Exhibit 10.1
EXECUTION COPY
CREDIT AGREEMENT (this "Agreement"), dated as of February 4, 2003 by
and among TPG-MD INVESTMENT, LLC, a Delaware limited liability company (the
"Lender"), J. CREW OPERATING CORP., a Delaware corporation (the "Borrower"), J.
CREW GROUP, INC. (the "Parent") and each of XXXXX XXXXXX INC., a Delaware
corporation doing business as J. Crew Retail, H.F.D. NO. 55, INC., a Delaware
corporation doing business as J. Crew Factory, J. CREW, INC., a New Jersey
corporation, and J. CREW INTERNATIONAL, INC., a Delaware corporation, as
guarantors (each a "Guarantor") and together with any subsidiary that executes a
Note Guarantee (the "Guarantors").
WHEREAS, the Borrower seeks to borrow an amount in United States
dollars it deems necessary to pursue its business purposes and the Lender is
willing to lend such amount to the Borrower, subject to the terms and conditions
set forth below; and
WHEREAS, in consideration for the Lender's willingness to lend such
amount to the Borrower, subject to the terms and conditions set forth below, the
Parent is willing to provide the Lender with the right to exchange the loans
into shares of common stock of the Parent, par value $0.01 per share, subject to
the terms and conditions set forth below.
NOW, THEREFORE, the Lender, the Borrower and the Parent hereby agree
as follows:
ARTICLE I
THE LOANS
SECTION 1.01. The Loans. Subject to the terms and conditions of this
Agreement, the Lender agrees to make (a) a Tranche A loan (the "Tranche A Loan")
to the Borrower on the first Business Day following the first date on which each
of the conditions set forth in Section 4.01 has been satisfied (the "Funding
Date") in an aggregate principal amount of $10,000,000.00 (the "Tranche A Loan
Principal Amount") and (b) a Tranche B loan (the "Tranche B Loan" and, together
with the Tranche A Loan, the "Loans") to the Borrower on the Funding Date in an
aggregate principal amount of $10,000,000.00 (the "Tranche B Loan Principal
Amount" and, together with the Tranche A Loan Principal Amount, the "Principal
Amount").
SECTION 1.02. The Notes. The obligation of the Borrower to repay the
Tranche A Loan shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit A (the "Tranche A Note"), payable to the
order of the Lender. The obligation of the Borrower to repay the Tranche B Loan
shall be evidenced by a promissory note of the Borrower, substantially in the
form of Exhibit B (the "Tranche B Note" and, together with the Tranche A Note,
the "Notes"), payable to the order of the Lender. The Notes shall be dated the
Funding Date and shall mature on the Maturity Date (as hereinafter defined).
Each of the Tranche A Note and the Tranche B Note shall have an executed Note
Guarantee from the Guarantors substantially in the form of Exhibit C (the "Note
Guarantee") attached thereto. The Principal Amount of the Loans, the Funding
Date, the payment of principal with respect thereto, and the unpaid interest
accrued on the Loans, shall be determined from the records of the Lender, which
records shall be presumptively conclusive as to the accuracy of such
information.
SECTION 1.03. Procedure for the Loans. The Principal Amount of the
Loans shall be made available to the Borrower in immediately available funds on
the Funding Date to an account designated by the Borrower.
SECTION 1.04. Method of Payment.
(a) The payment or prepayment by the Borrower of the principal amount
of and unpaid interest accrued on the Loans shall be made to the Lender in
lawful money of the United States and in immediately available funds, to an
account designated by the Lender.
(b) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
provided, however, if such extension would cause payment of interest on or
principal of the Loans to be made in the next succeeding calendar month, such
payment shall be made on the next preceding Business Day.
SECTION 1.05. Interest. The Loans shall bear interest on the
Principal Amount thereof at a fixed rate per annum equal 5.0% (the "Interest
Rate").
SECTION 1.06. Capitalization of Interest. Interest on the Loans shall
be payable semi-annually in arrears on each January 31 and July 31 (each, an
"Interest Payment Date"), commencing on July 31, 2003. Interest payable on the
Loans on any Interest Payment Date, shall compound and be capitalized and added
to the principal amount of the Loans on each Interest Payment Date, until the
principal amount of the Loans has been repaid or prepaid, and shall be due and
payable on the date of repayment or prepayment, as applicable, of the unpaid
principal amount of the Loans. For the avoidance of doubt, the compounding and
capitalization of interest as aforesaid shall not constitute a default for
purposes of Section 5.01(a) until such interest shall fail to be paid on the
date of such repayment or prepayment, as applicable.
SECTION 1.07. Computation of Interest. Interest on the Loans shall be
calculated on the basis of a 365-day year for the actual number of days elapsed.
SECTION 1.08. Post Maturity Interest. After the Maturity Date or the
date on which a Loan shall otherwise become due and payable, such Loan shall
bear interest, payable on demand, at a rate per annum (on the basis of a 365-day
year for the actual number of days elapsed) equal to the sum of (a) the Interest
Rate and (b) 2.0%.
SECTION 1.09. Illegality. If the Lender determines at any time that
any law or regulation or any change therein or in the interpretation or
application thereof makes or will make it unlawful for the Lender to maintain
the Loans or to claim or receive any amount payable to it hereunder, the Lender
shall give notice of such determination to the Borrower, whereupon the
obligations of the Lender hereunder shall terminate. In such event, the Borrower
shall prepay the Loans by paying the outstanding principal amount of and unpaid
interest accrued on the Notes within five Business Days after the date such
notice is given (or on such earlier date as the Lender determines is necessary
in order to enable it to comply with such law or regulation or change).
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SECTION 1.10. Withholding or Deduction; Gross-Up.
(a) Each payment by the Borrower under this Agreement or under the
Notes shall, except as required by law, be made without withholding or deduction
for or on account of any present or future taxes, levies, imposts, duties,
charges, assessments or fees of any nature (including interest, penalties and
additions thereto) that are imposed by any government or other taxing authority
(collectively, "Taxes") from or through which the Borrower makes payment
hereunder. If any Taxes are required to be withheld or deducted from any such
payment, the Borrower shall pay such additional amounts as may be necessary to
ensure that the net amount actually received by the Lender after such
withholding or deduction is equal to the amount that the Lender would have
received had no such withholding or deduction been required, provided, however,
that no such additional amounts shall be payable in respect of any Taxes imposed
on the net income of the Lender and franchise taxes imposed on the Lender by the
jurisdiction under the laws of which the Lender is organized or has its
principal place of business.
(b) The Borrower shall pay all Taxes referred to in Section 1.10(a)
before penalties are payable or interest accrues thereon, but if any such
penalties are payable or interest accrues, the Borrower shall make payment
thereof when due to the appropriate governmental authority within 30 days after
each such payment of Taxes, and the Borrower shall deliver to the Lender an
official receipt or a certified copy thereof evidencing such payment.
(c) The Lender agrees to comply with any certification,
identification, information, documentation or other reporting requirement if (i)
such compliance is required by law, regulation, administrative practice or an
applicable treaty as a precondition to exemption from, or reduction in the rate
of, deduction or withholding of any Taxes for which Borrower is required to pay
additional amounts pursuant to Section 1.10(a) and (ii) at least 30 days prior
to the first payment date with respect to which the Borrower shall apply this
paragraph (c), the Borrower shall have notified the Lender that the Lender will
be required to comply with such requirement, provided, however, that the
exclusion set forth in this paragraph (c) shall not apply in respect of any
certification, identification, information, documentation or other reporting
requirement if such requirement would be materially more onerous, in form, in
procedure or in the substance of information disclosed, to the Lender than
comparable information or other reporting requirements imposed under U.S. tax
law, regulation and administrative practice (such as IRS Forms W-8BEN and W-9).
(d) The Borrower shall pay any present or future stamp, transfer or
documentary taxes or any other excise or property taxes, charges or similar
levies, and any penalties, additions to tax or interest due with respect
thereto, that may be imposed by any jurisdiction in connection with the
execution, delivery or registration of this Agreement and the Notes or the
filing, registration, recording or perfection of any security interest
contemplated by this Agreement and the Notes.
(e) If the Lender pays any Taxes or other amounts that the Borrower is
required to pay pursuant to this Section 1.10, Borrower shall indemnify it on
demand in full in the currency in which such Taxes or other amounts are paid
together with interest thereon from and including the date of payment to but
excluding the date of reimbursement at a rate per annum determined in accordance
with Section 1.08.
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SECTION 1.11. Increased Costs. The Borrower shall pay to the Lender
on demand the amount the Lender reasonably determines to be necessary to
compensate it fully for all costs incurred and reductions in amounts received or
receivable that are attributable to the Loans made hereunder or the performance
by the Lender of its obligations under this Agreement and that occur by reason
of the adoption of, or any change in, any law, regulation or treaty or in the
application or interpretation thereof or compliance by the Lender with any
direction, requirement or request of any governmental authority, including,
without limitation, any such cost or reduction resulting from the imposition,
amendment or change in the application or basis of any Taxes other than (a) any
Taxes referred to in Section 1.10 or (ii) any Taxes imposed on or measured by
the net income of the Lender and imposed by the jurisdiction in which the
Lender's principal office is situated.
SECTION 1.12. Register. The Borrower shall maintain a register where
the Notes are registered as to both the principal and any stated interest on the
Notes and such principal and stated interest shall be paid only to the
registered holders of the Notes. The transfer of the Notes may be effected only
by the surrender of the Notes to the Borrower and either the reissuance by the
Borrower of the Notes to the new holder or the issuance by the Borrower of a new
Note to the new holder.
ARTICLE II
PREPAYMENTS
SECTION 2.01. Prepayment at the Lender's Option.
(a) Upon the occurrence of the Termination Event and subject to the
EBITDA (as defined in the Congress Loan and Security Agreement) of Parent and
its subsidiaries for the immediately preceding twelve (12) consecutive month
period (treated as a single accounting period) ending on the last day of the
most recent month prior to the Date of Termination (as defined in the Services
Agreement) being not less than the amount set forth in Schedule 2.01 hereto with
respect to such period then ending, the Lender shall have the right to require
the Borrower to prepay the Tranche B Loan, in whole but not in part, without
premium or penalty.
(b) In the event the Lender elects to exercise such right, the Lender
shall deliver written notice to the Borrower not less than five Business Days
prior to the first Prepayment Date occurring after the date of such notice. The
Borrower shall prepay the principal of and interest on the Tranche B Loan on
such Prepayment Date; provided that, on such Prepayment Date, (i) the Borrower
has, immediately prior to making such prepayment, Excess Availability (as
defined in the Congress Loan and Security Agreement) of not less than $30.0
million and (ii) after giving effect to such prepayment, there shall exist no
default or event of default under any agreement, contract, instrument, indenture
or mortgage of the Borrower or the Parent, including, without limitation, the
Congress Loan and Security Agreement and the Senior Subordinated Notes
Indenture.
(c) In the event that the conditions specified in clauses (i) and (ii)
of Section 2.01(b) above have not been satisfied, the principal of and interest
on the Tranche B Loan shall be due and payable on the first Prepayment Date
immediately following the date on which the
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conditions specified in clauses (i) and (ii) of Section 2.01(b) above have been
satisfied (but in no event later than the Maturity Date); provided that, if (A)
the condition in clause (i) of Section 2.01(b) above is satisfied and (B) a
portion of the principal of and interest on the Tranche B Loan could be paid on
the Prepayment Date set forth in the Lender's written notice to the Borrower
without causing the condition in clause (ii) of Section 2.01(b) not to be
satisfied, then (x) the maximum amount of such portion (but only if such maximum
amount is equal to or greater than $1.0 million) shall be due and payable on the
Prepayment Date set forth in such written notice and (y) the unpaid amount of
the Tranche B Loan shall become due and payable as provided in this Section
2.01(c), except that the $30.0 million of Excess Availability required pursuant
to clause (i) of Section 2.01(b) above shall be reduced by the amount of any
prepayment made by the Borrower to the Lender pursuant to clause (x) of this
Section 2.01(c).
SECTION 2.02. Mandatory Prepayments.
(a) Upon the occurrence of a Change of Control (as defined in the
Senior Subordinated Notes Indenture), the Borrower shall prepay the Loans, in
whole but not in part, without premium or penalty. As promptly as practicable
following any Change of Control, the Borrower shall deliver written notice to
the Lender describing the transaction or transactions that constitute the Change
of Control and specifying the date of prepayment, which date shall be no earlier
than 30 days and no later than 60 days from the date of such notice. The
principal amount of the Loans shall be due and payable on the date specified in
such notice, together with interest accrued thereon to such date.
(b) Upon the consummation of an IPO, the Borrower shall prepay the
Loans, in whole but not in part, without premium or penalty. As promptly as
practicable following any IPO, the Borrower shall deliver written notice to the
Lender setting forth the date of consummation of such IPO and the date of
prepayment, which date shall be no earlier than 30 days and no later than 60
days from the date of the consummation of such IPO. The principal amount of the
Loans shall be due and payable on the date specified in such notice, together
with interest accrued thereon to such date, provided that, on the date of such
payment, the Borrower has, immediately prior to giving effect thereto, Excess
Availability of not less than $30.0 million.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties.
(a) The Borrower, the Parent and the Guarantors makes to the Lender as
of the date hereof and the Funding Date the representations and warranties of
the Borrower, the Parent and the Guarantors contained in Section 8 (other than
Section 8.14(d)) of the Congress Loan and Security Agreement. The terms of
Section 8 (other than Section 8.14(d)) of the Congress Loan and Security
Agreement are incorporated herein by reference (including the definitions of the
terms used in such Article).
(b) Each of the Borrower and the Guarantors severally represents and
warrants to the Lender as of the date hereof and the Funding Date that such
Borrower or Guarantor, as the
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case maybe, is Solvent (as defined in the Congress Loan and the Security
Agreement) and will continue to be Solvent after the creation of the obligations
hereunder and the Notes.
ARTICLE IV
CONDITIONS TO FUNDING
SECTION 4.01. Conditions to Funding. The obligation of the Lender to
make the Loans is subject to:
(a) The Lender having received the Tranche A Note duly executed and
delivered by the Borrower with a duly executed Note Guarantee attached thereto.
(b) The Lender having received the Tranche B Note duly executed and
delivered by the Borrower with a duly executed Note Guarantee attached thereto.
(c) The Boards of Directors of Operating and Parent having received an
opinion or opinions in form and substance satisfactory to such Boards as to the
fairness to the holders of the Subordinated Senior Notes, the holders of the
Senior Discount Debentures and the shareholders (other than TPG) of Operating
and Parent of the transactions contemplated by this Agreement and the Notes from
a financial point of view issued by an accounting, appraisal or investment
banking firm of national standing reasonably satisfactory to such Boards.
(d) The execution of an intercreditor agreement between the Lender and
the Agent (as defined in the Congress Loan and Security Agreement) pursuant to
Section 9.09(i) of the Congress Loan and Security Agreement.
(e) There existing no Default or Event of Default (each as defined in
the Congress Loan and Security Agreement) under the Congress Loan and Security
Agreement.
(f) Each of the representations and warranties set forth in Section
3.01 being true and correct as of the date of this Agreement and as of the
Funding Date.
ARTICLE V
EVENTS OF DEFAULT; ABSENCE OF RIGHT TO SET-OFF
SECTION 5.01. Events of Default. If any one or more of the following
events (each, an "Event of Default") shall have occurred and be continuing:
(a) if default shall be made in the due and punctual payment of the
principal amount of or the interest on the Notes, when and as the same shall
become due and payable, whether on the applicable Interest Payment Date, the
Maturity Date, by acceleration, by notice of prepayment or otherwise, and such
default shall have continued for three Business Days;
(b) if any representation or warranty made by the Borrower, the Parent
or any Guarantor in this Agreement shall prove to have been false or misleading
in any material respect on the date as of which made;
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(c) if an involuntary case or other proceeding shall be commenced
against the Borrower or any Guarantor seeking liquidation, reorganization or
other relief with respect to it or its debts under any applicable Federal or
State bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar law now or hereafter in effect or seeking the appointment of a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed, or an order or
decree approving or ordering any of the foregoing shall be entered and continued
unstayed and in effect, in any such event, for a period of 60 days;
(d) if the Borrower or any Guarantor shall commence a voluntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar law or any
other case or proceeding to be adjudicated a bankrupt or insolvent, or shall
consent to the entry of a decree or order for relief in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or if it shall file a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law, or consent
to the filing of such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of it or any substantial part of its property, or shall make an
assignment for the benefit of creditors, or admit in writing its inability to
pay its debts generally as they become due, or shall take corporate action in
furtherance of any such action;
(e) if the Borrower or any Guarantor shall default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for borrowed money by the Borrower or such
Guarantor whether such indebtedness now exists or is created after the date
hereof, which default (A) is caused by a failure to pay principal of such
Indebtedness after giving effect to any grace period provided in such
Indebtedness (a "Payment Default") or (B) results in the acceleration of such
Indebtedness prior to its stated maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any such
indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $20 million or more; or
(f) if the Borrower, Parent or any Guarantor shall fail to observe any
of its respective covenants or agreements set forth herein or under any of the
Notes or the Note Guarantees, as applicable (in each case, other than those
described in paragraphs (a) or (b) of this Section 5.01), and such failure shall
continue unremedied for five Business Days following receipt of written notice
from the Lender of such failure;
then and in any such event the Lender may at its option, exercised by written
notice given at any time (unless all Events of Default shall theretofore have
been remedied) to the Borrower declare the Notes to be due and payable,
whereupon the same shall mature and become payable, together with interest
accrued thereon, without the necessity of any presentment, demand, protest or
further notice, all of which are hereby waived by the Borrower; provided that
upon the happening of any event specified in paragraph (c) or (d) above, all
amounts owing hereunder and
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under the Notes shall automatically become immediately due and payable, all
without declaration or any notice to the Borrower.
SECTION 5.02. Absence of Right to Set-off. The Borrower hereby
waives, and agrees that it will not seek to avoid payment of the Notes in whole
or in part by exercising, any right of set-off it may assert or possess whether
created by contract, statute or otherwise.
ARTICLE VI
SUBORDINATION
SECTION 6.01. Subordination. The Borrower agrees that the payment of
the Loans evidenced by the Notes is subordinated in right of payment to the
prior payment in full of all Senior Debt (as defined in the Senior Subordinated
Indenture), whether outstanding on the date hereof or hereafter incurred,
assumed or guaranteed, on the same terms and to the same extent as the
Borrower's 10 3/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated
Notes") and ranks and will rank at all times pari passu with the Senior
Subordinated Notes.
ARTICLE VII
EXCHANGE RIGHT
SECTION 7.01. Exchange Right.
(a) The Lender will have the right to exchange (the "Exchange Right")
the Loans into the shares of common stock of Parent, par value $0.01 per share
("Common Stock"), on any Business Day (the "Exercise Date") during the period
commencing the Funding Date and ending one Business Day immediately preceding to
the Maturity Date (the "Exercise Period"). The Lender may exercise the Exchange
Right with respect to the Tranche A Loan and the Tranche B Loan separately;
provided, however, if the Lender elects to exercise the Exchange Right with
respect to the Tranche A Loan or the Tranche B Loan, as the case may be, the
Lender must exercise the Exchange Right with respect to the entire principal
amount thereof and the unpaid interest accrued thereon.
(b) Upon the exercise of the Exchange Right, the number of shares of
Common Stock to be issued to the Lender will be determined by dividing the
aggregate principal amount of and the unpaid interest accrued on the Tranche A
Note and/or the Tranche B Note as of the Exercise Date divided by $6.82 (the
"Exercise Price"), rounding the resulting number down to the nearest whole
number of shares of the Common Stock. The Exercise Price is subject to
adjustment pursuant to the provisions of Section 7.02, in which case, the
"Exercise Price" shall be the Exercise Price so adjusted.
(c) In order to exercise the Exchange Right, the Lender shall deliver
written notice to the Parent setting forth the aggregate principal amount of and
the unpaid interest accrued on the Tranche A Note and/or the Tranche B Note as
of the Exercise Date, the Exercise Price and the number of shares of Common
Stock to be issued by the Parent upon the exercise of the Exchange Right,
together with the Tranche A Note and/or the Tranche B Note, or, in lieu
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thereof, a lost Note affidavit together with an indemnity against third party
claims reasonably satisfactory to Parent.
(d) Upon receipt of such notice and the Tranche A Note and/or the
Tranche B Note (or, if applicable, a lost Note affidavit and indemnity as
described in Section 7.01(c)), the Parent shall deliver to the Lender the share
certificates evidencing such number of shares of the Common Stock relating to
the exercise of the Exchange Right, in accordance to the delivery instruction of
the Lender.
(e) Unless exercised during the Exercise Period, the Exchange Right
shall automatically expire and be void on the Maturity Date, and all rights of
the Lender under this Agreement with respect thereto shall cease.
SECTION 7.02. Adjustment of Exercise Price.
The Exercise Price will be subject to adjustment upon the occurrence
of the following events:
(a) If the Parent declares a dividend or makes a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class), then the Exercise Price in effect
at the opening of business on the date following the date fixed for the
determination of holders of Common Stock entitled to receive such dividend or
other distribution (the "Record Date") shall be reduced by multiplying such
Exercise Price by a fraction, the numerator which will be the number of shares
of Common Stock outstanding at the close of business on the Record Date and the
denominator of which will be the sum of (x) the number of shares of Common Stock
outstanding at the close of business on the Record Date and (y) the total number
of shares constituting such dividend or other distribution.
(b) If the Parent (x) subdivides shares of the Common Stock into a
greater number of shares, (y) combines its outstanding Common Stock into a
smaller number of shares or (z) issues by reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Parent is the continuing corporation) other securities of
the Parent; then the Exercise Price in effect immediately prior to the date on
which such corporate action becomes effective will be increased or decreased (as
the case may be) to a price obtained by multiplying such Exercise Price by a
fraction, the numerator of which will be the number of shares of Common Stock
outstanding (exclusive of any treasury shares) on the date of, and immediately
prior to, the date on which such corporate action becomes effective, and the
denominator of which will be the number of shares of Common Stock outstanding
(exclusive of any treasury shares) immediately after the date on which such
corporate action becomes effective.
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ARTICLE VIII
NOTE GUARANTEES
SECTION 8.01. Note Guarantees. Subject to Section 8.04, each of the
Guarantors hereby, jointly and severally, unconditionally guarantees to the
Lender and its successors and assigns, irrespective of the validity and
enforceability of this Agreement, the Notes and the obligations of the Borrower
hereunder and thereunder, that: (a) the principal of and the interest on the
Notes will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal and interest on any interest, if any, on the
Notes, and all other payment obligations of the Borrower to the Lender hereunder
or thereunder will be promptly paid in full and performed, all in accordance
with the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration, redemption or otherwise. An Event of Default
under this Agreement or the Notes shall constitute an event of default under the
Note Guarantees, and shall entitle the Lender to accelerate the obligations of
the Guarantors hereunder in the same manner and to the same extent as the
obligations of the Borrower. The Guarantors hereby agree that their obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Agreement, the absence of any action to
enforce the same, any waiver or consent by the Lender with respect to any
provisions hereof or thereof, the recovery of any judgment against the Borrower,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. The parties
agree that the Note Guarantees are guarantees of payment and not of collection.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Borrower,
any right to require a proceeding first against the Borrower, protest, notice
and all demands whatsoever and covenants that the Note Guarantees will not be
discharged except by complete performance of the obligations contained in the
Notes and this Agreement. If the Lender is required by any court or otherwise to
return to the Borrower, the Guarantors, or liquidator or other similar official
acting in relation to either the Borrower or the Guarantors, any amount paid to
the Lender, the Note Guarantees, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that it shall not be
entitled to, and hereby waives, any right of subrogation in relation to the
Lender in respect of any obligations guaranteed hereby. Each Guarantor further
agrees that, as between the Guarantors, on the one hand, and the Lender, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article V for the purposes of the Note Guarantees,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Article V, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantors for the purpose of the Note Guarantees.
The Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Lender under the Note Guarantees.
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SECTION 8.02. Guarantors May Consolidate, Etc. on Certain Terms. No
Guarantor may consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another corporation, Person or entity
whether or not affiliated with such Guarantor unless, subject to the provisions
of the following paragraph, (a) the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental agreement in form and
substance reasonably satisfactory to the Lender, under this Agreement and the
Note Guarantees; and (b) immediately after giving effect to such transaction, no
Default or Event of Default exists.
SECTION 8.03. Release Following Sale of Assets, Merger, Sale of
Capital Stock Etc. In the event (a) of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, or (b) that
the Borrower designates a Guarantor to be an Unrestricted Subsidiary (as defined
in the Senior Subordinated Notes Indenture), or such Guarantor ceases to be a
Subsidiary (as defined in the Senior Subordinated Notes Indenture) of the
Borrower, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor or any such designation) or the entity acquiring the property (in
the event of a sale or other disposition of all of the assets of such Guarantor)
shall be released and relieved of any obligations under this Agreement and its
Note Guarantees upon the assumption provided for in clause (a) of Section 8.02.
SECTION 8.04. Limitation on Guarantor Liability. For purposes hereof,
each Guarantor's liability shall be limited to the lesser of (a) the aggregate
amount of the obligations of the Borrower under the Notes and this Agreement and
(b) the amount, if any, which would not have (i) rendered such Guarantor
"insolvent" (as such term is defined in the United States Bankruptcy Code and in
the Debtor and Creditor Law of the State of New York) or (ii) left such
Guarantor with unreasonably small capital at the time its Note Guarantees of the
Notes was entered into; provided that, it will be a presumption in any lawsuit
or other proceeding in which a Guarantor is a party that the amount guaranteed
pursuant to the Note Guarantees is the amount set forth in clause (a) above
unless any creditor, or representative of creditors of such Guarantor, or
debtor-in-possession or trustee in bankruptcy of the Guarantor, otherwise proves
in such a lawsuit that the aggregate liability of the Guarantor is the amount
set forth in clause (b) above. In making any determination as to solvency or
sufficiency of capital of a Guarantor in accordance with the previous sentence,
the right of such Guarantor to contribution from other Guarantors, and any other
rights such Guarantor may have, contractual or otherwise, shall be taken into
account.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common Control with such Person.
11
"Agreement" has the meaning specified in the preamble.
"Borrower" has the meaning specified in the preamble.
"Business Day" means any day on which commercial banks are open for
domestic and international business (including dealings in dollar deposits) in
New York City.
"Common Stock" has the meaning specified in Section 7.01.
"Congress Loan and Security Agreement" means the Loan and Security
Agreement dated December 23, 2002 by and among the Borrower and other borrowers
named therein, the guarantors named therein, the lenders named therein and the
arranger and the agent named therein.
"Control" when used with respect to any Person means the possession,
direct or indirect, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of Voting
Securities, by contract or otherwise.
"Event of Default" has the meaning specified in Section 5.01.
"Executive Officer" means any of the Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer, Controller, Chief
Administrative Officer, Principal Accounting Officer, Treasurer or General
Counsel or any Executive Vice President of the Borrower.
"Exercise Date" has the meaning specified in Section 7.01.
"Exercise Period" has the meaning specified in Section 7.01.
"Exercise Price" has the meaning specified in Section 7.01.
"Funding Date" has the meaning specified in Section 1.01.
"Guarantor" has the meanings specified in the preamble.
"Interest Payment Date" has the meaning specified in Section 2.02.
"Interest Rate" has the meaning specified in Section 2.01.
"IPO" means a bona fide underwritten initial public offering of Common
Stock of the Parent as a direct result of which at least $50,000,000 of
proceeds, net of all investment banking, legal, accounting and other fees and
commissions, costs, expenses and taxes paid or payable as a result thereof or in
connection with such initial public offering, is received by Parent.
"Lender" has the meaning specified in the preamble.
"Loans" has the meaning specified in Section 1.01.
12
"Maturity Date" means the fifth anniversary of the Funding Date, or if
such day is not a Business Day, the next succeeding day that is a Business Day.
"Notes" has the meaning specified in Section 1.02.
"Note Guarantee" has the meaning specified in Section 1.02.
"Payment Default" has the meaning specified in Section 5.01(e).
"Parent" has the meaning specified in the preamble.
"Person" means any individual, partnership, joint venture,
corporation, limited liability company, association, trust or any other entity
or any government or political subdivision or an agency, department or
instrumentality thereof.
"Prepayment Date" means each of January 16, April 16, July 16 and
October 16 of each year.
"Principal Amount" has the meaning specified in Section 1.01.
"Record Date" has the meaning specified in Section 7.02.
"Senior Discount Debentures" means Parent's 13 1/8% Senior Discount
Debentures due 2008.
"Senior Subordinated Notes" has the meaning specified in Section 6.01.
"Senior Subordinated Notes Indenture" means the Indenture dated as of
October 17, 1997 among the Borrower, the guarantors named therein and State
Street Bank and Trust Company relating to the Senior Subordinated Notes.
"Services Agreement" means the Services Agreement, dated as of January
24, 2003, among the Parent, the Borrower, Xxxxxxx X. Xxxxxxx, Inc. and Xxxxxxx
X. Xxxxxxx.
"Taxes" has the meaning specified in Section 1.10.
"Termination Event" means a termination of the Services (as defined in
the Services Agreement) by the Borrower or the Parent without Cause (as defined
in the Services Agreement), or a termination of the Services by Xxxxxxx X.
Xxxxxxx or Xxxxxxx X. Xxxxxxx, Inc., in either case, for Good Reason (as defined
in the Services Agreement).
"Tranche A Loan" has the meaning specified in Section 1.01.
"Tranche A Loan Principal Amount" has the meaning specified in Section
1.01.
"Tranche A Note" has the meaning specified in Section 1.02.
"Tranche B Loan" has the meaning specified in Section 1.01.
13
"Tranche B Loan Principal Amount" has the meaning specified in Section
1.01.
"Tranche B Note" has the meaning specified in Section 1.02.
"Voting Securities" means securities or interests entitling the holder
thereof to vote or to designate directors or individuals performing a similar
function.
SECTION 9.02. No Recourse. The obligations of the Borrower hereunder
are solely the obligations of the Borrower, and no recourse shall be had for the
payment of any sum hereunder against any Affiliate, member, manager, officer,
employee, attorney or agent of the Borrower other than as provided in Article
VIII or in the Note Guarantees.
SECTION 9.03. Expenses. The Borrower agrees, in the case of an Event
of Default, to pay all reasonable expenses incurred by the Lender in connection
with the enforcement of any provision of this Agreement and the collection of
the Notes.
SECTION 9.04. Cumulative Rights and No Waiver. Each and every right
granted to the Lender hereunder or under any other document delivered hereunder
or in connection herewith, or allowed it by law or equity, shall be cumulative
and may be exercised from time to time. No failure on the part of the Lender to
exercise, and no delay in exercising, any right will operate as a waiver
thereof, nor will any single or partial exercise of any right preclude any other
or future exercise thereof or the exercise of any other right.
SECTION 9.05. Notices. Any communication, demand or notice to be
given hereunder or with respect to the Notes will be duly given when delivered
in writing or sent by tested telex to a party at its address as indicated below.
A communication, demand or notice given pursuant to this Section 9.05
shall be addressed:
If to the Lender, at
TPG-MD Investment, LLC
c/o Corporation Trust Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxx of Xxx Xxxxxx, Xxxxxxxx 00000
with a copy to: MDJC LLC
c/o Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telecopy: 000-000-0000
14
with a copy to: Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telecopy: 000-000-0000
with a copy to: TPG Bacchus II LLC
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Telecopy: 000-000-0000
with a copy to: Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Telecopy: 212-225-3999
If to the Borrower or to Parent, at
J. Crew Group, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Telephone No.: 000-000-0000
With a copy to:
J. Crew Group, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Telephone No.: 000-000-0000
SECTION 9.06. Amendments. This Agreement or the terms of any Note may
only be amended in a writing executed by the parties hereto (which writing
shall, in the case of the Lender, be executed by each member thereof).
SECTION 9.07. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Borrower, the Parent and the Lender and their
respective successors and assigns; provided, however, that (a) the Borrower or
the Parent may not assign any of its respective rights or delegate any of its
respective obligations hereunder or under the Notes without the prior written
consent of the Lender and (b) any assignment by the Lender of its rights or
obligations hereunder shall be made only pursuant to a writing signed by each
member of the Lender. Any assignment purported to be made in contravention of
this Section 9.07 shall be null and void.
15
SECTION 9.08. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 9.09. Separability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect under any law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 9.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, and all the counterparts shall together constitute one and the same
instrument.
* * *
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
TPG-MD INVESTMENT, LLC
By: TPG Bacchus II LLC, its Member
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
J. CREW OPERATING CORP.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice-President and
Chief Financial Officer
J. CREW GROUP, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice-President and
Chief Financial Officer
XXXXX XXXXXX, INC. d/b/a
J. CREW RETAIL
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice-President and
Chief Financial Officer
H.F.D. NO 55, INC. d/b/a J. CREW FACTORY
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice-President and
Chief Financial Officer
J. CREW, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice-President and
Chief Financial Officer
J. CREW INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice-President
EXHIBIT A
[FORM OF TRANCHE A NOTE]
NOTE
__________, 2003
Principal Amount: $10,000,000.00
J. CREW OPERATING CORP., a Delaware corporation (the "Borrower"), for
value received, hereby promises to pay to TPG-MD INVESTMENT, LLC (the "Lender")
or its registered assigns, at the office and to an account designated by the
Lender, in lawful money of the United States, on the Maturity Date, the
principal amount of $10,000,000.00 (Ten million United States dollars). This
Note shall bear interest on the unpaid principal amount hereof at the rate set
forth in the Agreement. Interest on such unpaid principal amount shall be
payable and compound and be capitalized and added to such unpaid principal
amount as provided for in the Agreement. Capitalized terms used herein have the
same meanings given in the Agreement specified below unless otherwise indicated.
The Borrower shall maintain a register where the Note is registered as
to both the principal and any stated interest on the Note and such principal and
stated interest shall be paid only to the registered holder of the Note. The
transfer of the Notes may be effected only by the surrender of the Notes to the
Borrower and either the reissuance by the Borrower of the Notes to the new
holder or the issuance by the Borrower of a new note to the new holder.
Except as provided in the Agreement, the Borrower waives presentment,
demand, protest or other notice of any kind.
The payment of the Loan evidenced by this Note is subordinated in
right of payment to the prior payment in full of all Senior Debt (as defined in
the Senior Subordinated Notes Indenture), whether outstanding on the date hereof
or hereafter incurred, assumed or guaranteed, on the same terms and to the same
extent as the Senior Subordinated Notes and ranks and will rank at all times
pari passu with the Senior Subordinated Notes.
This Note is the Note referred to in a Credit Agreement dated even
date herewith by and among the Lender, the Borrower, the Parent and the
Guarantors named therein (the "Agreement"), and is entitled to the benefits
provided therein, including, without limitation, the Exchange Right described
therein. This Note is subject to prepayment in whole but not in part and the
maturity of this Note is subject to acceleration upon the terms provided for in
the Agreement.
J. CREW OPERATING CORP.
By: ___________________________
Name:
Title:
X-0
XXXXXXX X
[XXXX XX XXXXXXX X NOTE]
NOTE
__________, 2003
Principal Amount: $10,000,000.00
J. CREW OPERATING CORP., a Delaware corporation (the "Borrower"), for
value received, hereby promises to pay to TPG-MD INVESTMENT, LLC (the "Lender")
or its registered assigns, at the office and to an account designated by the
Lender, in lawful money of the United States, on the Maturity Date, the
principal amount of $10,000,000.00 (Ten million United States dollars). This
Note shall bear interest on the unpaid principal amount hereof at the rate set
forth in the Agreement. Interest on such unpaid principal amount shall be
payable and compound and be capitalized and added to such unpaid principal
amount as provided for in the Agreement. Capitalized terms used herein have the
same meanings given in the Agreement specified below unless otherwise indicated.
The Borrower shall maintain a register where the Note is registered as
to both the principal and any stated interest on the Note and such principal and
stated interest shall be paid only to the registered holder of the Note. The
transfer of the Notes may be effected only by the surrender of the Notes to the
Borrower and either the reissuance by the Borrower of the Notes to the new
holder or the issuance by the Borrower of a new note to the new holder.
Except as provided in the Agreement, the Borrower waives presentment,
demand, protest or other notice of any kind.
The payment of the Loan evidenced by this Note is subordinated in
right of payment to the prior payment in full of all Senior Debt (as defined in
the Senior Subordinated Notes Indenture), whether outstanding on the date hereof
or hereafter incurred, assumed or guaranteed, on the same terms and to the same
extent as the Senior Subordinated Notes and ranks and will rank at all times
pari passu with the Senior Subordinated Notes.
This Note is the Note referred to in a Credit Agreement dated even
date herewith by and among the Lender, the Borrower, the Parent and the
Guarantors named therein (the "Agreement"), and is entitled to the benefits
provided therein, including, without limitation, the Exchange Right described
therein. This Note is subject to prepayment in whole but not in part and the
maturity of this Note is subject to acceleration upon the terms provided for in
the Agreement.
J. CREW OPERATING CORP.
By: ____________________________
Name:
Title:
B-1
EXHIBIT C
NOTE GUARANTEE
Each of the undersigned Guarantors hereby, jointly and severally,
unconditionally guarantees to the Lender and its successors and assigns,
irrespective of the validity and enforceability of the Credit Agreement dated
even date herewith by and among the Borrower, the Lender and the Parent (the
"Agreement"), the Notes and the obligations of the Borrower hereunder and
thereunder, that: (a) the principal of and the interest on the Notes will be
promptly paid in full when due, subject to any applicable grace period, whether
at maturity, by acceleration, redemption or otherwise, and interest on the
overdue principal and interest on any interest, if any, on the Notes, and all
other payment obligations of the Borrower to the Lender hereunder or thereunder
will be promptly paid in full and performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration, redemption or otherwise.
An Event of Default under the Agreement or the Notes shall constitute
an event of default under this Note Guarantee, and shall entitle the Lender to
accelerate the obligations of the Guarantors hereunder in the same manner and to
the same extent as the obligations of the Borrower.
THE TERMS OF ARTICLE VIII OF THE AGREEMENT ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Agreement unless otherwise indicated.
Dated:
XXXXX XXXXXX, INC. d/b/a
J. CREW RETAIL
By:_____________________________
Name:
Title:
H.F.D. NO 55, INC. d/b/a J. CREW
FACTORY
By:_____________________________
Name:
Title:
C-1
J. CREW, INC.
By:_____________________________
Name:
Title:
J. CREW INTERNATIONAL, INC.
By:_____________________________
Name:
Title:
C-2
SCHEDULE 2.01
Date of Termination EBITDA
------------------- ------
Funding Date to January 31, 2004 $ 0
February 1, 2004 to January 31, 2005 $ 41,100,000
February 1, 2005 to January 31, 2006 $ 90,300,000
February 1, 2006 to January 31, 2007 $115,800,000
February 1, 2007 to the Maturity Date $146,300,000
1
