-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FAfmxvi8GXj2nDqrT4NGfq5lGw6r8VIuX5jSZhUz5WR+bSxHbIS48IIvxVTYbILK HmUQiD4CO3QDM3bgZS+Kzg== /in/edgar/work/20000905/0001016843-00-000704/0001016843-00-000704.txt : 20000922 0001016843-00-000704.hdr.sgml : 20000922 ACCESSION NUMBER: 0001016843-00-000704 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000729 FILED AS OF DATE: 20000905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHICOS FAS INC CENTRAL INDEX KEY: 0000897429 STANDARD INDUSTRIAL CLASSIFICATION: [5621 ] IRS NUMBER: 592389435 STATE OF INCORPORATION: FL FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21258 FILM NUMBER: 716539 BUSINESS ADDRESS: STREET 1: 11215 METRO PKWY CITY: FT MYERS STATE: FL ZIP: 33912-1206 BUSINESS PHONE: 8134335505 MAIL ADDRESS: STREET 1: 11215 METRO PKY CITY: FT MYERS STATE: FL ZIP: 33912-1206 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT FOR THE QUARTER ENDED: COMMISSION FILE NUMBER: JULY 29, 2000 0-21258 ------------- ------- CHICO'S FAS, Inc. -------------------------------------------------- (Exact name of registrant as specified in charter) FLORIDA 59-2389435 ------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) 11215 METRO PARKWAY, FORT MYERS, FLORIDA 33912 ---------------------------------------------- (Address of principal executive offices) 941-277-6200 ------------ (Registrant's telephone number, including area code) 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. At August 28th, there were 17,437,830 shares outstanding of Common Stock, $.01 par value per share. CHICO'S FAS, Inc. Index PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS (UNAUDITED): Condensed Consolidated Balance Sheets - July 29, 2000 and January 29, 2000_______________________________________________ 3 Condensed Consolidated Statements of Income for the Thirteen and Twenty-Six Weeks Ended July 29, 2000 and July 31, 1999________________________________ 4 Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended July 29, 2000 and July 31, 1999__________________________________________________ 5 Notes to Condensed Consolidated Financial Statements_________________ 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS_______________________________________ 7 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK___________ 11 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS_________________ 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K____________________________________ 12 Signatures___________________________________________________________________ 12 2 CHICO'S FAS, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
AS OF AS OF 07-29-00 01-29-00 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,829,580 $ 3,980,930 Marketable securities, at market 19,133,617 13,995,527 Receivables, net 1,944,146 1,706,661 Inventories 21,449,962 14,834,800 Prepaid expenses 1,667,686 668,695 Deferred taxes 2,785,000 2,038,000 ------------ ------------ TOTAL CURRENT ASSETS 50,809,991 37,224,613 ------------ ------------ LAND, BUILDING AND EQUIPMENT: Cost 56,803,901 41,217,160 Less accumulated depreciation and amortization (11,930,734) (9,872,163) ------------ ------------ LAND, BUILDING AND EQUIPMENT, NET 44,873,167 31,344,997 ------------ ------------ OTHER ASSETS: Deferred taxes 1,363,000 1,106,000 Other assets, net 631,885 640,211 ------------ ------------ TOTAL OTHER ASSETS 1,994,885 1,746,211 ------------ ------------ $ 97,678,043 $ 70,315,821 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 12,564,037 $ 5,982,684 Accrued liabilities 7,426,302 4,593,104 Current portion of debt and lease obligations 275,247 260,111 ------------ ------------ TOTAL CURRENT LIABILITIES 20,265,586 10,835,899 ------------ ------------ NONCURRENT LIABILITIES: Notes and capital leases payable 5,185,500 5,221,500 Deferred rent 1,774,265 1,617,680 ------------ ------------ TOTAL NONCURRENT LIABILITIES 6,959,765 6,839,180 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock 174,263 171,285 Additional paid-in capital 17,627,740 14,709,238 Unrealized gain (loss) on marketable securities 12,790 (24,334) Retained earnings 52,637,899 37,784,553 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 70,452,692 52,640,742 ------------ ------------ $ 97,678,043 $ 70,315,821 ============ ============
SEE ACCOMPANYING NOTES 3 CHICO'S FAS, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited)
TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED 07-29-00 07-31-99 07-29-00 07-31-99 ------------ ------------ ------------ ------------ Net sales by Company stores $115,255,264 $ 71,913,385 $ 59,572,855 $ 36,192,085 Net sales to Franchisees 2,075,866 1,282,889 1,065,461 579,208 ------------ ------------ ------------ ------------ NET SALES 117,331,130 73,196,274 60,638,316 36,771,293 Cost of goods sold 48,407,946 30,394,972 25,643,952 15,494,349 ------------ ------------ ------------ ------------ GROSS PROFIT 68,923,184 42,801,302 34,994,364 21,276,944 General, administrative and store operating expenses 45,235,343 29,679,614 23,267,122 14,954,637 ------------ ------------ ------------ ------------ INCOME FROM OPERATIONS 23,687,841 13,121,688 11,727,242 6,322,307 Interest income, net 268,505 44,431 171,184 42,359 ------------ ------------ ------------ ------------ INCOME BEFORE TAXES 23,956,346 13,166,119 11,898,426 6,364,666 Income tax provision 9,103,000 5,003,000 4,521,000 2,418,000 ------------ ------------ ------------ ------------ NET INCOME $ 14,853,346 $ 8,163,119 $ 7,377,426 $ 3,946,666 ============ ============ ============ ============ PER SHARE DATA: Net income per common share - basic $ 0.86 $ 0.48 $ 0.43 $ 0.23 ============ ============ ============ ============ Net income per common and common equivalent share - diluted $ 0.83 $ 0.46 $ 0.41 $ 0.22 ============ ============ ============ ============ Weighted average common shares outstanding - basic 17,218,987 16,847,146 17,293,448 16,884,584 ============ ============ ============ ============ Weighted average common and common equivalent shares outstanding - diluted 17,966,178 17,582,042 18,076,725 17,617,638 ============ ============ ============ ============
SEE ACCOMPANYING NOTES 4 CHICO'S FAS, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
TWENTY-SIX WEEKS ENDED 07-29-00 07-31-99 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,853,346 $ 8,163,119 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,453,241 1,464,529 Deferred taxes (1,004,000) (362,000) Loss on disposal of land, building and equipment 193,255 112,206 Deferred rent expense, net 156,585 99,944 Changes in assets and liabilities: Increase in receivables, net (237,485) (668,194) Increase in inventories (6,615,162) (2,328,328) Increase in prepaid expenses and other assets (1,028,125) (298,288) Increase in accounts payable 6,581,353 2,784,851 Increase (decrease) in accrued liabilities 2,848,334 (237,072) ------------ ------------ Total adjustments 3,347,996 567,648 ------------ ------------ Net cash provided by operating activities 18,201,342 8,730,767 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities, net (5,100,966) (12,678,466) Purchase of land, building and equipment (16,122,206) (5,266,205) ------------ ------------ Net cash used in investing activities (21,223,172) (17,944,671) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuances of common stock 2,921,480 861,031 Principal payments on debt (36,000) (96,273) Purchase of intangible assets (15,000) -- ------------ ------------ Net cash provided by financing activities 2,870,480 764,758 ------------ ------------ Net decrease in cash and cash equivalents (151,350) (8,449,146) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 3,980,930 14,484,776 ------------ ------------ CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,829,580 $ 6,035,630 ============ ============
SEE ACCOMPANYING NOTES 5 CHICO'S FAS, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements July 29, 2000 (Unaudited) ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Chico's FAS, Inc. and its wholly-owned subsidiaries (collectively, "Chico's" or the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the financial statements and notes thereto for the fiscal year ended January 29, 2000, included in the Company's Annual Report on Form 10-K filed on April 28, 2000. The January 29, 2000 balance sheet amounts were derived from audited financial statements included in the Company's Annual Report. Operating results for the thirteen and twenty-six weeks ended July 29, 2000 are not necessarily indicative of the results that may be expected for the entire year. All per share data for the prior year has been restated to reflect the two-for-one split effective in January 2000. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Basic EPS is based upon the weighted average number of common shares outstanding and diluted EPS is based upon the weighted average number of common shares outstanding plus the dilutive common equivalent shares outstanding during the period. The following is a reconciliation of the denominators of the basic and diluted EPS computations shown on the face of the accompanying statements of income:
TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED 07-29-00 07-31-99 07-29-00 07-31-99 ---------- ---------- ---------- ---------- Basic weighted average outstanding common shares 17,218,987 16,847,146 17,293,448 16,884,584 Dilutive effect of options outstanding 747,191 734,896 783,277 733,054 ---------- ---------- ---------- ---------- Diluted weighted average common and common equivalent shares outstanding 17,966,178 17,582,042 18,076,725 17,617,638 ========== ========== ========== ==========
6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED JULY 29, 2000 COMPARED TO THE THIRTEEN WEEKS ENDED JULY 31, 1999. NET SALES. Net sales by Company-owned stores for the thirteen weeks ended July 29, 2000 (the current period) increased by $23.4 million, or 64.6%, over net sales by Company-owned stores for the comparable thirteen weeks ended July 31, 1999 (the prior period). The increase was the result of a comparable Company store net sales increase of $12.2 million, $11.0 million additional sales from the new stores not yet included in the Company's comparable store base (net of sales of approximately $332,000 from three stores closed in fiscal 2000 and fiscal 2001), and approximately $203,000 of net sales from the Company's call center (website and mailer sales) which began operations in late May 2000. Net sales to franchisees for the current period increased by approximately $486,000 or 84.0% compared to net sales to franchisees for the prior period. The increase in net sales to franchisees was primarily due to a net increase in purchases by the franchisees as a whole and the opening of one additional franchised location in fiscal 2001 by an existing franchisee. GROSS PROFIT. Gross profit for the current period was $35.0 million, or 57.7% of net sales, compared with $21.3 million, or 57.9% of net sales, for the prior period. The decrease in the gross profit percentage resulted from a substantial decline in gross margins in the Company's seven outlet locations and to a lesser degree, an increase in the Company's distribution center, product development and merchandising costs, net of improved initial markups on its products. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $23.3 million, or 38.3% of net sales, in the current period from $15.0 million, or 40.7% of net sales, in the prior period. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with additional store openings. The decrease in these expenses as a percentage of net sales was principally due to leverage associated with the Company's 34.3% comparable Company store sales increase for the current period, net of an increase in marketing expenses as a percentage of net sales. INTEREST INCOME, NET. The Company had net interest income during the current period of approximately $171,000 versus approximately $42,000 in the prior period. The increase in net interest income was primarily a result of the Company's increased cash and marketable securities position, as well as improved interest rates on cash and marketable securities. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 86.9% to $7.4 million in the current period from net income of $3.9 million in the prior period. The income tax provision represented an effective rate of 38.0% for the current and prior period. 7 RESULTS OF OPERATIONS - TWENTY-SIX WEEKS ENDING JULY 29, 2000 COMPARED TO THE TWENTY-SIX WEEKS ENDED JULY 31, 1999. NET SALES. Net sales by Company-owned stores for the twenty-six weeks ended July 29, 2000 (the current period) increased by $43.3 million, or 60.3%, over net sales by Company-owned stores for the comparable twenty-six weeks ended July 31, 1999 (the prior period). The increase was the result of a comparable Company store net sales increase of $23.0 million, $20.1 million additional sales from the new stores not yet included in the Company's comparable store base (net of sales of approximately $643,000 from five stores closed in fiscal 2000 and fiscal 2001), and approximately $203,000 of net sales from the Company's call center (website and mailer phone sales) which began operations in late May 2000. Net sales to franchisees for the current period increased by approximately $793,000 or 61.8% compared to net sales to franchisees for the prior period. The increase in net sales to franchisees was primarily due to a net increase in purchases by the franchisees as a whole and the opening by an existing franchisee of one additional franchised location in each of fiscal 2001 and fiscal 2000. GROSS PROFIT. Gross profit for the current period was $68.9 million, or 58.7% of net sales, compared with $42.8 million, or 58.5% of net sales, for the prior period. The increase in the gross profit percentage resulted from reduced markdowns and improved initial markups in the current period versus the prior period, net of additional mailer-related promotional activities and increased volume of discounts, including those associated with expanding the Company's frequent shopper club (the "Passport Club") which was relaunched in the first quarter of last year, and net of a decline in the gross margins in the Company's seven outlet locations. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $45.2 million, or 38.6% of net sales, in the current period from $29.7 million, or 40.5% of net sales, in the prior period. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with additional store openings. The decrease in these expenses as a percentage of net sales was principally due to leverage associated with the Company's 32.7% comparable Company store sales increase for the current period, net of an increase in marketing expenses as a percentage of sales. INTEREST INCOME, NET. The Company had net interest income during the current period of approximately $269,000 versus approximately $44,000 in the prior period. The increase in net interest income was primarily a result of the Company's increased cash and marketable securities position, as well as improved interest rates on cash and marketable securities. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 82.0% to $14.9 million in the current period from net income of $8.2 million in the prior period. The income tax provision represented an effective rate of 38% for the current and prior period. 8 COMPARABLE COMPANY STORE NET SALES Comparable Company store net sales increased by 34.3% in the current quarter and 32.7% in the first six months of this fiscal year when compared to the comparable prior periods. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have operated as a Company store for at least thirteen months. The Company believes that the increase in comparable Company store net sales in the current quarter resulted from the continuing effort to focus the Company's product development, merchandise planning, buying and marketing departments on Chico's target customer. The Company also believes that the look, fit and pricing policy of the Company's product was in line with the needs of our target customer and that the increase in comparable stores sales was also fueled by increased direct mailings, a larger database of existing customers for such mailings and the success of the Company's frequent shopper club (the "Passport Club"). To a lesser degree, the Company believes the increase was due to increased store-level training efforts associated with ongoing training programs and continuing strong sales associated with several styles of clothing produced from a related group of fabrics introduced by the Company in the fourth quarter of fiscal 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's primary ongoing capital requirements are for funding capital expenditures for new store openings and merchandise inventory purchases. In addition, over the past six months and continuing over the next twelve months, the Company has experienced and anticipates continuing to experience the need for capital to address expansions of its office and design facility at its headquarters facilities, the chain-wide roll out of new point-of-sale devices and the development of infrastructure, including internal call and fulfillment centers, to support the Company's planned expansion into catalog and Internet sales. During the first two quarters of the current fiscal year (fiscal 2001) and the first two quarters of the prior fiscal year (fiscal 2000), the Company's primary source of working capital was cash flow from operations of $18.2 million and $8.7 million, respectively. The increase in cash flow from operations of $9.5 million was primarily due to an increase of $6.7 million in net income, an increase of $9.4 million in accounts payable and accrued liabilities, and an increase of $1.0 million in depreciation and amortization, net of an increase in inventories of $6.6 million, and an increase in deferred taxes of $1.0 million. The increase in accounts payable and inventories is associated with increased fabric purchases (which generally have an extended payment due date) and other required increased inventory purchase activities to support the Company's significant sales increases. The Company invested $16.1 million in the first two quarters of the current fiscal year for capital expenditures. The capital expenditures for the first two quarters of the current fiscal year included $9.7 million primarily associated with the planning and opening of new Company stores, and the remodeling/relocating/expansion of numerous existing stores, $2.5 million for new point-of-sale devices, approximately $2.4 million for the expansion of its office and design facilities, and approximately $1.5 million for the development of infrastructure associated with catalog and Internet sales. During the same period in the prior fiscal year, the Company invested $5.3 million primarily for capital expenditures associated with the opening of new Company stores, and the remodeling of several existing stores. 9 LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) During the first two quarters of the current fiscal year, the Company invested an additional $5.1 million in high quality tax free municipal bonds in an effort to improve the after-tax interest earnings from its increased cash and marketable securities position. During the first two quarters of the current fiscal year, two of the Company's officers and its three independent directors exercised 248,735 stock options at prices ranging from $1.625 to $11.344 and several employees and former employees exercised 35,892 options at prices ranging from $1.625 to $11.344. Also during this period, the Company sold 13,155 shares of common stock under its employee stock purchase plan at a price of $15.25. The proceeds from these issuances of stock, together with the tax benefit recognized by the Company, amounted to approximately $2.9 million. As more fully described in "Item 1-Business" beginning on page 13 of the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2000, the Company is subject to ongoing risks associated with imports. The Company's reliance on sourcing from foreign countries causes the Company to be exposed to certain unique business and political risks. Import restrictions, including tariffs and quotas, and changes in such tariffs or quotas could affect the importation of apparel generally and, in that event, could increase the cost or reduce the supply of apparel available to the Company and have an adverse effect on the Company's business, financial condition and/or results of operations. The Company's merchandise flow could also be adversely affected by political instability in any of the countries in which its goods are manufactured, by significant fluctuations in the value of the U.S. dollar against applicable foreign currencies and by restrictions on the transfer of funds. The Company plans to open between 45 and 50 Company-owned new stores in fiscal 2001, 20 of which were open as of August 28, 2000. The Company believes that the liquidity needed for its planned new store growth, continuing remodel/expansion program, maintenance of proper inventory levels associated with this growth, expansion of its office and design facilities and establishment of catalog and Internet sales activities will be funded primarily from cash flow from operations and its strong existing cash balances. The Company further believes that this liquidity will be sufficient, based on currently planned new store openings, to fund anticipated capital needs over the near-term, including scheduled debt repayments. In further support of its liquidity needs, the Company expanded its line of credit and letter of credit facilities to $25 million, effective May 2000. Given the Company's existing cash and marketable securities balances and the capacity included in its newly expanded bank credit facilities, the Company does not believe that it would need to seek other sources of financing to conduct its operations or pursue its expansion plans even if cash flow from operations should prove to be less than anticipated or even if there should arise a need for additional letter of credit capacity due to establishing new and expanded sources of supply, or if the Company were to increase the number of new Company stores planned to be opened in future periods. SEASONALITY AND INFLATION Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the current or prior periods. The Company does not consider its business to be seasonal. 10 CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS This 10-Q may contain forward-looking statements which reflect the current views of the Company with respect to certain events that could have an effect on the Company's future financial performance. These statements include the words "expects", "believes", and similar expressions. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. These potential risks and uncertainties include ability to secure customer acceptance of Chico's styles, propriety of inventory mix and sizing, quality of merchandise received from vendors, timeliness of vendor production and deliveries, increased competition, extent of the market demand by women for private label clothing and related accessories, adequacy and perception of customer service, ability to coordinate product development along with buying and planning, rate of new store openings, performance of management information systems, ability to hire, train, energize and retain qualified sales associates and other employees, availability of quality store sites, ability to hire and retain qualified managerial employees, ability to effectively and efficiently establish and operate catalog and Internet sales activities and other risks. In addition, there are potential risks and uncertainties that are peculiar to the Company's heavy reliance on sourcing from foreign vendors including the impact of work stoppages, transportation delays and other interruptions, political instability, foreign currency fluctuations, imposition of and changes in tariffs and import and export controls such as import quotas, changes in governmental policies in or towards such foreign countries and other similar factors. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk of the Company's financial instruments as of July 29, 2000 has not significantly changed since April 29, 2000. The Company is exposed to market risk from changes in interest rates on its indebtedness. The Company's exposure to interest rate risk relates in part to its revolving line of credit with its bank; however, as of July 29, 2000, the Company did not have any outstanding balance on its line of credit and, given its existing liquidity position, does not expect to utilize its line of credit in the foreseeable future except for its continuing use of the letter of credit facility portion thereof. The Company's exposure to interest rate risk also relates to its $5.3 million mortgage loan indebtedness which bears a variable interest rate based upon changes in the prime rate. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of the Company was held on June 13, 2000. There were 17,180,936 shares of common stock entitled to a vote. The following matters were voted upon at the meeting:
a) Election of Directors: VOTES FOR VOTES WITHHELD --------- -------------- CLASS I - TERM EXPIRING IN 2003 ------------------------------- Charles J. Kleman 15,683,199 276,295 Ross E. Roeder 15,865,809 93,685
11 b) Board of Directors proposal to ratify the appointment of Arthur Andersen LLP as independent certified public accountants for fiscal year 2001. Voting Results: For the Proposal 15,942,909 Against the Proposal 12,176 Abstentions 4,409 c) Board of Directors proposal to ratify amendments to the Non-Employee Directors' Stock Option Plan Voting Results: For the Proposal 14,649,166 Against the Proposal 1,281,629 Abstentions 28,699 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.1 Employment Agreement between the Company and Marvin J. Gralnick, effective as of February 7, 2000. 10.2 Employment Agreement between the Company and Helene B. Gralnick, effective as of February 7, 2000. 10.3 Employment Agreement between the Company and Tedford Marlow, dated August 28, 2000. 10.4 Revolving Credit and Term Loan Agreement by and among Bank of America, N.A., the Company and the subsidiaries of the Company dated as of May 12, 2000. 27 Financial Data Schedule. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the current period. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: AUGUST 31, 2000 By: /s/ MARVIN J. GRALNICK --------------- --------------------------------------------- Marvin J. Gralnick Chief Executive Officer (Principal Executive Officer) Date: AUGUST 31, 2000 By: /s/ CHARLES J. KLEMAN --------------- --------------------------------------------- Charles J. Kleman Chief Financial Officer (Principal Financial and Accounting Officer) 12 EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 10.1 Employment Agreement between the Company and Marvin J. Gralnick, effective as of February 7, 2000. 10.2 Employment Agreement between the Company and Helene B. Gralnick, effective as of February 7, 2000. 10.3 Employment Agreement between the Company and Tedford Marlow, dated August 28, 2000. 10.4 Revolving Credit and Term Loan Agreement by and among Bank of America, N.A., the Company and the subsidiaries of the Company dated as of May 12, 2000. 27 Financial Data Schedule. EX-10.1 2 0002.txt EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made and entered into this 16th day of August, 2000, but is effective for all purposes as of February 7, 2000, by and between CHICO'S FAS, INC. a Florida corporation (the "Employer"), and MARVIN J. GRALNICK, residing at 648 Lake Murex Circle, Sanibel Island, Florida 33957, (the "Executive"). W I T N E S S E T H: 1. EMPLOYMENT. The Employer hereby employs the Executive, and the Executive hereby accepts such employment, upon the terms and subject to the conditions set forth in this Agreement. 2. TERM. Subject to the provisions of termination as hereinafter provided, the term of employment under this Agreement shall begin as of February 7, 2000 and shall continue through January 31, 2003; provided, however, that beginning on February 1, 2003 and on each February 1st (each a "Renewal Date") thereafter, the term of this agreement shall automatically be extended for one additional year unless either party gives the other written notice of termination at least ninety (90) days prior to any such Renewal Date. 3. COMPENSATION; REIMBURSEMENT, ETC. (a) BASIC SALARY. The Employer shall pay to the Executive as compensation for all services rendered by the Executive during the term of this Agreement a basic annualized salary as follows (the "Basic Salary"), or such other sum as the parties may agree on from time to time, payable monthly or in other more frequent installments, as determined by the Employer:
PERIOD BASIC ANNUALIZED SALARY ------ ----------------------- For the period from February 7, 2000 through January 31, 2001 $600,000 For the period from February 1, 2001 through January 31, 2002 $750,000 For the period from February 7, 2002 through January 31, 2003 and thereafter $850,000
The Board of Directors of the Employer shall have the right to increase the Executive's compensation from time to time by action of the Board of Directors. In addition, the Board of Directors of the Employer, in its discretion, may, with respect to any year during the term hereof, award a bonus or 1. bonuses to the Executive in addition to the bonuses provided for in Section 3(b). The compensation provided for in this Section 3(a) shall be in addition to any pension or profit sharing payments set aside or allocated for the benefit of the Executive. (b) BONUSES. In addition to the Basic Salary to be paid pursuant to Section 3(a) of this Agreement, during the term of this Agreement or any renewal or extension, the Company shall pay to the Executive as incentive compensation quarterly and annual bonuses in accordance with the incentive bonus plan(s) adopted from time to time by the Board or the Compensation and Benefits Committee of the Board (the "Committee"), as the case may be. Such plan for the initial three year term of this Agreement ending January 31, 2003, among other things, shall establish a "Target Bonus" equal to 50% of the Executive's Basic Salary and a "Maximum Bonus" equal to 100% of the Executive's Basic Salary. (c) STOCK OPTIONS. The Executive shall participate in under the Employer's stock option plan or plans, in accordance with the terms thereof, through the grant by the Committee of nonqualified options to purchase shares of the Employer's common stock, as follows (the "Options"), provided that Executive remains employed by the Employer on the approximate date of grant: APPROXIMATE DATE OF GRANT NUMBER OF OPTIONS ------------------------- ----------------- Effective Date of this Agreement 75,000 February 1, 2001 100,000 February 1, 2002 125,000 The date of grant for each tranche of Options shall be the respective day on which the Committee acts to effectuate the respective grant. The initial exercise price for each tranche of the Options shall be the closing price for the Company's stock on the Nasdaq Stock Market (NMS) on the respective date of grant. The Options shall be subject to the terms of the applicable stock option plan under which they are issued. (d) REIMBURSEMENTS. The Employer shall reimburse the Executive for all reasonable expenses incurred by the Executive in the performance of his duties under this Agreement; provided, however, that the Executive must furnish to the Employer an itemized account, satisfactory to the Employer, in substantiation of such expenditures. (e) OTHER FRINGE BENEFITS. The Executive shall be entitled to such fringe benefits including, but not limited to, medical and insurance benefits as may be provided from time to time by the Employer to other senior officers of the Employer. (f) AUTOMOBILE. The Executive shall provide his own automobile for use as an employee hereunder. The Executive shall at all times maintain said automobile in good repair and condition and shall insure both Employer and Executive against claims for bodily injury, death or 2. property damage occurring as a result of its use to the limit of not less than Five Hundred Thousand ($500,000.00) Dollars in respect to any one accident and to the limit of not less than One Million ($1,000,000.00) Dollars in respect to any one accident and to the limit of not less than One Hundred Thousand ($100,000.00) Dollars in respect to property damage. (g) DEFERRAL OF CERTAIN COMPENSATION PAYMENTS. Notwithstanding any other provisions of this Agreement to the contrary, any portion of the cash compensation otherwise payable to the Executive under this Agreement shall not be paid currently in cash to the Executive hereunder if pursuant to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended, or any similar or successor provision ("Section 162(m)"), the Company would not be entitled to a current deduction for federal income tax purposes in respect of the payment of such portion of the cash compensation (any such compensation being referred to as "Section 162(m) Non-Deductible Compensation"). The payment of any such Section 162(m) Non-Deductible Compensation shall be deferred (the "Deferred Compensation"). The Deferred Compensation shall be recorded on the books of the Company but shall be unfunded. The Executive's right to receive the Deferred Compensation in cash shall arise automatically no later than 30 days after the first time when the deduction for federal income taxes by the Company in respect of the Section 162(m) Non-Deductible Compensation to which the Deferred Compensation relates would no longer be prohibited by Section 162(m). 4. DUTIES. The Executive is engaged as the Chief Executive Officer and President. In addition, the Executive shall have such other duties and hold such other offices as may from time to time be reasonably assigned to him by the Board of Directors of the Employer. 5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF. (a) EXTENT OF SERVICES. During the term of his employment under this Agreement, the Executive shall devote such time, energy and attention during regular business hours to the benefit and business of the Employer as may be reasonably necessary in performing his duties pursuant to this Agreement. (b) VACATIONS. The Executive shall be entitled to vacations with pay and to such personal and sick leave with pay in accordance with the policy of the Employer as may be established from time to time by the Employer and applied to other senior officers of the Employer. 6. FACILITIES. The Employer shall provide the Executive with a fully furnished office, and the facilities of the Employer shall be generally available to the Executive in the performance of his duties pursuant to this Agreement, it being understood and contemplated by the parties that all equipment, supplies and office personnel required in the performance of the Executive's duties under this Agreement shall be supplied by the Employer. 3. 7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC. (a) DEATH OF EXECUTIVE. If the Executive dies during the term of his employment, the Employer shall pay to the estate of the Executive such compensation, including any bonus compensation earned but not yet paid, as would otherwise have been payable to the Executive up to the end of the month in which his death occurs plus six (6) month's Basic Salary. The Employer shall have no additional financial obligation under this Agreement to the Executive or his estate. After receiving the payments provided in this subparagraph (a), the Executive and his estate shall have no further rights under this Agreement. (b) DISABILITY OF EXECUTIVE (i) During any period of disability, illness or incapacity during the term of this Agreement which renders the Executive at least temporarily unable to perform the services required under this Agreement for a period which shall not equal or exceed one hundred and eighty (180) continuous days, or one hundred and eighty (180) continuous days in any one (1) year period, the Executive shall receive the compensation payable under Section 3(a) of this Agreement plus any bonus compensation earned but not yet paid, less any benefits received by him under any disability insurance carried by or provided by the Employer. All rights of the Executive under this Agreement (other than rights already accrued) shall terminate as provided below upon the Executive's permanent disability (as defined below), although the Executive shall continue to receive any disability benefits to which he may be entitled under any disability income insurance which may be carried by or provided by the Employer from time to time. (ii) The term "permanent disability" as used in this Agreement shall mean the inability of the Executive, as determined by the Board of Directors of the Employer, by reason of physical or mental disability to perform the duties required of him under this Agreement for a period of one hundred and eighty (180) days in any one-year period. Successive periods of disability, illness or incapacity will be considered separate periods unless the later period of disability, illness or incapacity is due to the same or related cause and commences less than six months from the ending of the previous period of disability. Upon such determination, the Board of Directors may terminate the Executive's employment under this Agreement upon ten (10) days' prior written notice. If any determination of the Board of Directors with respect to permanent disability is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians. The Executive and Employer shall each appoint one member, and the third member of the panel shall be appointed by the other two members. The Executive agrees to make himself available for and submit to examinations by such physicians as may be directed by the Employer. Failure to submit to any such examination shall constitute a breach of a material part of this Agreement. 4. 8. OTHER TERMINATIONS. (a) VOLUNTARY TERMINATION BY EXECUTIVE. (i) The Executive may terminate his employment hereunder upon giving at least ninety (90) days' prior written notice. In addition, the Executive shall have the right to terminate his employment hereunder on the conditions and at the times provided for in Section 8(d) of the Agreement. (ii) If the Executive gives notice pursuant to Section 8(a) above, the Employer shall have the right to relieve the Executive, in whole or in part, of his duties under this Agreement (without reduction in compensation through the termination date). (b) TERMINATION BY EMPLOYER. (i) Except as otherwise provided in this Agreement, the Employer may terminate the employment of the Executive hereunder only for good cause and upon written notice; provided, however, that no breach or default by the Executive shall be deemed to occur hereunder unless the Executive shall have failed to cure the breach or default within thirty (30) days after he received written notice thereof indicating that it is a notice of termination pursuant to this Section of this Agreement. (ii) As used herein, "good cause" shall include: (1) the Executive's conviction of either a felony involving moral turpitude or any crime in connection with his employment by the Employer which causes the Employer a substantial detriment, but specifically shall not include traffic offenses; (2) actions by the Executive as an executive officer of the Employer which clearly are contrary to the best interests of the Employer; (3) the Executive's willful failure to take actions permitted by law and necessary to implement policies of the Employer's Board of Directors which the Board of Directors has communicated to him in writing, provided that minutes of a Board of Directors meeting attended in its entirety by the Executive shall be deemed communicated to the Executive; (4) the Executive's continued failure to attend to his duties as an executive officer of the Employer; or 5. (5) any condition which either resulted from the Executive's substantial dependence, as determined by the Board of Directors of the Employer, on alcohol, or any narcotic drug or other controlled or illegal substance. If any determination of substantial dependence is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians appointed in the manner and subject to the same penalties for noncompliance as specified in Section 7(b)(ii) of this Agreement. (iii) Termination of the employment of the Executive for reasons other than those expressly specified in this Agreement as good cause shall be deemed to be a termination of employment "without good cause." (c) CONTINUATION OF COMPENSATION FOLLOWING TERMINATION WITHOUT GOOD CAUSE. (i) If the Employer shall terminate the employment of the Executive without good cause effective on a date earlier than the termination date provided for in Section 2 (with the effective date of termination as so identified by the Employer being referred to herein as the "Accelerated Termination Date"), the Executive, until the termination date provided for in Section 2 or until the date which is twelve (12) months after the Accelerated Termination Date, whichever is later, shall continue to receive the Basic Salary and employee benefits (including without limitation the bonus that would have otherwise been payable during such compensation continuation period under the bonus plan in effect immediately before the Accelerated Termination Date) that the Employer has heretofore in Section 3 agreed to pay and to provide for the Executive, in each case in the amount and kind and at the time provided for in Section 3; provided that, notwithstanding such termination of employment, the Executive's covenants set forth in Section 10 and Section 11 are intended to and shall remain in full force and effect. (ii) The parties agree that, because there can be no exact measure of the damage that would occur to the Executive as a result of a termination by the Employer of the Executive's employment without good cause, the payments and benefits paid and provided pursuant to this Section 8(c) shall be deemed to constitute liquidated damages and not a penalty for the Employer's termination of the Executive's employment without good cause, and the Employer agrees that the Executive shall not be required to mitigate his damages. (d) RIGHTS UPON CHANGE IN CONTROL. (i) If a Change in Control of the Employer, as defined in Section 8(d)(ii) shall occur and the Executive shall: (1) voluntarily terminate his employment within one year following such Change in Control and such termination shall be as a result of the Executive's good faith determination that as a result of the Change in Control and a change in circumstances thereafter significantly affecting his position, he can no longer adequately exercise the 6. authorities, powers, functions or duties attached to his position as an executive officer of the Employer; or (2) voluntarily terminate his employment within one year following such Change in Control, and such termination shall be as a result of the Executive's good faith determination that he can no longer perform his duties as an executive officer of the Employer by reason of a substantial diminution in his responsibilities, status or position; or (3) have his employment terminated by the Employer for reasons other than those specified in Section 8(b)(ii) within one (1) year following such Change in Control; then in any of the above three cases, the Executive shall have, instead of the further rights described in Section 3(a), the right to immediately terminate this Agreement and a nonforfeitable right to receive, payable in a lump sum, the sum of the monthly amounts of his Basic Salary for a period equal to the greater of 12 months or the number of full months remaining in the period from the date of such termination through the termination date provided for in Section 2 of this Agreement plus an amount equal to the aggregate of all bonuses earned by the Executive with respect to the 12 month period ended on the fiscal quarter end which next precedes such date of termination. (ii) For purposes of this Agreement, a "Change in Control" shall mean: (1) the obtaining by any party of fifty percent (50%) or more of the voting shares of the Employer pursuant to a "tender offer" for such shares as provided under Rule 14d-2 promulgated under the Securities Exchange Act of 1934, as amended, or any subsequent comparable federal rule or regulation governing tender offers; or (2) individuals who were members of the Employer's Board of Directors immediately prior to any particular meeting of the Employer's shareholders which involves a contest for the election of directors fail to constitute a majority of the members of the Employer's Board of Directors following such election; or (3) the Employer's executing an agreement concerning the sale of substantially all of its assets to a purchaser which is not a subsidiary; or (4) the Employer's adoption of a plan of dissolution or liquidation; or (5) the Employer's executing an agreement concerning a merger or consolidation involving the Employer in which the Employer is not the surviving corporation or if, immediately following such merger or consolidation, less than fifty percent 7. (50%) of the surviving corporation's outstanding voting stock is held by persons who are stockholders of the Employer immediately prior to such merger or consolidation. (iii) The provisions of Section 8(c) and this Section 8(d) are mutually exclusive, provided, however, that if within one year following commencement of an 8(c) payout there shall be a Change in Control as defined in Section 8(d)(ii), then the Executive shall be entitled to the amount payable to the Executive under Section 8(d)(i) reduced by the amount that the Executive has received under Section 8(c) up to the date of the change in control. The triggering of the lump sum payment requirement of this Section 8(d) shall cause the provisions of Section 8(c) to become inoperative. The triggering of the continuation of payment provisions of Section 8(c) shall cause the provisions of Section 8(d) to become inoperative except to the extent provided in this Section 8(d)(iii). (e) COMPENSATION PAYABLE UPON TERMINATION BY EMPLOYER FOR GOOD CAUSE OR VOLUNTARILY BY EMPLOYEE ABSENT CHANGE IN CONTROL. If the employment of the Executive is terminated for good cause under Section 8(b)(ii) of this Agreement, or if the Executive voluntarily terminates his employment by written notice to the Employer under Section 8(a) of this Agreement without reliance on Section 8(d), the Employer shall pay to the Executive any compensation earned but not paid to the Executive prior to the effective date of such termination. Under such circumstances, such payment shall be in full and complete discharge of any and all liabilities or obligations of the Employer to the Executive hereunder, and the Executive shall be entitled to no further benefits under this Agreement. (f) RELEASE. Payment of any compensation to the Executive under this Section 8 following termination of employment shall be conditioned upon the prior receipt by the Employer of a release executed by the Executive in substantially the form attached to this Agreement as Exhibit A. 9. DISCLOSURE. The Executive agrees that during the term of his employment by the Employer, he will disclose and disclose only to the Employer all ideas, methods, plans, developments or improvements known by him which relate directly or indirectly to the business of the Employer, whether acquired by the Executive before or during his employment by the Employer. Nothing in this Section 9 shall be construed as requiring any such communication where the idea, plan, method or development is lawfully protected from disclosure as a trade secret of a third party or by any other lawful prohibition against such communication. 10. CONFIDENTIALITY. The Executive agrees to keep in strict secrecy and confidence any and all information the Executive assimilates or to which he has access during his employment by the Employer and which has not been publicly disclosed and is not a matter of common knowledge in the fields of work of the Employer. The Executive agrees that both during and after the term of his employment by the Employer, he will not, without the prior written consent of the Employer, disclose 8. any such confidential information to any third person, partnership, joint venture, company, corpora tion or other organization. 11. NONCOMPETITION AND NONSOLICITATION. The Executive hereby acknowledges that, during and solely as a result of his employment by the Employer, he has received and shall continue to receive: (1) special training and education with respect to the operations of a retail clothing chain and other related matters, and (2) access to confidential information and business and professional contacts. In consideration of the special and unique opportunities afforded to the Executive by the Employer as a result of the Executive's employment, as outlined in the previous sentence, the Executive hereby agrees as follows: (a) NONCOMPETITION. During the term of the Executive's employment, whether pursuant to this Agreement, any automatic or other renewal hereof or otherwise, and, except as may be otherwise herein provided, for a period of two (2) years after the termination of his employment with the Employer, regardless of the reason for such termination, the Executive shall not, directly or indirectly, enter into, engage in, be employed by or consult with any business which competes with the business of the Employer by selling, offering to sell, soliciting offers to buy, or producing, or by consulting with others concerning the selling or producing of, any product substantially similar to those now sold or produced by the Employer or included in the product lines then developed by the Employer for sale or production, or by engaging in transactions with any person who was a vendor of merchandise to the Employer; provided that the restriction on the ability to deal with a vendor shall not apply to dealing with any vendor from whom the Employer has not purchased or is not expected to purchase in excess of $250,000 of merchandise in any one fiscal year and shall not apply to dealing with a vendor in connection with any transaction which does not involve, directly or indirectly, a product substantially similar to those being sold or produced by the Employer. The Executive shall not engage in such prohibited activities, either as an individual, partner, officer, director, stockholder, employee, advisor, independent contractor, joint venturer, consultant, agent, or representative or salesman for any person, firm, partnership, corporation or other entity so competing with the Employer. The restrictions of this Section 11 shall not be violated by (i) the ownership of no more than 2% of the outstanding securities of any company whose stock is traded on a national securities exchange or is quoted in the Automated Quotation System of the National Association of Securities Dealers (NASDAQ), or (ii) other outside business investments that do not in any manner conflict with the services to be rendered by the Executive for the Employer and that do not diminish or detract from the Executive's ability to render his required attention to the business of the Employer. (b) NONSOLICITATION. During his employment with the Employer and, except as may be otherwise herein provided, for a period of two (2) years following the termination of his employment with the Employer, regardless of the reason for such termination, the Executive agrees he will refrain from and will not, directly or indirectly, as an individual, partner, officer, director, stockholder, employee, advisor, independent contractor, joint venturer, consultant, agent, representative, salesman or otherwise solicit any of the employees of the Employer to terminate their 9. employment unless such solicitation is consented to in writing by an authorized senior officer of the Employer (other than the Employer or a person related to the Employee) prior to such solicitation. (c) EXTENSION OF PROHIBITION PERIOD. The period of time during which the Executive is prohibited from engaging in certain business practices pursuant to Sections 11(a) or (b) shall be extended by any length of time during which the Executive is in breach of such covenants. (d) INDEPENDENT COVENANTS. It is understood by and between the parties hereto that the foregoing restrictive covenants set forth in Sections 11(a) through (c) are essential elements of this Agreement, and that, but for the agreement of the Executive to comply with such covenants, the Employer would not have agreed to enter into this Agreement. Such covenants by the Executive shall be construed as agreements independent of any other provision in this Agreement. The existence of any claim or cause of action of the Executive against the Employer, whether predicated on this Agreement, or otherwise, shall not constitute a defense to the enforcement by the Employer of such covenants. (e) DIVISIBLE COVENANTS. It is agreed by the Employer and Executive that if any portion of the covenants set forth in this Section 11 are held to be invalid, unreasonable, arbitrary or against public policy, then such portion of such covenants shall be considered divisible both as to time and geographical area. The Employer and Executive agree that, if any court of competent jurisdiction determines the specified time period or the specified geographical area applicable to this Section 11 to be invalid, unreasonable, arbitrary or against public policy, a lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced against the Executive. The Employer and the Executive agree that the foregoing covenants are appropriate and reasonable when considered in light of the nature and extent of the business conducted by the Employer. 12. SPECIFIC PERFORMANCE. The Executive agrees that damages at law will be an insufficient remedy to the Employer if the Executive violates the terms of Sections 9, 10 or 11 of this Agreement and that the Employer would suffer irreparable damage as a result of such violation. Accordingly, it is agreed that the Employer shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of such Sections, which injunctive relief shall be in addition to any other rights or remedies available to the Employer. The Executive agrees to pay to the Employer all costs and expenses incurred by the Employer relating to the enforcement of the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees and disbursements of counsel (both at trial and in appellate proceedings). 13. PAYMENT OF EXCISE TAXES. (a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1) Change of Control Payment under Section 8(d) of this Agreement, (2) any benefit or payment under Section 7 as a result of or following the death or permanent disability of the Executive, or (3) any benefit or 10. payment under Section 8(c) as a result of or following any termination of employment hereunder Without Good Cause (such sections being referred to as the "Covered Sections" and the benefits and payments to be received thereunder being referred to as the "Covered Payments"), the Executive shall be entitled to receive the amount described below to the extent applicable: If any Covered Payment(s) under any of the Covered Sections or by the Employer under another plan or agreement (collectively, the "Payments") are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from time to time, the "Code"), or any successor or similar provision of the Code (the "Excise Tax"), the Employer shall pay the Executive an additional cash amount (the "Gross Up") such that the net amount retained by the Executive after deduction of any Excise Tax on the Payments (and any Excise Tax on the federal income tax and Excise Tax on any amounts paid as Gross Up under this Section 13) shall be equal to the Payments. (b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross Up, the Executive shall be deemed to pay the federal income tax at the highest marginal rate of taxation (currently 39.6%) in the calendar year in which the payment to which the Gross Up applies is to be made. The determination of whether such Excise Tax is payable and the amount thereof shall be made upon the opinion of tax counsel selected by the Employer and reasonably acceptable to the Executive. The Gross Up, if any, that is due as a result of such determination shall be paid to the Executive in cash in a lump sum within thirty (30) days of such computation. If such opinion is not finally accepted by the Internal Revenue Service upon audit or otherwise, then appropriate adjustments shall be computed (without interest but with additional Gross Up, if applicable) by such tax counsel based upon the final amount of the Excise Tax so determined; any additional amount due the Executive as a result of such adjustment shall be paid to the Executive by the Employer in cash in a lump sum within thirty (30) days of such computation, or if less than the Gross Up any amount due the Employer as a result of such adjustment shall be paid to the Employer by the Executive in cash in a lump sum within thirty (30) days of such computation. 14. COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and warrants that the execution of this Agreement by him and his performance of his obligations hereunder will not conflict with, result in the breach of any provision of or the termination of or constitute a default under any Agreement to which the Executive is a party or by which the Executive is or may be bound. 15. WAIVER OF BREACH. The waiver by the Employer of a breach of any of the provisions of this Agreement by the Executive shall not be construed as a waiver of any subsequent breach by the Executive. 16. BINDING EFFECT; ASSIGNMENT. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. It is expressly acknowledged that the provisions of Section 11 relating to noncompetition, nonsolicitation and nonacceptance may be enforced by the Employer's successors and assigns. This Agreement is a personal employment contract and the rights, obligations and interests of the Executive hereunder may not be sold, assigned, transferred, pledged or hypothecated. 11. 17. ENTIRE AGREEMENT. This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof, including without limitation any previously existing employment agreements between the parties. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge is sought. 18. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 19. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of Florida. 20. NOTICE. All notices which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy or similar electronic transmission method; one working day after it is sent, if sent by recognized expedited delivery service; and five days after it is sent, if mailed, first class mail, certified mail, return receipt requested, with postage prepaid. In each case notice shall be sent to: To the Employer: Chico's FAS, Inc. 11215 Metro Parkway Ft. Myers, Florida 33912 With a copy to: Gary I. Teblum, Esquire Trenam, Kemker, Scharf, Barkin Frye, O'Neill & Mullis, P.A. Post Office Box 1102 Tampa, Florida 33601 To the Executive at his address herein first above written. 12. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. CHICO'S FAS, INC. By: /s/ JOHN BURDEN ----------------------------------- John Burden, Chairperson, Compensation & Benefits Committee EXECUTIVE: /s/ MARVIN J. GRALNICK -------------------------------------- Marvin J. Gralnick 13. EXHIBIT A TO EMPLOYMENT AGREEMENT WITH MARVIN J. GRALNICK DATED AS OF FEBRUARY 7, 2000 RELEASE WHEREAS, __________________________(the "Executive") is an employee of Chico's FAS, Inc., (the "Company") and is a party to the Employment Agreement dated __________________ (the "Agreement"); WHEREAS, the Executive's employment has been terminated in accordance with Section 8___ of the Agreement; and WHEREAS, the Executive is required to sign this Release in order to receive the payment of any compensation under Section 8 of the Agreement following termination of employment. NOW, THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Executive agrees as follows: 2. This Release is effective on the date hereof and will continue in effect as provided herein. 3. In consideration of the payments to be made and the benefits to be received by the Executive pursuant to the Agreement, which the Executive acknowledges are in addition to payment and benefits to which the Executive would be entitled to but for the Agreement, the Executive, for the Executive and the Executive's dependents, successors, assigns, heirs, executors and administrators (and the Executive and their legal representatives of every kind), hereby releases, dismisses, remises and forever discharges the Company, its predecessors, parents, subsidiaries, divisions, related or affiliated companies, officers, directors, stockholders, members, employees, heirs, successors, assigns, representatives, agents and counsel (collectively the "Released Party") from any and all arbitrations, claims, including claims for attorney's fees, demands, damages, suits, proceedings, actions and/or causes of action of any kind and every description, whether known or unknown, which the Executive now has or may have had for, upon, or by reason of any cause whatsoever ("claims"), against the Released Party, including but not limited to: (a) any and all claims arising out of or relating to Executive's employment by or service with the Company and the Executive's termination from the Company. (b) any and all claims of discrimination, including but not limited to claims of discrimination on the basis of sex, race, age, national origin, marital status, religion or handicap, including, specifically, but without limiting the generality of the A-1 foregoing, any claims under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act; and (c) any and all claims of wrongful or unjust discharge or breach of any contract or promise, express or implied. 4. The Executive understands and acknowledges that the Company does not admit any violation of law, liability or invasion of any of the Executive rights and that any such violation, liability or invasion is expressly denied. The consideration provided for this Release is made for the purpose of settling and extinguishing all claims and rights (and every other similar or dissimilar matter) that the Executive ever had or now may have against the Company to the extent provided in this Release. The Executive further agrees and acknowledges that no representations, promises or inducements have been made that the Company other than as appear in the Agreement. 5. The Executive further agrees and acknowledges that: (a) The Release provided for herein releases claims to and including the date of this Release; (b) The Executive has been advised by the Company to consult with legal counsel prior to executing this Release, has had an opportunity to consult with and to be advised by legal counsel of the Executive's choice, fully understands the terms of this Release, and enters into this Release freely, voluntarily and intending to be found. (c) The Executive has been given a period of 21 days to review and consider the terms of this Release, prior to its execution and that the Executive may use as much of the 21 day period as the Executive desires; and (d) The Executive may, within 7 days after execution, revoke this Release. Revocation shall be made by delivering a written notice of revocation to the Chief Financial Officer at the Company. For such revocation to be effective, written notice must be actually received by the Chief Financial Officer at the Company no later than the close of business on the 7th day after the Executive executes this Release. If the Executive does exercise the Executive's right to revoke this Release, all of the terms and conditions of the Release shall be of no force and effect and the Company shall not have any obligation to make payments or provide benefits to the Executive as set forth in Sections 8 of the Agreement. 6. The Executive agrees that the Executive will never file a lawsuit or other complaint asserting any claim that is released in this Release. A-2 7. The Executive waives and releases any claim that the Executive has or may have to reemployment after ____________________________. IN WITNESS WHEREOF, the Executive has executed and delivered this Release on the date set forth below. Dated:_______________________ ________________________________ Executive A-3 EX-10.2 3 0003.txt EXHIBIT 10.2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made and entered into this 16th day of August, 2000, but is effective for all purposes as of February 7, 2000, by and between CHICO'S FAS, INC. a Florida corporation (the "Employer"), and HELENE B. GRALNICK, residing at 648 Lake Murex Circle, Sanibel Island, Florida 33957, (the "Executive"). W I T N E S S E T H: 1. EMPLOYMENT. The Employer hereby employs the Executive, and the Executive hereby accepts such employment, upon the terms and subject to the conditions set forth in this Agreement. 2. TERM. Subject to the provisions of termination as hereinafter provided, the term of employment under this Agreement shall begin as of February 7, 2000 and shall continue through January 31, 2003; provided, however, that beginning on February 1, 2003 and on each February 1st (each a "Renewal Date") thereafter, the term of this agreement shall automatically be extended for one additional year unless either party gives the other written notice of termination at least ninety (90) days prior to any such Renewal Date. 3. COMPENSATION; REIMBURSEMENT, ETC. (a) BASIC SALARY. The Employer shall pay to the Executive as compensation for all services rendered by the Executive during the term of this Agreement a basic annualized salary as follows (the "Basic Salary"), or such other sum as the parties may agree on from time to time, payable monthly or in other more frequent installments, as determined by the Employer:
PERIOD BASIC ANNUALIZED SALARY ------ ----------------------- For the period from February 7, 2000 through January 31, 2001 $230,000 For the period from February 1, 2001 through January 31, 2002 $250,000 For the period from February 7, 2002 through January 31, 2003 and thereafter $275,000
The Board of Directors of the Employer shall have the right to increase the Executive's compensation from time to time by action of the Board of Directors. In addition, the Board of Directors of the Employer, in its discretion, may, with respect to any year during the term hereof, award a bonus or 1. bonuses to the Executive in addition to the bonuses provided for in Section 3(b). The compensation provided for in this Section 3(a) shall be in addition to any pension or profit sharing payments set aside or allocated for the benefit of the Executive. (b) BONUSES. In addition to the Basic Salary to be paid pursuant to Section 3(a) of this Agreement, during the term of this Agreement or any renewal or extension, the Company shall pay to the Executive as incentive compensation quarterly and annual bonuses in accordance with the incentive bonus plan(s) adopted from time to time by the Board or the Compensation and Benefits Committee of the Board (the "Committee"), as the case may be. Such plan for the initial three year term of this Agreement ending January 31, 2003, among other things, shall establish a "Target Bonus" equal to 50% of the Executive's Basic Salary and a "Maximum Bonus" equal to 100% of the Executive's Basic Salary. (c) STOCK OPTIONS. The Executive shall participate in under the Employer's stock option plan or plans, in accordance with the terms thereof, through the grant by the Committee of nonqualified options to purchase shares of the Employer's common stock, as follows (the "Options"), provided that Executive remains employed by the Employer on the approximate date of grant: APPROXIMATE DATE OF GRANT NUMBER OF OPTIONS ------------------------- ----------------- Effective Date of this Agreement 25,000 February 1, 2001 30,000 February 1, 2002 30,000 The date of grant for each tranche of Options shall be the respective day on which the Committee acts to effectuate the respective grant. The initial exercise price for each tranche of the Options shall be the closing price for the Company's stock on the Nasdaq Stock Market (NMS) on the respective date of grant. The Options shall be subject to the terms of the applicable stock option plan under which they are issued. (d) REIMBURSEMENTS. The Employer shall reimburse the Executive for all reasonable expenses incurred by the Executive in the performance of her duties under this Agreement; provided, however, that the Executive must furnish to the Employer an itemized account, satisfactory to the Employer, in substantiation of such expenditures. (e) OTHER FRINGE BENEFITS. The Executive shall be entitled to such fringe benefits including, but not limited to, medical and insurance benefits as may be provided from time to time by the Employer to other senior officers of the Employer. (f) AUTOMOBILE. The Executive shall provide her own automobile for use as an employee hereunder. The Executive shall at all times maintain said automobile in good repair and condition and shall insure both Employer and Executive against claims for bodily injury, death or 2. property damage occurring as a result of its use to the limit of not less than Five Hundred Thousand ($500,000.00) Dollars in respect to any one accident and to the limit of not less than One Million ($1,000,000.00) Dollars in respect to any one accident and to the limit of not less than One Hundred Thousand ($100,000.00) Dollars in respect to property damage. (g) DEFERRAL OF CERTAIN COMPENSATION PAYMENTS. Notwithstanding any other provisions of this Agreement to the contrary, any portion of the cash compensation otherwise payable to the Executive under this Agreement shall not be paid currently in cash to the Executive hereunder if pursuant to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended, or any similar or successor provision ("Section 162(m)"), the Company would not be entitled to a current deduction for federal income tax purposes in respect of the payment of such portion of the cash compensation (any such compensation being referred to as "Section 162(m) Non-Deductible Compensation"). The payment of any such Section 162(m) Non-Deductible Compensation shall be deferred (the "Deferred Compensation"). The Deferred Compensation shall be recorded on the books of the Company but shall be unfunded. The Executive's right to receive the Deferred Compensation in cash shall arise automatically no later than 30 days after the first time when the deduction for federal income taxes by the Company in respect of the Section 162(m) Non-Deductible Compensation to which the Deferred Compensation relates would no longer be prohibited by Section 162(m). 4. DUTIES. The Executive is engaged as the Chief Executive Officer and President. In addition, the Executive shall have such other duties and hold such other offices as may from time to time be reasonably assigned to her by the Board of Directors of the Employer. 5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF. (a) EXTENT OF SERVICES. During the term of her employment under this Agreement, the Executive shall devote such time, energy and attention during regular business hours to the benefit and business of the Employer as may be reasonably necessary in performing her duties pursuant to this Agreement. (b) VACATIONS. The Executive shall be entitled to vacations with pay and to such personal and sick leave with pay in accordance with the policy of the Employer as may be established from time to time by the Employer and applied to other senior officers of the Employer. 6. FACILITIES. The Employer shall provide the Executive with a fully furnished office, and the facilities of the Employer shall be generally available to the Executive in the performance of her duties pursuant to this Agreement, it being understood and contemplated by the parties that all equipment, supplies and office personnel required in the performance of the Executive's duties under this Agreement shall be supplied by the Employer. 3. 7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC. (a) DEATH OF EXECUTIVE. If the Executive dies during the term of her employment, the Employer shall pay to the estate of the Executive such compensation, including any bonus compensation earned but not yet paid, as would otherwise have been payable to the Executive up to the end of the month in which her death occurs plus six (6) month's Basic Salary. The Employer shall have no additional financial obligation under this Agreement to the Executive or her estate. After receiving the payments provided in this subparagraph (a), the Executive and her estate shall have no further rights under this Agreement. (b) DISABILITY OF EXECUTIVE (i) During any period of disability, illness or incapacity during the term of this Agreement which renders the Executive at least temporarily unable to perform the services required under this Agreement for a period which shall not equal or exceed one hundred and eighty (180) continuous days, or one hundred and eighty (180) continuous days in any one (1) year period, the Executive shall receive the compensation payable under Section 3(a) of this Agreement plus any bonus compensation earned but not yet paid, less any benefits received by her under any disability insurance carried by or provided by the Employer. All rights of the Executive under this Agreement (other than rights already accrued) shall terminate as provided below upon the Executive's permanent disability (as defined below), although the Executive shall continue to receive any disability benefits to which she may be entitled under any disability income insurance which may be carried by or provided by the Employer from time to time. (ii) The term "permanent disability" as used in this Agreement shall mean the inability of the Executive, as determined by the Board of Directors of the Employer, by reason of physical or mental disability to perform the duties required of her under this Agreement for a period of one hundred and eighty (180) days in any one-year period. Successive periods of disability, illness or incapacity will be considered separate periods unless the later period of disability, illness or in capacity is due to the same or related cause and commences less than six months from the ending of the previous period of disability. Upon such determination, the Board of Directors may terminate the Executive's employment under this Agreement upon ten (10) days' prior written notice. If any determination of the Board of Directors with respect to permanent disability is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians. The Executive and Employer shall each appoint one member, and the third member of the panel shall be appointed by the other two members. The Executive agrees to make herself available for and submit to examinations by such physicians as may be directed by the Employer. Failure to submit to any such examination shall constitute a breach of a material part of this Agreement. 4. 8. OTHER TERMINATIONS. (a) VOLUNTARY TERMINATION BY EXECUTIVE. (i) The Executive may terminate her employment hereunder upon giving at least ninety (90) days' prior written notice. In addition, the Executive shall have the right to terminate her employment hereunder on the conditions and at the times provided for in Section 8(d) of the Agreement. (ii) If the Executive gives notice pursuant to Section 8(a) above, the Employer shall have the right to relieve the Executive, in whole or in part, of her duties under this Agreement (without reduction in compensation through the termination date). (b) TERMINATION BY EMPLOYER. (i) Except as otherwise provided in this Agreement, the Employer may terminate the employment of the Executive hereunder only for good cause and upon written notice; provided, however, that no breach or default by the Executive shall be deemed to occur hereunder unless the Executive shall have failed to cure the breach or default within thirty (30) days after she received written notice thereof indicating that it is a notice of termination pursuant to this Section of this Agreement. (ii) As used herein, "good cause" shall include: (1) the Executive's conviction of either a felony involving moral turpitude or any crime in connection with her employment by the Employer which causes the Employer a substantial detriment, but specifically shall not include traffic offenses; (2) actions by the Executive as an executive officer of the Employer which clearly are contrary to the best interests of the Employer; (3) the Executive's willful failure to take actions permitted by law and necessary to implement policies of the Employer's Board of Directors which the Board of Directors has communicated to her in writing, provided that minutes of a Board of Directors meeting attended in its entirety by the Executive shall be deemed communicated to the Executive; (4) the Executive's continued failure to attend to her duties as an executive officer of the Employer; or 5. (5) any condition which either resulted from the Executive's substantial dependence, as determined by the Board of Directors of the Employer, on alcohol, or any narcotic drug or other controlled or illegal substance. If any determination of substantial dependence is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians appointed in the manner and subject to the same penalties for noncompliance as specified in Section 7(b)(ii) of this Agreement. (iii) Termination of the employment of the Executive for reasons other than those expressly specified in this Agreement as good cause shall be deemed to be a termination of employment "without good cause." (c) CONTINUATION OF COMPENSATION FOLLOWING TERMINATION WITHOUT GOOD CAUSE. (i) If the Employer shall terminate the employment of the Executive without good cause effective on a date earlier than the termination date provided for in Section 2 (with the effective date of termination as so identified by the Employer being referred to herein as the "Accelerated Termination Date"), the Executive, until the termination date provided for in Section 2 or until the date which is twelve (12) months after the Accelerated Termination Date, whichever is later, shall continue to receive the Basic Salary and employee benefits (including without limitation the bonus that would have otherwise been payable during such compensation continuation period under the bonus plan in effect immediately before the Accelerated Termination Date) that the Employer has heretofore in Section 3 agreed to pay and to provide for the Executive, in each case in the amount and kind and at the time provided for in Section 3; provided that, notwithstanding such termination of employment, the Executive's covenants set forth in Section 10 and Section 11 are intended to and shall remain in full force and effect. (ii) The parties agree that, because there can be no exact measure of the damage that would occur to the Executive as a result of a termination by the Employer of the Executive's employment without good cause, the payments and benefits paid and provided pursuant to this Section 8(c) shall be deemed to constitute liquidated damages and not a penalty for the Employer's termination of the Executive's employment without good cause, and the Employer agrees that the Executive shall not be required to mitigate her damages. (d) RIGHTS UPON CHANGE IN CONTROL. (i) If a Change in Control of the Employer, as defined in Section 8(d)(ii) shall occur and the Executive shall: (1) voluntarily terminate her employment within one year following such Change in Control and such termination shall be as a result of the Executive's good faith determination that as a result of the Change in Control and a change in circumstances thereafter significantly affecting her position, she can no longer adequately exercise the 6. authorities, powers, functions or duties attached to her position as an executive officer of the Employer; or (2) voluntarily terminate her employment within one year following such Change in Control, and such termination shall be as a result of the Executive's good faith determination that she can no longer perform her duties as an executive officer of the Employer by reason of a substantial diminution in her responsibilities, status or position; or (3) have her employment terminated by the Employer for reasons other than those specified in Section 8(b)(ii) within one (1) year following such Change in Control; then in any of the above three cases, the Executive shall have, instead of the further rights described in Section 3(a), the right to immediately terminate this Agreement and a nonforfeitable right to receive, payable in a lump sum, the sum of the monthly amounts of her Basic Salary for a period equal to the greater of 12 months or the number of full months remaining in the period from the date of such termination through the termination date provided for in Section 2 of this Agreement plus an amount equal to the aggregate of all bonuses earned by the Executive with respect to the 12 month period ended on the fiscal quarter end which next precedes such date of termination. (ii) For purposes of this Agreement, a "Change in Control" shall mean: (1) the obtaining by any party of fifty percent (50%) or more of the voting shares of the Employer pursuant to a "tender offer" for such shares as provided under Rule 14d-2 promulgated under the Securities Exchange Act of 1934, as amended, or any subsequent comparable federal rule or regulation governing tender offers; or (2) individuals who were members of the Employer's Board of Directors immediately prior to any particular meeting of the Employer's shareholders which involves a contest for the election of directors fail to constitute a majority of the members of the Employer's Board of Directors following such election; or (3) the Employer's executing an agreement concerning the sale of substantially all of its assets to a purchaser which is not a subsidiary; or (4) the Employer's adoption of a plan of dissolution or liquidation; or (5) the Employer's executing an agreement concerning a merger or consolidation involving the Employer in which the Employer is not the surviving corporation or if, immediately following such merger or consolidation, less than fifty percent 7. (50%) of the surviving corporation's outstanding voting stock is held by persons who are stockholders of the Employer immediately prior to such merger or consolidation. (iii) The provisions of Section 8(c) and this Section 8(d) are mutually exclusive, provided, however, that if within one year following commencement of an 8(c) payout there shall be a Change in Control as defined in Section 8(d)(ii), then the Executive shall be entitled to the amount payable to the Executive under Section 8(d)(i) reduced by the amount that the Executive has received under Section 8(c) up to the date of the change in control. The triggering of the lump sum payment requirement of this Section 8(d) shall cause the provisions of Section 8(c) to become inoperative. The triggering of the continuation of payment provisions of Section 8(c) shall cause the provisions of Section 8(d) to become inoperative except to the extent provided in this Section 8(d)(iii). (e) COMPENSATION PAYABLE UPON TERMINATION BY EMPLOYER FOR GOOD CAUSE OR VOLUNTARILY BY EMPLOYEE ABSENT CHANGE IN CONTROL. If the employment of the Executive is terminated for good cause under Section 8(b)(ii) of this Agreement, or if the Executive voluntarily terminates her employment by written notice to the Employer under Section 8(a) of this Agreement without reliance on Section 8(d), the Employer shall pay to the Executive any compensation earned but not paid to the Executive prior to the effective date of such termination. Under such circumstances, such payment shall be in full and complete discharge of any and all liabilities or obligations of the Employer to the Executive hereunder, and the Executive shall be entitled to no further benefits under this Agreement. (f) RELEASE. Payment of any compensation to the Executive under this Section 8 following termination of employment shall be conditioned upon the prior receipt by the Employer of a release executed by the Executive in substantially the form attached to this Agreement as Exhibit A. 9. DISCLOSURE. The Executive agrees that during the term of her employment by the Employer, she will disclose and disclose only to the Employer all ideas, methods, plans, developments or improvements known by her which relate directly or indirectly to the business of the Employer, whether acquired by the Executive before or during her employment by the Employer. Nothing in this Section 9 shall be construed as requiring any such communication where the idea, plan, method or development is lawfully protected from disclosure as a trade secret of a third party or by any other lawful prohibition against such communication. 10. CONFIDENTIALITY. The Executive agrees to keep in strict secrecy and confidence any and all information the Executive assimilates or to which she has access during her employment by the Employer and which has not been publicly disclosed and is not a matter of common knowledge in the fields of work of the Employer. The Executive agrees that both during and after the term of her employment by the Employer, she will not, without the prior written consent of the Employer, 8. disclose any such confidential information to any third person, partnership, joint venture, company, corporation or other organization. 11. NONCOMPETITION AND NONSOLICITATION. The Executive hereby acknowledges that, during and solely as a result of her employment by the Employer, she has received and shall continue to receive: (1) special training and education with respect to the operations of a retail clothing chain and other related matters, and (2) access to confidential information and business and professional contacts. In consideration of the special and unique opportunities afforded to the Executive by the Employer as a result of the Executive's employment, as outlined in the previous sentence, the Executive hereby agrees as follows: (a) NONCOMPETITION. During the term of the Executive's employment, whether pursuant to this Agreement, any automatic or other renewal hereof or otherwise, and, except as may be otherwise herein provided, for a period of two (2) years after the termination of her employment with the Employer, regardless of the reason for such termination, the Executive shall not, directly or indirectly, enter into, engage in, be employed by or consult with any business which competes with the business of the Employer by selling, offering to sell, soliciting offers to buy, or producing, or by consulting with others concerning the selling or producing of, any product substantially similar to those now sold or produced by the Employer or included in the product lines then developed by the Employer for sale or production, or by engaging in transactions with any person who was a vendor of merchandise to the Employer; provided that the restriction on the ability to deal with a vendor shall not apply to dealing with any vendor from whom the Employer has not purchased or is not expected to purchase in excess of $250,000 of merchandise in any one fiscal year and shall not apply to dealing with a vendor in connection with any transaction which does not involve, directly or indirectly, a product substantially similar to those being sold or produced by the Employer. The Executive shall not engage in such prohibited activities, either as an individual, partner, officer, director, stockholder, employee, advisor, independent contractor, joint venturer, consultant, agent, or representative or salesman for any person, firm, partnership, corporation or other entity so competing with the Employer. The restrictions of this Section 11 shall not be violated by (i) the ownership of no more than 2% of the outstanding securities of any company whose stock is traded on a national securities exchange or is quoted in the Automated Quotation System of the National Association of Securities Dealers (NASDAQ), or (ii) other outside business investments that do not in any manner conflict with the services to be rendered by the Executive for the Employer and that do not diminish or detract from the Executive's ability to render her required attention to the business of the Employer. (b) NONSOLICITATION. During her employment with the Employer and, except as may be otherwise herein provided, for a period of two (2) years following the termination of her employment with the Employer, regardless of the reason for such termination, the Executive agrees she will refrain from and will not, directly or indirectly, as an individual, partner, officer, director, stockholder, employee, advisor, independent contractor, joint venturer, consultant, agent, representative, salesman or otherwise solicit any of the employees of the Employer to terminate their 9. employment unless such solicitation is consented to in writing by an authorized senior officer of the Employer (other than the Employer or a person related to the Employee) prior to such solicitation. (c) EXTENSION OF PROHIBITION PERIOD. The period of time during which the Executive is prohibited from engaging in certain business practices pursuant to Sections 11(a) or (b) shall be extended by any length of time during which the Executive is in breach of such covenants. (d) INDEPENDENT COVENANTS. It is understood by and between the parties hereto that the foregoing restrictive covenants set forth in Sections 11(a) through (c) are essential elements of this Agreement, and that, but for the agreement of the Executive to comply with such covenants, the Employer would not have agreed to enter into this Agreement. Such covenants by the Executive shall be construed as agreements independent of any other provision in this Agreement. The existence of any claim or cause of action of the Executive against the Employer, whether predicated on this Agreement, or otherwise, shall not constitute a defense to the enforcement by the Employer of such covenants. (e) DIVISIBLE COVENANTS. It is agreed by the Employer and Executive that if any portion of the covenants set forth in this Section 11 are held to be invalid, unreasonable, arbitrary or against public policy, then such portion of such covenants shall be considered divisible both as to time and geographical area. The Employer and Executive agree that, if any court of competent jurisdiction determines the specified time period or the specified geographical area applicable to this Section 11 to be invalid, unreasonable, arbitrary or against public policy, a lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced against the Executive. The Employer and the Executive agree that the foregoing covenants are appropriate and reasonable when considered in light of the nature and extent of the business conducted by the Employer. 12. SPECIFIC PERFORMANCE. The Executive agrees that damages at law will be an insufficient remedy to the Employer if the Executive violates the terms of Sections 9, 10 or 11 of this Agreement and that the Employer would suffer irreparable damage as a result of such violation. Accordingly, it is agreed that the Employer shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of such Sections, which injunctive relief shall be in addition to any other rights or remedies available to the Employer. The Executive agrees to pay to the Employer all costs and expenses incurred by the Employer relating to the enforcement of the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees and disbursements of counsel (both at trial and in appellate proceedings). 13. PAYMENT OF EXCISE TAXES. (a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1) Change of Control Payment under Section 8(d) of this Agreement, (2) any benefit or payment under Section 7 as a result of or following the death or permanent disability of the Executive, or (3) any benefit or 10. payment under Section 8(c) as a result of or following any termination of employment hereunder Without Good Cause (such sections being referred to as the "Covered Sections" and the benefits and payments to be received thereunder being referred to as the "Covered Payments"), the Executive shall be entitled to receive the amount described below to the extent applicable: If any Covered Payment(s) under any of the Covered Sections or by the Employer under another plan or agreement (collectively, the "Payments") are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from time to time, the "Code"), or any successor or similar provision of the Code (the "Excise Tax"), the Employer shall pay the Executive an additional cash amount (the "Gross Up") such that the net amount retained by the Executive after deduction of any Excise Tax on the Payments (and any Excise Tax on the federal income tax and Excise Tax on any amounts paid as Gross Up under this Section 13) shall be equal to the Payments. (b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross Up, the Executive shall be deemed to pay the federal income tax at the highest marginal rate of taxation (currently 39.6%) in the calendar year in which the payment to which the Gross Up applies is to be made. The determination of whether such Excise Tax is payable and the amount thereof shall be made upon the opinion of tax counsel selected by the Employer and reasonably acceptable to the Executive. The Gross Up, if any, that is due as a result of such determination shall be paid to the Executive in cash in a lump sum within thirty (30) days of such computation. If such opinion is not finally accepted by the Internal Revenue Service upon audit or otherwise, then appropriate adjustments shall be computed (without interest but with additional Gross Up, if applicable) by such tax counsel based upon the final amount of the Excise Tax so determined; any additional amount due the Executive as a result of such adjustment shall be paid to the Executive by the Employer in cash in a lump sum within thirty (30) days of such computation, or if less than the Gross Up any amount due the Employer as a result of such adjustment shall be paid to the Employer by the Executive in cash in a lump sum within thirty (30) days of such computation. 14. COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and warrants that the execution of this Agreement by her and her performance of her obligations hereunder will not conflict with, result in the breach of any provision of or the termination of or constitute a default under any Agreement to which the Executive is a party or by which the Executive is or may be bound. 15. WAIVER OF BREACH. The waiver by the Employer of a breach of any of the provisions of this Agreement by the Executive shall not be construed as a waiver of any subsequent breach by the Executive. 16. BINDING EFFECT; ASSIGNMENT. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. It is expressly acknowledged that the provisions of Section 11 relating to noncompetition, nonsolicitation and nonacceptance may be enforced by the Employer's successors and assigns. This Agreement is a personal employment contract and the rights, obligations and interests of the Executive hereunder may not be sold, assigned, transferred, pledged or hypothecated. 11. 17. ENTIRE AGREEMENT. This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof, including without limitation any previously existing employment agreements between the parties. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge is sought. 18. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 19. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of Florida. 20. NOTICE. All notices which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy or similar electronic transmission method; one working day after it is sent, if sent by recognized expedited delivery service; and five days after it is sent, if mailed, first class mail, certified mail, return receipt requested, with postage prepaid. In each case notice shall be sent to: To the Employer: Chico's FAS, Inc. 11215 Metro Parkway Ft. Myers, Florida 33912 With a copy to: Gary I. Teblum, Esquire Trenam, Kemker, Scharf, Barkin Frye, O'Neill & Mullis, P.A. Post Office Box 1102 Tampa, Florida 33601 To the Executive at her address herein first above written. 12. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. CHICO'S FAS, INC. By: /s/ JOHN BURDEN ----------------------------------- John Burden, Chairperson, Compensation & Benefits Committee EXECUTIVE: /s/ HELENE B. GRALNICK -------------------------------------- Helene B. Gralnick 13. EXHIBIT A TO EMPLOYMENT AGREEMENT WITH HELENE B. GRALNICK DATED AS OF FEBRUARY 7, 2000 RELEASE WHEREAS, _______________________________ (the "Executive") is an employee of Chico's FAS, Inc., (the "Company") and is a party to the Employment Agreement dated __________________ (the "Agreement"); WHEREAS, the Executive's employment has been terminated in accordance with Section 8___ of the Agreement; and WHEREAS, the Executive is required to sign this Release in order to receive the payment of any compensation under Section 8 of the Agreement following termination of employment. NOW, THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Executive agrees as follows: 2. This Release is effective on the date hereof and will continue in effect as provided herein. 3. In consideration of the payments to be made and the benefits to be received by the Executive pursuant to the Agreement, which the Executive acknowledges are in addition to payment and benefits to which the Executive would be entitled to but for the Agreement, the Executive, for the Executive and the Executive's dependents, successors, assigns, heirs, executors and administrators (and the Executive and their legal representatives of every kind), hereby releases, dismisses, remises and forever discharges the Company, its predecessors, parents, subsidiaries, divisions, related or affiliated companies, officers, directors, stockholders, members, employees, heirs, successors, assigns, representatives, agents and counsel (collectively the "Released Party") from any and all arbitrations, claims, including claims for attorney's fees, demands, damages, suits, proceedings, actions and/or causes of action of any kind and every description, whether known or unknown, which the Executive now has or may have had for, upon, or by reason of any cause whatsoever ("claims"), against the Released Party, including but not limited to: (a) any and all claims arising out of or relating to Executive's employment by or service with the Company and the Executive's termination from the Company. (b) any and all claims of discrimination, including but not limited to claims of discrimination on the basis of sex, race, age, national origin, marital status, religion or handicap, including, specifically, but without limiting the generality of the A-1 foregoing, any claims under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act; and (c) any and all claims of wrongful or unjust discharge or breach of any contract or promise, express or implied. 4. The Executive understands and acknowledges that the Company does not admit any violation of law, liability or invasion of any of the Executive rights and that any such violation, liability or invasion is expressly denied. The consideration provided for this Release is made for the purpose of settling and extinguishing all claims and rights (and every other similar or dissimilar matter) that the Executive ever had or now may have against the Company to the extent provided in this Release. The Executive further agrees and acknowledges that no representations, promises or inducements have been made that the Company other than as appear in the Agreement. 5. The Executive further agrees and acknowledges that: (a) The Release provided for herein releases claims to and including the date of this Release; (b) The Executive has been advised by the Company to consult with legal counsel prior to executing this Release, has had an opportunity to consult with and to be advised by legal counsel of the Executive's choice, fully understands the terms of this Release, and enters into this Release freely, voluntarily and intending to be found. (c) The Executive has been given a period of 21 days to review and consider the terms of this Release, prior to its execution and that the Executive may use as much of the 21 day period as the Executive desires; and (d) The Executive may, within 7 days after execution, revoke this Release. Revocation shall be made by delivering a written notice of revocation to the Chief Financial Officer at the Company. For such revocation to be effective, written notice must be actually received by the Chief Financial Officer at the Company no later than the close of business on the 7th day after the Executive executes this Release. If the Executive does exercise the Executive's right to revoke this Release, all of the terms and conditions of the Release shall be of no force and effect and the Company shall not have any obligation to make payments or provide benefits to the Executive as set forth in Sections 8 of the Agreement. 6. The Executive agrees that the Executive will never file a lawsuit or other complaint asserting any claim that is released in this Release. A-2 7. The Executive waives and releases any claim that the Executive has or may have to reemployment after __________________________. IN WITNESS WHEREOF, the Executive has executed and delivered this Release on the date set forth below. Dated:__________________________ ________________________ Executive A-3 EX-10.3 4 0004.txt EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made and entered into this 29th day of August, 2000, but is effective for all purposes as of September 6, 2000, by and between CHICO'S FAS, INC. a Florida corporation (the "Employer"), and TEDFORD MARLOW, residing at 553 Weed Street, New Caanan, Connecticut 06840 (the "Executive"). W I T N E S S E T H: 1. EMPLOYMENT. The Employer hereby employs the Executive, and the Executive hereby accepts such employment, upon the terms and subject to the conditions set forth in this Agreement. 2. TERM. Subject to the provisions of termination as hereinafter provided, the term of employment under this Agreement shall begin as of September 6, 2000 and shall continue through September 1, 2002; provided, however, that beginning on September 1, 2001 and on each September 1st (each a "Renewal Date") thereafter, the term of this agreement shall automatically be extended for one additional year so that on each Renewal Date the then remaining unexpired term of this Agreement shall be two years, unless either party gives the other written notice of non-renewal at least ninety (90) days prior to any such Renewal Date. 3. COMPENSATION; REIMBURSEMENT, ETC. (a) BASIC SALARY. The Employer shall pay to the Executive as compensation for all services rendered by the Executive during the term of this Agreement a basic annualized salary (the "Basic Salary") of $500,000, or such other sum as the parties may agree on from time to time, payable monthly or in other more frequent installments, as determined by the Employer. The Board of Directors of the Employer shall have the right to increase the Executive's compensation from time to time by action of the Board of Directors and shall evaluate such Base Salary for adjustment on the basis of a performance/merit review within one year from the effective date of this Agreement and at least annually thereafter so long as the term continues. In addition, the Board of Directors of the Employer, in its discretion, may, with respect to any year during the term hereof, award a bonus or bonuses to the Executive in addition to the bonuses provided for in Sections 3(b) and (c). The compensation provided for in this Section 3(a) shall be in addition to any pension or profit sharing payments set aside or allocated for the benefit of the Executive. (b) SIGN ON BONUS. Upon the execution of this Agreement, the Executive shall receive from the Employer a lump sum payment equal to $50,000 (the "Sign On Bonus"). (c) INCENTIVE BONUSES. In addition to the Basic Salary to be paid pursuant to Section 3(a) of this Agreement, during the term of this Agreement or any renewal or extension, the Company shall pay to the Executive as incentive compensation semi-annual and annual bonuses in accordance with the incentive bonus plan(s) adopted from time to time by the Board or the Compensation and Benefits Committee of the Board (the "Committee"), as the case may be. Such plan shall establish (i) for the initial twelve months of this Agreement, among other things, a "Minimum Guaranteed Bonus" equal to 40% of the Executive's Basic Salary and a "Maximum Bonus" equal to 80% of the Executive's Basic Salary and (ii) thereafter, among other things, a "Target Bonus" equal to 40% of the Executive's Basic Salary and a "Maximum Bonus" equal to 80% of the Executive's Basic Salary. Except as otherwise expressly provided in this Agreement, to receive an incentive bonus, the Executive must be employed by the Employer on the last day of the semi-annual period or the last day of the year to which the incentive bonus relates, as the case may be. For the Employer's fiscal semi-annual period ending February 3, 2001, the amount of any incentive bonus shall be adjusted to take into account the portion of the semi-annual period during which the Executive was employed by the Employer. (d) STOCK OPTIONS. The Executive shall receive one or more nonqualified stock options to purchase an aggregate of 250,000 shares of the Employer's common stock. The right to purchase such stock shall be nontransferable and shall vest in equal thirds on each one year anniversary date of the execution of this Agreement over a 3 year period commencing one year after the execution date of this Agreement and such vesting shall continue during such period as the Executive is continuing to receive and/or entitled to receive compensation under this Agreement. The option price on 30,000 of the options shall be equal to 2/3 of the closing market price of the stock on the business day next preceding the execution of this Agreement and the option price on the balance of the options shall be equal to the closing market price of the stock on the business day next preceding the execution of this Agreement. The Employer may grant said stock options either under the Employer's currently existing stock option plans ("Plans"), or in such other manner as may be determined by the Employer; provided, however, that the terms pursuant to which the stock option is granted, if granted outside of the Plans, shall be substantially similar to the terms of grant contained in the Plans; except that the vesting of such stock option shall be fully accelerated in the event that the Executive's employment hereunder terminates following a "change of control" (as hereinafter defined) as a result of termination of such employment by the Employer without cause or termination of such employment by the Executive for Good Reason (as hereinafter defined). (e) REIMBURSEMENTS AND ADVANCES. The Employer shall reimburse the Executive or shall make an advance to the Executive, as appropriate, for all reasonable expenses incurred or scheduled to be incurred by the Executive, as the case may be, in the performance of his duties under this Agreement; provided, however, that the Executive must furnish to the Employer an itemized account, satisfactory to the Employer, in substantiation of such expenditures. Notwithstanding the foregoing, as for travel expenses incurred in the performance of his duties under this Agreement, the Executive shall be entitled to secure reimbursement or advance, as applicable, for an upgrade to a business class level of travel only where the travel involves a domestic flight in excess of four (4) hours or an international flight. 2. (f) OTHER FRINGE BENEFITS. The Executive shall be entitled to such fringe benefits including, but not limited to, medical, dental, vision and other insurance benefits and participation in the Employer's 401(k) plan upon qualification for participation, as may be provided from time to time by the Employer to other senior officers of the Employer. (g) AUTOMOBILE. The Executive shall provide his own automobile for use as an employee hereunder. The Executive shall at all times maintain said automobile in good repair and condition and shall insure both Employer and Executive against claims for bodily injury, death or property damage occurring as a result of its use to the limit of not less than Five Hundred Thousand ($500,000.00) Dollars in respect to any one accident and to the limit of not less than One Million ($1,000,000.00) Dollars in respect to any one accident and to the limit of not less than One Hundred Thousand ($100,000.00) Dollars in respect to property damage. The Employer shall provide the Executive with an automobile allowance of $2,000 per month ($24,000 per year). (h) RELOCATION EXPENSES. To assist the Executive in his relocation to Lee County in order to commence his employment hereunder, the Employer shall reimburse the Executive for all reasonable and customary relocation expenses incurred therewith by the Executive. (i) COMMUTING EXPENSES. The Employer acknowledges that at least for the first year of this Agreement the Executive may continue to maintain a residence in the New Canaan, Connecticut area and will establish a temporary residence in the Fort Myers, Florida area. The Employer shall reimburse the Executive for reasonable housing and commuting expenses incurred by Executive in connection with the performance of his obligations under this Agreement for a period of one year from the date of this Agreement of (1) up to $2,000 per month in temporary living expenses in the Fort Myers, Florida area and (2) reasonable travel expenses between Executive's residence in New Canaan and the Employer's corporate offices for up to two round trips per month. The Employer will make such payments within 30 days after receipt of Executive's written request therefore, which request shall be accompanied by documentation supporting the request for reimbursement. Prior to the commencement of the second year of the term of this Agreement, the parties will review whether it is appropriate for the Executive to continue with such commuting and whether and to what extent the Employer should continue to reimburse the Executive for such expenses. If it is determined that it is appropriate for such commuting to continue and for the Employer to continue any reimbursement of such commuting expenses, the agreement to such effect will be reflected in an amendment to this Agreement, in a side letter agreement between the parties or in such other fashion as mutually agreed upon by the parties. (j) DISCOUNT ON CLOTHING. During the term of this Agreement, the Executive shall be entitled to receive the 50% employee discount on purchases made at any of the Employer-owned Chico's stores, to the extent that such privilege is being given to employees of Chico's and to the extent that such purchases constitute normal levels of individual customer purchases. 3. (k) DEFERRAL OF CERTAIN COMPENSATION PAYMENTS. Notwithstanding any other provisions of this Agreement to the contrary, any portion of the cash compensation otherwise payable to the Executive under this Agreement shall not be paid currently in cash to the Executive hereunder if pursuant to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended, or any similar or successor provision ("Section 162(m)"), the Company would not be entitled to a current deduction for federal income tax purposes in respect of the payment of such portion of the cash compensation (any such compensation being referred to as "Section 162(m) Non-Deductible Compensation"). The payment of any such Section 162(m) Non-Deductible Compensation shall be deferred (the "Deferred Compensation"). The Deferred Compensation shall be recorded on the books of the Company but shall be unfunded. The Executive's right to receive the Deferred Compensation in cash shall arise automatically no later than 30 days after the first time when the deduction for federal income taxes by the Company in respect of the Section 162(m) Non-Deductible Compensation to which the Deferred Compensation relates would no longer be prohibited by Section 162(m). 4. DUTIES. The Executive is engaged as Executive Vice President and an adjustment in such title shall be considered by the Board of Directors of the Employer within one year following the effective date of this Agreement. In addition, at the request of the Board, the Executive shall serve in the same or other positions in any wholly owned subsidiary, joint venture or affiliate of the Company, without any additional compensation. The Executive shall report directly to the Chief Executive Officer. The Executive's duties and responsibilities shall be commensurate with those customarily associated with an executive vice president of a corporation comparable to the Employer, with such specific duties and powers as shall be assigned by the Board consistent therewith. 5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF. (a) EXTENT OF SERVICES. During the term of the Executive's employment under this Agreement, except during customary vacation periods and periods of illness, the Executive shall devote full-time energy and attention during regular business hours to the benefit and business of the Company as may be reasonably necessary in performing the Executive's duties pursuant to this Agreement. Notwithstanding the foregoing, the Executive may (i) serve on corporate, trade association, civic, religious or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal investments, so long as such activities do not interfere with the performance of the Executive's duties and responsibilities and do not create a conflict of interest. (b) VACATIONS. The Executive shall be entitled to vacations with pay (initially four weeks each year) and to such personal and sick leave with pay in accordance with the policy of the Employer as may be established from time to time by the Employer and applied to other senior officers of the Employer. 4. 6. FACILITIES. The Employer shall provide the Executive with a fully furnished office, and the facilities of the Employer shall be generally available to the Executive in the performance of his duties pursuant to this Agreement, it being understood and contemplated by the parties that all equipment, supplies and office personnel required in the performance of the Executive's duties under this Agreement shall be supplied by the Employer and it being further understood that a temporary office may need to be utilized until the Employer completes the office space expansion project currently under construction. 7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC. (a) DEATH OF EXECUTIVE. If the Executive dies during the term of his employment, the Employer shall pay to the estate of the Executive such compensation, including any bonus compensation earned but not yet paid, as would otherwise have been payable to the Executive up to the end of the month in which his death occurs plus six (6) month's Basic Salary. The Employer shall have no additional financial obligation under this Agreement to the Executive or his estate. After receiving the payments provided in this subparagraph (a), the Executive and his estate shall have no further rights under this Agreement. (b) DISABILITY OF EXECUTIVE (i) During any period of disability, illness or incapacity during the term of this Agreement which renders the Executive at least temporarily unable to perform the services required under this Agreement for a period which shall not equal or exceed one hundred and eighty (180) continuous days, or one hundred and eighty (180) days in any one (1) year period, the Executive shall receive the compensation payable under Section 3(a) of this Agreement plus any bonus compensation earned but not yet paid, less any benefits received by him under any disability insurance carried by or provided by the Employer. All rights of the Executive under this Agreement (other than rights already accrued) shall terminate as provided below upon the Executive's permanent disability (as defined below), although the Executive shall continue to receive any disability benefits to which he may be entitled under any disability income insurance which may be carried by or provided by the Employer from time to time. (ii) The term "permanent disability" as used in this Agreement shall mean the inability of the Executive, as determined by the Board of Directors of the Employer, by reason of physical or mental disability to perform the duties required of him under this Agreement for a period of one hundred and eighty (180) days in any one-year period. Successive periods of disability, illness or incapacity will be considered separate periods unless the later period of disability, illness or incapacity is due to the same or related cause and commences less than six months from the ending of the previous period of disability. Upon such determination, the Board of Directors may terminate the Executive's employment under this Agreement upon ten (10) days' prior written notice. If any determination of the Board of Directors with respect to permanent disability is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians. The 5. Executive and Employer shall each appoint one member, and the third member of the panel shall be appointed by the other two members. The Executive agrees to make himself available for and submit to examinations by such physicians as may be directed by the Employer. Failure to submit to any such examination shall constitute a breach of a material part of this Agreement. 8. OTHER TERMINATIONS. (a) VOLUNTARY TERMINATION BY EXECUTIVE. (i) The Executive may terminate his employment hereunder upon giving at least ninety (90) days' prior written notice. In addition, the Executive shall have the right to terminate his employment hereunder on the conditions and at the times provided for in Section 8(d) of the Agreement. (ii) If the Executive gives notice pursuant to Section 8(a) above, the Employer shall have the right to relieve the Executive, in whole or in part, of his duties under this Agreement (without reduction in compensation through the termination date). (b) TERMINATION BY EMPLOYER. (i) Except as otherwise provided in this Agreement, the Employer may terminate the employment of the Executive hereunder only for good cause and upon written notice; provided, however, that no breach or default by the Executive shall be deemed to occur hereunder unless the Executive shall have failed to cure the breach or default within thirty (30) days after he received written notice thereof indicating that it is a notice of termination pursuant to this Section of this Agreement. (ii) As used herein, "good cause" shall include: (1) the Executive's conviction of either a felony involving moral turpitude or any crime in connection with his employment by the Employer which causes the Employer a substantial detriment, but specifically shall not include traffic offenses; (2) the Executive's willful failure to take actions permitted by law and necessary to implement policies of the Employer's Board of Directors which the Board of Directors has communicated to him in writing, provided that minutes of a Board of Directors meeting attended in its entirety by the Executive shall be deemed communicated to the Executive; (3) the Executive's continued failure to attend to his duties as an executive officer of the Employer; or 6. (4) any condition which either resulted from the Executive's substantial dependence, as determined by the Board of Directors of the Employer, on alcohol, or any narcotic drug or other controlled or illegal substance. If any determination of substantial dependence is disputed by the Executive, the parties hereto agree to abide by the decision of a panel of three physicians appointed in the manner and subject to the same penalties for noncompliance as specified in Section 7(b)(ii) of this Agreement. (iii) Termination of the employment of the Executive for reasons other than those expressly specified in this Agreement as good cause shall be deemed to be a termination of employment "without good cause." (c) CONTINUATION OF COMPENSATION FOLLOWING TERMINATION WITHOUT GOOD CAUSE. (i) If the Employer shall terminate the employment of the Executive without good cause effective on a date earlier than the termination date provided for in Section 2 (with the effective date of termination as so identified by the Employer being referred to herein as the "Accelerated Termination Date"), the Executive, until the termination date provided for in Section 2 or until the date which is twelve (12) months after the Accelerated Termination Date, whichever is later, shall continue to receive the Basic Salary and employee benefits (including without limitation the bonus that would have otherwise been payable during such compensation continuation period under the bonus plan in effect immediately before the Accelerated Termination Date) that the Employer has heretofore in Section 3 agreed to pay and to provide for the Executive, in each case in the amount and kind and at the time provided for in Section 3; provided that, notwithstanding such termination of employment, the Executive's covenants set forth in Section 10 and Section 11 are intended to and shall remain in full force and effect. (ii) The parties agree that, because there can be no exact measure of the damage that would occur to the Executive as a result of a termination by the Employer of the Executive's employment without good cause, the payments and benefits paid and provided pursuant to this Section 8(c) shall be deemed to constitute liquidated damages and not a penalty for the Employer's termination of the Executive's employment without good cause, and the Employer agrees that the Executive shall not be required to mitigate his damages. (d) RIGHTS UPON CHANGE IN CONTROL. (i) If a Change in Control of the Employer, as defined in Section 8(d)(ii) shall occur and the Executive shall: (1) voluntarily terminate his employment within one year following such Change in Control and such termination shall be as a result of the Executive's good faith determination that as a result of the Change in Control and a change in circumstances thereafter significantly affecting his position, he can no longer adequately exercise the 7. authorities, powers, functions or duties attached to his position as an executive officer of the Employer; or (2) voluntarily terminate his employment within one year following such Change in Control, and such termination shall be as a result of the Executive's good faith determination that he can no longer perform his duties as an executive officer of the Employer by reason of a substantial diminution in his responsibilities, status or position; or (3) have his employment terminated by the Employer for reasons other than those specified in Section 8(b)(ii) within one (1) year following such Change in Control; then in any of the above three cases, the Executive shall have, instead of the further rights described in Section 3(a), the right to immediately terminate this Agreement and a nonforfeitable right to receive the sum of the monthly amounts of his Basic Salary for a period equal to 36 months plus three times his most recently set annual target bonus. (ii) For purposes of this Agreement, a "Change in Control" shall mean: (1) the obtaining by any party of fifty percent (50%) or more of the voting shares of the Employer pursuant to a "tender offer" for such shares as provided under Rule 14d-2 promulgated under the Securities Exchange Act of 1934, as amended, or any subsequent comparable federal rule or regulation governing tender offers; or (2) individuals who were members of the Employer's Board of Directors immediately prior to any particular meeting of the Employer's shareholders which involves a contest for the election of directors fail to constitute a majority of the members of the Employer's Board of Directors following such election; or (3) the Employer's executing an agreement concerning the sale of substantially all of its assets to a purchaser which is not a subsidiary; or (4) the Employer's adoption of a plan of dissolution or liquidation; or (5) the Employer's executing an agreement concerning a merger or consolidation involving the Employer in which the Employer is not the surviving corporation or if, immediately following such merger or consolidation, less than fifty percent (50%) of the surviving corporation's outstanding voting stock is held by persons who are stockholders of the Employer immediately prior to such merger or consolidation. (iii) The provisions of Section 8(c) and this Section 8(d) are mutually exclusive, provided, however, that if within one year following commencement of an 8(c) payout 8. there shall be a Change in Control as defined in Section 8(d)(ii), then the Executive shall be entitled to the amount payable to the Executive under Section 8(d)(i) reduced by the amount that the Executive has received under Section 8(c) up to the date of the change in control. The triggering of the lump sum payment requirement of this Section 8(d) shall cause the provisions of Section 8(c) to become inoperative. The triggering of the continuation of payment provisions of Section 8(c) shall cause the provisions of Section 8(d) to become inoperative except to the extent provided in this Section 8(d)(iii). (e) COMPENSATION PAYABLE UPON TERMINATION BY EMPLOYER FOR GOOD CAUSE OR VOLUNTARILY BY EMPLOYEE ABSENT CHANGE IN CONTROL. If the employment of the Executive is terminated for good cause under Section 8(b)(ii) of this Agreement, or if the Executive voluntarily terminates his employment by written notice to the Employer under Section 8(a) of this Agreement without reliance on Section 8(d), the Employer shall pay to the Executive any compensation earned but not paid to the Executive prior to the effective date of such termination. Under such circumstances, such payment shall be in full and complete discharge of any and all liabilities or obligations of the Employer to the Executive hereunder, and the Executive shall be entitled to no further benefits under this Agreement. (f) RELEASE. Payment of any compensation to the Executive under this Section 8 following termination of employment shall be conditioned upon the prior receipt by the Employer of a release executed by the Executive in substantially the form attached to this Agreement as Exhibit A. 9. DISCLOSURE. The Executive agrees that during the term of his employment by the Employer, he will disclose and disclose only to the Employer all ideas, methods, plans, developments or improvements known by him which relate directly or indirectly to the business of the Employer, whether acquired by the Executive before or during his employment by the Employer. Nothing in this Section 9 shall be construed as requiring any such communication where the idea, plan, method or development is lawfully protected from disclosure as a trade secret of a third party or by any other lawful prohibition against such communication. 10. CONFIDENTIALITY. The Executive agrees to keep in strict secrecy and confidence any and all information the Executive assimilates or to which he has access during his employment by the Employer and which has not been publicly disclosed and is not a matter of common knowledge in the fields of work of the Employer. The Executive agrees that both during and after the term of his employment by the Employer, he will not, without the prior written consent of the Employer, disclose any such confidential information to any third person, partnership, joint venture, company, corporation or other organization. 11. NONSOLICITATION. The Executive hereby acknowledges that, during and solely as a result of his employment by the Employer, he has received and shall continue to receive access to confidential information and 9. business and professional contacts. In consideration of the special and unique opportunities afforded to the Executive by the Employer as a result of the Executive's employment, as outlined in the previous sentence, the Executive hereby agrees as follows: (a) NONSOLICITATION. During his employment with the Employer and, except as may be otherwise herein provided, for a period of two (2) years following the termination of his employment with the Employer, regardless of the reason for such termination, the Executive agrees he will refrain from and will not, directly or indirectly, as an individual, partner, officer, director, stockholder, employee, advisor, independent contractor, joint venturer, consultant, agent, representative, salesman or otherwise solicit any of the employees of the Employer to terminate their employment unless such solicitation is consented to in writing by an authorized senior officer of the Employer (other than the Employer or a person related to the Employee) prior to such solicitation. (b) EXTENSION OF PROHIBITION PERIOD. The period of time during which the Executive is prohibited from engaging in certain business practices pursuant to Sections 11(a) shall be extended by any length of time during which the Executive is in breach of such covenants. (c) INDEPENDENT COVENANTS. It is understood by and between the parties hereto that the foregoing restrictive covenants set forth in Sections 11(a) through (b) are essential elements of this Agreement, and that, but for the agreement of the Executive to comply with such covenants, the Employer would not have agreed to enter into this Agreement. Such covenants by the Executive shall be construed as agreements independent of any other provision in this Agreement. The existence of any claim or cause of action of the Executive against the Employer, whether predicated on this Agreement, or otherwise, shall not constitute a defense to the enforcement by the Employer of such covenants. (d) DIVISIBLE COVENANTS. It is agreed by the Employer and Executive that if any portion of the covenants set forth in this Section 11 are held to be invalid, unreasonable, arbitrary or against public policy, then such portion of such covenants shall be considered divisible both as to time and geographical area. The Employer and Executive agree that, if any court of competent jurisdiction determines the specified time period or the specified geographical area applicable to this Section 11 to be invalid, unreasonable, arbitrary or against public policy, a lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced against the Executive. The Employer and the Executive agree that the foregoing covenants are appropriate and reasonable when considered in light of the nature and extent of the business conducted by the Employer. 12. SPECIFIC PERFORMANCE. The Executive agrees that damages at law will be an insufficient remedy to the Employer if the Executive violates the terms of Sections 9, 10 or 11 of this Agreement and that the Employer would suffer irreparable damage as a result of such violation. Accordingly, it is agreed that the Employer shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of such Sections, which injunctive 10. relief shall be in addition to any other rights or remedies available to the Employer. The Executive agrees to pay to the Employer all costs and expenses incurred by the Employer relating to the enforcement of the terms of Sections 9, 10 or 11 of this Agreement, including reasonable fees and disbursements of counsel (both at trial and in appellate proceedings). 13. COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and warrants that the execution of this Agreement by him and his performance of his obligations hereunder will not conflict with, result in the breach of any provision of or the termination of or constitute a default under any Agreement to which the Executive is a party or by which the Executive is or may be bound. 14. WAIVER OF BREACH. The waiver by the Employer of a breach of any of the provisions of this Agreement by the Executive shall not be construed as a waiver of any subsequent breach by the Executive. 15. BINDING EFFECT; ASSIGNMENT. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. It is expressly acknowledged that the provisions of Section 11 relating to noncompetition, nonsolicitation and nonacceptance may be enforced by the Employer's successors and assigns. This Agreement is a personal employment contract and the rights, obligations and interests of the Executive hereunder may not be sold, assigned, transferred, pledged or hypothecated. 16. ENTIRE AGREEMENT. This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof, including without limitation any previously existing employment agreements between the parties. This Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge is sought. 17 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 18 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of Florida. 19 NOTICE. All notices which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy or similar electronic transmission method; one working day after it is sent, if sent by recognized expedited delivery service; and five days after it is sent, if mailed, first class mail, certified mail, return receipt requested, with postage prepaid. In each case notice shall be sent to: 11. To the Employer: Chico's FAS, Inc. 11215 Metro Parkway Ft. Myers, Florida 33912 With a copy to: Gary I. Teblum, Esquire Trenam, Kemker, Scharf, Barkin Frye, O'Neill & Mullis, P.A. Post Office Box 1102 Tampa, Florida 33601 To the Executive at his address herein first above written. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. CHICO'S FAS, INC. By: /s/ MARVIN GRALNICK ----------------------------------- Marvin Gralnick, CEO and President EXECUTIVE: /s/ TEDFORD MARLOW --------------------------------------- Tedford Marlow 12. EXHIBIT A TO EMPLOYMENT AGREEMENT WITH TEDFORD MARLOW DATED AS OF _______________, 2000 RELEASE WHEREAS, _______________________________ (the "Executive") is an employee of Chico's FAS, Inc., (the "Company") and is a party to the Employment Agreement dated __________________ (the "Agreement"); WHEREAS, the Executive's employment has been terminated in accordance with Section 8___ of the Agreement; and WHEREAS, the Executive is required to sign this Release in order to receive the payment of any compensation under Section 8 of the Agreement following termination of employment. NOW, THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Executive agrees as follows: 1. This Release is effective on the date hereof and will continue in effect as provided herein. 2. In consideration of the payments to be made and the benefits to be received by the Executive pursuant to the Agreement (collectively, the "Release Consideration), which the Executive acknowledges are in addition to payments and benefits to which the Executive would be entitled but for the Agreement, the Executive, for the Executive and the Executive's dependents, successors, assigns, heirs, executors and administrators (and the Executive and their legal representatives of every kind), hereby releases, dismisses, remises and forever discharges the Company, its predecessors, parents, subsidiaries, divisions, related or affiliated companies, officers, directors, stockholders, members, employees, heirs, successors, assigns, representatives, agents and counsel (collectively the "Released Party") from any and all arbitrations, claims, including claims for attorney's fees, demands, damages, suits, proceedings, actions and/or causes of action of any kind and every description, whether known or unknown, which the Executive now has or may have had for, upon, or by reason of any cause whatsoever ("claims"), against the Released Party, including but not limited to: (1) any and all claims arising out of or relating to Executive's employment by or service with the Company and the Executive's termination from the Company. (2) any and all claims of discrimination, including but not limited to claims of discrimination on the basis of sex, race, age, national origin, marital status, religion or handicap, including, specifically, but without limiting the generality of the foregoing, any claims under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act; and (3) any and all claims of wrongful or unjust discharge or breach of any contract or promise, express or implied. A-1 Notwithstanding the foregoing, nothing herein shall be considered as releasing the Company from its obligations to pay and/or provide the Release Consideration or as an agreement by the Executive not to file a lawsuit to enforce the payment and/or providing of the Release Consideration. 3. The Executive understands and acknowledges that the Company does not admit any violation of law, liability or invasion of any of the Executive rights and that any such violation, liability or invasion is expressly denied. The consideration provided for this Release is made for the purpose of settling and extinguishing all claims and rights (and every other similar or dissimilar matter) that the Executive ever had or now may have against the Company to the extent provided in this Release. The Executive further agrees and acknowledges that no representations, promises or inducements have been made that the Company other than as appear in the Agreement. 4. The Executive further agrees and acknowledges that: (1) The Release provided for herein releases claims to and including the date of this Release; (2) The Executive has been advised by the Company to consult with legal counsel prior to executing this Release, has had an opportunity to consult with and to be advised by legal counsel of the Executive's choice, fully understands the terms of this Release, and enters into this Release freely, voluntarily and intending to be found. (3) The Executive has been given a period of 21 days to review and consider the terms of this Release, prior to its execution and that the Executive may use as much of the 21 day period as the Executive desires; and (4) The Executive may, within 7 days after execution, revoke this Release. Revocation shall be made by delivering a written notice of revocation to the Chief Financial Officer at the Company. For such revocation to be effective, written notice must be actually received by the Chief Financial Officer at the Company no later than the close of business on the 7th day after the Executive executes this Release. If the Executive does exercise the Executive's right to revoke this Release, all of the terms and conditions of the Release shall be of no force and effect and the Company shall not have any obligation to make payments or provide benefits to the Executive as set forth in Sections 8 of the Agreement. 5. The Executive agrees that the Executive will never file a lawsuit or other complaint asserting any claim that is released in this Release. 6. The Executive waives and releases any claim that the Executive has or may have to reemployment after _______________________. IN WITNESS WHEREOF, the Executive has executed and delivered this Release on the date set forth below. Dated:_______________________ Executive A-2 EX-10.4 5 0005.txt EXHIBIT 10.4 REVOLVING CREDIT AND TERM LOAN AGREEMENT BY AND AMONG BANK OF AMERICA, N.A., LENDER, AND CHICO'S FAS, INC., CHICO'S CONCEPT, INC., CHICO'S DISTRIBUTION, INC. AND CHICO'S MEDIA, INC., OBLIGORS ------------------------------------------------------- DATED AS OF MAY 12, 2000 -------------------------------- REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT ("Agreement") is made and entered into as of this May 12, 2000 by and among BANK OF AMERICA, N.A., the successor in interest to NationsBank, N.A. ("Lender") and CHICO'S FAS, INC., a Florida corporation ("FAS"), CHICO'S CONCEPT, INC., a Florida corporation ("Concept") CHICO'S DISTRIBUTION, INC., a Florida corporation ("Distribution") and CHICO'S MEDIA, INC., a Florida corporation ("Media") (individually "Obligor" and collectively, "Obligors"). BACKGROUND WHEREAS, Obligors have requested Lender to establish a revolving credit facility in the amount of $25,000,000.00 to be utilized for the purposes of refinancing existing indebtedness of Obligors with Lender, for the support of Letters of Credit for one or more Obligors and for working capital for one or more Obligors and to restate the loan terms and adjust the interest rate on an existing real estate term loan between Lender and FAS; and WHEREAS, Lender has agreed to establish the revolving credit facility and modify the real estate term loan, conditioned upon terms and conditions acceptable to Lender; and WHEREAS, the parties desire to set forth the mutually agreed upon terms and conditions for the revolving credit facility and the restated real estate term loan. NOW THEREFORE, in consideration of the premises and the mutual agreements, covenants and conditions herein, Obligors and Lender agree as follows: SECTION 1. DEFINITIONS. 1.1 DEFINED TERMS. Unless the context of a particular Loan Document otherwise provides, the terms in quotes used in the foregoing preamble and the following terms shall have the respective meanings ascribed to them for all purposes of the Loan Documents: "Acceptances" means documentary banker's acceptances issued by Lender for the account of any Obligor. "Advance" shall mean each advance of principal outstanding under the Revolving Credit Loan including any Letter of Credit which Lender funds. "Advance Account" means account number 003601213648 of FAS on the books of the Lender, to which (i) any Advance by the Lender to Obligors under the Revolving Credit Loan shall be credited thereto by recording therein on the date of such Advance a credit entry in the amount of such Advance; and (ii) debits shall be made thereto if (A) there exist any funds in such account when there is Indebtedness outstanding under the Revolving Credit Loan and the ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 1 Real Estate Loan, in which case such funds will be debited thereto and applied to the payment, if any, then due on the Indebtedness by recording therein a debit entry in the amount of such funds, and (B) any Advance is required to fund a Letter of Credit draw, in which case there shall be debited thereto the amount of such Advance by recording therein a debit entry in the amount of such Advance on the date of such Advance. Obligors hereby agree that FAS is the designated agent of each Obligor and is solely responsible for the making of Letter of Credit requests and Advance requests and the subsequent disbursement of funds to Obligors. Lender shall have no obligation to any Obligor for the misapplication of any Loan proceeds by FAS. "Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with any Person. A Person shall be deemed to control an entity if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, by contract or otherwise. "Authorized Officer" means any of the Chairman, President, Senior Vice Presidents or Vice Presidents of an Obligor or, with respect to financial matters, the Treasurer or Chief Financial Officer of an Obligor or any other person expressly designated by the Board of Directors (or the appropriate committee thereof) of such Obligor as an Authorized Officer for purposes of this Agreement, as set forth from time to time in a written certificate delivered to Lender. "Agreement" means this Revolving Credit And Term Loan Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof. "Business Day" means a day that is not a Saturday, a Sunday, or a day on which Lender is closed pursuant to authorization or requirement of law. "Capital Expenditures" means, on a Consolidated Basis, for any period, the sum of (i) the gross amount of additions to property, plant and equipment of Obligors during such period plus (ii) with respect to any Capital Leases entered into by Obligors during such period, the present value of the lease payments due under such Capital Leases applying a discount rate equal to the interest rate provided in such lease or, if not so provided, that rate of interest assumed by Obligors' independent public accountants in connection with the preparation of the Financial Statement, plus (iii) leasehold improvements made by Obligors. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP; "Closing Date" shall mean the date of Closing. "Closing" shall mean the execution and delivery to Lender of this Agreement together with all related Loan Documents, including, but not limited to, the Revolving Credit Note and ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 2 the Real Estate Note and compliance documents coincidental to closing of the Revolving Credit Loan and modification of the Real Estate Loan. "Consolidated Basis" shall mean the consolidation of financial information of Obligors done in accordance with GAAP. "Consolidated Current Assets" means on a Consolidated Basis, cash and all other assets or resources of Obligors which are expected to be realized in cash, sold in the ordinary course of business, or consumed within one year, all determined in accordance with GAAP. "Consolidated Current Liabilities" means on a Consolidated Basis, the amount of all liabilities of Obligors which by their terms are payable within one year (including all indebtedness payable on demand or maturing not more than one year from the date of computation and the current portion of Indebtedness having a maturity date in excess of one year) all determined in accordance with GAAP. "Consolidated Current Maturity Coverage Ratio" means on a Consolidated Basis, with respect to Obligors for the four consecutive rolling fiscal quarters ending as of the date of computation thereof: NET INCOME + DEPRECIATION + AMORTIZATION + INTEREST EXPENSE ----------------------------------------------------------- CURRENT MATURITIES LONG TERM DEBT (EXCLUSIVE OF DEFERRED RENT) + CURRENT MATURITIES CAPITAL LEASES + INTEREST EXPENSE "Consolidated Total Liabilities" means, on a Consolidated Basis, the aggregate amount of all liabilities of Obligors as determined in accordance with GAAP. "Contractual Obligation" as to any Person shall mean any undertaking by such Person represented by any agreement, to which such Person is a party or by which it or any of its property is bound. "Costs" shall mean all costs, expenses, losses and damages sustained or incurred by Lender in connection with, because of, or as a result of any default or any one or more Events of Default of any Obligor under this Agreement, the Loan Documents or any of them, or in realizing upon, protecting, perfecting, defending or enforcing, or any combination thereof, the rights and remedies of Lender under this Agreement, the Loan Documents, or any of them, including, without limitation, recording charges, documentary stamp taxes, intangible taxes, all expert fees and all attorney's fees and costs, including paralegal fees in all legal proceedings, including administrative, trial, appellate, probate, bankruptcy or any other legal or administrative proceeding, regardless of whether suit is brought. "Debt" shall mean as to any Person (i) all obligations of borrowed money, (ii) obligations evidenced by bonds, debentures, notes or similar instruments, or upon which ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 3 interest payments are customarily made, (iii) all obligations under conditional sale or other title retention agreements relating to property purchased by that Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations, including, without limitation, any items, issued or assumed as the deferred purchase price of property or services purchased (including trade debt incurred in the ordinary course of business and regardless of the due date thereof) which would appear as liabilities on a balance sheet, (v) all obligations under take-or-pay or similar agreements or under commodities agreements, (vi) all Debt of others secured by (or for which the holder of such debt has an existing right, contingent or otherwise, to be secured by), any lien on, or payable out of the proceeds of production from, property owned or acquired by that Person, whether or not the obligations secured thereby have been assumed, (vii) all guaranty and other contingent or indirect obligations, (viii) the principal portion of all obligations under capital leases other than operating leases, (ix) all matured obligations in respect of interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements, (x) all outstanding and unreimbursed drafts under all letters of credit issued or banker's acceptance facilities created for the benefit of and at the request of such Person(to the extent unreimbursed), (xi) all preferred stock or other equity interests issued and required by the terms thereof to be redeemed, for which mandatory sinking fund payments are due, by a fixed date, and (xi) other off balance sheet financing arrangements including, without limitation, synthetic leases, which, for purposes of this Agreement, shall not include operating leases. In determining Debt for Obligors, such determination shall be made without duplication and shall eliminate inter-company Debt among Obligors. "Default Rate" shall mean the interest charged on any Note or Advance or other indebtedness of Obligors to Lender under the Loan Documents after the occurrence of an Event of Default and the expiration of any applicable cure periods. The Default Rate shall be the lesser of: (i) the Libor Rate plus Eight Hundred (800) basis points (8.0%); or (ii) twenty five percent (25%) per annum, whichever is less, but in any event, not exceeding the highest rate allowed by law. "EBITDA" means the sum of net income before taxes, plus interest expense, plus depreciation, depletion and amortization. "Environmental Assessment" shall mean that certain Environmental Phase I report, dated February 27, 1995, prepared by W. Dexter Bender & Associates, Inc. of the Real Estate. "Event of Default" means any of the events specified in Section 7 hereof. "Fiscal Year" shall mean the 52 or 53 week fiscal year of Obligors ending on the Saturday closest to January 31 in each year. "Financial Statement" shall mean the financial statements of Obligors described in ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 4 Section 4.6. Fixed Charge Coverage Ratio shall mean the quotient of (EBITDA plus rental expense) all divided by the sum of (current maturities of long term debt, plus interest expense, plus current portion of long term leases, plus rental expense). "Funded Debt" shall mean all outstanding indebtedness for borrowed money and other interest-bearing indebtedness, including current and long term indebtedness. Funded Debt and Letter of Credit Exposure shall mean shall mean all outstanding indebtedness for borrowed money and other interest-bearing indebtedness, including current and long term indebtedness, plus all outstanding Letters of Credit. "GAAP" means generally accepted accounting principles, set forth in Opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants or which have other substantial authoritative support, as in effect from, time to time. "Governmental Authority" shall mean any national, state, local or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government. "Governmental Regulation" shall mean any law, statute, ordinance, rule or regulation issued by or enacted by a Governmental Authority. "Guaranty" shall mean the absolute and unconditional guarantee of all liabilities of FAS to Lender executed by Concept, Distribution and Media. "Hazardous Substances or Hazardous Materials" shall mean any flammable materials (excluding wood products normally used in construction), explosives, radioactive materials, hazardous wastes, toxic substances, or related materials, including, without limitation, any substances defined as or included in the definitions of "hazardous substances," "hazardous wastes," "hazardous materials," "special wastes," "solid wastes," or "toxic substances" under any applicable federal, state, county, regional, or local laws, ordinances, regulations, or guidelines. "Indebtedness" shall mean any and all debts, obligations, and liabilities of Obligors to Lender, whether arising out of or related to the Loan Documents, whether principal, interest, fees, or otherwise, whether now existing or hereafter arising, whether voluntary or involuntary, whether jointly owed with others, whether direct or indirect, absolute or contingent, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, whether or not from time to time decreased or extinguished and later increased, created or incurred and whether or not renewed, extended, modified, rearranged, restructured, refinanced, or replaced, including without limitation, modifications to interest rates or other ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 5 payment terms of such debts, obligations or liabilities. "Letter of Credit" shall mean those Letters of Credits issued by Lender for the benefit of an Obligor pursuant to Section 2.2. "Letter of Credit Request" shall mean the written application from an Obligor for the issuance of a Letter of Credit by Lender. Each Letter of Credit Request shall specify the duration of the Letter of Credit, the beneficiary of the Letter, and such other information as may be necessary to properly process the issuance of the Letter of Credit. "Libor Rate" for any interest period shall mean the offered rate for deposits in United States dollars in the London Interbank market for a one month period which appears on the Telerate Screen Page 3750 as of 11:00 a.m. (London time) on the day that is two London Banking days (as defined herein) preceding the first Business Day of the interest period. If at least two such offered rates appear on the Telerate Screen Page 3750, the rate will be the arithmetic mean of such offered rates. If the foregoing rate is unavailable from the Telerate Screen, Lender may, in its discretion, use any other publicly available index or reference rate showing rates offered for United States dollar deposits in the London Interbank market as of the applicable date. In addition, the Lender may, in its discretion, use rate quotations for daily or annual periods in lieu of quotations for substantially equivalent monthly periods. "Loan Fees" shall mean those fees set forth in Section 2.4 (b). "Loans" shall mean, collectively, the Revolving Credit Loan and the Real Estate Loan. The word, "Loan", may refer individually to either of the Loans. "Loan Documents" shall mean this Agreement, the Notes, the Security Instruments, any Letter of Credit, the Guaranties, Acceptances, Letter of Credit Requests, affidavits demonstrating that any Note is exempt from documentary stamp taxes, documentary stamp tax indemnity agreement and all the other documents, agreements, certificates, schedules, statements and opinions, however described, referenced herein or executed or delivered pursuant hereto or in connection with or arising with the Loans or the transactions contemplated by this Agreement. "Net Worth" means on a Consolidated Basis the depreciated book value amount of all assets of Obligors, with no adjustment from and after the Statement Date due to revaluation, depreciation, reserves or otherwise, and after elimination of any inter-company transactions, less: (i) intangible assets, such as (without limitation) goodwill (whether representing the excess of cost over book value of assets acquired or otherwise), capitalized expenses, patents, trademarks, trade names, copyrights, franchises, licenses, and deferred charges, such as (without limitation) unamortized costs and costs of research and development; ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 6 (ii) treasury stock; (iii) advances to employees, officers, directors, stock-holders or Affiliates of any Obligor; and (iv) Consolidated Tot al Liabilities. "Notes" shall mean the Revolving Credit Note and the Real Estate Note, and the term "Note", may refer to either of the Notes. "Permitted Encumbrances" means and includes: (a) liens for taxes, assessments or similar governmental charges not in default or being contested in good faith (with all foreclosure or execution proceedings thereon effectively stayed); (b) workers', mechanics' and materialmen's liens and similar liens incurred in the ordinary course of business remaining undischarged or unstayed for not longer than 60 days after the attachment thereof; (c) liens in respect of final judgments or awards remaining undischarged or unstayed for not longer than 60 days after the making thereof; (d) liens in respect of pledges or deposits under worker's compensation laws, unemployment insurance or similar legislation and in respect of pledges or deposits to secure bids, tenders, or statutory obligations, or in connection with surety, appeal and similar bonds incidental to the conduct of litigation; (e) liens and security interests securing purchase money Debt so long as (i) Obligors first obtain Lender's prior written consent thereto to the extent same exceeds $500,000.00 in the aggregate; and (ii) such lien or security interest does not extend to any property other than that acquired with the proceeds of such Debt; (f) the liens and security interests in favor of the Lender created under the Loan Documents; (g) liens in favor of Lender; and (h) liens and encumbrances contained in the Title Policy. "Person" means any corporation, business entity, natural person, firm, joint venture, limited liability company, partnership, trust, unincorporated organization, association, government, or any department or agency of any government, and shall include the singular and the plural. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 7 "Potential Default" shall mean an event that but for the lapse of time or the giving of notice, or both, would constitute an Event of Default. "Principal Place of Business" shall mean 11215 Metro Parkway, Ft. Myers, Florida 33912. "Real Estate" shall mean that certain real property located in Lee County, Florida, described in the Security Instruments, the description of which is attached hereto as Exhibit A. "Real Estate Loan" means the loan between FAS and Lender last amended on October ___, 1998 in the principal amount, as of January 4, 1996, of $5,587,500.00. "Real Estate Loan Maturity Date" shall mean December 31, 2002. "Real Estate Note" means that certain Renewal Promissory Note dated the Closing Date to Lender from FAS in the original principal sum of Five Million Two Hundred Seventy Five Thousand Five Hundred and 00/Hundredths Dollars ($5,275,500.00) and all extensions, consolidations and renewals thereof. "Requirements of Law" shall mean as to any Person the Certificate of Incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule, or regulation, or a final and binding determination of an arbitrator or a determination of a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Revolving Credit Advance Term" shall commence on May 12, 2000 and end on June 1, 2002 or such later date as may be provided for pursuant to Section 2.4 F. "Revolving Credit Loan" means the loan, dated the Closing Date, to Obligors from Lender in the original principal amount of $25,000,000.00. "Revolving Credit Loan Ceiling" is defined as the Revolving Credit Loan Commitment less the amounts of all Letters of Credit issued and outstanding under this Agreement. "Revolving Credit Loan Commitment" shall mean Twenty Five Million and no/100's Dollars ($25,000,000.00). "Revolving Credit Loan Maturity Date" shall mean the date of the final payment is due under the Revolving Credit Note. The Initial Revolving Credit Loan Maturity Date shall be June 1, 2002 and the Revolving Credit Loan Maturity Date may be extended as provided for pursuant to Section 2.4 f. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 8 "Revolving Credit Note" means that certain Revolving Credit Promissory Note from Obligors to Lender dated the Closing Date in the original principal sum of Twenty Five Million and No/Hundredths Dollars ($25,000,000.00) and all extensions, consolidations and renewals thereof. "Security Instruments" shall mean Mortgage And Security Agreement, dated June 14, 1994, recorded at O.R. Book 2510, Page 3237, as amended by instruments recorded in O.R. Book 2558, Page 1030, O.R. Book 2576, Page 0693, O.R. Book 2641, Page 0680, Assignment in O.R. Book 2665, Page 2918, and Future Advance And Modification in O.R. Book 2665, Page 2925, and Amended and Restated Mortgage Security Agreement and Assignment of Rents recorded in O.R. Book 2665, Page 2931, all of the Public Records of Lee County, Florida, and such further amendments and restatements, recorded in O.R. Book 2665, Page 2931, of the Public Records of Lee County, Florida, together with Uniform Commercial Code filing statements associated therewith, recorded under filing statement 940000163547 with the Secretary of State, as may have been continued from time to time, and filing statement, recorded in O.R. Book 2510, Page 3256, of the Public Records of Lee County, Florida, as may have been continued from time to time, and Collateral Assignment Of Rents And Leases, dated June 14, 1994, recorded in O.R. Book 2510, Page 3249, and modified in O.R. Book 2558, Page 1030, O.R. Book 2576, Page 0693, O.R. Book 2641, Page 680, and assigned in O.R. Book 2665, Page 2918, all of the Public Records of Lee County, Florida, as further modified from time to time. Security Instruments shall further include any and all security agreements and any and all other documents evidencing a pledge of assets to secure the Real Estate Note. "Statement Date" shall mean the date of the Financial Statement. "Subsidiary" shall mean any non-natural Person, more than fifty percent (50%) of the voting control of which is owned or controlled, directly or indirectly, by any Obligor. "Title Policy" shall mean Chicago Title Insurance Company Policy No. 10-2003-107-00000001 and all endorsements thereto, up to and including endorsement No. 4. "Total Funded Debt" shall mean on a Consolidated Basis, all Debt of Obligors evidenced by a note or other instrument or which arise under a Capital Lease. "UCC" shall mean the Florida Uniform Commercial Code, Chapters 671 to 680, inclusive, as amended from time to time. 1.2 ACCOUNTING TERMS AND SPECIAL CALCULATIONS. All accounting terms used herein shall be construed in accordance with GAAP and all financial data submitted pursuant to this Agreement shall be prepared in accordance with GAAP. In performing calculations of current maturities of long term debt, Lender and Obligors agree that if the calculations would otherwise require the inclusion of the entire remaining principal balance of the Real Estate Loan to determine the current maturities of long term debt, and there otherwise does not exist ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 9 an Event of Default under this Agreement, then, the calculation of current maturities of long term debt shall be made as if there were an additional calendar year added to the Real Estate Loan Maturity Date beyond the calculation date, thereby deleting the entire principal balance of the Real Estate Loan and in place thereof, the portion of the Real Estate Loan long term debt that was included in the corresponding period of the preceding year shall be used to calculate the current maturity of the Real Estate Loan. Nothing in this paragraph shall be deemed to require Lender to actually extend the Real Estate Loan Maturity Date beyond December 31, 2002. 1.3 OTHER DEFINITIONAL PROVISIONS. All of the terms defined in this Agreement shall have such defined meanings when used in all the Loan Documents unless the context shall otherwise require. All terms defined or used in this Agreement in the singular shall have comparable meanings when used in the plural, and vice versa. Terms defined in, or by reference to, the UCC, including Chapter 679 of the Florida Statutes, to the extent not otherwise defined herein shall have the respective meanings given to them in the UCC, including Chapter 679 of the Florida Statutes, with the exception of the word "document," unless the context clearly requires such meaning. The words "hereby", "hereto", "hereof", "herein", "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The use of "to", "until", "on", and words of similar import in this Agreement, in indicating expiration, shall be interpreted to include the date mentioned. The neuter genders as used herein and whenever used shall include the masculine, feminine and neuter as well. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party unless the context shall expressly provide otherwise. 1.4 INTEREST CALCULATIONS. A. Except as otherwise provided herein under 1.4(d), Interest on the Loans shall, until an Event of Default or maturity, accrue interest at the Libor Rate as adjusted pursuant to the following performance standards schedule based upon the ratio of Obligors' Total Funded Debt to Obligors' EBITDA on a Consolidated Basis: - ------------------------------- ------------------------------------- RATIO LEVEL INTEREST RATE - ------------------------------- ------------------------------------- 2.26 x > Default Rate - ------------------------------- ------------------------------------- 1.51 to 2.25 x Libor Rate + 290 Basis Pts. - ------------------------------- ------------------------------------- 1.01 to 1.50 x Libor Rate + 220 Basis Pts. - ------------------------------- ------------------------------------- .51 to 1.00 x Libor Rate + 150 Basis Pts. - ------------------------------- ------------------------------------- 0 to .51 x Libor Rate + 80 Basis Pts. - ------------------------------- ------------------------------------- B. Any interest due on the Indebtedness under the provisions of this Agreement shall be calculated on the outstanding principal balance for the actual number of days which have elapsed in an interest period, on the basis of 360 days and shall accrue from the date any Advance is made pursuant to any Note or this Agreement or any other Loan Document. The ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 10 interest due on any date for payment of interest hereunder shall be that interest, to the extent accrued, as of midnight on the last calendar day immediately prior to the interest payment date. Notwithstanding anything herein or in any Loan Document to the contrary, the sum of all interest and all other amounts deemed interest under Florida or other applicable law which may be collected by Lender hereunder shall never exceed the maximum lawful interest rate permitted by such law from time to time. Lender and Obligors intend and agree that under no circumstances shall Obligors be required to pay interest on the Loans or on any other Indebtedness at a rate in excess of the maximum interest rate permitted by applicable law from time to time, and in the event any such interest is received or charged by Lender in excess of that rate, Obligors shall be entitled to an immediate refund of any such excess interest by a credit to and payment toward the unpaid balance of the Indebtedness (such credit to be considered to have been made at the time of the payment of the excess interest) with any excess interest not so credited to be immediately paid to Obligors by Lender. c. Any Indebtedness arising pursuant to this Agreement not paid when due (whether at stated maturity, upon acceleration or otherwise) shall bear interest from the Due Date until paid in full at the Default Rate. For these purposes, the Due Date shall mean 10 days after Obligor receives written notice from Lender as to the amount then due. d. If existing Letter of Credit fees collected by Lender falls below $15,000.00 during any calendar quarter, Lender may, at its option, increase the interest rate on the Revolving Credit Loan by an additional fifty (50) basis points (.50%), provided that if Lender so elects and provided no Event of Default exists and remains uncured, the rate will return to the prior rate once the fees once again exceed $15,000.00 for a calendar quarter. e. In the event Obligors fail to maintain at least $5,000,000 average balances either in depository accounts with Lender or Investment accounts with Lender, to be measured by the preceding three month end average balances, commencing July 30, 2000 and each fiscal quarter thereafter, Lender may, at its option, increase the interest rate on the Revolving Credit Loan by and additional fifty (50) basis points (.50%), provided that if Lender so elects, the rate will return to the prior rate once the average balance monthly balance once again exceeds $5,000,000. SECTION 2. AMOUNT AND TERMS OF THE LOANS 2.1 REVOLVING CREDIT LOAN. a. Lender agrees, upon the terms and conditions set forth in this Agreement, and in reliance upon the representations and warranties made under this Agreement, to make the Revolving Credit Loan available to Obligors and allow Obligors during the Revolving Credit Advance Term to borrow, repay and re-borrow from Lender in an amount up to, but not exceeding, the Revolving Credit Loan Ceiling. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 11 b. The proceeds of the Revolving Credit Loan shall be utilized (I) for the refinance of loan #'s 4289356-265 and 4289356-307 held by Lender, (II) to support the issuance of Letters of Credit, (III) for working capital, and (IV) for capital expenditures and acquisitions of business operations. c. Lender agrees to make Advance(s) to Obligors under the Revolving Credit Loan, from time to time, upon written request from FAS from the Closing Date of the Revolving Credit Loan, up to but not including the Revolving Credit Maturity Date and in accordance with the terms hereof; provided, however, that at no time shall the total aggregate amount of Advances outstanding and total aggregate amount of all outstanding Letters of Credit issued under this Agreement exceed the Revolving Credit Loan Commitment. In the event Lender is required to fund any Letter of Credit issued under this Agreement by an Advance, interest thereon shall accrue at the rate set forth in Section 1.4 until paid. d. Each Advance shall be in a minimum amount of $100,000.00 and multiples thereof. e. Advances shall be paid by credit to the Advance Account with Lender. Lender shall give written confirmation of deposit at the Principal Place of Business. In the alternative, Lender, may at its option, disburse an Advance directly to FAS if directed by FAS in writing. Obligors shall deliver certified copies of corporate resolutions evidencing those Authorized Officers authorized to make Advance Requests. Lender shall be entitled to rely on any Advance Request that Lender reasonably believes to be executed by a person authorized under corporate resolutions furnished to Lender by FAS. f. If at any time the outstanding Advances plus amounts of Letters of Credit issued pursuant to this Agreement exceeds the Revolving Credit Loan Commitment, Obligors shall repay such amounts as are necessary to reduce the aggregate outstanding principal balance of the Revolving Credit Loan below the Revolving Credit Loan Ceiling. 2.2 LETTERS OF CREDIT AND ACCEPTANCES a. So long as no Event of Default or Potential Default exists and remains uncured, Lender agrees, subject to the terms and conditions of this Agreement, to issue from time to time from the date hereof to and including the 30th day immediately preceding the Revolving Credit Loan Maturity Date, its Letters of Credit and Acceptances, for the account of Obligors in an amount which, when added to: (i) the aggregate amount of all other outstanding Letters of Credit at the proposed issuance date and (ii) all outstanding Advances, will not exceed the Revolving Credit Loan Commitment. b. The issuance by the Lender of each Letter of Credit and Acceptance shall, in addition to the conditions precedent set forth elsewhere in this Agreement, be subject to the ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 12 conditions that such Letter of Credit or Acceptance shall be in such form, contain such terms, and support such transactions or obligations as shall be reasonably satisfactory to the Lender, consistent with the Lender's then current practices and procedures with respect to similar letters of credit or acceptances. All Letters of Credit and Acceptances shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500, and all subsequent amendments and revisions thereto. In addition, Obligors shall pay to the Lender such fees in connection with the issuance and maintenance of Letters of Credit and Acceptances in accordance with Lender's fee schedule in effect from time to time. c. Obligors agree that the Lender may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit or Acceptance, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in Bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit or Acceptance to draw or issue any drafts or other documents. d. No Letter of Credit may have an expiration date later than five (5) Business Days prior to the Revolving Credit Loan Maturity Date. Each drawing under a Letter of Credit (an "L/C Advance"), shall be payable by Obligors, without demand or notice of any kind, in full, on the date the beneficiary of the Letter of Credit draws on such Letter of Credit. e. Without limiting the generality of any other provision hereof, Obligors hereby indemnify and hold harmless Lender from and against any and all claims and damages, losses, liabilities, Costs, or expenses which Lender may incur (or which may be claimed against the Lender) by any Person by reason of, or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit or Acceptance; provided that Obligors shall not be required to indemnify Lender for any claims, damages, losses, liabilities, costs, or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified, or (ii) caused by the Lender's failure to pay under any Letter of Credit or Acceptance after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit or Acceptance, unless such payment is prohibited by any law, regulation, court order, or decree. This indemnity shall survive the termination of this Agreement. f. Obligors' obligation to pay L/C Advances shall be absolute, irrevocable, and unconditional under any and all circumstances whatsoever and irrespective of any setoff, counterclaim, or defense to payment that Obligors may have or had against Lender (except such as may arise out of Lender's gross negligence or willful misconduct hereunder) or any other Person, including, without limitation, any setoff, counterclaim, or defense based upon or arising out of: (1) Any lack of validity or enforceability of this Agreement or any of the other Loan Documents; ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 13 (2) Any amendment or waiver of or any consent to departure from the terms of any Letter of Credit; (3) The existence of any claim, setoff, defense, or other right which any Obligor or any other Person may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting); or (4) Any allegation that any demand, statement or any other document presented under any Letter of Credit is forged, fraudulent, invalid, or insufficient in any respect, excepting those instances of Lender's gross negligence or willful misconduct where the forgery, fraudulent nature, invalidity or insufficiency is evident from the face of the presentation; or (5) Any statement therein being untrue or inaccurate in any respect whatsoever or any variations in punctuation, capitalization, spelling, or format of the drafts or any statements presented in connection with any L/C Advance. (6) Any lack of validity or enforceability of the Letter of Credit or Acceptance, the obligation supported by the Letter of Credit or Acceptance or any other agreement or instrument relating thereto (collectively, the "Related Documents"); (7) Any amendment or waiver of or any consent to or departure from all or any of the Related Documents; (8) Any breach of contract or other dispute between any Obligor and any beneficiary or any transferee of a Letter of Credit or Acceptance (or any persons or entities for whom such beneficiary or any such transferee may be acting) or any other person or entity; or (9) Any delay, extension of time, renewal, compromise, or other indulgence or modification granted or agreed to by the Lender, with or without notice to or approval by Obligors in respect of any of Obligors' indebtedness hereunder. G. Until such time as the Lender shall otherwise consent in writing, which consent shall not be unreasonably withheld, Obligors shall have available to them under the Revolving Credit Loan, for working capital needs, for capital expenditures, for funding acquisitions and for the refinancing of existing indebtedness with Lender, the sum of Ten Million Dollars ($10,000,000.00). Until Lender otherwise consents in writing, the remaining balance of the Revolving Credit Loan shall be reserved to support Letters of Credit. 2.3 REAL ESTATE LOAN. a. Obligors acknowledge that FAS executed and delivered documents in ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 14 connection with a real estate loan secured by the Real Estate under a Loan Agreement and other documents which are presently held by Lender under an Assignment of Notes, Mortgages and Other Loan Documents, recorded on January 5, 1996 in O.R. Book 2665, Page 2918, of the Public Records of Lee County, Florida. Obligors acknowledge that FAS is the sole borrower under the Real Estate Loan. In consideration of the establishment of the Revolving Credit Loan and the adjustment of the interest rate on the Real Estate Loan, Concept, Distribution and Media have executed absolute, unconditional and continuing Guaranties of all Indebtedness of FAS. Obligors acknowledge that they have no offsets or defenses to the Real Estate Loan or any of the Loan Documents associated with the Real Estate Loan and confirm that the principal balance of the Real Estate Loan is set forth in the Real Estate Note. b. FAS has executed a Real Estate Note for the Indebtedness related to the Real Estate Loan, and FAS acknowledges that the entire proceeds have already been disbursed under the Real Estate Note. The Real Estate Loan Indebtedness shall be payable in accordance with the terms and conditions of the Real Estate Note, unless modified herein. 2.4 PROVISIONS APPLICABLE TO THE CREDIT FACILITIES. a. All payments made on account of the Indebtedness shall be made by the respective Obligors, without setoff or counterclaim, in lawful money of the United States in immediately available funds, free and clear of and without deduction for any taxes, fees, or other charges of any nature whatsoever imposed by any taxing authority. Any payments must be received by the Lender by 2:00 P.M. Eastern Standard Time, on the day of payment, it being expressly agreed and understood that if a payment is received after 2:00 P.M. by Lender, such payment will be considered to have been made by the respective Obligors on the next succeeding Business Day, and interest thereon shall be payable by the respective Obligors at the applicable rate set forth herein during such extension. All payments on account of the Indebtedness shall be made to Lender, to the extent of funds available, by auto debit of Advance Account. If any payment required to be made by Obligors hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. All payments made in connection with the Loan shall be applied first to Costs, then to application on any scheduled payments of principal and/or interest then due, and if none, then to accrued interest to the date of payment, then to application of principal on the Loans in such order as FAS shall direct. b. A annual loan fee of $50,000.00 shall be due and payable on each June 1, during the Revolving Credit Advance Term, commencing on June 1, 2000. A fee of ten (10) basis points (.10%) shall be due and payable each calendar quarter on the unfunded principal amount of the Revolving Credit Loan calculated as of the last Business Day preceding the calendar quarter, with the first such fee due as of July 15, 2000, then quarterly thereafter. For purposes of this Agreement, the unfunded principal amount of the Revolving Credit Loan shall be the total Revolving Credit Loan Commitment, less the average amount of cash draws for ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 15 the quarter during the period of calculation. Undrawn Letters of Credit shall not be considered a cash draw for purposes of this calculation. Payment of the Loan Fees shall, to the extent of funds available, be by auto debit from the Advance Account. c. Lender shall not be responsible for any damages to Obligors resulting from Obligors' anticipation of funding of an Advance before such Advance is actually funded by Lender. d. Obligors may prepay all or any portion of the Loans in advance of their respective maturity dates without prepayment penalty. e. Obligors shall repay the Real Estate Loan, interest thereon and all outstanding costs in accordance with the terms and conditions of the Real Estate Note. f. Principal on the Revolving Credit Note is due in full in a single payment on the Initial Revolving Credit Loan Maturity Date. Notwithstanding the foregoing, Lender will automatically renew the Revolving Credit Note for a period of one year from the Initial Revolving Credit Loan Maturity Date and for successive one year periods thereafter with a final Revolving Credit Loan Maturity Date of April 30, 2005 unless either: (a) at least fifteen (15) days prior to any Revolving Credit Loan Maturity Date, Lender notifies Borrower that the Revolving Credit Note will not be renewed; or (b) Borrower is in default under any Note or any of the Loan Documents; or (c) Lender has previously refused to make any additional advances or reduced the availability of advances under the Revolving Credit Note. If Lender, in its sole discretion, decides not to renew the Revolving Credit Note, Lender will not be obligated to make any further advances thereunder after the then applicable Revolving Credit Loan Maturity Date, and provided that Borrower is not in default under any Note or any of the Loan Documents, Borrower will pay the entire balance outstanding under the Revolving Credit Note by the then applicable Revolving Credit Loan Maturity Date. If Borrower is in default under any Note or any of the Loan Documents, then after expiration of any applicable notice and grace periods, Lender may demand payment of the balance outstanding under all Notes in full immediately. The Revolving Credit Note notwithstanding, Obligors shall repay such outstanding advances as are necessary to reduce the outstanding principal balance thereunder to the extent necessary so as not to exceed the Revolving Credit Loan Ceiling. SECTION 3. CONDITIONS OF LENDING. 3.1 CONDITIONS TO REESTABLISHMENT OF REVOLVING CREDIT LOAN AND MODIFICATION OF THE REAL ESTATE LOAN. As conditions precedent to the obligation of the Lender to establish the Revolving Credit Loan and to adjust the interest rate on the Real Estate Loan: a. DELIVERY OF DOCUMENTS. Obligors shall have delivered to Lender, in form and substance satisfactory to the Lender and its counsel, the following: ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 16 (1) A duly executed copy of this Agreement; (2) Duly executed copies of the other Loan Documents; (3) A certificate of active status from the Florida Secretary of State with respect to each Obligor; (4) A certificate from an Authorized Officer of each Obligor certifying that a resolution (which shall be attached to the certificate) has been duly adopted by each Obligor and remains in full force and effect specifically authorizing such Obligor to borrow under the Loan, and authorizing certain named individuals to execute and deliver documents on behalf of and to bind such Obligor; (5) Copies of each Obligor's organizational documents filed with the Secretary of State and all amendments thereto and copies of each Obligor's By-Laws and all amendments thereto, all of which shall be attached to an Authorized Officer's certificate attesting them to be true and correct copies; (6) Such credit applications, financial statements, authorizations, and such information concerning each Obligor and its business, operations and condition (financial and otherwise) as the Lender may reasonably request prior to the date of this Agreement; (7) An opinion of counsel for each Obligor from an attorney-at-law licensed to practice in the State of Florida, which opinion must be acceptable to Lender and its counsel and shall contain at least the following opinions: A. Each Obligor is duly organized and validly existing under Florida law and of active status and that the execution and delivery of the Loan Documents and the Closing of the Loan have been duly authorized by all necessary action on the part of such Obligor. B. Each Obligor has the right and capacity to execute and deliver each of the Loan Documents and no Obligor has executed any documents of any kind, including any prior loan or documents, which would prohibit the execution and delivery of the Loan Documents. E. The Notes and all other Loan Documents have been duly executed and delivered by each Obligor and are the legal, binding, valid and enforceable obligations of each Obligor in accordance with their respective terms, except as the enforcement of them may be limited by bankruptcy, insolvency, moratorium and other applicable debtor relief laws. D. To such counsel's knowledge and based solely upon a written certification from Obligors, there are no undisclosed material legal actions or proceedings involving pending or threatened against, or with reference to any Obligor before any court, quasi judicial or administrative body or Governmental Authority. E. Assuming that the collection of the interest and other charges provided for in this Agreement and the Notes is undertaken strictly in accordance with the terms of such documents, the aggregate interest paid by the Obligors under this Agreement and the Notes will not be usurious under the laws of the United States and the State of Florida. F. To such counsel's knowledge, and based solely upon a written ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 17 certification from Obligors, the execution and delivery of the Loan Documents by each Obligor do not violate, conflict with, result in a breach of or default under any applicable statute, rule, order or other Governmental Regulation applicable to such Obligor or any agreement by which such Obligor's properties are bound, or result in the creation of any imposition of any lien, charge or encumbrance other than as contemplated by this Agreement. G. That the state imposes a documentary stamp tax equal to 35 cents on each $100 or fraction thereof of the indebtedness or obligation evidenced by promissory notes, nonnegotiable notes and written obligations to pay money made, executed, delivered, sold, transferred or assigned in the State and on mortgages, trust deeds, security agreements or other evidences of indebtedness filed or recorded in the State. That Counsel for Obligors understands that neither the Notes, the Agreement nor any other document contemplated by the Agreement (other than the Financing Statements) will be made, executed, delivered, sold, transferred or recorded in the State except possibly in connection with the enforcement and collection thereof and based upon that understanding and the other assumptions set forth in their opinion, counsel for Obligors believes that no Florida documentary stamp tax should be due and payable in connection with the execution, delivery and performance of the Notes, the Agreement and the other documents contemplated by the Revolving Credit and Term Loan Agreement. b. COMPLIANCE WITH LOAN DOCUMENTS. All acts and conditions (including, without limitation, the obtaining of any necessary regulatory approvals and the making of any required filings, recordings, or registrations) required to be done and performed and to have happened precedent to the execution, delivery, and performance of the Loan Documents and to constitute the same legal, valid, and binding Indebtedness, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all applicable laws. c. NO DEFAULT. A determination by Lender that there shall exist no Event of Default or Potential Default; and there shall have occurred no material, adverse change in the financial condition of the Obligors considered on a consolidated basis. dD. EXECUTED DOCUMENTATION. All documentation, including, without limitation, documentation for corporate and legal proceedings in connection with the transactions contemplated by the Loan Documents shall be reasonably satisfactory in form and substance to the Lender and its counsel. e. ADDITIONAL CERTIFICATIONS. Any and all other certificates, affidavits, resolutions, instruments, documents and legal opinions reasonably deemed appropriate or necessary by Lender or its counsel. f. ACCURATE REPRESENTATIONS AND WARRANTIES. The representations and warranties of Obligors set forth in Article 4 hereof and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date hereof. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 18 3.2 CONDITIONS TO ADVANCES UNDER THE REVOLVING CREDIT LOAN. As conditions precedent to the obligation of the make an Advance under the Revolving Credit Loan or issue of a Letter of Credit under this Agreement: a. LETTER OF CREDIT REQUIREMENTS. In the case of the issuance of a Letter of Credit, Obligors shall have executed and delivered to the Lender such documents in form and content reasonably acceptable to the Lender together with such other instruments and documents as it shall reasonably request; b. ACCURATE REPRESENTATIONS AND WARRANTIES. The representations and warranties of Obligors set forth in Article 4 hereof and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance or other borrowing or the issuance of such Letter of Credit, as the case may be, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the Financial Statement referred to in Section 4.6 shall be deemed to be those financial statements most recently delivered to the Lender pursuant to Section 4.6 hereof; c. PAYMENT OF COSTS. Obligors have paid or have arranged to pay all costs incurred by Lender in making an Advance including any applicable intangible taxes, documentary stamp taxes, attorney's fees or recording costs. d. NO DEFAULT. A determination by Lender that there shall exist no Event of Default or Potential Default and there shall have occurred no material, adverse change in the financial condition of the Obligors considered on a consolidated basis. SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Obligor represents and warrants to Lender (which representations and warranties shall survive the execution and delivery of the Loan Documents) that: 4.1 ORGANIZATION, POWERS, ETC. Each Obligor: (i) is a corporation duly organized, validly existing and of active status under the laws of the State of Florida; (ii) has all requisite power and authority to own its properties and assets and to carry on its business as now conducted and proposed to be conducted; (iii) is duly qualified to do business and is in good standing in every jurisdiction in which the character of its properties or assets owned or the nature of its activities conducted makes such qualification necessary, except where the effect of such failure to qualify would not have a material adverse effect on the financial condition of the Obligors, considered on a consolidated basis; and (iv) has the power and authority to execute and deliver, and to perform its obligations under the Loan Documents. 4.2 AUTHORIZATION OF LOAN FOR OBLIGORS, ETC. The execution, delivery and performance of the Loan Documents by each Obligor: (a) has been duly authorized by all requisite action; and (b) will not: (i) violate (A) any material provision of law applicable to ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 19 such Obligor, any material Government Regulation applicable to such Obligor, any material order, writ, judgment, decree, determination or award of any court, arbitrator or Government Authority to which such Obligor is subject; (B) the Articles of Incorporation or Bylaws of such Obligor; or (C) any provision of any indenture, agreement or other instrument to which such Obligor is a party or by which it or any of its properties or assets are bound, unless such violations would not have a material adverse effect on the financial condition of the Obligors, considered on a consolidated basis; (ii) be in material conflict with, result in a material breach of or constitute (with due notice or lapse of time or both) a material default under any such indenture, agreement or other instrument; or (iii) result in the creation or imposition of any material lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Obligor other than the Permitted Encumbrances. 4.3 BINDING EFFECT. This Agreement is, and the Notes and the other Loan Documents when delivered hereunder will be legal, valid and binding obligations of each respective Obligor, enforceable against each Obligor in accordance with their respective terms, except (a) as enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights. 4.4 TAX PAYMENTS. All federal and state tax returns and reports of each Obligor required to be filed have been filed, and all taxes, assessments, fees and other charges by any Government Authority upon each Obligor, or upon any Obligor's properties, assets, including the collateral, incomes or franchises, which are due and payable in accordance with such returns and reports, have been paid, other than those presently: (a) payable without penalty or interest; or (b) contested in good faith and by appropriate and lawful proceedings prosecuted diligently. The aggregate amount of the taxes, assessments, charges and levies so contested is not material to the condition (financial or otherwise) and operations of the Obligors, considered on a consolidated basis. The charges, accruals, and reserves on the books of the Obligors in respect of federal, state and local taxes for all fiscal periods to date are adequate in all material respects for Obligors, when considered on a consolidated basis, and no Obligor knows of any other material unpaid assessment for additional federal, state or local taxes for any such fiscal period or of any basis therefore. 4.5 AGREEMENTS. a. No Obligor is a party to any agreement, indenture, lease or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation which is reasonably likely to materially and adversely affect the business, properties, assets, operations or condition (financial or otherwise) of the Obligors, considered on a consolidated basis. b. No Obligor is a party to, or otherwise subject to any provision contained in, any instrument evidencing indebtedness of any such Obligor, any agreement relating thereto or any other contract or agreement which restricts or otherwise limits the incurring of the Indebtedness evidenced by the Notes. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 20 c. No Obligor is in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any material agreement or instrument to which it is a party where the effect of such default is reasonably likely to materially and adversely affect the business, properties, assets or condition (financial or otherwise) of the Obligors, considered on a consolidated basis. d. Each Obligor enjoys lawful, peaceful and undisturbed possession in all material respects to all permits, licenses, trade names, trade marks, services marks and patents used or whose use is contemplated in the operation of its business other than where the failure to maintain same is not reasonably likely to materially and adversely affect the business, properties, assets or condition (financial or otherwise) of the Obligors, considered on a consolidated basis. Each Obligor enjoys lawful, peaceful and undisturbed possession in all material respects under all leases as to which any such Obligor is a lessee, other than where the failure to maintain same is not reasonably likely to materially and adversely affect the business, properties, assets or condition (financial or otherwise) of the Obligors, considered on a consolidated basis, and to the knowledge of the Obligors, all such leases are valid and subsisting and in full force and effect. 4.6 FINANCIAL STATEMENT. a. Obligors have furnished Lender with a consolidated Financial Statement for the period ending November 30, 1999 (herein the "Statement Date"). The Financial Statement, including any related schedules and/or notes, is true and correct in all material respects and has been prepared in accordance with GAAP and shows all liabilities, direct and contingent, of Obligors required to be shown in accordance with such principles, except for year-end adjustments. The balance sheet fairly presents the consolidated condition of Obligors as of the Statement Date in all material respects, and the profit and loss statement fairly presents the results of the consolidated operations of Obligors for the periods indicated in all material respects. b. Since the Statement Date there has been no material undisclosed adverse change in the actual or anticipated assets, liabilities, financial condition, business, operations, affairs or prospects (financial or otherwise) of Obligors, considered on a consolidated basis from that set forth or reflected in the Financial Statement, other than changes in the ordinary course of business. 4.7 LITIGATION, ETC. Except as disclosed in the Financial Statement, there are no undisclosed actions, proceedings or investigations pending or, to the knowledge of any Obligor, threatened, against any Obligor or affecting any Obligor (or any basis therefore known to any Obligor) which, either in any case or in the aggregate, might result in any material adverse change in the financial condition, business, prospects, affairs or operations of the Obligors, considered on a consolidated basis or in the Obligors' properties and assets, considered on a consolidated basis, or in any material impairment of the right or ability of the ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 21 Obligors to carry on their consolidated operations as now conducted or proposed to be conducted, or in any material liability on the part of the Obligors, considered on a consolidated basis, and none which questions the validity of this Agreement, the Notes or any of the other Loan Documents or of any action taken or to be taken in connection with the transactions contemplated hereby or thereby. 4.8 VIOLATION OF JUDICIAL OR GOVERNMENTAL ORDERS, LAWS, ORDINANCES OR REGULATIONS. No Obligor has notice of any violation of any court order or of any law, Governmental Regulation, ordinance, rule, order, code, or requirement of any Governmental Authority having jurisdiction over any Obligor that may materially affect the business and operation of the Obligors, considered on a consolidated basis. 4.9 TITLE TO ASSETS. The Obligors have good and marketable title to the Real Estate and all other material assets reflected in the Financial Statement, and all such assets are free and clear of all liens, mortgages, pledges, security interests, charges, title retention agreements, or other encumbrances of any kind, except the Permitted Encumbrances. To its knowledge, each Obligor enjoys lawful, peaceful and undisturbed possession in all material respects to all permits, licenses, trade names, trade marks, services marks and patents used or whose use is contemplated in and is material to the operation of the business of the Obligors, considered on a consolidated basis. To its knowledge, each Obligor enjoys lawful, peaceful and undisturbed possession in all material respects under all leases as to which such Obligor is a lessee and which are material to the business of the Obligors, considered on a consolidated basis, and all such leases are valid and subsisting and in full force and effect. 4.10 REGULATION U. No Obligor is engaged and no Obligor will engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of such terms under Regulation U published by the Regulations of the Board of Governors of the Federal Reserve System. No part of the proceeds of the Loan will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose that violates, or that would be inconsistent with, the provisions of Regulation U published by the Board of Governors of the Federal Reserve System. 4.11 NO OUTSTANDING DEBT. No Obligor has any outstanding debt material to Obligors as determined under GAAP considered on a consolidated basis, except for: (i) the Loan; (ii) liabilities shown on the Financial Statement; (iii) intercompany liabilities; and (iv) other obligations in the nature of trade payables incurred by Obligors in the ordinary course of business. 4.12 TRADE NAMES AND SUBSIDIARIES . No Obligor uses any trade names other than those set forth in the Preamble of this Agreement and Obligors' Principal Place of Business in Florida is 11215 Metro Parkway, Fort Myers, FL 33912. Obligors shall not change their Principal Place of Business without prior written notice to Lender. There are no Subsidiaries of any Obligor which have not executed this Agreement. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 22 4.13 SOLVENCY. After giving effect to the funding of the Revolving Credit Loan, the application of the proceeds thereof as contemplated by this Agreement and the Loan Documents, the payment of all estimated banking, legal, accounting and other fees related thereto and the guarantee of the Indebtedness of FAS, the Obligors are solvent considered on a consolidated basis. 4.14 INVESTMENT COMPANIES ACT. No Obligor is an "investment company" or a company "controlled" by, or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). The making of the Loan by Lender, the application of the proceeds and repayment thereof by Obligors and the consummation of the transactions contemplated by this Agreement will not violate any provision of such act or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. 4.15 RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT. No Obligor has ever been and is not now engaged, and will not knowingly engage, directly or indirectly, in any pattern of "racketeering activity" or in any "collection of any unlawful debt," as each of the quoted terms or phrases is defined or used by the Racketeer Influenced and Corrupt Organization(s) Act of either the United States or the State of Florida, Title 18, United States Code, Section 1961 ET,.SEG. and Chapter 895, Florida Statutes, respectively, as each act now exists or is hereafter amended (the "RICO Lien Acts"). 4.16 ERISA REQUIREMENT. No Obligor has incurred any material accumulated funding deficiency within the meaning of ERISA or incurred any material liability to the Pension Benefit Guaranty Corporation established under ERISA (or any successor thereto under ERISA) in connection with any employee pension benefit plan established or maintained by the Obligor or by any person under common control with the Obligor (within the meaning of Section 414(c) of the Internal Revenue Code of 1986, as amended, or of Section 4001 (b) of ERISA) , or in which employees of any of them are entitled to participate. No Reportable Event (as defined in ERISA) in connection with any such plan has occurred or is continuing. 4.17 HAZARDOUS MATERIAL. No Obligor has generated, stored, or disposed of any Hazardous Material on any portion of any property occupied by it, including the Real Estate, or transferred any Hazardous Material from the property occupied by it, including the Real Estate, to any other location in violation of any applicable Environmental Laws which has not been fully remedied. To the best of each Obligor's knowledge after due investigation, each Obligor is in compliance in all material respects with all applicable Environmental Laws and has not been notified of any action, suit, proceeding or investigation which calls into question compliance by any Obligor with any Environmental Laws or which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Material with the exception of noncompliances that are not reasonably likely to have a material adverse effect on the condition (financial or otherwise) of the Obligors, considered on a consolidated basis. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 23 4.18 FAIR LABOR STANDARDS ACT. Each Obligor has complied with, and will continue to comply with, in all material respects, the provisions of the Fair Labor Standards Act of 1938, 29 U.S.C. Section 200, et seq., as amended from time to time (the "FLSA"), including specifically, but without limitation, 29 U.S.C. Section 215(a) with the exception of noncompliances that are not reasonably likely to have a material adverse effect on the condition (financial or otherwise) of the Obligors, considered on a consolidated basis. This representation and warranty, and each reconfirmation hereof, shall constitute written assurance from each Obligor, given as of the date hereof and as of the date of each reconfirmation, that each Obligor has complied, in all material respects, with the requirements of the FLSA, in general, and 29 U.S.C. Section 215(a)(1) thereof, in particular. 4.19 OCCUPATIONAL SAFETY HAZARDS ACT. Each Obligor has complied with, and will continue to comply with, in all material respects, the provisions of the Occupational Safety Hazards Act, as amended from time to time ("OSHA") with the exception of noncompliances that are not reasonably likely to have a material adverse effect on condition (financial or otherwise) of the Obligors, considered on a consolidated basis. 4.20SECURITIES AND EXCHANGE COMMISSION COMPLIANCE. Each Obligor has complied with, and will continue to comply with, all Federal Securities laws and all rules, regulations, and orders of the Securities And Exchange Commission, as amended from time to time with the exception of noncompliances that are not reasonably likely to have a material adverse effect on condition (financial or otherwise) of the Obligors, considered on a consolidated basis. 4.21REGULATORY COMPLIANCE. Each Obligor has in the past complied with and is presently complying in all material respects with all other laws and Governmental Regulations applicable to such Obligor's business with the exception of noncompliances that are not reasonably likely to have a material adverse effect on condition (financial or otherwise) of the Obligors, considered on a consolidated basis. 4.22 USURY. The amounts to be received by Lender which are or which may be deemed to be interest under any of the Loan Documents or otherwise in connection with the transactions described herein constitute lawful interest and are not usurious or illegal under the laws of the State of Florida, and no aspect of the transaction contemplated by this Agreement is or will be usurious. 4.23 OBLIGOR SETOFFS. No Obligor has, as of the date hereof, any defenses, counterclaims, or setoffs with respect to any sums to be advanced under this Agreement, the Real Estate Loan, or under any other loan between any Obligor and Lender. 4.24 ENVIRONMENTAL. Obligors hereby reaffirm the terms and conditions of that certain covenant and warranties concerning hazardous substances, dated January 4, 1996, ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 24 executed by FAS (the "Environmental Agreement"). Concept, Distribution and Media hereby agree to indemnify Lender in accordance with the terms and conditions of the Environmental Agreement as if Concept, Distribution and Media had fully executed the Environmental Agreement. Obligors hereby warrant that the Environmental Assessment does not contain any untrue statement of material fact or omit any material fact necessary to make the conclusions therein not misleading, and, since the effective date of the Environmental Assessment, no event has occurred to change the nature of the Real Estate which would alter the conclusions contained in the Environmental Assessment. 4.25 STATUS OF TITLE. Obligors acknowledge that Lender is the insured under the Title Policy. Obligors hereby represent and warrant that no change has occurred in the fee simple ownership of the Real Estate since the effective date of the Title Policy and the last endorsement thereto (being Endorsement No. 4), nor has any Obligor further encumbered the Real Estate, except as set forth in the Title Policy. The liens held by Lender are perfected first liens in and upon the Real Estate, and other than non-material liens which shall be removed or otherwise bonded off within 60 days from the filing thereof, there are no other liens or other Security Interests in the Real Estate, except as set forth in the Title Policy. Except for the Permitted Encumbrances, the Real Estate shall remain free clear of all liens and other adverse claims of any nature, and FAS shall keep good and marketable fee simple title to the Real Estate and bond any and all lien claims off pursuant to Section 5.6. 4.26 DISCLOSURE AND NO REPRESENTATION, WARRANTY OR DOCUMENT UNTRUE. No representation or warranty made by any Obligor contained herein, the Loan Documents, or in any certificate or other document furnished or to be furnished by any Obligor pursuant hereto, or which will be made by any Obligor from time to time in connection with the Loan Documents (a) contains or will contain any misrepresentation or untrue statement of fact, or (b) omits or will omit to state any material fact necessary to make the statements therein not misleading, measured against the Obligors, considered on a consolidated basis, unless otherwise disclosed in writing to Lender. There is no fact known to any Obligor which materially and adversely affects, or which is reasonably likely in the future to materially and adversely affect, the business, assets, properties or condition, financial or otherwise, of the Obligors, considered on a consolidated basis, except as set forth or reflected in the Loan Documents or otherwise disclosed in writing to Lender. 4.27 GOVERNMENTAL PERMITS, ETC. All material governmental permits, approvals, consents and other authorizations required in connection with the use of the Real Estate have been obtained. The Real Estate has access to a publicly dedicated road right-of-way. 4.28 SURVIVAL. All of the representations and warranties set forth in this Agreement shall survive until all Indebtedness is satisfied in full. SECTION 5. AFFIRMATIVE COVENANTS. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 25 Each Obligor covenants and agrees that, from the date of this Agreement until payment in full of all Indebtedness and termination of all present or future credit facilities established hereunder, unless Lender shall otherwise consent in writing which consent will not be unreasonably withheld, each Obligor will fully comply with the following provisions: 5.1 FINANCIAL REPORTS AND OTHER DATA. Each Obligor shall deliver or cause to be delivered to Lender the following financial information, prepared in accordance with GAAP, as applicable: a. As soon as practicable and in any event within forty-five (45) days after the end of each fiscal quarter during the term of this Agreement, internally prepared quarterly and year-to-date management consolidated financial statements of FAS, prepared in accordance with GAAP and including a balance sheet, income statement, a statement of cash flows, and containing comparative information for the corresponding quarter and year-to-date of the prior fiscal year, all in form and content reasonably acceptable to Lender and certified by the Authorized Officer of FAS, which statements shall contain such documentation and information to enable Lender to verify compliance with the financial covenants contained in this Agreement. b. As soon as practicable and in any event within one hundred twenty (120) days after each Fiscal Year end of Obligors, audited consolidated Financial Statement of FAS (i) audited in accordance with GAAP by independent certified public accountants of recognized standing reasonably acceptable to Lender; (ii) prepared in reasonable detail in comparative form to the prior fiscal year; (iii) accompanied by a report of such accountants containing an opinion in form and content reasonably acceptable to the Lender; and (iv) including a balance sheet, an income statement, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto. c. Together with each delivery of those items required in clauses (a) and (b) above, Obligors shall deliver or cause to be delivered to Lender compliance certificates executed by the Authorized Officer of FAS, certifying Obligors' compliance with the terms and conditions of the Loan Agreement and specifically including the financial covenants. The certifications shall contain computations indicting compliance with the financial covenant ratios contained in this Agreement and, stating that to the best such officer's knowledge, each Obligor has kept, observed, performed and fulfilled in all material respects each and every Agreement binding upon it contained in the Loan Documents, and is not at the time in default in any material respect of the keeping, observance, performance or fulfillment of any of the terms, provisions and conditions thereof. d. Lender is hereby authorized to deliver a copy of any financial statements or any other information relating to the business, operations, or financial condition of any Obligor which may be furnished to it or come to its attention pursuant to the Loan Documents or otherwise, to any participating lender, regulatory body or agency having jurisdiction over Lender or to any Person which shall, or shall have the right or obligation to, succeed to all or ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 26 any part of Lender's interest in the Loan Documents. e. Within thirty (30) days after the same are sent, Obligors shall provide copies of all reports and other financial information which any Obligor sends to its public stockholders, and within ten (10) days after filing, copies of all financial statements and non-confidential reports, including, but not limited to, 10-K and 10-Q filings, which any Obligor may make to, or file with, the Securities and Exchange Commission or any successor or analogous Government Authority. f. Within thirty (30) days after the end of each fiscal year of FAS, FAS shall deliver a summary, if any exist, of all interest rate protection agreements, foreign currency exchange agreements, commodity purchase or option agreements or other interest or exchange rate or commodity price hedging agreements entered into by any Obligor with sufficient detail to enable Lender to determine all potential exposures of any Obligor thereunder. 5.2 PAYMENT OF INDEBTEDNESS TO LENDER; PERFORMANCE OF OTHER COVENANTS; PAYMENT OF OTHER OBLIGATIONS. (a) Obligors will make full and timely payment of the principal and interest on the Notes; (b) each Obligor will duly comply with all the terms and covenants contained in the Loan Documents; and (c) Obligors will make full and timely payment of all other Indebtedness of Obligors to Lender, whether now existing or hereafter arising. 5.3 MAINTENANCE OF PROPERTY. Each Obligor will maintain its fee simple real estate and its material leaseholds and personal property in good order and repair and, from time to time, make all needful and proper repairs, renewals, replacements, additions, and improvements thereto, so that the business carried on may be properly and advantageously conducted at all times in accordance with prudent business management. 5.4 RIGHT OF INSPECTION; DISCUSSIONS. Each Obligor will permit any person designated by Lender, at Lender's expense, during normal business hours, and upon reasonable notice, to visit and inspect any of the properties, books, records, papers, and financial reports of such Obligor, including the making of any copies thereof and abstracts therefrom, and to discuss such Obligor's affairs, finances, and accounts with such Obligor's agents, all at such reasonable times and as often as Lender may reasonably request. . 5.5 NOTICES. FAS will promptly give written notice to Lender of: a. The occurrence of any Event of Default or Potential Default hereunder or under any other obligation of a Obligor to which this Agreement refers, in which case such notice shall specify the nature thereof, the period of existence thereof, and the action that the Obligors or any of them propose to take with respect thereto; b. The occurrence of any material casualty to any material facility or property of the Obligors, considered on a consolidated basis, or any force majeure (including, without ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 27 limitation, any strike or other labor disturbance) materially affecting the operation or value of any such facility or property (specifying whether or not such casualty or force majeure is covered by insurance); and c. The commencement of, or any material change in, the nature or status of any actual or potential litigation in excess of $500,000.00, whether direct or contingent, or any actual or potential dispute or proceeding, whether direct or contingent, that may involve a claim for damages, injunctive relief, enforcement, or other relief pending, being instituted, or threatened by, against or involving any Obligor, or any attachment, levy, execution or other process being instituted by or against any assets of any Obligor, which might impair the conduct of the Obligors' business, considered on a consolidated basis, or might affect financially, or otherwise, the Obligors' business, operations, assets, properties, prospects, or condition in excess of $500,000.00. d. Notification of any violation notices received from the Securities and Exchange Commission, including copies of such notices. 5.6 PAYMENT OF TAXES; LIENS. Each Obligor will promptly pay, or cause to be paid, all taxes, assessments and other governmental charges which may lawfully be levied or assessed (i) upon the income or profits of such Obligor, (ii) upon any fee simple owned real property and all material leases and material personal property, belonging to such Obligor, or upon any part thereof, or (iii) by reason of any lawful claims for labor, material and supplies which, if unpaid, might become a lien or charge against the property of such Obligor; provided, however, such Obligor shall not be required to pay any such tax, assessment, charge, levy, or claim so long as the validity thereof shall be actively contested in good faith by appropriate proceedings and such Obligor shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge, levy, or claim so contested; but provided further that any such tax, assessment, charge, levy, or claim shall be paid forthwith upon the commencement of proceedings to foreclose any lien securing the same and the failure to promptly thereafter bond off such lien within 60 days after the filing thereof. 5.7 INSURANCE OF PROPERTIES. Each Obligor will keep its business and properties insured at all times by insurance companies reasonably acceptable to Lender against the risks for which provision for such insurance is usually made by other Persons engaged in a similar business similarly situated (including without limitation, insurance for fire, flood, and other hazards, insurance against liability on account of damage to persons or property, business interruption insurance, and insurance under all applicable workman's compensation laws) and to the same extent thereto and carry such other types and amounts of insurance as usually carried by Persons engaged in the same or a similar business similarly situated, and upon request deliver to Lender a certificate from the insurer setting forth the nature of the risks covered by such insurance, the amount carried with respect to each risk, and the name of the insured. Lender shall be named as an additional insured on all policies relating to the Real Estate. The obligations of Obligors to provide insurance coverage may be further amplified under the terms and conditions of the Security Instruments. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 28 5.8 APPLICATION OF INSURANCE AND OTHER PROCEEDS. So long as the Real Estate Loan is outstanding, FAS shall comply with the requirements of the Security Instruments and Lender shall be entitled to exercise all of its rights to insurance proceeds, condemnation awards and other proceeds from the Real Estate as provided in the Security Instruments. 5.9 TRUE BOOKS. FAS will keep proper and true books of record and account, reasonably satisfactory to Lender, in which full, true, and correct entries, in all material respects, will be made of FAS' dealings and transactions, and establish on FAS' books such reserves as may be required, by GAAP, with respect to all taxes, assessments, charges, levies and claims, and with respect to FAS' businesses in general, and will include such reserves in any interim as well as year-end financial statements. 5.10 FINANCIAL COVENANTS. So long as any Indebtedness is outstanding Obligors shall comply with the following financial covenants: a. Until January 31, 2001, Obligors shall maintain, on a Consolidated Basis, a minimum Net Worth of $52,000,000.00 annually. As of January 31, 2001, Obligors shall achieve and thereafter maintain a Net Worth of no less than $65,000,000.00 measured on each Fiscal Year End beginning with the Fiscal Year End ending on the Saturday closest to January 31, 2001. b. To maintain on a Consolidated Basis a ratio of Funded Debt to EBITDA, excluding other income and expense and extraordinary items, not exceeding 2.25 as measured at the end of each fiscal quarter, with EBITDA calculated on a rolling four (4) quarter basis: PERIOD RATIO ------ ----- Quarterly 2.25/1.0. c. To maintain a Consolidated Current Maturity Coverage Ratio of not less than 3.00 in any quarter, calculated on a rolling four (4) quarter basis. d. To maintain, on a Consolidated Basis, a Funded Debt and Letter of Credit Exposure to EBITDA ratio of not greater than 2.00 to 1.00 calculated on a rolling four (4) quarter basis. e. To maintain a Fixed Charge Coverage Ratio of at least 2.0 to be tested on an annual basis measured on each Fiscal Year End beginning with the Fiscal Year End ending on the Saturday closest to January 31, 2001 The ratios in b., c. and d. shall be calculated at the end of each fiscal quarter, using the results of that fiscal quarter and each of the 3 immediately preceding fiscal quarters. FAS shall be responsible for procuring the submission of all necessary data to ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 29 demonstrate compliance with these covenants. 5.11 OBSERVANCE OF LAWS. Each Obligor will conform to and duly observe all material laws, regulations, and other valid requirements of any governmental authority with respect to the conduct of its business and operations, except where the effect of any nonobservance would not have a material adverse effect on the business and operations of the Obligors, considered on a consolidated basis. 5.12 MAINTENANCE OF LEGAL EXISTENCE: COMPLIANCE WITH LAWS. Each Obligor shall at all times preserve and maintain in full force and effect its legal existence, powers, rights, licenses, permits and franchises in the jurisdiction of its organization; continue to conduct and operate its business substantially as conducted and operated during the present and preceding Fiscal Year of such Obligor; operate in full compliance with all applicable laws, statutes, regulations, certificates of authority and orders in respect of the conduct of its business; and qualify and remain qualified as a foreign organization in each jurisdiction in which such qualification is necessary or appropriate in view of its business and operations, except where in each case, the effect of the failure to preserve and maintain, the failure to continue to conduct and operate, and the failure to fully comply or failure to qualify and remain qualified would not have a material adverse effect on the business and operations of the Obligors, considered on a consolidated basis. 5.13 FURTHER ASSURANCES. Each Obligor will, at the cost of Obligors, and without expense to Lender, promptly upon the request of Lender: (a) correct any defect, error or omission which may be discovered in the contents of any Loan Documents or in the execution or acknowledgment thereof; (b) execute, acknowledge, deliver and record or file such other and further instruments (including, without limitation, mortgages, deeds or trusts, security agreements, financing statements and specific assignments of rents or leases) and do such further acts, in either case as may be necessary, desirable or proper in Lender's opinion to carry out more effectively the purposes of the Loan Documents. Each Obligor hereby appoints Lender as its attorney-in-fact, coupled with an interest, to take the above actions and to perform such obligations on behalf of such Obligor, at Obligors' sole expense, if any Obligor fails to comply with its obligations under this paragraph. 5.14 REAPPRAISAL. If at any time and for any reason Lender, reasonably determines that the value of the Real Estate may have declined or be less than Lender previously anticipated, or Lender is required to reappraise the Real Estate pursuant to regulation or direction from any Governmental Authority regulating Lender, then, within sixty (60) days from Lender's written request, Obligors shall, at Obligors' sole expense, provide to Lender a current appraisal of the Real Estate, from an appraiser reasonably acceptable to Lender and in form and content as required by Lender. Obligors shall cooperate fully with such appraiser and provide all documents and information as the appraiser may reasonably request in connection therewith. 5.15 NEGATIVE PLEDGE. No Obligor shall create, assume, or suffer to exist any lien ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 30 upon its assets, whether now owned or hereafter acquired, except for liens for taxes not yet due and payable or which are being actively contested in good faith by appropriate proceedings and Permitted Encumbrances. Lender may require Obligors to execute nontaxable agreements not to encumber property in a form and in content reasonably acceptable to Lender which shall not be recorded in any public records. SECTION 6. NEGATIVE COVENANTS. Each Obligor covenants and agrees that, from the date of this Agreement until payment in full of the Indebtedness and all advances hereunder and of all other present or future indebtedness hereunder and termination of all present or future credit facilities established for Obligor's benefit, unless Lender shall otherwise consent in writing, which consent will not be unreasonably withheld, each Obligor will fully comply with the following provisions: 6.1 LIMITATIONS OF MORTGAGES, LIENS, ETC. No Obligor shall lien, mortgage, pledge or otherwise encumber any of such Obligor's assets, except for Permitted Encumbrances. 6.2 LIMITATIONS ON GUARANTIES. No Obligor shall directly or indirectly, guarantee, assume, endorse, become a surety or accommodation party for, or otherwise in any way extend credit or become responsible for or remain liable or contingently liable in connection with any indebtedness or other obligations of any other Person, except guaranties and endorsements made in connection with the deposit of negotiable instruments and other items for collection and credit extended to Obligor in the ordinary course of business and except as part of the permitted Debt set forth in Section 6.8. 6.3 TRANSFER OF ASSETS. No Obligor shall, directly or indirectly, sell, transfer, assign, lease, or otherwise, dispose of any of its fee simple real estate or its material personal property to third parties, including, but not limited to, trusts and individuals, other than in the ordinary course of business where the effect of such disposition is reasonably likely to have a material adverse effect on the business and operations of the Obligors considered on a consolidated basis. 6.4 LOANS. No Obligor shall directly or indirectly, make or have outstanding a loan or advance to any Person, except for loans existing at the date of this Agreement which have been disclosed in writing to and approved by Lender. The foregoing notwithstanding, Obligors shall have the right to make the following classes of loans: a. Loans to their employees so long as such loans do not exceed $250,000.00 in the aggregate; b. Intercompany loans among Obligors c. Advances to Obligors vendors in the ordinary course of Obligors' business, provided, however, that outstanding advances to any one vendor shall never be more than ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 31 $500,000.00. 6.5 MAINTAIN ASSETS. No Obligor shall conceal, remove or permit to be concealed or removed any part of its fee simple real estate or its material personal properties, with the intent to hinder, delay or defraud its creditors or any of them, or made or suffered a transfer of its fee simple real estate or its material personal properties which may be fraudulent under any Bankruptcy, fraudulent conveyance or similar law or shall have made any transfer of its fee simple real estate or its material personal properties to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid, or shall have suffered or permitted, while insolvent, any creditor to obtain a lien on any of its fee simple real estate or its material personal properties through legal proceedings or distraint which is not vacated within sixty (60) days from the date thereof. 6.6 CHARACTER OF BUSINESS/MANAGEMENT. The Obligors shall not change the general character of the consolidated business as conducted at the date hereof, nor engage in any type of business not reasonably related to their consolidated business as presently conducted.. Obligors shall at all times maintain two of the following three persons in key management roles for Obligors: a. Charles J. Kleman; b. Marvin Gralnick; and c. Scott Edmonds 6.7 SUSPENSION OF BUSINESS. No Obligor may liquidate, suspend, dissolve or cease operation during the term of the Loan unless the operations of such Obligor are continued thereafter by one of the other Obligors. 6.8 ADDITIONAL DEBT. Without the prior written consent of Lender, Obligors will not incur, create, assume or permit to exist any Debt except: a. Debt to the Lender; b. Purchase money Debt incurred in connection with acquisitions, so long as such Debt is subordinated to the Indebtedness; c. Debt disclosed in the Financial Statement which shall be paid in accordance with its terms as they exist on the date hereof; d. Purchase money Debt to FAS' franchisees in connection with FAS' repurchase of franchises in an aggregate amount not to exceed $2,500,000.00 e. Debt incurred in the ordinary course of business so long as such Debt does not exceed $500,000.00 annually. SECTION 7. EVENTS OF DEFAULT. The following shall be considered an Event of Default: 7.1 The failure of Obligors to pay any installment of principal or interest in accordance ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 32 with the terms and conditions of the Notes or any guaranty or the failure of Obligors to pay any Loan Fees and such other sums due under the Loan Documents and such failure to pay continues for a period of ten (10) days after notice thereof from Lender; 7.2 The failure of any Obligor to perform any of the terms and conditions of the Notes, any Guaranty and this Agreement other than the failure to pay money and such failure shall not have been remedied within thirty (30) days after written notice thereof to Obligors from the Lender; 7.3 The failure of any Obligor to perform or observe any of the obligations contained in any other Loan Document other than the failure to pay money and such failure shall not have been remedied within thirty (30) days after written notice thereof to Obligors from the Lender; 7.4 Any warranty or representation made by any Obligor hereunder at the time of execution of this Agreement or at the time of a request for any additional advance shall prove to be untrue or incorrect in any material respect; 7.5 The failure of Obligors, considered on a consolidated basis, generally to pay their debts as such debts become due in the normal course of business; the execution of a general assignment for the benefit of creditors by any Obligor; the institution by or against any Obligor of any bankruptcy proceeding remaining undismissed for 60 days after filing; the liquidation, winding up, reorganization, or adjustment of debts of FAS; the suffering of a final monetary judgment against any Obligor in excess of $500,000.00 which is not bonded off or discharged within 60 days from its entry; or the execution of any such judgment exceeding $500,000.00 against property owned by any Obligor. 7.6 Default, after giving effect to any and all applicable grace periods, by any Obligor under any other loan between any Obligor or any Affiliate or Subsidiary of any Obligor and Lender (or any Affiliate or Subsidiary of Lender). SECTION 8. REMEDIES Upon the occurrence or continuing of any Event of Default, Lender shall have and may exercise any or all of the rights set forth herein (provided, however, Lender shall be under no duty or obligation to do so): 8.1 ACCELERATION. To declare the indebtedness evidenced by any or all Notes and all other Indebtedness to be forthwith due and payable, whereupon the Notes and all other Indebtedness shall become forthwith due and payable, both as to principal and interest, without presentment, demand, protest or any other notice or grace period of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes or in such other Indebtedness to the contrary notwithstanding, and, upon such acceleration, the unpaid principal balance and accrued interest upon the Notes shall from and after such date of acceleration bear interest at the Default Rate. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 33 8.2 RIGHT OF SETOFF. To exercise any rights of setoff granted by law or under this Agreement or the Loan Documents. 8.3 UNIFORM COMMERCIAL CODE. To exercise from time to time any and all rights and remedies of a secured creditor under the UCC and any and all rights and remedies available to it under any other applicable law. 8.4 FORECLOSURE. Foreclose any Security Instrument by instituting a foreclosure suit in any court having jurisdiction thereof. 8.5 OTHER RIGHTS. To exercise such other rights as may be permitted under any of the Loan Documents or applicable law. 8.6 CURE OF DEFAULTS. Cure any Event of Default without releasing any Obligor from any obligation hereunder or under the Loan Documents. In connection with exercising its right to cure an Event of Default, Lender may enter upon any Place of Business and do such acts and things as Lender deem necessary or desirable to protect the collateral pledged under any Security Instrument, including, without limitation: (i) paying, purchasing, contesting or compromising any encumbrance, charge, lien, claim of lien, tax, assessment, fine, or other imposition; (ii) paying any insurance premiums and (iii) employing counsel, accountants, contractors and other appropriate persons to assist Lender in the foregoing. 8.7 COLLATERALIZE OUTSTANDING LETTERS OF CREDIT. Lender may demand and within five business days thereof, Obligors shall provide, cash collateral for any outstanding Letter of Credit, whether or not funded, in the amount of the outstanding Letter of Credit issued by Lender for the benefit of any Obligor. 8.8 INTEREST RATE ADJUSTMENT. In the event any Obligor defaults in the performance of this Agreement and Lender elects not to accelerate the Indebtedness, whether or not Lender elects not to accelerate the entire balance of the outstanding Indebtedness to immediate maturity, then, to the extent permitted by law, the rate of interest on the unpaid principal of the Indebtedness under the Notes and this Agreement shall be increased at Lender's discretion to the Default Rate. The provisions herein for a Default Rate shall not be deemed to extend the time for any payment hereunder or to constitute a "grace period" giving any Obligor a right to cure any default. At Lender's option, any accrued and unpaid interest, fees or charges may, for purposes of computing and accruing interest on a daily basis after the due date of any Note or any installment thereof, be deemed to be a part of the principal balance, and interest shall accrue on a daily compounded basis after such date at the Default Rate provided in this Agreement until the entire outstanding balance of principal and interest is paid in full. 8.9 NO WAIVER. The failure of Lender to exercise any of its rights granted hereunder shall not be deemed a waiver thereof nor shall Lender be estopped from asserting such rights for any subsequent defaults. The remedies provided herein are cumulative and are not exclusive to any remedies that Lender may otherwise be provided by law or any Loan Documents. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 34 SECTION 9. MISCELLANEOUS 9.1 Each Obligor agrees to pay and save Lender harmless against liability for the payment of all reasonable out of pocket expenses in connection with this transaction, including documentary stamp taxes or other taxes which may be determined to be payable in respect to the execution and delivery of any loan documents executed in connection with this agreement, and the reasonable fees and expenses of Lender's counsel. 9.2 This Agreement shall not be amended or modified unless in writing and signed by all the parties hereto. 9.3 All notices to be mailed to Lender shall be sent to: Bank Of America, N.A. ATTN: Meriem Blevins, Vice President Suite 415, 13099 US HWY 41 SE Fort Myers, FL 33907 and collectively to Obligors at: 11215 Metro Parkway Fort Myers, FL 33912, with copies to: Gary I. Teblum, Atty. Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A. STE 2700, Barnett Plaza 101 E. Kennedy Blvd. Tampa, FL 33601-1102 For purposes of this Agreement, delivery to any party shall be complete upon actual delivery to such party or their agent or employee, either by hand delivery or overnight courier service, or upon the expiration of five (5) days after posting the writing in the mails by certified mail or registered mail, return receipt requested, with sufficient postage to reach its destination. 9.4 In the event any action becomes necessary to enforce the terms and conditions of this Agreement or to foreclose on any Security Instrument or any Note, Obligors shall pay all costs incurred in connection therewith, including a reasonable attorney's fee, whether or not preceding litigation and whether at trial, or in any bankruptcy proceeding, and at any appellate level. As used herein attorney's fees shall be deemed to include a separate award for paralegal or legal assistant fees. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 35 9.5 This Agreement may not be assigned by any Obligor, however, Lender reserves the right to assign this Agreement or to participate this Agreement and the Loans. 9.6 This Agreement shall be governed by and construed in accordance with the laws of Florida. 9.7 In the event that any provision of this Agreement is declared unenforceable by a court of competent jurisdiction, then such unenforceable provision shall not affect the remaining provisions hereunder. 9.8 As the context requires, the singular shall include the plural and the plural the singular, and any one gender shall include all genders. 9.9 This Agreement and all Loan Documents may be executed in counter parts and each shall be deemed an original. 9.10 This Agreement supercedes the previous loan agreement between Lender and FAS for the Real Estate Loan and the previous loan agreement between Lender and Obligors for the revolving credit facility and constitutes the sole remaining loan agreement between Lender and Obligors for all credit facilities existing at the date of this Agreement. 9.11 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION. A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY OBLIGOR'S DOMICILE, OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AT TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION LENDER WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS. ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 36 B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. OBLIGORS: CHICO'S FAS, INC., a Florida corporation /s/ PATRICIA HAUSLE By: /s/ CHARLES KLEMAN - --------------------------- ---------------------- Print name: Patricia Hausle Witness as to all CHICO'S CONCEPT, INC., a Florida corporation By: /s/ SCOTT EDMONDS ---------------------- Print Name: Scott Edmonds Its: President CHICO'S DISTRIBUTION, INC., a Florida corporation By: /s/ CHARLES KLEMAN ---------------------- Print Name: Charles Kleman Its: President CHICO'S MEDIA, INC., a Florida corporation By: /s/ SCOTT EDMONDS ----------------------- Print Name: Scott Edmonds Its: Vice President ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 37 LENDER: BANK OF AMERICA, N.A. /s/ JAMES ALLGOOD By: /s/ MERIEM BLEVINS - -------------------------------- --------------------- Print name: James Allgood Meriem Blevins Its Vice-president ------------------------------------------------------- LOAN AGREEMENT IN FAVOR OF BANK OF AMERICA, N.A. PAGE 38 EX-27 6 0006.txt
5 6-MOS FEB-03-2001 JAN-30-2000 JUL-29-2000 3,829,580 19,133,617 1,944,146 0 21,449,962 50,809,991 56,803,901 71,930,734 97,678,043 20,265,586 0 0 0 174,263 70,278,429 97,678,043 117,331,130 117,331,130 48,407,946 48,407,946 45,235,343 0 (268,505) 23,956,346 9,103,000 14,853,346 0 0 0 14,853,346 .86 .83
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