EXHIBIT 10.11
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LOAN AND SECURITY AGREEMENT
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BANKBOSTON RETAIL FINANCE INC.
AGENT FOR
THE LENDERS REFERENCED HEREIN
SUNGLASS HUT TRADING CORPORATION
THE LEAD BORROWER FOR
SUNGLASS HUT TRADING CORPORATION
WATCH STATION, INC.
US BORROWERS
AND
SUNGLASS HUT OF CANADA LTD.
CANADIAN BORROWER
AND
SUNGLASS HUT INTERNATIONAL, INC.
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April 28, 1998
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TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS...........................................................................................8
ARTICLE 2 - THE REVOLVING CREDIT.................................................................................28
2-1. Establishment of Revolving Credit............................................................28
2-2. Initial Reserves, Changes to Reserves........................................................31
2-3. Advances in Excess of Borrowing Base.........................................................32
2-4. Risks of Value of Collateral.................................................................32
2-5. Loan Requests................................................................................32
2-6. Making of Loans Under Revolving Credit.......................................................34
2-7. The Loan Account.............................................................................35
2-8. The Revolving Credit Notes...................................................................36
2-9. Voluntary Reduction of Commitment and Loan Ceiling...........................................36
2-10. Payment of The Loan Account..................................................................36
2-11. Interest. ...................................................................................37
2-12. Commitment Fee...............................................................................38
2-13. Line Fee.....................................................................................38
2-14. Early Termination Fee........................................................................39
2-15 Concerning Fees..............................................................................39
2-16. Agent's and Lenders' Discretion..............................................................40
2-17. Procedures For Issuance of L/C's.............................................................41
2-18. Fees For L/C's...............................................................................42
2-19. Concerning L/C's.............................................................................42
2-20. Changed Circumstances........................................................................44
2-21. Increased Costs..............................................................................45
2-22 Lenders' Commitments.........................................................................46
2-23. Designation of Lead Borrower as Borrowers' Agent............................................48
ARTICLE 3 - CONDITIONS PRECEDENT.................................................................................48
3-1. Corporate Due Diligence......................................................................48
3-2. Opinion......................................................................................48
3-3. Accountant's Opinion.........................................................................49
3-4. Host Store Agreements........................................................................49
3-5. Additional Documents.........................................................................49
3-6. Officers' Certificates.......................................................................49
3-7. Representations and Warranties...............................................................49
3-8. Minimum Excess Availability..................................................................49
3-9. All Fees and Expenses Paid...................................................................49
3-10. No Suspension Event..........................................................................50
3-11. No Adverse Change............................................................................50
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................50
4-1. Payment and Performance of Liabilities.......................................................50
4-2. Due Organization - Corporate Authorization - No Conflicts....................................50
4-3. Trade Names..................................................................................51
4-4. Infrastructure...............................................................................52
4-5. Locations; Landlord's Waiver.................................................................52
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4-6. Title to Assets..............................................................................54
4-7. Indebtedness.................................................................................54
4-8. Insurance Policies...........................................................................54
4-9. Licenses.....................................................................................55
4-10. Leases.......................................................................................56
4-11. Requirements of Law..........................................................................56
4-12. Maintain Properties..........................................................................56
4-13. Pay Taxes....................................................................................56
4-14. No Margin Stock..............................................................................58
4-15. ERISA; CAN Plans.............................................................................58
4-16. Hazardous Materials..........................................................................58
4-17. Litigation...................................................................................59
4-18. Dividends or Investments.....................................................................59
4-19. Loans........................................................................................60
4-20. Protection of Assets.........................................................................60
4-21. Line of Business.............................................................................61
4-22. Affiliate Transactions.......................................................................61
4-23. Executive Pay................................................................................61
4-24. Additional Assurances........................................................................61
4-25. Adequacy of Disclosure.......................................................................62
4-26. Right of First Refusal.......................................................................63
4-27. Subordinated Debt............................................................................63
4-28. No Restrictions on Liabilities...............................................................64
4-29. General Restrictions on Investments, Loans and Affiliate Transactions........................64
4-30. Other Covenants..............................................................................65
ARTICLE 5 - REPORTING REQUIREMENTS...............................................................................65
5-1. Maintain Records.............................................................................65
5-2. Access to Records............................................................................65
5-3. Immediate Notice to Agent ...................................................................66
5-4. Borrowing Base Certificate...................................................................67
5-5. Intentionally Omitted........................................................................67
5-6. Monthly Reports..............................................................................67
5-7. Quarterly Reports............................................................................68
5-8. Annual Reports...............................................................................69
5-9. Officers' Certificates.......................................................................70
5-10. Inventories, Appraisals, and Audits..........................................................70
5-11. Additional Financial Information.............................................................71
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.....................................................................71
6-1. Use of Inventory Collateral..................................................................71
6-2. Inventory Quality............................................................................72
6-3. Adjustments and Allowances...................................................................72
6-4. Validity of Accounts.........................................................................72
6-5. Notification to Account Debtors..............................................................72
ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES..............................................................73
7-1 Depository Accounts..........................................................................73
7-2. Credit Card Receipts.........................................................................73
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7-3. The Concentration and the Funding Accounts...................................................73
7-4. Proceeds and Collection of Accounts..........................................................74
7-5. Payment of Liabilities.......................................................................75
7-6. The Funding Account; the CAN Funding Account.................................................76
7-7. Transfers From CAN Borrower..................................................................76
ARTICLE 8 - GRANT OF SECURITY INTEREST...........................................................................77
8-1. Grant of Security Interest...................................................................77
8-2. Extent and Duration of Security Interest.....................................................77
8-3. Security from Parent.........................................................................78
8-4. Security from CAN Borrower...................................................................78
ARTICLE 9 - AGENT AS BORROWERS' ATTORNEY-IN-FACT.................................................................78
9-1. Appointment as Attorney-In-Fact..............................................................78
9-2. No Obligation to Act.........................................................................79
ARTICLE 10 - EVENTS OF DEFAULT...................................................................................79
10-1. Failure to Pay Revolving Credit..............................................................79
10-2. Failure To Make Other Payments...............................................................80
10-3. Failure to Perform Covenant or Liability (No Grace Period)...................................80
10-4. Failure to Perform Covenant or Liability (Grace Period)......................................80
10-5. Misrepresentation............................................................................80
10-6. Acceleration of Other Debt. Breach of Lease..................................................80
10-7. Default Under Other Agreements...............................................................80
10-8. Uninsured Casualty Loss......................................................................81
10-9. Judgment. Restraint of Business.............................................................81
10-10. Business Failure.............................................................................81
10-11. Bankruptcy...................................................................................82
10-12. Default by Guarantor or Related Entity.......................................................82
10-13. Indictment - Forfeiture......................................................................82
10-14. Termination of Guaranty......................................................................82
10-15. Challenge to Loan Documents..................................................................82
10-16. Change in Control............................................................................83
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT....................................................................83
11-1. Rights of Enforcement........................................................................83
11-2. Sale of Collateral...........................................................................84
11-3. Occupation of Business Location..............................................................85
11-4. Grant of Nonexclusive License................................................................85
11-5. Assembly of Collateral.......................................................................85
11-6. Rights and Remedies..........................................................................85
ARTICLE 12 - NOTICES.............................................................................................86
12-1. Notice Addresses.............................................................................86
12-2. Notice Given.................................................................................86
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ARTICLE 13 - TERM................................................................................................87
13-1. Termination of Revolving Credit..............................................................87
13-2. Effect of Termination........................................................................87
ARTICLE 14 - GENERAL...........................................................................................88
14-1. Protection of Collateral.....................................................................88
14-2. Successors and Assigns.......................................................................88
14-3. Severability.................................................................................88
14-4. Amendments. Course of Dealing...............................................................88
14-5. Power of Attorney............................................................................89
14-6. Application of Proceeds......................................................................89
14-7. Costs and Expenses of Agent and Of Lenders...................................................89
14-8. Copies and Facsimiles........................................................................90
14-9. Massachusetts Law............................................................................90
14-10. Consent to Jurisdiction......................................................................90
14-11. Indemnification..............................................................................91
14-12. Rules of Construction........................................................................91
14-13. Intent.......................................................................................92
14-14. Right of Set-Off.............................................................................93
14-15. Maximum Interest Rate........................................................................93
14-16. Judgment Currency. ..........................................................................94
14-17. Net Payments.................................................................................94
14-18. Waivers. ....................................................................................95
14-19. LIMITATION OF CAN BORROWER LIABILITY.........................................................96
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EXHIBITS
1-1 : Business Plan
1-2 : Pricing Grid
2-5 : Loan Request
2-8 : Revolving Credit Note
2-22 : Voting Rights
3-5 : Other Documents
4-2 : Related Entities
4-3 : Trade Names
4-5 : Locations, Leases, and Landlords
4-5(c) : Required Landlord's Waivers
4-6 : Encumbrances
4-7 : Indebtedness
4-8 : Insurance Policies
4-10 : Capital Leases
4-13 : Taxes
4-17 : Litigation
5-4 : Borrowing Base Certificate
7-1 : DDA's.
7-2 : Credit Card Arrangements
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LOAN AND SECURITY AGREEMENT BANKBOSTON RETAIL FINANCE INC.
AGENT
THIS AGREEMENT is made between
BankBoston Retail Finance Inc. (in such capacity, herein the
"AGENT"), a Delaware corporation with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent for the ratable benefit of the
"LENDERS", who are, at present, those financial institutions identified
on the signature pages of the within Agreement and who in the future
are those Persons (if any) who become "Lenders" in accordance with the
provisions of Section 2-22, below,
and
Sunglass Hut Trading Corporation (hereinafter, in such
capacity, the "LEAD BORROWER"), a Florida corporation with its
principal executive offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent for
Said Sunglass Hut Trading Corporation; and Watch Station,
Inc., a Florida corporation with its principal executive
offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(individually, a "US BORROWER" and collectively, the "US
BORROWERS");
and
Sunglass Hut of Canada Ltd., an Ontario corporation with its
principal executive offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ #▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the "CAN BORROWER");
and
Sunglass Hut International, Inc., a Florida corporation with
its principal executive offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "PARENT")
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
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WITNESSETH:
ARTICLE 1 - DEFINITIONS
As herein used, the following terms have the following meanings or are
defined in the section of the within Agreement so indicated:
"ACCEPTABLE INVENTORY": (a) With respect to the US Borrowers, the US
Borrowers' sunglass and watch Inventory and other Inventory
related thereto of the types existing as of the date of this
Agreement (excluding any EyeX Inventory), located in the
United States (net of Inventory Reserves) as to which
Inventory, the Agent has a perfected security interest which
is prior and superior to all security interests, claims, and
all Encumbrances other than Permitted Encumbrances.
(b) With respect to the CAN Borrower, the CAN
Borrower's sunglass and watch Inventory and other Inventory
related thereto of the types existing as of the date of this
Agreement (excluding any EyeX Inventory), located in Canada
(net of Inventory Reserves) as to which Inventory, the Agent
has a perfected security interest or hypothec under the CCQ,
which is prior and superior to all security interests, claims,
and all Encumbrances other than Permitted Encumbrances.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, "accounts" as defined in the
PPSA, and also all: accounts, accounts receivable, credit card
receivables, notes, drafts, acceptances, and other forms of
obligations and receivables and rights to payment for credit
extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract
rights" as formerly defined in the UCC; all Inventory which
gave rise thereto, and all rights associated with such
Inventory, including the right of stoppage in transit; all
reclaimed, returned, rejected or repossessed Inventory (if
any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"ADVISORY/STRUCTURING FEE": Is defined in Section 2-12.
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"AFFILIATE": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Twenty
Five Percent (25%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other;
or (b) one has, directly or indirectly, the right, under
ordinary circumstances, to vote for the election of a majority
of the directors (or other body or Person who has those powers
customarily vested in a board of directors of a corporation);
or (c) not less than Twenty Five Percent (25%) of their
respective ownership is directly or indirectly held by the
same third Person.
"AGENT": Is defined in the Preamble.
"AGENT'S FEE": Is defined in Section 2-12.
"AGENT'S RIGHTS AND REMEDIES": Is defined in Section 11-6.
"AVAILABILITY": Is defined in Section 2-1(b).
"AVAILABILITY RESERVES": Such reserves as the Agent from time to time
determines in the Agent's reasonable discretion as being
appropriate to reflect the impediments to the Agent's ability
to realize upon the Collateral. Without limiting the
generality of the foregoing, Availability Reserves may include
(but are not limited to) reserves based on the following, it
being agreed that the amount of any Availability Reserves
shall not exceed the actual amounts therefor reflected in the
Borrowers' books and records:
(i) Rent (based upon past due rent,
whether or not Landlord's Waiver,
acceptable to the Agent, has been
received by the Agent ).
(ii) In store customer credits.
(iii) Payables (based upon payables which
are past due normal trade terms).
(iv) Gift Certificates.
(v) Frequent Shopper Programs.
(vi) Layaways and Customer Deposits
(vii) Taxes and other governmental
charges, including, ad valorem,
personal property, and other taxes
which might have priority over the
security interests of the Agent in
the Collateral.
(viii) L/C Landing Costs.
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"BANKBOSTON": BankBoston Retail Finance Inc. or any of its Affiliates.
"BANKRUPTCY ACT": The Bankruptcy and Insolvency Act (Canada), the
Companies' Creditors Arrangement Act (Canada) and the
Winding-up and Restructuring Act (Canada), as amended from
time to time.
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE" The Base Rate announced from time to time by BankBoston, N.A.
(or any successor in interest to BankBoston, N.A.). In the
event that said bank (or any such successor) ceases to
announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Agent, in good
faith, designates as the functional equivalent to said Base
Rate. Any change in "Base" shall be effective, for purposes of
the calculation of interest due hereunder, when such change is
made effective generally by the bank on whose rate or index
"Base" is being set. In all events, interest which is
determined by reference to Base (or any successor to Base)
shall be calculated on a 365 day year and actual days elapsed.
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest
at the Base Margin Rate.
"BASE MARGIN RATE": The aggregate of Base plus the Base Margin.
"BASE MARGIN": From the date of this Agreement through April 30,
1999, 0 basis points. Thereafter, the Base Margin shall be
adjusted based upon the consolidated financial condition and
operating performance of the Obligors as reflected in the
financial statements delivered to the Agent pursuant to
Section 5-8 hereof, at the times and in accordance with the
provisions of the Pricing Grid annexed hereto as Exhibit 1-2.
"BORROWER" or "BORROWERS": Collectively, the US Borrowers and the CAN
Borrower.
"BORROWING BASE": The lesser, on any day, of
(a) the amount determined in accordance with Section
2-1(b)(i); or
(b) the amount determined in accordance with Section
2-1(b)(ii),
in each instance ((a) or (b)) determined without deduction
from said amount of the unpaid principal balance of the Loan
Account on that day.
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"BUSINESSDAY": Any day other than (a) a Saturday or Sunday; (b) any
day on which banks in Boston, Massachusetts generally are not
open to the general public for the purpose of conducting
commercial banking business; or (c) a day on which the Agent
is not open to the general public to conduct business.
"BUSINESSPLAN": The Borrowers' business plan annexed hereto as EXHIBIT
1-1 and any revision, amendment, or update of such business
plan, as long as such revision, amendment or update does not
reflect a material change in (a) the nature of the Borrowers
business or (b) the assumptions upon which the business plan
annexed as EXHIBIT 1-1 was based.
"CCQ": The Civil Code of Quebec, as amended and in effect from time
to time.
"CAN AVAILABILITY": Is defined in Section 2-1(c).
"CAN BORROWER": Sunglass Hut of Canada Ltd.
"CAN BORROWING BASE": The lesser, on any day, of
(a) the amount determined in accordance with
Section 2-1(c)(i); or
(b) the amount determined in accordance with
Section 2-1(c)(ii) hereof,
in each instance ((a) or (b)) determined without deduction
from said amount of the unpaid principal balance of the Loan
Account on that day.
"CAN COMMITMENT": Subject to Section 2-22, as of the date of this
Agreement, as follows:
LENDER CAN DOLLAR COMMITMENT COMMITMENT PERCENTAGE
BankBoston Retail $80,000,000.00 100%
Finance Inc.
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"CAN DEBT": Is limited to, all and each of the following, whether
now existing or hereafter arising, but solely with respect to
the Revolving Credit Loans made to, or L/Cs issued for the
benefit of, the CAN Borrower:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the CAN Borrower to the Agent or any
Lender, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the CAN Borrower to the Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by the Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, contingent, or
of any other type, nature, or description, or by reason of any
cause of action which the Agent or any Lender may hold against
the CAN Borrower.
(c) All notes and other obligations of the CAN
Borrower now or hereafter assigned to or held by the Agent or
any Lender, each of every kind, nature, and description.
(d) All interest, fees, and charges and other amounts
which may be charged by the Agent or any Lender to the CAN
Borrower and/or which may be due from the CAN Borrower to the
Agent or any Lender from time to time.
(e) All costs and expenses incurred or paid by the
Agent or any Lender in respect of any agreement between the
CAN Borrower and Agent or any Lender or any instrument
furnished by the CAN Borrower to the Agent or any Lender
(including, without limitation, Costs of Collection,
attorneys' reasonable fees, and all court and litigation costs
and expenses).
(f) Any and all covenants of the CAN Borrower to or
with the Agent or any Lender and any and all obligations of
the CAN Borrower to act or to refrain from acting in
accordance with any agreement between the CAN Borrower and the
Agent or any Lender or instrument furnished by the CAN
Borrower to the Agent or any Lender.
"CAN DOLLAR COMMITMENT": As provided in the Definition of "CAN
Commitment," above.
"CAN FUNDING ACCOUNT": Is defined in Section 7-3.
"CAN PLAN": Any pension or other similar employee benefit plan
which is subject to Canadian law and which is: (a) a plan
maintained by the Parent or any of its Subsidiaries; (b) a
plan to which the Parent or any of its Subsidiaries
contributes or is required to contribute; (c) a plan to which
the Parent or any of its Subsidiaries was required to make
contributions at
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any time during the five (5) calendar years
preceding the date of this Agreement; or (d) any other plan
with respect to which the Parent or any of its Subsidiaries
has incurred or may incur liability, including contingent
liability, either to such plan or to any Person.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence
of liabilities which may be capitalized in accordance with
GAAP.
"CAPITAL LEASE": Any lease which may be capitalized in accordance with
GAAP.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) The acquisition, by any group of persons (within
the meaning of the Securities Exchange Act of 1934, as
amended) or by any Person, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission) of 20% or more of the issued and outstanding
capital stock of the Parent having the right, under ordinary
circumstances, to vote for the election of directors of the
Parent.
(b) More than half of the persons who were directors
of the Parent on the first day of any period consisting of
Twelve (12) consecutive calendar months (the first of which
Twelve (12) month periods commencing with the first day of the
month during which the within Agreement was executed), cease,
for any reason other than death or disability, to be directors
of the Parent.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"COLLATERAL": Is defined in Section 8-1.
"COMMITMENT FEE": Is defined in Section 2-12.
"COMMITMENT"" Subject to Section 2-22, as of the date of this
Agreement, as follows:
LENDER DOLLAR COMMITMENT COMMITMENT PERCENTAGE
BankBoston $80,000,000.00 100%
Retail Finance
Inc.
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"CONCENTRATION ACCOUNT": Is defined in Section 7-3.
"CONSOLIDATED": The consolidation, in accordance with GAAP, of a
financial term, test, statement or report (as appropriate) of
the Borrowers or the Obligors (as the case may be).
"CONTRACTUAL CURRENCY": Is defined in Section 14-16.
"COST": The lower of:
(a) The calculated cost of purchases, as determined
from invoices received by the Borrowers, the Borrowers'
purchase journal or stock ledger, based upon the Borrowers'
accounting practices, known to the Agent, which practices are
in effect on the date on which this Agreement was executed; or
(b) The lowest ticketed or promoted price at which
the subject Inventory is offered to the public, after all
▇▇▇▇-▇▇▇▇▇ (whether or not such price is then reflected on the
Borrowers' accounting system).
"Cost" does not include inventory capitalization costs or
other non-purchase price charges (such as freight) used in the
Borrowers' calculation of costs of goods sold, except that the
Cost of Inventory shall include the capitalization costs
relating to sunglass cases sold with products.
"COSTS OF COLLECTION": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred
by the Agent's and any Lender's attorneys, and all reasonable
costs incurred by the Agent or any Lender in the
administration of the Liabilities and/or the Loan Documents,
including, without limitation, reasonable costs and expenses
associated with travel on behalf of the Agent or any Lender
(limited, however, prior to the occurrence of a Suspension
Event to those in connection with the monitoring of the
Borrowers and the Collateral and continuing due diligence in
connection therewith), which costs and expenses are directly
or indirectly related to or in respect of the Agent's and any
Lender's: administration and management of the Liabilities;
negotiation, documentation, and amendment of any Loan
Document; or efforts to preserve, protect, collect, or enforce
the Collateral, the Liabilities, and/or the Agent's Rights and
Remedies and/or any of the Agent's rights and remedies against
or in respect of any guarantor or other person liable in
respect of the Liabilities (whether or not suit is instituted
in connection with such efforts). The Costs of Collection are
Liabilities, and at the Agent's
14
option may bear interest at
the highest post-default rate which the Agent may charge the
Borrowers hereunder as if such had been lent, advanced, and
credited by the Agent to, or for the benefit of, the
Borrowers.
"DDA": Any checking or other demand daily depository account
maintained by any of the Obligors.
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in the UCC ,
and "documents of title" as defined in the PPSA.
"DOLLAR COMMITMENT": As provided in the Definition of
"Commitment", above.
"DOMESTIC SUBSIDIARY or "DOMESTIC SUBSIDIARIES": Any Subsidiary
organized under the laws of, or having a place of business in,
the United States of America, or any state or political
subdivision thereof.
"EARLY TERMINATION FEE": Is defined in Section 2-14.
"ELIGIBLE TAX REFUND": The unpaid balance of the federal income tax
refund due to the Parent for the tax year ending January 31,
1998, in the estimated amount of $12,000,000.00. The amount of
the Eligible Tax Refund shall be reduced by any payments
received by any Obligor with respect thereto. In any event,
after the earliest of the receipt of payment of the entire tax
refund, ninety days after the filing of the Borrowers' tax
return for the tax year ending January 31, 1998, or December
31, 1998 (regardless of whether any payment is received), the
Eligible Tax Refund shall be zero.
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale
15
of accounts receivable or chattel paper; or other arrangement
pursuant to which any Person is entitled to any preference or
priority with respect to the property or assets of another
Person or the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under the
UCC, the PPSA, or comparable law of any jurisdiction.
"END DATE": The date upon which both (a) all Liabilities have been
paid in full and (b) all obligations of any Lender to make
loans and advances and to provide other financial
accommodations to the Borrowers hereunder shall have been
irrevocably terminated.
"ENVIRONMENTAL LAWS": All of the following:
(a) Any and all United States
or Canadian federal, state, provincial, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements which regulate or relate to, or impose
any standard of conduct or liability on account of or in
respect to environmental protection matters, including,
without limitation, Hazardous Materials, as are now or
hereafter in effect.
(b) The common law relating to
damage to Persons or property from Hazardous Materials.
"EQUIPMENT": Includes, without limitation, "equipment" as defined in
the UCC, "equipment" as defined in the PPSA, and also all
motor vehicles, rolling stock, machinery, office equipment,
plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are
used and/or were purchased for use in the operation or
furtherance of the Borrowers' business, and any and all
accessions or additions thereto, and substitutions therefor.
"ERISA": The Employee Retirement Security Act of 1974, as amended, and
any analogous Canadian (federal or provincial) law or statute.
"ERISA AFFILIATE": Any Person which is under common control with the
Borrowers within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrowers and which would
be treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended.
16
"EVENTS OF DEFAULT": Is defined in Article 10.
"EXECUTIVE AGREEMENT": Any agreement or understanding (whether or
not written) to which any Obligor is a party or by which any
Obligor may be bound, which agreement or understanding relates
to Executive Pay.
"EXECUTIVE OFFICER": ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
"EXECUTIVE PAY": All salary, bonuses, and other value directly or
indirectly provided by or on behalf of any Obligor to or for
the benefit of any Executive Officer or any Affiliate, spouse,
parent, or child of any Executive Officer.
"FEE LETTER": That letter, styled the "Fee Letter" between the US
Borrowers and the Agent, as such letter may from time to time
be amended.
"FIXTURES": Has the meaning given that term in the UCC.
"FUNDING ACCOUNT": Is defined in Section 7-3.
"GAAP": Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that
accounting period in respect of which reference to GAAP is
being made, PROVIDED, HOWEVER, in the event of a Material
Accounting Change, then unless otherwise specifically agreed
to by the Agent, the Borrowers shall include, with its
monthly, quarterly, and annual financial statements a
schedule, certified by the Lead Borrower's chief financial
officer, on which the effect of such Material Accounting
Change to the statement with which provided shall be
described.
"GENERAL INTANGIBLES": Includes, without limitation, "general
intangibles" as defined in the UCC; "intangibles" as defined
in the PPSA; and also all: rights to payment for credit
extended; deposits; amounts due to any Obligor; credit
memoranda in favor of any Obligor; warranty claims; tax
refunds and abatements; insurance refunds and premium rebates;
all means and vehicles of investment or hedging, including,
without limitation, options, warrants, and futures contracts;
records; customer lists; telephone numbers; goodwill; causes
of action; judgments; payments under any settlement or other
agreement; literary rights; rights to performance; royalties;
license and/or franchise fees; rights of admission;
17
licenses; franchises; license agreements, including all rights
of any Obligor to enforce same; permits, certificates of
convenience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents
pending, and other intellectual property; internet addresses
and domain names; developmental ideas and concepts;
proprietary processes; blueprints, drawings, designs,
diagrams, plans, reports, and charts; catalogs; manuals;
technical data; computer software programs (including the
source and object codes therefor), computer records, computer
software, rights of access to computer record service bureaus,
service bureau computer contracts, and computer data; tapes,
disks, semi-conductors chips and printouts; trade secrets
rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and
other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; applications for
registration of the foregoing; and all other general
intangible property of any Obligor in the nature of
intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts
or ideas, and any matter related to, or connected with, the
design, development, manufacture, sale, marketing, leasing, or
use of any or all property produced, sold, or leased, by any
Obligor or credit extended or services performed, by any
Obligor, whether intended for an individual customer or the
general business of any Obligor, or used or useful in
connection with research by any Obligor.
"GOODS": Has the meaning given that term in the UCC, and "goods"
within the meaning of the PPSA.
"GUARANTORS": Each of (a) the Parent and its direct and indirect
Domestic Subsidiaries, and (b) as to each US Borrower, each
other US Borrower.
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous
waste, hazardous or toxic substances, petroleum products,
which (as to any of the foregoing) are defined or regulated as
a hazardous material in or under any Environmental Law and (b)
oil in any physical state.
"HOST STORES": Those Persons in whose premises the Borrowers operate
leased or licensed departments.
"INDEBTEDNESS": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
18
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
(d) On account of deposits or advances.
(e) As lessee under Capital Leases.
"INDEBTEDNESS" also includes:
(x) Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or
not such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or
other undertaking pursuant to which that Person may
be liable on account of any obligation of any third
party.
(z) The Indebtedness of a partnership or
joint venture in which such Person is a general
partner or joint venturer.
"INDEMNIFIED PERSON": Is defined in Section 14-11.
"INSTRUMENTS": Has the meaning given that term in the UCC, and
"instrument" as defined in the PPSA.
"INTEREST PAYMENT DATE": With reference to:
(a) Each LIBOR Loan: (i) Having an Interest Period of
one, two or three months, the last day of the Interest Period
relating thereto; the Termination Date, and the End Date; (ii)
Having an Interest Period of six months, the last day of the
third month of such Interest Period, the last day of the
Interest Period, the Termination Date and the End Date.
(b) Each Base Margin Loan: the first day of
each month; the Termination Date; and the End Date.
19
"INTEREST PERIOD": (a) With respect to each LIBOR Loan:
Subject to Subsection (c), below, the period commencing on the
date of the making or continuation of, or conversion to, such
LIBOR Loan and ending on the day which corresponds numerically
to such date, one, two, three or six months thereafter, as the
Lead Borrower may elect by notice to the Agent.
(b) With respect to each Base Margin Loan:
Subject to Subsection (c), below, the period commencing on the
date of the making or continuation of or conversion to such
Base Margin Loan and ending on that date (i) as of which the
subject Base Margin Loan is converted to a LIBOR Loan, as the
Lead Borrower may elect by notice to the Agent, or (ii) on
which the subject Base Margin Loan is paid by the Borrowers.
(c) The setting of Interest Periods is in all
instances subject to the following: (i) Any
Interest Period for a Base Margin Loan which
would otherwise end on a day which is not a
Business Day shall be extended to the next
succeeding Business Day.
(ii) Any Interest Period for a LIBOR Loan
which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is
in the next calendar month, in which event such
Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Subject to Subsection (v), below, any
Interest Period applicable to a LIBOR Loan, which
Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month
during which such Interest Period ends, shall end on
the last Business Day of the month during which that
Interest Period ends.
(iv) Any Interest Period which would
otherwise end after the Termination Date shall end on
the Termination Date.
(v) No Interest Period applicable to a LIBOR
Loan may be less than one (1) month.
(vi) The number of Interest Periods
applicable to LIBOR Loans in effect at any one time
is subject to Section 2-9 hereof.
"INVENTORY": Includes, without limitation, "inventory" as defined in
the UCC, "inventory" as defined in the PPSA, and also all:
packaging, advertising, and shipping materials related to any
of the foregoing, and all names or marks affixed or to be
affixed thereto for identifying or selling the same; Goods
held for sale or lease or furnished or to be
20
furnished under a contract or contracts of sale or service by
the Borrowers, or used or consumed or to be used or consumed
in the Borrowers' business; Goods of said description in
transit: returned, repossessed and rejected Goods of said
description; and all documents (whether or not negotiable)
which represent any of the foregoing.
"INVENTORY ADVANCE RATE": Seventy-five percent (75%).
"INVENTORY RESERVES": Such Reserves as may be established from
time to time by the Agent in the Agent's reasonable discretion
with respect to the determination of a change in the
salability, at retail, of the Acceptable Inventory or a change
in other factors as affect the market value of the Acceptable
Inventory. Without limiting the generality of the foregoing,
Inventory Reserves may include (but are not limited to)
reserves based on changes in the following:
(i) Obsolescence (determined based upon
Inventory on hand beyond a given
number of days).
(ii) Seasonality.
(iii) Shrinkage (based upon the actual
amounts reflected in the Borrowers'
stock ledger).
(iv) Imbalance.
(v) Inventory character.
(vi) Inventory composition
(vii) Inventory mix.
(viii) Markdowns (both permanent and point
of sale)
(ix) Retail markons and markups
inconsistent with prior period
practice and performance; industry
standards; current business plans;
or advertising calendar and planned
advertising events.
(x) Return to Vendors (based upon the
actual amounts reflected in the
Borrowers' stock ledger).
(xi) Damage.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": The issuer of any L/C.
"L/C": Any letter of credit, the issuance of which is procured by
the Agent for the account of any Borrower and any acceptance
made on account of such letter of credit.
21
"L/C LANDING COSTS": To the extent not included in the Stated
Amount of an L/C, customs, duty, freight, and other
out-of-pocket costs and expenses which will be expended to
"land" the Inventory, the purchase of which is supported by
such L/C.
"LEAD BORROWER": Is defined in the Preamble.
"LEASE": Any lease or other agreement, no matter how styled or
structured, pursuant to which any Obligor is entitled to the
use or occupancy of any space.
"LEASEHOLD INTEREST": Any interest of any Obligor as lessee under
any Lease.
"LENDERS": Defined in the Preamble to the within Agreement
"LIABILITIES" (in the singular, "LIABILITY"): Includes, without
limitation, all and each of the following, whether now
existing or hereafter arising:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrowers to the Agent or any
Lender, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrowers to the Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by the Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, contingent, or
of any other type, nature, or description, or by reason of any
cause of action which the Agent or any Lender may hold against
the Borrowers.
(c) All notes and other obligations of the
Borrowers now or hereafter assigned to or held by the Agent or
any Lender, each of every kind, nature, and description.
(d) All interest, fees, and charges and other amounts
which may be charged by the Agent or any Lender to the
Borrowers and/or which may be due from the Borrowers to the
Agent or any Lender from time to time.
(e) All costs and expenses incurred or paid by the
Agent or any Lender in respect of any agreement between the
Borrowers and Agent or any the Lender or instrument furnished
by the Borrowers to the Agent or any Lender (including,
without limitation, Costs of Collection, attorneys' reasonable
fees, and all court and litigation costs and expenses).
(f) Any and all covenants of the Borrowers to or with
the Agent or any Lender and any and all obligations of the
Borrowers to act or to refrain from acting in
22
accordance with any agreement between the Borrowers and the
Agent or any Lender or instrument furnished by the Borrowers
to the Agent or any Lender.
"LIBOR BUSINESS DAY": Any day which is both a Business Day and a
day on which the principal interbank market for LIBOR deposits
in London in which BankBoston, N.A. participates is open
for dealings in United States Dollar deposits.
"LIBOR LOAN": Any Revolving Credit Loan which bears interest at a
LIBOR Rate.
"LIBOR OFFER RATE": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the Agent to
be the highest prevailing rate per annum at which deposits in
U.S. Dollars are offered to BankBoston, N.A., by first-class
banks in the London interbank market in which BankBoston, N.A.
participates at or about 10:00AM (Boston Time) Two (2) LIBOR
Business Days before the first day of the Interest Period for
the subject LIBOR Loan, for a deposit approximately in the
amount of the subject loan for a period of time approximately
equal to such Interest Period.
"LIBOR MARGIN": From the date of this Agreement through April 30,
1999, 150 basis points. Thereafter, the LIBOR Margin shall be
adjusted based upon the consolidated financial condition and
operating performance of the Obligors as reflected in the
financial statements delivered to the Agent pursuant to
Section 5-8 hereof, at the times and in accordance with the
provisions of the Pricing Grid annexed hereto as Exhibit 1-2.
"LIBOR RATE": That per annum rate determined as the aggregate of the
LIBOR Offer Rate plus the LIBOR Margin EXCEPT THAT, in the
event that it is determined by the Agent that any Lender may
be subject to the Reserve Percentage, the "LIBOR Rate" shall
mean, with respect to any LIBOR Loans then outstanding (from
the date on which that Reserve Percentage first became
applicable to such loans), and with respect to all LIBOR Loans
thereafter made, an interest rate per annum equal the sum of
(a) plus (b), where:
(a) is the decimal equivalent of the
following fraction:
LIBOR OFFER RATE
----------------
1 minus Reserve Percentage
(b) the applicable LIBOR Margin.
23
"LINE FEE": Is defined in Section 2-13.
"LOAN ACCOUNT": Is defined in Section 2-7.
"LOAN CEILING": Eighty Million U.S. Dollars ($80,000,000.00) through
January 31, 1999 and Sixty-Five Million U.S. Dollars
($65,000,000.00) thereafter, subject, in each case to
reduction in accordance with the provisions of Section 2-9
hereof.
"LOAN DOCUMENTS": The within Agreement, each instrument and document
executed and/or delivered as contemplated by Article 3, below,
and each other instrument or document from time to time
executed and/or delivered in connection with the arrangements
contemplated hereby, as each may be amended from time to time.
"LOCAL DDA": Depository accounts maintained by the Borrowers, the
only contents of which may be transfers FROM the Funding
Account and actually used solely (i) for ▇▇▇▇▇ cash purposes;
or (ii) for payroll.
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
accounting periods subsequent to the Borrowers' fiscal year
most recently completed prior to the execution of the within
Agreement, which change has a material effect on the
Borrowers' financial condition or operating results, as
reflected on financial statements and reports prepared by or
for the Borrowers, when compared with such condition or
results as if such change had not taken place.
"MATURITY DATE": April 28, 2001.
"NORTH AMERICA": Collectively, Sunglass Hut Trading Corporation and
the CAN Borrower.
"OBLIGORS": Subject to the provisions of Section 14-19, the Borrowers
and the Guarantors.
"PPSA": The Personal Property Security Act (Ontario), as amended from
time to time.
"PARENT": Is defined in the Preamble.
"PARTICIPANT": Is defined in Section 14-14, hereof.
24
"PERMITTED ENCUMBRANCES": Those Encumbrances permitted as provided in
Section 4-6(a) hereof.
"PERSON": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other
enterprise or entity.
"PROCEEDS": Includes, without limitation, "Proceeds" as defined in the
UCC (defined below) and the PPSA, and each type of property
described in Section 8-1 hereof.
"QUALIFIED REFINANCING": A refinancing of all or any portion of the
Liabilities by any Obligor with a Person other than
BankBoston, as to which refinancing BankBoston has exercised
the Right of First Refusal and provided an alternative
commitment on terms and conditions substantially equal to
those set forth in such offer for refinancing and such Obligor
has nevertheless determined to proceed with the refinancing
with such other Person. A Qualified Refinancing shall not
include the repayment of the Liabilities with the proceeds of
a public debt or equity offering by the Parent or a so-called
Rule 144A offering.
"RECEIPTS": All cash, cash equivalents, checks, and credit card slips
and receipts as arise out of the sale of the Collateral.
"RECEIVABLES COLLATERAL": That portion of the Collateral which consists
of the Obligors' Accounts, Accounts Receivable, contract
rights, General Intangibles, Chattel Paper, Instruments,
Documents of Title, Documents, Investment Property, letters of
credit for the benefit of the Obligors, and bankers'
acceptances held by any Obligor, and any rights to payment.
"RELATED ENTITY": (a) Any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise which:
is a parent, brother-sister, Subsidiary, or Affiliate, of any
Borrower; could have such enterprise's tax returns or
financial statements consolidated with the Borrowers'; could
be a member of the same controlled group of corporations
(within the meaning of Section 1563(a)(1), (2) and (3) of the
Internal Revenue Code of 1986, as amended from time to time)
of which any Borrower is a member; controls or is controlled
by any Borrower or by any Affiliate of any Borrower.
(b) Any Affiliate.
"REQUIREMENT OF LAW": As to any Person:
25
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"RESERVE PERCENTAGE": The decimal equivalent of that rate applicable to
a Lender under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Lender
with respect to "Eurocurrency liabilities" as defined in such
regulations. The Reserve Percentage applicable to a particular
LIBOR Loan shall be based upon that in effect during the
subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to
take effect (and to consequently change any interest rate
determined with reference to the Reserve Percentage) if and
when such change is applicable to such loans. As of the date
hereof, the Agent acknowledges that the Reserve Percentage is
zero.
"RESERVES": All (if any) Availability Reserves and Inventory Reserves.
"REVOLVING CREDIT": Is defined in Section 2-1.
"REVOLVING CREDIT NOTE": Is defined in Section 2-8.
"RIGHT OF FIRST REFUSAL": The right of BankBoston to match any offer
received by any Obligor during the one-year period commencing
on the date hereof for the refinancing of all or any portion
of the Liabilities by a Person other than BankBoston.
"STATED AMOUNT": The maximum amount for which an L/C may be honored.
"SUBORDINATED DEBT": The promissory notes issued, and other obligations
due or to become due, under the Indenture dated as of June 26,
1996 between the Parent and The Bank of
26
New York, as Trustee relating to the Parent's 53% Convertible
Subordinated Notes due 2003.
"SUBSIDIARY" or "SUBSIDIARIES": (a) Any corporation or limited
liability company of which more than fifty percent (50%) of
the issued and outstanding securities having ordinary voting
power for the election of directors or membership interests is
owned or controlled, directly or indirectly, by a Person
and/or by one or more of its Subsidiaries, and (b) any
partnership in which a Person and/or one or more Subsidiaries
of such Person shall have a general partnership interest or
any other interest (whether in the form of voting or
participation in profits or capital contribution), in each
case, of more than fifty percent (50%).
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) would become an Event
of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence,
circumstance, or state of facts were not absolutely cured
within any applicable grace period.
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10-11 hereof; or
(c) date set by notice by the Agent to the Lead Borrower,
which notice sets the Termination Date on account of the
occurrence of any Event of Default other than as described in
Section 10-11 hereof.
"UCC": The Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106).
"US BORROWER(S)": Is defined in the Preamble.
"WATCH STATION": Watch Station, Inc.
ARTICLE 2 - THE REVOLVING CREDIT
2-1. ESTABLISHMENT OF REVOLVING CREDIT
(a) The Lenders hereby establish a revolving line of credit
(the "REVOLVING CREDIT") in the Borrowers' favor pursuant to which each Lender,
subject to, and in accordance with, the within Agreement, acting through the
Agent, shall make loans and advances and otherwise provide financial
accommodations to and for the account of the Borrowers as provided herein, in
each instance equal to that Lender's Commitment Percentage of Availability or
CAN Availability, as applicable, up to the
27
maximum amount of that Lender's Dollar Commitment or CAN Dollar Commitment, as
applicable. The amount of the Revolving Credit shall be determined by the Agent
by reference to Availability or CAN Availability, as applicable, as determined
by the Agent from time to time hereafter. All loans made under this Agreement,
and all of the Borrowers' other Liabilities, are payable as provided herein.
(b) As used herein, the term "AVAILABILITY" refers at
any time to the lesser of (i) or (ii), below, where:
(i) Is the result of:
(A) The Loan Ceiling.
MINUS
(B) The then unpaid principal balance of the Loan Account.
MINUS
(C) The then aggregate of such Availability Reserves as may have been
reasonably established by the Agent as provided herein.
MINUS
(D) The then outstanding Stated Amount
of all L/C's.
MINUS
(E) L/C Landing Costs.
(ii) Is the result of:
(A) The Inventory Advance Rate of the Cost of Acceptable Inventory of the
US Borrowers.
PLUS
(B) Eighty-Five Percent (85%) of the Eligible Tax Refund.
MINUS
(C) The then unpaid principal balance of the Loan Account (exclusive of
the CAN Debt).
MINUS
(D) The then aggregate of such
Availability Reserves as may have
been reasonably established by the
Agent as provided herein.
MINUS
(E) The then outstanding Stated Amount
of all L/C's.
MINUS
(F) L/C Landing Costs.
(c) As used herein, the term "CAN Availability" refers
at any time to the lesser of (i) or (ii) below, where:
28
(i) Is the result of:
(A) The Loan Ceiling.
MINUS
(B) The then unpaid principal balance of the Loan Account.
MINUS
(C) The then aggregate of such Availability Reserves as may have been
reasonably established by the Agent as provided herein.
MINUS
(D) The then outstanding Stated Amount
of all L/C's.
MINUS
(E) L/C Landing Costs.
(ii) Is the result of:
(A) The Inventory Advance Rate of the Cost of Acceptable Inventory of the
CAN Borrower.
MINUS
(B) The then unpaid principal balance of the CAN Debt.
MINUS
(C) The then aggregate of such Availability Reserves as may have been
reasonably established by the Agent as provided herein.
MINUS
(D) The then outstanding Stated Amount of all L/C's issued for the CAN
Borrower.
MINUS
(E) L/C Landing Costs related to the CAN
Borrower.
(d) Availability and CAN Availability shall be based upon
Borrowing Base Certificates furnished as provided in Section 5-4 hereof.
(e) The proceeds of borrowings under the Revolving Credit
shall be used solely in accordance with the Business Plan for (i) working
capital purposes of the Borrowers, for general corporate purposes and for
Capital Expenditures, all solely to the extent not expressly prohibited by the
within Agreement and (ii) subject to the provisions of this Agreement, for loans
to the Parent to be utilized by the Parent for the repurchase of the Parent's
capital stock or options for the purchase or sale of such stock, provided that
no Revolving Credit Loans shall be made for the purposes described in this
clause (e)(ii) unless Availability after giving effect to such Revolving Credit
Loans is not less than $5,000,000.00.
29
(f) Notwithstanding anything to the contrary herein contained,
the Lenders shall not be obligated to make any loans under the Revolving Credit
to the CAN Borrower unless and until, and at such times as, the US Borrowers
have no Availability.
2-2. INITIAL RESERVES, CHANGES TO RESERVES
(a) At the execution of the within Agreement, the only
Reserves are as follows:
(i) Shrinkage (an Inventory Reserve): An amount
equal to 1.2% of the total retail sales of the US Borrowers or CAN Borrower, as
applicable, made after the date of the immediately preceding physical count of
such Borrower's Inventory. The Reserve for Shrinkage shall be adjusted daily
based upon the immediately preceding days' sales and shall be reset after the
results of each physical count of such Borrower's Inventory have been furnished
to the Agent.
(ii) Return to Vendors and Damage (an Inventory
Reserve): The amount posted to the stock ledger of the US Borrowers or the CAN
Borrower, as applicable, for such items. The Borrowers agree to accurately post
such items to the stock ledger daily, absent which the Agent may establish a
Reserve hereunder as the Agent in its reasonable discretion determines.
(iii) Canadian Provincial and Governmental Sales
Taxes (an Availability Reserve, but only with respect to loans based upon the
Inventory of the CAN Borrower): The amount posted to the general ledger of the
CAN Borrower for such items. The CAN Borrower agrees to accurately post such
items to the general ledger daily, absent which the Agent may establish a
Reserve hereunder as the Agent in its reasonable discretion determines.
(iv) Canadian Pension withholding Liability
(an Availability Reserve, but only with respect to loans based upon the
Inventory of the CAN Borrower): The amount posted to the general ledger of the
CAN Borrower for such items. The CAN Borrower agrees to accurately post such
items to the general ledger daily, absent which the Agent may establish a
Reserve hereunder as the Agent in its reasonable discretion determines.
(b) The Agent shall not establish any Reserve, other than the
Reserves referenced in Section 2-2(a) above, except in the exercise of the
Agent's reasonable discretion and then only upon not less than six (6) Business
Days prior notice to the Lead Borrower in each instance. Except as provided in
Section 2-2(a), above, a change to a then existing Reserve may be made only with
not less than six (6) Business Days prior notice to the Lead Borrower, EXCEPT
THAT a change to a then existing Reserve, which change reflects changed
circumstances of which any Borrower has knowledge (such as a change in the
aggregate of Gift Certificates then outstanding), may be made without such
notice. Except as provided in Section 2-2(a) above, in no event shall any
Availability Reserve exceed the actual amounts for such item reflected in the
Borrowers' books and records.
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2-3 ADVANCES IN EXCESS OF BORROWING BASE. No Lender has any obligation
to make any loan or advance, or otherwise to provide any credit for the benefit
of the US Borrowers such that the balance of the Loan Account (exclusive of the
CAN Debt) exceeds the Borrowing Base or to the CAN Borrower such that the CAN
Debt exceeds the CAN Borrowing Base. The making of loans, advances, and credits
and the providing of financial accommodations in excess of the Borrowing Base or
the CAN Borrowing Base, as applicable, is for the benefit of the Borrowers and
does not affect the obligations of the Borrowers hereunder; such loans,
advances, credits, and financial accommodations constitute Liabilities. The
making of any such loans, advances, and credits and the providing of financial
accommodations, on any one occasion such that the Borrowing Base or the CAN
Borrowing Base, as applicable, is exceeded, shall not obligate any Lender to
make any such loans, credits, or advances or to provide any financial
accommodation on any other occasion or permit such loans, credits, or advances
to remain outstanding.
2-4. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given
asset in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Agent or any Lender relative to the actual value of the
asset in question. All risks concerning the are and remain upon the Borrowers.
All Collateral secures the prompt, punctual, and faithful performance of the
Liabilities whether or not relied upon by the Agent or by any Lender in
connection with the making of loans, credits, and advances and the providing of
financial accommodations under the Revolving Credit, PROVIDED THAT any
Collateral granted by the CAN Borrower shall only secure the CAN Debt.
2-5. LOAN REQUESTS
(a) Subject to the provisions of the within Agreement, a loan
or advance under the Revolving Credit duly and timely requested by the Lead
Borrower shall be made pursuant hereto, PROVIDED THAT:
(i) The Borrowing Base or the CAN Borrowing
Base, as applicable, will not be exceeded; and
(ii) The Revolving Credit has not been suspended
as provided in Section 2-5(h).
(b) Subject to the provisions of the within Agreement,
the Lead Borrower may request a Revolving Credit Loan and elect an interest rate
and Interest Period to be applicable to that Revolving Credit Loan by giving the
Agent written notice or telephonic notice confirmed in writing (in the form of
EXHIBIT 2-5 hereof) no later than the following:
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(i) If such Loan is or is to be converted to a Base
Margin Loan: By 1:30 PM on the Business Day on which the subject
Revolving Credit Loan is to be made or is to be so converted.
(ii) If such Loan is or is to be continued as a LIBOR
Loan: By 1:00 PM Three (3) Business Days before the end of the then
applicable Interest Period or before the day on which such Loan is to
be made.
(iii) If such Loan is to be converted to a LIBOR
Loan: By 1:00PM Three (3) Business Days before the day on which such
conversion is to take place.
(c) (i) Base Margin Loans and conversions to Base
Margin Loans shall be in a minimum amount of $10,000.00 each.
(ii) LIBOR Loans and conversions to LIBOR Loans shall
each be not less than $1,000,000.00 and $500,000.00 increments in
excess of such minimum.
(d) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made at the
opening of business on the then next Business Day or LIBOR Business Day, as
applicable.
(e) The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of the Borrowers as provided in Section 2-17.
(f) The Agent may rely on any request for a loan or advance,
or other financial accommodation under the Revolving Credit which the Agent, in
good faith, believes to have been made by a person duly authorized to act on
behalf of the Lead Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation pending the
Agent's being furnished with such documentation concerning that person's
authority to act as may be satisfactory to the Agent.
(g) A request by the Lead Borrower for loan or advance, or
other financial accommodation under the Revolving Credit shall be irrevocable
and shall constitute certification by the Lead Borrower that as of the date of
such request, each of the following is true and correct:
(i) There has been no material adverse change in the
consolidated financial condition of the Obligors from the most recent
financial information furnished Agent or any Lender pursuant to this
Agreement, except as reflected in the Parent's press releases since
January 31, 1998 (copies of which have been furnished the Agent).
(ii) Each Obligor is in compliance with, and has
not breached any of, its material covenants contained in this
Agreement.
(iii) If and to the extent necessary, all or a
portion of any loan or advance so requested will be used by the
Borrowers to cover all of the Borrowers' obligations for sales tax on
account of sales since the then most recent borrowing pursuant to the
Revolving Credit.
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(iv) Each representation which is made herein or in
any of the Loan Documents (defined below) is then true and complete in
all material respects as of and as if made on the date of such request.
(v) No Suspension Event is then extant.
(h) Upon the occurrence from time to time of any
Suspension Event:
(i) The Agent may suspend the Revolving Credit
immediately.
(ii) Neither the Agent nor any Lender shall be
obligated, during such suspension, to make any loans or advance, or to
provide any financial accommodation hereunder or to seek the issuance
of any L/C.
(iii) The Agent may suspend the right of the Lead
Borrower to request or continue LIBOR Loans or to convert Base Margin
Loans to LIBOR Loans.
2-6. MAKING OF LOANS UNDER REVOLVING CREDIT
(a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Funding Account
or CAN Funding Account, as applicable, or as otherwise instructed by the Lead
Borrower.
(b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrowers shall be indebted to the Agent for the
amount thereof immediately (provided that the CAN Borrower shall be indebted
only for the CAN Debt)) at the following:
(i) The Lead Borrower's or the CAN Borrower's (as
applicable) receipt of the transfer of the proceeds of such loan or
advance in accordance with the Lead Borrower's instructions (if such
loan or advance is of funds requested by the Lead Borrower).
(ii) The charging of the amount of such loan to
the Loan Account (in all other circumstances).
(c) Except in the case of gross negligence or willful
misconduct, there shall not be any recourse to or liability of the Agent or any
Lender, on account of:
(i) Any delay in the making of any loan or
advance requested under the Revolving Credit.
(ii) Any delay in the proceeds of any such loan
or advance constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit,
the wire transfer of which was properly initiated by the Agent in
accordance with wire instructions provided to the Agent by the Lead
Borrower.
2-7. THE LOAN ACCOUNT
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(a) An account ("LOAN ACCOUNT") shall be opened on the books
of the Agent. A record may be kept in the Loan Account of all loans made under
or pursuant to this Agreement to the US Borrowers and the CAN Borrower,
respectively, and of all payments thereon.
(b) The Agent shall also keep a record (either in the Loan
Account or elsewhere, as the Agent may from time to time elect) of all interest,
fees, service charges, costs, expenses, and other debits owed the Lender on
account of the Liabilities and of all credits against such amounts so owed
(including separate records for the CAN Debt).
(c) All credits against the Liabilities shall be conditional
upon final payment to the Agent for the Account of each Lender of the items
giving rise to such credits. The amount of any item credited against the
Liabilities which is charged back against Agent or any Lender for any reason or
is not so paid shall be a Liability and shall be added to the Loan Account,
whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrowers are obligated hereunder are
payable on demand. In the determination of Availability and CAN Availability,
the Agent may deem fees, service charges, accrued interest, and other payments
as having been advanced under the Revolving Credit whether or not such amounts
are then due and payable.
(e) The Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
payment to which the Agent or any Lender is entitled from the Borrowers pursuant
hereto and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in Borrowing Base's or CAN Borrowing Base's, as
applicable, being exceeded. Prompt written notice of any such advance shall be
provided by the Agent to the Parent. Such action on the part of the Agent shall
not constitute a waiver of the Agent's rights and Borrowers' obligations under
Section 2-10(b). Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2-7(e) shall bear interest at the interest
rate applicable from time to time to the unpaid principal balance of the Loan
Account.
(f) Any statement rendered by the Agent or any Lender to the
Lead Borrower concerning the Liabilities shall be considered correct and
accepted by the Obligors and shall, absent fraud or manifest error, be
conclusively binding upon the Obligors unless the Lead Borrower provides the
Agent with written objection thereto within thirty-five (35) days from the
mailing of such statement, which written objection shall indicate, with
particularity, the reason for such objection. The Loan Account and the Agent's
books and records concerning the loan arrangement contemplated herein and the
Liabilities shall be prima facie evidence and proof of the items described
therein, absent fraud or manifest error.
2.8 THE REVOLVING CREDIT NOTES. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "REVOLVING
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CREDIT NOTE") in the form of EXHIBIT 2-8, annexed hereto, executed by
each of the US Borrowers and the CAN Borrower, one payable to each Lender.
Neither the original nor a copy of any Revolving Credit Note shall be required,
however, to establish or prove any Liability. In the event that any Revolving
Credit Note is ever lost, mutilated, or destroyed, the Borrowers shall execute a
replacement thereof and deliver such replacement to the Agent.
2.9 VOLUNTARY REDUCTION OF COMMITMENT AND LOAN CEILING. The US
Borrowers and the CAN Borrower may reduce, or terminate, the Lenders' Commitment
or CAN Commitment, as applicable, pro rata, and the Loan Ceiling, in whole or in
part from time to time, by furnishing three (3) Business Days' written notice to
the Agent. Upon the effective date of any such reduction, (a) the Borrowers
shall pay to the Agent any amounts required by under Section 2-10(b) hereof as a
result of such reduction or termination and (b) the US Borrowers shall pay to
the Agent the accrued Line Fee as of the date of such reduction or termination.
No reduction or termination of the Commitment, the CAN Commitment or the Loan
Ceiling may be reinstated.
2.10. PAYMENT OF THE LOAN ACCOUNT
(a) The Borrowers may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date. Such payments shall be applied first to Base Margin Loans and (subject to
Section 2-10(e)) only then to LIBOR Loans.
(b) The Borrowers, without notice or demand from the Agent or
any Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed the
Borrowing Base or the unpaid balance of the CAN Debt does not exceed the CAN
Borrowing Base (provided that the CAN Borrower shall be indebted only for the
CAN Debt). Such payments shall be applied first to Base Margin Loans and
(subject to Section 2-10(e)) only then to LIBOR Loans.
(c) The Borrowers, without notice or demand from the Agent or
any Lender, shall repay the principal balance of the Loan Account in an amount
equal to the proceeds received from the Eligible Tax Refund and any other
Collateral, all in accordance with the provisions of this Agreement, provided
that, any Collateral granted by the CAN Borrower shall be applied only to the
CAN Debt.
(d) The Borrowers shall repay the then entire unpaid balance
of the Loan Account and all other Liabilities on the Termination Date (provided
that the CAN Borrower shall be indebted only for the CAN Debt).
(e) Upon the written request of any Lender, the Borrowers
shall, jointly and severally, indemnify each Lender and hold each Lender
harmless from and against any reasonable loss, cost or expense (including loss
of anticipated profits) which such Lender may sustain or incur (including,
35
without limitation, by virtue of acceleration after the occurrence of any Event
of Default) as a consequence of
(i) default by the Borrowers in payment of the
principal amount of or any interest on any LIBOR Loans as and when due
and payable, including any such loss or expense arising from interest
or fees payable by such Lender to lenders of funds obtained by it in
order to maintain its LIBOR Loans;
(ii) default by the Borrowers in making a borrowing
or conversion after the Borrower has given (or is deemed to have given)
a request for a LIBOR Loan or a request to convert a Revolving Credit
Loan from one applicable interest rate to another; or
(iii) the making of any payment of a LIBOR Loan or
the making of any conversion of any such Loan to a Base Margin Loan on
a day that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by such Lender to
lenders of funds obtained by it in order to maintain any such Loans as
"breakage fees" (so-called);
(provided that the CAN Borrower shall be indebted only for the CAN Debt).
2-11. INTEREST.
(a) Each Revolving Credit Loan shall bear interest (determined
based on a 365 day year and actual days elapsed) at the Base Margin Rate unless
timely notice is given (as provided in Section 2-5(a)) that the subject
Revolving Credit Loan (or a portion thereof) is, or is to be converted to, a
LIBOR Loan.
(b) Each Revolving Credit Loan which consists of a LIBOR Loan
shall bear interest at the applicable LIBOR Rate.
(c) Subject to the provisions hereof, the Lead Borrower, by
notice to the Agent, may cause all or a part of the unpaid principal balance of
the Loan Account to bear interest at the Base Margin Rate or the LIBOR Rate as
specified from time to time by the Lead Borrower. For ease of reference and
administration, each part of the Loan Account which bears interest at the same
interest and for the same Interest Period is referred to herein as if it were a
separate "Revolving Credit Loan".
(d) The Lead Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit Loan such that there are more than six (6)
Interest Periods applicable to the LIBOR Loans at any one time.
(e) The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears
(i) On the applicable Interest Payment Date for
that Revolving Credit Loan.
(ii) On the Termination Date and on the End Date.
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(iii) Following the occurrence, and during the
continuance, of any Event of Default, with such frequency as may be determined
by the Agent; (provided that the CAN Borrower shall be indebted only for the
CAN Debt)
(f) Following the occurrence, and during the continuance, of
any Event of Default (whether or not the Agent exercises the Agent's rights on
account thereof), all Revolving Credit Loans shall bear interest, at the option
of the Agent, at the aggregate of the Base Margin Rate plus Two Percent (2%) per
annum.
(g) In addition, in the event of the occurrence of any of the
circumstances described in Section 2-20 hereof, and during the continuance
thereof, each Revolving Credit Loan shall bear interest (determined based on a
365 day year and actual days elapsed) at the Base Margin Rate.
2-12. COMMITMENT FEE; ADVISORY/STRUCTURING FEE; AGENT'S FEE.
(a) As compensation for BankBoston's commitments included
herein to make loans and advances to the Borrowers and as compensation for
BankBoston's maintenance of sufficient funds available for such purpose,
BankBoston has earned a COMMITMENT FEE and an ADVISORY/STRUCTURING FEE (so
referred to herein) payable by the US Borrowers at the times and in the amounts
as set forth the Fee Letter.
(b) As compensation for BankBoston's serving as Agent
hereunder, BankBoston has earned an AGENT'S FEE (so referred to herein) payable
by the US Borrowers at the times and in the amounts as set forth the Fee Letter.
2-13. LINE FEE. In addition to any other fee by the Borrowers on
account of the Revolving Credit, the US Borrowers shall pay the Agent a LINE FEE
(so referred to herein) in arrears, on the first day of each month (and on the
Termination Date). The Line Fee shall be equal to 0.375% per annum of the
average daily difference, during the month just ended (or relevant period with
respect to the payment being made on the Termination Date), between the Loan
Ceiling and the sum of (x) the unpaid principal balance of the Loan Account PLUS
(y) the aggregate Stated Amount of all outstanding L/Cs.
2-14. EARLY TERMINATION FEE.
In the event that, prior to the first anniversary of the date
hereof, any Obligor consummates a Qualified Refinancing, for any reason, or in
the event that during such time, the Liabilities are repaid after the
occurrence, and during the continuance of an Event of Default, the US Borrowers
shall pay the Agent an EARLY TERMINATION FEE (so referred to herein) at the
times and in the amounts as set forth the Fee Letter.
2-15 CONCERNING FEES.
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(a) In addition to any other right to which the Agent is then
entitled on account thereof, the Agent may assess an additional fee payable by
the Borrowers on account of the accommodation, from time to time, by the Agent
to the Borrowers' request that the Agent depart or dispense with one or more of
the administrative provisions of the within Agreement and/or the Borrowers'
failure to comply with any of such provisions; provided that the CAN Borrower
shall be responsible only for the CAN Debt.
(i) By way of non-exclusive example, the Agent
may assess a fee on account of any of the following:
(A) The Borrowers' failure to pay that
amount which is necessary so that the principal balance of the
Loan Account does not exceed the Borrowing Base or the CAN
Borrowing Base, as applicable, (as required under Section
2-10(b) hereof).
(B) The providing of a loan or advance under
the Revolving Credit or charging of the Loan Account such that
the Borrowing Base or the CAN Borrowing Base, as applicable,
would be exceeded.
(C) The foreshortening of any of the time
frames with respect to the making of Revolving Credit Loans as
set forth in Section 2-5(b).
(D) The Lead Borrower's failure to provide a
financial statement or report within the applicable time frame
provided for such report under Article 5 hereof.
(ii) The inclusion of the foregoing right on the part
of the Agent to assess a fee does not constitute an obligation, on the
part of the Agent, to waive any provision of the within Agreement under
any circumstances. The assessment of any such fee in any particular
circumstance shall not constitute the Agent's waiver of any breach of
the within Agreement on account of which such fee was assessed nor a
course of action on which the Borrowers may rely.
(b) The Borrowers shall not be entitled to any credit, rebate
or repayment of the Commitment Fee, Advisory/Structuring Fee, Line Fee, Early
Termination Fee, or other fee previously earned by the Agent or any Lender
pursuant to this Agreement notwithstanding any termination of the within
Agreement or suspension or termination of the Agent's and any Lender's
respective obligation to make loans and advances hereunder.
2-16. AGENT'S AND LENDERS' DISCRETION
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by the Agent or any Lender shall be to that Person's
reasonable exercise of its judgement, in good faith, based upon that Person's
consideration of any such factor as the Agent or that Lender, taking into
account information of which that Person then has actual knowledge, believes:
(i) Will or reasonably could be expected to affect
the value of the Collateral, the enforceability of the Agent's security
and collateral interests therein, or the amount which the
38
Agent would likely realize therefrom (taking into account delays which
may possibly be encountered in the Agent's realizing upon the
Collateral and likely Costs of Collection).
(ii) Indicates that any report or financial
information delivered to the Agent or any Lender by or on behalf of any
Obligor is incomplete, inaccurate, or misleading in any material manner
or was not prepared in all material respects in accordance with the
requirements of the within Agreement.
(iii) Reasonably suggests an increase in the
likelihood that any Obligor will become the subject of a bankruptcy or
insolvency proceeding.
(iv) Constitutes a Suspension Event.
(bi In the exercise of such judgement, the Agent and each
Lender also may reasonably take into account any of the following factors:
(i) Those included in, or tested by, the
definitions of "Acceptable Inventory" and "Cost".
(ii) Changes to the current financial and business
climate of the industry in which the Borrowers compete (having regard
for the Borrowers' position in that industry).
(iii) Changes to general macroeconomic conditions
which have a material effect on the Borrowers' cost structure.
(iv) Material changes in or to the mix of the
Borrowers' Inventory.
(v) Changes regarding seasonality with respect
to the Borrowers' Inventory and patterns of retail sales.
(vi) Changes to such other factors as the Agent and
each Lender reasonably determines as having a material bearing on
credit risks associated with the providing of loans and financial
accommodations to the Borrowers.
(c) The burden of establishing the failure of the Agent or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrowers'.
2-17. PROCEDURES FOR ISSUANCE OF L/C'S
(a) The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of any US Borrower or the CAN Borrower. Each
such request shall be in such manner as may from time to time be acceptable to
the Agent.
(b) The Agent will endeavor to cause the issuance of any L/C
so requested by the Lead Borrower, PROVIDED THAT , at the time that the request
is made, the Revolving Credit has not been suspended as provided in Section
2-5(h) and if so issued:
(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed Five Million Dollars ($5,000,000.00).
39
(ii) The expiry of the L/C is not later than the
earlier of Thirty (30) days prior to the Maturity Date or the
following:
(A) Standby's: One (1) year from initial
issuance.
(B) Documentary's: Sixty (60) days from
issuance.
(iii) The Borrowing Base or the CAN Borrowing Base,
as applicable, would not be exceeded.
(c) The Lead Borrower shall execute such documentation to
apply for and support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue
an L/C;
(ii) Any action or inaction of an Issuer on
account of or in respect to, any L/C.
(e) The Agent, without the request of the Borrowers, may
advance under the Revolving Credit (and charge to the Loan Account) the amount
of any honoring of any L/C and other amount for which the Borrowers, the Issuer,
or the Lenders become obligated on account of, or in respect to, any L/C
(provided that the CAN Borrower shall be indebted only for L/Cs issued for the
CAN Borrower , Revolving Credit Loans made to the CAN Borrower or otherwise in
connection with the CAN Debt). Such advance shall be made whether or not a
Suspension Event is then extant or such advance would result in Borrowing Base's
or CAN Borrowing Base's (as applicable) being exceeded. Such action shall not
constitute a waiver of the Agent's rights under Section 2-10(b) hereof.
2-18. FEES FOR L/C'S
(a) The Borrowers shall pay to the Agent a fee, on account of
any documentary or commercial L/C's, the issuance of which had been procured by
the Agent, monthly in arrears, and on the Termination Date and on the End Date,
equal to the greatest of $750.00, or 12% of, or per annum of, the Stated Amount
of each such L/C outstanding during the period in respect of which such fee is
being paid (provided that the CAN Borrower shall be indebted only for the CAN
Debt).
(b) The Borrowers shall pay to the Agent a fee, on account of
any Standby L/C's, the issuance of which had been procured by the Agent, monthly
in arrears, and on the Termination Date and on the End Date, equal to 12% per
annum of the weighted average Stated Amount of all L/C's outstanding during the
period in respect of which such fee is being paid (provided that the CAN
Borrower shall be indebted only for the CAN Debt).
(c) In addition to the fee to be paid as provided in
Subsection 2-18(a), above, the Borrowers shall pay to the Agent (or to the
Issuer, if so requested by Agent), on demand, all customary issuance,
processing, negotiation, amendment, and administrative fees and other amounts
charged by
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the Issuer on account of, or in respect to, any L/C (provided that
the CAN Borrower shall be indebted only for the CAN Debt).
2-19. CONCERNING L/C'S
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any L/C
of that beneficiary's obligations to the Borrowers.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal effect of;
any documents called for under any L/C if (with respect to the
foregoing) such documents on their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any
L/C and of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator, trustee
in bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.
(c) Unless otherwise agreed to, in the particular instance,
the Borrowers hereby authorize any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrowers. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Agent, any Lender,
nor the Issuer shall have any responsibility for any inaccuracy, interruption,
error, or delay in transmission or delivery by post, telegraph or cable, or for
any inaccuracy of translation.
(e) The Agent's, each Lender's, and the Issuer's rights,
powers, privileges and immunities specified in or arising under this Agreement
are in addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrowers, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
41
(g) If any change in any law, executive order or regulation,
or any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Agent, any or any Issuer has an obligation to lend to fund drawings
under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Section 2-19(g)(i) or 2-19(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining any
L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the aggregate of
such cost increases resulting from such events), then, upon demand by the Agent
and delivery by the Agent to the Lead Borrower of a certificate of an officer of
the subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the basis
for determining such increased costs and their allocation, the Borrowers shall
immediately pay to the Agent, from time to time as specified by the Agent, such
amounts as shall be sufficient to compensate such Issuer for such increased cost
(provided that the CAN Borrower shall be indebted only for the CAN Debt). Any
Issuer's determination of costs incurred under Section 2-19(g)(i) or
2-19(g)(ii), above, and the allocation, if any, of such costs among the
Borrowers and other letter of credit customers of such Issuer, if done in good
faith and made on an equitable basis and in accordance with such officer's
certificate, shall be conclusive and binding on the Borrowers, absent manifest
error.
(h) The obligations of the Borrowers under the within
Agreement with respect to L/C's are absolute, unconditional, and irrevocable and
shall be performed strictly in accordance with the terms hereof under all
circumstances, whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of the within
Agreement, any L/C, or any other agreement or instrument relating
thereto.
(ii) Any amendment or waiver of, or consent to the
departure from, any L/C.
(iii) The existence of any claim, set-off, defense,
or other right which the Borrowers may have at any time against the
beneficiary of any L/C.
(iv) Any good faith honoring of a drawing under any
L/C, which drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
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2-20. CHANGED CIRCUMSTANCES
(a) The Agent may give the Lead Borrower notice of the
occurrence of the following:
(i) The Agent shall have determined in good
faith on any day on which the rate for a LIBOR Loan would
otherwise be set, that, by reason of changes arising after the
date of this Agreement affecting the London interbank market,
adequate and fair means do not exist for ascertaining such
rate on the basis provided for in the definition of LIBOR
Offer Rate.
(ii) The Agent shall have determined in good faith
that:
(A) The continuation of or conversion of any
Revolving Credit Loan to a LIBOR Loan has been made
impracticable or unlawful by the occurrence of a change in law
occurring after the date of this Agreement that materially and
adversely affects the applicable market or compliance by the
Agent or any Lender in good faith with any applicable law or
governmental regulation, guideline or order or interpretation
or change thereof by any governmental authority charged with
the interpretation or administration thereof or with any
request or directive of any such governmental authority
(whether or not having the force of law).
(B) The indices on which the interest rates
for LIBOR Loans are determined shall no longer represent the
effective cost to the Agent or any Lender for U.S. dollar
deposits in the interbank market for deposits in which it
regularly participates.
(b) In the event that the Agent gives the Lead Borrower notice
of an occurrence described in Section 2-20(a), then, until the Agent notifies
the Lead Borrower that the circumstances giving rise to such notice no longer
apply:
(i) The obligation of the Agent and of each Lender to
make LIBOR Loans of the type affected by such changed circumstances or
to permit the Lead Borrower to select the affected interest rate as
otherwise applicable to any Revolving Credit Loans shall be suspended.
(ii) Any notice which the Lead Borrower had given the
Agent with respect to any LIBOR Loan, the time for action with respect
to which has not occurred prior to the Agent's having given notice
pursuant to Section 2-20(a), shall be deemed at the option of the Agent
to not having been given and such loan shall be made or continued as,
or converted into, as appropriate, a Base Margin Loan.
(iii) Subject to the provisions of Section
2-11, the Lead Borrower may (and shall, with respect to the occurrence of any
event described in Section 2-20(a)(ii)), cancel the relevant borrowing or
conversion notice on the same date the Lead Borrower was notified of such event,
or if the LIBOR Loan is then outstanding, prepay, or cause to be prepaid, the
affected LIBOR Loan.
2-21. INCREASED COSTS. If, as a result of any changes, arising after
the date of this Agreement, in any requirement of law, or of the interpretation
or application thereof by any court or by
43
any governmental or other authority or entity charged with the administration
thereof, whether or not having the force of law, which:
(a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrowers to the Agent or any
Lender under this Agreement (except for taxes on the Agent or any
Lender's overall net income or capital);
(b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held by,
or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender;
(c). imposes on any Lender any other condition with
respect to any Loan Document; or
(d) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in the such Lender's reasonable opinion,
is to increase the cost to that Lender of making or maintaining any loan,
advance or financial accommodation or to reduce the income receivable by such
Lender in respect of any loan, advance or financial accommodation by an amount
which such Lender deems to be material, then upon the Agent's giving written
notice thereof, from time to time, to the Lead Borrower (such notice to set out
in reasonable detail the facts giving rise to and a summary calculation of such
increased cost or reduced income), the Borrowers shall forthwith pay to the
Agent, for the benefit of the subject Lender, upon receipt of such notice, that
amount which shall compensate the subject Lender for such additional cost or
reduction in income (provided that the CAN Borrower shall be indebted only for
the CAN Debt). The payment obligations contemplated by this Section 2-21 shall
terminate one month after the Maturity Date unless prior written notice of any
claim hereunder has been provided to the Parent.
2-22 LENDERS' COMMITMENTS
(a) The obligations of each Lender are several and not joint.
No Lender shall have any obligation to make any loan or advance under the
Revolving Credit in excess of the lesser of
(i) that Lender's Commitment Percentage
of the subject loan or advance or of Availability or CAN Availability,
as applicable; or
(ii) that Lender's Dollar Commitment or CAN
Dollar Commitment, as applicable.
(b) No Lender shall have any liability to the Borrowers on
account of the failure of any other Lender to provide any loan or advance under
the Revolving Credit nor any obligation to make up any shortfall which may be
created by such failure.
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(c) The Dollar Commitments, CAN Dollar Commitments, Commitment
Percentages, and identities of the Lenders (but not the overall Commitment or
CAN Commitment) may be changed, from time to time by the reallocation or
assignment of Dollar Commitments or CAN Dollar Commitment and Commitment
Percentages amongst the Lenders or with other Persons who determine to become
"Lenders", PROVIDED, HOWEVER,
(i) Unless an Event of Default has occurred and is
continuing (in which event, no consent of the Lead Borrower is
required) any assignment to a Person not then a Lender shall be subject
to the prior consent of the Lead Borrower (not to be unreasonably
withheld), which consent will be deemed given unless the Lead Borrower
provides the Agent with written objection, not more than Five (5)
Business Days after the Agent shall have given the Lead Borrower
written notice of a proposed assignment).
(ii) Any such assignment or reallocation shall be on
a pro-rata basis such that each reallocated or assigned Dollar
Commitment or CAN Dollar Commitment to any Person remains the same
percentage of the overall Commitment or CAN Commitment (in terms of
dollars) as the reallocated Commitment Percentage is to such Person.
(iii) Unless an Event of Default has occurred and is
continuing, BankBoston shall retain a Dollar Commitment of at least
$35,000,000.00.
(d). Upon written notice given to the Lead Borrower from
time to time by the Agent of any assignment or allocation referenced in Section
2-22(c):
(i) The Borrowers shall execute replacement one or
more Revolving Credit Notes to reflect such changed Dollar Commitments,
CAN Dollar Commitments, Commitment Percentages, and identities and
shall deliver such replacement Revolving Credit Notes to the Agent
(which promptly thereafter shall deliver to the Lead Borrower the
Revolving Credit Notes so replaced) PROVIDED HOWEVER, in the event that
a Revolving Credit Note is to be exchanged following its acceleration
or the entry of an order for relief under the Bankruptcy Code with
respect to the Borrowers, the Agent, in lieu of causing the Borrowers
to execute one or more new Revolving Credit Notes, may issue the
Agent's Certificate confirming the resulting Commitments, CAN
Commitments, and Commitment Percentages.
(ii) Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Lender shall have all rights and privileges of a Lender hereunder
thereafter as if such Person had been a signatory to the within
Agreement and any other Loan Document to which a Lender is a signatory
and any person removed as a Lender shall be relieved of any obligations
or responsibilities of a Lender hereunder thereafter.
(e) The Borrowers recognize that the Agent's exercise of any
discretion accorded to the Agent herein and of its rights, remedies, powers,
privileges, and discretions with respect to the Borrowers is subject to a
certain Agency Agreement amongst the Agent and the Lenders. The provisions
45
of the Agency Agreement relating to voting rights of the Lenders shall be
subject to the approval of the Lead Borrower, which approval shall not be
unreasonably delayed or withheld. The Borrowers acknowledge that the Lead
Borrower's approval of the voting rights shall be deemed furnished if the voting
rights provision described in EXHIBIT 2-22 hereto are incorporated in the Agency
Agreement.
2-23. DESIGNATION OF LEAD BORROWER AT BORROWERS' AGENT. (a) Each
Borrower hereby designates the Lead Borrower as that Borrower's agent to request
loans and advances under the Revolving Credit, the proceeds of which shall be
available to each Borrower for the same uses as those set forth in Section
2-1(d), above. As the disclosed principal for its agent, each Borrower shall be
obligated to the Agent and the Lenders on account of loans and advances so made
under the Revolving Credit as if made directly by the Lenders to that Borrower,
notwithstanding the manner by which such loans and advances are recorded on the
books and records of the Lead Borrower and of any Borrower.
(b) The proceeds of each of such loans and advances shall be
deposited into the Funding Account, CAN Funding Account, or as otherwise
indicated by the Lead Borrower. Neither the Agent, nor any Lender shall have any
obligation to see to the application of such proceeds.
ARTICLE 3 - CONDITIONS PRECEDENT.
As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, and the making of the first loan under
the Revolving Credit, each of the documents respectively described in Sections
3-1 through and including 3-6, (each in form and substance satisfactory to the
Agent) shall have been delivered to the Agent, and the conditions respectively
described in Sections 3-7 through and including 3-11, shall have been satisfied:
3-1. CORPORATE DUE DILIGENCE.
(a) A Certificate of corporate good standing or status issued
by the Secretary(ies) of State (or other appropriate governmental authority) of
each state under whose law each Obligor is organized.
(b) Certificates of due qualification, in good standing,
issued by the Secretary(ies) of State of each State or Province in which the
nature of each Obligor's business conducted or assets owned could require such
qualification.
(c) A Certificate of each Obligor's Secretary of the due
adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.
46
3-2. OPINION. An opinion of counsel to the Obligors in form and
substance satisfactory to the Agent .
3-3. ACCOUNTANT'S OPINION. An opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP with
respect to the validity, amount, and collectibility of the Eligible Tax Refund,
in form and substance satisfactory to the Agent.
3-4 HOST STORE AGREEMENTS. Agreements with the Host Stores in form and
substance satisfactory to the Agent.
3-5. ADDITIONAL DOCUMENTS. Such additional instruments and documents
as the Agent or its counsel reasonably may require or request, including,
without limitation, those documents listed on EXHIBIT 3-5 hereto.
3-6. OFFICERS' CERTIFICATES. Certificates executed on behalf of the
Borrowers by the President and the Chief Financial Officer of the Borrowers and
stating that the representations and warranties made by the Borrowers to the
Agent and the Lenders in the Loan Documents are true and complete in all
material respects as of the date of such Certificate, and that no event has
occurred which is or which, solely with the giving of notice or passage of time
(or both) would be an Event of Default.
3-7. REPRESENTATIONS AND WARRANTIES. Each of the representations made
by or on behalf of the Borrowers in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Borrowers shall be true and complete in all material respects
as of the date as of which such representation or warranty was made.
3-8. MINIMUM EXCESS AVAILABILITY. There shall be minimum excess
Availability of at least $40,000,000.00 after giving effect to the first loans
and advances to be made under the Revolving Credit, all then held checks,
accounts payable which are beyond credit terms then accorded the Borrowers,
overdrafts, and any charges to the Loan Account made in connection with the
establishment of the Revolving Credit.
3-9. ALL FEES AND EXPENSES PAID. All fees due at or immediately after
the first funding under the Revolving Credit and all costs and expenses incurred
by the Agent in connection with the establishment of the credit facility
contemplated hereby (including the fees and expenses of counsel to the Agent)
shall have been paid; PROVIDED THAT the Lead Borrower shall have the right to
receive a detailed accounting of, and to review, the fees and expenses of
counsel before making payment thereof.
47
3-10. NO SUSPENSION EVENT. No Suspension Event shall then exist.
3-11. NO ADVERSE CHANGE. No event shall have occurred or failed to
occur, which occurrence or failure is or could reasonably be expected to have a
materially adverse effect upon the Borrowers' financial condition when compared
with such financial condition at January 31, 1998, except as reflected in the
Parent's press releases (copies of which have been furnished the Agent).
No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head offices in Boston, Massachusetts. Under no
circumstances will the within Agreement take effect until executed and accepted
by the Agent at said head office.
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) the Obligors, in addition to all other
representations, warranties, and covenants made by the Obligors in any other
Loan Document, makes those representations, warranties, and covenants included
in the within Agreement.
4-1. PAYMENT AND PERFORMANCE OF LIABILITIES. Each Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability (provided that
the CAN Borrower shall be indebted only for the CAN Debt).
4-2. DUE ORGANIZATION - CORPORATE AUTHORIZATION - NO CONFLICTS.
(a) Each Obligor presently is and shall hereafter remain in
good standing as a corporation organized under the laws of the jurisdiction of
its incorporation as set forth in the Preamble to this Agreement, and is and
shall hereafter remain duly qualified and in good standing in every other state
or province in which, by reason of the nature or location of that Obligor's
assets or operation of the Borrower's business, such qualification may be
necessary.
(b) Each Related Entity is listed on EXHIBIT 4-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State (or other applicable governmental authority) in which incorporated and
is and shall hereafter remain duly qualified in each other state or province in
which, by reason of that entity's assets or the operation of such entity's
business, such qualification may be necessary. The Lead Borrower shall provide
the Agent with prior written notice of any entity's becoming or ceasing to be a
Related Entity.
48
(c) Each Obligor has all requisite corporate power and
authority to execute and deliver all Loan Documents to which such Obligor is a
party and has and will hereafter retain all requisite corporate power to perform
all Liabilities.
(d) The execution and delivery by the Obligors of each Loan
Document to which it is a party; the Obligors' consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Obligors as contemplated hereby); the Obligors'
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any
material respect any provision of any Requirement of Law or obligation
of any Obligor.
(iii) Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any
assets of any Obligor pursuant to any Requirement of Law or obligation,
except pursuant to the Loan Documents.
(e) The Loan Documents have been duly executed and delivered
by each Obligor and are the legal, valid and binding obligations of each
Obligor, enforceable against each Obligor in accordance with their respective
terms, except as enforceability is limited by bankruptcy, insolvency, or other
laws relating to or affecting generally the enforcement of creditors' rights and
except to the extent that the availability of the remedy of specific performance
or injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
4-3. TRADE NAMES.
(a) EXHIBIT 4-3, annexed hereto, is a listing of:
(i) All names under which any Obligor conducted its business
in over 25 retail locations at any time during the prior five years.
(ii) All entities and/or persons (other than those with fewer
than 25 retail locations) with whom any Obligor consolidated or merged,
or from whom any Obligor ever acquired in a single transaction or in a
series of related transactions substantially all of such entity's or
person's assets, at any time during the prior five years.
(b) Except (i) upon not less than twenty-one (21) days prior
written notice given the Agent , and (ii) in compliance with all other
provisions of the within Agreement, the Obligors will not undertake or commit to
undertake any action such that the results of that action, if undertaken prior
to the date of this Agreement, would have been reflected on EXHIBIT 4-3 or would
result in the conduct of business in a jurisdiction or province where the
Borrowers do not presently conduct business.
4-4. INFRASTRUCTURE.
49
(a) Each Obligor has and will maintain a sufficient
infrastructure to conduct its business as presently conducted and as
contemplated to be conducted as described in the Business Plan.
(b) Each Obligor owns and possesses, or has the right to use
(and will hereafter own, possess, or have such right to use) all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for
such Obligor's conduct of its business.
(c) The conduct by the Obligors of their respective business
does not presently infringe (nor will any Obligor conduct its business in the
future so as to infringe) the patents, industrial designs, trademarks, trade
names, trade styles, brand names, service marks, logos, copyrights, trade
secrets, know-how, confidential information, or other intellectual or
proprietary property of any third Person.
4-5. LOCATIONS; LANDLORD'S WAIVER.
(a) The Collateral, and the books, records, and papers
of the Obligors pertaining thereto, are kept and maintained solely at
(i) the Obligors' chief executive offices at
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇; and
(ii) those locations which are listed on EXHIBIT 4-5,
annexed hereto. Within thirty (30) days after the date hereof, the Lead
Borrower shall furnish the Agent with a revised EXHIBIT 4-5, which
revised EXHIBIT shall include, with respect to each such location, the
name and address of the landlord on the Lease which covers such
location (or an indication that an Obligor owns the subject location)
and of all service bureaus at which any such records are maintained.
(b) The Borrowers shall not remove any of the Collateral from
said chief executive office or those locations listed on EXHIBIT 4-5 except,
unless otherwise expressly prohibited under this Agreement, to
(i) accomplish sales, returns, or other transfers of
Inventory in the ordinary course of business, consistent with past and
existing practices of the Borrowers;
(ii) move Inventory from one such location to another
such location; or
(iii) utilize such of the Collateral as is removed
from such locations in the ordinary course of business (such as motor
vehicles).
(c) Within thirty (30) days after the Agent's request
therefor, the Borrowers shall use reasonable efforts to provide the Agent with
landlord's waivers, each in form reasonably satisfactory to the Agent, for each
of the locations identified on EXHIBIT 4-5(C). The Agent may establish an
Availability
50
Reserve for each of such locations as to which such a waiver is not so delivered
(not exceed two months rent for each such location). Such Availability Reserve
shall be reduced or eliminated (but only if no Suspension Event is then extant)
upon delivery of such waivers.
(d) The Borrowers will not:
(i) Execute, alter, modify, or amend any Lease in any
material respect, except in the ordinary course of business, consistent
with past and existing practices of the Borrowers.
(ii) Commit to, or close, any location at which any
Borrower maintains, offers for sales, or stores any of the Collateral,
except for closures contemplated by the Business Plan and deemed in the
best interest of such Borrower's business, in such Borrower's
reasonable business judgment.
(iii) Commit to or open any new location except
(A) in connection with the relocation of a
retail location of that Borrower;
or
(B) the opening up of new retail locations
in accordance with the Business Plan, or otherwise deemed in the best interest
of such Borrower's business, in such Borrower's reasonable business judgment,
and where, in each instance, the requirements of Subsection 4-5(e), below, are
satisfied.
(e) The conditions to be satisfied, as required by Section
4-5(iii)(B), above, are as follows:
(i) The Lender shall be provided such prior written
notice (with reasonable detail) of the proposed opening, as is required
under Section 4-3(b) hereof; and
(ii) Immediately prior to the earliest day on which
the subject Borrower becomes legally obligated on account of
its leasing of the subject new location, no Event of Default
exists and none will occur by reason of that Borrower's so
becoming obligated. (f) Except as otherwise disclosed pursuant
to, or permitted by, this Section 4-5, no
tangible personal property of any Obligor is in the care or custody of any third
party or stored or entrusted with a bailee or other third party and none shall
hereafter be placed under such care, custody, storage, or entrustment.
4-6. TITLE TO ASSETS.
(a) Each Obligor is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following (the "PERMITTED ENCUMBRANCES"):
(i) Encumbrances in favor of the Agent.
(ii) Those Encumbrances (if any) listed on EXHIBIT
4-6, annexed hereto.
51
(iii) Purchase money security interests in Equipment
to secure Indebtedness otherwise permitted hereby.
(iv) Encumbrances for taxes, governmental assessments
or charges in the nature of taxes not yet due.
(v) Encumbrances in respect of property or assets of
the Borrowers imposed by law, which were incurred in the ordinary
course of business, such as carriers', warehousemen's, materialmen's,
repairmen's, and mechanics' liens and other similar Encumbrances, in
each case in respect of obligations not overdue.
(vi) Utility deposits and pledges or deposits in
connection with worker's compensation, unemployment insurance and other
social security legislation.
(vii) Encumbrances arising under Capital Leases.
(viii) Unperfected Encumbrances arising by operation
of law under Section 81.1 of the Bankruptcy and Insolvency Act
(Canada), or Article 1741 of the CCQ in favor of unpaid sellers or
prepaying buyers of goods relating to amounts that are not past due in
accordance with their respective terms of sale.
(b) No Obligor has and none shall hereafter have, possession
of any property on consignment to such Obligor (i) having a value in excess of
$5,000,000.00 in the aggregate, and (ii) unless either (A) as to which property,
no financing statement has been filed by consignor or other action taken by
consignor under the UCC to perfect an interest in the consigned goods or (B) as
to which property, an intercreditor agreement between the consignor and the
Agent has been executed, in form reasonably satisfactory to the Agent..
4-7. INDEBTEDNESS. No Obligor has and none shall hereafter have, any
Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lenders .
(b) The Indebtedness (if any) listed on EXHIBIT 4-7,
annexed hereto.
4-8. INSURANCE POLICIES.
(a) EXHIBIT 4-8, annexed hereto, is a schedule of all
insurance policies owned by the Obligors or under which any Obligor is the named
insured. Each of such policies is in full force and effect. Neither the issuer
of any such policy nor any Obligor is in default or violation of any such
policy.
(b) The Obligors shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be reasonably
satisfactory to the Agent . The coverage reflected on EXHIBIT 4-8 presently
satisfies the foregoing requirements. All insurance carried by the Obligors
shall provide for a minimum of Sixty (60) days' written notice of cancellation
to the Agent and all such insurance which covers the Collateral shall include an
endorsement in favor of the Agent, which endorsement shall provide that the
52
insurance, to the extent of the Agent's interest therein, shall not be impaired
or invalidated, in whole or in part, by reason of any act or neglect of the
Obligors or by the failure of the Obligors to comply with any warranty or
condition of the policy. In the event of the failure by the Obligors to maintain
insurance as required herein, the Agent , at its option, may obtain such
insurance, PROVIDED, HOWEVER, the Agent's obtaining of such insurance shall not
constitute a cure or waiver of any Event of Default occasioned by the Obligors'
failure to have maintained such insurance. The Obligors shall furnish to the
Agent certificates or other evidence satisfactory to the Agent regarding
compliance by the Borrower with the foregoing insurance provisions.
(c) The Obligors shall advise the Agent of each claim in
excess of $100,000.00 made by any Obligor under any policy of insurance which
covers the Collateral and will permit the Agent, at the Agent's option in each
instance, to the exclusion of the Obligors, following the occurrence, and during
the continuance, of an Event of Default, to conduct the adjustment of all claims
(regardless of amount). The Obligors hereby appoint the Agent as the Obligors'
attorney in fact, exercisable following the occurrence, and during the
continuance, of an Event of Default, to obtain, adjust, settle, and cancel any
insurance described in this section and to endorse in favor of the Agent any and
all drafts and other instruments with respect to such insurance. The within
appointment, being coupled with an interest, is irrevocable until this Agreement
is terminated by a written instrument executed by a duly authorized officer of
the Agent . The Agent shall not be liable on account of any exercise pursuant to
said power except for any exercise in gross negligence or willful misconduct.
The Agent may apply any proceeds of such insurance against the Liabilities,
whether or not such have matured, in such order of application as the Agent may
determine; PROVIDED THAT any such proceeds derived from any Collateral granted
by the CAN Borrower shall be applied only to the CAN Debt.
4-9. LICENSES Each license, distributorship, franchise, and similar
agreement issued to, or to which any Obligor is a party is in full force and
effect. Neither the Obligors nor, to the Parent's knowledge, any other party to
any such license or agreement is in default or violation thereof. No Obligor has
received any notice or threat of cancellation of any such license or agreement.
4-10. LEASES. EXHIBIT 4-10, annexed hereto, is a schedule of all
presently effective Capital Leases. EXHIBIT 4-5 includes a list of all other
presently effective Leases. Each of such Leases and Capital Leases is in full
force and effect. Neither the Obligors nor, to the Parent's knowledge, any other
party to any such Lease or Capital Lease is in default or violation of any such
Lease or Capital Lease and no Obligor has received any notice or threat of
cancellation of any such Lease or Capital Lease. The Obligors hereby authorize
the Agent at any time and from time, after and during the continuance of an
Event of Default, to time to contact any of the Obligors' landlords in order to
confirm the Obligors' continued compliance with the terms and conditions of the
Lease(s) between each Obligor
53
and that landlord and to discuss such issues, concerning the Obligors' occupancy
under such Lease(s), as the Agent may determine.
4-11. REQUIREMENTS OF LAW. The Obligors are in compliance in all
material respects with, and shall hereafter comply with and use their respective
assets in compliance in all material respects with, all Requirements of Law. The
Obligors have not received any notice of any material violation of any
Requirement of Law, which has not been cured or otherwise remedied.
4-12. MAINTAIN PROPERTIES. The Obligors shall:PERTIES
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral. (c) Not use any of the Collateral in violation
of any policy of insurance thereon.
(d) Not sell, lease, transfer, or otherwise dispose of any of
the Collateral, other than in the ordinary course of business, consistent with
past and existing practices of the Borrowers; provided that, no Event of Default
would arise therefrom.
4-13. PAY TAXES.
(a) The Obligors have received written notice from the
Internal Revenue Service and Revenue Canada that each of the Internal Revenue
Service and Revenue Canada has completed its examination of the Obligor's
federal income tax returns for all tax years through and including the Obligors'
taxable year referenced on EXHIBIT 4-13, annexed hereto, and that all
deficiencies, assessments, and other amounts asserted as a result of such
examinations have been fully paid or settled. Except as set forth on EXHIBIT
4-13, no agreement is extant which waives or extends any statute of limitations
applicable to the right of the Internal Revenue Service or Revenue Canada to
assert a deficiency or make any other claim for or in respect to federal income
taxes. Except as set forth on EXHIBIT 4-13, no issue has been raised in any such
examination which, by application of similar principles, reasonably could be
expected to result in the assertion of a deficiency for any fiscal year open for
examination, assessment, or claim by the Internal Revenue Service or Revenue
Canada.
(b) The Obligors have received written notice from the
respective state, provincial and local taxing authorities to which the Obligors
are subject that such authorities have completed their respective examination of
the Obligors' returns for all state, provincial and local income, excise, sales,
and other taxes for which the Obligors are liable for the respective tax years
referenced on EXHIBIT 4-13, annexed hereto, and that all deficiencies,
assessments, and other amounts asserted as a result of such examinations have
been fully paid or settled. Except as set forth on EXHIBIT 4-13, no agreement is
extant which waives or extends any statute of limitations applicable to the
right of any state, provincial or
54
local taxing authority to assert a deficiency or make any other claim for or in
respect to any such state, provincial or local taxes. Except as set forth on
EXHIBIT 4-13, no issue has been raised in any such examination which, by
application of similar principles, reasonably could be expected to result in the
assertion of a deficiency for any fiscal year open for examination, assessment,
or claim by any state, provincial or local taxing authority.
(c) Except as disclosed on said EXHIBIT 4-13, there are no
examinations of or with respect to any Obligor presently being conducted by the
Internal Revenue Service, Revenue Canada, or any other taxing authority.
(d) The Obligors have, and hereafter shall: pay, as they
become due and payable, all taxes and unemployment contributions, Canada Pension
Plan and Workers' Compensation and other charges of any kind or nature levied,
assessed or claimed against any Obligor or the Collateral by any person or
entity whose claim could result in an Encumbrance upon any asset of any Obligor
or by any governmental authority; properly exercise any trust responsibilities
imposed upon each Obligor by reason of withholding from employees' pay or by
reason of such Obligor's receipt of sales tax or other funds for the account of
any third party; timely make all contributions and other payments as may be
required pursuant to any Employee Benefit Plan now or hereafter established by
the Borrower; and timely file all tax and other returns and other reports with
each governmental authority to whom the Obligors are obligated to so file.
(e) At its option, the Agent may, but shall not be obligated
to, pay any taxes, unemployment contributions, Canada Pension Plan and Workers'
Compensation, and any and all other charges levied or assessed upon any Obligor
or the Collateral by any person or entity or governmental authority, and make
any contributions or other payments on account of any Obligor's Employee Benefit
Plan as the Agent , in the Agent's discretion, may deem necessary or desirable,
to protect, maintain, preserve, collect, or realize upon any or all of the
Collateral or the value thereof or any right or remedy pertaining thereto,
PROVIDED, HOWEVER, the Agent's making of any such payment shall not constitute a
cure or waiver of any Event of Default occasioned by the Obligors' failure to
have made such payment.
4-14. NO MARGIN STOCK. The Obligors are not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations G,U,T, and X of the Board of Governors of the
Federal Reserve System of the United States).
4-15. ERISA; CAN PLANS. Neither any Obligor nor any ERISA Affiliate
ever has or hereafter shall:
(a) Violate or fail to be in compliance in all material
respects with such Obligor's Employee Benefit Plan.
55
(b) Fail timely to file all reports and filings required
by ERISA to be filed by such Obligor.
(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA).
(d) Engage in, or commit, any act such that a tax or penalty
could reasonably be expected to be imposed upon any Obligor on account thereof
pursuant to ERISA.
(e) Accumulate any material funding deficiency within the
meaning of ERISA.
(f) Terminate any Employee Benefit Plan such that a lien
could be asserted against any assets of any Obligor on account thereof pursuant
to ERISA.
(g) Be a member of, contribute to, or have any obligation
under any Employee Benefit Plan which is a multiemployer plan within the meaning
of Section 4001(a) of ERISA.
(h) Fail to pay any liability imposed upon it pursuant
to the provisions of any CAN Plan.
4-16. HAZARDOUS MATERIALS
(a) No Obligor has ever:
(i) been legally responsible for any release or
threat of release of any Hazardous Material; or
(ii) received notification of any release or threat
of release of any Hazardous Material from any site or vessel occupied
or operated by an Obligor and/or of the incurrence of any expense or
loss in connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any such
site or vessel.
(b) The Obligors shall:
(i) dispose of any Hazardous Material only in
compliance with all Environmental Laws; and
(ii) not store on any site or vessel occupied or
operated by any Obligor and not transport or arrange for the transport
of any Hazardous Material, except if such storage or transport is in
the ordinary course of such Obligor's business and is in compliance
with all Environmental Laws.
(c) The Lead Borrower shall provide the Agent with written
notice upon the Obligors' obtaining knowledge of any incurrence of any expense
or loss by any governmental authority or other Person in connection with the
assessment, containment, or removal of any Hazardous Material, for which expense
or loss any Obligor could reasonably be expected to be liable.
4-17. LITIGATION. Except as described in EXHIBIT 4-17, annexed hereto,
there is not presently pending or, to the knowledge of the Parent, threatened by
or against any Obligor any suit, action, proceeding, or investigation which, if
determined adversely to such Obligor, would have a material
56
adverse effect upon the Parent's consolidated financial condition or ability to
conduct its business as such business is presently conducted or is contemplated
to be conducted in the foreseeable future.
4-18. DIVIDENDS OR INVESTMENTS. The Obligors shall not:
(a) Pay any cash dividend or make any other distribution in
respect of any class of the Borrower's capital stock.
(b) Own, redeem, retire, purchase, or acquire any capital
stock, PROVIDED THAT as long as no Event of Default then exists or would arise
therefrom, the Parent may redeem, purchase or acquire the Parent's common stock
or options for the purchase or sale of such stock, provided that the maximum
number of shares of the Parent's common stock which may be the subject to any of
the foregoing is limited to 10,000,000 shares.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity,
except in the ordinary course of business, consistent with past and existing
practices, provided that no Event of Default then exists or would arise
therefrom.
(d) Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity (other than with another Obligor).
(e) Consolidate any of any Obligor's operations with those of
any other corporation or other entity (other than with another Obligor).
(f) Organize or create any Related Entity other than in the
ordinary course of business, consistent with past and existing practices, and
only (i) if a Domestic Subsidiary, the Subsidiary executes a guaranty of the
Liabilities and grants the Agent first perfected liens on its assets, and (ii)
all of the stock of such Subsidiary (or with respect to a foreign Subsidiary,
65% of its stock) is pledged to the Agent as security for the Liabilities and
(iii) no Event of Default exists or would arise therefrom.
(g) Subordinate any debts or obligations owed to any Obligor
by any third party to any other debts owed by such third party to any other
Person.
(h) Acquire any assets other than in the ordinary course and
conduct of such Obligor's business as conducted at the execution of this
Agreement
4-19. LOANS. The Obligors shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, PROVIDED, HOWEVER, the foregoing does
not prohibit any of the following:
(a) Advance payments made to an Obligor's suppliers in the
ordinary course.
(b) Advances to any Obligor's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of such Obligor, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by such Obligor.
57
(c) Loans to any Related Entity or Affiliate not expressly
prohibited under this Agreement; provided that no Event of Default then exists
or would arise therefrom.
4-20. PROTECTION OF ASSETS. The Agent, in the Agent's discretion, and
from time to time following and during the continuance of an Event of Default,
may discharge any tax or Encumbrance on any of the Collateral, or take any other
action that the Agent may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The Agent
shall not have any obligation to undertake any of the foregoing and shall have
no liability on account of any action so undertaken except where there is a
specific finding in a judicial proceeding (in which the Agent has had an
opportunity to be heard), from which finding no further appeal is available,
that the Agent had acted in actual bad faith or in a grossly negligent manner.
The Obligors shall pay to the Agent, on demand, or the Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Agent pursuant
to this section. The obligation of the Obligors to pay such amounts is a
Liability.
4-21. LINE OF BUSINESS. Except as provided in Section 4-21(b) below,
the Obligors shall not engage in any business other than the business in which
they are currently engaged or a business reasonably related thereto (such being
the sale at retail of sunglasses and watches and other Inventory related thereto
of the types existing as of the date of this Agreement).
(b) Notwithstanding the provisions of Section 4-21(a), the Obligors may
engage in new lines of business, provided that:
(i) The maximum investment (whether as a capital contribution,
loan or otherwise) in any new line of business shall not
exceed $2,500,000.00, or $10,000,000.00 in the aggregate for
all new lines of business. (ii) The Agent and the Lenders
shall have no obligations to include any Inventory of such new
lines of business as "Acceptable Inventory". (iii) No Event of
Default exists, or would arise as of result of, the
establishment of the new line of business or the investment of
the Obligors therein.
4-22. AFFILIATE TRANSACTIONS. The Obligors shall not make any payment,
make any investment, nor give any value to any Related Entity except in the
ordinary course of business, consistent with past and existing practices of the
Borrowers, or not otherwise prohibited hereunder, provided that no Event of
Default then exists or would arise therefrom.
4-23. EXECUTIVE PAY.
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(a) The only Executive Officers of the Obligors, at the
execution of the within Agreement, are those individuals referenced in the
definition of "Executive Officers", above.
(b) Prior to the execution of the within Agreement, the
Obligors furnished the Agent with copies of all written Executive Agreements and
outlines of the salient features of all unwritten Executive Agreements (as
amended to date) then extant. There are no unwritten agreements or
understandings between the Obligors and any Executive Officer which relate to
Executive Pay, written disclosure of which has not been made to the Agent .
4-24. ADDITIONAL ASSURANCES
(a) Except as disclosed in writing to the Agent, no Obligor is
the owner of, nor has it any interest in, any material property or asset which,
immediately upon the satisfaction of the conditions precedent to the
effectiveness of the credit facility contemplated hereby (Article 3) will not be
subject to a security or other collateral interest in favor of the Agent
(subject only to Permitted Encumbrances) to secure the Liabilities (but, as to
the CAN Borrower's assets, to secure the CAN Debt only).
(b) Except for certain of the stock of Related Entities
engaged in business outside of the United States, the Obligors will not
hereafter acquire any asset or any interest in property which is not,
immediately upon such acquisition, subject to such a security or other
collateral interest in favor of the Agent to secure the Liabilities (subject
only to Permitted Encumbrances).
(c) The Obligors shall execute and deliver to the Agent such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Agent may reasonably request to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Agent's
security interests in the Collateral; and to comply with all applicable statutes
and laws, and facilitate the collection of the Receivables Collateral. The
Obligors shall execute all such instruments as may be reasonably required by the
Agent with respect to the recordation and/or perfection of the security
interests created herein.
(d) Each Obligor hereby designates the Agent as and for such
Obligor's true and lawful attorney, with full power of substitution, to sign and
file any financing statements in order to perfect or protect the Agent's
security and other collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4-24 shall be sufficient for filing to perfect the security
interests granted herein.
4-25. ADEQUACY OF DISCLOSURE
(a) All financial statements furnished to the Agent and each
Lender by the Obligors have been prepared in accordance with GAAP consistently
applied and present fairly in all material respects the consolidated financial
condition of the Parent and its Subsidiaries at the date(s) thereof and
59
the consolidated results of operations and cash flows for the period(s) covered.
Except as reflected in the Parent's press releases (copies of which have been
furnished the Agent), since January 31, 1998, there has been no change in the
consolidated financial condition, results of operations, or cash flows of the
Parent and its Subsidiaries, other than changes in the ordinary course of
business, which changes have not been materially adverse, either singularly or
in the aggregate.
(b) As of January 31, 1998, no Obligor has any contingent
obligations or obligation under any Lease or Capital Lease which is not noted in
the Parent's consolidated financial statements furnished to the Agent and each
Lender prior to the execution of the within Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Agent or any Lender by or on behalf of any Obligor in
connection with the execution of the within Agreement by the Agent and each
Lender, taken as a whole, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. There is no fact known to the
Obligors which has, or which, in the foreseeable future could reasonably be
expected to have, a material adverse effect on the financial condition of the
Parent and its Subsidiaries which has not been disclosed in writing to the
Agent.
4-26. RIGHT OF FIRST REFUSAL. In the event that the Borrowers desire to
refinance the Liabilities with a Person other than BankBoston prior to the first
anniversary of this Agreement (other than pursuant to a public debt or equity
offering by the Parent or a so-called Rule 144A offering), the Borrowers shall
first comply with the following provisions:
(a) The Borrowers shall furnish BankBoston with a copy of the
commitment letter issued by such other Person promptly on receipt
thereof.
(b) Upon receipt of a copy of the Commitment Letter from the
Borrowers, BankBoston shall thereafter have fifteen (15) Business Days
to present to the Borrowers an alternative commitment for the
refinancing of the Liabilities on terms and conditions substantially
equal to those outlined in the said Commitment Letter.
(c) If BankBoston fails to provide an alternative commitment
in writing on terms and conditions substantially equal to those
outlined in the Commitment Letter within fifteen (15) Business Days
after receipt of the Commitment Letter from the Borrowers, then the
Borrowers may thereafter proceed to close on the refinancing upon the
terms and conditions set forth in the Commitment Letter.
(d) If BankBoston provide an alternative commitment in writing
on terms and conditions substantially equal to those outlined in the
Commitment Letter within fifteen (15) Business Days after receipt of
the Commitment Letter from the Borrowers, then the Borrowers shall
proceed to close on the refinancing with BankBoston, failing which the
Borrowers shall pay the Agent the Early Termination Fee.
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4-27. SUBORDINATED DEBT
(a) The Obligors shall not
(i) effect or permit any material change or
amendment to the terms of the instruments, documents, or agreements
evidencing the Subordinated Debt;
(ii) grant any collateral security for the
Subordinated Debt; or
(iii) directly or indirectly, make any payment of any
principal of, or in redemption, retirement or repurchase of, any
Subordinated Debt (other than payments of interest at the times and
rates set forth in the instruments, documents, and agreements
evidencing the Subordinated Debt).
(b) THE OBLIGORS ACKNOWLEDGE THAT THE LIABILITIES AND THE
CAN DEBT (AND THE PARENT'S GUARANTY THEREOF)
CONSTITUTE "DESIGNATED SENIOR INDEBTEDNESS" FOR
PURPOSES OF, AND AS DEFINED IN, THE INDENTURE DATED
AS OF JUNE 26, 1996 BETWEEN THE PARENT AND THE BANK
OF NEW YORK, AS TRUSTEE RELATING TO THE PARENT'S 53%
CONVERTIBLE SUBORDINATED NOTES DUE 2003, AS AMENDED
AND IN EFFECT.
4-28. NO RESTRICTIONS ON LIABILITIES. None of the Obligors shall enter
into or become subject to, directly or indirectly, any agreement prohibiting or
restricting in any manner (including, without limitation, by way of covenant,
representation or event of default) (i) the incurrence, creation or assumption
of the Liabilities or any Encumbrances on any property of any Obligor, except in
the case of customary transfer restrictions in Related Entities owned 50% or
less by any Obligor, or (ii) the granting of a security interest, pledge or
encumbrance in favor of the Agent and the Lenders on any asset of any Obligor.
4-29. GENERAL RESTRICTIONS ON INVESTMENTS, LOANS AND AFFILIATE
TRANSACTIONS. Notwithstanding anything to the contrary contained herein, the
Obligors shall not, directly or indirectly, undertake any of the following to
the extent that, at the time of such action, the aggregate Net Amount of cash or
property expended or transferred by the Obligors on account of all such actions
would exceed $10,000,000.00 in any fiscal year of the Parent and its
Subsidiaries:
(a) Open any new locations outside of the United States and
Canada;
(b) Transfer any Inventory or other assets (whether or not
constituting Collateral) to any Related Entity conducting business outside of
the United States and Canada;
(c) Make any investments in any Related Entity conducting
business outside of the United States and Canada;
(d) Organize or create any Related Entity which does not
constitute a Domestic Subsidiary;
61
(e) Make any loans or advances to any Related Entity
conducting business outside of the United States and Canada; or
(f) Make any payment or give any value to any Related Entity
conducting business outside of the United States and Canada. As used herein,
"Net Amount" shall mean, at the time of measurement, and after giving effect to
the proposed expenditure or transfer, the amount of cash or property expended or
transferred BY the Obligors on account of the foregoing actions LESS the amount
of cash or property theretofore transferred TO the Obligors by all Related
Entities conducting business outside of the United States and Canada.
4-30. OTHER COVENANTS. The Obligors shall not indirectly do or cause
to be done any act which, if done directly by the Obligors, would breach any
covenant contained in this Agreement.
ARTICLE 5 - REPORTING REQUIREMENTS
5-1. MAINTAIN RECORDS. The Obligors shall:ORDS
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Obligors' transactions,
all in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Obligors at the close of, and the results
of operations for, the periods in question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article 5 or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Obligors at the close of, and the results
of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants who are reasonably satisfactory to the Agent and instruct such
accountants to fully cooperate with, and be available to, the Agent and each
Lender to discuss the Obligors' financial performance, financial condition,
operating results, controls, and such other matters, within the scope of the
retention of such accountants, as may be raised by the Agent or that Lender.
(e) Not change any Obligor's fiscal year.
(f) Not change any Obligor's taxpayer identification number.
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5-2. ACCESS TO RECORDS
(a) The Obligors shall accord the Agent and the Agent's
representatives with reasonable access from time to time as the Agent and such
representatives may require to all properties owned by or over which the
Obligors have control. The Agent and the Agent's representatives shall have the
right, and the Obligors will permit the Agent and such representatives from time
to time as the Agent and such representatives may reasonably request, upon
reasonable notice and during normal business hours, to examine, inspect, copy,
and make extracts from any and all of the Obligors' books, records,
electronically stored data, papers, and files. The Obligors shall make all of
the Obligors' copying facilities available to the Agent.
(b) Each Obligor hereby authorizes the Agent and the
Agent's representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to
the Obligors, or any service bureau, contractor, accountant, or other
person, and directs any such service bureau, contractor, accountant, or
other person fully to cooperate with the Agent and the Agent's
representatives with respect thereto.
(ii) Following and during the continuance of an Event
of Default, verify at any time the Collateral or any portion thereof,
including verification with Account Debtors, and/or with the Obligors'
computer billing companies, collection agencies, and accountants and to
sign the name of such Obligor on any notice to such Obligor's Account
Debtors or verification of the Collateral.
5-3. IMMEDIATE NOTICE TO AGENT
(a) The Lead Borrower shall provide the Agent with written
notice immediately upon the occurrence of any of the following events, which
written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:
(i) Any change in any of Parent's executive
officers.
(ii) The completion of any physical count of all or a
material portion of any Obligor's Inventory (together with a copy of
the certified results thereof).
(iii) Any ceasing of any Obligor's making of payment,
other than in the ordinary course, to any of its creditors.
(iv) Other than in connection with a good faith
dispute, any failure by any Obligor to pay rent at any of such
Obligor's locations, which failure continues for more than Three (3)
days following the day on which such rent first came due.
(v) Any material change in the business,
operations, or financial affairs of any Obligor.
(vi) The occurrence of any Suspension Event.
63
(vii) Any intention on the part of any Obligor to
discharge such Obligor's present independent accountants or any
withdrawal or resignation by such independent accountants from their
acting in such capacity (as to which, see Subsection 5-1(d)).
(viii) Any litigation which, if determined adversely
to an Obligor, could reasonably be expected to have a material adverse
effect on the consolidated financial condition of the Parent and its
Subsidiaries.
(ix) The occurrence of any event or circumstance with
respect to any Employee Benefit Plan or CAN Plan which could reasonably
be expected to have a material adverse effect with respect to any
Borrower.
(b) The Lead Borrower shall:
(i) Provide the Agent, when so distributed, with
copies of any materials distributed to the shareholders of the Parent
(QUA such shareholders).
(ii) Contemporaneously with the filing thereof,
copies of all material of a financial nature filed with the Securities
and Exchange Commission, including, without limitation, Form 10Q and
10K.
(iii) Add the Agent as an addressee on all mailing
lists maintained by or for any Obligor.
(iv) At the reasonable request of the Agent, from
time to time, provide the Agent with copies of all advertising
(including copies of all print advertising and duplicate tapes of all
video and radio advertising).
(v) Provide the Agent, when received by any Obligor,
with a copy of any management letter or similar communications from any
accountant of such Obligor.
5-4. BORROWING BASE CERTIFICATE. The Lead Borrower shall provide the
Agent weekly, by 11:30AM, on Wednesday of each week, and on each day that a
Revolving Credit loan is requested, with a Borrowing Base Certificate for each
of the US Borrowers and the CAN Borrower (in the form of EXHIBIT 5-4 annexed
hereto, as such form may be revised from time to time by the Agent). Inventory
levels shall in all events be rolled forward on a weekly basis. Such Certificate
may be sent to the Agent by facsimile transmission, PROVIDED THAT the original
thereof is forwarded to the Agent on the date of such transmission.
5-5. INTENTIONALLY OMITTED.
5-6. MONTHLY REPORTS
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(a) Monthly, within thirty (30) days of the end of the
previous month, the Lead Borrower shall provide the Agent with original
counterparts of the following (each in such form as the Agent from time to time
may specify):
(i) An Inventory Position Report for each of North
America and Watch Station and a Certificate (signed by the respective
President or Chief Financial Officer thereof) concerning the Inventory
of each of North America and Watch Station.
(ii) A Weekly Performance Report (month end version)
for each of North America and Watch Station.
(iii) An Open to Buy Report on which is shown whether
inventory levels are adequate to meet sales projections.
(iv) Reconciliations of the above described Inventory
Position Report and inventory Certificate (Section 5-6(a)(i)) to
Availability and to the general ledger as of the end of the subject
month.
(v) A schedule of purchases from each of North
America's and Watch Station's ten largest vendors (in terms of year to date
purchases), which schedule shall be in such form as may be satisfactory to the
Agent and shall include year to date cumulative purchases and an aging of
payables to each such vendor.
(vi) An aging of the accounts payable for the ten
largest vendors of each of North
America and Watch Station, and a summary of the aging of the accounts payable of
all of the vendors for each of North America and Watch Station.
(vii) A Store Activity Report.
(viii) An internally prepared financial statement of
the financial condition for each of North America and Watch Station, the results
of its operations for, the period ending with the end of the subject month,
which financial statement shall include, at a minimum, a balance sheet, income
statement, cash flow and comparison of same store sales for the corresponding
month of the then immediately previous year, as well as to the Business Plan.
(b) For purposes of Section 5-6(a), above, the first "previous
month" in respect of which the items required by that Section shall be provided
shall be March, 1998.
5-7. QUARTERLY REPORTS. Quarterly, within Forty Five (45) days
following the end of each of the Obligors' fiscal quarters, the Lead Borrower
shall provide the Agent with original counterparts of the following (each in
such form as the Agent from time to time may specify):
(a) A management prepared consolidated financial statement of
the Parent and its Subsidiaries for the period from the beginning of the
Parent's then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
"consolidated" basis
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together with a separate statement for each of North America and Watch Station),
statement of changes in shareholders' equity, and cash flows and comparisons for
the corresponding quarter of the then immediately previous year, as well as to
the Business Plan.
(b) A Cost of Sales Report for each of North America and Watch
Station.
(c) An aging of the Inventory of each of North
America and Watch Station.
(d) A Discount Split report for
each of each of North America and Watch Station.
(e) A Gross Margin Reconciliation.
5-8. ANNUAL REPORTS
(a) Annually, within ninety (90) days following the end of the
Obligors' fiscal year, the Lead Borrower shall furnish the Agent with an
original signed counterpart of the consolidated annual financial statement of
the Parent and its Subsidiaries, which statement shall have been prepared by,
and bear the unqualified opinion of, the Parent's independent certified public
accountants (i.e. said statement shall be "certified" by such accountants). Such
annual statement shall include, at a minimum (with comparative information for
the then prior fiscal year) a consolidated balance sheet, income statement,
statement of changes in shareholders' equity, and cash flows.
(b) Annually, within ninety (90) days following the end of the
Obligors' fiscal year, the Lead Borrower shall furnish the Agent with an
internally prepared financial statement of the financial condition for each of
North America and Watch Station, and the results of its operations, for the
subject fiscal year, which financial statement shall include, at a minimum, a
balance sheet, income statement, cash flow and comparison to the Business Plan.
(c) No later than the earlier of Fifteen (15) days prior to
the end of each of the Obligors' fiscal years or the date on which such
accountants commence their work on the audit of the Obligors' annual
consolidated financial statement, the Lead Borrower shall give written notice to
such accountants (with a copy of such notice, when sent, to the Agent) that:
(i) Such annual financial statement will be delivered
by the Lead Borrower to the Agent (for subsequent distribution
to each Lender).
(ii) It is the primary intention of the Obligors, in
its engagement of such accountants, to satisfy the financial
reporting requirements set forth in this Article 5.
(iii) The Obligors have been advised that the Agent
(and each Lender) will rely thereon with respect to the
administration of, and transactions under, the credit facility
contemplated by the within Agreement.
(d) Each annual statement shall be accompanied by such
accountant's Certificate indicating that, in conducting the audit for such
annual statement, nothing came to the attention of such accountant, that would
lead the accountants to believe that any Suspension Event had occurred during
the subject fiscal year (or if one or more had occurred, the facts and
circumstances thereof).
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5-9. OFFICERS' CERTIFICATES. The Lead Borrower shall cause the Parent's
Chief Financial Officer to provide such Person's Certificate with those monthly,
quarterly, and annual statements to be furnished pursuant to this Agreement,
which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied and presents fairly the financial
condition of the Parent, the Borrowers and their respective Subsidiaries at the
close of, and the results of the Borrowers= operations and cash flows for, the
period(s) covered, SUBJECT, HOWEVER to the following:
(i) usual year end adjustments (this exception shall
not be included in the Certificate which accompanies such annual
statement).
(ii) Material Accounting Changes.
(b) Indicate either that (i) no Suspension Event has occurred
or (ii) if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Obligors to be taken on
account thereof.
5-10. INVENTORIES, APPRAISALS, AND AUDITS
(a) The Agent and each Lender, at the expense of the
Borrowers, may observe, at the Parent's distribution facility, each physical
count and/or inventory of so much of the Collateral as consists of Inventory
which is undertaken on behalf of the Borrowers.
(b) At the end of the Parent's second and fourth fiscal
quarters, the Parent shall obtain, or shall permit the Agent to obtain (in all
events, at the Borrowers' expense) physical counts and/or inventories of the
Collateral, conducted by such inventory takers as are reasonably satisfactory to
the Agent and following such methodology as may be reasonably required by the
Agent. Following the occurrence and during the continuance of an Event of
Default, the Agent, in its discretion, may undertake additional such counts or
inventories as the Agent determines. Copies of all reports and other information
relating to such physical counts and/or inventories, whenever taken (and not
merely those described above) shall be promptly furnished to the Agent.
(c) Upon the Agent's reasonable request from time to time (but
not more than once in any twelve month period, unless Availability is ever less
than $15,000,000.00, in which event the Agent may undertake up to two such
appraisals in any twelve month period), the Borrowers shall permit the Agent to
obtain appraisals (in all events, at the Borrowers' expense) conducted by such
appraisers as are reasonably satisfactory to the Agent.
(d) The Agent contemplates conducting two (2) commercial
finance audits (in each event, at the Borrowers' expense) of the Borrowers'
books and records during any Twelve (12) month period during which the within
Agreement is in effect, but in its discretion if Availability is ever less than
$15,000,000.00, may undertake one additional audit at the Borrowers' expense
during such period.
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(e) Upon Agent's request, Parent shall provide the Agent with
all reports relating to "mystery shopping" (so-called) visits to all or any of
the Borrowers' business premises.
5-11. ADDITIONAL FINANCIAL INFORMATION
(a) In addition to all other information required to be
provided pursuant to this Article 5, the Lead Borrower promptly shall provide
the Agent, with such other and additional information concerning the Borrowers,
the Collateral, the operation of the Borrowers' business, and the Borrowers'
financial condition, including original counterparts of financial reports and
statements, as the Agent may from time to time reasonably request from the Lead
Borrower.
(b) The Lead Borrower may provide the Agent, from time to time
hereafter, with updated projections of the Borrowers' anticipated performance
and operating results.
(c) In all events, the Lead Borrower, no sooner than Ninety
(90) nor later than Sixty (60) days prior to the end of each of the Borrowers'
fiscal years, shall furnish the Agent with an updated and extended projection
which shall go out at least through the end of the then next fiscal year.
(d) Such updated and extended projections shall be prepared
pursuant to a methodology and shall include such assumptions as are reasonably
satisfactory to the Agent.
(e) The Borrowers recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Agent or any
Lender may obtain, develop, or receive with respect to the Borrowers is
confidential to the Agent and the Lenders and that, except as otherwise provided
herein, the Borrowers are not entitled to receipt of any of such appraisals,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.
6-1. USE OF INVENTORY COLLATERAL
(a) The Borrowers shall not engage in any sale of the
Inventory other than for fair consideration in the conduct of the Borrowers'
business in the ordinary course and shall not (i) engage in sales or other
dispositions to creditors; or (ii) sales or other dispositions in bulk, except
in a manner consistent with past and existing practices of the Borrowers and in
the ordinary course of business (unless either (x) the value of the Borrowers'
remaining Inventory will be materially and adversely affected thereby, or (y) an
Event of Default exists and is continuing, in which events the foregoing will be
prohibited under all circumstances).
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, such Inventory may be returned to the
Borrowers without the consent of the Agent .
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6-2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired
by the Borrowers is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).
6-3. ADJUSTMENTS AND ALLOWANCES. The Borrowers may grant such
allowances or other adjustments to the Borrowers' Account Debtors (exclusive of
extending the time for payment of any Account or Account Receivable, which shall
not be done without first obtaining the Agent's prior written consent in each
instance) as the Borrowers may reasonably deem to accord with sound business
practice, PROVIDED, HOWEVER, the authority granted the Borrowers pursuant to
this Section 6-3 may be limited or terminated by the Agent at any time after the
occurrence and during the continuance of an Event of Default, in the Agent's
discretion.
6-4. VALIDITY OF ACCOUNTS
(a) The amount of each Account shown on the books, records,
and invoices of the Borrowers represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrowers.
(b) The Borrowers have no knowledge of any material impairment
of the validity or collectibility of any of the Accounts and shall notify the
Agent of any such fact immediately after the Borrowers become aware of any such
material impairment.
(c) The Borrowers shall not post any bond to secure the
Borrowers' performance under any agreement to which any Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of any Borrower (other than to the Agent ) in the event
of such Borrower's failure so to perform.
6-5. NOTIFICATION TO ACCOUNT DEBTORS. The Agent shall have the right
at any time, after the occurrence and during the continuance of an Event of
Default, to notify any of the Borrowers' Account Debtors to make payment
directly to the Agent and to collect all amounts due on account of the
Collateral.
ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES.
7-1. DEPOSITORY ACCOUNTS
(a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present
DDA's, which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.
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(b) The Borrowers shall deliver to the Agent, as a condition
to the effectiveness of the within Agreement:
(i) Notification, executed on behalf of the
Borrowers, to each depository institution with which any DDA is
maintained (other than the Funding Account, the CAN Funding Account, or
any Local DDA), in form satisfactory to the Agent, of the Agent's
interest in such DDA.
(ii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the Agent, with
any depository institution at which the Central Account, the Funding
Account and the CAN Funding Account is maintained.
(c) The Borrowers will not establish any DDA hereafter (other
than a Local DDA) unless, contemporaneous with such establishment, the Borrowers
deliver to the Agent an agreement (in form satisfactory to the Agent) executed
on behalf of the depository with which such DDA is being established.
7-2. CREDIT CARD RECEIPTS
(a) Annexed hereto as EXHIBIT 7-2, is a Schedule which
describes all arrangements to which the Borrowers are a party with respect to
the payment to the Borrowers of the proceeds of all credit card charges for
sales by the Borrowers.
(b) The Borrowers shall deliver to the Agent, as a condition
to the effectiveness of the within Agreement, notification, executed on behalf
of the Borrowers, to each of the Borrowers' credit card clearinghouses and
processors of notice (in form satisfactory to the Agent ), which notice provides
that payment of all credit card charges submitted by the Borrowers to that
clearinghouse or other processor and any other amount payable to the Borrowers
by such clearinghouse or other processor shall be directed to such account as
may be designated by the Agent in such notice. The Borrowers shall not change
such direction or designation except upon and with the prior written consent of
the Agent .
7-3. THE CONCENTRATION AND THE FUNDING ACCOUNTS
(a) The following checking accounts have been or will be
established (and are so referred to herein):
(i) The CONCENTRATION ACCOUNT: Established by
the Agent with BankBoston, N.A.
(ii) The CENTRAL ACCOUNT: Established by the US
Borrowers with Nationsbank and the CAN Borrower with Bank of Montreal.
(iii) The FUNDING ACCOUNT: Established by the US
Borrowers with Nationsbank.
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(iv) The CAN FUNDING ACCOUNT: Established by the CAN
Borrower with Bank of Montreal.
(b) The contents of each DDA (other than the Funding Account
and the CAN Funding Account) and the Central Account constitutes Collateral and
Proceeds of Collateral. The contents of the Concentration Account constitutes
the Agent's property.
(c) The Borrowers shall not establish any Central Account
hereafter except upon not less than Thirty (30) days' prior written notice to
the Agent and the delivery to the Agent of a Blocked Account Agreement similar
to that executed pursuant to Section 7-1(b)(ii) hereof.
(d) The Borrowers shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Agent or by any bank
in which any account is opened as required hereby (even if such account is
opened by and/or is the property of the Agent).
7-4. PROCEEDS AND COLLECTION OF ACCOUNTS
(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrowers for the Agent; and shall
be deposited and/or transferred only to the DDAs (other than any Local DDA, the
Funding Account or the CAN Funding Account), the Central Account, or the
Concentration Account, as provided herein.
(b) The Lead Borrower shall cause the ACH or wire transfer to
the Central Account, no less frequently than daily (and whether or not there is
then an outstanding balance in the Loan Account) of the then contents of each
DDA (other than (i) any Local DDA, (ii) the Funding Account and (iii) the CAN
Funding Account), each such transfer to be net of any minimum balance, not to
exceed $750.00, as may be required to be maintained in the subject DDA by the
bank at which such DDA is maintained).
(c) Subject to the provisions of Section 7-4(d) hereof, the US
Borrowers shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than weekly (and whether or not there is then an outstanding
balance in the Loan Account) of
(i) the then contents of the Central Account
established by the US Borrowers; and
(ii) the proceeds of all credit card charges for
the US Borrowers not otherwise provided for pursuant hereto.
Telephone advice (confirmed by written notice) shall be provided to the Agent on
each Business Day on which any such transfer is made.
(d) After the occurrence of a Suspension Event, the ACH or
wire transfers described in Section 7-4(c) hereof shall be made daily to the
Concentration Account.
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(e) Subject to the provisions of Section 7-4(f) hereof, the
CAN Borrower shall cause the ACH or wire transfer to the Concentration Account,
no less frequently than weekly, but only if there is then an outstanding balance
of CAN Debt, of
(i) the then contents of the Central Account
established by the CAN Borrower in excess of $350,000.00 or such lesser
amount, if necessary, so that the CAN Debt does not exceed CAN
Availability; and
(ii) the proceeds of all credit card charges for the
CAN Borrower not otherwise provided for pursuant hereto.
Telephone advice (confirmed by written notice) shall be provided to the Agent on
each Business Day on which any such transfer is made.
(f) After the occurrence of a Suspension Event, the ACH or
wire transfers described in Section 7-4(e) hereof shall be made daily to the
Concentration Account.
(g) In the event that, notwithstanding the provisions of this
Section 7-4, the Borrowers receive or otherwise have dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrowers for the Agent
and shall not be commingled with any of the Borrowers' other funds or deposited
in any account of the Borrowers other than as provided in Section 7-4(a) or as
instructed by the Agent.
7-5. PAYMENT OF LIABILITIES
(a) On each Business Day, subject to the terms of the Fee
Letter, the Agent shall apply toward the Liabilities the then collected balance
of the Concentration Account (net of fees charged, and of such impressed
balances as may be required by the bank at which the Concentration Account is
maintained), PROVIDED that any amounts received in the Concentration Account
from the CAN Borrower (other than the funds described in Section 7-7 hereof)
shall be applied only to the CAN Debt.
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which
deposited, PROVIDED THAT notice of such deposit is available
to the Agent by 2:00PM on that Business Day.
(ii) Funds paid to the Agent, other than by deposit
to the Concentration Account, shall be deemed to have been
received on the Business Day when they are good and collected
funds, PROVIDED THAT notice of such payment is available to
the Agent by 2:00PM on that Business Day.
(iii) If notice of a deposit to the Concentration
Account (Section 7-5(b)(i)) or payment (Section 7-5(b)(ii)) is
not available to the Agent until after 2:00PM on a Business
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Day, such deposit or payment shall be deemed to have been made
at 9:00AM on the then next Business Day.
(iv) All deposits to the Concentration Account and
other payments to the Agent are subject to clearance and
collection.
(c) The Agent shall transfer to the Funding
Account or the CAN Funding Account, as applicable, any surplus in the
Concentration Account remaining after the application towards the Liabilities
referred to in Section 7-5(a), above (less those amount which are to be netted
out, as provided therein) PROVIDED, HOWEVER, in the event that both (i) a
Suspension Event has occurred and (ii) one or more L/C's are then outstanding,
the Agent may establish a funded reserve of up to 110% of the aggregate Stated
Amounts of such L/C's.
7-6. THE FUNDING ACCOUNT; THE CAN FUNDING ACCOUNT. Except as otherwise
specifically provided in, or permitted by, the within Agreement, (a) all checks
shall be drawn by the US Borrowers upon, and other disbursements made by the US
Borrowers solely from, the Funding Account, and (b) all checks shall be drawn by
the CAN Borrower upon, and other disbursements made by the CAN Borrower solely
from the CAN Funding Account.
7-7. TRANSFERS FROM CAN BORROWER. The CAN Borrower shall transfer funds to
the US Borrowers, the Parent, and any other Domestic Subsidiaries at the same
intervals, and consistent with, past practices for, among other things, the
payment for Inventory and other property purchased by the CAN Borrower and
repayment of loans by the CAN Borrower. Such funds shall be deposited into the
Central Account established by the US Borrowers, shall be transferred to the
Concentration Account as set forth above and applied to the Liabilities in such
order and manner as the Agent reasonably determines (i.e. such funds need not
solely be applied to the CAN Debt).
ARTICLE 8 - GRANT OF SECURITY INTEREST
8-1. GRANT OF SECURITY INTEREST. To secure the Borrowers' prompt,
punctual, and faithful performance of all and each of the Borrowers'
Liabilities, subject to the provisions of Section 8-4 hereof, the Borrowers each
hereby grant to the Agent, for the ratable benefit of the Lenders, a continuing
security interest in and to, and assigns to the Agent, for the ratable benefit
of the Lenders, the following, and each item thereof, whether now owned or now
due, or in which the Borrowers have an interest, or hereafter acquired, arising,
or to become due, or in which the Borrowers obtain an interest, and all
products, Proceeds, substitutions, and accessions of or to any of the following
(all of which, together with any other property in which the Agent may in the
future be granted a security interest, is referred to herein as the
"COLLATERAL"):
(a) All Accounts and accounts receivable.
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(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of the Borrowers'
business, and all rights of access to such books,
records, and information, and all property in which
such books, records, and information are stored,
recorded, and maintained.
(i) All Investment Property, Instruments, Documents,
Deposit Accounts, policies and certificates of
insurance, deposits, impressed accounts, compensating
balances, money, cash, or other property.
(j) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and
credit insurance, whether any of such proceeds,
refunds, and premium rebates arise out of any of the
foregoing.(8-1(a) through 8-1(i)) or otherwise.
(k) All liens, guaranties, rights, remedies, and
privileges pertaining to any of the foregoing (8-1(a)
through 8-1(i)), including the right of stoppage in
transit.
(l) All Leasehold Interests.
8-2. EXTENT AND DURATION OF SECURITY INTEREST. The within grant of a
security interest is in addition to, and supplemental of, any security interest
previously granted by the Borrowers to the Agent and, subject to the provisions
of Section 8-4 hereof, shall continue in full force and effect applicable to all
Liabilities until all Liabilities have been paid and/or satisfied in full (other
than contingent Liabilities which have not then ripened into a claim), at which
time the security interest granted herein shall be terminated in writing by a
duly authorized officer of the Agent .
8-3. SECURITY FROM PARENT. To secure its Guaranty of the Liabilities,
the Parent and its Domestic Subsidiaries, as applicable, are contemporaneously
herewith granting the Agent, for the ratable benefit of the Lenders, a security
interest in (a) the Eligible Tax Refund, (b) all capital stock of such Person's
Domestic Subsidiaries, (c) sixty-five percent (65%) of the capital stock of each
of such Person's foreign Subsidiaries and (d) all right, title and interest of
the Parent under any agreements with Host Stores. All property of the Parent in
which the Agent is obtaining a security interest shall be deemed "Collateral"
for purposes of this Agreement and the other Loan Documents.
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8-4. SECURITY FROM CAN BORROWER. Notwithstanding anything to the
contrary herein contained, all Collateral granted by the CAN Borrower shall only
secure the CAN Debt and no other Liabilities.
ARTICLE 9 - AGENT AS BORROWERS' ATTORNEY-IN-FACT.
9-1. APPOINTMENT AS ATTORNEY-IN-FACT. The Borrowers hereby irrevocably
constitute and appoint the Agent as the Borrowers' true and lawful attorney,
with full power of substitution, exercisable after the occurrence and during the
continuance of an Event of Default, to convert the Collateral into cash at the
sole risk, cost, and expense of the Borrowers, but for the sole benefit of the
Agent. The rights and powers granted the Agent by the within appointment include
but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address
to which the Borrowers' mail is to be sent to such address as the Agent shall
designate; receive and open the Borrowers' mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Lead Borrower or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrowers, or other legal
representative of the Borrowers whom the Agent determines to be the appropriate
person to whom to so turn over such mail.
(c) Endorse the name of the Borrowers in favor of the Agent
upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrowers on, and receive as
secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
the Borrowers' name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which any Borrower
is a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of any Borrower.
(g) Use, license or transfer any or all General Intangibles of
any Borrower.
9-2. NO OBLIGATION TO ACT. The Agent shall not be obligated to do any
of the acts or to exercise any of the powers authorized by Section 9-1 herein,
but if the Agent elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result of such
exercise of power, and shall not be responsible to the Borrowers for any act or
omission to act
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except for any act or omission to act as to which there is a final determination
made in a judicial proceeding (in which proceeding the Agent has had an
opportunity to be heard) which determination includes a specific finding that
the subject act or omission to act had been grossly negligent or in actual bad
faith.
ARTICLE 10 - EVENTS OF DEFAULT.
The occurrence of any event described in this Article 10 respectively
shall constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event
of Default described in Section 10-11, any and all Liabilities shall become due
and payable without any further act on the part of the Agent or any Lender. Upon
the occurrence of any other Event of Default, any and all Liabilities shall
become immediately due and payable, at the option of the Agent upon notice or
demand to the Borrowers. The occurrence of any Event of Default shall also
constitute, without notice or demand, a default under all other agreements
between the Agent or any Lender and any Borrower and instruments and papers
given the Agent or any Lender by any Borrower, whether such agreements,
instruments, or papers now exist or hereafter arise.
10-1. FAILURE TO PAY REVOLVING CREDIT. The failure by the Borrowers to
pay any amount when due under the Revolving Credit.
10-2. FAILURE TO MAKE OTHER PAYMENTS. The failure by the Borrowers to
pay when due (or upon demand, if payable on demand) any payment Liability other
than under the Revolving Credit.
10-3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The
failure by the Borrowers to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 10-1 or Section 10-2 hereof, and included in any of the following
provisions hereof:
SECTION RELATES TO :
------------------------------------------
4-5(a) and (b) Location of Collateral
4-6 Title to Assets
4-7 Indebtedness
4-8(b) Maintenance of Insurance
4-13(d) Pay taxes
4-18(a)-(e) Dividends and Investments
4-22 Affiliate Transactions
5-4 Borrowing Base Certificates
Article 7 Cash Management
10-4. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The
failure by the Borrowers, (a) upon Five (5) days written notice by the Agent, to
cure the Borrowers' failure to promptly, punctually and
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faithfully perform, discharge, or comply with any covenant set forth in Article
5 hereof (other than Section 5-4), or (b) upon Fifteen (15) days written notice
by the Agent, to cure the Borrowers' failure to promptly, punctually and
faithfully perform, discharge, or comply with any covenant or Liability under
any Loan Document not described in any of Sections 10-1, 10-2, or 10-3 hereof.
10-5. MISREPRESENTATION. Any representation or warranty at any time
made by any Borrower to the Agent or any Lender, was not true or complete in all
material respects when given.
10-6. ACCELERATION OF OTHER DEBT, BREACH OF LEASE. The occurrence of
any event such that any Indebtedness aggregating in excess of $1,000,000.00 of
any Borrower to any creditor other than the Agent or any Lender could be
accelerated or, without the consent of such Borrower, Leases with remaining
rental payments over the term of such Leases aggregating in excess of
$2,000,000.00 could be terminated (whether or not the subject creditor or lessor
takes any action on account of such occurrence).
10-7. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach or
default (after the expiration of any applicable notice and grace periods, if
any) under any agreement between the Agent or any Lender and any Borrower or
instrument or paper given the Agent or any Lender by any Borrower (not
constituting a Loan Document), whether such agreement, instrument, or paper now
exists or hereafter arises (notwithstanding that the Agent or the subject Lender
may not have exercised its rights upon default under any such other agreement,
instrument or paper). The Agent and the Borrowers are not aware of the existence
of any agreements, instruments or papers which are not Loan Documents as of the
date hereof.
10-8. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral.
10-9. JUDGMENT. RESTRAINT OF BUSINESS
(a) The service of process upon the Agent or any Lender or any
Participant seeking to attach, by trustee or other process, any of a Borrower's
funds on deposit with, or assets of such Borrower in the possession of, the
Agent or any Lender or such Participant, which is not timely contested in good
faith by such Borrower by appropriate proceedings, or if so contested, is not
dismissed within thirty (30) days.
(b) Except for any judgments in the litigation described on
the disclosure letter furnished to the Agent, the entry of any judgment or
judgments against any Borrower in excess of
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$500,000.00 in the aggregate, which judgment(s) are not satisfied (if a money
judgment) or appealed from (with execution or similar process stayed) within
thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by any Borrower of its business in the ordinary course.
10-10. BUSINESS FAILURE. Any act by, against, or relating to any
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
person, pursuant to court action or otherwise, over all, or any part of any
Borrower's property, which, if commenced against any Borrower, is not timely
contested in good faith by such Borrower by appropriate proceedings, or if so
contested, is not dismissed within thirty (30) days of when filed; the granting
of any trust mortgage or execution of an assignment for the benefit of the
creditors of any Borrower, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for any Borrower; the
offering by or entering into by any Borrower of any composition, extension, or
any other arrangement seeking relief from or extension of the debts of any
Borrower; or the initiation of any judicial or non-judicial proceeding or
agreement by, against, or including any Borrower which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the initiation
by or on behalf of any Borrower of the liquidation or winding up of all or any
part of the Borrower's business or operations.
10-11. BANKRUPTCY. The failure by any Borrower to generally pay the
debts of such Borrower as they mature; adjudication of bankruptcy or insolvency
relative to any Borrower; the entry of an order for relief or similar order with
respect to any Borrower in any proceeding pursuant to the Bankruptcy Code,
Bankruptcy Act, or any other bankruptcy law; the filing of any complaint,
application, or petition by any Borrower initiating any matter in which such
Borrower is or may be granted any relief from the debts of such Borrower
pursuant to the Bankruptcy Code, Bankruptcy Act or any other insolvency statute
or procedure; the filing of any complaint, application, or petition against any
Borrower initiating any matter in which such Borrower is or may be granted any
relief from the debts of such Borrower pursuant to the Bankruptcy Code,
Bankruptcy Act or any other insolvency statute or procedure, which complaint,
application, or petition is not timely contested in good faith by such Borrower
by appropriate proceedings or, if so contested, is not dismissed within thirty
(30) days of when filed.
10-12. DEFAULT BY GUARANTOR OR RELATED ENTITY. The occurrence of any
of the foregoing Events of Default with respect to the Parent or Related Entity,
as if such Parent, or Related Entity were the "Borrower" described therein.
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10-13. INDICTMENT - FORFEITURE. The indictment of, or institution of
any legal process or proceeding against, any Borrower, under any federal, state,
provincial, municipal, and other civil or criminal statute, rule, regulation,
order, or other requirement having the force of law where the relief, penalties,
or remedies sought or available include the forfeiture of any property of any
Borrower and/or the imposition of any stay or other order, the effect of which
could reasonably be expected to be to restrain in any material way the conduct
by any Borrower of its business in the ordinary course.
10-14. TERMINATION OF GUARANTY. The termination or attempted
termination of any guaranty by any guarantor of the Liabilities.
10-15. CHALLENGE TO LOAN DOCUMENTS
(a) Any challenge by or on behalf of any Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
10-16. CHANGE IN CONTROL. Any Change in Control.
aRTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies upon the
occurrence, and during the continuance, of any Event of Default. No stay which
otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code or
otherwise shall stay, limit, prevent, hinder, delay, restrict, or otherwise
prevent the Agent's exercise of any of such rights and remedies.
11-1. RIGHTS OF ENFORCEMENT. The Agent shall have all of the rights
and remedies of a secured party upon default under the UCC and the PPSA, in
addition to which the Agent shall have all and each of the following rights and
remedies:
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(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(b) To take possession of all or any portion of the
Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Agent deems advisable and with or without the taking of possession of any of
the Collateral.
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
(g) Applicable to the CAN Borrower Only: To appoint by
instrument in writing, a receiver (which term shall include a receiver and
manager or agent) of the CAN Borrower and of all or any part of its Collateral
and remove or replace such receiver from time to time or to institute
proceedings in any court of competent jurisdiction for the appointment of a
receiver. Any such receiver so appointed by the Agent, with respect to
responsibility for its acts, shall be deemed, to the extent permitted by
applicable law, the agent of the CAN Borrower and not of the Agent. Where the
Agent is referred to in this Article 11, the reference includes, where the
context so permits, any receiver so appointed and the officers, employees,
servants, or agents of such receiver.
11-2. SALE OF COLLATERAL
(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.
(b) The Agent, in the exercise of the Agent's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s) may
be conducted upon any premises owned, leased, or occupied by any Borrower. The
Agent and any such agent or contractor, in conjunction with any such sale, may
augment the Inventory with other goods (all of which other goods shall remain
the sole property of the Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Agent or such agent or contractor
and neither the Borrowers nor any Person claiming under or in right of the
Borrowers shall have any interest therein.
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(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Agent shall provide the Lead Borrower with such
notice as may be practicable under the circumstances), the Agent shall give the
Lead Borrower at least seven (7) days prior written notice of the date, time,
and place of any proposed public sale, and of the date after which any private
sale or other disposition of the Collateral may be made. The Borrowers agree
that such written notice shall satisfy all requirements for notice to the
Borrowers which are imposed under the UCC, the PPSA, or other applicable law
with respect to the exercise of the Agent's rights and remedies upon default.
(d) The Agent and any Lender may purchase the Collateral, or
any portion of it at any sale held under this Article.
(e) The Agent shall apply the proceeds of any exercise of the
Agent's Rights and Remedies under this Article 11 towards the Liabilities in
such manner, and with such frequency, as the Agent determines.
11-3. OCCUPATION OF BUSINESS LOCATION. In connection with the Agent's
exercise of the Agent's rights under this Article 11, the Agent may enter upon,
occupy, and use any premises owned or occupied by any Borrower, and may exclude
the Borrowers from such premises or portion thereof as may have been so entered
upon, occupied, or used by the Agent. The Agent shall not be required to remove
any of the Collateral from any such premises upon the Agent's taking possession
thereof, and may render any Collateral unusable to the Borrowers. In no event
shall the Agent be liable to the Borrowers for use or occupancy by the Agent of
any premises pursuant to this Article 11, nor for any charge (such as wages for
the Borrowers' employees and utilities) incurred in connection with the Agent's
exercise of the Agent's Rights and Remedies.
11-4. GRANT OF NONEXCLUSIVE LICENSE. The Borrowers each hereby grant
to the Agent a royalty free nonexclusive irrevocable license to use, apply, and
affix any trademark, trade name, logo, or the like in which the Borrowers now or
hereafter has rights, such license being solely applicable with respect to the
Agent's exercise of the rights under Articles 9 and 11 hereof including, without
limitation, in connection with any completion of the manufacture of Inventory or
sale or other disposition of Inventory.
11-5. ASSEMBLY OF COLLATERAL. The Agent may require the Borrowers to
assemble the Collateral and make it available to the Agent at the Borrowers'
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and Borrowers.
11-6. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges,
and discretions of the Agent hereunder (herein, the " AGENT'S RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of
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any rights or remedies which it would otherwise have. No delay or omission by
the Agent in exercising or enforcing any of the Agent's Rights and Remedies
shall operate as, or constitute, a waiver thereof. No waiver by the Agent of any
Event of Default or of any default under any other agreement shall operate as a
waiver of any other default hereunder or under any other agreement. No single or
partial exercise of any of the Agent's Rights or Remedies, and no express or
implied agreement or transaction of whatever nature entered into between the
Agent and any person, at any time, shall preclude the other or further exercise
of the Agent's Rights and Remedies. No waiver by the Agent of any of the Agent's
Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. All of the
Agent's Rights and Remedies and all of the Agent's rights, remedies, powers,
privileges, and discretions under any other agreement or transaction are
cumulative, and not alternative or exclusive, and may be exercised by the Agent
at such time or times and in such order of preference as the Agent in its sole
discretion may determine. The Agent's Rights and Remedies may be exercised
without resort or regard to any other source of satisfaction of the Liabilities.
ARTICLE 12 - NOTICES.
12-1. NOTICE ADDRESSES. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:
If to the Agent:
BankBoston Retail Finance Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
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If to the Borrowers:
Sunglass Hut Trading Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
Fax : (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ & Quentel
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire
Fax: : (▇▇▇) ▇▇▇-▇▇▇▇
12-2. NOTICE GIVEN
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
Three (3) days following deposit in the United States mail, postage
prepaid.
(ii) By recognized overnight express delivery: the
Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after
9:00 AM and no later than Three (3) hours prior to the close of
customary business hours of the recipient, when delivered. Otherwise,
at the opening of the then next Business Day.
(iv) By Facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 AM and no later than Three (3) hours
prior to the close of customary business hours of the recipient, one
(1) hour after being sent. Otherwise, at the opening of the then next
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice sent.
ARTICLE 13 - TERM
13-1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2-5(h) hereof)
until the Termination Date.
13-2. EFFECT OF TERMINATION. Upon the termination of the Revolving
Credit, the Borrowers shall pay the Agent (whether or not then due), in
immediately available funds, all then Liabilities including, without limitation:
the entire balance of the Loan Account; the Early Termination Fee, if
applicable, any
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remaining balance of the Agent's Fee; any accrued and unpaid Line Fee; and all
unreimbursed costs and expenses of the Agent and of each Lender for which the
Borrowers are responsible; and shall make such arrangements concerning any L/C's
then outstanding are reasonably satisfactory to the Agent . Until such payment,
all provisions of this Agreement, other than those contained in Article 2 which
place an obligation on the Agent and any Lender to make any loans or advances or
to provide financial accommodations under the Revolving Credit or otherwise,
shall remain in full force and effect until all Liabilities shall have been paid
in full. The release by the Agent of the security and other collateral interests
granted the Agent by the Borrowers hereunder may be upon such reasonable
conditions and indemnifications as the Agent may require.
ARTICLE 14 - GENERAL
14-1. PROTECTION OF COLLATERAL. The Agent has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrowers (and may
utilize any logo or other distinctive symbol associated with the Borrowers) in
connection with any advertising, promotion, or marketing undertaken by the Agent
with the Borrowers' approval, which shall not be unreasonably withheld or
delayed.
14-2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrowers and the Borrowers' representatives, successors, and assigns and shall
enure to the benefit of the Agent and each Lender and the respective successors
and assigns of each PROVIDED, HOWEVER, no trustee or other fiduciary appointed
with respect to any Borrower shall have any rights hereunder. In the event that
the Agent or any Lender assigns or transfers its rights under this Agreement,
the assignee shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of such assignor hereunder and such assignor
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
14-3. SEVERABILITY. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
14-4. AMENDMENTS. COURSE OF DEALING
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(a) This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Obligors and the Agent and each
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by the Agent or any Lender to give notice to any Borrower of such
Borrower's having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document. No change made by the
Agent in the manner by which Availability is determined shall obligate the Agent
to continue to determine Availability in that manner.
(b) The Borrowers may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Agent, then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by the Agent shall be in reliance upon all representations
and warranties theretofore made to the Agent by or on behalf of the Obligors and
consequently may be rescinded in the event that any of such representations or
warranties was not true and complete in all material respects when given.
14-5. POWER OF ATTORNEY. In connection with all powers of attorney
included in this Agreement, the Obligors each hereby grant unto the Agent full
power (exercisable following and during the continuance of an Event of Default)
to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the Obligors might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement. No power of attorney set forth in this Agreement shall
be affected by any disability or incapacity suffered by any Obligor and each
shall survive the same. All powers conferred upon the Agent by this Agreement,
being coupled with an interest, shall be irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Agent.
14-6. APPLICATION OF PROCEEDS. The proceeds of any collection, sale,
or disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion. The Obligors shall remain liable for any
deficiency remaining following such application.
14-7. COSTS AND EXPENSES OF AGENT AND OF LENDERS. (a) The Obligors
shall pay on demand all Costs of Collection and all reasonable expenses of the
Agent in connection with the
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preparation, execution, and delivery of this Agreement and of any other Loan
Documents, whether now existing or hereafter arising, and all other reasonable
expenses which may be incurred by the Agent in preparing or amending this
Agreement and all other agreements, instruments, and documents related thereto,
or otherwise incurred with respect to the Liabilities, and all costs and
expenses of the Agent which relate to the credit facility contemplated hereby.
(b) The Obligors shall pay on demand all costs and expenses
(including attorneys' reasonable fees) incurred, following the occurrence of any
Event of Default, by each Lender in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as any such costs and expenses in connection with any
"workout", forbearance, or restructuring of the credit facility contemplated
hereby.
(c) The Obligors authorize the Agent to pay all such fees and
expenses and in the Agent's discretion, to add such fees and expenses to the
Loan Account.
(d) The undertaking on the part of the Obligors in this
Section 14-7 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Obligors, other than
a termination, release, or discharge which makes specific reference to this
Section 14-7.
14-8. COPIES AND FACSIMILES. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Agent or any
Lender may be reproduced by that Person or by the Agent by any photographic,
microfilm, xerographic, digital imaging, or other process, and that Person may
destroy any document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.
14-9. MASSACHUSETTS LAW. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
14-10. CONSENT TO JURISDICTION
(a) The Obligors agree that any legal action, proceeding,
case, or controversy against any Obligors with respect to any Loan Document may
be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this
86
Agreement, the Obligors, for themselves and in respect of their property,
accepts, submits, and consents generally and unconditionally, to the
jurisdiction of the aforesaid courts.
(b) To the extent permitted by applicable law, the Obligors
each WAIVE personal service of any and all process upon them, and irrevocably
consent to the service of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the Obligors at the address for notices as specified herein,
such service to become effective five (5) Business Days after such mailing.
(c) The Obligors each WAIVE any objection based on FORUM NON
CONVENIENS and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other competent jurisdiction.
(e) The Obligors each agree that any action commenced by any
Obligor asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.
14-11. INDEMNIFICATION. The Obligors shall indemnify, defend, and hold
the Agent and each Lender and any employee, officer, or agent of any of the
foregoing (each, an "INDEMNIFIED PERSON") harmless of and from any claim brought
or threatened against any Indemnified Person by any Obligor, or any other Person
(as well as from attorneys' reasonable fees and expenses in connection
therewith) on account of the relationship of any Obligor with the Agent or any
Lender (each of claims which may be defended, compromised, settled, or pursued
by the Indemnified Person with counsel of the Lender's selection, but at the
expense of the Obligors) other than any claim as to which a final determination
is made in a judicial proceeding (in which the Agent and any other Indemnified
Person has had an opportunity to be heard), which determination includes a
specific finding that the Indemnified Person seeking indemnification had acted
in a grossly negligent manner or in actual bad faith. The within indemnification
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by the Agent in favor of any Obligor, other than a
termination, release, or discharge which makes specific reference to this
Section 14-11.
14-12. RULES OF CONSTRUCTION. The following rules of construction
shall be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and words
in the plural include the singular.
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(b) Headings (indicated by being UNDERLINED) and the Table of
Contents are solely for convenience of reference and do not constitute a part of
the instrument in which included and do not affect such instrument's meaning,
construction, or effect.
(c) The words "includes" and "including" are not limiting.
(d) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(e) Text which is UNDERLINED, shown in ITALICS, shown in BOLD,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.
(f) The words "may not" are prohibitive and not permissive.
(g) The word "or" is not exclusive.
(h) Terms which are defined in one section of an instrument
are used with such definition throughout the instrument in which so defined.
(i) The symbol "$" refers to United States Dollars.
(j) References to "herein", "hereof", and "within" are to this
entire Loan Agreement and not merely to the provision in which such reference is
included.
(k) References to "this Agreement" or to any other Loan
Document is to the subject instrument as amended to the date on which
application of such reference is being made.
(l) Except as otherwise specifically provided, all references
to time are to Boston time.
(m) In the determination of any notice, grace, or other
period of time prescribed or allowed hereunder:
(i) Unless otherwise provided (i) the day of the act,
event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 PM on
the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The word "through" means "to and including".
(n) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 14-13
hereof, PROVIDED, HOWEVER, in the event of any inconsistency between the
provisions of the within Agreement and any other Loan Document, the provisions
of the within Agreement shall govern and control.
14-13. INTENT. It is intended that:
(a) This Agreement take effect as a sealed instrument.
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(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.
(c) The security interests created by this Agreement secure
all Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs and expenses incurred by the Agent
and, to the extent provide in Section 14-7 each Lender in connection with such
Person's relationship(s) with the Obligors shall be borne by the Obligors.
(e) Unless otherwise explicitly provided herein, the Agent's
consent to any action of any Obligor which is prohibited unless such consent is
given may be given or refused by the Agent in its sole discretion and without
reference to Section 2-16 hereof.
14-14. RIGHT OF SET-OFF. Any and all deposits or other sums at any
time credited by or due to any Obligor from the Agent or any Lender and any
cash, securities, instruments or other property of any Obligor in the possession
of the Agent or any Lender, whether for safekeeping or otherwise (regardless of
the reason such Person had received the same) shall at all times constitute
security for all Liabilities and for any and all obligations of the Obligors to
the Agent and each Lender and may be applied or set off against the Liabilities
and against such obligations at any time, whether or not such are then due and
whether or not other collateral is then available to the Agent.
14-15. MAXIMUM INTEREST RATE. (a) Regardless of any provision of any
Loan Document, none of the Agent or any Lender shall be entitled to contract
for, charge, receive, collect, or apply as interest on any Liability, any amount
in excess of the maximum rate imposed by applicable law. Any payment which is
made which, if treated as interest on a Liability would result in such
interest's exceeding such maximum rate shall be held, to the extent of such
excess, as additional collateral for the Liabilities as if such excess were
"Collateral."
(b) (Applicable in Canada) Notwithstanding any other provision
of this Agreement or any other Loan Document, the CAN Borrower shall not be
obliged to make any payments of interest or other amounts payable to the Agent
or the Lenders hereunder or under any other Loan Document in an amount or rate
which would be prohibited by law or would result in the receipt by the Agent or
the Lenders of interest at a criminal rate (as the terms "interest" and
"criminal rate" are defined under the CRIMINAL CODE (Canada)) or which would
contravene any local usury laws which may be applicable to the CAN Debt under or
in connection with this Agreement. Any payment which is made which, if treated
as interest would result in such interest's exceeding such maximum rate shall be
held, to the extent of such excess, as additional Collateral. If the making of
more than one payment would, in the aggregate, have such result, the Agent
shall, in its reasonable discretion, determine the payment or payments that are
to be so held. For the purposes of the INTEREST ACT (Canada), whenever interest
payable pursuant to this
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Agreement is calculated on the basis of a period other than a calendar year,
such rate of interest determined pursuant to such calculation, expressed as an
annual rate, is such rate, as so determined, multiplied by the actual number of
days in the calendar year in which the same is to be ascertained and divided by
the number of days in such period of other than a calendar year. All interest
payable by the CAN Borrower hereunder will be calculated using the nominal rate
method of calculation and not the effective rate method of calculation or any
other basis that gives effect to the principle of deemed reinvestment of
interest.
14-16. JUDGMENT CURRENCY. The obligations of the CAN Borrower pursuant
to the Loan Documents to make payments in United States Dollars (the
"CONTRACTUAL CURRENCY") shall not be discharged or satisfied by any tender or
recovery pursuant to any judgement expressed in or converted into any other
currency except to the extent to which such tender or recovery shall result in
the effective receipt by the Agent and the Lenders of the full amount of the
Contractual Currency payable or expressed to be payable under this Agreement and
accordingly the obligation of the CAN Borrower shall be enforceable as an
alternative or additional cause of action for the purpose of recovery in the
other currency of the amount (if any) by which such effective receipt shall fall
short of the full amount of the Contractual Currency payable or expressed to be
payable under this Agreement and shall not be effected by judgment being
obtained for any other sum due under this Agreement.
14-17. NET PAYMENTS. Any and all payments made under this Agreement
shall be made free and clear of and without deduction or withholding for or on
account of any present or future taxes, levies, duties, fees, deductions,
withholdings, restrictions or conditions of any nature whatsoever. If at any
time any applicable law, regulation or agreement requires any Obligor to make
any such deduction or withholding in respect of any amount paid or payable under
this Agreement:
(a) such amount shall be increased as shall be necessary so
that after making all deductions or withholdings so required (including
deductions and withholdings applicable to additional amounts payable
under this Section) the Agent and the Lenders receive an amount equal
to the amount we would have received had no such deductions or
withholdings been made;
(b) the applicable Obligor shall make such deductions or
withholdings; and
(c) the applicable Obligor shall pay the full amount deducted
or withheld to the relevant taxation or other authority in accordance
with such applicable law.
In the event that the Agent or any Lender receives or is granted a credit
against or relief or omission for, or repayment of, any tax paid or payable by
the Agent or such Lender in respect of or calculated with reference to the
deduction or withholding giving rise to an additional payment under this
paragraph, the Agent or the Lender, to the extent that the Agent or the Lender
can do so without prejudice to the retention of the amount of such credit,
relief, remission or repayment, shall pay or cause to be paid to the
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applicable Obligor such amount that the Agent or the Lender, in the Agent or the
Lender's reasonable judgment, shall have concluded to be attributable to the
relevant deduction or withholding. Any such payment shall be conclusive evidence
of the amount due to all Obligors hereunder and shall be accepted by all
Obligors in full and final settlement of any rights of reimbursement hereunder
in respect of such deduction or withholding. Nothing herein contained shall
interfere with the Lender's right to arrange its tax affairs in whatever manner
the Agent or any Lender may think fit. In particular, the Agent and the Lenders
shall not be under any obligation to claim credit, relief, remission or
repayment from or against its corporate profits or similar tax liability in
respect of the amount of such deduction or withholding in priority to any other
claims, reliefs, credits or deductions available to the Agent or the Lenders.
14-18. WAIVERS.
(a) The Obligors make each of the waivers included in Section
14-18(b), below, knowingly, voluntarily, and intentionally, and understands that
the Agent and each Lender, in entering into the financial arrangements
contemplated hereby and in providing loans and other financial accommodations to
or for the account of the Borrowers as provided herein, whether not or in the
future, is relying on such waivers.
(b) THE OBLIGORS RESPECTIVELY WAIVE THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required
hereby, the right to notice and/or hearing prior to the Agent's
exercising of the Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN ANY OBLIGOR OR ANY OTHER PERSON AND
THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE WAIVES
THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
(iv) The benefits or availability of any stay,
limitation, hindrance, delay, or restriction (including, without
limitation, any automatic stay which otherwise might be imposed
pursuant to Section 362 of the Bankruptcy Code) with respect to any
action which the Agent may or may become entitled to take hereunder.
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(v) Any claim to consequential, special, or punitive
damages.
14-19. LIMITATION OF CAN BORROWER LIABILITY. NOTWITHSTANDING ANYTHING
TO THE CONTRARY HEREIN CONTAINED, THE LIABILITY OF THE CAN BORROWER HEREUNDER
AND UNDER ANY OTHER LOAN DOCUMENTS SHALL BE LIMITED TO THE CAN DEBT AND THE CAN
BORROWER SHALL HAVE NO LIABILITY WHATSOEVER UNDER THE LOAN DOCUMENTS WITH
RESPECT TO ANY OTHER LIABILITIES.
SUNGLASS HUT TRADING CORPORATION
("LEAD BORROWER")
By_________________________________
Print Name:________________________________
Title:________________________________
("BORROWERS")
SUNGLASS HUT TRADING CORPORATION
By_________________________________
Print Name:________________________________
Title:________________________________
WATCH STATION, INC.
By_________________________________
Print Name:________________________________
Title:________________________________
("CAN BORROWER")
SUNGLASS HUT OF CANADA LTD.
By_________________________________
Print Name:________________________________
Title:________________________________
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("PARENT")
SUNGLASS HUT INTERNATIONAL INC.
By_________________________________
Print Name:________________________________
Title:________________________________
BANKBOSTON RETAIL FINANCE INC.
("AGENT")
By_________________________________
Print Name:________________________________
Title:________________________________
The "LENDERS"
BANKBOSTON RETAIL FINANCE INC.
By_________________________________
Print Name:________________________________
Title:________________________________
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