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CREDIT AGREEMENT
Dated as of March 30, 2000,
among
TRACK 'N TRAIL,
a California corporation,
and
OVERLAND MANAGEMENT CORPORATION,
a Massachusetts corporation,
as Borrowers,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and a Lender
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TABLE OF CONTENTS
PAGE
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1. AMOUNT AND TERMS OF CREDIT...............................................................................1
1.1 Credit Facilities...............................................................................1
1.2 Letters of Credit...............................................................................5
1.3 Prepayments.....................................................................................5
1.4 Use of Proceeds.................................................................................7
1.5 Interest and Applicable Margins.................................................................7
1.6 Eligible Accounts...............................................................................9
1.7 Eligible Inventory.............................................................................11
1.8 Cash Management System.........................................................................12
1.9 Fees...........................................................................................13
1.10 Receipt of Payments............................................................................13
1.11 Application and Allocation of Payments.........................................................13
1.12 Loan Account and Accounting....................................................................14
1.13 Indemnity......................................................................................15
1.14 Access.........................................................................................16
1.15 Taxes..........................................................................................16
1.16 Capital Adequacy; Increased Costs; Illegality..................................................17
2. CONDITIONS PRECEDENT....................................................................................18
2.1 Conditions to the Initial Loans................................................................18
2.2 Further Conditions to Each Loan................................................................19
3. REPRESENTATIONS AND WARRANTIES..........................................................................20
3.1 Corporate Existence; Compliance with Law.......................................................20
3.2 Executive Offices; Collateral Locations; FEIN..................................................21
3.3 Corporate Power, Authorization, Enforceable Obligations........................................21
3.4 Financial Statements and Projections...........................................................21
3.5 Material Adverse Effect........................................................................22
3.6 Ownership of Property; Liens...................................................................22
3.7 Labor Matters..................................................................................23
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness......................23
3.9 Government Regulation..........................................................................23
3.10 Margin Regulations.............................................................................23
3.11 Taxes..........................................................................................24
3.12 ERISA..........................................................................................24
3.13 No Litigation..................................................................................25
3.14 Brokers........................................................................................25
3.15 Intellectual Property..........................................................................25
3.16 Full Disclosure................................................................................25
3.17 Environmental Matters..........................................................................26
3.18 Insurance......................................................................................27
3.19 Deposit and Disbursement Accounts..............................................................27
3.20 Government Contracts...........................................................................27
3.21 Trade Relations................................................................................27
3.22 Agreements and Other Documents.................................................................27
3.23 Solvency.......................................................................................27
3.24 Year 2000 Representations......................................................................27
3.25 Agency Agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Retail Partners, LLC....................................27
3.26 Amounts Owing to Landlords.....................................................................28
4. FINANCIAL STATEMENTS AND INFORMATION....................................................................28
4.1 Reports and Notices............................................................................28
4.2 Communication with Accountants.................................................................28
5. AFFIRMATIVE COVENANTS...................................................................................28
5.1 Maintenance of Existence and Conduct of Business...............................................28
5.2 Payment of Obligations.........................................................................29
5.3 Books and Records..............................................................................29
5.4 Insurance; Damage to or Destruction of Collateral..............................................29
5.5 Compliance with Laws...........................................................................31
5.6 Supplemental Disclosure........................................................................31
5.7 Intellectual Property..........................................................................31
5.8 Environmental Matters..........................................................................31
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters.................................32
5.10 Inventory Appraisals...........................................................................32
5.11 Further Assurances.............................................................................32
6. NEGATIVE COVENANTS......................................................................................32
6.1 Mergers, Subsidiaries, Etc.....................................................................33
6.2 Investments; Loans and Advances................................................................33
6.3 Indebtedness...................................................................................33
6.4 Employee Loans and Affiliate Transactions......................................................34
6.5 Capital Structure and Business.................................................................34
6.6 Guaranteed Indebtedness........................................................................35
6.7 Liens..........................................................................................35
6.8 Sale of Stock and Assets.......................................................................35
6.9 ERISA..........................................................................................35
6.10 Financial Covenants............................................................................35
6.11 Hazardous Materials............................................................................35
6.12 Sale-Leasebacks................................................................................36
6.13 Cancellation of Indebtedness...................................................................36
6.14 Restricted Payments............................................................................36
6.15 Change of Corporate Name or Location; Change of Fiscal Year....................................36
6.16 No Impairment of Intercompany Transfers........................................................36
6.17 No Speculative Transactions....................................................................37
6.18 Leases.........................................................................................37
6.19 New Store Openings.............................................................................37
7. TERM....................................................................................................37
7.1 Termination....................................................................................37
7.2 Survival of Obligations Upon Termination of Financing Arrangements.............................37
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES..................................................................38
8.1 Events of Default..............................................................................38
8.2 Remedies.......................................................................................39
8.3 Waivers by Credit Parties......................................................................40
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT.....................................................40
9.1 Assignment and Participations..................................................................40
9.2 Appointment of Agent...........................................................................42
9.3 Agent's Reliance, Etc..........................................................................43
9.4 GE Capital and Affiliates......................................................................43
9.5 Lender Credit Decision.........................................................................43
9.6 Indemnification................................................................................43
9.7 Successor Agent................................................................................44
9.8 Setoff and Sharing of Payments.................................................................44
9.9 Advances; Non-Funding Lenders; Information; Actions in Concert.................................45
10. SUCCESSORS AND ASSIGNS..................................................................................47
11. MISCELLANEOUS...........................................................................................47
11.1 Complete Agreement; Modification of Agreement..................................................47
11.2 Amendments and Waivers.........................................................................47
11.3 Fees and Expenses..............................................................................49
11.4 No Waiver......................................................................................50
11.5 Remedies.......................................................................................51
11.6 Severability...................................................................................51
11.7 Conflict of Terms..............................................................................51
11.8 Confidentiality...............................................................................51
11.9 GOVERNING LAW..................................................................................51
11.10 Notices........................................................................................52
11.11 Section Titles.................................................................................53
11.12 Counterparts...................................................................................53
11.13 WAIVER OF JURY TRIAL...........................................................................53
11.14 Press Releases.................................................................................53
11.15 Reinstatement..................................................................................53
11.16 Advice of Counsel..............................................................................53
11.17 No Strict Construction.........................................................................54
12. CROSS-GUARANTY..........................................................................................54
12.1 Cross-Guaranty.................................................................................54
12.2 Waivers by Borrowers...........................................................................54
12.3 Benefit of Guaranty............................................................................55
12.4 Subordination of Subrogation, Etc..............................................................55
12.5 Election of Remedies...........................................................................55
12.6 Limitation.....................................................................................55
12.7 Contribution with Respect to Guaranty Obligations..............................................56
12.8 Liability Cumulative...........................................................................56
INDEX OF APPENDICES
Annex A (Recitals) - Definitions
Annex B (SECTION 1.2) - Letters of Credit
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Annex C (SECTION 1.8) - Cash Management System
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Annex D (SECTION 2.1(a)) - Schedule of Documents
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Annex E (SECTION 4.1(a)) - Financial Statements and Projections -- Reporting
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Annex F (SECTION 4.1(b)) - Collateral Reports
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Annex G (SECTION 6.10) - Financial Covenants
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Annex H (SECTION 9.9(a)) - Lenders' Wire Transfer Information
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Annex I (SECTION 11.10) - Notice Addresses
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Annex J ("COMMITMENTS") - Commitments as of Closing Date
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Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.5(a) - Form of Applicable Margin Certificate
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Exhibit A - Form of Compliance Certificate
Schedule (1.1) - Agent Representative
Disclosure Schedule (1.4) - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule (1.6) - Approved Credit Card Companies
Disclosure Schedule (1.7) - Planned 2000 Store Closings
Disclosure Schedule (3.2) - Executive Offices; Collateral Locations; FEIN
Disclosure Schedule (3.4(a)) - Financial Statements
Disclosure Schedule (3.4(b)) - Projections
Disclosure Schedule (3.5) - Defaults Under Real Estate Leases
Disclosure Schedule (3.6) - Real Estate and Leases
Disclosure Schedule (3.7) - Labor Matters
Disclosure Schedule (3.8) - Ventures and Affiliates; Stock
Disclosure Schedule (3.11) - Tax Matters
Disclosure Schedule (3.12) - ERISA Plans
Disclosure Schedule (3.13) - Litigation
Disclosure Schedule (3.15) - Intellectual Property
Disclosure Schedule (3.17) - Hazardous Materials
Disclosure Schedule (3.18) - Insurance
Disclosure Schedule (3.19) - Deposit and Disbursement Accounts
Disclosure Schedule (3.20) - Government Contracts
Disclosure Schedule (3.22) - Material Agreements
Disclosure Schedule (5.1) - Trade Names
Disclosure Schedule (6.3) - Indebtedness
Disclosure Schedule (6.4(a)) - Transactions with Affiliates
Disclosure Schedule (6.7) - Existing Liens
Disclosure Schedule (6.19) - Planned 2000 Store Openings
THIS CREDIT AGREEMENT ("AGREEMENT") is entered into as of
March 30, 2000, by and among TRACK 'N TRAIL, a California corporation
("TNT"), and OVERLAND MANAGEMENT CORPORATION, a Massachusetts corporation
("OMC") (TNT and OMC are sometimes collectively referred to herein as the
"BORROWERS" and individually as a "BORROWER"); the other Credit Parties
signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (in its individual capacity, "GE CAPITAL"), for itself, as a
Lender, and as Agent for Lenders, and the other Lenders signatory hereto from
time to time.
RECITALS
A. Borrowers have requested that Lenders extend a revolving
credit facility to Borrowers of up to Twenty Five Million Dollars
($25,000,000) in the aggregate for the purpose of refinancing certain
indebtedness of Borrowers and to provide (i) working capital financing for
Borrowers, (ii) funds for other general corporate purposes of Borrowers, and
(iii) funds for certain fees and expenses in connection with the financing
transactions contemplated herein; and Lenders are willing to make certain
loans and other extensions of credit to Borrowers of up to such amount upon
the terms and conditions set forth herein.
B. Borrowers desire to secure all of their obligations
under the Loan Documents by granting to Agent, for the benefit of Agent and
Lenders, a security interest in and lien upon all of their existing and
after-acquired personal and real property.
C. Track 'n Trail, a Delaware corporation ("HOLDINGS"), and
▇▇▇▇▇'▇ Eagles Nest, Inc., a Colorado corporation ("NEN") are willing to
enter into a secured guaranty of all of the obligations of Borrowers to Agent
and Lenders under the Loan Documents, and Holdings is willing to pledge to
Agent, for the benefit of Agent and Lenders, all of the capital Stock of each
of TNT and OMC to secure such guaranty.
D. Capitalized terms used in this Agreement shall have the
meanings ascribed to them in ANNEX A and, for purposes of this Agreement and
the other Loan Documents, the rules of construction set forth in ANNEX A
shall govern. All exhibits, schedules, annexes and other attachments
(collectively, "APPENDICES") hereto, or expressly identified to this
Agreement, are incorporated herein by reference and, taken together with this
Agreement, shall constitute but a single agreement. These Recitals shall be
construed as part of the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 CREDIT FACILITIES.
(a) REVOLVING CREDIT FACILITY.
(i) Subject to the terms and conditions hereof,
each Revolving Lender agrees to make available to Borrowers from time to time
until the Commitment Termination Date its Pro Rata Share of advances (each, a
"REVOLVING CREDIT ADVANCE"). The Pro Rata Share of the Revolving Loan of any
Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment. The obligations of each Revolving Lender hereunder shall be
several and not joint. Except to the extent otherwise provided in SECTION
1.1(a)(iii), the aggregate amount of Revolving Credit Advances outstanding
shall not exceed at any time the lesser of (A) the Maximum Amount and (B) the
Aggregate Borrowing Base, in each case less the sum of the Letter of Credit
Obligations and the Swing Line Loan outstanding at such time and any Reserves
established by Agent ("BORROWING AVAILABILITY"). Moreover, the sum of the
Revolving Loan and Swing Line Loan outstanding to any Borrower shall not
exceed at any time that Borrower's separate Borrowing Base. Until the
Commitment Termination Date, Borrowers may from time to time borrow, repay
and reborrow under this SECTION 1.1(a). Each Revolving Credit Advance shall
be made on notice by Borrower Representative on behalf of the applicable
Borrower to a representative of Agent identified in SCHEDULE (1.1) at the
address specified therein. Any such notice must be given no later than (1)
10:00 a.m. (California time) on the Business Day of the proposed Revolving
Credit Advance, in the case of an Index Rate Loan, or (2) 10:00 a.m.
(California time) on the date that is three Business Days prior to the
proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such
notice (a "NOTICE OF REVOLVING CREDIT ADVANCE") shall be given in writing (by
telecopy or overnight courier) substantially in the form of EXHIBIT
1.1(a)(i), and shall include the information required in such Exhibit and
such other information as may be required by Agent. If any Borrower desires
to have any Revolving Credit Advance bear interest by reference to a LIBOR
Rate, Borrower Representative must comply with SECTION 1.5(e).
(ii) Each Borrower shall execute and deliver to
each Revolving Lender a note to evidence the Revolving Loan Commitment of
such Revolving Lender, which note shall be (A) in the principal amount of the
Revolving Loan Commitment of such Revolving Lender, (B) dated the Closing
Date and (C) substantially in the form of EXHIBIT 1.1(a)(ii) (each a
"REVOLVING NOTE" and collectively the "REVOLVING NOTES"). Each Revolving Note
shall represent the obligation of the applicable Borrower to pay the amount
of the applicable Revolving Lender's Revolving Loan Commitment or, if less,
such Revolving Lender's Pro Rata Share of the aggregate unpaid principal
amount of all Revolving Credit Advances made to such Borrower together with
interest thereon as prescribed in SECTION 1.5. The entire unpaid balance of
the aggregate Revolving Loan and all other noncontingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date.
(iii) At the request of Borrower Representative,
Agent may (but shall have absolutely no obligation to), in its discretion,
make Revolving Credit Advances to Borrowers on behalf of Revolving Lenders in
amounts that cause the outstanding balance of the aggregate Revolving Loan to
exceed the Aggregate Borrowing Base (less the Swing Line Loan) or that cause
the outstanding balance of the Revolving Loan owing by any Borrower to exceed
that Borrower's separate Borrowing Base (less the Swing Line Loan advanced to
that Borrower) (any such excess Revolving Credit Advances are herein referred
to collectively as "OVERADVANCES"); PROVIDED, that (A) no such event or
occurrence shall cause or constitute a waiver of Agent's, the Swing Line
Lender's or Revolving Lenders' right to refuse to make any further
Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any
Letter of Credit Obligations, as the case may be, at any time that an
Overadvance exists or would result therefrom, and (B) any Overadvance shall
not constitute a Default or Event of Default due to any Borrower's failure to
comply with SECTION 1.3(b)(i) for so long as Agent permits such Overadvance
to be outstanding. In addition, Overadvances may be made even if the
conditions to lending set forth in SECTION 2 have not been met. All
Overadvances shall constitute Index Rate Loans, shall bear interest at the
Default Rate and shall be payable on demand. Except as otherwise provided in
SECTION 1.11(b), the authority of Agent to make Overadvances (1) is limited
to an aggregate amount not to exceed $500,000 at any time, (2) shall not
cause the aggregate Revolving Loan to exceed the Maximum Amount, and (3) may
be revoked prospectively by a written notice to Agent signed by Revolving
Lenders holding fifty percent (50%) or more of the Revolving Loan Commitments.
(b) SWING LINE FACILITY.
(i) SWING LINE ADVANCES. Agent shall notify the
Swing Line Lender upon Agent's receipt of any Notice of Revolving Credit
Advance. Subject to the terms and conditions hereof, the Swing Line Lender
may, in its discretion, make available from time to time until the Commitment
Termination Date advances (each, a "SWING LINE ADVANCE") in accordance with
any such notice. The aggregate amount of Swing Line Advances outstanding
shall not exceed at any time the lesser of (A) the Swing Line Commitment and
(B) the lesser of (1) the Maximum Amount and (2) (except for Overadvances)
the Aggregate Borrowing Base, in each case less the outstanding balance of
the Revolving Loan at such time ("SWING LINE AVAILABILITY"). Moreover, except
for Overadvances, the Swing Line Loan outstanding to any Borrower shall not
exceed at any time such Borrower's separate Borrowing Base less the Revolving
Loan outstanding to such Borrower. Until the Commitment Termination Date,
Borrowers may from time to time borrow, repay and reborrow under this SECTION
1.1(b). Each Swing Line Advance shall be made pursuant to a Notice of
Revolving Credit Advance delivered to Agent by Borrower Representative on
behalf of the applicable Borrower in accordance with SECTION 1.1(a). Any such
notice must be given no later than 10:00 a.m. (California time) on the
Business Day of the proposed Swing Line Advance. Unless the Swing Line Lender
has received at least one Business Day's prior written notice from Agent or
Requisite Revolving Lenders instructing it not to make any Swing Line
Advance, the Swing Line Lender shall, notwithstanding the failure of any
condition precedent set forth in SECTION 2.2 (other than the condition
precedent set forth in SECTION 2.2(e)) be entitled to fund such Swing Line
Advance and, in connection with such Swing Line Advance, to have each
Revolving Lender make Revolving Credit Advances in accordance with SECTION
1.1(b)(iii) and to purchase participating interests in accordance with
SECTION 1.1(b)(iv). Notwithstanding any other provision of this Agreement or
the other Loan Documents, the Swing Line Loan shall constitute an Index Rate
Loan. Unless the Swing Line Lender has received at least one Business Day's
prior written notice from Agent or Requisite Revolving Lenders instructing it
not to make any Swing Line Advance, the Swing Line Lender shall,
notwithstanding the failure of any condition precedent set forth in SECTION
2.2 (other than the condition precedent set forth in SECTION 2.2(e)) be
entitled to fund such Swing Line Advance and, in connection with such Swing
Line Advance, to have each Revolving Lender make Revolving Credit Advances in
accordance with SECTION 1.1(b)(iii) and to purchase participating interests
in accordance with SECTION 1.1(b)(iv). Borrowers shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand therefor by
Agent.
(ii) SWING LINE NOTES. Each Borrower shall execute
and deliver to the Swing Line Lender a promissory note to evidence the Swing
Line Commitment. Each note shall be (A) in the principal amount of the Swing
Line Commitment, (B) dated the Closing Date, and (C) substantially in the
form of EXHIBIT 1.1(b)(ii) (each a "SWING LINE NOTE" and collectively the
"SWING LINE NOTES"). Each Swing Line Note shall represent the obligation of
the applicable Borrower to pay the amount of the Swing Line Commitment or, if
less, the aggregate unpaid principal amount of all Swing Line Advances made
to such Borrower together with interest thereon as prescribed in SECTION 1.5.
The entire unpaid balance of the Swing Line Loan and all other noncontingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date if not sooner paid in full.
(iii) REFUNDING OF SWING LINE LOANS. The Swing
Line Lender, at any time and from time to time in its sole and absolute
discretion, but not less frequently than weekly, shall on behalf of any
Borrower (and each Borrower hereby irrevocably authorizes the Swing Line
Lender to so act on its behalf) request each Revolving Lender (including the
Swing Line Lender) to make a Revolving Credit Advance to such Borrower (which
shall be an Index Rate Loan) in an amount equal to such Revolving Lender's
Pro Rata Share of the principal amount of such Borrower's Swing Line Loan
(the "REFUNDED SWING LINE LOAN") outstanding on the date such notice is
given. Unless any of the events described in SECTIONS 8.1(h) or 8.1(i) shall
have occurred (in which event the procedures of SECTION 1.1(b)(iv) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied,
each Revolving Lender shall disburse directly to Agent its Pro Rata Share of
a Revolving Credit Advance on behalf of the Swing Line Lender prior to 12:00
noon (California time) in immediately available funds on the Business Day
next succeeding the date such notice is given. The proceeds of such Revolving
Credit Advances shall be immediately paid to the Swing Line Lender and
applied to repay the Refunded Swing Line Loan of the applicable Borrower.
(iv) PARTICIPATION IN SWING LINE LOANS. If, prior
to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to
SECTION 1.1(b)(iii), one of the events described in SECTIONS 8.1(h) or 8.1(i)
shall have occurred, then, subject to the provisions of SECTION 1.1(b)(v)
below, each Revolving Lender shall, on the date such Revolving Credit Advance
was to have been made for the benefit of the applicable Borrower, purchase
from the Swing Line Lender an undivided participation interest in the Swing
Line Loan to such Borrower in an amount equal to its Pro Rata Share of such
Swing Line Loan. Upon request, each Revolving Lender shall promptly transfer
to the Swing Line Lender, in immediately available funds, the amount of its
participation interest.
(v) REVOLVING LENDERS' OBLIGATIONS UNCONDITIONAL.
Each Revolving Lender's obligation to make Revolving Credit Advances in
accordance with SECTION 1.1(b)(iii) and to purchase participating interests
in accordance with SECTION 1.1(b)(iv) shall be absolute and unconditional and
shall not be affected by any circumstance, including: (A) any setoff,
counterclaim, recoupment, defense or other right that such Revolving Lender
may have against the Swing Line Lender, any Borrower or any other Person for
any reason whatsoever; (B) the occurrence or continuance of any Default or
Event of Default; (C) any inability of any Borrower to satisfy the conditions
precedent to borrowing set forth in this Agreement on the date upon which
such
participating interest is to be purchased; or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing. If any Revolving Lender does not make available to Agent or the
Swing Line Lender, as applicable, the amount required pursuant to SECTIONS
1.1(b)(iii) or 1.1(b)(iv), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Revolving Lender,
together with interest thereon for each day from the date of non-payment
until such amount is paid in full at the Federal Funds Rate for the first two
Business Days and at the Index Rate thereafter.
(c) RELIANCE ON NOTICES; APPOINTMENT OF BORROWER
REPRESENTATIVE. Agent shall be entitled to rely upon, and shall be fully
protected in relying upon, any Notice of Revolving Credit Advance, Notice of
Conversion/Continuation or similar notice believed by Agent to be genuine.
Agent may assume that each person executing and delivering any such notice
was duly authorized, unless the responsible individual acting thereon for
Agent has actual knowledge to the contrary. Each Borrower hereby designates
TNT as its representative and agent on its behalf for the purposes of issuing
Notices of Revolving Credit Advances and Notices of Conversion/Continuation,
giving instructions with respect to the disbursement of the proceeds of the
Loans, selecting interest rate options, requesting Letters of Credit, giving
and receiving all other notices and consents hereunder or under any of the
other Loan Documents and taking all other actions (including in respect of
compliance with covenants) on behalf of any Borrower or Borrowers under the
Loan Documents. Borrower Representative hereby accepts such appointment.
Agent and each Lender may regard any notice or other communication pursuant
to any Loan Document from Borrower Representative as a notice or
communication from all Borrowers, and may give any notice or communication
required or permitted to be given to any Borrower or Borrowers hereunder to
Borrower Representative on behalf of such Borrower or Borrowers. Each
Borrower agrees that each notice, election, representation and warranty,
covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to
the same extent as if the same had been made directly by such Borrower.
1.2 LETTERS OF CREDIT. Subject to and in accordance with the
terms and conditions contained herein and in ANNEX B, Borrower
Representative, on behalf of the applicable Borrower, shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of each Borrower.
1.3 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Borrowers may at any time
on at least ten days' prior written notice by Borrower Representative to
Agent terminate the Revolving Loan Commitment; PROVIDED, that upon such
termination, all Loans and other Obligations shall be immediately due and
payable in full and Borrowers shall make arrangements, in accordance with the
terms and conditions of ANNEX B, for the satisfaction of any outstanding
Letter of Credit Obligations. Any such voluntary prepayment and any such
termination of the Revolving Loan Commitment must be accompanied by payment
of the Fee required by SECTION 1.9(c), if any, Agent's and each Lender's
reasonable out-of-pocket expenses, and payment of any LIBOR funding breakage
costs in accordance with SECTION 1.13(b). Upon any such prepayment and
termination of the Revolving Loan Commitment, each Borrower's right to
request Revolving Credit Advances or Swing Line Advances,
or request that Letter of Credit Obligations be incurred on its behalf, or
request Swing Line Advances, shall simultaneously be terminated.
(b) MANDATORY PREPAYMENTS.
(i) If at any time the outstanding balance of the
aggregate Revolving Loan exceeds the lesser of (A) the Maximum Amount and (B)
the Aggregate Borrowing Base, in each case less the aggregate outstanding
Swing Line Loan at such time, then Borrowers shall immediately repay the
aggregate outstanding Revolving Credit Advances to the extent required to
eliminate such excess. If any such excess remains after repayment in full of
the aggregate outstanding Revolving Credit Advances, Borrowers shall provide
cash collateral for the Letter of Credit Obligations in the manner set forth
in ANNEX B to the extent required to eliminate such excess. Furthermore, if
at any time the outstanding balance of the Revolving Loan of any Borrower
exceeds such Borrower's separate Borrowing Base less the outstanding balance
of the Swing Line Loan of such Borrower at such time, then such Borrower
shall immediately repay its Revolving Credit Advances in the amount of such
excess (and, if necessary, shall provide cash collateral for its Letter of
Credit Obligations as described above). Notwithstanding the foregoing, any
Overadvance made pursuant to SECTION 1.1(a)(iii) shall be repaid only on
demand.
(ii) Immediately upon receipt by any Credit Party
of any cash proceeds of any asset disposition (excluding, so long as no
Default or Event of Default has occurred and is continuing, proceeds of asset
dispositions permitted by SECTION 6.8(a)) or any sale of Stock of any
Subsidiary of any Credit Party, Borrowers shall repay the Loans, in each case
in an amount equal to all such proceeds, net of (A) commissions and other
reasonable and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrowers in connection
therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C)
amounts payable to holders of senior Liens (to the extent such Liens
constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate
reserve for income taxes in accordance with GAAP in connection therewith. Any
such prepayment shall be applied in accordance with SECTION 1.3(c).
(iii) If Holdings or any Borrower issues Stock or
debt securities, then no later than the Business Day following the date of
receipt of any cash proceeds thereof, all Borrowers (in the case of an
issuance by Holdings) or the issuing Borrower shall repay the Loans in an
amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith. Any such prepayment shall be applied in accordance with SECTION
1.3(c).
(c) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any
payments made by any Borrower pursuant to SECTIONS 1.3(b)(ii) or (b)(iii), or
CLAUSE (d) below shall be applied as follows: FIRST, to Fees and reimbursable
expenses of Agent then due and payable pursuant to any of the Loan Documents;
SECOND, to interest then due and payable on such Borrower's Swing Line Loan;
THIRD to the principal balance of the Swing Line Loan outstanding to such
Borrower until the same shall have been repaid in full; FOURTH to interest
then due and payable on Revolving Credit Advances made to such Borrower;
FIFTH to the principal balance of Revolving Credit Advances outstanding to
such Borrower until the same shall have been repaid in full; SIXTH to any
Letter of Credit Obligations of such Borrower to provide cash collateral
therefor in the manner set forth in ANNEX B, until all such
Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in ANNEX B; SEVENTH to interest then due and payable on the
Swing Line Loan of each other Borrower, PRO RATA; EIGHTH to the principal
balance of the Swing Line Loan outstanding to each other Borrower, PRO RATA,
until the same shall have been repaid in full; NINTH to interest then due and
payable on the Revolving Credit Advances outstanding to each other Borrower,
PRO RATA; TENTH to the principal balance of the Revolving Credit Advances
made to each other Borrower, PRO RATA, until the same shall have been paid in
full, and LAST to any Letter of Credit Obligations of each other Borrower,
PRO RATA, to provide cash collateral therefor in the manner set forth in
ANNEX B, until all such Letter of Credit Obligations have been fully cash
collateralized. Neither the Revolving Loan Commitment nor the Swing Line
Commitment shall be permanently reduced by the amount of any such payments.
(d) APPLICATION OF PREPAYMENTS FROM INSURANCE AND
CONDEMNATION PROCEEDS. Payments from insurance or condemnation proceeds in
accordance with SECTIONS 5.4(c) or 5.4(d), respectively, shall be applied in
accordance with SECTION 1.3(c). Neither the Revolving Loan Commitment nor the
Swing Line Loan Commitment shall be permanently reduced by the amount of any
such payments. If the insurance or condemnation proceeds received as to a
particular Borrower exceed the outstanding principal balances of the Loans to
that Borrower or if the precise amount of insurance or condemnation proceeds
allocable to Inventory as compared to Equipment, Fixtures and Real Estate are
not otherwise determined, the allocation and application of those proceeds
shall be determined by Agent.
(e) NO CONSENT TO PROHIBITED TRANSACTIONS. Nothing in
this SECTION 1.3 shall be construed to constitute Agent's or any Lender's
consent to any transaction that is not permitted by other provisions of this
Agreement or the other Loan Documents.
1.4 USE OF PROCEEDS. Borrowers shall utilize the proceeds of
the Revolving Loan and the Swing Line Advances solely for the Refinancing
(and to pay any related transaction expenses), and for the financing of
Borrowers' ordinary working capital and general corporate needs (but
excluding in any event the making of any Restricted Payment not specifically
permitted by SECTION 6.14). DISCLOSURE SCHEDULE (1.4) contains a description
of Borrowers' sources and uses of funds as of the Closing Date, including
Loans and Letter of Credit Obligations to be made or incurred on such date,
and a funds flow memorandum detailing how funds from each source are to be
transferred to particular uses.
1.5 INTEREST AND APPLICABLE MARGINS.
(a) Borrowers shall pay interest to Agent, for the
ratable benefit of Lenders in accordance with the various Loans being made by
each Lender, in arrears on each applicable Interest Payment Date, at the
following rates: (i) with respect to the Revolving Credit Advances, the Index
Rate PLUS the Applicable Revolver Index Margin PER ANNUM or, at the election
of Borrower Representative, the applicable LIBOR Rate PLUS the Applicable
Revolver LIBOR Margin PER ANNUM, based on the aggregate Revolving Credit
Advances outstanding from time to time; and (ii) with respect to the Swing
Line Loan, the Index Rate PLUS the Applicable Revolver Index Margin PER ANNUM.
The Applicable Revolver Index Margin, Applicable Revolver
LIBOR Margin, and
Applicable Unused Line Fee Margin shall be 0%, 2.5%, and 0.25% PER ANNUM,
respectively, as of the Closing Date. The Applicable Margins shall be
adjusted (up or down) prospectively on a quarterly basis as determined by
Borrowers' Net Borrowing Availability Ratio , commencing with the first day
of the first calendar month that occurs more than five days after delivery of
Borrowers' quarterly Financial Statements to Lenders for the Fiscal Quarter
ending March 31, 2001. Adjustments in Applicable Margins will be determined
by reference to the following grids:
IF NET BORROWING AVAILABILITY LEVEL OF
RATIO IS: APPLICABLE MARGINS:
--------- -------------------
GREATER THAN OR EQUAL TO 10% Level I
GREATER THAN OR EQUAL TO 5%, but LESS THAN 10% Level II
GREATER THAN OR EQUAL TO 0%, but LESS THAN 5% Level III
APPLICABLE MARGINS
------------------
LEVEL I LEVEL II LEVEL III
------- -------- ---------
Applicable Revolver -0.5% 0% 0.5%
Index Margin
Applicable Revolver LIBOR 2.0% 2.5% 3.0%
Margin
Applicable Unused Line Fee 0.25% 0.25% 0.375%
Margin
All adjustments in the Applicable Margins after March 31,
2001, shall be implemented quarterly on a prospective basis, for each
calendar month commencing at least five days after the date of delivery to
Lenders of the quarterly unaudited or annual audited (as applicable)
Financial Statements evidencing the need for an adjustment. Concurrently with
the delivery of such Financial Statements, Borrower Representative shall
deliver to Agent and Lenders a certificate, in the form of EXHIBIT 1.5(a),
signed by its chief financial officer, setting forth in reasonable detail the
basis for the continuance of, or any change in, the Applicable Margins.
Failure to timely deliver such Financial Statements shall, in addition to any
other remedy provided for in this Agreement, result in an increase in the
Applicable Margins to the highest level set forth in the foregoing grid until
delivery of those Financial Statements demonstrating that such an increase is
not required. If a Default or Event of Default shall have occurred and be
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day of the
first calendar month following the date on which such Default or Event of
Default is waived or cured.
(b) If any payment on any Loan becomes due and payable
on a day other than a Business Day, the maturity thereof will be extended to
the next succeeding Business Day (except as set forth in the definition of
LIBOR Period) and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
(c) All computations of Fees calculated on a PER ANNUM
basis and interest shall be made by Agent on the basis of a 360-day year, in
each case for the actual number of days
occurring in the period for which such Fees or interest are payable. Each
determination by Agent of an interest rate or Fees hereunder shall be final,
binding and conclusive on Borrower (absent manifest error).
(d) So long as an Event of Default shall have occurred
and be continuing under SECTION 8.1(a), (h) or (i) or so long as any other
Default or Event of Default shall have occurred and be continuing, and at the
election of Agent (or upon the written request of Requisite Lenders)
confirmed by written notice from Agent to Borrower Representative, the
interest rates applicable to the Loans and the Letter of Credit Fees shall be
increased by two percentage points (2%) PER ANNUM above the rates of interest
or the rate of such Fees otherwise applicable hereunder (the "DEFAULT RATE"),
and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall
be payable upon demand.
(e) So long as no Default or Event of Default shall
have occurred and be continuing and subject to the conditions precedent set
forth in SECTION 2.2, Borrower Representative shall have the option to (i)
request that any Revolving Credit Advance be made as a LIBOR Loan, (ii)
convert at any time all or any part of outstanding Loans (other than the
Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any
LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs
in accordance with SECTION 1.13(b) if such conversion is made prior to the
expiration of the LIBOR Period applicable thereto, or (iv) continue all or
any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon
the expiration of the applicable LIBOR Period and the succeeding LIBOR Period
of that continued Loan shall commence on the last day of the LIBOR Period of
the Loan to be continued. Any Loan to be made or continued as, or converted
into, a LIBOR Loan must be in a minimum amount of $2,500,000 and integral
multiples of $500,000 in excess of such amount. Any such election must be
made by 10:00 a.m. (California time) on the third Business Day prior to (A)
the date of any proposed Advance that is to bear interest at the LIBOR Rate,
(B) the end of each LIBOR Period with respect to any LIBOR Loans to be
continued as such, or (C) the date on which Borrower Representative wishes to
convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by
Borrower Representative in such election. If no election is received with
respect to a LIBOR Loan by 10:00 a.m. (California time) on the third Business
Day prior to the end of the LIBOR Period with respect thereto (or if a
Default or an Event of Default shall have occurred and be continuing or if
the additional conditions precedent set forth in SECTION 2.2 shall not have
been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at
the end of its LIBOR Period. Borrower Representative must make such election
by notice to Agent in writing, by telecopy or overnight courier. In the case
of any conversion or continuation, such election must be made pursuant to a
written notice (a "NOTICE OF CONVERSION/CONTINUATION") in the form of EXHIBIT
1.5(e).
(f) Notwithstanding anything to the contrary set forth
in this SECTION 1.5, if a court of competent jurisdiction determines in a
final order that the rate of interest payable
hereunder exceeds the highest rate of interest permissible under law (the
"MAXIMUM LAWFUL RATE"), then so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable hereunder shall be equal to the
Maximum Lawful Rate; PROVIDED, that if at any time thereafter the rate of
interest payable hereunder is less than the Maximum Lawful Rate, Borrowers
shall continue to pay interest hereunder at the Maximum Lawful Rate until
such time as the total interest received by Agent, on behalf of Lenders, is
equal to the total interest that would have been received had the interest
rate payable hereunder been (but for the operation of this paragraph) the
interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of
interest and in the manner provided in SECTIONS 1.5(a) through (e), unless
and until the rate of interest again exceeds the Maximum Lawful Rate, and at
that time this paragraph shall again apply. In no event shall the total
interest received by any Lender pursuant to the terms hereof exceed the
amount that such Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful
Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph,
such interest shall be calculated at a daily rate equal to the Maximum Lawful
Rate DIVIDED BY the number of days in the year in which such calculation is
made. If, notwithstanding the provisions of this SECTION 1.5(f), a court of
competent jurisdiction shall finally determine that a Lender has received
interest hereunder in excess of the Maximum Lawful Rate, then Agent shall, to
the extent permitted by applicable law, promptly apply such excess in the
order specified in SECTION 1.11 and thereafter shall refund any excess to
Borrowers or as a court of competent jurisdiction may otherwise order.
1.6 ELIGIBLE ACCOUNTS. Based on the most recent Borrowing Base
Certificate delivered by each Borrower to Agent and on other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Accounts of each Borrower shall be "ELIGIBLE ACCOUNTS" for purposes of
this Agreement. In determining whether a particular Account of any Borrower
constitutes an Eligible Account, Agent shall not include any such Account to
which any of the exclusionary criteria set forth below applies. Agent
reserves the right, at any time and from time to time after the Closing Date
in its reasonable credit judgment, to adjust any such criteria, to establish
new criteria, to adjust advance rates, to establish and modify Reserves with
respect to Eligible Accounts, in each case subject to the approval of
Supermajority Revolving Lenders in the event any such adjustments or the
establishment of such new criteria or Reserves have the effect of making more
credit available. Eligible Accounts shall not include any Account of any
Borrower:
(a) that does not arise from the sale of goods by such
Borrower in the ordinary course of its business pursuant to which payment is
made by means of a credit card;
(b) (i) upon which such Borrower's right to receive
payment is not absolute or is contingent upon the fulfillment of any
condition whatsoever or (ii) as to which such Borrower is not able to bring
suit or otherwise enforce its remedies against the Account Debtor through
judicial process;
(c) to the extent that any defense, counterclaim,
setoff or dispute is asserted as
to such Account;
(d) that is not a true and correct statement of BONA
FIDE indebtedness of one of the entities set forth in DISCLOSURE SCHEDULE
(1.6) that is approved, to the extent necessary, under such entity's
procedures and agreements with such Borrower;
(e) that is not owned by such Borrower or is subject
to any right, claim, security interest or other interest of any other Person,
other than Liens in favor of Agent, on behalf of itself and Lenders;
(f) that is in default; PROVIDED, that without
limiting the generality of the foregoing, an Account shall be deemed in
default upon the occurrence of any of the following:
(i) such Account is not paid within three days after
the sale of goods from which such Account arises;
(ii) the Account Debtor obligated upon such Account
suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or
(iii) a petition is filed by or against any Account
Debtor obligated upon such Account under any bankruptcy law or any
other federal, state or foreign (including any provincial)
receivership, insolvency relief or other law or laws for the relief of
debtors;
(g) that is an obligation of an Account Debtor with
respect to which fifty percent (50%) or more of the Dollar amount of all
Accounts owing by such Account Debtor are ineligible under the other criteria
set forth in this SECTION 1.6;
(h) as to which Agent's Lien thereon, on behalf of
itself and Lenders, is not a first priority perfected Lien;
(i) as to which any of the representations or
warranties pertaining to Accounts in the Loan Documents is untrue;
(j) to the extent such Account is evidenced by a
judgment, Instrument or Chattel Paper;
(k) to the extent such Account exceeds any credit
limit established by Agent, in its reasonable credit judgment, following
prior notice of such limit by Agent to Borrower Representative;
(l) that is payable in any currency other than
Dollars; or
(m) that is otherwise unacceptable to Agent in its
reasonable credit judgment.
1.7 ELIGIBLE INVENTORY. Based on the most recent Borrowing Base
Certificate delivered by each Borrower to Agent and on any other information
available to Agent, Agent shall in its reasonable credit judgment determine
which Inventory of each Borrower shall be "ELIGIBLE INVENTORY" for purposes
of this Agreement. In determining whether any particular Inventory of any
Borrower constitutes Eligible Inventory, Agent shall not include any such
Inventory to which any of the exclusionary criteria set forth below applies.
Agent reserves the right, at any time and from time to time after the Closing
Date in its reasonable credit judgment, to adjust any such criteria, to
establish new criteria, to adjust advance rates, to establish and modify
Reserves with respect to Eligible Inventory, in each case subject to the
approval of Supermajority Revolving Lenders in the event any such adjustments
or the establishment of such new criteria or Reserves have the effect of
making more credit available. Eligible Inventory shall not include any
Inventory of any Borrower that:
(a) is not owned by such Borrower free and clear of
all Liens and rights of any other Person (including the rights of a purchaser
that has made progress payments and the rights of a surety that has issued a
bond to assure such Borrower's performance with respect to such Inventory),
except the Liens in favor of Agent, on behalf of itself and Lenders, and
Permitted Encumbrances in favor of landlords and bailees to the extent
permitted in SECTION 5.9 (subject to Reserves established by Agent in
accordance with SECTION 5.9);
(b) (i) is not located on premises owned or leased by
such Borrower or stored at a public warehouse, in each case located within
the United States of America and referenced in DISCLOSURE SCHEDULE (3.2),
(ii) is located at a public warehouse, unless (A) the warehouseman has
executed a bailee letter in form and substance acceptable to Agent and (B)
Agent has determined the amount of, and is maintaining, a Reserve against the
Borrowing Base with respect to the Inventory located at such public
warehouse, (iii) is located at one of such Borrower's owned or leased
locations, unless either (A) the mortgagee or landlord, as applicable, has
executed a mortgagee's waiver or a landlord's waiver, as the case may be, in
form and substance acceptable to Agent or (B) Agent has determined the amount
of, and is maintaining, a Reserve against the Borrowing Base with respect to
the Inventory located at such owned or leased location, (iv) is located at
any site if the aggregate book value of Inventory at any such location is
less than $100,000; PROVIDED, that Inventory located at up to five sites
where the aggregate book value of Inventory at any such location is greater
than $75,000 and less than $100,000 shall constitute Eligible Inventory, (v)
is located at a store listed in DISCLOSURE SCHEDULE (1.7) or that is
otherwise in the process of being closed, or (vi) is located at any outside
processing facility or is otherwise in the custody of third parties for
processing or manufacture;
(c) is placed on consignment or is in transit;
(d) is covered by a negotiable document of title,
unless such document has been delivered to Agent with all necessary
endorsements, free and clear of all Liens except those
in favor of Agent on behalf of itself and Lenders;
(e) in Agent's reasonable determination is excess,
obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;
(f) consists of display or promotional items, samples,
packing or shipping materials, supplies, work-in-process Inventory or
replacement parts;
(g) consists of goods that (i) have been returned by
the buyer, unless such goods are (A) in a form in which the vendor that sold
such goods to such Borrower would accept returned goods from such Borrower
and (B) otherwise acceptable to Agent in its reasonable credit judgment, or
(ii) have been specifically ordered by a customer and paid for in full at the
time such order is placed;
(h) is not of a type held for sale in the ordinary
course of such Borrower's business;
(i) is not subject to a first priority perfected Lien
in favor of Agent, on behalf of itself and Lenders;
(j) does not comply with any of the representations or
warranties pertaining to Inventory set forth in the Loan Documents;
(k) consists of any costs associated with "freight-in"
charges;
(l) consists of Hazardous Materials or goods that can
be transported or sold only with licenses that are not readily available;
(m) is not covered by casualty insurance acceptable to
Agent;
(n) is subject to licensing or distribution agreements
unless Agent has obtained all consents, approvals and other documents
required, in its sole discretion, to provide Agent with the ability under
such licensing or distribution agreements and applicable laws and regulations
to sell or dispose of such Inventory; or
(o) is otherwise unacceptable to Agent in its
reasonable credit judgment.
1.8 CASH MANAGEMENT SYSTEM. On or prior to the Closing Date,
Borrowers will establish and will maintain until the Termination Date, the
cash management system described in ANNEX C (the "CASH MANAGEMENT SYSTEMS").
1.9 FEES.
(a) Borrowers shall pay to GE Capital, individually,
the Fees specified in that
certain fee letter of even date herewith among Borrowers and GE Capital (the
"GE CAPITAL FEE LETTER"), at the times specified for payment therein.
(b) As additional compensation for the Revolving
Lenders, Borrowers shall pay to Agent, for the ratable benefit of such
Lenders, in arrears, on the first Business Day of each month prior to the
Commitment Termination Date and on the Commitment Termination Date, a Fee for
Borrowers' non-use of available funds in an amount equal to (i) the
Applicable Unused Line Fee Margin (calculated on the basis of a 360 day year
for actual days elapsed) MULTIPLIED BY (ii) (A) the Maximum Amount (as in
effect from time to time) MINUS (B) the average for the period of the daily
closing balances of the aggregate Revolving Loan and the Swing Line Loan
outstanding during the period for which such Fee is due.
(c) If Borrowers prepay the Revolving Loan and
terminate the Revolving Loan Commitment, whether voluntarily or involuntarily
and whether before or after acceleration of the Obligations, then Borrowers
shall pay to Agent, for the benefit of Lenders as liquidated damages and
compensation for the costs of being prepared to make funds available
hereunder an amount equal to (i) the Applicable Percentage (as defined below)
MULTIPLIED BY (ii) the Revolving Loan Commitment. As used herein, the term
"APPLICABLE PERCENTAGE" shall mean (1) two percent (2%), in the case of a
prepayment on or prior to the first anniversary of the Closing Date, and (2)
one percent (1%), in the case of a prepayment after the first anniversary of
the Closing Date but on or prior to the second anniversary thereof.
Notwithstanding the foregoing, no prepayment fee shall be payable by
Borrowers upon a mandatory prepayment made pursuant to SECTIONS 1.3(b) or
1.16(c); PROVIDED, that Borrowers do not permanently reduce the Revolving
Loan Commitment upon any such prepayment and, in the case of prepayments made
pursuant to SECTIONS 1.3(b)(ii) or (b)(iii), the transaction giving rise to
the applicable prepayment is expressly permitted under SECTION 6.
(d) Borrowers shall pay to Agent, for the ratable
benefit of Revolving Lenders, the Letter of Credit Fee as provided in ANNEX B.
1.10 RECEIPT OF PAYMENTS. Borrowers shall make each payment
under this Agreement not later than 2:00 p.m. (California time) on the day
when due in immediately available funds in Dollars to the Collection Account.
For purposes of computing Fees or determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received
on the Business Day of receipt by Agent of immediately available funds
therefor in the Collection Account prior to 11:00 a.m. (California time). For
purposes of computing interest only, all payments shall be deemed received
one Business Day after receipt of immediately available funds therefor in the
Collection Account prior to 2:00 p.m. (California time). Payments received
after 2:00 p.m. (California time) on any Business Day or on a day that is not
a Business Day shall be deemed to have been received on the following
Business Day.
1.11 APPLICATION AND ALLOCATION OF PAYMENTS.
(a) So long as no Default or Event of Default shall
have occurred and be
continuing: (i) payments consisting of proceeds of Accounts received in the
ordinary course of business shall be applied FIRST to the Swing Line Loan and
SECOND to the Revolving Loan; (ii) voluntary prepayments shall be applied as
determined by Borrower Representative, subject to the provisions of SECTION
1.3(a); and (iii) mandatory prepayments shall be applied as set forth in
SECTION 1.3. As to each other payment, and as to all payments made when a
Default or Event of Default shall have occurred and be continuing or
following the Commitment Termination Date, each Borrower hereby irrevocably
waives the right to direct the application of any and all payments received
from or on behalf of such Borrower, and each Borrower hereby irrevocably
agrees that Agent shall have the continuing exclusive right to apply any and
all such payments against the Obligations of Borrowers as Agent may deem
advisable notwithstanding any previous entry by Agent in the Loan Account or
any other books and records. In the absence of a specific determination by
Agent with respect thereto, payments shall be applied to amounts then due and
payable in the following order: (A) to Fees and Agent's expenses reimbursable
hereunder; (B) to interest on the Swing Line Loan; (C) to principal payments
on the Swing Line Loan; (D) to interest on the other Loans, ratably in
proportion to the interest accrued as to each Loan; (E) to principal payments
on the other Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in ANNEX B, ratably to the aggregate,
combined principal balance of the other Loans and outstanding Letter of
Credit Obligations; and (F) to all other Obligations, including expenses of
Lenders to the extent reimbursable under SECTION 11.3.
(b) Agent is authorized to, and at its sole election
may, charge to the Revolving Loan balance on behalf of each Borrower and
cause to be paid all Fees, expenses, Charges, costs (including insurance
premiums in accordance with SECTION 5.4(a)) and interest and principal to the
extent that such principal payment consists of a repayment of one or more
Swing Line Advances upon demand by Agent pursuant to SECTION 1.1(b)(i) owing
by Borrowers under this Agreement or any of the other Loan Documents if and
to the extent Borrowers fail to pay promptly any such amounts as and when
due, even if such charges would cause the aggregate amount of Revolving
Credit Advances and Swing Line Advances outstanding after giving effect to
such charges to exceed Borrowing Availability or would cause the balance of
the Revolving Loan and the Swing Loan of any Borrower to exceed such
Borrower's separate Borrowing Base. At Agent's option and to the extent
permitted by law, any charges so made shall constitute part of the Revolving
Loan hereunder.
1.12 LOAN ACCOUNT AND ACCOUNTING. Agent shall maintain a loan
account (the "LOAN ACCOUNT") on its books to record: (a) all Revolving Credit
Advances; (b) all payments made by Borrowers; and (c) all other debits and
credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by each Borrower; PROVIDED, that any failure to so
record or any error in so recording shall not limit or otherwise affect any
Borrower's duty to pay the Obligations. Agent shall render to Borrower
Representative a monthly accounting of transactions with respect to the Loans
setting forth the
balance of the Loan Account as to each Borrower for the immediately preceding
month. Unless Borrower Representative notifies Agent in writing of any
objection to any such accounting (specifically describing the basis for such
objection), within 45 days after the date thereof, each and every such
accounting shall be deemed final, binding and conclusive on Borrowers (absent
manifest error) in all respects as to all matters reflected therein. Only
those items expressly objected to in such notice shall be deemed to be
disputed by Borrowers.
1.13 INDEMNITY.
(a) Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of Agent, Lenders and
their respective Affiliates, and each such Person's respective officers,
directors, employees, attorneys, agents and representatives (each, an
"INDEMNIFIED PERSON"), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) that may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement and
the other Loan Documents and the administration of such credit, and in
connection with or arising out of the transactions contemplated hereunder and
thereunder and any actions or failures to act in connection therewith,
including any and all Environmental Liabilities and legal costs and expenses
arising out of or incurred in connection with disputes between or among any
parties to any of the Loan Documents (collectively, "INDEMNIFIED
LIABILITIES"); PROVIDED, that no such Credit Party shall be liable for any
indemnification to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results solely
from such Indemnified Person's gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction. NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON
OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS
A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY
LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER
OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option
on the terms provided herein, if: (i) any LIBOR Loans are repaid in whole or
in part prior to the last day of any applicable LIBOR Period (whether such
repayment is made pursuant to any provision of this Agreement or any other
Loan Document or occurs as a result of acceleration, by operation of law or
otherwise); (ii) any Borrower shall default in payment when due of the
principal amount of or interest on any LIBOR Loan; (iii) any Borrower shall
default in making any borrowing of, conversion into or continuation of LIBOR
Loans after Borrower Representative has given notice requesting the same in
accordance herewith; or (iv) any Borrower shall fail to make any prepayment
of a LIBOR Loan after Borrower Representative has given a notice thereof in
accordance herewith, then Borrowers shall jointly and severally indemnify and
hold harmless
each Lender from and against all losses, costs and expenses resulting from or
arising from any of the foregoing. Such indemnification shall include any
loss (including loss of margin) or expense arising from the reemployment of
funds obtained by it or from fees payable to terminate deposits from which
such funds were obtained. For the purpose of calculating amounts payable to a
Lender under this subsection, each Lender shall be deemed to have actually
funded its relevant LIBOR Loan through the purchase of a deposit bearing
interest at the LIBOR Rate in an amount equal to the amount of such LIBOR
Loan and having a maturity comparable to the relevant Interest Period;
PROVIDED, that each Lender may fund each of its LIBOR Loans in any manner it
sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this SECTION 1.13(b),
and such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten Business Days of receipt
thereof, specifying the basis for such objection in detail.
1.14 ACCESS. Each Credit Party that is a party hereto shall,
during normal business hours, from time to time upon one Business Day's prior
notice as frequently as Agent determines to be appropriate: (a) provide Agent
and any of Agent's officers, employees and agents access to its properties,
facilities, advisors and employees (including officers) of each Credit Party
and to the Collateral; (b) permit Agent and any of its officers, employees
and agents to inspect, audit and make extracts from any Credit Party's books
and records; and (c) permit Agent and its officers, employees and agents to
inspect, review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Credit Party. If a Default or
an Event of Default shall have occurred and be continuing or if access is
necessary to preserve or protect the Collateral as determined by Agent, each
such Credit Party shall provide such access to Agent and to each Lender at
all times and without advance notice. Furthermore, so long as any Event of
Default shall have occurred and be continuing, Borrowers shall provide Agent
and each Lender with access to their suppliers and customers. Each Credit
Party shall make available to Agent and its counsel, as quickly as is
possible under the circumstances, originals or copies of all books and
records that Agent may request. Each Credit Party shall deliver any document
or instrument necessary for Agent, as it may from time to time request, to
obtain records from any service bureau or other Person that maintains records
for such Credit Party, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned by such
Credit Party. Agent will give Lenders at least ten days' prior written notice
of regularly scheduled audits. Representatives of any Lender may accompany
Agent's representatives on regularly scheduled audits at no charge to
Borrowers.
1.15 TAXES.
(a) Any and all payments by each Borrower hereunder
(including any payments made pursuant to SECTION 12) or under the Notes shall
be made, in accordance with this SECTION 1.15, free and clear of and without
deduction for any and all present or future Taxes. If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder (including any sum payable pursuant to SECTION 12) or under
the Notes, (i) the sum payable shall be increased as much as shall be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 1.15) Agent or
Lenders, as applicable, receive an amount equal to the sum they would have
received had no such deductions been made, (ii) such Borrower shall make such
deductions, and (iii) such Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law. Within
30 days after the date of any payment of Taxes, Borrower Representative shall
furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof.
(b) Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and, within ten days of demand therefor, pay
Agent and each Lender for the full amount of Taxes (including any Taxes
imposed by any jurisdiction on amounts payable under this SECTION 1.15) paid
by Agent or such Lender, as appropriate, in connection with the transactions
contemplated under the Loan Documents and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally asserted.
(c) Each Lender organized under the laws of a
jurisdiction outside the United States (a "FOREIGN LENDER") as to which
payments to be made under this Agreement or under the Notes are exempt from
United States withholding tax under an applicable statute or tax treaty shall
provide to Borrower Representative and Agent a properly completed and
executed IRS Forms 4224 (or IRS Forms W-8ECI) or IRS Forms 1001 (or IRS Forms
W-8BEN) and any analogous forms required under state law or other applicable
form, certificate or document prescribed by the IRS, the United States or any
state certifying as to such Foreign Lender's entitlement to such exemption (a
"CERTIFICATE OF EXEMPTION"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower
Representative and Agent prior to becoming a Lender hereunder. No foreign
Person may become a Lender hereunder if such Person is unable to deliver a
Certificate of Exemption.
1.16 CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.
(a) If any Lender shall have determined that the
adoption after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by any
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law)
from any central bank or other Governmental Authority increases or would have
the effect of increasing the amount of capital, reserves or other funds
required to be maintained by such Lender and thereby reducing the rate of
return on such Lender's capital as a consequence of its obligations
hereunder, then Borrowers shall from time to time upon demand by such Lender
(with a copy of such demand to Agent) pay to Agent, for the account of such
Lender, additional amounts sufficient to compensate such Lender for such
reduction. A certificate as to the amount of that reduction and showing the
basis of the computation thereof submitted by such Lender to Borrower
Representative and to Agent
shall be final, binding and conclusive on Borrower (absent manifest error)
for all purposes. Each Lender agrees that, as promptly as practicable after
it becomes aware of any circumstances referred to above that would result in
any such increased cost, the affected Lender shall, to the extent not
inconsistent with such Lender's internal policies of general application, use
reasonable commercial efforts to minimize the additional amounts payable by
Borrowers to it to compensate such Lender for such reduction pursuant to this
SECTION 1.16(a).
(b) If, due to either (i) the introduction of or any
change in any law or regulation (or any change in the interpretation thereof)
or (ii) the compliance with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining any Loan, then Borrowers shall, from time to
time upon demand by such Lender (with a copy of such demand to Agent), pay to
Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost. A certificate as to the
amount of such increased cost, submitted to Borrower Representative and to
Agent by such Lender, shall be final, binding and conclusive on Borrowers
(absent manifest error) for all purposes. Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances referred
to above that would result in any such increased cost, the affected Lender
shall, to the extent not inconsistent with such Lender's internal policies of
general application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrowers pursuant to this
SECTION 1.16(b).
(c) Notwithstanding anything to the contrary contained
herein, if the introduction of or any change in any law or regulation (or any
change in the interpretation thereof) shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for
any Lender to agree to make or to make or to continue to fund or maintain any
LIBOR Loan, then, unless that Lender is able to make or to continue to fund
or to maintain such LIBOR Loan at another branch or office of that Lender
without, in that Lender's opinion, adversely affecting it or its Loans or the
income obtained therefrom, on notice thereof and demand therefor by such
Lender to Borrower Representative through Agent, (i) the obligation of such
Lender to agree to make or to make or to continue to fund or maintain LIBOR
Loans shall terminate, and (ii) each Borrower shall forthwith prepay in full
all outstanding LIBOR Loans owing by such Borrower to such Lender, together
with interest accrued thereon, UNLESS Borrower Representative on behalf of
such Borrower, within five Business Days after the delivery of such notice
and demand, converts all such LIBOR Loans into Index Rate Loans.
(d) (i) Within 15 days after receipt by Borrower
Representative of written notice and demand from any Lender (an "AFFECTED
LENDER") for payment of additional amounts or increased costs as provided in
SECTIONS 1.15(a), 1.16(a) or 1.16(b), Borrower Representative may, at its
option, notify Agent and such Affected Lender of its intention to replace the
Affected Lender. So long as no Default or Event of Default shall have
occurred and be continuing, Borrower Representative, with the consent of
Agent, may obtain, at Borrowers' expense, a replacement Lender ("REPLACEMENT
LENDER") for the Affected Lender, which Replacement
Lender must be satisfactory to Agent. If Borrower Representative obtains a
Replacement Lender within 90 days following notice of its intention to do so,
the Affected Lender must sell and assign its Loans and Commitments to such
Replacement Lender for an amount equal to the principal balance of all Loans
held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale; PROVIDED, that Borrowers shall have
reimbursed such Affected Lender for the additional amounts or increased costs
that it is entitled to receive under this Agreement through the date of such
sale and assignment.
(ii) Notwithstanding the foregoing, Borrowers
shall not have the right to obtain a Replacement Lender if the Affected
Lender rescinds its demand for increased costs or additional amounts within
15 days following its receipt of Borrowers' notice of intention to replace
such Affected Lender. Furthermore, if Borrowers give a notice of intention to
replace and do not so replace such Affected Lender within 90 days thereafter,
Borrowers' rights under this SECTION 1.16(d) shall terminate and Borrowers
shall promptly pay all increased costs or additional amounts demanded by such
Affected Lender pursuant to SECTIONS 1.15(a), 1.16(a) and 1.16(b).
1.17 SINGLE LOAN. All Loans and all of the other Obligations of
each Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of such Borrower secured, until the
Termination Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1 CONDITIONS TO THE INITIAL LOANS. No Lender shall be
obligated to make any Loan or incur any Letter of Credit Obligations on the
Closing Date, or to take, fulfill, or perform any other action hereunder,
until the following conditions have been satisfied or provided for in a
manner satisfactory to Agent, or waived in writing by Agent and Lenders:
(a) CREDIT AGREEMENT; LOAN DOCUMENTS. This Agreement
or counterparts hereof shall have been duly executed by and delivered to
Borrowers, each other Credit Party, Agent and Lenders, and Agent shall have
received such documents, instruments, agreements and legal opinions as Agent
shall request in connection with the transactions contemplated by this
Agreement and the other Loan Documents, including all those listed in the
Schedule of Documents that are required to be delivered on or prior to the
Closing Date, each in form and substance satisfactory to Agent.
(b) REPAYMENT OF PRIOR LENDER OBLIGATIONS;
SATISFACTION OF OUTSTANDING L/CS. (i) Agent shall have received a fully
executed original of a pay-off letter satisfactory to Agent confirming that
all of the Prior Lender Obligations will be repaid in full from the proceeds
of the initial Revolving Credit Advance and all Liens upon any of the
property of Borrowers or any of their Subsidiaries in favor of Prior Lender
shall be terminated by Prior Lender immediately upon such payment; and (ii)
all letters of credit issued or guaranteed by Prior Lender shall have been
cash collateralized, supported by a guaranty of Agent or supported by a
Letter of Credit issued pursuant to ANNEX B, in each case as mutually agreed
upon by Agent,
Borrowers and Prior Lender.
(c) APPROVALS. Agent shall have received (i)
satisfactory evidence that the Credit Parties have obtained all required
consents and approvals of all Persons, including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the Related Transactions; or
(ii) an officer's certificate in form and substance satisfactory to Agent
affirming that no such consents or approvals are required.
(d) OPENING AVAILABILITY. The Eligible Accounts and
Eligible Inventory supporting the initial Revolving Credit Advance and the
initial Letter of Credit Obligations incurred and the amount of the Reserves
to be established on the Closing Date shall be sufficient in value, as
determined by Agent, to provide Borrowers, collectively, with Net Borrowing
Availability, after giving effect to the initial Revolving Credit Advance
made to each Borrower, the incurrence of any initial Letter of Credit
Obligations and the consummation of the Related Transactions (on a PRO FORMA
basis, with trade payables being paid currently, and expenses and liabilities
being paid in the ordinary course of business and without acceleration of
sales) of at least $500,000.
(e) PAYMENT OF FEES. Borrowers shall have paid the
Fees required to be paid on the Closing Date in the respective amounts
specified in SECTION 1.9 (including the Fees specified in the GE Capital Fee
Letter), and shall have reimbursed Agent for all fees, costs and expenses of
closing presented as of the Closing Date.
(f) CAPITAL STRUCTURE; OTHER INDEBTEDNESS. The capital
structure of each Credit Party and the terms and conditions of all
Indebtedness of each Credit Party shall be acceptable to Agent in its sole
discretion.
(g) DUE DILIGENCE. Agent shall have completed its
business and legal due diligence, including a roll forward of its previous
Collateral audit, with results satisfactory to Agent.
2.2 FURTHER CONDITIONS TO EACH LOAN. Except as otherwise
expressly provided herein, no Lender shall be obligated to fund any Loan,
convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit
Obligation, if, as of the date thereof:
(a) any representation or warranty by any Credit Party
contained herein or in any other Loan Document shall be untrue or incorrect
as of such date, except to the extent that such representation or warranty
expressly relates to an earlier date and except for changes therein expressly
permitted or expressly contemplated by this Agreement; and Agent or Requisite
Revolving Lenders shall have determined not to make any Loan or incur any
Letter of Credit Obligation so long as such representation or warranty
continues to be untrue or incorrect;
(b) any event or circumstance having a Material
Adverse Effect shall have
occurred since the date hereof as determined by Agent or Requisite Revolving
Lenders;
(c) any Default or Event of Default shall have
occurred and be continuing or would result after giving effect to any Loan or
the incurrence of any Letter of Credit Obligations, and Agent or Requisite
Revolving Lenders shall have determined not to make any Loan or incur any
Letter of Credit Obligation so long as such Default or Event of Default is
continuing;
(d) except to the extent that Agent has elected to
make Overadvances pursuant to SECTION 1.1(a)(iii), after giving effect to any
Revolving Credit Advance (or the incurrence of any Letter of Credit
Obligation), (i) the outstanding principal amount of the aggregate Revolving
Loan would exceed the lesser of the Aggregate Borrowing Base and the Maximum
Amount, in each case less the then outstanding principal amount of the Swing
Line Loan, or (ii) the outstanding principal amount of the Revolving Loan of
the applicable Borrower would exceed such Borrower's separate Borrowing Base
LESS the outstanding principal amount of the Swing Line Loan to that
Borrower; or
(e) after giving effect to any Swing Line Advance, (i)
the outstanding principal amount of the Swing Line Loan would exceed Swing
Line Availability, or (ii) the outstanding principal amount of the Swing Line
Loan of the applicable Borrower would exceed such Borrower's separate
Borrowing Base less the outstanding principal amount of the Revolving Loan to
such Borrower.
The request and acceptance by any Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or
continuation of any Loan into, or as, a LIBOR Loan, as the case may be, shall
be deemed to constitute, as of the date of such request, acceptance or
incurrence, (i) a representation and warranty by Borrowers that the
conditions in this SECTION 2.2 have been satisfied and (ii) a reaffirmation
by Borrowers of the cross-guaranty provisions set forth in SECTION 12 and of
the granting and continuance of Agent's Liens, on behalf of itself and
Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make Revolving Credit Advances and Swing Line
Advances and to incur Letter of Credit Obligations, the Credit Parties
executing this Agreement, jointly and severally, make the following
representations and warranties to Agent and each Lender with respect to all
Credit Parties, each and all of which shall survive the execution and
delivery of this Agreement.
3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Credit
Party: (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; (b) is duly
qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification; (c) has the requisite corporate power
and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property
it operates under lease and to conduct its business as now, heretofore and
proposed to be conducted; (d) has all licenses, permits, consents or
approvals from or by, and has made all filings with, and has given all
notices to, all Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (e) is in compliance with
its charter and bylaws; and (f) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax and other laws, is in
compliance with all applicable provisions of law, except where the failure to
comply, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
3.2 EXECUTIVE OFFICES; COLLATERAL LOCATIONS; FEIN. As of the
Closing Date, the current location of each Credit Party's chief executive
office and the warehouses and premises within which any Collateral is stored
or located are set forth in DISCLOSURE SCHEDULE (3.2), and none of such
locations has changed within the 12 months preceding the Closing Date. In
addition, DISCLOSURE SCHEDULE (3.2) lists the federal employer identification
number of each Credit Party.
3.3 CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS.
The execution, delivery and performance by each Credit Party of the Loan
Documents to which it is a party and the creation of all Liens provided for
therein: (a) are within such Credit Party's corporate power; (b) have been
duly authorized by all necessary or proper corporate and shareholder action;
(c) do not contravene any provision of such Credit Party's charter or bylaws;
(d) do not violate any law or regulation, or any order or decree of any court
or Governmental Authority; (e) do not conflict with or result in the breach
or termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Credit Party is a
party or by which such Credit Party or any of its property is bound; (f) do
not result in the creation or imposition of any Lien upon any of the property
of such Credit Party other than those in favor of Agent, on behalf of itself
and Lenders, pursuant to the Loan Documents; and (g) do not require the
consent or approval of any Governmental Authority or any other Person, except
those referred to in SECTION 2.1(c), all of which will have been duly
obtained, made or complied with prior to the Closing Date. On or prior to the
Closing Date, each of the Loan Documents shall have been duly executed and
delivered by each Credit Party that is a party thereto and each such Loan
Document shall then constitute a legal, valid and binding obligation of such
Credit Party enforceable against it in accordance with its terms, subject, as
to enforceability, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights generally, and to
general principles of equity.
3.4 FINANCIAL STATEMENTS AND PROJECTIONS. Except for the
Projections and the Fair Salable Balance Sheet, all Financial Statements
concerning Holdings and its Subsidiaries that are referenced below have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for the absence of footnotes and normal year-end audit
adjustments) and present fairly in all material respects the financial
position of the Persons covered thereby as at the dates
thereof and the results of their operations for the periods then ended.
(a) The following Financial Statements attached hereto as
DISCLOSURE SCHEDULE (3.4(a)) have been delivered on the date hereof:
(i) The audited consolidated balance sheets at
December 25, 1999, and December 26, 1998, and the related statement of income of
Holdings and its Subsidiaries for the Fiscal Years then ended, certified by
PricewaterhouseCoopers LLP.
(ii) The unaudited consolidated and consolidating
balance sheets at February 26, 2000, and the related statement of income of
Holdings and its Subsidiaries for the two Fiscal Months then ended.
(b) PROJECTIONS. The Projections delivered on the date hereof
and attached hereto as DISCLOSURE SCHEDULE (3.4(b)) have been prepared by
Holdings and Borrowers on a consolidated and consolidating basis in light of the
past operations of their businesses, but including future payments of known
contingent liabilities, and reflect projections on a month-by-month basis for
the period commencing on March 1, 2000, and ending on December 31, 2000. The
Projections (i) are based upon estimates and assumptions stated therein, all of
which Borrowers believe to be reasonable and fair in light of current conditions
and current facts known to Borrowers and, as of the Closing Date, reflect
Borrowers' good faith and reasonable estimates of the future financial
performance of Borrowers and of the other information projected therein for the
period set forth therein and (ii) reflect the closing of the stores at the
locations set forth in DISCLOSURE SCHEDULE (1.7).
3.5 MATERIAL ADVERSE EFFECT. Between December 25, 1999, and the
Closing Date: (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or
unusual forward or long-term commitments that are not reflected in the
Financial Statements and that, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect; (b) no contract, lease or other
agreement or instrument has been entered into by any Credit Party or has
become binding upon any Credit Party's assets and no law or regulation
applicable to any Credit Party has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect; and (c) except as
disclosed in DISCLOSURE SCHEDULE (3.5), no Credit Party is in default and to
the best of Borrowers' knowledge no third party is in default under any
material contract, lease or other agreement or instrument to which such
Credit Party is a party that alone or in the aggregate could reasonably be
expected to have a Material Adverse Effect. Between December 25, 1999, and
the Closing Date, no event has occurred that alone or together with other
events could reasonably be expected to have a Material Adverse Effect.
3.6 OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date, the
real estate ("REAL ESTATE") listed in DISCLOSURE SCHEDULE (3.6) constitutes
all of the real property owned, leased, subleased, or used by any Credit
Party. Each Credit Party owns good and marketable fee simple title to all of
its owned Real Estate, and valid and marketable leasehold interests in all of
its
leased Real Estate, all as described in DISCLOSURE SCHEDULE (3.6), and copies of
all such leases or a summary of terms thereof satisfactory to Agent have been
delivered to Agent. DISCLOSURE SCHEDULE (3.6) further describes any Real Estate
with respect to which any Credit Party is a lessor, sublessor or assignor as of
the Closing Date. Each Credit Party also has good title to, or valid leasehold
interests in, all of its personal property and assets. As of the Closing Date,
none of the properties and assets of any Credit Party are subject to any Liens
other than Permitted Encumbrances, and there are no facts, circumstances or
conditions known to any Credit Party that may result in any Liens (including
Liens arising under Environmental Laws) other than Permitted Encumbrances. Each
Credit Party has received all deeds, assignments, waivers, consents,
nondisturbance and attornment or similar agreements, bills of sale and other
documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party's right, title and
interest in and to all such Real Estate and other properties and assets.
DISCLOSURE SCHEDULE (3.6) also describes any purchase options, rights of first
refusal or other similar contractual rights pertaining to any Real Estate. As of
the Closing Date, no portion of any Credit Party's Real Estate has suffered any
material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied. As of the Closing Date, all material permits required to
have been issued or appropriate to enable the Real Estate to be lawfully
occupied and used for all of the purposes for which it is currently occupied and
used have been lawfully issued and are in full force and effect.
3.7 LABOR MATTERS. As of the Closing Date (a) no strikes or
other material labor disputes against any Credit Party are pending or, to any
Credit Party's knowledge, threatened; (b) hours worked by and payment made to
employees of each Credit Party comply with the Fair Labor Standards Act and
each other federal, state, local or foreign law applicable to such matters;
(c) all payments due from any Credit Party for employee health and welfare
insurance have been paid or accrued as a liability on the books of such
Credit Party; (d) except as set forth in DISCLOSURE SCHEDULE (3.7), no Credit
Party is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus plan
or agreement or stock option, restricted stock, stock appreciation right or
any similar plan, agreement or arrangement (and true and complete copies of
any agreements described in DISCLOSURE SCHEDULE (3.7) have been delivered to
Agent); (e) there is no organizing activity involving any Credit Party
pending or, to any Credit Party's knowledge, threatened by any labor union or
group of employees; (f) there are no representation proceedings pending or,
to any Credit Party's knowledge, threatened with the National Labor Relations
Board, and no labor organization or group of employees of any Credit Party
has made a pending demand for recognition; and (g) except as set forth in
DISCLOSURE SCHEDULE (3.7), there are no complaints or charges against any
Credit Party pending or, to the knowledge of any Credit Party, threatened to
be filed with any Governmental Authority or arbitrator based on, arising out
of, in connection with, or otherwise relating to the employment or
termination of employment by any Credit Party of any individual.
3.8 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK
AND INDEBTEDNESS. Except as set forth in DISCLOSURE SCHEDULE (3.8), no Credit
Party has any Subsidiaries, is engaged
in any joint venture or partnership with any other Person, or is an Affiliate of
any other Person. All of the issued and outstanding Stock of each Credit Party
is owned by each of the Stockholders and in the amounts set forth in DISCLOSURE
SCHEDULE (3.8). Except as disclosed in DISCLOSURE SCHEDULE (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock
or other equity securities of its Subsidiaries. All outstanding Indebtedness of
each Credit Party as of the Closing Date is described in SECTION 6.3 (including
DISCLOSURE SCHEDULE (6.3)).
3.9 GOVERNMENT REGULATION. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940. No Credit Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
or any other federal or state statute that restricts or limits its ability to
incur Indebtedness or to perform its obligations hereunder. The making of the
Loans by Lenders to Borrowers, the incurrence of the Letter of Credit
Obligations on behalf of Borrowers, the application of the proceeds thereof
and repayment thereof and the consummation of the Related Transactions will
not violate any provision of any such statute or any rule, regulation or
order issued by the Securities and Exchange Commission.
3.10 MARGIN REGULATIONS. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
security" as such terms are defined in Regulation U of the Federal Reserve
Board as now and from time to time hereafter in effect (such securities being
referred to herein as "MARGIN STOCK"). No Credit Party owns any Margin Stock,
and none of the proceeds of the Loans or other extensions of credit under
this Agreement will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any Indebtedness that was originally incurred to purchase or carry
any Margin Stock or for any other purpose that might cause any of the Loans
or other extensions of credit under this Agreement to be considered a
"purpose credit" within the meaning of Regulations T, U or X of the Federal
Reserve Board. No Credit Party will take or permit to be taken any action
that might cause any Loan Document to violate any regulation of the Federal
Reserve Board.
3.11 TAXES. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by
any Credit Party have been filed with the appropriate Governmental Authority
and all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof (or any
such fine, penalty, interest, late charge or loss has been paid), excluding
Charges or other amounts being contested in accordance with SECTION 5.2(b).
Proper and accurate amounts have been withheld by each Credit Party from its
respective employees for all periods in full and complete compliance with all
applicable federal, state, local and foreign laws and such withholdings have
been timely paid to the respective Governmental Authorities. DISCLOSURE
SCHEDULE (3.11) sets forth as of the Closing Date those taxable years for
which any Credit Party's
tax returns are currently being audited by the IRS or any other applicable
Governmental Authority, and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as
described in DISCLOSURE SCHEDULE (3.11), no Credit Party has executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. None of the Credit Parties or their respective
predecessors are liable for any Charges: (a) under any agreement (including any
tax sharing agreements) or (b) to each Credit Party's knowledge, as a
transferee. As of the Closing Date, no Credit Party has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, that would have a Material Adverse Effect.
3.12 ERISA.
(a) DISCLOSURE SCHEDULE (3.12) lists (i) all ERISA
Affiliates and (ii) all Plans and separately identifies all Pension Plans,
(including all Title IV Plans, Multiemployer Plans, and ESOPs) and Welfare
Plans, including all Retiree Welfare Plans. Copies of all such listed Plans,
together with a copy of the latest IRS/DOL 5500-series form for each such Plan,
have been delivered to Agent. Each Qualified Plan has been determined by the
IRS to qualify under Section 401 of the IRC, and the trusts created thereunder
have been determined to be exempt from tax under the provisions of Section 501
of the IRC, and nothing has occurred that would cause the loss of such
qualification or tax-exempt status. Each Plan is in compliance with the
applicable provisions of ERISA and the IRC, including the timely filing of all
reports required under the IRC or ERISA, including the statement required by 29
CFR Section 2520.104-23, except where the failure to comply could not reasonably
be expected to have a Material Adverse Effect. Neither any Credit Party nor any
ERISA Affiliate has failed to make any contribution or pay any amount due as
required by either Section 412 of the IRC or Section 302 of ERISA or the terms
of any such Plan. Neither any Credit Party nor any ERISA Affiliate has engaged
in a "prohibited transaction," as defined in Section 406 of ERISA and Section
4975 of the IRC, in connection with any Plan, that would subject any Credit
Party to a material tax on prohibited transactions imposed by Section 502(i)
of ERISA or Section 4975 of the IRC. Each Credit Party and each ERISA Affiliate
has performed all of its respective obligations under all Plans, except where
the failure to perform such obligations could not reasonably be expected to have
a Material Adverse Effect.
(b) Except as set forth in DISCLOSURE SCHEDULE (3.12): (i)
no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or
event described in Section 4062(e) of ERISA with respect to any Title IV Plan
has occurred or is reasonably expected to occur; (iii) there are no pending, or
to the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or any ERISA Affiliate (determined at any time within the last five
years) has
been terminated, whether or not in a "standard termination" as that term is used
in Section 4041(b)(1) of ERISA, nor has any Title IV Plan of any Credit Party or
any ERISA Affiliate (determined at any time within the last five years) with
Unfunded Pension Liabilities been transferred outside of the "controlled group"
(within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or
ERISA Affiliate (determined at such time); (vi) except in the case of any ESOP,
Stock of all Credit Parties and their ERISA Affiliates makes up, in the
aggregate, no more than 10% of the assets of any Plan, measured on the basis of
fair market value as of the latest valuation date of any Plan; and (vii) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or an equivalent rating by another nationally recognized
rating agency.
3.13 NO LITIGATION. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party before any Governmental Authority
or before any arbitrator or panel of arbitrators (collectively, "LITIGATION")
that (a) challenges any Credit Party's right or power to enter into or
perform any of its obligations under the Loan Documents to which it is a
party, or the validity or enforceability of any Loan Document or any action
taken thereunder, or (b) has a reasonable risk of being determined adversely
to any Credit Party and that, if so determined, could have a Material Adverse
Effect. Except as set forth in DISCLOSURE SCHEDULE (3.13), as of the Closing
Date there is no Litigation pending or threatened that seeks damages in
excess of $100,000 or injunctive relief against, or alleges criminal
misconduct by, any Credit Party.
3.14 BROKERS. No broker or finder acting on behalf of any Person
brought about the obtaining, making or closing of the Loans or the Related
Transactions, and no Credit Party has any obligation to any Person in respect
of any finder's or brokerage fees in connection therewith.
3.15 INTELLECTUAL PROPERTY. As of the Closing Date, each Credit
Party owns or has rights to use all Intellectual Property necessary to
continue to conduct its business as now or heretofore conducted by it or
proposed to be conducted by it, and each Patent, Trademark, Copyright and
License is listed, together with application or registration numbers, as
applicable, in DISCLOSURE SCHEDULE (3.15). Each Credit Party conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person. Except as set forth in DISCLOSURE
SCHEDULE (3.15), no Credit Party is aware of any infringement or claim of
infringement by others of any of any Credit Party's Intellectual Property
Collateral.
3.16 FULL DISCLOSURE. No representation or warranty of any
Credit Party contained in this Agreement and the schedules and exhibits
attached hereto, the other Loan Documents, the Projections or Financial
Statements, the Collateral Reports or the certificates, reports or other
written statements furnished or to be furnished by any Credit Party as of the
date provided, when read together, contains any untrue statement of a
material fact or, to any Credit Party's knowledge, omits to state a material
fact necessary to make the statements or facts contained therein not
misleading in light of the circumstances under which they were made;
PROVIDED, that the Projection are based upon estimates and assumptions stated
therein, all of which Borrowers believe to be reasonable and fair in light of
current conditions and current facts known to
Borrowers and, as of the date provided, reflect Borrowers' good faith and
reasonable estimates of their future financial performance and of the other
information projected therein for the period set forth therein, and Borrowers
do not represent or warrant that it will achieve such financial projections.
The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the
Collateral Documents will at all times be fully perfected first priority
Liens in and to the Collateral described therein, subject, as to priority,
only to Permitted Encumbrances with respect to the Collateral other than
Accounts.
3.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in DISCLOSURE SCHEDULE (3.17), as
of the Closing Date: (i) the Real Estate is free of contamination from any
Hazardous Material except for such contamination that would not adversely
impact the value or marketability of such Real Estate and that would not
result in Environmental Liabilities that could reasonably be expected to
exceed $25,000; (ii) no Credit Party has caused or suffered to occur any
Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate; (iii) the Credit Parties are and have been in
compliance with all Environmental Laws, except for such noncompliance that
would not result in Environmental Liabilities that could reasonably be
expected to exceed $25,000; (iv) the Credit Parties have obtained, and are in
compliance with, all Environmental Permits required by Environmental Laws for
the operations of their respective businesses as presently conducted or as
proposed to be conducted, except where the failure to so obtain or comply
with such Environmental Permits would not result in Environmental Liabilities
that could reasonably be expected to exceed $25,000, and all such
Environmental Permits are valid, uncontested and in good standing; (v) no
Credit Party is involved in operations or knows of any facts, circumstances
or conditions, including any Releases of Hazardous Materials, that are likely
to result in any Environmental Liabilities of such Credit Party that could
reasonably be expected to exceed $25,000, and no Credit Party has permitted
any current or former tenant or occupant of the Real Estate to engage in any
such operations; (vi) the Credit Parties estimate that they will not incur
any costs of compliance with Environmental Laws and Environmental Permits for
each of the two Fiscal Years following the Closing Date; (vii) there is no
Litigation arising under or related to any Environmental Laws, Environmental
Permits or Hazardous Material that seeks damages, penalties, fines, costs or
expenses in excess of $25,000 or injunctive relief against, or that alleges
criminal misconduct by, any Credit Party; (viii) no notice has been received
by any Credit Party identifying it as a "potentially responsible party" or
requesting information under CERCLA or analogous state statutes, and to the
knowledge of the Credit Parties, there are no facts, circumstances or
conditions that may result in any Credit Party being identified as a
"potentially responsible party" under CERCLA or analogous state statutes; and
(ix) the Credit Parties have provided to Agent copies of all existing
environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that
Agent (i) is not now, and has not ever been, in control of any of the Real
Estate or any Credit Party's affairs, and (ii) does not have the capacity
through the provisions of the Loan Documents or otherwise to
influence any Credit Party's conduct with respect to the ownership, operation or
management of any of its Real Estate or compliance with Environmental Laws or
Environmental Permits.
3.18 INSURANCE. DISCLOSURE SCHEDULE (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each
such policy.
3.19 DEPOSIT AND DISBURSEMENT ACCOUNTS. DISCLOSURE SCHEDULE
(3.19) lists all banks and other financial institutions at which any Credit
Party maintains deposit or other accounts as of the Closing Date, including
any Disbursement Accounts, and such Schedule correctly identifies the name,
address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and the
complete account number therefor.
3.20 GOVERNMENT CONTRACTS. Except as set forth in DISCLOSURE
SCHEDULE (3.20), as of the Closing Date, no Credit Party is a party to any
contract or agreement with any Governmental Authority and no Credit Party's
Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C.
Section 3727) or any similar state or local law.
3.21 TRADE RELATIONS. As of the Closing Date, there exists no
actual or, to the knowledge of any Credit Party, threatened termination or
cancellation of, or any material adverse modification or change in the
business relationship of any Credit Party with any supplier material to its
operations.
3.22 AGREEMENTS AND OTHER DOCUMENTS. As of the Closing Date,
each Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following
agreements or documents to which it is subject, each of which is listed in
DISCLOSURE SCHEDULE (3.22): (a) supply agreements and purchase agreements not
terminable by such Credit Party within 60 days following written notice
issued by such Credit Party and involving transactions in excess of
$1,000,000 PER ANNUM; (b) leases of Equipment having a remaining term of one
year or longer and requiring aggregate rental and other payments in excess of
$500,000 PER ANNUM; (c) licenses and permits held by the Credit Parties, the
absence of which could be reasonably likely to have a Material Adverse
Effect; (d) instruments and documents evidencing Indebtedness of such Credit
Party and any Lien granted by such Credit Party with respect thereto; and (e)
instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit
Party.
3.23 SOLVENCY. Both before and after giving effect to: (a) the
Loans and Letter of Credit Obligations to be made or incurred on the Closing
Date or such other date as Loans and Letter of Credit Obligations requested
hereunder are made or incurred; (b) the disbursement of the proceeds of such
Loans pursuant to the instructions of Borrower Representative; (c) the
Refinancing and the consummation of the other Related Transactions; and (d)
the payment and accrual of all transaction costs in connection with the
foregoing, each Credit Party, other than NEN, is and will be Solvent.
3.24 YEAR 2000 REPRESENTATIONS. Each Credit Party has completed a Year
2000 Assessment and a Year 2000 Corrective Plan, copies of which have been
delivered to Agent, and each Credit Party completed all Year 2000 Corrective
Actions and Year 2000 Implementation Testing. Each Credit Party has eliminated
all Year 2000 Problems, except where the failure to correct the same could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.
3.25 AGENCY AGREEMENTS WITH ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ RETAIL PARTNERS, LLC.
The aggregate amount of the obligations of each of the Credit Parties to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Retail Partners, LLC and its successors and assigns
(collectively, "▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇") under that certain Agency Agreement dated
as of January 13, 2000, between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Holdings and all
agreements, instruments, agreements and documents executed in connection
therewith (as amended, supplemented, restated or otherwise modified at any
time, collectively, the "AGENCY AGREEMENTS") does not, and shall not at any
time, exceed $250,000, other than obligations payable solely from the
"Proceeds" of "Merchandise," each as defined in the Agency Agreements. From
and after the "Sale Commencement Date," as defined in the Agency Agreements,
the Credit Parties have deposited all "Proceeds," as defined in the Agency
Agreements, of the Merchandise in the Excluded Retail Blocked Accounts and
will continue to do so until full and final payment of all obligations to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ under the Agency Agreements.
3.26 AMOUNTS OWING TO LANDLORDS. The aggregate amount of the
obligations of the Credit Parties to (i) DJM Asset Management, Inc. and its
successors and assigns (collectively, "DJM") under that certain letter
agreement dated as of January 6, 2000, between DJM, Borrowers, and NEN and
all agreements, instruments, agreements and documents executed in connection
therewith (as amended, supplemented, restated or otherwise modified at any
time, collectively, the "LETTER AGREEMENT"), and (ii) the landlords of
Borrowers and NEN with respect to the stores listed in DISCLOSURE SCHEDULE
(1.7) does not, and shall not at any time, exceed $4,800,000.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 REPORTS AND NOTICES.
(a) Each Credit Party executing this Agreement hereby agrees
that, from and after the Closing Date and until the Termination Date, it
shall deliver to Agent or Lenders, as required, the Financial Statements,
notices, Projections and other information at the times, to the Persons and
in the manner set forth in ANNEX E.
(b) Each Credit Party executing this Agreement hereby agrees
that, from and after the Closing Date and until the Termination Date, it
shall deliver to Agent or Lenders, as required, the various Collateral
Reports (including Borrowing Base Certificates in the form of
EXHIBIT 4.1(b)) at the times, to the Persons and in the manner set forth in
ANNEX F.
4.2 COMMUNICATION WITH ACCOUNTANTS. Each Credit Party executing this
Agreement authorizes Agent and, so long as a Default or an Event of Default
shall have occurred and be continuing, each Lender, to communicate directly with
its independent certified public accountants, including PricewaterhouseCoopers
LLP, and authorizes and shall instruct those accountants and advisors to
disclose and make available to Agent and each Lender any and all Financial
Statements and other supporting financial documents, schedules and information
relating to any Credit Party (including copies of any issued management letters)
with respect to the business, financial condition and other affairs of any
Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Credit Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:
5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Credit
Party shall: (a) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and its rights and
franchises; (b) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder; (c) at all times maintain,
preserve and protect all of its assets and properties used or useful in the
conduct of its business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration ordinary wear
and tear) and from time to time make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices; and (d) transact business only in such corporate and
trade names as are set forth in DISCLOSURE SCHEDULE (5.1) or such other
corporate or trade names so long as such Credit Party has complied with
SECTION 6.15.
5.2 PAYMENT OF OBLIGATIONS.
(a) Subject to SECTION 5.2(b), each Credit Party shall
pay and discharge or cause to be paid and discharged promptly all (i) Charges
payable by it, including Charges imposed upon it, its income and profits, or
any of its property (real, personal or mixed) and all Charges with respect to
tax, social security and unemployment withholding with respect to its
employees, and (ii) lawful claims for labor, materials, supplies and services
or otherwise, in each case before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by
appropriate proceedings, the validity or amount of any Charges, Taxes or claims
described in SECTION 5.2(a); PROVIDED, that: (i) at the time of commencement of
any such contest no Default or Event of Default shall have occurred and be
continuing; (ii) adequate reserves with respect to such contest are maintained
on the books of such Credit Party, in accordance with GAAP; (iii) such contest
is maintained and prosecuted continuously and with diligence and operates to
suspend collection or enforcement of such Charges or claims or any Lien in
respect thereof; (iv) none of the Collateral
becomes subject to forfeiture or loss as a result of such contest; (v) no
Lien shall be imposed to secure payment of such Charges, Taxes, or claims
other than Permitted Encumbrances; (vi) such Credit Party shall promptly pay
or discharge such contested Charges, Taxes or claims and all additional
charges, interest, penalties and expenses, if any, and shall deliver to Agent
evidence acceptable to Agent of such compliance, payment or discharge, if
such contest is terminated or discontinued adversely to such Credit Party or
the conditions set forth in this SECTION 5.2(b) are no longer met; and (vii)
Agent has not advised Borrowers in writing that Agent reasonably believes
that nonpayment or nondischarge thereof could have or result in a Material
Adverse Effect.
5.3 BOOKS AND RECORDS. Each Credit Party shall keep adequate books and
records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as DISCLOSURE SCHEDULE
(3.4(a)).
5.4 INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL.
(a) The Credit Parties shall, at their sole cost and
expense, maintain the policies of insurance described in DISCLOSURE SCHEDULE
(3.18) in form and with insurers reasonably acceptable to Agent. If any
Credit Party at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above, or to pay all premiums
relating thereto, Agent may at any time or times thereafter obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto that Agent deems advisable. Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default
or Event of Default arising from any Credit Party's failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
attorneys'fees, court costs and other charges related thereto, shall be
payable on demand by Borrowers to Agent and shall be additional Obligations
hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any change in
any Credit Party's risk profile (including any change in the product mix
maintained by any Credit Party or any laws affecting the potential liability of
such Credit Party) to require additional forms and limits of insurance to, in
Agent's opinion, adequately protect both Agent's and Lenders' interests in all
or any portion of the Collateral and to ensure that each Credit Party is
protected by insurance in amounts and with coverage customary for its industry.
If requested by Agent, each Credit Party shall deliver to Agent from time to
time a report of a reputable insurance broker, satisfactory to Agent, with
respect to its insurance policies.
(c) Each Credit Party shall deliver to Agent, in form and
substance satisfactory to Agent, endorsements to (i) all "All Risk" and business
interruption insurance naming Agent, on behalf of itself and Lenders, as loss
payee, and (ii) all general liability and other liability policies naming Agent,
on behalf of itself and Lenders, as additional insured. Each
Credit Party irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as any Default or
Event of Default shall have occurred and be continuing or the anticipated
insurance proceeds exceed $100,000, as such Credit Party's true and lawful
agent and attorney-in-fact (which power is coupled with an interest) for the
purpose of making, settling and adjusting claims under such "All Risk"
policies of insurance, endorsing the name of such Credit Party on any check
or other item of payment for the proceeds of such "All Risk" policies of
insurance and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. Agent shall have no duty to exercise
any rights or powers granted to it pursuant to the foregoing
power-of-attorney. Borrower Representative shall promptly notify Agent of any
loss, damage, or destruction to the Collateral in the amount of $100,000 or
more, whether or not covered by insurance. Each Credit Party hereby directs
its insurers to pay all proceeds payable under its insurance policies
directly to Agent, subject to the rights, if any, of any holders of Permitted
Encumbrances with respect to such proceeds that are prior to Agent's Liens on
such proceeds as a matter of law. After deducting from such proceeds the
expenses, if any, incurred by Agent in the collection or handling thereof,
Agent may, at its option, apply such proceeds to the reduction of the
Obligations in accordance with SECTION 1.3(d), or permit or require the
applicable Credit Party to use such money, or any part thereof, to replace,
repair, restore or rebuild the Collateral in a diligent and expeditious
manner with materials and workmanship of substantially the same quality as
existed before the loss, damage or destruction. Notwithstanding the
foregoing, if the casualty giving rise to such insurance proceeds could not
reasonably be expected to have a Material Adverse Effect and such insurance
proceeds do not exceed $100,000 in the aggregate, Agent shall permit the
applicable Credit Party to replace, restore, repair or rebuild the property;
PROVIDED, that if such Credit Party shall not have completed or entered into
binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may apply such insurance
proceeds to the Obligations in accordance with SECTION 1.3(d). All insurance
proceeds that are to be made available to any Borrower to replace, repair,
restore or rebuild the Collateral shall be applied by Agent to reduce the
outstanding principal balance of the Revolving Loan of such Borrower (which
application shall not result in a permanent reduction of the Revolving Loan
Commitment) and upon such application, Agent shall establish a Reserve
against the separate Borrowing Base of the affected Borrower in an amount
equal to the amount of such proceeds so applied. All insurance proceeds made
available to any Credit Party that is not a Borrower to replace, repair,
restore or rebuild Collateral shall be deposited in a cash collateral
account. Thereafter, such funds shall be made available to such Credit Party
to provide funds to replace, repair, restore or rebuild the Collateral as
follows: (A) Borrower Representative shall request a Revolving Credit Advance
be made to such Borrower in the amount requested to be released; (B) so long
as the conditions set forth in SECTION 2.2 have been met, Revolving Lenders
shall make such Revolving Credit Advance; and (C) the Reserve established
with respect to such insurance proceeds shall be reduced by the amount of
such Revolving Credit Advance. To the extent not used to replace, repair,
restore or rebuild the Collateral, such insurance proceeds shall be applied
in accordance with SECTION 1.3(d).
5.5 COMPLIANCE WITH LAWS. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to licensing,
ERISA and labor matters and Environmental Laws and Environmental Permits,
except to the extent that the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.6 SUPPLEMENTAL DISCLOSURE. From time to time as may be requested by
Agent (which request will not be made more frequently than once each year absent
the occurrence and continuance of a Default or an Event of Default), the Credit
Parties shall supplement each Disclosure Schedule hereto, or any representation
herein or in any other Loan Document, with respect to any matter hereafter
arising that, if existing or occurring at the date of this Agreement, would have
been required to be set forth or described in such Disclosure Schedule or as an
exception to such representation or that is necessary to correct any information
in such Disclosure Schedule or representation that has been rendered inaccurate
thereby (and, in the case of any supplements to any Disclosure Schedule, such
Disclosure Schedule shall be appropriately marked to show the changes made
therein); PROVIDED, that (a) no such supplement to any such Disclosure Schedule
or representation shall be or be deemed a waiver of any Default or Event of
Default resulting from the matters disclosed therein, except as consented to by
Agent and Requisite Revolving Lenders in writing, and (b) no supplement shall be
required as to representations and warranties that relate solely to the Closing
Date.
5.7 INTELLECTUAL PROPERTY. Each Credit Party shall conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person.
5.8 ENVIRONMENTAL MATTERS. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate
or necessary to comply with Environmental Laws and Environmental Permits
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or Release of any Hazardous Material on, at, in, under, above,
to, from or about any of its Real Estate; (c) notify Agent promptly after
such Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or
about any Real Estate that is reasonably likely to result in Environmental
Liabilities in excess of $25,000; and (d) promptly forward to Agent a copy of
any order, notice, request for information or any communication or report
received by such Credit Party in connection with any such violation or
Release or any other matter relating to any Environmental Laws or
Environmental Permits that could reasonably be expected to result in
Environmental Liabilities in excess of $25,000, in each case whether or not
the Environmental Protection Agency or any Governmental Authority has taken
or threatened any action in connection with any such violation, Release or
other matter. If Agent at any time has a reasonable basis to believe that
there may be a violation of any Environmental Laws or Environmental Permits
by any Credit Party or any Environmental Liability arising thereunder, or a
Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate, that, in each case, could reasonably be expected to
have a Material Adverse Effect, then each Credit Party shall, upon Agent's
written request (i) cause the performance of such
environmental audits including subsurface sampling of soil and groundwater,
and preparation of such environmental reports, in each case at Borrowers'
expense, as Agent may from time to time request, all of which shall be
conducted by reputable environmental consulting firms acceptable to Agent and
shall be in form and substance acceptable to Agent, and (ii) permit Agent or
its representatives to have access to all Real Estate for the purpose of
conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrowers shall
reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS.
Each Credit Party shall use its best efforts to obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property, mortgagee of owned property or bailee with respect to any
warehouse, processor or converter facility or other location where Collateral is
stored or located, which agreement or letter shall contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee or bailee may
assert against the Collateral at that location, and shall otherwise be
reasonably satisfactory in form and substance to Agent. With respect to such
locations or warehouse space leased, owned or used as of the Closing Date, if
Agent has not received a landlord or mortgagee agreement or bailee letter as of
the Closing Date (or, if later, as of the date such location is leased, acquired
or used), any Borrower's Eligible Inventory at that location shall, in Agent's
discretion, be excluded from the Borrowing Base or be subject to such Reserves
as may be established by Agent in its reasonable credit judgment. After the
Closing Date, no real property or warehouse space that is not set forth in
DISCLOSURE SCHEDULE (3.2) shall be leased, acquired or used by any Credit Party
and no Inventory of any Credit Party shall be shipped to a processor or
converter under arrangements established after the Closing Date, in each case
without the prior written consent of Agent (which consent, in Agent's
discretion, may be conditioned upon the exclusion from the Borrowing Base of
Eligible Inventory at that location or the establishment of Reserves acceptable
to Agent) or unless and until a satisfactory landlord or mortgagee agreement or
bailee letter, as appropriate, shall first have been obtained with respect to
such location. Each Credit Party shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located.
5.10 INVENTORY APPRAISALS. On a quarterly basis, or more frequently
if required by Agent in its reasonable credit judgment, Agent shall obtain,
at Borrowers' expense, and Borrowers shall cooperate in the preparation of,
an update or amendment with respect to the existing appraisal of Borrowers'
Inventory, together with any other appraisals or updates thereof of any or
all of the Collateral, in each case from an appraiser, and prepared on a
basis, satisfactory to Agent.
5.11 FURTHER ASSURANCES. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper
in the reasonable opinion of Agent to carry out more effectively the
provisions and purposes of this Agreement or any other Loan Document.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees
as to all Credit Parties that, without the prior written consent of Agent and
the Requisite Revolving Lenders, from and after the date hereof until the
Termination Date:
6.1 MERGERS, SUBSIDIARIES, ETC. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, or (b) merge with, consolidate with, acquire all or substantially
all of the assets or capital Stock of, or otherwise combine with or acquire, any
Person, except that any Borrower may merge with another Borrower; PROVIDED, that
Borrower Representative shall be the survivor of any such merger to which it is
a party.
6.2 INVESTMENTS; LOANS AND ADVANCES. Except as otherwise expressly
permitted by this SECTION 6, no Credit Party shall make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money to,
any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except that: (a) Credit Parties may hold investments
comprised of notes payable, or stock or other securities issued by Account
Debtors to any Credit Party pursuant to negotiated agreements with respect to
settlement of such Account Debtor's Accounts in the ordinary course of business,
so long as the aggregate amount of such Accounts so settled by Credit Parties
does not exceed $100,000 in any Fiscal Year; (b) each Credit Party may maintain
its existing investments in its Subsidiaries as of the Closing Date; (c) any
Borrower may make loans or otherwise advance funds to NEN at any time from the
Closing Date through June 30, 2000, that are used by NEN for the purpose of
satisfying NEN's obligations to its landlords in an amount not to exceed
$2,000,000 in the aggregate outstanding at any time; PROVIDED, that, for
purposes of this SECTION 6.2(d), any non-cash repayments of loans by NEN to such
Borrower shall not be applied as a credit against the outstanding amount of such
loans or other advances; and (d) so long as no Default or Event of Default shall
have occurred and be continuing and no Advances are outstanding, Borrowers may
make investments, subject to Control Letters in favor of Agent, for the benefit
of Agent and Lenders, or otherwise subject to a perfected security interest in
favor of Agent, for the benefit of Agent and Lenders, in (i) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency thereof maturing within one year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., (iii)
certificates of deposit maturing no more than one year from the date of creation
thereof issued by commercial banks incorporated under the laws of the United
States of America, each having combined capital, surplus and undivided profits
of not less than $300,000,000 and having a senior secured rating of "A" or
better by a nationally recognized rating agency (an "A RATED BANK"), and (iv)
time deposits maturing no more than 30
days from the date of creation thereof with A Rated Banks.
6.3 INDEBTEDNESS.
(a) Except as otherwise expressly permitted by this SECTION
6, no Credit Party shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests and Capital Leases permitted in CLAUSE (l)
of the definition of Permitted Encumbrances, (ii) the Loans and the other
Obligations, (iii) deferred taxes, (iv) unfunded pension fund and other
employee benefit plan obligations and liabilities to the extent they are
permitted to remain unfunded under applicable law, (v) existing Indebtedness
described in DISCLOSURE SCHEDULE (6.3) and refinancings thereof or amendments
or modifications thereto that do not have the effect of increasing the
principal amount thereof or changing the amortization thereof (other than to
extend the same) and that are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as determined by Agent,
than the terms of the Indebtedness being refinanced, amended or modified,
(vi) Subordinated Debt, (vii) Indebtedness specifically permitted under
SECTION 6.17, and (viii) Indebtedness consisting of intercompany loans and
advances made by any Borrower to any other Borrower; PROVIDED, that: (A) each
Borrower shall have executed and delivered to such other Borrower, on the
Closing Date, a demand note (collectively, the "INTERCOMPANY NOTES") to
evidence any such intercompany Indebtedness owing at any time by such
Borrower to such other Borrower which Intercompany Notes shall be in form and
substance satisfactory to Agent and shall be pledged and delivered to Agent
pursuant to the applicable Pledge Agreement or Security Agreement as
additional collateral security for the Obligations; (B) each Borrower shall
record all intercompany transactions on its books and records in a manner
satisfactory to Agent; (C) the obligations of each Borrower under any such
Intercompany Notes shall be subordinated to the Obligations of such Borrower
hereunder in a manner satisfactory to Agent; (D) at the time any such
intercompany loan or advance is made by any Borrower to any other Borrower
and after giving effect thereto, each such Borrower shall be Solvent; (E) no
Default or Event of Default would occur and be continuing after giving effect
to any such proposed intercompany loan; (F) the aggregate amount of such
intercompany Indebtedness owing by any Borrower shall not exceed $500,000 at
any one time outstanding; and (G) the loan or advance shall be made on fair
and reasonable terms (other than the interest rate on such loan or advance)
that are no less favorable to each Borrower than would be obtained in a
comparable arm's length transaction with a Person that was not an Affiliate
of such Borrower.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than: (i) the
Obligations; and (ii) Indebtedness secured by a Permitted Encumbrance if the
asset securing such Indebtedness has been sold or otherwise disposed of in
accordance with SECTIONS 6.8(b) or (c).
6.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS.
(a) Except as otherwise expressly permitted in this SECTION 6
with respect to Affiliates, no Credit Party shall enter into or be a party to
any transaction with any other Credit
Party or any Affiliate thereof except in the ordinary course of and pursuant
to the reasonable requirements of such Credit Party's business and upon fair
and reasonable terms that are no less favorable to such Credit Party than
would be obtained in a comparable arm's length transaction with a Person not
an Affiliate of such Credit Party. In addition, if any such transaction or
series of related transactions involves payments in excess of $100,000 in the
aggregate, the terms of these transactions must be disclosed in advance to
Agent and Lenders. All such transactions existing as of the date hereof are
described in DISCLOSURE SCHEDULE (6.4(a)).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to its
respective employees on an arm's length basis in the ordinary course of business
consistent with past practices for travel expenses, relocation costs and similar
purposes and stock option financing up to a maximum of $50,000 to any employee
and up to a maximum of $100,000 in the aggregate at any one time outstanding.
6.5 CAPITAL STRUCTURE AND BUSINESS. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations that
could in any way adversely affect the repayment of the Loans or any of the
other Obligations or could have or result in a Material Adverse Effect, (b)
make any change in its capital structure as described in DISCLOSURE SCHEDULE
(3.9), including the issuance of any shares of Stock, warrants or other
securities convertible into Stock or any revision of the terms of its
outstanding Stock; PROVIDED, that Holdings may make a Qualified Public
Offering of its common Stock so long as (i) the proceeds thereof are applied
in prepayment of the Obligations as required by SECTION 1.3(b)(iii), and (ii)
no Change of Control occurs after giving effect thereto, or (c) amend its
charter or bylaws in a manner that would adversely affect Agent or Lenders or
such Credit Party's duty or ability to repay the Obligations. No Credit Party
shall engage in any business other than the businesses currently engaged in
by it.
6.6 GUARANTEED INDEBTEDNESS. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement.
6.7 LIENS. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other
properties or assets (whether now owned or hereafter acquired) except for
Liens in existence on the date hereof and summarized on DISCLOSURE SCHEDULE
(6.7) and other Permitted Encumbrances. In addition, no Credit Party shall
become a party to any agreement, note, indenture or instrument or take any
other action that would prohibit the creation of a Lien on any of its
properties or other assets in favor of Agent, on behalf of itself and
Lenders, as additional collateral for the Obligations, except operating
leases, Capital Leases or Licenses that prohibit Liens upon the assets that
are subject thereto.
6.8 SALE OF STOCK AND ASSETS. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including its capital Stock or the capital Stock of any of its Subsidiaries
(whether in a public or a private offering or otherwise but
subject, in the case of Holdings, to the provisions of SECTION 6.5(b)) or any
of its Accounts, other than: (a) the sale of Inventory in the ordinary course
of business; (b) the sale, transfer, conveyance or other disposition by a
Credit Party of Equipment, Fixtures or Real Estate that is obsolete or no
longer used or useful in such Credit Party's business and having a value not
exceeding $100,000 in any single transaction or $250,000 in the aggregate in
any Fiscal Year; and (c) other Equipment and Fixtures having a value not
exceeding $100,000 in any single transaction or $250,000 in the aggregate in
any Fiscal Year. With respect to any disposition of assets or other
properties permitted pursuant to CLAUSES (b) and (c) above, Agent agrees on
reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrowers, at Borrowers'
expense, appropriate UCC termination statements and other releases as
reasonably requested by Borrowers in connection therewith.
6.9 ERISA. No Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur an event that could result in
the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068
of ERISA or cause or permit to occur an ERISA Event to the extent that such
ERISA Event could reasonably be expected to have a Material Adverse Effect.
6.10 FINANCIAL COVENANTS. Borrowers shall not breach or fail to
comply with any of the financial covenants set forth in ANNEX G (the
"FINANCIAL COVENANTS").
6.11 HAZARDOUS MATERIALS. No Credit Party shall cause or permit
a Release of any Hazardous Material on, at, in, under, above, to, from or
about any of the Real Estate where such Release would (a) violate in any
respect, or form the basis for any Environmental Liabilities under, any
Environmental Laws or Environmental Permits or (b) otherwise adversely impact
the value or marketability of any of the Real Estate or any of the
Collateral, other than such violations or impacts that could not reasonably
be expected to have a Material Adverse Effect.
6.12 SALE-LEASEBACKS. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13 CANCELLATION OF INDEBTEDNESS. No Credit Party shall cancel
any claim or debt owing to it, except for reasonable consideration negotiated
on an arm's length basis and in the ordinary course of its business
consistent with past practices.
6.14 RESTRICTED PAYMENTS. No Credit Party shall make any
Restricted Payment, except (a) intercompany loans and advances between
Borrowers to the extent permitted by SECTION 6.3, (b) dividends and
distributions by Subsidiaries of any Borrower paid to such Borrower, (c)
employee loans permitted under SECTION 6.4(b), and (d) dividends or other
distributions made by Borrowers to Holdings out of legally available funds to
enable Holdings to pay (i) its reasonable legal, accounting and operational
expenses incurred in the ordinary course in an amount not to exceed
$1,600,000 in the aggregate in any Fiscal Year and (ii) tax liabilities in an
aggregate amount not to exceed in any Fiscal Year in an amount equal to (A)
distributable taxable net income of Borrowers as determined by the Board of
Directors of each such Borrower for such Fiscal Year MULTIPLIED BY (B) the
sum of the maximum combined corporate federal,
state and local income tax rates during such Fiscal Year; PROVIDED, that (I)
any such tax liabilities shall be reduced each Fiscal Year by the aggregate
amount of any refunds, tax credits, loss-carry forwards, or other similar
credits arising from the liabilities attributable to such Borrower, and (II)
prior to making any such dividend or other distribution, such Borrower shall
deliver to Agent a certification of the Chief Financial Officer of such
Borrower setting forth the calculation of such tax liabilities and certifying
that the information presented is true, correct and complete in all material
respects.
6.15 CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL
YEAR. No Credit Party shall (a) change its corporate name or (b) change its
chief executive office, principal place of business, corporate offices or
warehouses or locations at which Collateral is held or stored, or the
location of its records concerning the Collateral, in each case without at
least 30 days' prior written notice to Agent and after Agent's written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of
Agent, on behalf of Agent and Lenders, in any Collateral and to provide
access and other rights as against third parties in accordance with the
requirements of SECTION 5.9, has been completed or taken, and provided that
any such new location shall be in the continental United States of America.
Without limiting the generality of the foregoing, no Credit Party shall
change its name, identity or corporate structure in any manner that might
make any financing or continuation statement filed in connection herewith
seriously misleading within the meaning of Section 9-402(7) of the Code or
any other then applicable provision of the Code except upon prior written
notice to Agent and after Agent's written acknowledgment that any reasonable
action requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Agent and Lenders, in
any Collateral, has been completed or taken. No Credit Party shall change its
Fiscal Year.
6.16 NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No Credit Party
shall directly or indirectly enter into or become bound by any agreement,
instrument, indenture or other obligation (other than this Agreement and the
other Loan Documents) that could directly or indirectly restrict, prohibit or
require the consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by a
Subsidiary of any Borrower to any Borrower or between Borrowers.
6.17 NO SPECULATIVE TRANSACTIONS. No Credit Party shall engage
in any transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18 LEASES. No Credit Party shall enter into any operating
lease for Equipment or Real Estate if the aggregate of all such operating
lease payments payable in any year for all Credit Parties on a consolidated
basis would exceed $250,000.
6.19 NEW STORE OPENINGS. No Credit Party shall open any new
store locations; PROVIDED, that, (a) Borrowers shall be permitted to open the
four new store locations set forth in DISCLOSURE SCHEDULE (6.19) during the
Fiscal Year ending December 30, 2000, and (b) a Credit
Party may open a new store location so long as (i) no Default or Event of
Default shall have occurred and be continuing or would result after giving
effect to any payments in connections with such store opening, and (ii) with
respect to any payments to be made in connection with such store opening,
Borrowers collectively shall have Net Borrowing Availability of not less than
the lesser of (A) $2,500,000 and (B) 10% of Borrowing Availability after
giving effect (including PRO FORMA effect during the period prior to such
store opening) to any such payments at all times during the period from the
date that is 90 days prior to the earlier of the date on which such Credit
Party makes the initial payment or incurs the initial obligations in
connection with any such store opening and, based on Net Borrowing
Availability projections prepared by Borrowers and delivered to Agent and
Lenders, which Projections shall be in form and substance acceptable to
Agent, through and including the date that is 90 days after such store
opening. Prior to making any payment under CLAUSE (b) of this SECTION 6.19,
Borrowers shall deliver a certificate to Agent certifying that the conditions
set forth in such clause have been satisfied, which certificate shall be in
form and substance satisfactory to Agent.
7. TERM
7.1 TERMINATION. The financing arrangements contemplated hereby
shall be in effect until the Commitment Termination Date, and the Loans and
all other Obligations shall be automatically due and payable in full on such
date.
7.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
ARRANGEMENTS. Except as otherwise expressly provided in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair
the obligations, duties and liabilities of the Credit Parties or the rights
of Agent and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction
or event, the performance of which is required after the Commitment
Termination Date. Except as otherwise expressly provided herein or in any
other Loan Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of
Agent and each Lender, all as contained in the Loan Documents, shall not
terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the
Termination Date; PROVIDED, that the provisions of SECTION 11, the payment
obligations under SECTIONS 1.15 and 1.16, and the indemnities contained in
the Loan Documents shall survive the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an
"EVENT OF DEFAULT" hereunder:
(a) Any Borrower (i) shall fail to make any payment of
principal of, or interest on, or Fees owing in respect of, the Loans or any
of the other Obligations when due and payable, or (ii) shall fail to pay or
reimburse Agent or Lenders for any expense reimbursable hereunder or under
any other Loan Document within ten days following Agent's demand for such
reimbursement or payment of expenses.
(b) Any Credit Party shall fail or neglect to perform,
keep or observe any of the provisions of SECTIONS 1.4, 1.8, 5.4 or 6, or any
of the provisions set forth in ANNEXES C or G, respectively.
(c) Any Borrower shall fail or neglect to perform,
keep or observe any of the provisions of SECTION 4 or any provisions set
forth in ANNEXES E or F, respectively, and the same shall remain unremedied
for two Business Days or more following the earlier of (i) receipt by such
Borrower of written notice of such failure and (ii) such Borrower's knowledge
of such failure.
(d) Any Credit Party shall fail or neglect to perform,
keep or observe any other provision of this Agreement or of any of the other
Loan Documents (other than any provision embodied in or covered by any other
clause of this SECTION 8.1) and the same shall remain unremedied for 20 days
or more.
(e) A default or breach shall occur under any other
agreement, document or instrument to which any Credit Party is a party that
is not cured within any applicable grace period therefor, and such default or
breach (i) involves the failure to make any payment when due in respect of
any Indebtedness (other than the Obligations) of any Credit Party in excess
of $500,000 in the aggregate, or (ii) causes, or permits any holder of such
Indebtedness or a trustee to cause, Indebtedness or a portion thereof in
excess of $500,000 in the aggregate to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment, regardless of
whether such default is waived, or such right is exercised, by such holder or
trustee.
(f) Any information contained in any Borrowing Base
Certificate shall be untrue or incorrect in any respect, or any
representation or warranty herein or in any Loan Document or in any written
statement, report, financial statement or certificate (other than a Borrowing
Base Certificate) made or delivered to Agent or any Lender by any Credit
Party is untrue or incorrect in any material respect as of the date when made
or deemed made.
(g) Assets of any Credit Party with a fair market
value of $500,000 or more shall be attached, seized, levied upon or subjected
to a writ or distress warrant, or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors of any Credit
Party and such condition continues for 30 days or more.
(h) A case or proceeding shall have been commenced
against any Credit Party seeking a decree or order in respect of such Credit
Party (i) under the Bankruptcy Code or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for such Credit Party or for any substantial part of such Credit Party's
assets, or (iii) ordering the winding-up or liquidation of the affairs of
such Credit Party, and such case or proceeding shall remain
undismissed or unstayed for 60 days or more or a decree or order granting the
relief sought in such case or proceeding shall be entered by a court of
competent jurisdiction over such case or proceeding.
(i) Any Credit Party shall (i) file a petition seeking
relief under the Bankruptcy Code or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) consent to or fail to contest
in a timely and appropriate manner the institution of proceedings thereunder
or the filing of any such petition or the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) for such Credit Party or for any substantial part of such
Credit Party's assets, (iii) make an assignment for the benefit of creditors,
(iv) take any corporate action in furtherance of any of the foregoing, or (v)
admit in writing its inability to, or shall be generally unable to, pay its
debts as such debts become due.
(j) A final judgment or judgments for the payment of
money in excess of $350,000 in the aggregate at any time outstanding shall be
rendered against any Credit Party and the same shall not, within 30 days
after the entry thereof, have been discharged or execution thereof stayed or
bonded pending appeal, or shall not have been discharged prior to the
expiration of any such stay.
(k) Any material provision of any Loan Document shall
for any reason cease to be valid, binding and enforceable in accordance with
its terms (or any Credit Party shall challenge the enforceability of any Loan
Document or shall assert in writing, or engage in any action or inaction
based on any such assertion, that any provision of any of the Loan Documents
has ceased to be or otherwise is not valid, binding and enforceable in
accordance with its terms), or any Lien created under any Loan Document shall
cease to be a valid and perfected first priority Lien (except as otherwise
permitted herein or therein) in any of the Collateral purported to be covered
thereby.
(l) Any Change of Control shall occur.
(m) Any event shall occur, whether or not insured or
insurable, as a result of which (i) revenue-producing activities cease or are
substantially curtailed at any facility of Borrowers generating more than 10%
of Borrowers' consolidated revenues for the Fiscal Year preceding such event
or (ii) any facility is damaged or destroyed at which more than 10% of
Borrowers' Inventory is located and, as a result of such damage or
destruction, such facility is closed, and such cessation, curtailment or
closure continues for more than 30 days.
8.2 REMEDIES.
(a) If any Event of Default shall have occurred and be
continuing, or if any Default shall have occurred and be continuing and Agent
or Requisite Revolving Lenders shall have determined not to make any Advances
or incur any Letter of Credit Obligations so long as such Default is
continuing, then Agent may (and at the written request of the Requisite
Revolving Lenders shall), without notice, suspend this facility with respect
to further Advances
or the incurrence of further Letter of Credit Obligations, whereupon any
further Advances and the incurrence of further Letter of Credit Obligations
shall be made or extended in Agent's sole discretion (or in the sole
discretion of the Requisite Revolving Lenders, if such suspension occurred at
their direction) so long as such Default or Event of Default is continuing.
If any Default or Event of Default shall have occurred and be continuing,
Agent may (and at the written request of Requisite Lenders shall), without
notice except as otherwise expressly provided herein, increase the rate of
interest applicable to the Loans and the Letter of Credit Fees to the Default
Rate.
(b) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the Requisite Revolving
Lenders shall), without notice: (i) terminate this facility with respect to
further Revolving Credit Advances or the incurrence of further Letter of
Credit Obligations; (ii) declare all or any portion of the Obligations,
including all or any portion of any Loan, to be forthwith due and payable,
and require that the Letter of Credit Obligations be cash collateralized as
provided in ANNEX B, all without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by Borrowers and each
other Credit Party; or (iii) exercise any rights and remedies provided to
Agent under the Loan Documents or at law or in equity, including all remedies
provided under the Code; PROVIDED, that upon the occurrence of an Event of
Default specified in SECTIONS 8.1(g), (h) or (i), all of the Obligations,
including the aggregate Revolving Loan, shall become immediately due and
payable without declaration, notice or demand by any Person.
8.3 WAIVERS BY CREDIT PARTIES. Except as otherwise provided for
in this Agreement or by applicable law, each Credit Party waives (including
for purposes of SECTION 12): (a) presentment, demand and protest and notice
of presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent on which any Credit Party may in any way be liable, and
hereby ratifies and confirms whatever Agent may do in this regard, (b) all
rights to notice and a hearing prior to Agent's taking possession or control
of, or Agent's replevy, attachment or levy upon, the Collateral or any bond
or security that might be required by any court prior to allowing Agent to
exercise any of its remedies, and (c) the benefit of all valuation,
appraisal, marshalling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 ASSIGNMENT AND PARTICIPATIONS.
(a) The Credit Parties signatory hereto consent to any
Lender's assignment of, or sale of participations in, at any time or times,
the Loan Documents, Loans, Letter of Credit Obligations or any Commitment or
of any portion thereof or interest therein, including any Lender's rights,
title, interests, remedies, powers or duties thereunder, whether evidenced by
a writing or not; PROVIDED, that no Credit Party shall be required to pay any
closing or commitment fee to such assignee Lender or participant in
connection with any such assignment or participation. Any assignment by a
Lender shall: (i) require the consent of Agent (which shall
not be unreasonably withheld or delayed) and the execution of an assignment
agreement (an "ASSIGNMENT AGREEMENT") substantially in the from attached
hereto as EXHIBIT 9.1(a) and otherwise in form and substance satisfactory to,
and acknowledged by, Agent; (ii) be conditioned on such assignee Lender
representing to the assigning Lender and Agent that it is purchasing the
applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (iii) if a partial
assignment, be in an amount at least equal to $5,000,000 and, after giving
effect to any such partial assignment, the assigning Lender shall have
retained Commitments in an amount at least equal to $5,000,000; and (iv)
include a payment to Agent of an assignment fee of $3,500. In the case of an
assignment by a Lender under this SECTION 9.1, the assignee shall have, to
the extent of such assignment, the same rights, benefits and obligations of
all other Lenders hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Each Borrower hereby
acknowledges and agrees that any assignment shall give rise to a direct
obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "Lender." In all instances, each Lender's liability to
make Loans hereunder shall be several and not joint and shall be limited to
such Lender's Pro Rata Share of the applicable Commitment. In the event Agent
or any Lender assigns or otherwise transfers all or any part of a Note, Agent
or any such Lender shall so notify Borrowers and Borrowers shall, upon the
request of Agent or such Lender, execute new Notes in exchange for the Notes
being assigned. Notwithstanding the foregoing provisions of this SECTION
9.1(a), any Lender may at any time pledge or assign all or any portion of
such Lender's rights under this Agreement and the other Loan Documents to a
Federal Reserve Bank; PROVIDED, that no such pledge or assignment shall
release such Lender from such Lender's obligations hereunder or under any
other Loan Document.
(b) Any participation by a Lender of all or any part
of its Commitments shall be in an amount at least equal to $5,000,000, and
with the understanding that all amounts payable by Borrowers hereunder shall
be determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be entitled to require such Lender
to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of, or interest rate or
Fees payable with respect to, any Loan in which such holder participates,
(ii) any extension of the scheduled amortization of the principal amount of
any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of SECTIONS 1.13,
1.15, 1.16 and 9.8, each Borrower acknowledges and agrees that a
participation shall give rise to a direct obligation of Borrowers to the
participant and the participant shall be considered to be a "Lender." Except
as set forth in the preceding sentence no Borrower or Credit Party shall have
any obligation or duty to any participant. Neither Agent nor any Lender
(other than the Lender selling a participation) shall have any duty to any
participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.
(c) Except as expressly provided in this SECTION 9.1,
no Lender shall, as between Borrowers and that Lender, or Agent and that
Lender, be relieved of any of its obligations hereunder as a result of any
sale, assignment, transfer or negotiation of, or granting of
participation in, all or any part of the Loans, the Notes or other
Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall
assist any Lender permitted to sell assignments or participations under this
SECTION 9.1 as reasonably required to enable the assigning or selling Lender
to effect any such assignment or participation, including the execution and
delivery of any and all agreements, notes and other documents and instruments
as shall be requested and, if requested by Agent, the preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants. Each Credit Party executing this
Agreement shall certify the correctness, completeness and accuracy of all
descriptions of the Credit Parties and their respective affairs contained in
any selling materials provided by them and all other information provided by
them and included in such materials, except that any Projections delivered by
Borrowers shall only be certified by Borrowers as having been prepared by
Borrowers in compliance with the representations contained in SECTION 3.4(b).
(e) Any Lender may furnish any information concerning
Borrowers in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants); PROVIDED,
that such Lender shall obtain from assignees or participants confidentiality
covenants substantially equivalent to those contained in SECTION 11.8.
(f) So long as no Event of Default shall have occurred
and be continuing, no Lender shall assign or sell participations in any
portion of its Loans or Commitments to a potential Lender or participant if,
as of the date of the proposed assignment or sale, the assignee Lender or
participant would be subject to capital adequacy or similar requirements
under SECTION 1.16(a), increased costs under SECTION 1.16(b), an inability to
fund LIBOR Loans under SECTION 1.16(c), or withholding taxes in accordance
with SECTION 1.16(d).
9.2 APPOINTMENT OF AGENT.
(a) GE Capital is hereby appointed to act on behalf of
all Lenders as Agent under this Agreement and the other Loan Documents. The
provisions of this SECTION 9.2 are solely for the benefit of Agent and
Lenders and no Credit Party nor any other Person shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or
trust with or for any Credit Party or any other Person. Agent shall have no
duties or responsibilities except for those expressly set forth in this
Agreement and the other Loan Documents. The duties of Agent shall be
mechanical and administrative in nature and Agent shall not have, or be
deemed to have, by reason of this Agreement, any other Loan Document or
otherwise a fiduciary relationship in respect of any Lender. Neither Agent
nor any of its Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages solely
caused by its or their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) If Agent shall request instructions from Requisite
Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders or all
affected Lenders with respect to any act or action (including failure to act)
in connection with this Agreement or any other Loan Document, then Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from Requisite Lenders,
Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected
Lenders, as the case may be, and Agent shall not incur liability to any
Person by reason of so refraining. Agent shall be fully justified in failing
or refusing to take any action hereunder or under any other Loan Document (i)
if such action would, in the opinion of Agent, be contrary to law or the
terms of this Agreement or any other Loan Document, (ii) if such action
would, in the opinion of Agent, expose Agent to Environmental Liabilities or
(iii) if Agent shall not first be indemnified to its satisfaction against any
and all liability and expense that may be incurred by it by reason of taking
or continuing to take any such action. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders, as applicable.
9.3 AGENT'S RELIANCE, ETC. Neither Agent nor any of its
Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it
or them under or in connection with this Agreement or the other Loan
Documents, except for damages solely caused by its or their own gross
negligence or willful misconduct as finally determined by a court of
competent jurisdiction. Without limiting the generality of the foregoing,
Agent: (a) may treat the payee of any Note as the holder thereof until Agent
receives written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to Agent; (b) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts; (c) makes
no warranty or representation to Agent or any Lender and shall not be
responsible to any Lender for any statements, warranties or representations
made in or in connection with this Agreement or the other Loan Documents; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or
the other Loan Documents on the part of any Credit Party or to inspect the
Collateral (including the books and records) of any Credit Party; (e) shall
not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of
this Agreement or the other Loan Documents by acting upon any notice,
consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed
or sent by the proper party or parties.
9.4 GE CAPITAL AND AFFILIATES. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this
Agreement and the other Loan Documents as any other Lender and may exercise
the same as though it were not Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated,
include GE Capital in its individual capacity. GE Capital and its Affiliates
may lend money to, invest in, and generally engage in any kind of business
with, any Credit Party, any of their Affiliates and any Person who may do
business with or own securities of any Credit Party or any such Affiliate,
all as if GE Capital were not Agent and without any duty to account therefor
to Lenders. GE Capital and its Affiliates may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
Each Lender acknowledges the potential conflict of interest between GE
Capital as a Lender holding disproportionate interests in the Loans and GE
Capital as Agent.
9.5 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender and
based on the Financial Statements referred to in SECTION 3.4(a) and such
other documents and information as it has deemed appropriate, made its own
credit and financial analysis of the Credit Parties and its own decision to
enter into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement. Each Lender acknowledges the potential conflict of
interest of each other Lender as a result of Lenders holding disproportionate
interests in the Loans, and expressly consents to, and waives any claim based
upon, such conflict of interest.
9.6 INDEMNIFICATION. Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrowers and without limiting the obligations of
Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on,
incurred by, or asserted against Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any action taken or omitted
to be taken by Agent in connection therewith; PROVIDED, that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's gross negligence or wilful misconduct as
finally determined by a court of competent jurisdiction. Without limiting the
foregoing, each Lender agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under, this Agreement and each other Loan
Document, to the extent that Agent is not reimbursed for such expenses by
Credit Parties.
9.7 SUCCESSOR AGENT. Agent may resign at any time by giving not
less than 30 days' prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Revolving Lenders
shall have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Requisite Revolving Lenders and shall
have accepted such appointment within 30 days after the resigning Agent's
giving notice of resignation, then the resigning Agent may, on behalf of
Lenders, appoint a successor Agent, which shall be a Lender if a Lender is
willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the foregoing
within 30 days after the date such notice of resignation was given by the
resigning Agent, such resignation shall become effective and the Requisite
Revolving Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Revolving Lenders appoint a successor
Agent as provided above. Any successor Agent appointed by Requisite Revolving
Lenders hereunder shall be subject to the approval of Borrower Representative,
such approval not to be unreasonably withheld or delayed; PROVIDED, that such
approval shall not be required if a Default or an Event of Default shall have
occurred and be continuing. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
Agent. Upon the earlier of the acceptance of any appointment as Agent hereunder
by a successor Agent or the effective date of the resigning Agent's resignation,
the resigning Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents, except that any indemnity rights or
other rights in favor of such resigning Agent shall continue. After any
resigning Agent's resignation hereunder, the provisions of this SECTION 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was acting as Agent under this Agreement and the other Loan Documents.
9.8 SETOFF AND SHARING OF PAYMENTS. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, and subject to the provisions of SECTION 9.9(f), upon the occurrence
and during the continuance of any Event of Default, each Lender and each holder
of any Note is hereby authorized at any time or from time to time, without
notice to any Credit Party or to any other Person, any such notice being hereby
expressly waived, to offset and to appropriate and to apply any and all
balances held by it at any of its offices for the account of any Credit Party
(regardless of whether such balances are then due to such Credit Party) and any
other properties or assets at any time held or owing by that Lender or that
holder to or for the credit or for the account of Credit Parties against and on
account of any of the Obligations that are not paid when due. Any Lender or
holder of any Note exercising a right to offset or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares. Each Lender's obligation under this
SECTION 9.8 shall be in addition to and not in limitation of its obligations to
purchase a participation in an amount equal to its Pro Rata Share of the Swing
Line Loans under SECTION 1.1. Each Credit Party agrees, to the fullest extent
permitted by law, that (a) any Lender or holder may exercise its right to
offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender or holders so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of setoff, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the setoff amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of setoff,
the purchase of participations by that Lender shall be rescinded and the
purchase price restored without interest.
9.9 ADVANCES; NON-FUNDING LENDERS; INFORMATION; ACTIONS IN CONCERT.
(a) ADVANCES; PAYMENTS.
(i) Revolving Lenders shall refund or participate in the
Swing Line Loan in accordance with CLAUSES (iii) and (iv) of SECTION 1.1(b).
If the Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 11:00
a.m. (California time) on the date such Notice of Revolving Credit Advance is
received, by telecopy, telephone or other similar form of transmission. Each
Revolving Lender shall make the amount of such Lender's Pro Rata Share of each
Revolving Credit Advance available to Agent in same day funds by wire transfer
to Agent's account as set forth in ANNEX H not later than 12:00 noon (California
time) on the requested funding date, in the case of an Index Rate Loan, and not
later than 10:00 a.m. (California time) on the required funding date, in the
case of a LIBOR Loan. After receipt of such wire transfers (or, in the Agent's
sole discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to the Borrower
designated by Borrower Representative in the Notice of Revolving Credit Advance.
All payments by each Revolving Lender shall be made without setoff, counterclaim
or deduction of any kind.
(ii) On the second Business Day of each calendar week or more
frequently as aggregate cumulative payments in excess of $5,000,000 are received
with respect to the Loans (other than the Swing Line Loan) (each, a "SETTLEMENT
DATE"), Agent shall advise each Lender by telephone or telecopy of the amount of
such Lender's Pro Rata Share of principal, interest and Fees paid for the
benefit of Lenders with respect to each applicable Loan. Provided that each
Lender has made all payments required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the other
Loan Documents as of such Settlement Date, Agent shall pay to each Lender such
Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since
the previous Settlement Date for the benefit of such Lender on the Loans held by
it. Such payments shall be made by wire transfer to such Lender's account (as
specified by such Lender in ANNEX H or the applicable Assignment Agreement) not
later than 11:00 a.m. (California time) on the next Business Day following each
Settlement Date.
(b) AVAILABILITY OF LENDER'S PRO RATA SHARE. Agent may assume
that each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to Agent on each funding date. If such Pro Rata Share is not,
in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled
to recover such amount on demand from
such Revolving Lender without setoff, counterclaim or deduction of any kind. If
any Revolving Lender fails to pay the amount of its Pro Rata Share forthwith
upon Agent's demand, Agent shall promptly notify Borrower Representative and
Borrowers shall immediately repay such amount to Agent. Nothing in this SECTION
9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be
deemed to require Agent to advance funds on behalf of any Revolving Lender or
to relieve any Revolving Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Borrowers may have against any
Revolving Lender as a result of any default by such Revolving Lender hereunder.
To the extent that Agent advances funds to any Borrower on behalf of any
Revolving Lender and is not reimbursed therefor on the same Business Day as
such Revolving Credit Advance is made, Agent shall be entitled to retain for
its account all interest accrued on such Revolving Credit Advance until
reimbursed by the applicable Revolving Lender.
(c) RETURN OF PAYMENTS.
(i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrowers and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to any Borrower or paid
to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender. In addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together with interest at
such rate, if any, as Agent is required to pay to any Borrower or such other
Person without setoff, counterclaim or deduction of any kind.
(d) NON-FUNDING LENDERS. The failure of any Revolving Lender
(such Revolving Lender, a "NON-FUNDING LENDER") to make any Revolving Credit
Advance or to purchase any participation in any Swing Line Loan to be made or
purchased by it on the date specified therefor shall not relieve any other
Revolving Lender (each such other Revolving Lender, an "OTHER LENDER") of its
obligations to make such Revolving Credit Advance or purchase such participation
on such date, but neither any Other Lender nor Agent shall be responsible for
the failure of any Non-Funding Lender to make an Advance to be made, or to
purchase a participation to be purchased, by such Non- Funding Lender, and no
Non-Funding Lender shall have any obligation to Agent or any Other Lender for
the failure by such Non-Funding Lender. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
"Lender" or a "Revolving Lender" (or be included in the calculation of
"Requisite Revolving Lenders" or "Supermajority Revolving Lenders" hereunder)
for any voting or consent rights under or with respect to any Loan Document.
(e) DISSEMINATION OF INFORMATION. Agent shall use reasonable
efforts to provide Lenders with any notice of Default or Event of Default
received by Agent from, or delivered by Agent to, any Credit Party, with notice
of any Event of Default of which Agent has actually become aware and with notice
of any action taken by Agent following any Event of Default; PROVIDED, that
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable solely to Agent's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.
Lenders acknowledge that Borrowers are required to provide Financial Statements
and Collateral Reports to Lenders in accordance with ANNEXES E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.
(f) ACTIONS IN CONCERT. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each other Lender that
no Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including exercising any rights of setoff) without
first obtaining the prior written consent of Agent or Requisite Revolving
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of Agent.
10. SUCCESSORS AND ASSIGNS
This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of each Credit Party, Agent, Lenders and their
respective successors and assigns (including, in the case of any Credit Party, a
debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein. No Credit Party may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Agent and Requisite Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agent and Requisite Lenders shall be void. The terms and
provisions of this Agreement are for the purpose of defining the relative rights
and obligations of each Credit Party, Agent and Lenders with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.
11. MISCELLANEOUS
11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in SECTION 11.2. Any letter of interest, commitment letter, fee letter
(other than the GE Capital Fee Letter) or confidentiality agreement between any
Credit Party and Agent or any Lender or any of their respective Affiliates,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this Agreement.
11.2 AMENDMENTS AND WAIVERS. (a) Except for actions expressly permitted
to be taken
by Agent, no amendment, modification, termination or waiver of any provision of
this Agreement, any of the Notes or any other Loan Document, or any consent to
any departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Agent and Borrowers, and by
Requisite Revolving Lenders, Supermajority Revolving Lenders or all affected
Lenders, as applicable. Except as set forth in CLAUSES (b) and (c) below, all
such amendments, modifications, terminations or waivers requiring the consent
of any Lenders shall require the written consent of Requisite Revolving Lenders.
(b) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement that increases the
percentage advance rates set forth in the definition of the TNT Borrowing Base
or the OMC Borrowing Base, or that makes less restrictive the nondiscretionary
criteria for exclusion from Eligible Accounts and Eligible Inventory set forth
in SECTIONS 1.6 and 1.7, shall be effective unless the same shall be in writing
and signed by Agent, Supermajority Revolving Lenders and Borrowers. No
amendment, modification, termination or waiver of or consent with respect to any
provision of this Agreement that waives compliance with the conditions precedent
set forth in SECTION 2.2 to the making of any Loan or the incurrence of any
Letter of Credit Obligations shall be effective unless the same shall be in
writing and signed by Agent, Requisite Revolving Lenders and Borrowers.
Notwithstanding anything contained in this Agreement to the contrary, no waiver
or consent with respect to any Default (if in connection therewith Agent or
Requisite Revolving Lenders, as the case may be, have exercised its or their
right to suspend the making or incurrence of further Revolving Credit Advances
or Letter of Credit Obligations pursuant to SECTION 8.2(a)) or any Event of
Default shall be effective for purposes of the conditions precedent to the
making of Loans or the incurrence of Letter of Credit Obligations set forth in
SECTION 2.2 unless the same shall be in writing and signed by Agent, Requisite
Revolving Lenders and Borrowers.
(c) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender directly affected thereby:
(i) increase the principal amount of any Lender's Commitment (which action shall
be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of
interest on or Fees payable with respect to any Loan or Letter of Credit
Obligations of any affected Lender; (iii) extend any scheduled payment date or
final maturity date of the principal amount of any Loan of any affected Lender;
(iv) waive, forgive, defer, extend or postpone any payment or prepayment of
interest, principal or Fees as to any affected Lender; (v) release any Guaranty
or, except as otherwise permitted herein or in the other Loan Documents, permit
any Credit Party to sell or otherwise dispose of any Collateral with a value
exceeding $5,000,000 in the aggregate (which action shall be deemed to directly
affect all Lenders); (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend or waive
this SECTION 11.2 or the definitions of the terms "Requisite Lenders,"
"Requisite Revolving Lenders" or "Supermajority Revolving Lenders" insofar as
such definitions affect the substance of this SECTION 11.2. Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties of
Agent under this Agreement or any other Loan Document shall be effective unless
in writing and signed by Agent, in addition to Lenders required hereinabove to
take such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
No amendment, modification, termination or waiver shall be required for Agent
to take additional Collateral pursuant to any Loan Document. No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of such Note. No notice
to or demand on any Credit Party in any case shall entitle such Credit Party or
any other Credit Party to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this SECTION 11.2 shall be binding upon each holder
of the Notes at the time outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "PROPOSED CHANGE"):
(i) requiring the consent of all affected Lenders, the
consent of Supermajority Revolving Lenders is obtained, but
the consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as
described in this CLAUSE (i) and in CLAUSES (ii) and (iii)
below being referred to as a "NON-CONSENTING LENDER"),
(ii) requiring the consent of Supermajority Revolving
Lenders, the consent of Requisite Revolving Lenders is
obtained, but the consent of Supermajority Revolving Lenders
is not obtained, or
(iii) requiring the consent of Requisite Revolving
Lenders, the consent of Revolving Lenders holding 51% or more
of the aggregate Revolving Loan Commitments is obtained, but
the consent of Requisite Revolving Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower
Representative's request, Agent or a Person acceptable to Agent shall have the
right with Agent's consent and in Agent's sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent's request, sell and
assign to Agent or such Person, all of the Commitments of such Non-Consenting
Lenders for an amount equal to the principal balance of all Loans held by such
Non-Consenting Lenders and all accrued interest and Fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and performance of
all of the Obligations (other than indemnification Obligations under SECTION
1.13), termination of the Commitments and a release of all claims against Agent
and Lenders, and so long as no suits, actions, proceedings or claims are pending
or threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Agent shall deliver to Borrowers
termination statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.
11.3 FEES AND EXPENSES. Borrowers shall reimburse Agent for all
out-of-pocket expenses incurred in connection with the negotiation and
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its special loan counsel, advisors, consultants and auditors retained in
connection with the Loan Documents and the Related Transactions and advice in
connection therewith). Borrowers shall reimburse Agent (and, with respect to
CLAUSES (c), (d) and (e) below, all Lenders) for all fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and appraisers) for advice,
assistance, or other representation in connection with:
(a) the forwarding to Borrowers or any other Person on behalf of
Borrowers by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, consent with
respect to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, any Borrower or any other Person, and
whether as a party, witness or otherwise) in any way relating to the Collateral,
any of the Loan Documents or any other agreement to be executed or delivered in
connection herewith or therewith, including any litigation, contest, dispute,
suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against any or all of the Borrowers or
any other Person that may be obligated to Agent by virtue of the Loan Documents,
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; PROVIDED, that in the case of
reimbursement of counsel for Lenders other than Agent, such reimbursement shall
be limited to one counsel for all such Lenders;
(d) any attempt to enforce any remedies of Agent against any or
all of the Credit Parties or any other Person that may be obligated to Agent or
any Lender by virtue of any of the Loan Documents, including any such attempt to
enforce any such remedies in the course of any work-out or restructuring of the
Loans during the pendency of one or more Events of Default; PROVIDED, that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;
(e) any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; and
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including all reasonable attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings, and all expenses, costs, charges and other fees
incurred by such counsel and others in connection with or relating to any of the
events or actions described in this SECTION 11.3, all of which shall be payable,
on demand, by Borrowers to Agent. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: fees, costs and
expenses of accountants, environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services.
11.4 NO WAIVER. Agent's or any Lender's failure, at any time or times,
to require strict performance by the Credit Parties of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of SECTION 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders, and directed to Borrowers specifying
such suspension or waiver.
11.5 REMEDIES. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
11.6 SEVERABILITY. Wherever possible, each provision of this Agreement
and the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any other Loan Document shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement or such other Loan Document.
11.7 CONFLICT OF TERMS. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
11.8 CONFIDENTIALITY. Agent and each Lender agree to use commercially
reasonable
efforts (equivalent to the efforts Agent or such Lender applies to
maintaining the confidentiality of its own confidential information) to maintain
as confidential all confidential information provided to them by the Credit
Parties and designated as confidential for a period of two years following
receipt thereof, except that Agent and any Lender may disclose such information
(a) to Persons employed or engaged by Agent or such Lender in evaluating,
approving, structuring or administering the Loans and the Commitments; (b) to
any BONA FIDE assignee or participant or potential assignee or participant that
has agreed to comply with the covenant contained in this SECTION 11.8 (and any
such BONA FIDE assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in
CLAUSE (a) above); (c) as required or requested by any Governmental Authority or
reasonably believed by Agent or such Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (d) as, in the opinion of
Agent's or such Lender's counsel, is required by law; (e) in connection with the
exercise of any right or remedy under the Loan Documents or in connection with
any Litigation to which Agent or such Lender is a party; or (f) that ceases to
be confidential through no fault of Agent or any Lender.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
(WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND
AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN SAN FRANCISCO COUNTY, CITY OF
SAN FRANCISCO, CALIFORNIA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
SAN FRANCISCO COUNTY, CITY OF SAN FRANCISCO, CALIFORNIA; PROVIDED FURTHER, THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION (INCLUDING
ANY JURISDICTION IN WHICH THE COLLATERAL IS LOCATED) TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY AND EACH LENDER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH SUCH PERSON HEREBY WAIVES ANY
OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH
CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE
UNITED STATES MAILS, PROPER POSTAGE PREPAID.
11.10 NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and three
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this SECTION
11.10); (c) one Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated in ANNEX I or to such other address (or
facsimile number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrower Representative or Agent) designated in ANNEX
I to receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
11.11 SECTION TITLES. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.
11.14 PRESS RELEASES. Each Credit Party executing this Agreement agrees
that neither it nor its Affiliates will in the future issue any press releases
or other public disclosure using the name of GE Capital or its affiliates or
referring to this Agreement, the other Loan Documents or the Related
Transactions Documents without at least two Business Days' prior notice to GE
Capital and without the prior written consent of GE Capital unless (and only to
the extent that) such Credit Party or Affiliate is required to do so under law
and then, in any event, such Credit Party or Affiliate will consult with GE
Capital before issuing such press release or other public disclosure; PROVIDED,
that neither the prior written consent nor consultation with GE Capital shall be
required prior to any Credit Party's filing this Agreement with the Securities
and Exchange Commission. Each Credit Party consents to the publication by Agent
or any Lender of a tombstone or similar advertising material relating to the
financing transactions contemplated by this Agreement.
11.15 REINSTATEMENT. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Borrower for liquidation or reorganization, should any Borrower become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Borrower's assets, and shall continue to be effective or to be reinstated, as
the case may be, if at any time payment and performance of the Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
11.16 ADVICE OF COUNSEL. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of SECTIONS 11.9 and 11.13, with its counsel.
11.17 NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
12. CROSS-GUARANTY
12.1 CROSS-GUARANTY. Each Borrower hereby agrees that such Borrower is
jointly and severally liable for, and hereby absolutely and unconditionally
guarantees to Agent and Lenders and their respective successors and assigns, the
full and prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance of, all Obligations owed or hereafter owing to Agent
and Lenders by each other Borrower. Each Borrower agrees that its guaranty
obligation hereunder is a continuing guaranty of payment and performance and not
of collection, and that its obligations under this SECTION 12 shall be absolute
and unconditional, irrespective of, and unaffected by,
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document or
any other agreement, document or instrument to which any Borrower is or may
become a party;
(b) the absence of any action to enforce this Agreement
(including this SECTION 12) or any other Loan Document or the waiver or consent
by Agent and Lenders with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to perfect
its Lien against, any security for the Obligations or any action, or the absence
of any action, by Agent and Lenders in respect thereof (including the release of
any such security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being agreed by each Borrower that its obligations under this SECTION 12
shall not be discharged until the payment and performance, in full, of the
Obligations has occurred. Each Borrower shall be regarded, and shall be in the
same position, as principal debtor with respect to the Obligations guaranteed
hereunder.
12.2 WAIVERS BY BORROWERS. Each Borrower expressly waives all rights
it may have now or in the future under any statute, or at common law, or at law
or in equity, or otherwise, to compel Agent or Lenders to ▇▇▇▇▇▇▇▇ assets or to
proceed in respect of the Obligations guaranteed hereunder against any other
Credit Party, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Borrower. It is agreed among each Borrower, Agent and
Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and
the other Loan Documents and that, but for the provisions of this SECTION 12
and such waivers, Agent and Lenders would decline to enter into this Agreement.
12.3 BENEFIT OF GUARANTY. Each Borrower agrees that the provisions of
this SECTION 12 are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any other Borrower and Agent or Lenders, the
obligations of such other Borrower under the Loan Documents.
12.4 SUBORDINATION OF SUBROGATION, ETC. Notwithstanding anything to
the contrary in this Agreement or in any other Loan Document, and except as set
forth in SECTION 12.7, each Borrower hereby expressly and irrevocably
subordinates to payment of the Obligations any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution, indemnification
or set off and any and all defenses available to a surety, guarantor or
accommodation co-obligor until the Obligations are indefeasibly paid in full in
cash. Each Borrower acknowledges and agrees that this subordination is intended
to benefit Agent and Lenders and shall not limit or otherwise affect such
Borrower's liability hereunder or the enforceability of this SECTION 12, and
that Agent, Lenders and their respective successors and assigns are intended
third party beneficiaries of the waivers and agreements set forth in this
SECTION 12.4.
12.5 ELECTION OF REMEDIES. If Agent or any Lender may, under
applicable law, proceed to realize its benefits under any of the Loan Documents
giving Agent or such Lender a Lien upon any Collateral, whether owned by any
Borrower or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agent or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any
of its rights and remedies under this SECTION 12. If, in the exercise of any of
its rights and remedies, Agent or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, each Borrower hereby consents to such
action by Agent or such Lender and waives any claim based upon such action,
even if such action by Agent or such Lender shall result in a full or partial
loss of any rights of subrogation that each Borrower might otherwise have had
but for such action by Agent or such Lender. Any election of remedies that
results in the denial or impairment of the right of Agent or any Lender to seek
a deficiency judgment against any Borrower shall not impair any other
Borrower's obligation to pay the full amount of the Obligations. In the event
Agent or any Lender shall bid at any foreclosure or trustee's sale or at any
private sale permitted by law or the Loan Documents, Agent or such Lender may
bid all or less than the amount of the Obligations and the amount of such bid
need not be paid by Agent or such Lender but shall be credited against the
Obligations. The amount of the successful bid at any such sale, whether Agent,
Lender or any other party is the successful bidder, shall be conclusively
deemed to be the fair market value of the Collateral and the difference between
such bid amount and the remaining balance of the Obligations shall be
conclusively deemed to be the amount of the Obligations guaranteed under this
SECTION 12, notwithstanding that any present or future law or court decision or
ruling may have the effect of reducing the amount of any deficiency claim to
which Agent or any Lender might otherwise be entitled but for such bidding at
any such sale.
12.6 LIMITATION. Notwithstanding any provision herein contained to the
contrary, each Borrower's liability under this SECTION 12 (which liability is in
any event in addition to amounts for which such Borrower is primarily liable
under SECTION 1) shall be limited to an amount not to exceed as of any date of
determination the greater of:
(a) the net amount of all Loans advanced to any other Borrower
under this Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Borrower; and
(b) the amount that could be claimed by Agent and Lenders from
such Borrower under this SECTION 12 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from each
other Borrower under SECTION 12.7.
12.7 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS.
(a) To the extent that any Borrower shall make a payment under
this SECTION 12 of all or any of the Obligations (other than Loans made to that
Borrower for which it is primarily liable) (a "GUARANTOR PAYMENT") that, taking
into account all other Guarantor Payments then previously or concurrently made
by any other Borrower, exceeds the amount that such Borrower would otherwise
have paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower's "ALLOCABLE AMOUNT"
(as defined below) (as determined immediately prior to such Guarantor Payment)
bore to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Borrower for the
amount of such excess, PRO RATA based upon their respective Allocable Amounts in
effect immediately prior to such Guarantor Payment.
(b) As of any date of determination, the "ALLOCABLE AMOUNT" of
any Borrower shall be equal to the maximum amount of the claim that could then
be recovered from such Borrower under this SECTION 12 without rendering such
claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.
(c) This SECTION 12.7 is intended only to define the relative
rights of Borrowers and nothing set forth in this SECTION 12.7 is intended to or
shall impair the obligations of Borrowers, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Agreement, including SECTION 12.1. Nothing contained in this
SECTION 12.7 shall limit the liability of any Borrower to pay the Loans made
directly or indirectly to that Borrower and accrued interest, Fees and expenses
with respect
thereto for which such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Borrower to which such contribution and indemnification is owing.
(e) The rights of the indemnifying Borrowers against other
Credit Parties under this SECTION 12.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Commitments.
12.8 LIABILITY CUMULATIVE. The liability of Borrowers under this
SECTION 12 is in addition to and shall be cumulative with all liabilities of
each Borrower to Agent and Lenders under this Agreement and the other Loan
Documents to which such Borrower is a party or in respect of any Obligations or
obligation of the other Borrower, without any limitation as to amount, unless
the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
"Borrowers"
TRACK 'N TRAIL, a California corporation, as a Borrower
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
OVERLAND MANAGEMENT CORPORATION, a
Massachusetts corporation, as a Borrower
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and a Lender
By:
▇▇▇▇ ▇▇▇▇▇▇
Duly Authorized Signatory
Revolving Loan
Commitment (including
a Swing Line Commitment
of $2,500,000):
$25,000,000
The following Persons are signatories to this Agreement in
their capacity as Credit Parties and not as Borrowers.
TRACK 'N TRAIL, a Delaware corporation, as a Credit Party
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
▇▇▇▇▇'▇ EAGLES NEST, INC., a Colorado corporation, as a
Credit Party
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings, and all references in the following definitions to
Sections, Exhibits, Schedules or Annexes shall refer to Sections, Exhibits,
Schedules or Annexes of the Agreement:
"ACCOUNT DEBTOR" shall mean any Person who may become
obligated to any other Person under, with respect to, or on account of, an
Account.
"ACCOUNTING CHANGES" shall have the meaning assigned to it in
ANNEX G.
"ACCOUNTS" shall mean all "accounts," as such term is defined
in the Code, now owned or hereafter acquired by any Person, including (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments), whether arising out of goods sold or services
rendered by it or from any other transaction (including any such obligations
that may be characterized as an account or contract right under the Code), (b)
all of such Person's rights in, to and under all purchase orders or receipts for
goods or services, (c) all of such Person's rights to any goods represented by
any of the foregoing (including unpaid sellers' rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned, reclaimed or
repossessed goods), (d) all monies due or to become due to such Person under all
purchase orders and contracts for the sale of goods or the performance of
services or both by such Person or in connection with any other transaction
(whether or not yet earned by performance on the part of such Person), including
the right to receive the proceeds of said purchase orders and contracts, and (e)
all collateral security and guaranties of any kind given by any other Person
with respect to any of the foregoing.
"ADVANCE" shall mean any Revolving Credit Advance or Swing
Line Advance, as the context may require.
"AFFILIATE" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, five percent (5%) or more of the
Stock having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person, (c) each of such Person's officers, directors, joint venturers and
partners or (d) in the case of Borrowers, the immediate family members, spouses
and lineal descendants of individuals who are Affiliates of any Borrower. For
the purposes of this definition, "CONTROL" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise; PROVIDED, that the term "AFFILIATE" shall
specifically exclude Agent and each Lender.
"AGENCY AGREEMENTS" shall have the meaning assigned to it in
SECTION 3.25.
"AGENT" shall mean GE Capital, in its capacity as Agent for
Lenders, or its successor appointed pursuant to SECTION 9.7.
"AGGREGATE BORROWING BASE" shall mean, as of any date of
determination, an amount equal to the sum of the TNT Borrowing Base and the OMC
Borrowing Base.
"AGREEMENT" shall mean the Credit Agreement by and among
Borrowers, the other Credit Parties party thereto, GE Capital, as Agent and a
Lender, and the other Lenders from time to time party thereto, as the same may
be amended, supplemented, restated or otherwise modified from time to time in
accordance with the terms thereof.
"APPENDICES" shall have the meaning assigned to it in the
recitals to the Agreement.
"APPLICABLE MARGINS" shall mean, collectively, the Applicable
Unused Line Fee Margin, the Applicable Revolver Index Margin, and the Applicable
Revolver LIBOR Margin.
"APPLICABLE PERCENTAGE" shall have the meaning assigned to it
in SECTION 1.9(c).
"APPLICABLE REVOLVER INDEX MARGIN" shall mean the PER ANNUM
interest rate margin from time to time in effect and payable in addition to the
Index Rate applicable to the Revolving Loan, as determined by reference to
SECTION 1.5(a).
"APPLICABLE REVOLVER LIBOR MARGIN" shall mean the PER ANNUM
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to the Revolving Loan, as determined by reference to SECTION
1.5(a).
"APPLICABLE UNUSED LINE FEE MARGIN" shall mean the PER ANNUM
fee, from time to time in effect, payable in respect of Borrowers' non-use of
available funds pursuant to SECTION 1.9(b), which fee is determined by reference
to SECTION 1.5(a).
"ASSIGNMENT AGREEMENT" shall have the meaning assigned to it
in SECTION 9.1(a).
"BANKRUPTCY CODE" shall mean the provisions of title 11 of the
United States Code, 11 U.S.C. Sections 101 ET SEQ.
"BORROWER ACCOUNTS" shall have the meaning assigned to it in
ANNEX C.
"BORROWER REPRESENTATIVE" shall mean TNT, in its capacity as
Borrower Representative pursuant to the provisions of SECTION 1.1(c).
"BORROWERS" and "BORROWER" shall have the respective meanings
assigned thereto in the preamble to the Agreement.
"BORROWING AVAILABILITY" shall have the meaning assigned to it
in SECTION 1.1(a)(i).
"BORROWING BASE" shall mean, as the context may require, the
TNT Borrowing Base and the OMC Borrowing Base or any such Borrowing Base.
"BORROWING BASE CERTIFICATE" shall mean a certificate to be
executed and delivered from time to time by each Borrower in the form attached
to the Agreement as EXHIBIT 4.1(b).
"BUSINESS DAY" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
States of California or New York and in reference to LIBOR Loans shall mean any
such day that is also a LIBOR Business Day.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person,
all expenditures (by the expenditure of cash or the incurrence of Indebtedness)
by such Person during any measuring period for any fixed assets or improvements
or for replacements, substitutions or additions thereto that have a useful life
of more than one year and that are required to be capitalized under GAAP.
"CAPITAL LEASE" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person.
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any
Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance sheet of
such lessee in respect of such Capital Lease.
"CASH COLLATERAL ACCOUNT" shall have the meaning assigned to
it in ANNEX B.
"CASH EQUIVALENTS" shall have the meaning assigned to it in
ANNEX B.
"CASH MANAGEMENT SYSTEM" shall have the meaning assigned to it
in SECTION 1.8.
"CHANGE OF CONTROL" means any of the following: (a) any Person
or group of Persons (within the meaning of the Securities Exchange Act) shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act) of
20% or more of the issued and outstanding
shares of capital Stock of Holdings having the right to vote for the election
of directors of Holdings under ordinary circumstances; (b) during any period
of 12 consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors of Holdings (together with any new
directors whose election by the board of directors of Holdings or whose
nomination for election by the Stockholders of Holdings was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election were previously so approved) cease for any reason
other than death or disability to constitute a majority of the directors then
in office; (c) Holdings shall cease to own and control all of the economic
and voting rights associated with all of the outstanding capital Stock of
each of TNT and OMC; or (d) any of TNT or OMC shall cease to own and control
all of the economic and voting rights associated with all of the outstanding
capital Stock of each of its Subsidiaries.
"CHARGES" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes (including taxes owed to
the PBGC at the time due and payable), levies, assessments, charges, liens,
claims or encumbrances upon or relating to (a) the Collateral, (b) the
Obligations, (c) the employees, payroll, income or gross receipts of any Person,
(d) any Person's ownership or use of any properties or other assets, or (e) any
other aspect of any Person's business.
"CHATTEL PAPER" shall mean any "chattel paper," as such term
is defined in the Code, now owned or hereafter acquired by any Person, wherever
located.
"CLOSING DATE" shall mean March 30, 2000.
"CODE" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of California;
PROVIDED, that in the event that, by reason of mandatory provisions of law, any
or all of the attachment, perfection or priority of, or remedies with respect
to, Agent's or any Lender's Lien on any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State
of California, the term "CODE" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for
purposes of definitions related to such provisions.
"COLLATERAL" shall mean the property covered by the Security
Agreement, and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on behalf of Agent and Lenders, to secure the Obligations.
"COLLATERAL DOCUMENTS" shall mean the Security Agreement, the
Pledge Agreements, the Guaranties, the Patent, Trademark and Copyright Security
Agreement and all similar agreements entered into guaranteeing payment of, or
granting a Lien upon property as security for payment of, the Obligations, as
each such agreement may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms thereof.
"COLLATERAL REPORTS" shall mean the reports with respect to
the Collateral referred to in ANNEX F.
"COLLECTION ACCOUNT" shall mean that certain account of Agent,
account number ▇▇▇-▇▇▇-▇▇ in the name of Agent at Bankers Trust Company in New
York, New York, ABA No. 021 001 033, or such other account as may be designated
in writing by Agent as the "Collection Account."
"COMMITMENT TERMINATION DATE" shall mean the earliest of (a)
▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) the date of termination of Lenders' obligations to make
Revolving Credit Advances and to incur Letter of Credit Obligations or permit
existing Loans to remain outstanding pursuant to SECTION 8.2(b), and (c) the
date of indefeasible prepayment in full by Borrowers of the Loans, the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to ANNEX B,
and the permanent reduction of the Revolving Loan Commitment and the Swing Line
Commitment to zero dollars ($0), in each case in accordance with the provisions
of SECTION 1.3(a).
"COMMITMENTS" shall mean (a) as to any Lender, the aggregate
of such Lender's Revolving Loan Commitment (including without duplication the
Swing Line Lender's Swing Line Commitment) as set forth on the signature page to
the Agreement or in the most recent Assignment Agreement executed by such Lender
and (b) as to all Lenders, the aggregate of all Lenders' Revolving Loan
Commitments (including without duplication the Swing Line Lender's Swing Line
Commitment), which aggregate commitment shall be $25,000,000 on the Closing
Date, as such amount may be adjusted, if at all, from time to time in accordance
with the Agreement.
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to it
in ANNEX E.
"CONCENTRATION ACCOUNT" shall have the meaning assigned to it
in ANNEX C.
"CONCENTRATION ACCOUNT AGREEMENTS" shall have the meaning
assigned to it in ANNEX C.
"CONCENTRATION ACCOUNT BANK" shall have the meaning assigned
to it in ANNEX C.
"CONTRACTS" shall mean all contracts, undertakings, or
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which such Person may now or hereafter have any right,
title or interest, including any agreement relating to the terms of payment or
the terms of performance of any Account.
"CONTROL LETTER" shall mean a letter agreement between Agent
and (a) the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party,
(b) a securities intermediary with respect to securities, whether
certificated or uncertificated, securities entitlements and other financial
assets held in a securities account in the name of any Credit Party, (c) a
futures commission merchant or clearing house with respect to commodity
accounts and commodity contracts held by any Credit Party, whereby, among
other things, the issuer, securities intermediary or futures commission
merchant, as applicable, disclaims or subordinates any security interest in
the applicable financial assets, acknowledges the Lien of Agent, on behalf of
Agent and Lenders, on such financial assets, and agrees to follow the
instructions or entitlement orders of Agent without further consent by the
affected Credit Party.
"COPYRIGHT LICENSE" shall mean any and all rights now owned or
hereafter acquired by any Person under any written agreement granting any right
to use any Copyright or Copyright registration.
"COPYRIGHTS" shall mean all of the following property now
owned or existing or hereafter adopted or acquired by any Person: (a) all
copyrights and General Intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Copyright Office or in any similar office or agency of the
United States or territory thereof, or any other country or any political
subdivision thereof, and (b) all extensions or renewals thereof.
"CREDIT PARTIES" shall mean each Borrower, each Guarantor, and
each of their respective Subsidiaries.
"CREDIT PARTY PLEDGED ACCOUNT AGREEMENTS" shall have the
meaning assigned to it in ANNEX C.
"DEFAULT" shall mean any event that, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" shall have the meaning assigned to it in
SECTION 1.5(d).
"DISBURSEMENT ACCOUNT" shall have the meaning assigned to it
in ANNEX C.
"DISCLOSURE SCHEDULES" shall mean the Schedules prepared by
Borrowers and denominated as DISCLOSURE SCHEDULES (1.4) through (6.7) in the
Index to the Agreement.
"DOCUMENTS" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any Person, wherever
located.
"DOLLARS" or "$" shall mean lawful currency of the United
States of America.
"DROP SHIPPED INVENTORY" shall mean Inventory of any Borrower
that is received at its store locations at the end of any Fiscal Month and is
not input on such Borrower's perpetual Inventory report for such Fiscal Month.
"EBITDA" shall mean, with respect to any person for any fiscal
period, without duplication, an amount equal to (a) consolidated net income of
such person for such period, MINUS (b) the sum of (i) income tax credits, (ii)
interest income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain (but not any aggregate net loss) during such period arising
from the sale, exchange or other disposition of capital assets by such person
(including any fixed assets, whether tangible or intangible, all inventory sold
in conjunction with the disposition of fixed assets and all securities), and (v)
any other non-cash gains that have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, PLUS (c) the sum of (i) any provision for income taxes, (ii)
Interest Expense, (iii) loss from extraordinary items for such period, (iv) the
amount of non-cash charges (including depreciation and amortization) for such
period, (v) amortized debt discount for such period, and (vi) the amount of any
deduction to consolidated net income as the result of any grant to any members
of the management of such person of any Stock, in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication. For purposes of this
definition, the following items shall be excluded in determining consolidated
net income of a person: (A) the income (or deficit) of any other person accrued
prior to the date it became a Subsidiary of, or was merged or consolidated into,
such Person or any of such Person's Subsidiaries; (B) the income (or deficit) of
any other Person (other than a Subsidiary) in which such person has an ownership
interest, except to the extent any such income has actually been received by
such person in the form of cash dividends or distributions; (C) the
undistributed earnings of any subsidiary of such person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (D) any restoration to income
of any contingency reserve, except to the extent that provision for such reserve
was made out of income accrued during such period; (E) any write-up of any
asset; (F) any net gain from the collection of the proceeds of life insurance
policies; (G) any net gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness, of such person; (H) in the
case of a successor to such Person by consolidation or merger or as a transferee
of its assets, any earnings of such successor prior to such consolidation,
merger or transfer of assets; and (I) any deferred credit representing the
excess of equity in any Subsidiary of such Person at the date of acquisition of
such Subsidiary over the cost of such person of the investment in such
Subsidiary.
"ELIGIBLE ACCOUNTS" shall have the meaning assigned to it in
SECTION 1.6.
"ELIGIBLE INVENTORY" shall have the meaning assigned to it in
SECTION 1.7.
"ENVIRONMENTAL LAWS" shall mean all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards and
regulations, now or hereafter in effect, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability or
standards of conduct for or relating to the regulation and protection of human
health, safety, the environment
and natural resources (including ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 ET
SEQ.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of
1994 (49 U.S.C. Sections 5101 ET SEQ.); the Federal Insecticide, Fungicide,
and Rodenticide Act (7 U.S.C. Sections 136 ET SEQ.); the Solid Waste Disposal
Act (42 U.S.C. Sections 6901 ET SEQ.); the Toxic Substance Control Act (15
U.S.C. Sections 2601 et seq.); the Clean Air Act (42 U.S.C. Sections 7401 ET
SEQ.); the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 ET
SEQ.); the Occupational Safety and Health Act (29 U.S.C. Sections 651 ET
SEQ.); and the Safe Drinking Water Act (42 U.S.C. Sections 300(f) ET SEQ.),
and any and all regulations promulgated thereunder, and all analogous state,
local and foreign counterparts or equivalents and any transfer of ownership
notification or approval statutes.
"ENVIRONMENTAL LIABILITIES" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages, property
damages, natural resource damages, consequential damages, treble damages, costs
and expenses (including all fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
authorizations, certificates, approvals, registrations or other written
documents required by any Governmental Authority under any Environmental Laws.
"EQUIPMENT" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any Person, wherever
located, including all such Person's machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment with software and peripheral equipment, and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures,
together with all additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel therefor, and all
manuals, drawings, instructions, warranties and rights with respect thereto, and
all products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, and any regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean, with respect to any Credit
Party, any trade or business (whether or not incorporated) that, together with
such Credit Party, are treated as a single employer within the meaning of
Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA EVENT" shall mean, with respect to any Credit Party or
any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a "substantial employer," as defined in Section 4001(a)(2)
of ERISA; (c) the complete or partial withdrawal of any Credit Party or any
ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
any Credit Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition that might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status;
or (j) the termination of a Plan described in Section 4064 of ERISA.
"ESOP" shall mean a Plan that is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"EVENT OF DEFAULT" shall have the meaning assigned to it in
SECTION 8.1.
"EXCLUDED RETAIL BLOCKED ACCOUNTS" shall have the meaning
assigned to it in ANNEX C.
"FAIR LABOR STANDARDS ACT" shall mean the provisions of the
Fair Labor Standards Act, 29 U.S.C. Sections 201 ET SEQ.
"FEDERAL FUNDS RATE" shall mean, for any day, a floating rate
equal to the weighted average of the rates on overnight Federal funds
transactions among members of the Federal Reserve System, as determined by Agent
in its sole discretion, which determination shall be final, binding and
conclusive (absent manifest error).
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of
the Federal Reserve System.
"FEES" shall mean any and all fees payable to Agent or any
Lender pursuant to the Agreement or any of the other Loan Documents.
"FINANCIAL COVENANTS" shall have the meaning assigned to it in
SECTION 6.10.
"FINANCIAL STATEMENTS" shall mean the consolidated or
consolidating income statements, statements of cash flows and balance sheets of
Borrowers delivered in accordance with SECTION 3.4 and ANNEX E.
"FISCAL MONTH" shall mean any of the monthly accounting
periods of Borrowers.
"FISCAL QUARTER" shall mean any of the quarterly accounting
periods of Borrowers.
"FISCAL YEAR" shall mean any of the annual accounting periods
of Borrowers ending on the last Saturday of December of each year.
"FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any
Person for any fiscal period, the ratio of (a) (i) EBITDA, PLUS (ii) Occupancy
Expenses paid or accrued by such person during such period, MINUS (iii) Capital
Expenditures paid by such Person during such period (other than Capital
Expenditures financed by a third party lender not a party to the Agreement)
MINUS (iv) income Taxes (including state income Taxes) paid in cash during such
period, TO (b) Fixed Charges.
"FIXED CHARGES" shall mean, with respect to any Person for any
fiscal period, (a) the aggregate of all Interest Expense paid or accrued during
such period, PLUS (b) scheduled payments of principal with respect to
Indebtedness during such period, PLUS (c) all dividends and other distributions
made to Stockholders of such Person during such period, PLUS (d) Occupancy
Expenses paid or accrued by such Person during such period.
"FIXTURES" shall mean all "fixtures," as such term is defined
in the Code, now owned or hereafter acquired by any Person, wherever located.
"FUNDED DEBT" shall mean, with respect to any Person, without
duplication, all Indebtedness of such Person for borrowed money evidenced by
notes, bonds, debentures or similar evidences of Indebtedness that by its terms
matures more than one year from, or is directly or indirectly renewable or
extendible at such Person's option under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than one
year from the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and also
including, in the case of Borrowers, the Obligations.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the Closing Date, consistently
applied as such term is further defined in ANNEX G to the Agreement.
"GE CAPITAL" shall mean General Electric Capital Corporation,
a New York corporation.
"GE CAPITAL FEE LETTER" shall mean that certain letter of even
date herewith between GE Capital and Borrowers with respect to certain Fees to
be paid from time to time by Borrowers to GE Capital.
"GENERAL INTANGIBLES" shall mean all "general intangibles,"
as such term is defined in the Code, now owned or hereafter acquired by any
Person, including all right, title and interest that such Person may now or
hereafter have in or under any Contracts, Licenses, Copyrights, Trademarks
and Patents and all applications therefor and reissues, extensions or
renewals thereof, interests in partnerships, joint ventures and other
business associations, permits, inventions (whether or not patented or
patentable), knowledge, know-how, software, data bases, data, skill,
expertise, experience, processes, models, drawings, materials and records,
Goodwill (including the goodwill associated with any Trademark or Trademark
License), all rights and claims in or under insurance policies (including
insurance for fire, damage, loss and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key man and business interruption insurance, and all unearned
premiums), uncertificated and certificated securities, choses in action,
deposit, checking and other bank accounts, rights to receive tax refunds and
other payments, rights to receive dividends, distributions, cash, instruments
and other property in respect of or in exchange for pledged shares or other
equity interests, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including all tapes,
cards, computer runs and other papers and documents in the possession or
under the control of such Person or any computer bureau or service company
from time to time acting for such Person.
"GENERAL LEDGER VARIANCE RESERVE" shall mean, with respect to
the determination of certain components of the Borrowing Base with respect to
each Borrower, a reserve determined from time to time by Agent, which reserve is
based, in part, on the historic, unreconciled variance between Inventory levels
shown in such Borrower's general ledger and perpetual inventory report.
"GOODS" shall mean any "goods" as such term is defined in the
Code, now owned or hereafter acquired by any Person.
"GOODWILL" shall mean all goodwill, trade secrets, proprietary
or confidential information, technical information, procedures, formulae,
quality control standards, designs, operating and training manuals, customer
lists and distribution agreements now or hereafter owned or acquired by any
Person.
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇" shall have the meaning assigned to it in
SECTION 3.25.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("PRIMARY OBLIGATION") of any other Person (the "PRIMARY
OBLIGOR") in any manner, including any obligation or arrangement of such Person
to (a) purchase or repurchase any such primary obligation, (b) advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) indemnify
the owner of such primary obligation against loss in respect thereof. The amount
of any Guaranteed Indebtedness at any time shall be deemed to be an amount equal
to the lesser at such time of (x) the stated or determinable amount of the
primary obligation in respect of which such Guaranteed Indebtedness is incurred
and (y) the maximum amount for which such Person may be liable pursuant to the
terms of the instrument embodying such Guaranteed Indebtedness or, if not stated
or determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
"GUARANTIES" shall mean, collectively, the Guaranty and any
other guaranty executed by any Guarantor in favor of Agent, for the benefit of
Agent and Lenders, in respect of the Obligations.
"GUARANTORS" shall mean Holdings, NEN, and each other Person,
if any, that executes a guaranty or other similar agreement in favor of Agent
for itself and the benefit of Lenders in connection with the transactions
contemplated by the Agreement and the other Loan Documents.
"GUARANTY" shall mean the Continuing Guaranty of even date
herewith executed by each of Holdings and NEN in favor of Agent, on behalf of
itself and Lenders, as the same may be amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms thereof.
"HAZARDOUS MATERIAL" shall mean any substance, material or
waste that is regulated by, or forms the basis of liability now or hereafter
under, any Environmental Laws, including any material or substance that is (a)
defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, or (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
"HOLDINGS" shall have the meaning ascribed thereto in the
recitals to the Agreement.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for that is deferred six months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six months unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations, (f) all
obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all obligations of such Person under any foreign exchange contract,
currency swap agreement, interest rate swap, cap or collar agreement or other
similar agreement or arrangement designed to alter the risks of that Person
arising from fluctuations in currency values or interest rates, in each case
whether contingent or matured, (h) all Indebtedness referred to above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.
"INDEMNIFIED LIABILITIES" shall have the meaning assigned to
it in SECTION 1.13.
"INDEX RATE" shall mean, for any day, a floating rate equal to
the higher of (a) the rate publicly quoted from time to time by THE WALL STREET
JOURNAL as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate
of the type described, the highest PER ANNUM rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(b) the Federal Funds Rate PLUS 50 basis points PER ANNUM. Each change in any
interest rate provided for in the Agreement based upon the Index Rate shall take
effect at the time of such change in the Index Rate.
"INDEX RATE LOAN" shall mean a Loan or any portion thereof
bearing interest by reference to the Index Rate.
"INSTRUMENTS" shall mean any "instrument," as such term is
defined in the Code, now owned or hereafter acquired by any Person, wherever
located, including all certificated securities, all certificates of deposit, and
all notes and other evidences of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" shall mean any and all Licenses,
Patents, Copyrights, Trademarks and the Goodwill associated with the foregoing.
"INTELLECTUAL PROPERTY COLLATERAL" shall mean all of the
right, title and interest of any Credit Party, whether presently existing or
hereafter arising or acquired, in, to and under the
following:
(a) each Patent owned and Patent application filed by such
Person;
(b) each Patent License to which such Person is a party (or
the assignee of a party);
(c) each Trademark owned and Trademark application filed by
such Person;
(d) each Trademark License to which such Person is a party (or
the assignee of a party);
(e) each Copyright owned and Copyright application filed by
such Person;
(f) each Copyright License to which such Person is a party;
(g) the Goodwill associated with each Trademark and Trademark
application, and each of such Person's Trademarks licensed under any Trademark
License; and
(h) all Proceeds of the foregoing, including (i) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to any
Person from time to time with respect to any of the foregoing, (ii) any and
all payments (in any form whatsoever) made or due and payable to any Person
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the foregoing by
any Governmental Authority (or any Person acting under color of Governmental
Authority), (iii) any claim of any Person against third parties for (A) past,
present or future infringement of any Patent or Patent License, (B) past,
present or future infringement of any Copyright, Copyright License, (C) past,
present or future infringement or dilution of any Trademark or Trademark
License, or (D) injury to the Goodwill associated with any Trademark or
Trademark License, (iv) any recoveries by any Person against third parties
with respect to any litigation or dispute concerning any of the foregoing,
and (v) any and all other amounts from time to time paid or payable under or
in connection with any of the foregoing, upon disposition or otherwise.
"INTERCOMPANY NOTES" shall have the meaning assigned to it in
SECTION 6.3.
"INTEREST EXPENSE" shall mean, with respect to any Person for
any fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including interest expense with respect to any Funded Debt of such Person.
"INTEREST PAYMENT DATE" shall mean (a) as to any Index Rate
Loan, the first Business Day of each month to occur while such Loan is
outstanding, and (b) as to any LIBOR Loan, the last day of the applicable LIBOR
Period; PROVIDED, that, in addition to the foregoing, each of (x) the date upon
which all of the Commitments have been terminated and the Loans have been paid
in full and (y) the Commitment Termination Date shall be deemed to be an
"Interest Payment Date" with respect to any interest that has then accrued under
the Agreement.
"INVENTORY" shall mean any "inventory," as such term is
defined in the Code, now owned or hereafter acquired by any Person, wherever
located, including inventory, merchandise, goods and other personal property
that are held by or on behalf of such Person for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Person's business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including other supplies.
"INVESTMENT PROPERTY" shall mean all "investment property," as
such term is defined in Section 9115 of the Code in those jurisdictions in which
such definition has been adopted, now owned or hereafter acquired by any Person,
wherever located, including (a) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares, (b) all securities entitlements of such Person, including
the rights of such Person to any securities account and the financial assets
held by a securities intermediary in such securities account and any free credit
balance or other money owing by any securities intermediary with respect to such
account, (c) all securities accounts of such Person, (d) all commodity contracts
held by such Person, and (e) all commodity accounts held by such Person.
"IRC" shall mean the Internal Revenue Code of 1986 and any
regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"L/C ISSUER" shall have the meaning assigned to it in ANNEX B.
"L/C SUBLIMIT" shall have the meaning assigned to it in ANNEX
B.
"LENDERS" shall mean GE Capital, the other Lenders named on
the signature pages of the Agreement and, if any such Lender shall decide to
assign all or any portion of the Obligations, such term shall include any
assignee of such Lender.
"LETTER OF CREDIT FEE" shall have the meaning assigned to it
in ANNEX B.
"LETTER OF CREDIT OBLIGATIONS" shall mean all outstanding
obligations incurred by Agent and Lenders at the request of Borrower
Representative, whether direct or indirect, contingent or otherwise, due or not
due, in connection with the issuance of a reimbursement agreement or guaranty by
Agent with respect to any Letter of Credit. The amount of such Letter of Credit
Obligations shall equal the maximum amount that may be payable by Agent or
Lenders thereupon or pursuant thereto.
"LETTERS OF CREDIT" shall mean commercial or standby letters
of credit issued for the account of any Borrower by any L/C Issuer, and bankers'
acceptances issued by any Borrower, for which Agent and Lenders have incurred
Letter of Credit Obligations.
"LIBOR BUSINESS DAY" shall mean a Business Day on which banks
in the City of London are generally open for interbank or foreign exchange
transactions.
"LIBOR LOAN" shall mean a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.
"LIBOR PERIOD" shall mean, with respect to any LIBOR Loan,
each period commencing on a LIBOR Business Day selected by Borrower
Representative pursuant to the Agreement and ending one, two or three months
thereafter, as selected by Borrower Representative's irrevocable notice to Agent
as set forth in SECTION 1.5(e); PROVIDED, that the foregoing provision relating
to LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is
not a LIBOR Business Day, such LIBOR Period shall be extended to the
next succeeding LIBOR Business Day unless the result of such extension
would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding
LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two LIBOR Business Days prior to
such date;
(c) any LIBOR Period that begins on the last LIBOR Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower Representative shall select LIBOR Periods so as
not to require a payment or prepayment of any LIBOR Loan during a LIBOR
Period for such Loan; and
(e) Borrower Representative shall select LIBOR Periods so that
there shall be no more than five separate LIBOR Loans in existence at
any one time.
"LIBOR RATE" shall mean for each LIBOR Period, a rate of
interest determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for
the applicable LIBOR Period that appears on Telerate Page 3750 as of
11:00 a.m. (London time) on the second full LIBOR Business Day
preceding the first day of such LIBOR Period; DIVIDED BY
(b) a number equal to 1.0 MINUS the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two LIBOR Business Days prior
to the beginning of such LIBOR Period (including basic, supplemental,
marginal and emergency reserves under any regulations of the Federal
Reserve Board or other Governmental Authority having jurisdiction with
respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Federal Reserve Board) that are
required to be maintained by a member bank of the Federal Reserve
System.
If such interest rates shall cease to be available from
Telerate News Service, the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be mutually
acceptable to Agent and Borrower Representative.
"LICENSE" shall mean any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Person.
"LIEN" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"LITIGATION" shall have the meaning assigned to it in
SECTION 3.13.
"LOAN ACCOUNT" shall have the meaning assigned to it in
SECTION 1.12.
"LOAN DOCUMENTS" shall mean the Agreement, the Notes, the
Collateral Documents and all other agreements, instruments, documents and
certificates identified in the Schedule of Documents executed and delivered to,
or in favor of, Agent or any Lender and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of any
Credit Party, or any employee of any Credit Party, and delivered to Agent or any
Lender in connection with the Agreement or the transactions contemplated
thereby. Any reference in the Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to such Agreement or Loan Document as the same may be in effect at any and
all times such reference becomes operative.
"LOANS" shall mean the Revolving Loan and the Swing Line Loan.
"LOCK BOXES" shall have the meaning assigned to it in ANNEX C.
"MARGIN STOCK" shall have the meaning assigned to it in
SECTION 3.10.
"MASTER DISTRIBUTION ACCOUNT" shall have the meaning
assigned to it in ANNEX C.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (a) the business, assets, operations, prospects or financial or other
condition of any Borrower, (b) any Borrower's ability to pay any of the Loans or
any of the other Obligations in accordance with the terms of the Agreement, (c)
the ability of Holdings, individually, and the Guarantors, taken as a whole, to
pay their respective obligations under the Guaranties, (d) the Collateral or
Agent's Liens, for the benefit of Agent and Lenders, on the Collateral or the
priority of such Liens, or (e) Agent's or any Lender's rights and remedies under
the Agreement and the other Loan Documents. Without limiting the generality of
the foregoing, any event or occurrence that results or could reasonably be
expected to result in costs or liabilities in excess of the lesser of $1,000,000
and 10% of Borrowing Availability as of any date of determination shall be
deemed to constitute a Material Adverse Effect.
"MAXIMUM AMOUNT" shall mean, at the time any determination
thereof is to be made, the amount at such time equal to the Revolving Loan
Commitment of all Lenders.
"MAXIMUM LAWFUL RATE" shall have the meaning assigned to it in
SECTION 1.5(f).
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA
Affiliate is making, is obligated to make, or has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"NEN" shall mean ▇▇▇▇▇'▇ Eagles Nest, Inc., a Colorado
corporation.
"NET BORROWING AVAILABILITY" shall mean as of any date of
determination (a) as to all Borrowers, the lesser of (i) the Maximum Amount and
(ii) the Aggregate Borrowing Base, in each case less the sum of the aggregate
Revolving Loan and Swing Line Loan then outstanding, or (b) as to an individual
Borrower, the lesser of (i) the Maximum Amount less the sum of the Revolving
Loan and Swing Line Loan outstanding to all Borrowers and (ii) such Borrower's
separate Borrowing Base, less the sum of the Revolving Loan and Swing Line Loan
outstanding to such Borrower.
"NET BORROWING AVAILABILITY RATIO" shall mean, with respect to
Borrowers for any Fiscal Quarter, (a) the average Net Borrowing Availability
during such Fiscal Quarter, DIVIDED BY (b) the Maximum Amount.
"NOTES" shall mean, collectively, the Revolving Notes and the
Swing Line Notes.
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning
assigned to it in SECTION 1.5(e).
"NOTICE OF REVOLVING CREDIT ADVANCE" shall have the meaning
assigned to it in SECTION 1.1(a).
"OBLIGATIONS" shall mean all loans, advances, debts,
liabilities and obligations for the performance of covenants, tasks or duties or
for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing by
any Credit Party to Agent or any Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement or other instrument, arising under the Agreement or any
of the other Loan Documents. This term includes all principal, interest
(including all interest that accrues after the commencement of any case or
proceeding by or against any Credit Party in bankruptcy, whether or not allowed
in such case or proceeding), Fees, Charges, expenses, attorneys' fees and any
other sum chargeable to any Credit Party under the Agreement or any of the other
Loan Documents.
"OCCUPANCY EXPENSES" shall mean, with respect to any Person,
all regularly scheduled amounts payable by such Person, as tenant or subtenant,
in connection with its leases of real property, including base rent, rental
overrides or increases, and all pass-through or "net" charges, expenses, and
costs incurred or assessed by the lessor in connection with such Person's
occupancy of such real property, including real and personal property taxes,
insurance costs, and maintenance costs.
"OMC" means Overland Management Corporation, a Massachusetts
corporation.
"OMC BORROWING BASE" shall mean, as of any date of
determination by Agent, from time to time, an amount equal to the sum at such
time of:
(a) up to 85% of OMC's Eligible Accounts, less any
Reserves established by Agent at such time; and
(b) up to (i) 90%, for the period from the Closing
Date through the date that is 90 days after the Closing Date,
and (ii) 85%, at all other times, of the sum of (A) the
orderly liquidation value of OMC's Eligible Inventory as
determined by Agent based on a written appraisal in form and
substance satisfactory to Agent and any other information
available to Agent that it deems appropriate, PLUS, without
duplication of the amount in CLAUSE (A) above, (B) the lesser
of (I) the value of OMC's Drop Shipped Inventory, which value
shall be determined by Agent in its reasonable credit
judgment, and (II) (x) $1,000,000 for the period from the
Closing Date through December 31, 2000, or (y) $500,000 on
January 1, 2001, and at all times thereafter, MINUS, in the
case of each of CLAUSES (X) and (Y), the value of TNT's Drop
Shipped Inventory, which value shall be determined by Agent in
its reasonable credit judgment, MINUS (C) the sum of (I) the
estimated liquidation expenses and other costs that
Administrative Agent would incur in connection with a
liquidation of such Eligible Inventory, PLUS (II) the General
Ledger Variance Reserve, PLUS (III) the Shrinkage and
Obsolescence Reserve, PLUS (IV) any other Reserves established
by Agent at such time.
"OVERADVANCE" shall have the meaning assigned to it in SECTION
1.1(a)(III).
"PATENT, TRADEMARK AND COPYRIGHT SECURITY AGREEMENT" shall
mean the Patent, Trademark and Copyright Security Agreement of even date
herewith executed by each of TNT, OMC, Holdings and NEN in favor of Agent, for
the benefit of Agent and Lenders, by each applicable Credit Party, as the same
may be amended, supplemented, restated or otherwise modified from time to time
in accordance with the terms thereof.
"PATENT LICENSE" shall mean rights under any written agreement
now owned or hereafter acquired by any Person granting any right with respect to
any invention on which a Patent is in existence.
"PATENTS" shall mean all of the following property in which
any Person now holds or hereafter acquires any interest: (a) all letters patent
of the United States or of any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or of any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States or any territory thereof, or any other country, and (b) all
reissues, continuations, continuations-in-part, divisions, or extensions
thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean a Plan described in Section 3(2) of
ERISA.
"PERMITTED ENCUMBRANCES" shall mean the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable; (b) pledges or deposits of money securing obligations
under workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA); (c) pledges
or deposits of money securing bids, tenders, contracts (other than contracts for
the payment of money) or leases to which any Credit Party is a party as lessee
made in the ordinary course of business; (d) deposits of money securing
statutory obligations of any Credit Party; (e) inchoate and unperfected
workers', mechanics' or similar liens arising in the ordinary course of
business, so long as such Liens attach only to Equipment, Fixtures or Real
Estate; (f) carriers', warehousemen's, suppliers' or other similar possessory
liens arising in the ordinary course of business and securing liabilities in an
outstanding aggregate amount not in excess of $50,000 at any time, so long as
such Liens attach only to Inventory; (g) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Credit Party is a
party; (h) any attachment or judgment lien not constituting an Event of Default
under SECTION 8.1(j), so long as such Lien only attaches to Real Estate; (i)
zoning restrictions, easements, licenses, or other restrictions on the use of
any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (j) Liens existing on the Closing Date and
listed in DISCLOSURE SCHEDULE (6.7); (k) presently existing or hereafter created
Liens in favor of Agent, on behalf of Lenders; (l) Liens created after the
Closing Date by conditional sale or other title retention
agreements (including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures acquired by any Credit
Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations
of not more than $250,000 outstanding at any one time for all such Liens
(provided that such Liens attach only to the assets subject to such purchase
money debt and such Indebtedness is incurred within 20 days following such
purchase and does not exceed 100% of the purchase price of the subject
assets); and (m) other Liens securing Indebtedness not exceeding $100,000 in
the aggregate at any time outstanding, so long as such Liens do not attach to
any Accounts or Inventory.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
"PLAN" shall mean, at any time, an "employee benefit plan," as
defined in Section 3(3) of ERISA, that any Credit Party or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to, or has
maintained, contributed to or had an obligation to contribute to at any time
within the last seven years, on behalf of participants who are or were employed
by any Credit Party or any ERISA Affiliate.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement of even
date herewith executed by each of TNT, OMC, Holdings and NEN in favor of Agent,
on behalf of itself and Lenders, pledging all Stock of its respective
Subsidiaries, if any, and all Intercompany Notes owing to or held by it, as the
same may be amended, supplemented, restated or otherwise modified from time to
time in accordance with the terms thereof.
"PLEDGE AGREEMENTS" shall mean, collectively, the Pledge
Agreement and any pledge agreements entered into after the Closing Date by any
Credit Party (as required by the Agreement or any other Loan Document).
"PLEDGED ACCOUNT AGREEMENTS" shall have the meaning assigned
to it in ANNEX C.
"PRIOR LENDER" shall mean Union Bank of California, N.A.
"PRIOR LENDER AGREEMENT" shall mean that certain Loan
Agreement dated as of October 4, 1999, by and among TNT, OMC and NEN, as
borrowers, and Prior Lender, as the same may have been amended, restated,
supplemented or otherwise modified from time to time.
"PRIOR LENDER OBLIGATIONS" shall mean all obligations of
Borrower to Prior Lender pursuant to the Prior Lender Agreement, and all other
agreements, instruments or documents executed and delivered to, or in favor of,
Prior Lender in connection therewith or the transactions contemplated thereby.
"PROCEEDS" shall mean "proceeds," as such term is defined in
the Code, including (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Person from time to time with respect to any
of the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Person from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under color of
governmental authority), (c) any claim of any Person against third parties (i)
for past, present or future infringement of any Patent or Patent License, or
(ii) for past, present or future infringement or dilution of any Copyright,
Copyright License, Trademark or Trademark License, or for injury to the Goodwill
associated with any Trademark or Trademark License, (d) any recoveries by any
Person against third parties with respect to any litigation or dispute
concerning any of the Collateral, and (e) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral, upon
disposition or otherwise.
"PROJECTIONS" shall mean Holding's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a
Subsidiary-by-Subsidiary or division-by-division basis, if applicable, and
otherwise consistent with the historical Financial Statements of Holdings,
together with appropriate supporting details and a statement of underlying
assumptions.
"PRO RATA SHARE" shall mean, with respect to all matters
relating to any Lender, the percentage obtained by dividing (a) the Revolving
Loan Commitment (including the Swing Line Commitment as a subset of the Swing
Line Lender's Revolving Loan Commitment) of such Lender by (b) the aggregate
Revolving Loan Commitments of all Lenders, including the Swing Line Commitment
of all Lenders, as any such percentages may be adjusted by assignments permitted
pursuant to SECTION 9.1.
"QUALIFIED PLAN" shall mean a Pension Plan that is intended to
be tax-qualified under Section 401(a) of the IRC.
"QUALIFIED PUBLIC OFFERING" shall mean a firm underwritten
public offering of common stock registered on form ▇-▇, ▇-▇ or S-3 under the
Securities Act by a nationally recognized investment banking firm, resulting in
net proceeds to the issuer of at least $10,000,000, and after giving effect to
which the issuer shall be qualified for listing on the NASDAQ National Market,
the American Stock Exchange or the New York Stock Exchange.
"REAL ESTATE" shall have the meaning assigned to it in SECTION
3.6.
"REFINANCING" shall mean the repayment in full by Borrowers of
the Prior Lender Obligations on the Closing Date.
"REFUNDED SWING LINE LOAN" shall have the meaning assigned to
it in SECTION 1.1(b)(III).
"RELATED TRANSACTIONS" shall mean the initial borrowing under
the Revolving Loan on the Closing Date, the Refinancing, the payment of all
fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transactions Documents.
"RELATED TRANSACTIONS DOCUMENTS" shall mean the Loan Documents
and all other documents executed in connection with the Related Transactions.
"RELEASE" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.
"REQUISITE REVOLVING LENDERS" shall mean Lenders having (a)
more than sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan
Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been
terminated, more than sixty-six and two-thirds percent (66 2/3%) of the
aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan
being attributed to the Lender making such Loan) and Letter of Credit
Obligations.
"RESERVES" shall mean, with respect to the Borrowing Base of
any Borrower, (a) the Shrinkage and Obsolescence Reserve, the General Ledger
Variance Reserve and other reserves established by Agent from time to time
against Eligible Inventory pursuant to SECTION 5.9, (b) reserves established
pursuant to SECTION 5.4(c), and (c) such other reserves against Eligible
Accounts or Eligible Inventory of any Borrower that Agent may, in its reasonable
credit judgment, establish from time to time. Without limiting the generality of
the foregoing, Reserves established to ensure the payment of accrued Interest
Expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent's
credit judgment.
"RESTRICTED PAYMENT" shall mean, with respect to any Person:
(a) the declaration or payment of any dividend or the incurrence of any
liability to make any other payment or distribution of cash or other property or
assets in respect of such Person's Stock; (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of such
Person's Stock or any other payment or distribution made in respect thereof,
either directly or indirectly; (c) any payment or prepayment of principal of,
premium, if any, or interest, fees or other charges on or with respect to, and
any redemption, purchase, retirement, defeasance, sinking fund or similar
payment and any claim for rescission with respect to, any Subordinated Debt of
such Person; (d) any payment made to redeem, purchase, repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire Stock of such Person now or hereafter outstanding; (e) any payment of a
claim for the rescission of the purchase or sale of, or for material damages
arising from the purchase or sale of, any shares of such Person's Stock or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder of
such Person; and (g) any payment of management fees (or other fees of a similar
nature) by such Person to any Stockholder of such Person or its Affiliates.
"RETAIL BLOCKED ACCOUNT AGREEMENTS" shall have the meaning
assigned to it in ANNEX C.
"RETAIL BLOCKED ACCOUNTS" shall have the meaning assigned to
it in ANNEX C.
"RETIREE WELFARE PLAN" shall mean, at any time, a Welfare Plan
that provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"REVOLVING CREDIT ADVANCE" shall have the meaning assigned to
it in SECTION 1.1(a)(i).
"REVOLVING LENDERS" shall mean, as of any date of
determination, Lenders having a Revolving Loan Commitment.
"REVOLVING LOAN" shall mean as the context may require, at any
time, (a) the aggregate amount of Revolving Credit Advances outstanding to any
Borrower or to all Borrowers PLUS (b) the aggregate Letter of Credit Obligations
incurred on behalf of any Borrower or all Borrowers.
"REVOLVING LOAN COMMITMENT" shall mean (a) as to any Lender,
the aggregate commitment of such Lender to make Revolving Credit Advances
(including without duplication Swing Line Advances) or incur Letter of Credit
Obligations as set forth in the signature page to the Agreement or in the most
recent Assignment Agreement executed by such Lender and (b) as to all Lenders,
the aggregate commitment of all Lenders to make Revolving Credit Advances
(including without duplication Swing Line Advances) or incur Letter of Credit
Obligations, which aggregate commitment shall be $25,000,000 on the Closing
Date, as such amount may be adjusted, if at all, from time to time in
accordance with the Agreement.
"REVOLVING NOTE" shall have the meaning assigned to it in
SECTION 1.1(a)(ii).
"SCHEDULE OF DOCUMENTS" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as ANNEX D.
"SECURITIES ACT" shall mean the provisions of the Securities
Act of 1933, 15 U.S.C. Sections 77a ET SEQ.
"SECURITIES EXCHANGE ACT" shall mean the provisions of the
Securities Exchange Act of 1934, 15 U.S.C. Sections 78a ET SEQ.
"SECURITY AGREEMENT" shall mean the Security Agreement of even
date herewith entered into by and among Agent, on behalf of itself and Lenders,
and each Credit Party signatory thereto.
"SHRINKAGE AND OBSOLESCENCE RESERVE" shall mean a reserve for
Inventory shrinkage and obsolescence determined by Agent based, in part, on the
book-to-physical Inventory reports to be provided by Borrowers to Agent pursuant
to ANNEX F.
"SOLVENT" shall mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person; (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities (such as litigation, guaranties and pension
plan liabilities) at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at the time, represents the amount that
can be reasonably be expected to become an actual or matured liability.
"STOCK" shall mean all shares, options, warrants, general or
limited partnership interests, membership interests, investments in joint
ventures or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including common stock, preferred stock or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act).
"STOCKHOLDER" shall mean, with respect to any Person, each
holder of Stock of such Person.
"SUBORDINATED DEBT" shall mean any Indebtedness of any Credit
Party subordinated to the Obligations in a manner and form satisfactory to Agent
and Lenders in their sole discretion, as to right and time of payment and as to
any other rights and remedies thereunder.
"SUBSIDIARY" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person or one or more Subsidiaries of such Person shall
have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general
partner or may exercise the powers of a general partner.
"SUPERMAJORITY REVOLVING LENDERS" shall mean Lenders having
(a) 80% or more of the Revolving Loan Commitments of all Lenders, or (b) if the
Revolving Loan Commitments have been terminated, 80% or more of the aggregate
outstanding amount of the Revolving Loan (with the Swing Line Loan being
attributed to the Lender making such Loan) and Letter of Credit Obligations.
"SWING LINE ADVANCE" shall have the meaning assigned to it in
SECTION 1.1(b)(i).
"SWING LINE AVAILABILITY" shall have the meaning assigned to
it in SECTION 1.1(b)(i).
"SWING LINE COMMITMENT" shall mean, as to the Swing Line
Lender, the commitment of the Swing Line Lender to make Swing Line Advances as
set forth on the signature page to the Agreement, which commitment constitutes a
subfacility of the Revolving Loan Commitment of the Swing Line Lender.
"SWING LINE LENDER" shall mean GE Capital.
"SWING LINE LOAN" shall mean, as the context may require, at
any time, the aggregate amount of Swing Line Advances outstanding to any
Borrower or to all Borrowers.
"SWING LINE LOAN PARTICIPATION CERTIFICATE" shall mean a
certificate delivered pursuant to SECTION 1.1(b)(iv).
"SWING LINE NOTE" shall have the meaning assigned to it in
SECTION 1.1(c)(ii).
"TAXES" shall mean taxes, levies, imposts, deductions, Charges
or withholdings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income of Agent or a Lender by the
jurisdictions under the laws of which Agent and Lenders are organized or by any
political subdivision thereof.
"TERMINATION DATE" shall mean the date on which (a) the Loans
have been indefeasibly repaid in full, (b) all other Obligations under the
Agreement and the other Loan Documents have been completely discharged, (c)
Letter of Credit Obligations have been terminated, replaced, guaranteed or cash
collateralized in accordance with ANNEX B, and (d) none of Borrowers shall have
any further right to borrow any monies under the Agreement.
"THIRD PARTY INTERACTIVES" shall mean all Persons with whom
any Credit Party exchanges data electronically in the ordinary course of
business, including customers, suppliers, third-party vendors, subcontractors,
processors-converters, shippers and warehousemen.
"TITLE IV PLAN" shall mean a Pension Plan (other than a
Multiemployer Plan) that is covered by Title IV of ERISA and that any Credit
Party or ERISA Affiliate maintains, contributes to or has an obligation to
contribute to, or has maintained, contributed to or had an obligation to
contribute to at any time within the last seven years, on behalf of participants
who are or were employed by any of them.
"TNT" means Track 'n Trail, a California corporation.
"TNT BORROWING BASE" shall mean, as of any date of
determination by Agent, from time to time, an amount equal to the sum at such
time of:
(a) up to 85% of TNT's Eligible Accounts, less any Reserves
established by Agent at such time; and
(b) up to (i) 90%, for the period from the Closing Date
through the date that is 90 days after the Closing Date, and (ii) 85%,
at all other times, of the sum of (A) the orderly liquidation value of
TNT's Eligible Inventory as determined by Agent based on a written
appraisal in form and substance satisfactory to Agent and any other
information available to Agent that it deems appropriate, PLUS, without
duplication of the amount in CLAUSE (A), above, (B) the lesser of (I)
the value of TNT's Drop Shipped Inventory, which value shall be
determined by Agent in its reasonable credit judgment, and (II) (x)
$1,000,000 for the period from the Closing Date through December 31,
2000, or (y) $500,000 on January 1, 2001, and at all times thereafter,
MINUS, in the case of each of CLAUSES (x) and (y), the value of OMC's
Drop Shipped Inventory, which value shall be determined by Agent in its
reasonable credit judgment, MINUS (C) the sum of (I) the estimated
liquidation expenses and other costs that Administrative Agent would
incur in connection with a liquidation of such Eligible Inventory, PLUS
(II) the General Ledger Variance Reserve, PLUS (III) the Shrinkage and
Obsolescence Reserve, PLUS (IV) any other Reserves established by Agent
at such time.
"TRADEMARK LICENSE" shall mean rights under any written
agreement now owned or hereafter acquired by any Person granting any right to
use any Trademark.
"TRADEMARKS" shall mean all of the following property now
owned or existing or hereafter adopted or acquired by any Person: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b) all extensions or renewals thereof; and (c) all goodwill associated
with or symbolized by any of the foregoing.
"UNFUNDED PENSION LIABILITY" shall mean, at any time, the
aggregate amount, if any, of the sum of (a) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of
five years following a transaction that might reasonably be expected to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.
"WELFARE PLAN" shall mean a Plan described in Section 3(1) of
ERISA.
"YEAR 2000 ASSESSMENT" shall mean a comprehensive written
assessment of the nature and extent of each Credit Party's Year 2000 Problems
and Year 2000 Date-Sensitive Systems/Components, including Year 2000 Problems
regarding data exchanges with Third Party Interactives.
"YEAR 2000 CORRECTIVE ACTIONS" shall mean, as to each Credit
Party, all actions necessary to eliminate such Person's Year 2000 Problems,
including computer code enhancements and revisions, upgrades and replacements of
Year 2000 Date-Sensitive Systems/Components, and coordination of such
enhancements, revisions, upgrades and replacements with Third Party
Interactives.
"YEAR 2000 CORRECTIVE PLAN" shall mean, with respect to each
Credit Party, a comprehensive plan to eliminate all of its Year 2000 Problems on
or before December 31, 1999, including (a) computer code enhancements or
revisions, (b) upgrades or replacements of Year 2000 Date-Sensitive
Systems/Components, (c) test and validation procedures, (d) an implementation
time line and budget, and (e) designation of specific employees who will be
responsible for planning, coordinating and implementing each phase or subpart of
the Year 2000 Corrective Plan.
"YEAR 2000 DATE-SENSITIVE SYSTEM/COMPONENT" shall mean, as to
any Person, any system software, network software, applications software, data
base, computer file, embedded microchip, firmware or hardware that accepts,
creates, manipulates, sorts, sequences, calculates, compares or outputs
calendar-related data accurately; such systems and components shall include
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"YEAR 2000 IMPLEMENTATION TESTING" shall mean, as to each
Credit Party, (a) the performance of test and validation procedures regarding
Year 2000 Corrective Actions on a unit basis and on a systemwide basis, (b) the
performance of test and validation procedures regarding data exchanges among the
Credit Parties' Year 2000 Date-Sensitive Systems/Components and data exchanges
with Third Party Interactives, and (c) the design and implementation of
additional
Year 2000 Corrective Actions, the need for which has been demonstrated by test
and validation procedures.
"YEAR 2000 PROBLEMS" shall mean, with respect to each
Credit Party, limitations on the capacity or readiness of any such Credit
Party's Year 2000 Date-Sensitive Systems/Components to accurately accept,
create, manipulate, sort, sequence, calculate, compare or output calendar
date information with respect to calendar year 1999 or any subsequent
calendar year beginning on or after January 1, 2000 (including leap year
computations), including exchanges of information among Year 2000
Date-Sensitive Systems/Components of the Credit Parties and exchanges of
information among the Credit Parties and Year 2000 Date-Sensitive
Systems/Components of Third Party Interactives and functionality of
peripheral interfaces, firmware and embedded microchips.
Rules of construction with respect to accounting terms used in
the Agreement or any of the other Loan Documents shall be as set forth in ANNEX
G. All other undefined terms contained in any of the Loan Documents shall,
unless the context indicates otherwise, have the meanings provided for by the
Code as in effect in the State of California to the extent the same are used or
defined therein. Unless otherwise specified, references in the Agreement or any
of the Appendices to a section, subsection or clause refer to such section,
subsection or clause as contained in the Agreement. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole, including all Annexes, Exhibits and Schedules, as the same may from time
to time be amended, restated, modified or supplemented, and not to any
particular section, subsection or clause contained in the Agreement or any such
Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders. The words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; the word "or" is not exclusive; references to Persons include their
respective successors and assigns (to the extent and only to the extent
permitted by the Loan Documents) or, in the case of governmental Persons,
Persons succeeding to the relevant functions of such Persons; and all references
to statutes and related regulations shall include any amendments of the same and
any successor statutes and regulations. Whenever any provision in any Loan
Document refers to the knowledge (or an analogous phrase) of any Credit Party,
such words are intended to signify that such Credit Party has actual knowledge
or awareness of a particular fact or circumstance or that such Credit Party, if
it had exercised reasonable diligence, would have known or been aware of such
fact or circumstance.
ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) ISSUANCE. Subject to the terms and conditions of the
Agreement, Agent and Revolving Lenders agree to incur, from time to time prior
to the Commitment Termination Date, upon the request of Borrower Representative
on behalf of the applicable Borrower and for such Borrower's account, Letter of
Credit Obligations by causing Letters of Credit to be issued (by a bank or other
legally authorized Person selected by or acceptable to Agent in its sole
discretion (each, an "L/C ISSUER")) for such Borrower's account and guaranteed
by Agent; PROVIDED, that if the L/C Issuer is a Revolving Lender, then such
Letters of Credit shall not be guaranteed by Agent but rather each Revolving
Lender shall, subject to the terms and conditions hereinafter set forth,
purchase (or be deemed to have purchased) risk participations in all such
Letters of Credit issued with the written consent of Agent, as more fully
described in PARAGRAPH (b)(ii) below. The aggregate amount of all such Letter of
Credit Obligations shall not at any time exceed the least of (i) One Million
Dollars ($1,000,000) (the "L/C SUBLIMIT"), (ii) the Maximum Amount less the
aggregate outstanding principal balance of the Revolving Credit Advances and the
Swing Line Loan, and (iii) the Aggregate Borrowing Base LESS the aggregate
outstanding principal balance of the Revolving Credit Advances and the Swing
Line Loan. Furthermore, the aggregate amount of any Letter of Credit Obligations
incurred on behalf of any Borrower shall not at any time exceed such Borrower's
separate Borrowing Base less the aggregate principal balance of the Revolving
Credit Advances and the Swing Line Loan to such Borrower. No such Letter of
Credit shall have an expiry date that is more than one year following the date
of issuance thereof, and neither Agent nor Revolving Lenders shall be under any
obligation to incur Letter of Credit Obligations in respect of, or purchase risk
participations in, any Letter of Credit having an expiry date that is later than
the Commitment Termination Date.
(b) ADVANCES AUTOMATIC; PARTICIPATIONS.
(i) In the event that Agent or any Revolving Lender
shall make any payment on or pursuant to any Letter of Credit Obligation, such
payment shall then be deemed automatically to constitute a Revolving Credit
Advance to the applicable Borrower under SECTION 1.1(a) of the Agreement
regardless of whether a Default or Event of Default shall have occurred and be
continuing and notwithstanding any Borrower's failure to satisfy the conditions
precedent set forth in SECTION 2, and each Revolving Lender shall be obligated
to pay its Pro Rata Share thereof in accordance with the Agreement. The failure
of any Revolving Lender to make available to Agent for Agent's own account its
Pro Rata Share of any such Revolving Credit Advance or payment by Agent under or
in respect of a Letter of Credit shall not relieve any other Revolving Lender of
its obligation hereunder to make available to Agent its Pro Rata Share thereof,
but no Revolving Lender shall be responsible for the failure of any other
Revolving Lender to make available such other Revolving Lender's Pro Rata Share
of any such payment.
(ii) If it shall be illegal or unlawful for any
Borrower to incur Revolving Credit Advances as contemplated by PARAGRAPH
(b)(i) above because of an Event of Default described in SECTIONS 8.1(h) or
(i) or otherwise or if it shall be illegal or unlawful for any Revolving
Lender to be deemed to have assumed a ratable share of the reimbursement
obligations owed to an L/C Issuer, or if the L/C Issuer is a Revolving
Lender, then (A) immediately and without further action whatsoever, each
Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Revolving Lender's Pro Rata Share
(based on the Revolving Loan Commitments) of the Letter of Credit Obligations
in respect of all Letters of Credit then outstanding and (B) thereafter,
immediately upon issuance of any Letter of Credit, each Revolving Lender
shall be deemed to have irrevocably and unconditionally purchased from Agent
(or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender's Pro Rata Share (based on the
Revolving Loan Commitments) of the Letter of Credit Obligations with respect
to such Letter of Credit on the date of such issuance. Each Revolving Lender
shall fund its participation in all payments or disbursements made under the
Letters of Credit in the same manner as provided in the Agreement with
respect to Revolving Credit Advances.
(c) CASH COLLATERAL.
(i) If Borrowers are required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, each Borrower will pay to Agent for the
benefit of Agent and Revolving Lenders cash or cash equivalents acceptable to
Agent ("CASH EQUIVALENTS") in an amount equal to 102% of the maximum amount then
available to be drawn under each applicable Letter of Credit outstanding for the
benefit of such Borrower. Such funds or Cash Equivalents shall be held by Agent
in a cash collateral account (the "CASH COLLATERAL ACCOUNT") maintained at a
bank or financial institution acceptable to Agent. The Cash Collateral Account
shall be in the name of the applicable Borrower and shall be pledged to, and
subject to the control of, Agent, for the benefit of Agent and Lenders, in a
manner satisfactory to Agent. Each Borrower hereby pledges and grants to Agent,
for the benefit of Agent and Lenders, a security interest in all such funds and
Cash Equivalents held in the Cash Collateral Account from time to time and all
proceeds thereof as security for the payment of all amounts due in respect of
the Letter of Credit Obligations and other Obligations, whether or not then due.
The Agreement, including this ANNEX B, shall constitute a security agreement
under applicable law.
(ii) If any Letter of Credit Obligations, whether or
not then due and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrowers shall either (A) provide cash collateral therefor in
the manner described above, (B) cause all such Letters of Credit and guaranties
thereof to be canceled and returned, or (C) deliver a stand-by letter (or
letters) of credit in guaranty of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like tenor and duration as,
and in an amount equal to 105% of the aggregate maximum amount then available to
be drawn under, the Letters of Credit to which
such outstanding Letter of Credit Obligations relate and shall be issued by a
Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.
(iii) From time to time after funds are deposited in
the Cash Collateral Account by any Borrower, whether before or after the
Commitment Termination Date, Agent may apply such funds or Cash Equivalents then
held in the Cash Collateral Account to the payment of any amounts, and in such
order as Agent may elect, as shall be or shall become due and payable by such
Borrower to Agent and Lenders with respect to such Letter of Credit Obligations
of such Borrower and, upon the satisfaction in full of all Letter of Credit
Obligations of such Borrower, to any other Obligations of any Borrower then due
and payable.
(iv) No Borrower nor any Person claiming on behalf
of or through any Borrower shall have any right to withdraw any of the funds or
Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrowers to Agent and Lenders in respect thereof, any funds
remaining in the Cash Collateral Account shall be applied to other Obligations
then due and owing and upon payment in full of such Obligations, any remaining
amount shall be paid to Borrowers or as otherwise required by law.
(d) FEES AND EXPENSES. Borrowers agree to pay (i) to Agent,
for the benefit of Agent and Revolving Lenders, as compensation to such Lenders
for Letter of Credit Obligations incurred hereunder, (A) all costs and expenses
incurred by Agent or any Revolving Lender on account of such Letter of Credit
Obligations, and (B) for each month during which any Letter of Credit Obligation
shall remain outstanding, a fee (the "LETTER OF CREDIT FEE") in an amount equal
to one percent (1%) PER ANNUM MULTIPLIED BY the daily average of the maximum
amount available from time to time to be drawn under the applicable Letter of
Credit during such month, which fee shall be paid to Agent, for the benefit of
Agent and Revolving Lenders, in arrears, on the first day of each month and on
the Commitment Termination Date, and (ii) to any L/C Issuer, on demand, such
fees (including all PER ANNUM fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.
(e) REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS.
Borrower Representative shall give Agent at least two Business Days' prior
written notice requesting the incurrence of any Letter of Credit Obligation,
specifying the date such Letter of Credit Obligation is to be incurred,
identifying the beneficiary and the Borrower to which such Letter of Credit
Obligation relates and describing the nature of the transactions proposed to be
supported thereby. The notice shall be accompanied by the form of the Letter of
Credit (which shall be acceptable to the L/C Issuer) to be guaranteed.
Notwithstanding anything contained herein to the contrary, Letter of Credit
applications by Borrower Representative and approvals by Agent may be made and
transmitted pursuant to electronic codes and security measures mutually agreed
upon and established by and among Borrower Representative, Agent and the L/C
Issuer.
(f) OBLIGATION ABSOLUTE. The obligation of Borrowers to
reimburse Agent and
Revolving Lenders for payments made with respect to any Letter of Credit
Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect
to Letters of Credit shall be unconditional and irrevocable. Such obligations
of Borrowers and Revolving Lenders shall be paid strictly in accordance with
the terms hereof under all circumstances, including the following:
(i) any lack of validity or enforceability of any
Letter of Credit or the Agreement or the other Loan Documents
or any other agreement;
(ii) the existence of any claim, setoff, defense or
other right that any Borrower or any of their respective
Affiliates or any Lender may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such transferee may be
acting), Agent, any Lender, or any other Person, whether in
connection with the Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated
transaction (including any underlying transaction between any
Borrower or any of their respective Affiliates and the
beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect;
(iv) payment by Agent (except as otherwise expressly
provided in PARAGRAPH (g)(ii)(C) below) or any L/C Issuer
under any Letter of Credit or guaranty thereof against
presentation of a demand, draft or certificate or other
document that does not comply with the terms of such Letter of
Credit or such guaranty;
(v) any other circumstance or event whatsoever that
is similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default
shall have occurred and be continuing.
(g) INDEMNIFICATION; NATURE OF LENDERS' DUTIES.
(i) In addition to amounts payable as elsewhere
provided in the Agreement, Borrowers hereby agree to pay and to protect,
indemnify, and save harmless Agent and each Lender from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including attorneys' fees and allocated costs of internal counsel) that Agent
or any Lender may incur or be subject to as a consequence, direct or indirect,
of (A) the issuance of any Letter of Credit or guaranty thereof, or (B) the
failure of Agent or any Lender seeking indemnification or of any L/C Issuer to
honor a demand for payment under any Letter of Credit or guaranty thereof as a
result of any act or omission, whether rightful or wrongful, of any
present or future DE JURE or DE FACTO government or Governmental Authority,
in each case other than to the extent solely as a result of the gross
negligence or willful misconduct of Agent or such Lender (as finally
determined by a court of competent jurisdiction).
(ii) As between Agent and any Lender and
Borrowers, Borrowers assume all risks of the acts and omissions of, or misuse
of any Letter of Credit by, beneficiaries of any Letter of Credit. In
furtherance and not in limitation of the foregoing, to the fullest extent
permitted by law, neither Agent nor any Lender shall be responsible for:
(A) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document issued by any party in connection with the application for and
issuance of any Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(B) the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may prove
to be invalid or ineffective for any reason; (C) failure of the beneficiary
of any Letter of Credit to comply fully with conditions required in order to
demand payment under such Letter of Credit; PROVIDED, that in the case of any
payment by Agent under any Letter of Credit or guaranty thereof, Agent shall
be liable to the extent such payment was made solely as a result of its gross
negligence or willful misconduct (as finally determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Letter of Credit or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit or guaranty
thereof; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they may be in cipher; (E) errors in interpretation of
technical terms; (F) any loss or delay in the transmission or otherwise of
any document required in order to make a payment under any Letter of Credit
or guaranty thereof or of the proceeds thereof; (G) the credit of the
proceeds of any drawing under any Letter of Credit or guaranty thereof; and
(H) any consequences arising from causes beyond the control of Agent or any
Lender. None of the above shall affect, impair, or prevent the vesting of any
of Agent's or any Lender's rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to
limit or to expand any waivers, covenants or indemnities made by Borrowers in
favor of any L/C Issuer in any letter of credit application, reimbursement
agreement or similar document, instrument or agreement between or among
Borrowers and such L/C Issuer.
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Each Credit Party shall, and shall cause its Subsidiaries to, establish
and maintain the cash management system described below:
(a) On or before the Closing Date and until the Termination
Date, each Borrower shall have established and maintain (i) blocked accounts in
such Borrower's name in connection with such Borrower's retail store operations
(collectively, the "RETAIL BLOCKED ACCOUNTS") with one or more of the banks set
forth in DISCLOSURE SCHEDULE (3.19) as maintaining such accounts, for the
collection of receivables and other items (other than credit card receivables of
such Borrower), into which all cash, checks, drafts or other similar items of
payment relating to or constituting payments made in respect of any and all
Collateral shall be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof; and (ii) a blocked concentration
account in such Borrower's name (each a "CONCENTRATION ACCOUNT" and
collectively, the "CONCENTRATION ACCOUNTS"), for the collection of credit card
receivables of such Borrower and for aggregating collections received in the
Retail Blocked Accounts of such Borrower, at the bank or banks that shall be
designated as the Concentration Account bank for each such Borrower in
DISCLOSURE SCHEDULE (3.19) (each a "CONCENTRATION ACCOUNT BANK" and
collectively, the "CONCENTRATION ACCOUNT BANKS"), which banks shall be
satisfactory to Agent.
(b) On or before the Closing Date and until the Termination
Date, each Borrower shall have established and maintain, in its name, an account
(each a "MASTER DISBURSEMENT ACCOUNT" and collectively, the "MASTER DISBURSEMENT
ACCOUNTS") at the bank identified in DISCLOSURE SCHEDULE (3.19) as maintaining
such account, into which Agent shall, from time to time, deposit proceeds of
Revolving Credit Advances and Swing Line Advances made to such Borrower pursuant
to SECTION 1.1 for use by such Borrower solely in accordance with the provisions
of SECTION 1.4. Each Borrower shall transfer amounts received into its Master
Disbursement Account into (i) one or more accounts (collectively, the
"DISBURSEMENT ACCOUNTS") established by such Borrower, in its name, at the banks
identified in DISCLOSURE SCHEDULE (3.19) as maintaining such Disbursement
Accounts, which banks shall be acceptable to Agent, or (ii) the Collection
Account. Borrowers shall not, and shall not cause or permit any Subsidiary
thereof to, accumulate or maintain cash in any Master Disbursement Account, any
Disbursement Account or any payroll account as of any date of determination in
excess of checks outstanding against such account as of such date and amounts
necessary to meet minimum balance requirements except as otherwise provided in
any tri-party blocked account agreement covering any such account. The banks at
which the Master Disbursement Accounts and Disbursement Accounts are held shall
have entered into a tri-party pledged account agreement with Agent, and the
applicable Borrower, in form and substance acceptable to Agent (the "PLEDGED
ACCOUNT AGREEMENTS"). Each such Pledged Account Agreement shall provide, among
other things, that such bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks
or other items of payment.
(c) On or before the Closing Date and until the Termination
Date, with respect to each of the bank accounts of Holdings and NEN designated
on DISCLOSURE SCHEDULE (3.19) as "Covered Credit Party Accounts," the banks at
which such accounts are maintained shall have entered into a tri-party pledged
account agreement with Agent, and the applicable Credit Party, in form and
substance acceptable to Agent (the "CREDIT PARTY PLEDGED ACCOUNT AGREEMENTS").
Each such Credit Party Pledged Account Agreement shall provide, among other
things, that such bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment.
(d) On or before the Closing Date (or such later date as Agent
shall consent to in writing), (i) except for the Retail Blocked Accounts
designated on DISCLOSURE SCHEDULE (3.19) as "EXCLUDED RETAIL BLOCKED ACCOUNTS,"
the banks at which the Retail Blocked Accounts are held shall have entered into
short form tri-party blocked account agreements with Agent, for the benefit of
Agent and Lenders, and the applicable Borrower and Subsidiaries thereof, as
applicable, in form and substance acceptable to Agent (the "RETAIL BLOCKED
ACCOUNT AGREEMENTS"); and (ii) the bank at which the Concentration Accounts are
held shall have entered into a tri-party blocked account agreement with Agent,
for the benefit of Agent and Lenders, and the applicable Borrower and
Subsidiaries thereof, as applicable, in form and substance acceptable to Agent
(the "CONCENTRATION ACCOUNT AGREEMENTS"). Each such Retail Blocked Account
Agreement and Concentration Account Agreement (i) shall become operative on or
prior to the Closing Date and (ii) shall provide, among other things, that (A)
except as otherwise provided, all items of payment deposited in such Retail
Blocked Account or Concentration Account and proceeds thereof deposited in such
account are held by such bank as agent or bailee-in-possession for Agent, on
behalf of Agent and Lenders, (B) the bank executing such agreement has no rights
of setoff or recoupment or any other claim against such account, as the case may
be, other than for payment of its service fees and other charges directly
related to the administration of such account and for returned checks or other
items of payment, and (C) from and after the Closing Date, the bank executing
such agreement agrees (1) with respect to any Retail Blocked Account Agreement,
that any and all collected funds (unless otherwise provided in the Retail
Blocked Account Agreement) in the applicable Retail Blocked Accounts shall be
forwarded to such Borrower's Concentration Account on the frequency provided for
in such Retail Blocked Account Agreement, but in any event, at least two
Business Days each week, and (2) with respect any Concentration Account
Agreement, that such bank agrees to forward immediately all amounts received in
the applicable Concentration Account to the Collection Account through daily
sweeps from such Concentration Account into the Collection Account.
(e) So long as no Default or Event of Default shall have
occurred and be
continuing, Borrowers may amend DISCLOSURE SCHEDULE (3.19) to add or replace
a Retail Blocked Account, a Concentration Account, a Master Disbursement
Account, a Disbursement Account; PROVIDED, that (i) Agent shall have
consented in writing in advance to the opening of such account with the
relevant bank and (ii) prior to the time of the opening of such account, the
applicable Borrower or its Subsidiaries, as applicable, and such bank shall
have executed and delivered to Agent a tri-party blocked account, in form and
substance satisfactory to Agent. Borrowers shall close any of their accounts
(and establish replacement accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days following notice from
Agent that the creditworthiness of any bank maintaining an account is no
longer acceptable in Agent's reasonable judgment, or as promptly as
practicable and in any event within 60 days following notice from Agent that
the operating performance, funds transfer or availability procedures or
performance with respect to accounts of the bank maintaining such accounts or
Agent's liability under any tri-party blocked account agreement with such
bank is no longer acceptable in Agent's reasonable judgment.
(f) The Retail Blocked Accounts, Master Disbursement Accounts,
Disbursement Accounts, Concentration Accounts and Credit Party Accounts shall be
cash collateral accounts, with all cash, checks and other similar items of
payment in such accounts securing payment of the Loans and all other
Obligations, and in which the applicable Credit Party shall have granted a Lien
to Agent, for the benefit of Agent and Lenders, pursuant to the Security
Agreement.
(g) All amounts deposited in the Collection Account shall be
deemed received by Agent in accordance with SECTION 1.10 and shall be applied
(and allocated) by Agent in accordance with SECTION 1.11. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(h) Each Borrower shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in concert
with such Borrower (each a "RELATED PERSON") to (i) hold in trust for Agent, for
the benefit of Agent and Lenders, all checks, cash and other items of payment
received by such Borrower or any such Related Person, and (ii) within one
Business Day after receipt by such Borrower or any such Related Person of any
checks, cash or other items of payment, deposit the same into a Borrower Account
of such Borrower. Each Borrower and each Related Person acknowledges and agrees
that all cash, checks or other items of payment constituting proceeds of
Collateral are the property of Agent and Lenders. All proceeds of the sale or
other disposition of any Collateral shall be deposited directly into the
applicable Retail Blocked Account or Concentration Account.
ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
SCHEDULE OF DOCUMENTS
[See attached]
ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrowers shall deliver or cause to be delivered to Agent or
to Agent and Lenders, as indicated, the following:
(a) MONTHLY FINANCIALS. To Agent and Lenders, within 30 days
after the end of each Fiscal Month, financial information regarding Borrowers
and their Subsidiaries, certified by the Chief Financial Officer of Borrower
Representative, consisting of (i) consolidated and consolidating unaudited
balance sheets as of the close of such Fiscal Month, the related statement of
income and, for each Fiscal Month ending on or after April 30, 2000, the related
statement of cash flows, in each case for that portion of the Fiscal Year ending
as of the close of such Fiscal Month; (ii) consolidated and consolidating
unaudited statements of income and, for each Fiscal Month ending on or after
April 30, 2001, cash flows for such Fiscal Month, setting forth in comparative
form the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments); and (iii) a summary of the
outstanding balance of all Intercompany Notes as of the last day of such Fiscal
Month. Such financial information shall be accompanied by (A) a statement in
reasonable detail in substantially the form of EXHIBIT A (each, a "COMPLIANCE
CERTIFICATE") showing the calculations used in determining compliance with each
financial covenant set forth on ANNEX G that is tested on a monthly basis, (B)
the certification of the Chief Financial Officer of Borrower Representative that
(1) such financial information presents fairly in accordance with GAAP (subject
to normal year-end adjustments) the financial position, results of operations
and, if applicable, statements of cash flows of Borrowers and their
Subsidiaries, on a consolidated and consolidating basis, in each case as at the
end of such Fiscal Month and for that portion of the Fiscal Year ending as of
the end of such Fiscal Month and (2) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default, and (C) a copy
of the monthly "Executive Committee Report" prepared by the Chief Financial
Officer of Holdings for the executive committee of Holdings.
(b) QUARTERLY FINANCIALS. To Agent and Lenders, within 45 days
after the end of each Fiscal Quarter, consolidated and consolidating financial
information regarding Borrowers and their Subsidiaries, certified by the Chief
Financial Officer of Borrower Representative, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter, the related statement of income
and, for each Fiscal Quarter ending on or after June 30, 2000, the related
statement of cash flows for that portion of the Fiscal Year ending as of the
close of such Fiscal Quarter and
(ii) unaudited statements of income and, for each Fiscal Quarter ending on or
after June 30, 2001, cash flows for such Fiscal Quarter, in each case setting
forth in comparative form the figures for the corresponding period in the
prior year and the figures contained in the Projections for such Fiscal Year,
all prepared in accordance with GAAP (subject to normal year-end
adjustments). Such financial information shall be accompanied by (A) a
Compliance Certificate in respect of each of the financial covenants set
forth on ANNEX G that is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer of Borrower Representative that
(1) such financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position, results of
operations and, if applicable, statements of cash flows of Borrowers and
their Subsidiaries, on both a consolidated and consolidating basis, as at the
end of such Fiscal Quarter and for that portion of the Fiscal Year ending as
of the end of such Fiscal Quarter, (2) any other information presented is
true, correct and complete in all material respects and that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default.
In addition, Borrowers shall deliver to Agent and Lenders, within 45 days
after the end of each Fiscal Quarter, a management discussion and analysis
that includes a comparison to budget for that Fiscal Quarter and a comparison
of performance for that Fiscal Quarter to the corresponding period in the
prior year.
(c) OPERATING PLAN. To Agent and Lenders, as soon as
available, but not later than 30 days after the end of each Fiscal Year, an
annual operating plan for each Borrower, approved by the Board of Directors of
such Borrower, for the following Fiscal Year, which will (i) include a statement
of all of the material assumptions on which such plan is based, (ii) include
monthly balance sheets and a monthly budget for the following year and (iii)
integrate sales, gross profits, operating expenses, operating profit, cash flow
projections and Borrowing Availability projections, all prepared on the same
basis and in similar detail as that on which operating results are reported (and
in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities.
(d) ANNUAL AUDITED FINANCIALS. To Agent and Lenders, within 90
days after the end of each Fiscal Year, audited Financial Statements for
Borrowers and their Subsidiaries on a consolidated basis, consisting of balance
sheets and statements of income and retained earnings and cash flows, setting
forth in comparative form in each case the figures for the previous Fiscal Year,
and the figures contained in the Projections for such Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified
without qualification by an independent certified public accounting firm of
national standing or otherwise acceptable to Agent. Such Financial Statements
shall be accompanied by (i) a statement prepared in reasonable detail showing
the calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred (or
specifying those Defaults and Events of Default that they became aware of), it
being understood that such audit examination extended only to
accounting matters and that no special investigation was made with respect to
the existence of Defaults or Events of Default, (iii) the annual letters to
such accountants in connection with their audit examination detailing
contingent liabilities and material litigation matters, and (iv) the
certification of the Chief Executive Officer or Chief Financial Officer of
Borrowers that all such Financial Statements present fairly in accordance
with GAAP the financial position, results of operations and statements of
cash flows of Borrowers and their Subsidiaries on a consolidated and
consolidating basis, as at the end of such Fiscal Year and for the period
then ended, and that there was no Default or Event of Default in existence as
of such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.
(e) MANAGEMENT LETTERS. To Agent and Lenders, within five
Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants.
(f) DEFAULT NOTICES. To Agent and Lenders, as soon as
practicable, and in any event within five Business Days after an executive
officer of any Borrower has actual knowledge of the existence of any Default,
Event of Default or other event that has had a Material Adverse Effect,
telephonic or telecopied notice specifying the nature of such Default or Event
of Default or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in writing on the
next Business Day.
(g) SEC FILINGS AND PRESS RELEASES. To Agent and Lenders,
promptly upon their becoming available, copies of: (i) all Financial Statements,
reports, notices and proxy statements made publicly available by any Credit
Party to its security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material adverse changes or developments in the business of any such Person.
(h) SUBORDINATED DEBT AND EQUITY NOTICES. To Agent, as soon as
practicable, copies of all material written notices given or received by any
Credit Party with respect to any Subordinated Debt or Stock of such Person, and,
within two Business Days after any Credit Party obtains knowledge of any matured
or unmatured event of default with respect to any Subordinated Debt, notice of
such event of default.
(i) SUPPLEMENTAL SCHEDULES. To Agent, supplemental
disclosures, if any, required by SECTION 5.6.
(j) LITIGATION. To Agent in writing, promptly upon learning
thereof, notice of any Litigation commenced or threatened against any Credit
Party that (i) seeks damages in excess of $100,000, (ii) seeks injunctive
relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its
assets or against any Credit Party or ERISA Affiliate in connection with any
Plan, (iv) alleges criminal misconduct by any Credit Party, or (v) alleges the
violation of any law
regarding, or seeks remedies in connection with, any Environmental Liabilities.
(k) INSURANCE NOTICES. To Agent, disclosure of losses or
casualties required by SECTION 5.4.
(l) LEASE DEFAULT NOTICES. To Agent, copies of (i) any
and all default notices received under or with respect to any leased location
or public warehouse where Collateral is located, and (ii) such other notices
or documents as Agent may request in its reasonable discretion.
(m) LEASE AMENDMENTS. To Agent, copies of all material
amendments to real estate leases.
(n) OTHER DOCUMENTS. To Agent and Lenders, such other
financial and other information respecting any Credit Party's business or
financial condition as Agent or any Lender shall, from time to time, request.
ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrowers shall deliver or cause to be delivered the
following:
(a) To Agent, as frequently as Agent may request and in any
event no later than the tenth Business Day of each Fiscal Month (together with a
copy of all or any part of the following reports requested by any Lender in
writing after the Closing Date), each of the following reports, each of which
shall be prepared by the applicable Borrower as of the last day of the
immediately preceding Fiscal Month:
(i) a Borrowing Base Certificate with respect to
each Borrower, in each case accompanied by such supporting
detail and documentation as shall be requested by Agent in
its reasonable discretion;
(ii) with respect to each Borrower, a summary of
Inventory by each of (A) location and (B) product department
(by shoe size), together with a supporting perpetual Inventory
report, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion;
(iii) with respect to each Borrower, a monthly trial
balance showing Accounts outstanding aged from date of sale of
goods, accompanied by such supporting detail and documentation
as shall be requested by Agent in its reasonable discretion;
and
(iv) With respect to each Borrower, an accounts
payable aging report of such Borrower, in each case
accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;
(b) To Agent, at the time of delivery of each of the
monthly Financial Statements delivered pursuant to ANNEX E, a reconciliation
of the Accounts trial balance and month-end Inventory reports of each
Borrower to such Borrower's general ledger and monthly Financial Statements
delivered pursuant to such ANNEX E, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(c) To Agent, twice per year, by the 60th day after the
end of the Borrower's interim and year-end physical inventory counts, a
book-to-physical Inventory report listing, by product department, shrinkage
for the prior interim period since the last physical Inventory report, and
including book-to-physical adjustments;
(d) To Agent, at the time of delivery of each of the
Financial Statements delivered pursuant to ANNEX E, (i) a listing of
government contracts of each Borrower subject to the Federal Assignment of
Claims Act of 1940; and (ii) a list of any applications for the registration
of any Patent, Trademark or Copyright filed by any Credit Party with the
United States Patent and Trademark Office, the United States Copyright Office
or any similar office or agency in the prior Fiscal Quarter;
(e) Each Borrower, at its own expense, shall deliver to
Agent the results of each physical verification, if any, that such Borrower
or any of its Subsidiaries may in their discretion have made, or caused any
other Person to have made on their behalf, of all or any portion of their
Inventory (and, if a Default or an Event of Default shall have occurred and
be continuing, each Borrower shall, upon the request of Agent, conduct, and
deliver the results of, such physical verifications as Agent may require);
(f) Each Borrower, at its own expense, shall deliver to
Agent such appraisals or appraisal updates of its assets as Agent may request
at any time after the occurrence and during the continuance of a Default or
an Event of Default, such appraisals to be conducted by an appraiser, and in
form and substance, satisfactory to Agent; and
(g) Such other reports, statements and reconciliations with
respect to the Borrowing Base or Collateral of any or all Credit Parties as
Agent shall from time to time request in its reasonable discretion.
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrowers shall not breach or fail to comply with any of
the following financial covenants, each of which shall be calculated in
accordance with GAAP consistently applied:
(a) MAXIMUM CAPITAL EXPENDITURES. Borrowers and their
Subsidiaries on a consolidated basis shall not make Capital Expenditures
during any Fiscal Year exceeding $1,500,000 in the aggregate.
(b) MINIMUM FIXED CHARGE COVERAGE RATIO. Borrowers and
their Subsidiaries shall have on a consolidated basis at the end of each
Fiscal Quarter set forth below, a Fixed Charge Coverage Ratio for the
12-month period then ended (or with respect to the Fiscal Quarters ending on
or before December 30, 2000, the period commencing on December 26, 1999, and
ending on the last day of such Fiscal Quarter) of not less than the following:
0.6 for the Fiscal Quarter ending April 1, 2000;
0.8 for the Fiscal Quarter ending July 1, 2000, and
the Fiscal Quarter ending September 30,2000;
and
1.2 for the Fiscal Quarter ending December 30, 2000,
and each Fiscal Quarter end thereafter.
(c) MINIMUM EBITDA. Borrowers and their Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Month set forth below,
EBITDA for the respective periods set forth below of not less than the
following:
Period EBITDA
------ ------
December 26, 1999 - April 1, 2000 $ (960,000)
December 26, 1999 - April 29, 2000 $(1,240,000)
December 26, 1999 - May 27, 2000 $(1,080,000)
December 26, 1999 - July 1, 2000 $ 310,000
December 26, 1999 - July 29, 2000 $ 340,000
December 26, 1999 - August 26, 2000 $ 870,000
December 26, 1999 - September 30, 2000 $ 1,310,000
December 26, 1999 - October 28, 2000 $ 1,170,000
December 26, 1999 - November 25, 2000 $ 1,080,000
December 26, 1999 - December 30, 2000 $ 3,870,000
At the end of each month thereafter,
for the immediately preceding
12-month period $ 4,000,000
Unless otherwise specifically provided herein, any
accounting term used in the Agreement shall have the meaning customarily
given such term in accordance with GAAP, and all financial computations
hereunder shall be computed in accordance with GAAP consistently applied.
That certain items or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing. If
any "Accounting Changes" (as defined below) occur and such changes result in
a change in the calculation of the financial covenants, standards or terms
used in the Agreement or any other Loan Document, then Borrowers, Agent and
Lenders agree to enter into negotiations in order to amend such provisions of
the Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating Borrowers' and their
Subsidiaries' financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made; PROVIDED, that the
agreement of Requisite Revolving Lenders to any required amendments of such
provisions shall be sufficient to bind all Lenders. "ACCOUNTING CHANGES"
means (i) changes in accounting principles required by the promulgation of
any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants (or
any successor thereto or any agency with similar functions), (ii) changes in
accounting principles concurred in by any Borrower's certified public
accountants, (iii) purchase accounting adjustments under A.P.B. 16 or 17 and
EITF 88-16, and the application of the accounting principles set forth in
FASB 109, including the establishment of reserves pursuant thereto and any
subsequent reversal (in whole or in part) of such reserves, and (iv) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made subsequent
to the Closing Date (including capitalization of costs and expenses or
payment of pre-Closing Date liabilities, but excluding the amortization of
fees, costs and expenses incurred in connection with the Related
Transactions) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If
Agent, Borrowers and Requisite Revolving Lenders agree upon the required
amendments, then after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP
consistently applied after giving effect to the implementation of such
Accounting Change. If Agent, Borrowers and Requisite Revolving Lenders cannot
agree upon the required amendments within 30 days following the date of
implementation of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying Accounting
Change.
ANNEX H (SECTION 9.9(a))
TO
CREDIT AGREEMENT
WIRE TRANSFER INFORMATION
If to GE Capital, at
Bank Name: Bankers Trust Company
Location: New York, New York
ABA Routing No.: ▇▇▇▇▇▇▇▇▇
Credit Account No.: ▇▇-▇▇▇-▇▇▇
Account Name: Track 'n Trail -- GE Capital Corporation
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Account Manager (Track 'n Trail)
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
General Electric Capital Corporation ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Floor
Attention: Corporate Counsel San Francisco, California 941
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Attention: Hill ▇▇▇▇▇▇▇▇, III,
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrowers, at
Track 'n Trail
▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Pillsbury Madison & Sutro LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
ANNEX J (ANNEX A - "COMMITMENTS")
TO
CREDIT AGREEMENT
COMMITMENTS AS OF THE CLOSING DATE
LENDER(S)
Revolving Loan Commitment General Electric Capital Corporation
(including a Swing Line Commitment
of $2,500,000):
$25,000,000
SCHEDULE (1.1)
TO
CREDIT AGREEMENT
LENDER'S REPRESENTATIVE
General Electric Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
