10.7 SEVENTH AMENDMENT SEVENTH AMENDMENT AND WAIVER, dated as of July 25, 2000 (the "Seventh Amendment"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A. (formerly BankAmerica Business Credit, Inc. ("BABC")) as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames Merchandising Corporation ("AMC" and "Borrower"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998, and amended as of April 16, 1999, as of June 1, 1999, as of October 15, 1999, as of January 18, 2000, as of January 27, 2000, and as of May 8, 2000 (as previously amended, the "Original Agreement", and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrower, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Original Agreement. WHEREAS, the Credit Parties wish to amend and waive certain provisions of the Original Agreement; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: SECTION 1. AMENDMENTS TO THE ORIGINAL AGREEMENT 1.1 Section 1.1 is hereby amended by adding the following new definitions in the proper alphabetical order therein: "Inventory Appraisal" means an appraisal of the Borrower's Inventory performed by Gordon Brothers which appraisal shall be in form and substance satisfactory to the Administrative Agent. "Seventh Amendment" means that certain Seventh Amendment dated as of July 25, 2000 among the Borrower, the Lenders, the Administrative Agent and the other Credit Parties. 1.2 The definition of "Applicable Margin" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Applicable Margin" means, with respect to any Loan, the amount set forth below which corresponds to the then current senior unsecured debt rating of the Parent by Moody's Investors Service (the "Debt Rating") set forth below. [Download Table] Applicable Margin Debt Applicable Margin for for Rating LIBOR Rate Loans Base Rate Loans B1 (or higher) 1.75% 0.125% B2 2.00% .375% B3 2.25% .625% Caa1 (or lower) 2.50% .750% -91-
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<FN> ; provided, however, that -------- ------- (i) as of the "Effective Date" of the Seventh Amendment (as defined therein), the Applicable Margin for LIBOR Rate Loans shall be 1.75% and the Applicable Margin for Base Rate Loans shall be 0.125%; (ii) each increase in the Applicable Margin shall be automatically effective as of the date any downgrade to the Debt Rating is publicly announced by Moody's Investors Service; each decrease in the Applicable Margin shall be automatically effective as of the date any upgrade to the Debt Rating is publicly announced by Moody's Investors Service; (iii) no decrease in the Applicable Margin shall occur in connection with any upgrade in the Debt Rating unless one or more downgrades have occurred; (iv) if at any time no Debt Rating is provided by Moody's Investors Service, then the Administrative Agent and the Borrower shall agree upon (x) a rating agency of similar status that provides debt ratings which are the equivalent of the Debt Ratings set forth above and (y) the Applicable Margin applicable to each such debt rating; should no such debt rating agency be available or if the Administrative Agent and the Borrower do not agree on a rating agency, the debt ratings or the Applicable Margins applicable thereto, then the Applicable Margin, immediately and without notice or further action, shall be the highest Applicable Margin provided herein; and (v) if at any time and for so long as the Debt Rating is B1 or higher and the Fixed Charge Coverage Ratio for the twelve month period ended as at the last day of the most recently ended month for which financial statements were required to be submitted to the Administrative Agent pursuant to Section 7.2 hereunder is equal to or greater than 1.50:1.00, the Applicable Margin for LIBOR Rate Loans shall be 1.50% and the Applicable Margin for Base Rate Loans shall be zero (0.0%); provided, that any such decrease in the Applicable Margin shall only take effect upon the Borrower's delivery of both notification of the Debt Rating and the applicable Fixed Charge Coverage Ratio Certificate. </FN>
1.3 The definition of "Commitment" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Commitment" means, at any time with respect to a Lender, the principal amount for such time set forth beside such Lender's name under the heading "Commitment" on Schedule I attached to the Seventh Amendment and made a part thereof or, on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.3, as such Commitment may be adjusted from time to time in accordance with the provisions of Section 13.3, and "Commitments" means, collectively, the aggregate amount of the commitments of all the Lenders. 1.4 The first paragraph contained in the definition of "Individual Availability" in Section 1.1 is hereby amended by replacing it in its entirety with the following new paragraph: -92-
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"Individual Availability" means at any time with respect to the Borrower: (a) the least of: (i) the Maximum Revolver Amount minus the Individual Outstandings of the Borrower at such time; or (ii) the sum of: (x) at any time, (1) seventy percent (70%) of the Book Value of Eligible Inventory of the Borrower (excluding Inventory referred to in clause (y) below) or (2) during the period commencing on the "Effective Date" of the Seventh Amendment (as defined therein) and ending on October 31, 2000, seventy five percent (75%) of the Book Value of Eligible Inventory of the Borrower, (in each case, excluding Inventory referred to in clause (y) below), plus (y) fifty percent (50%) of the Book Value of finished goods Inventory of the Borrower not in the possession of such Borrower as to which a merchandise or documentary Letter of Credit has been issued and which, if in possession of the Borrower, would be treated as Eligible Inventory of the Borrower, but only if such Inventory is covered by insurance with recognized insurers on terms (including, without limitation, types of coverage, policy limits and deductible amounts) not materially different from those of the insurance maintained by the Borrower with respect to such Inventory on the Closing Date or is otherwise deemed adequate by the Administrative Agent; or (iii) the maximum amount of indebtedness under the Credit Agreement (as defined in the Ames Indenture) then permitted to be outstanding pursuant to Section 4.09 of the Ames Indenture; minus ----- (b) the sum of: (i) the unpaid balance of Loans of the Borrower at such time, (ii) the aggregate amount of Pending Loans of the Borrower at such time, (iii) the aggregate undrawn amount of all outstanding Letters of Credit issued for the account of Borrower at such time, (iv) the aggregate amount of any unpaid reimbursement obligations of the Borrower in respect of the Letters of Credit, (v) reserves for accrued interest on the Obligations established with respect to the Borrower, (vi) the Environmental Compliance Reserve established with respect to the Borrower, and (vii) all other reserves which the Administrative Agent deems necessary or appropriate in its sole discretion to maintain with respect to the Borrower's account, including, without limitation, reserves for any amounts which the Administrative Agent or any Lender may be obligated to pay in the future for the account of the Borrower. 1.5 The definition of "Maximum Revolver Amount" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Maximum Revolver Amount" means: (i) from August 1, 2000 until close of business on November 30, 2000, $705,000,000; and (ii) at all times prior to August 1, 2000 and from and after December 1, 2000, $650,000,000; provided that such amount may be reduced from time to time pursuant to Section 4.2. 1.6 Paragraph (c) of Section 7.2 is hereby amended by replacing clause (x) therein with the following new clause (x): -93-
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(x) stating that Section 9.26 was not applicable during such month because the Combined Availability was not less than the minimum monthly Combined Availability amount specified in Section 9.26 for such month, or 1.7 Section 9.26 is hereby amended by replacing it in its entirety with the following new Section 9.26: Fixed Charge Coverage Ratio. If at any time during any month that occurs in the time periods below the Combined Availability is less than the respective amount set forth below for such time period: Time Period Minimum Combined Availability ----------- ----------------------------- 7/25/00 through 8/31/00 $ 90,000,000 9/01/00 and thereafter $100,000,000 the Parent shall maintain a Fixed Charge Coverage Ratio of not less than the respective amount set forth below for the appropriate time period for the most recently ended twelve month period for which financial statements were required to be submitted to the Administrative Agent pursuant to Section 7.2 hereunder: Time Period Fixed Charge Coverage Ratio ----------- --------------------------- 5/31/00 through 8/31/00 .50:1.00 9/01/00 through 10/31/00 .60:1.00 11/1/00 through 11/30/00 .70:1.00 12/01/00 through 2/28/01 .85:1.00 3/01/01 through 3/31/01 .90:1.00 4/01/01 through 4/30/01 .95:1.00 and thereafter, the Parent shall maintain a Fixed Charge Coverage Ratio of not less than 1.00:1.00. SECTION 2. AGREEMENTS OF THE PARTIES HERETO 2.1 Waiver. (a) Subject to the satisfaction of all the conditions set forth in Section 3 below, the Lenders hereby waive compliance by the Borrower with Section 9.26 of the Original Agreement through the date hereof and any Event of Default under clause (c) of Section 11.1 of the Original Agreement resulting solely from such failure to comply. (b) Except as expressly waived hereby, all of the representations, warranties, terms, covenants and conditions of the Original Agreement shall remain in full force and effect in accordance with their respective terms. The waiver set forth herein shall be limited precisely as provided for herein and shall not be deemed to be waivers of, amendments of, consents to or modifications of any term or provision of the Credit Agreement or any other document or instrument referred to therein or of any transaction or further or future action on the part of the Borrower requiring the consent of the Lenders except to the extent specifically provided for herein. Except as expressly set forth herein, the Lenders have not and shall not be deemed to have waived any of their rights and remedies against the Borrower for any existing or future Events of Default. 2.2 Amendment Fee. The Borrower agrees to pay to the Administrative Agent, for the account of the Lenders as set forth in Schedule II attached hereto, a nonrefundable fee in consideration of the special accommodations made hereunder of $808,462, payable as follows: $202,115.50 on August 1, 2000, September 1, 2000, October 2, 2000 and November 1, 2000. The total amendment fee payable hereunder shall be earned in full upon execution and delivery of this Seventh Amendment by the parties hereto. Upon the occurrence of an Event of Default or termination of the Credit Agreement all remaining unpaid installments of such fee shall be immediately due and payable. -94-
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SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVE DATE This Seventh Amendment shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: 3.1 This Seventh Amendment shall have been executed by the Credit Parties, the Administrative Agent and all the Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Original Agreement and in the other Loan Documents each as amended hereby. 3.2 The Administrative Agent shall have received: 3.2.1 The Inventory Appraisal; 3.2.2 Such opinions of counsel for the Parent and the other Credit Parties as the Administrative Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; 3.2.3 (x) a certificate of the Secretary or Assistant Secretary of each Credit Party certifying that (A) the copy of its By-laws attached to the certificate of its Secretary or Assistant Secretary delivered on the Closing Date, or in the case of AmesPlace.com as delivered in connection with the Sixth Amendment, is a true and complete copy of its By-laws as in effect on the date of the certificate delivered pursuant to this subsection and such By-laws have not been amended since the Closing Date, (B) all required corporate actions in connection with the execution, delivery and performance of this Seventh Amendment have been taken and, if resolutions have been adopted by its Board of Directors or shareholders, that attached thereto is a true and complete copy of such resolutions and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) its certificate or articles of incorporation has not been amended since the date of the last amendment thereto shown on the certificate of good standing from the Secretary of State of the state of its incorporation delivered on the Closing Date and in the case of AmesPlace.com, the date of the good standing certificate delivered in connection with the Sixth Amendment and (D) the officers executing this Seventh Amendment or any other document to which it is a party delivered in connection herewith or therewith are the incumbent officers and their signatures are as set forth thereto; and (y) a certificate of another officer thereof attesting to the incumbency and signature of its Secretary or Assistant Secretary, as the case may be; 3.2.4 Such other approvals, opinions or documents as the Administrative Agent may reasonably request; and 3.2.5 Such amendments and modifications to the other Loan Documents as the Administrative Agent may reasonably request. 3.3 To the extent invoiced, the Borrower shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Seventh Amendment and the transactions contemplated hereby. 3.4 All proceedings taken in connection with the execution of this Seventh Amendment and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent. 3.5 All representations and warranties contained in this Seventh Amendment or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. 3.6 After the effectiveness of this Seventh Amendment, no unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. -95-
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The execution and delivery to the Administrative Agent by the Credit Parties of a counterpart of this Seventh Amendment shall be deemed to be a representation and warranty made by each Credit Party to the effect that the conditions precedent to the Effective Date set forth in 3.5 and 3.6 above have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of each Credit Party, dated the Effective Date, to such effect. SECTION 4. MISCELLANEOUS 4.1 Each Credit Party affirms, reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Original Agreement, as amended by this Seventh Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. 4.2 Each Credit Party represents and warrants that the Borrower is and at all times will continue to be the sole Credit Party which owns Inventory and that all such Inventory is subject to no Liens except Permitted Liens. 4.3 Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Seventh Amendment and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Seventh Amendment and the transactions contemplated hereby; (b) No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Seventh Amendment and the other instruments and documents contemplated hereby; (c) This Seventh Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (d) The execution, delivery and performance of this Seventh Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 4.4 Other than as expressly set forth herein, nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Original Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Original Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party affirms its prior grant under the Original Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. 4.5 All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. -96-
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4.6 This Seventh Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 4.7 Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 4.8 This Seventh Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 4.9 The parties hereto shall, at any time and from time to time following the execution of this Seventh Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Seventh Amendment. IN WITNESS WHEREOF, the Borrower, the Majority Lenders, the Administrative Agent and the other Credit Parties have caused this Seventh Amendment to be duly executed by their respective authorized officers as of the day and year first above written. BANK OF AMERICA, N.A., as the Administrative Agent By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 BORROWER: AMES MERCHANDISING CORPORATION By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Senior Executive Vice President and CFO Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 -97-
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AMESPLACE.COM, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES REALTY II, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: ----------------------------------------- Name: Rolando de Aguiar Title: Vice President Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 BANK OF AMERICA, N.A., as a Lender By: ----------------------------------------- Name: William J. Wilson Title: Senior Account Executive Address: 40 East 52nd Street New York, New York 10022 Attn: Division Manager Telecopy No.: (212) 836-5167 -98-
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CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Sean McWhinnie Title: Authorized Signatory Address: 800 Connecticut Avenue, 2 North Norwalk, Connecticut 06854 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ------------------------------------ Name: Michael S. Burns Title: Vice President Address: 555 Theodore Fremd Avenue, Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------- Name: James M. Dailey Title: Vice President Address: 633 Third Avenue New York, New York 10017 Attn: Credit Deputy Telecopy No.: (212) 622-5218 -99-
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FLEET CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 LASALLE BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Lawrence P. Garni Title: First Vice President Address: 477 Madison Avenue, 12th Floor New York, New York 10022 Attn: Mr. Corey Sclar Telecopy No.: (212) 371-2966 FLEET NATIONAL BANK, as a Lender By: ----------------------------------------- Name: Linda Smyth Title: Vice President Address: 777 Main Street MSN 240 Hartford, Connecticut 06115 Attn: Linda Smyth Telecopy No.: (860) 986-6919 NATIONAL CITY COMMERCIAL FINANCE, INC., as a Lender By: ----------------------------------------- Name: Matthew D. Sheets Title: Account Executive Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 -100-
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PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------- Name: Janeann Fehrle Title: Vice President Address: 1600 Market Street, 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Janeann Fehrle Telecopy No.: (215) 585-4749 CITIZENS BUSINESS CREDIT COMPANY, as a Lender By: ----------------------------------------- Name: John Atanasoff Title: Vice President Address: 40 Court Street Boston, Massachusetts 02108 Attn: Mr. John Atanasoff Telecopy No.: (617) 695-4748 FOOTHILL CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Nakamoto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 AMSOUTH BANK, as a Lender By: ----------------------------------------- Name: Kevin P. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue, 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 -101-
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IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Andrew Sepe Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. Andrew Sepe Telecopy No.: (212) 858-2151 FLEET RETAIL FINANCE INC., as a Lender By: ----------------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street, 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Evelyn Kusold Title: Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Ms. Evelyn Kusold Telecopy No.: (212) 536-1295 TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Runge Title: Vice President Address: 4550 North Point, Suite 400 Alpharetta, Georgia 30022 Attn: Ms. Christine MacKay Telecopy No.: (770) 360-1672 -102-
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HELLER FINANCIAL, INC., as a Lender By: ----------------------------------------- Name: John Buff Title: Senior Vice President Address: 150 East 42nd Street, 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 FINOVA FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Bruce Mettle Title: Portfolio Administrator Address: 311 South Wacker Drive, Suite 4400 Chicago, IL 60606 Attn: Mr. Bruce Mettle Telecopy No.: (312) 322-7250 GMAC COMMERCIAL CREDIT LLC, as a Lender By: ----------------------------------------- Name: Robert E. Nuytkens Title: Vice President Address: 1290 Avenue of the Americas, 3rd Floor New York, New York 10004 Attn: Mr. Robert E. Nuytkens Telecopy No.: (212) 408-4317 -103-
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[Enlarge/Download Table] SCHEDULE I COMMITMENTS -------------------------------------------------------------------------- ------------------------- -------------------- Name of Lender Commitment Commitment to 11/30/00 thereafter -------------------------------------------------------------------------- ------------------------- -------------------- -------------------------------------------------------------------------- ------------------------- -------------------- BANK OF AMERICA, N.A. $57,432,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- CONGRESS FINANCIAL CORPORATION $50,000,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- GENERAL ELECTRIC CAPITAL CORPORATION $57,432,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- TRANSAMERICA BUSINESS CREDIT CORPORATION $50,000,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- THE CHASE MANHATTAN BANK $34,460,000 $30,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- FLEET CAPITAL CORPORATION $28,716,000 $25,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- LASALLE BUSINESS CREDIT, INC. $25,000,000 $25,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- FLEET NATIONAL BANK $11,487,000 $10,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- NATIONAL CITY COMMERCIAL FINANCE, INC. $28,716,000 $25,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- PNC BANK, NATIONAL ASSOCIATION $25,000,000 $25,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- CITIZENS BUSINESS CREDIT COMPANY $20,000,000 $20,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- FOOTHILL CAPITAL CORPORATION $57,432,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- AMSOUTH BANK $22,973,000 $20,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- IBJ WHITEHALL BUSINESS CREDIT CORPORATION $17,230,000 $15,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- FLEET RETAIL FINANCE INC. $40,203,000 $35,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- CIT GROUP/BUSINESS CREDIT, INC. $50,000,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- TEXTRON FINANCIAL CORPORATION $28,716,000 $25,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- HELLER FINANCIAL, INC. $50,000,000 $50,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- FINOVA FINANCIAL CORPORATION $10,000,000 $10,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- GMAC COMMERCIAL CREDIT LLC $40,203,000 $35,000,000 -------------------------------------------------------------------------- ------------------------- -------------------- -104-
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[Enlarge/Download Table] SCHEDULE II FEES --------------------------------------------------------------------------------- ------------------------ Name of Lender Amendment Fee --------------------------------------------------------------------------------- ------------------------ BANK OF AMERICA, N.A. $74,324 --------------------------------------------------------------------------------- ------------------------ CONGRESS FINANCIAL CORPORATION $46,154 --------------------------------------------------------------------------------- ------------------------ GENERAL ELECTRIC CAPITAL CORPORATION $74,324 --------------------------------------------------------------------------------- ------------------------ TRANSAMERICA BUSINESS CREDIT CORPORATION $46,154 --------------------------------------------------------------------------------- ------------------------ THE CHASE MANHATTAN BANK $44,596 --------------------------------------------------------------------------------- ------------------------ FLEET CAPITAL CORPORATION $37,162 --------------------------------------------------------------------------------- ------------------------ LASALLE BUSINESS CREDIT, INC. $23,077 --------------------------------------------------------------------------------- ------------------------ FLEET NATIONAL BANK $14,865 --------------------------------------------------------------------------------- ------------------------ NATIONAL CITY COMMERCIAL FINANCE, INC. $37,162 --------------------------------------------------------------------------------- ------------------------ PNC BANK, NATIONAL ASSOCIATION $23,077 --------------------------------------------------------------------------------- ------------------------ CITIZENS BUSINESS CREDIT COMPANY $18,461 --------------------------------------------------------------------------------- ------------------------ FOOTHILL CAPITAL CORPORATION $74,324 --------------------------------------------------------------------------------- ------------------------ AMSOUTH BANK $29,730 --------------------------------------------------------------------------------- ------------------------ IBJ WHITEHALL BUSINESS CREDIT CORPORATION $22,297 --------------------------------------------------------------------------------- ------------------------ FLEET RETAIL FINANCE INC. $52,027 --------------------------------------------------------------------------------- ------------------------ CIT GROUP/BUSINESS CREDIT, INC. $46,154 --------------------------------------------------------------------------------- ------------------------ TEXTRON FINANCIAL CORPORATION $37,162 --------------------------------------------------------------------------------- ------------------------ HELLER FINANCIAL, INC. $46,154 --------------------------------------------------------------------------------- ------------------------ FINOVA FINANCIAL CORPORATION $9,231 --------------------------------------------------------------------------------- ------------------------ GMAC COMMERCIAL CREDIT LLC $52,027 --------------------------------------------------------------------------------- ------------------------ -105-

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