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EXHIBIT 10.6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 23, 1997, among THE RUG BARN, INC.,
a South Carolina corporation, HOME INNOVATIONS, INC., a Delaware corporation,
DHA HOME, INC., a Delaware corporation, and ▇.▇. ▇▇▇▇▇▇ AND COMPANY, an
Illinois corporation (each a "Borrower" and collectively, the "Borrowers"),
DECORATIVE HOME ACCENTS, INC., a Delaware Corporation, DRAYMORE MFG. CORP., a
North Carolina corporation, and HOME INNOVATIONS, INC., a New York corporation
(each a "Guarantor" and collectively, the "Guarantors") and the lenders listed
on the signature pages hereto (each a "Lender" and collectively, the
"Lenders").
BACKGROUND
The Borrowers have requested the Lenders to provide the Borrowers with
term loans having an aggregate principal amount equal to $20 million and,
subject to the terms and conditions set forth herein, the Lenders have agreed
to provide such loans.
In consideration of the mutual covenants herein contained and of other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, as used herein the following words and terms shall
have the following meanings, respectively, unless the context hereof otherwise
clearly requires:
"Accelerated Maturity Date" shall mean the date on which the Obligations
(including, without limitation, the entire unpaid principal balance of the
Loans and accrued but unpaid interest thereon) shall become due and payable
pursuant to the terms of any of the Loan Documents, including, without
limitation, by reason of the occurrence of an Event of Default.
"Affiliate" of a Person shall mean any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the
election of directors of such Person or (b) direct or
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cause the direction of the management and policies of such Person, whether by
contract or otherwise.
"Agreement" shall mean this Credit Agreement as amended, modified,
supplemented or restated from time to time in accordance with the terms hereof.
"Bankruptcy Code" shall mean ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, 11 U.S.C.
Sections 101 et seq., or any similar United States federal or state law
for the relief of debtors, as amended from time to time.
"Borrower" and "Borrowers" shall have the meanings given such terms in the
introductory paragraph to this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in New
York, New York.
"▇▇▇▇▇▇ ▇▇▇▇▇ License" shall mean that certain License Agreement dated as
of April 27, 1997, by and between ▇▇▇▇▇▇ ▇▇▇▇▇, Inc. and DHA Home, Inc., as the
same may be amended or modified from time to time and any auxiliary agreement
entered into in connection therewith.
"Capitalized Lease" shall mean any lease which is required under GAAP to
be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean the aggregate amount which is
required under GAAP to be reported as a liability on the balance sheet of a
Person as lessee under a Capitalized Lease.
"Closing Date" shall mean the date on which the conditions set forth in
Section 3.01 hereof shall be satisfied, which date shall be no later than May
23, 1997.
"Closing Fee" shall have the meaning given such term in Section 2.07
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case
as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall have the meaning given such term in Section 5.01
hereof.
"Congress" shall mean Congress Financial Corporation, a California
corporation.
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"Congress Debt Documents" shall mean the Congress Loan Agreement and all
other instruments and documents that are in effect as of the date hereof and
are executed in connection with or otherwise relating to any Congress Debt
Document.
"Congress Liens" shall mean the Liens granted to Congress pursuant to the
Congress Loan Agreement.
"Congress Loan Agreement" shall mean that certain Loan and Security
Agreement, dated November 12, 1996, as amended as of the date hereof, by and
between Congress, the Borrowers and the Guarantors.
"Congress Supplemental Line" shall mean the $5,000,000 supplemental credit
line provided to the Borrowers by Congress under the Congress Loan Agreement in
accordance with that certain letter agreement, dated March 1, 1997, by and
among Congress, the Borrowers, the Guarantors and TCW Special Credits Fund V -
The Principal Fund.
"Decorative Home" shall mean Decorative Home Accents, Inc., a Delaware
corporation.
"Designated Borrowing Officer" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or ▇▇▇ ▇.
▇▇▇▇▇, or such other officer as shall be designated from time to time in
writing by the Borrowers to Lenders.
"Designated Financial Officer" of a Person shall mean the individual
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to be the chief financial officer or
treasurer of such Person (and individuals designated from time to time by the
Board of Directors or governing body performing like functions of such Person
to act in lieu of the chief financial officer or the treasurer).
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Effective Date" shall mean the date on which the Restructuring is
consummated pursuant to either a plan of reorganization under chapter 11 of the
Bankruptcy Code or an out-of-court restructuring.
"Environmental Law" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect relating to
the regulation and protection of human health, safety, the environment and
natural resources. Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous Material
Transportation Act, as amended (49 U.S.C. Section
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180 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C.
Section 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended
(15 U.S.C. Section 2601 et seq.); the Clean Air Act, as amended (42 U.S.C.
Section 7401 et seq.); the Federal Water Pollution Control Act, as amended (33
U.S.C. Section 1251 et seq.); and their state and local counterparts or
equivalents.
"Environmental Liabilities and Costs" shall mean all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, expert and consulting and costs of
investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition
or a Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by any of the Borrowers or any of the Guarantors or (ii) any
facility which received Hazardous Materials generated by any of the Borrowers
or any of the Guarantors.
"Environmental Lien" shall mean any Lien in favor of any Governmental
Authority or any other Person for Environmental Liabilities and Costs.
"Equipment" shall have the meaning given such term in Section 5.01(a)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as any Borrower, (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with any Borrower, or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as any Borrower, any
corporation described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default described in
Section 7.01 hereof.
"First Supplemental Indenture" shall mean the First Supplemental
Indenture, substantially in the form of Exhibit C hereto, by and among the
Indenture Trustee, the Borrowers, and the Guarantors, as amended, modified and
supplemented from time to time.
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"Fund V Guarantee" shall mean the guarantee of the obligations under the
Congress Supplemental Line made by TCW Special Credits Fund V - The Principal
Fund, pursuant to that certain letter agreement dated March 1, 1997, in favor
of Congress.
"GAAP" shall mean generally accepted accounting principles as such
principles shall be in effect in the United States at the relevant date.
"Governmental Authority" shall mean any nation or government, any federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Guarantee" shall mean the guarantees granted by the Guarantors to Lenders
pursuant to Article VIII hereof.
"guarantee" of or by any Person shall mean any obligation of such Person
guaranteeing any Indebtedness of any other Person (the "primary obligor"),
directly or indirectly, through an agreement (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Guarantor" and "Guarantors" shall have the meanings given to such terms
in the introductory paragraph to this Agreement.
"Hazardous Materials" shall mean (i) any element, compound or chemical
that is defined, listed or otherwise classified as a solid waste contaminant,
pollutant, toxic pollutant, hazardous substance, extremely hazardous substance,
toxic substance, hazardous waste, or special waste under any Environmental Law;
(ii) petroleum and its refined fractions, (iii) any dielectric fluids
containing more than 50 parts per polychlorinated biphenyls, (iv) any
flammable, explosive or radioactive materials; and (v) any other materials used
or stored by any Borrower, building, components (including but not limited to
asbestos containing materials) and manufactured products containing Hazardous
Materials.
"Indebtedness" shall mean as to any Person (i) indebtedness for
borrowed money; (ii) indebtedness for the deferred purchase price of property
or services (other than current trade payables incurred in the ordinary course
of business and payable in accordance with customary practices); (iii)
indebtedness evidenced by bonds, debentures,
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notes or other similar instruments (other than performance, surety and
appeal or other similar bonds arising in the ordinary course of business); (iv)
obligations and liabilities secured by a Lien upon property owned by such
Person, whether or not owing by such Person and even though such Person has not
assumed or become liable for the payment thereof; (v) any guarantee, direct or
indirect, by such Person of any obligations and liabilities; (vi) obligations
or liabilities created or arising under any conditional sales contract or other
title retention agreement with respect to property used and/or acquired by such
Person, even though the rights and remedies of the lessor, seller and/or lender
thereunder are limited to repossession of such property; (vii) Capitalized
Lease Obligations; (viii) all liabilities in respect of letters of credit,
acceptances and similar obligations created for the account of such Person; and
(ix) net liabilities of such Person under interest rate cap agreements,
interest rate swap agreements, foreign currency exchange agreements and other
hedging agreements or arrangements calculated on a basis satisfactory to the
Lenders and in accordance with accepted practice.
"Indemnified Parties" shall have the meaning given such term in Section
9.05 hereof.
"Indenture Trustee" shall mean American Bank National Association, as
Trustee, under the Indenture.
"Initial Term Loan" shall have the meaning given such term in Section 2.01
hereof.
"Initial Term Notes" shall have the meaning given such term in Section
2.02 hereof.
"Intercreditor Agreement" shall mean the Intercreditor Agreement,
substantially in the form of Exhibit D hereto, by and among the Lenders and
Congress and acknowledged by the Borrowers and the Guarantors, dated the
Closing Date hereof, as amended, modified and supplemented and in effect from
time to time, regarding the relative priority of the Liens granted to the
Lenders under this Agreement and the Security Documents and the Congress Liens.
"Interest Rate" shall have the meaning given such term in Section 2.08
hereof.
"Inventory" shall mean all goods and merchandise of the Borrowers and the
Guarantors including, but not limited to, all raw materials, work in process,
finished goods, materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or sale of such goods and
merchandise, whether now owned
or hereafter acquired and all such property, the sale or disposition of which
would give rise to accounts receivable or cash.
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"Indenture" shall mean that certain Indenture, dated July 13, 1995,
pursuant to which Decorative Home issued the Senior Notes.
"Lender" and "Lenders" shall have the meanings given such terms in the
introductory paragraph to this Agreement.
"Letter Agreement" shall mean the letter agreement, dated as of May 15,
1997, among Decorative Home, TCW Special Credits Fund V - The Principal Fund,
the entities listed on Schedule I thereto, and Magten, as agent on behalf of
certain of its accounts, a copy of which Letter Agreement is attached hereto as
Exhibit E.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, claim,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loans made by the Lenders to the
Borrowers under this Agreement.
"Loan Documents" shall mean this Agreement, the Term Notes, the Security
Documents, the Intercreditor Agreement and all other instruments, agreements
and documents from time to time delivered in connection herewith or therewith.
"Magten" shall mean Magten Asset Management Corp., as agent on behalf of
certain of its accounts.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
any Borrower's or Guarantor's assets, property, prospects, or condition,
financial or otherwise, (ii) the Collateral or Lenders' security interest
therein, (iii) any Borrower's or Guarantor's ability to pay or perform the
Obligations, or (iv) any of the Lenders' rights and remedies under any Loan
Document or applicable law or the Lenders' ability to enforce any such rights
and remedies.
"Maturity Date" shall mean the earlier to occur of (a) the Accelerated
Maturity Date and (b) the Stated Maturity Date.
"Mortgages" shall mean one or more mortgages or deeds of trust executed by
one or more of the Borrowers and Guarantors, the form and substance of which
shall be reasonably satisfactory to Lenders, that encumber the Real Property
Collateral and the related improvements thereto.
"Note Register" shall have the meaning given such term in Section 4.17
hereof.
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"Note Registrar" shall have the meaning given such term in Section 4.17
hereof.
"Notice of Borrowing" shall have the meaning given such term in Section
2.04 hereof.
"Obligations" shall mean any and all Loans and all other indebtedness,
obligations, indemnities and liabilities of every kind, nature and description
owing by any one or more Borrowers to Lenders and/or their respective
Affiliates including, without limitation, the Closing Fee and all principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser or otherwise, whether arising under this Agreement
or otherwise, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of this Agreement or
after the commencement of any case with respect to a Borrower under the
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lenders.
"Other Taxes" shall have the meaning given to such term in Section 2.12(a)
hereof.
"Percentage Interest" shall mean, with respect to each Lender, the
percentage interest of each Term Loan made by such Lender as set forth next to
such Lender's name on the signature pages hereto.
"Permitted Liens" shall mean, collectively, the (i) Congress Liens, (ii)
Liens granted pursuant to the Loan Documents and (iii) Liens permitted under
the Congress Loan Agreement but only to the extent such Liens exist as of the
date hereof.
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint-stock company, government (including
political subdivisions), Governmental Authority or agency, or any other entity.
"Pledge Agreements" shall mean collectively the Pledge Agreement made
by Decorative Home in favor of the Lenders, dated as of the date hereof, and
the Pledge Agreement made by Home Innovations, Inc., a Delaware corporation, in
favor of the Lenders, dated as of the date hereof, substantially in the forms
annexed collectively hereto as Exhibit F, as amended, modified, supplemented or
restated from time to time.
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"Potential Default" shall mean any event or condition which, with notice
or passage of time, or any combination of the foregoing, would constitute an
Event of Default.
"Real Property Collateral" shall mean the parcels of real property and the
related improvements thereto identified on Schedule I hereto.
"Receivables" shall have the meaning given such term in Section 5.01(c)
hereof.
"Related Contracts" shall have the meaning given such term in Section
5.01(c) hereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Hazardous Material into the indoor or outdoor environment or onto or from any
property presently or formerly owned or operated by any of the Borrowers or any
of the Guarantors, or at any disposed facility that received Hazardous
Materials generated by any of the Borrowers or any of the Guarantors including
the movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
"Remedial Action" shall mean all actions necessary to monitor, assess,
evaluate, investigate, clean up, remove or treat any Release or threatened
Release of Hazardous Materials or to prevent, mitigate or minimize any Release
or threatened Release so that the Release or threatened Release does not
migrate or endanger or threaten to endanger public health or welfare or the
environment.
"Restructuring" shall have the meaning given such term in the Letter
Agreement.
"Secured Obligations" has the meaning given to such term in Section 5.02
hereof.
"Security Agreement" shall mean the Security Agreement, substantially in
the form of Exhibit G hereto, made by the Borrowers and the Guarantors in favor
of the Lenders, as amended, modified, supplemented or restated from time to
time.
"Security Documents" shall mean, collectively, the Pledge Agreements,
the Mortgages, the Security Agreement, each executed and delivered by the
Borrowers and the Guarantors, and each Collateral Assignment of Trademarks and
Trademark Licenses (Security Agreement) and each Copyright Mortgage and
Security Agreement, substantially in the forms of Exhibits H and I hereto,
executed and delivered by the applicable Borrower or Guarantor, and all Uniform
Commercial Code financing statements required by this Agreement and the
Security Agreement to be filed with
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respect to the security interests in personal property and fixtures
created pursuant to such agreements, and all other documents and agreements
executed and delivered by the Borrowers and the Guarantors in connection with
any of the foregoing documents.
"Senior Notes" shall mean the 13% Senior Notes due 2002 issued pursuant to
the Indenture.
"Stated Maturity Date" shall mean September 20, 1997.
"Subsequent Borrowing Date" shall have the meaning given such term in
Section 2.04 hereof.
"Subsequent Term Loan" shall have the meaning given such term in Section
2.01 hereof.
"Subsequent Term Notes" shall have the meaning given such term in Section
2.03 hereof.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited or general partnership, limited liability company, limited liability
partnership, trust, association or other business entity of which an aggregate
of 30% or more of the outstanding stock or other interests entitled to vote in
the election 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), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more Subsidiaries
of such Person.
"Taxes" shall have the meaning given such term in Section 2.12(a) hereof.
"Term Loans" shall mean the Initial Term Loan and the Subsequent Term
Loan.
"Term Notes" shall mean the Initial Term Notes and the Subsequent Term
Notes.
"Trademarks" shall have the meaning given such term in Section 5.01(d)
hereof.
"Trademark Licenses" shall have the meaning given such term in Section
5.01(d) hereof.
1.02. Construction. Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or."
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References in this Agreement to "determination" by the Lenders include
good faith estimates by the Lenders (in the case of quantitative
determinations) and good faith beliefs by the Lenders (in the case of
qualitative determinations). The words "hereof," "herein," "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. The section and other headings
contained in this Agreement and the Table of Contents preceding this Agreement
are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection and exhibit references are to this Agreement unless
otherwise specified.
1.03. Accounting Principles. Except as otherwise provided in this
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
shall be made and prepared in accordance with GAAP (including principles of
consolidation where appropriate), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP. Notwithstanding the
definition of GAAP contained in this Agreement, no change in GAAP that would
affect the method or calculation of any of the financial covenants,
restrictions or standards or definitions of terms used herein shall be given
effect in such calculations until such financial covenants, restrictions or
standards or definitions are amended in a manner satisfactory to the Borrowers
and the Lenders so as to reflect such change in GAAP.
ARTICLE II
THE TERM LOANS
2.01. Term Loans. Subject to the terms and conditions hereof, Lenders
agree to make Loans to Borrowers not exceeding Twenty Million Dollars
($20,000,000) in the original aggregate amount as follows: (i) term loans on
the Closing Date in the aggregate principal amount of $15,000,000 (the "Initial
Term Loan") and (ii) term loans in the aggregate principal amount of $5,000,000
(the "Subsequent Term Loan") at the request of Borrowers at any time from and
after the Closing Date and through, but not including, the Maturity Date in
accordance with Section 2.04 hereof.
2.02. Initial Term Notes. The Borrowers agree that in order to evidence
the Initial Term Loan, the Borrowers will execute and deliver to each Lender on
the Closing Date a promissory note, dated the Closing Date, substantially in
the form of Exhibit A (collectively, the "Initial Term Notes"), payable to the
order of such Lender in the principal amount of its respective Percentage
Interest in the Initial Term Loan.
2.03. Subsequent Term Notes. The Borrowers agree that in order to
evidence the Subsequent Term Loan, the Borrowers will execute and deliver to
each
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Lender on the Subsequent Borrowing Date a promissory Note, dated the
Subsequent Borrowing Date, substantially in the form of Exhibit B
(collectively, the "Subsequent Term Notes"), payable to the order of such
Lender in the principal amount of its respective Percentage Interest in the
Subsequent Term Loan.
2.04. Request for Subsequent Term Loan. Whenever, at any time from and
after the Closing Date and through, but not including, the Maturity Date, the
Borrowers desire that Lenders make the Subsequent Term Loan, the Borrowers
shall provide notice to the Lenders of such proposed borrowing (a "Notice of
Borrowing"), such notice to be given not later than 12:00 noon (New York City
time) on the date which is ten (10) Business Days prior to the date of such
proposed borrowing setting forth: (a) the date, which shall be a Business Day,
on which such borrowing is to occur (the "Subsequent Borrowing Date"), and (b)
the account information where the proceeds of the Subsequent Term Loan are to
be received. Such Notice of Borrowing shall be given to the Lenders in writing
by a Designated Borrowing Officer. Subject to the terms and conditions of this
Agreement (including, without limitation, Sections 2.03 and 3.02 hereof),
Lenders shall make the Subsequent Term Loan on the Subsequent Borrowing Date.
2.05. Maturity Date. On the Maturity Date, all Obligations (including,
without limitation all outstanding amounts under the Term Notes and the Closing
Fee and all accrued and unpaid interest on the Obligations) shall become
immediately due and payable without notice or demand.
2.06. Joint and Several Liability. (a) Each of the Borrowers shall be
jointly and severally liable with the other Borrowers for the Obligations, and
each of the Obligations shall be secured by all of the Collateral. Each of the
Borrowers acknowledges that it is a co-borrower hereunder and is jointly and
severally liable under this Agreement and the other Loan Documents. All
financial accommodations extended to any of the Borrowers or requested by any
of the Borrowers shall be deemed to be financial accommodations extended for
each of the Borrowers, and each of the Borrowers hereby authorizes each other
of the Borrowers to effectuate borrowings on its behalf. Notwithstanding
anything to the contrary contained in this Agreement or any of the other Loan
Documents, the Lenders shall be entitled to rely upon any request, notice or
other communication received by them from any of the Borrowers on behalf of all
Borrowers, and shall be entitled to treat their giving of any notice hereunder
to any of the Borrowers as notice to each and all Borrowers.
(b) Each of the Borrowers agrees that the joint and several liability
of the Borrowers provided for in this Section 2.06 shall not be impaired or
affected by any modification, supplement, extension or amendment or any
contract or agreement to which the other Borrowers may hereafter agree (other
than an agreement signed by the Lenders specifically releasing such liability),
nor by any delay, extension of time, renewal,
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compromise or other indulgence granted by any Lender with respect to
any of the Obligations, nor by any other agreements or arrangements whatsoever
with the other Borrowers or with any other person, each of the Borrowers hereby
waiving all notice of such delay, extension, release, substitution, renewal,
compromise or other indulgence, and hereby consenting to be bound thereby as
fully and effectually as if it had expressly agreed thereto in advance. The
liability of each of the Borrowers is direct and unconditional as to all of the
Obligations, and may be enforced without requiring any Lender first to resort
to any other right, remedy or security. Each of the Borrowers hereby expressly
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Obligations, the Term Notes, the Closing Fee, this
Agreement or any other Loan Document and any requirement that the Lenders
protect, secure, perfect or insure any Lien or any property subject thereto or
exhaust any right or take any action against any of the Borrowers or any other
person or any Collateral.
(c) Each of the Borrowers hereby irrevocably waives and releases each
other of the Borrowers from all "claims" (as defined in Section 101(5) of the
Bankruptcy Code) to which such Borrowers are or would be entitled by virtue of
the provisions of the subsection 2.06(b) hereof or the performance of such
Borrower's obligations thereunder including, without limitation, any right of
subrogation (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise), reimbursement, contribution, exoneration or similar right, or
indemnity, or any right of recourse to security for any of the Obligations.
2.07. Closing Fee. On the Closing Date, a closing fee of $5,000,000 (the
"Closing Fee") shall be for all purposes fully earned and non-refundable by
Lenders (it being agreed that, as of the Closing Date, the Closing Fee shall be
deemed to be a portion of the Obligations by the Borrowers to Lenders
hereunder); provided, however, that (a) Lenders shall be deemed to have waived
Borrowers' obligation to pay the Closing Fee if either (i) the Restructuring is
not consummated consistent with the terms and conditions described in the
Letter Agreement solely by reason of Magten's breach of its commitments
described in the Letter Agreement or (ii) the Restructuring is consummated and
on the Effective Date all outstanding Obligations are repaid in full in cash,
and (b) if Magten terminates the Letter Agreement during the 45 day due
diligence period referred to in paragraph 3(b) thereof and prior to the later
of (i) the end of such 45 day period and (ii) 5 days following Magten's notice
of such termination to Borrowers, the sum of (A) $750,000 and (B) all
outstanding Obligations shall have been paid in full in cash to the Lenders,
then Borrowers' obligation in respect of the Closing Fee shall be deemed to
have been satisfied in full.
2.08. Interest Rate. The Obligations shall bear interest at a rate (the
"Interest Rate") per annum equal to the greater of (i) the highest per annum
interest rate for "Loans" (as such term is used in the Congress Loan Agreement)
in effect from time to time under the Congress Loan Agreement plus 3% and (ii)
12%.
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2.09. Interest Payment Dates. The Borrowers shall pay interest on the
unpaid principal amount of each Loan and the Closing Fee from the date of such
Loan or, in the case of the Closing Fee, from the Closing Date, until such
principal amount shall be paid in full, which interest shall be payable monthly
in arrears on the first Business Day of each month, commencing June 1, 1997.
2.10. Payments. (a) Time, Place and Manner. All payments to be made in
respect of the Obligations or other amounts due hereunder, under the Term Notes
or any other Loan Document shall be payable at or before 12:00 Noon, New York
City time, on the day when due without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived. Such payments shall be
made in Dollars by wire transfer in funds immediately available to each Lender
in its Percentage Interest of such payments according to the wire instructions
set forth on Schedule II hereto (or at any other address at which such Lender
shall notify the Borrowers in writing), without setoff, counterclaim or other
deduction or defense of any nature or kind whatsoever. Interest on all
Obligations and all fees that accrue on a per annum basis shall be computed on
the basis of the actual number of days elapsed in the period during which
interest or such fee accrues and a year of 360 days. In computing interest on
any Loan, the date of the making of such Loan shall be included and the date of
payment shall be excluded.
(b) Interest Upon Events of Default. To the extent permitted by law,
after there shall have occurred and so long as there is continuing an Event of
Default pursuant to Section 7.01, all principal, interest, fees, indemnities or
any other Obligations of the Borrowers hereunder, or under any Term Note or any
other Loan Document (and including, without limitation, interest accrued under
this subsection 2.10(b)) shall compound on a daily basis as provided in this
subsection 2.10(b) and shall bear interest for each day until paid (before and
after judgment), payable on demand, at a rate per annum of 2% above the
Interest Rate for such day.
2.11. Use of Proceeds. The Borrowers hereby covenant, represent and
warrant that the proceeds of the Term Loans made to them will be used first to
retire the $5,000,000 Congress Supplemental Line (and any and all accrued
interest, fees and expenses due to Congress in connection therewith), and
thereafter to fund working capital in the ordinary course of the business of
the Borrowers and the Guarantors through the Effective Date.
2.12. Taxes. (a) All payments made by any Borrower or Guarantor
hereunder, under the Term Notes or under any other Loan Document will be made
without setoff, counterclaim or other deduction or defense of any nature or
kind whatsoever. All such payments shall be made free and clear of, and
without deduction for, any present or future income, franchise, sales, use,
excise, stamp or other taxes, levies, imposts, deductions, charges, fees,
withholdings, restrictions or conditions of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any
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jurisdiction (whether pursuant to United States Federal, state, local
or foreign law) or by any political subdivision or taxing authority thereof or
therein, and all interest, penalties or similar liabilities, excluding taxes on
the overall net income of any Lender (such nonexcluded taxes are hereinafter
collectively referred to as the "Taxes"). If any Borrower or Guarantor shall
be required by law to deduct or to withhold any Taxes from or in respect of any
amount payable hereunder, (i) the amount so payable shall be increased to the
extent necessary so that after making all required deductions and withholdings
(including Taxes on amounts payable to the Lenders pursuant to this sentence)
the Lenders receive an amount equal to the sum they would have received had no
such deductions or withholdings been made, (ii) such Borrower or Guarantor
shall make such deductions or withholdings, and (iii) such Borrower or
Guarantor shall pay the full amount deducted or withheld to the relevant
taxation authority in accordance with applicable law. Whenever any Taxes are
payable by any Borrower, as promptly as possible thereafter, such Borrower or
Guarantor shall send the Lenders an official receipt showing payment. In
addition, the Borrowers and Guarantors agree to pay any present or future
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery, performance, recordation or filing of, or
otherwise with respect to, this Agreement, the Term Notes or any other Loan
Document (hereinafter referred to as "Other Taxes").
(b) The Borrowers will indemnify each Lender for the amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.11) paid by such
Lender and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be paid immediately following the date on
which such Lender makes written demand.
(c) If any Borrower or Guarantor fails to perform its obligations under
this Section 2.12, the Borrowers shall indemnify the Lenders for any
incremental taxes, interest or penalties that may become payable as a result of
any such failure.
ARTICLE III
CONDITIONS PRECEDENT TO LOANS
3.01. Conditions Precedent to Initial Term Loan. This Agreement shall
become effective as of the Business Day when each of the following conditions
precedent shall have been satisfied and the obligation of Lenders to make the
Initial Term Loan hereunder shall be subject to the satisfaction of the
following conditions precedent:
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(a) Payment of Expenses, Etc. The Borrowers shall have paid all amounts
then owing to the Lenders by the Borrowers or Guarantors hereunder, or under
any other Loan Document or the Letter Agreement, including, without limitation,
those amounts due and payable on the Closing Date pursuant to Section 9.05
hereof. The Borrowers shall have paid to counsel to the Lenders all fees and
other client charges due to such counsel on the Closing Date.
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Article IV of this Agreement and in
each other Loan Document and certificate or other writing delivered to the
Lenders pursuant hereto or thereto or prior to the Closing Date shall be
correct on and as of the Closing Date as though made on and as of such date;
and no Potential Default or Event of Default shall have occurred and be
continuing on the Closing Date or would result from (i) this Agreement becoming
effective in accordance with its terms or (ii) the Loans being made on the
Closing Date.
(c) Legality. The making of the Loans shall not contravene any law, rule
or regulation applicable to the Lenders.
(d) Delivery of Documents. Lenders shall have received on or before the
Closing Date the following, each in form and substance satisfactory to the
Lenders and their counsel and, unless indicated otherwise, dated the Closing
Date:
(i) Each Lender shall have received its respective Initial Term Note
payable to the order of such Lender and duly executed by each Borrower;
(ii) the Security Agreement, duly executed by each Borrower and
Guarantor, together with the Collateral Assignments of Trademarks and Trademark
Licenses (Security Agreements) and Copyright Mortgages and Security Agreements
duly executed by the applicable Borrower or Guarantor;
(iii) the Pledge Agreements duly executed by each Borrower and
Guarantor;
(iv) the Intercreditor Agreement duly executed by Congress and duly
acknowledged by the Borrowers and the Guarantors;
(v) acknowledgment copies of appropriate financing statements on Form
UCC-1, duly executed by the Borrowers and the Guarantors and duly filed in such
office or offices as may be necessary or, in the opinion of the Lenders,
desirable to perfect the security interests purported to be created by the
Security Documents and evidence that all necessary filing fees and taxes or
other expenses related to such filings have been paid in full;
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(vi) a copy of the resolutions adopted by the Board of Directors of
each of the Borrowers and the Guarantors, certified as of the Closing Date by
authorized officers thereof, authorizing (A) in the case of the Borrowers, the
borrowings hereunder and the transactions contemplated by the Loan Documents to
which each Borrower is or will be a party, and (B) the execution, delivery and
performance by such Person of each Loan Document and the execution and delivery
of the other documents to be delivered by such Person in connection therewith;
(vii) a certificate of an authorized officer of each Borrower and the
Guarantors, certifying the names and true signatures of the officers of such
Person authorized to sign each Loan Document to which such Person is or will be
a party and the other documents to be executed and delivered by such Person in
connection therewith, together with evidence of the incumbency of such
authorized officers;
(viii) a certificate, dated as of a date not more than five Business
Days prior to the Closing Date, of the appropriate official(s) of the states of
incorporation and each state of foreign qualification of the Borrowers and the
Guarantors, certifying as to the subsistence in good standing of, and the
payment of taxes by, such Person in such states and listing all charter
documents of such Person on file with such official(s), together with
confirmation by telephone or telegram (where available) on the Closing Date
from such official(s) as to such matters;
(ix) a copy of the charter of the Borrowers and the Guarantors
certified as of a date not more than three days prior to the Closing Date by
the appropriate official(s) of the state of incorporation of each such Person
and as of the Closing Date by an authorized officer of each such Person;
(x) a copy of the by-laws of the Borrowers and the Guarantors,
certified as of the Closing Date by an authorized officer of each such Person;
(xi) an opinion of Katten, Muchin & Zavis, counsel to the Borrowers
and the Guarantors, in form and substance satisfactory to the Lenders;
(xii) a certificate of the Designated Financial Officer of each of the
Borrowers, certifying as to the matters set forth in Section 3.01(b);
(xiii) a certificate of insurance evidencing insurance on the property
of the Borrowers and the Guarantors as is required by Article VI of this
Agreement, naming the Lenders as additional insureds and loss payees, using a
long form loss payee endorsement, for all insurance maintained by the Borrowers
and the Guarantors on the Inventory;
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(xiv) a certificate of an authorized officer of the Borrowers
certifying the names and true signatures of those officers of the Borrowers
that are authorized to provide all notices under this Agreement and the Loan
Documents;
(xv) true and complete certified copies of the Congress Debt
Documents as in effect on the Closing Date;
(xvi) evidence satisfactory to Lenders in their sole discretion that
all obligations under the Congress Supplemental Line (including all interest
accrued and unpaid with respect thereto) have been paid in full and fully
satisfied and that the Fund V Guarantee has been extinguished;
(xvii) the First Supplemental Indenture duly executed by the
Indenture Trustee, the Borrowers and the Guarantors;
(xviii) certified copies of requests for copies of information on Form
UCC-11 or reports from a reporting company satisfactory to the Lenders, listing
all effective UCC financing statements, tax liens and judgment liens which name
as debtor any Borrower or Gurantor and which are filed in the appropriate
offices in the states in which are located the chief executive office and other
operating offices of such Person, together with copies of such financing
statements;
(xix) the written consent of Congress in accordance with the Congress
Loan Documents permitting the transactions contemplated under this Agreement
and the other Loan Documents to occur in accordance herewith and therewith,
duly executed by Congress, Borrowers and Guarantors as of the Closing Date;
(xx) evidence satisfactory to Lenders in their sole discretion
that any and all agreements by and among any Borrower and/or Guarantor and
Congress ▇▇▇▇▇▇▇ Corporation, and any related security interests in any of the
Borrowers' or Guarantors' properties or assets, have been terminated,
including, without limitation, evidence that appropriate UCC-3 termination
statements have been filed in the applicable jurisdictions; and
(xxi) such other agreements, instruments, approvals, opinions and
other documents as the Lenders may reasonably request.
(e) Lien Priority. The Liens in favor of the Lenders pursuant to the Loan
Documents shall be valid and perfected, first priority Liens on the Collateral,
subject only to the Permitted Liens.
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(f) Legal Restraints/Litigation. There shall be no (1) litigation,
investigation or proceeding (judicial or administrative) pending or threatened
against the Borrowers or the Guarantors or their respective assets or
properties, by any Person relating in any way to the transactions contemplated
by this Agreement and the other Loan Documents or the consummation of the
Restructuring, (2) injunction, writ or restraining order restraining or
prohibiting the transactions contemplated by this Agreement and the other Loan
Documents or the consummation of the Restructuring, or (3) suit, action,
investigation or proceeding (judicial or administrative) pending or threatened
against the Borrowers or the Guarantors, or their assets, which, in the opinion
of the Lenders, if adversely determined could have a Material Adverse Effect.
(g) Indebtedness. The Borrowers and the Guarantors shall have no
Indebtedness or other liabilities other than (1) Indebtedness to Congress under
the Congress Loan Agreement, (2) Indebtedness permitted under the Congress Loan
Agreement but only to the extent such Indebtedness exists as of the date
hereof, and (3) Indebtedness permitted under the Loan Documents.
(h) Congress Obligations. The outstanding Indebtedness under the Congress
Debt Documents shall not exceed $40,000,000, after giving effect to the
satisfaction in full of all obligations under the Congress Supplemental Line
(including all interest accrued and unpaid with respect thereto).
(i) Material Adverse Effect. Since April 25, 1997, no situation, event or
circumstance shall have occurred which could have a Material Adverse Effect
which has not been fully and accurately disclosed to Lenders in writing.
3.02. Conditions Precedent to Subsequent Term Loan. In addition to the
requirements of Section 3.01, the obligation of the Lenders to make the
Subsequent Term Loan is subject to the fulfillment, in a manner satisfactory to
the Lenders, of each of the following conditions precedent:
(a) Payment of Expenses, Etc. The Borrowers shall have paid all expenses
and taxes then payable by the Borrowers pursuant to Section 9.05 hereof;
(b) Representations and Warranties; No Event of Default. The following
statements shall be true, and the submission by the Borrowers to the Lenders of
the Notice of Borrowing with respect to the Subsequent Term Loan and the
Borrowers' acceptance of the proceeds of such Loan shall be deemed to be a
representation and warranty by the Borrowers on the date of such Loan that, (i)
the representations and warranties contained in Article IV of this Agreement
and in each other Loan Document and certificate or other writing delivered to
the Lenders pursuant hereto on or prior to the Subsequent Borrowing Date are
correct on and as of such date as though made on and as of such date (except
for representations and warranties which relate to a specific date);
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and (ii) no Potential Default or Event of Default has occurred and is
continuing or would result from the making of the Loan to be made on such date.
(c) Legality. The making of the Subsequent Term Loan shall not contravene
any law, rule or regulation applicable to the Lenders.
(d) Borrowing Notice. Each Lender shall have received the Notice of
Borrowing pursuant to Section 2.04 hereof no later than 12:00 noon (New York
City time) on the date which is ten (10) Business Days prior to the date of
such proposed borrowing.
(e) Delivery of Documents. Each Lender shall have received its respective
Subsequent Term Note payable to the order of such Lender and duly executed by
the Borrowers and such other agreements, instruments, approvals and other
documents, each in form and substance satisfactory to the Lenders, as the
Lenders may reasonably request.
(f) Lien Searches. Certified copies of requests for copies of information
on Form UCC-11 or reports from a reporting company satisfactory to the Lenders,
listing all effective UCC financing statements, tax liens and judgment liens
which name as debtor any Borrower or Gurantor and which are filed in the
appropriate offices in the states in which any of the Borrowers or Guarantors
own or have an interest in real property or the Real Property Collateral is
located, together with copies of such financing statements.
(g) Real Property Documents. The Lenders shall have received the
Mortgages duly executed by the Borrowers and Guarantors, as applicable, and
title policies and opinions of counsel in respect of the Real Property
Collateral, in each case in form and substance satisfactory to the Lenders.
(h) Material Adverse Effect. Since the Closing Date, no situation, event
or circumstance shall have occurred which could have a Material Adverse Effect.
The Notice of Borrowing shall constitute a representation and warranty by
the Borrowers that the conditions set forth in this Section 3.02 have been
satisfied as of the date of such request. Failure of the Lenders to receive
notice from the Borrowers to the contrary before the Subsequent Borrowing Date
shall constitute a further representation and warranty by the Borrowers that
the conditions set forth in this Section 3.02 have been satisfied as of the
Subsequent Borrowing Date.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Lenders the
following (which shall survive the execution and delivery of this Agreement):
4.01. Corporate Existence, Power and Authority; Subsidiaries. Each
Borrower and Guarantor is a corporation duly organized and in good standing
under the laws of its state of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify has not had and could not reasonably be expected to have
a Material Adverse Effect. The execution, delivery and performance of this
Agreement, the other Loan Documents and the transactions contemplated hereunder
and thereunder are all within each Borrower's and Guarantor's corporate powers,
have been duly authorized and are not in contravention of law or the terms of
such Borrower's or Guarantor's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which such Borrower or Guarantor is a party or by which such Borrower or
Guarantor or its property are bound. This Agreement and the other Loan
Documents constitute legal, valid and binding obligations of each Borrower and
Guarantor enforceable in accordance with their respective terms. No Borrower
or Guarantor has any Subsidiaries except as set forth on Schedule III hereto.
4.02. Financial Statements; No Material Adverse Change. All financial
statements relating to the Borrowers and Guarantors which have been delivered
by any Borrower or Guarantor to Lenders on or prior to any date that this
representation and warranty is made or deemed to be made have been prepared in
accordance with GAAP and fairly present the financial condition and the results
of operation of such of the Borrowers and Guarantors as are included therein as
at the dates and for the periods set forth therein. Since April 25, 1997, no
situation, event or circumstance shall have occurred which could have a
Material Adverse Effect which has not been fully and accurately disclosed to
Lenders in writing.
4.03. Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and Guarantor and each Borrower's and Guarantor's
records concerning Receivables are located only at the address set forth on the
signature pages to this Agreement and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
Schedule IV hereto, subject to the right of a Borrower or Guarantor to
establish new locations in accordance with Section 6.01 below. Schedule IV
correctly identifies any of such locations which are not owned by a Borrower or
Guarantor and sets forth the owners and/or operators thereof and to the best
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of the applicable Borrower's and Guarantor's knowledge, the holders of any
mortgages on such locations.
4.04. Priority of Liens; Title to Properties. The security interests and
liens granted to Lenders under this Agreement and the other Loan Documents
constitute valid and perfected first priority liens and security interests in
and upon the Collateral, subject only to the Permitted Liens. Each Borrower
and Guarantor has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Lenders and the Permitted Liens.
4.05. Maintenance of Equipment. The Equipment is, and will be kept by the
Borrowers and Guarantors, in good operating condition and repair (ordinary wear
and tear excepted).
4.06. Tax Returns. Each Borrower and Guarantor has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it (without requests for extension except as previously
disclosed in writing to Lenders). All information in such tax returns, reports
and declarations is complete and accurate in all material respects. Each
Borrower and Guarantor has paid or caused to be paid all taxes due and payable
or claimed due and payable in any assessment received by it, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower or Guarantor and with respect
to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and
payable and whether or not disputed.
4.07. Litigation. Except as disclosed on Schedule V hereto, there is no
present investigation by any governmental agency pending, or to the best of any
Borrower's and Guarantor's knowledge threatened, against or affecting any
Borrower or Guarantor, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of any Borrower's or
Guarantor's knowledge threatened, against any Borrower or Guarantor or its
assets or goodwill, or against or affecting any transactions contemplated by
this Agreement or the other Loan Documents, which has resulted, or if adversely
determined against a Borrower or Guarantor could reasonably be expected to
result, in any Material Adverse Effect.
4.08. Compliance with Other Agreements and Applicable Laws. Except as
disclosed on Schedule VI hereto, no Borrower or Guarantor is in default under,
or in violation of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and each Borrower and Guarantor is in compliance with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local
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governmental authority. No "Event of Default" (as defined in the
Congress Loan Agreement) has occurred under the Congress Loan Agreement which
has not been either waived by Congress prior to the Closing Date or cured prior
to the Closing Date.
4.09. Employee Benefits. (a) No Borrower or Guarantor or any of their
ERISA Affiliates maintains or is required to contribute to, and no Borrower or
Guarantor or any of their ERISA Affiliates previously maintained or was
previously required to contribute to, any employee pension benefit plan subject
to Title IV of ERISA.
(b) No Borrower or Guarantor or any of their ERISA Affiliates has engaged
in any transaction in connection with which a Borrower or Guarantor or any of
their ERISA Affiliates could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code in an aggregate amount in excess of $500,000.
(c) Full payment has been made of all amounts which any Borrower or
Guarantor or any of their ERISA Affiliates is required to have contributed
under the terms of each employee pension benefit plan as contributions to such
plan as of the last day of the most recent fiscal year of such plan ended prior
to the date hereof and where nonpayment could result in a liability to any
Borrower or Guarantor or any of their ERISA Affiliates in an aggregate amount
in excess of $500,000, and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any employee pension benefit plan that is subject to
Title IV of ERISA.
(d) None of the Borrowers or Guarantors or their ERISA Affiliates is or
has ever been obligated to contribute to any "multiemployer plan" (as such term
is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.
4.10. Environmental Compliance. (a) Except as disclosed on Schedule VII
hereto, no Borrower or Guarantor has generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder, where such
violation has had or could reasonably be expected to have a Material Adverse
Effect. The operations of each Borrower and Guarantor comply in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as disclosed on Schedule VII hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other person nor is any pending or
to the best of any Borrower's or Guarantor's knowledge threatened, with respect
to any non-compliance
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with or violation of the requirements of any Environmental Law by any
Borrower or Guarantor or the release, spill or discharge, threatened or actual,
of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
any Borrower or Guarantor or its business, operations or assets or any
properties at which any Borrower or Guarantor has transported, stored or
disposed of any Hazardous Materials.
(c) Except as disclosed on Schedule VII hereto, no Borrower or Guarantor
has any material liability (contingent or otherwise) in connection with a
release, spill or discharge, threatened or actual, of any Hazardous Materials
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials.
(d) Each Borrower and Guarantor has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of such Borrower or Guarantor under any
Environmental Law and all of such licenses, permits, certificates, approvals or
similar authorizations are valid and in full force and effect.
4.11. Accuracy and Completeness of Information. All information furnished
by or on behalf of any Borrower or Guarantor in writing to Lenders in
connection with this Agreement or any of the other Loan Documents or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Schedules attached hereto, is true and correct in all
material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred which has
had or could reasonably be expected to have a Material Adverse Effect, which
has not been fully and accurately disclosed to Lenders in writing.
4.12. Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Loan Documents shall
survive the execution and delivery of this Agreement and shall be deemed to
have been made again to Lenders on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lenders regardless of any investigation made or information
possessed by Lenders. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations or warranties
which any Borrower or Guarantor shall now or hereafter give, or cause to be
given, to Lenders.
4.13. Enforceability of Loan Documents. This Agreement is, and each other
Loan Document to which each Borrower and each Guarantor is or will be a party,
when delivered hereunder, will be, a legal, valid and binding obligation of the
Borrowers
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and the Guarantors, enforceable against the Borrowers and the Guarantors in
accordance with its terms.
4.14. Nature of Business. The Borrowers and the Guarantors are primarily
engaged in the business of designing, manufacturing and marketing an extensive
line of decorative home accessories.
4.15. Use of Proceeds. The proceeds of the Term Loans shall be used first
to retire the $5,000,000 Congress Supplemental Line (and any and all accrued
and unpaid interest, fees and expenses with respect thereto) under the Congress
Loan Agreement, and thereafter for general working capital through the
Effective Date in the ordinary course of business of the Borrowers and the
Guarantors.
4.16. Congress Debt Documents. The copies of the Congress Debt Documents
delivered to the Lenders pursuant to Section 3.01(d) hereof are true, correct
and complete copies of the Congress Debt Documents.
4.17. Registration and Transfer of Term Notes. (a) The Borrowers shall
cause to be kept at the principal executive office of The Rug Barn, Inc. a
register (the register maintained in such office being herein referred to as
the "Note Register") in which the Borrowers shall provide for the registration
of the Term Notes and of transfers of Term Notes. The name and address of each
registered holder of a Term Note, each transfer thereof made pursuant to
paragraph (b) of this Section 4.17, and the name and address of each transferee
of the Term Notes shall be registered in the Note Register. The Note Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. The Borrowers hereby appoint The Rug
Barn, Inc. as security registrar (the "Note Registrar") for the purpose of
registering Term Notes and transfers of Term Notes as herein provided.
(b) Upon surrender for registration of transfer of any Term Note at the
principal executive office of The Rug Barn, Inc., the Borrowers and the
Guarantors shall execute and deliver, in the name of the designated transferee
or transferees, one or more new Term Notes of denominations of a like aggregate
principal amount. All Term Notes issued upon any registration of transfer of
Term Notes shall be the valid obligations of the Borrowers and the Guarantors,
evidencing the same debt (including, without limitation, the Guarantee), and
entitled to the same benefits under this Agreement and the other Loan
Documents, as the Term Notes surrendered upon such registration of transfer.
Every Term Note presented or surrendered for registration of transfer shall (if
so required by the Borrowers) be duly endorsed, or be accompanied by a written
instrument of transfer, in form reasonably satisfactory to the Borrowers duly
executed by the registered holder thereof or his attorney duly authorized in
writing. No service charge shall be made for any registration of transfer of
Term Notes.
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ARTICLE V
COLLATERAL
5.01. Grant of Security Interest. As collateral security for all of the
Secured Obligations, each Borrower and each Guarantor hereby pledges and
assigns to the Lenders, their successors and assigns, and hereby grants to the
Lenders an undivided continuing senior, first priority security interest in and
to all of such Borrower's or Guarantor's right, title and interest in and to
the following (the "Collateral"):
(a) all equipment of any kind and in all of its forms, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired (including, but not limited to, all machinery, apparatus, furniture,
fixtures, excluding fixtures bearing or identified by the ▇▇▇▇▇▇ ▇▇▇▇▇
Intellectual Property (unless removed or as approved by ▇▇▇▇▇▇ ▇▇▇▇▇, Inc.),
conveyors, tools, attachments, materials, storage and handling equipment, motor
vehicles, boats, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof), together with all substitutes, replacements, accessions and
additions thereto, and all tools, parts, accessories and attachments used in
connection therewith (hereinafter collectively referred to as the "Equipment");
(b) all Inventory of any kind and in all of its forms, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired;
(c) (i) all accounts, contract rights, chattel paper, instruments, deposit
accounts, general intangibles and other obligations of any kind (including, but
not limited to, any obligations of a Borrower or Guarantor to another Borrower
or Guarantor) whether now or hereafter existing, whether now owned or hereafter
acquired, and whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and (ii) all rights now or
hereafter existing in and to all credit insurance, guaranties, letters of
credit, security agreements, leases and other contracts now or hereafter
existing and securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, deposit accounts, general intangibles or
obligations (any and all such accounts, contract rights, chattel paper,
instruments, deposit accounts, general intangibles and obligations being
hereinafter referred to collectively as the "Receivables", and any and all such
credit insurance, guaranties, letters of credit, leases, security agreements
and other contracts, specifically excluding the ▇▇▇▇▇▇ ▇▇▇▇▇ License, being
hereinafter referred to collectively as the "Related Contracts");
(d) (i) all trademarks, service marks, trade names, business names, trade
styles, designs, logos, other source or business identifiers, copyrights and
all general intangibles of like nature, now or hereafter owned, adopted,
acquired or used by any Borrower or Guarantor, all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent
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and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other records of any Borrower or Guarantor relating to the
distribution of products and services in connection with which any of such
marks are used, and all income, royalties, damages and payments now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, payments under all licenses entered into in connection therewith
and damages and payments for past and future infringements or dilutions thereof
and the right to ▇▇▇ for past, present and future infringements and dilutions
thereof (hereinafter referred to collectively as the "Trademarks"); provided,
however, that Trademarks excludes any and all interests and/or rights to use
the trademark "▇▇▇▇▇▇ ▇▇▇▇▇" (or "CK/▇▇▇▇▇▇ ▇▇▇▇▇" or other derivative thereof)
deriving from the ▇▇▇▇▇▇ ▇▇▇▇▇ License or otherwise including any and all
copyrights, copyrightable material or other intellectual property or
proprietorial data or information which may exist or arise in connection
therewith or relating thereto (collectively, the "▇▇▇▇▇▇ ▇▇▇▇▇ Intellectual
Property"), and (ii) all licenses (other than the ▇▇▇▇▇▇ ▇▇▇▇▇ License and any
sublicenses thereunder), contracts or other agreements, whether written or
oral, naming any Borrower or Guarantor as licensor or licensee and providing
for the grant of any right to use any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses or agreements and
the right to prepare for sale and sell any and all Inventory now or hereafter
owned by any Borrower or Guarantor and now or hereafter covered by such
licenses (hereinafter referred to collectively as the "Trademark Licenses");
(e) (i) all moneys, securities and other property, and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Lenders
from or for any Borrower or Guarantor, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of the Borrowers' and
Guarantors' claims against any Lender at any time existing; (ii) all rights
relating to the sale or other transfer of property to, or the construction,
renovation or other improvement of property by or for, any Borrower or
Guarantor; (iii) all rights, interests, choses in action, causes of actions,
claims and all other intangible property of every kind and nature, in each
instance whether now owned or hereafter acquired by any Borrower or Guarantor,
including, without limitation, all corporate and other business records, all
loans, royalties, and all other forms of obligations receivable whatsoever
(other than Receivables); (iv) all customer and supplier contracts, sale
orders, rights under license and franchise agreements, and other contracts and
contract rights (other than the ▇▇▇▇▇▇ ▇▇▇▇▇ License); (v) all interests
(including, without limitation, profit participations) in partnerships, joint
ventures, corporations, limited liability companies or other Persons, and all
other equity or debt securities issued by any Persons, including all moneys due
from time to time in respect thereof; (vi) all federal, state and local tax
refunds and federal, state and local tax refund claims; (vii) all right, title
and interest under leases, subleases, licenses and concessions
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and other agreements relating to personal property, including all
moneys due from time to time in respect thereof; (viii) all payments due or
made to any Borrower or Guarantor in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property by any
Person, Governmental Authority or regulatory body; (ix) all deposit accounts
(general or special) with any bank or other financial institution and all funds
on deposit therein, and all certificates and instruments, if any, from time to
time representing or evidencing any of such accounts; (x) all credits with and
other claims against third parties (including carriers and shippers) (other
than Receivables); (xi) all rights to indemnification; (xii) all reversionary
interests in pension and profit sharing plans and reversionary, beneficial and
residual interests in trusts; (xiii) all letters of credit, guaranties, liens,
security interests and other security held by or granted to any Borrower or
Guarantor; (xiv) all instruments, files, records, ledger sheets and documents
covering or relating to any of the Collateral; (xv) all other intangible
property, whether or not similar to the foregoing, in each instance, however
and wherever arising (other than the ▇▇▇▇▇▇ ▇▇▇▇▇ Intellectual Property); (xvi)
all notes, certificates of deposit, deposit accounts, checks and other
instruments from time to time hereafter delivered to or otherwise possessed by
any Lender for or on behalf of any Borrower or Guarantor, in substitution for
or in addition to any or all of the foregoing; and (xvii) all interest,
dividends, cash, instruments and other property and assets from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing;
(f) the books and records of the Borrowers and the Guarantors relating to
any of the Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral;
(g) all of the shares of capital stock of each of the Borrowers and each
of the Guarantors (other than Decorative Homes);
(h) the Real Property Collateral and any estates or interests in real
property now owned and hereafter acquired by any Borrower or Guarantor
(including, without limitation, leasehold estates or interests);
(i) any such other property not included under paragraphs (a) through (h)
above that would otherwise be deemed to constitute "Collateral" as defined in
the Congress Loan Agreement, as such agreement may be amended, modified or
replaced from time to time, or in any other Congress Debt Document;
(j) any and all other assets or property of any kind and in all of its
forms, wherever located and whether now or hereafter existing and whether now
owned or hereafter acquired, not included under paragraphs (a) through (i)
above; and
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(k) all proceeds (in whatever form, whether cash, securities or any other
type of property) of any and all of the foregoing Collateral (including,
without limitation, (A) damages and payments for past or future infringements
of the Trademarks and (B) the right to ▇▇▇ for past, present and future
infringements of the Trademarks) and, to the extent not otherwise included, all
payments under insurance (whether or not the Lenders are the loss payees
thereof), any indemnity, warranty or guaranty payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral;
in each case howsoever any Borrower's or any Guarantor's interest therein may
arise or appear (whether by ownership, security interest, claim or otherwise).
Notwithstanding the foregoing, the senior, first priority security
interest granted to the Lenders in the Collateral shall be subject to Permitted
Liens.
5.02. Security for Secured Obligations. The security interest created
hereby and by the Security Documents in the Collateral constitutes continuing
collateral security for the payment of all of the Obligations and all
obligations of each Borrower and Guarantor now or hereafter arising under or
with respect to this Agreement, the Guarantee, the Term Notes or any other Loan
Document, whether for principal, premium, interest, fees, expenses or
otherwise, including, without limitation, the obligations to pay the Term Loans
and the Closing Fee and to perform each and every obligation set forth in this
Agreement (including, without limitation, the Guarantee), the Term Notes and
the other Loan Documents (all such obligations being hereinafter collectively
referred to as the "Secured Obligations").
5.03. Proceeds of Collateral. The proceeds of any sale or other
disposition of Collateral by any Lender permitted under this Agreement or any
other Loan Document shall be distributed by such Lender to each Lender based
upon each Lender's Percentage Interest.
ARTICLE VI
AFFIRMATIVE AND NEGATIVE COVENANTS
6.01. Covenants Under Congress Loan Agreement. Section 9 of the Congress
Loan Agreement and any definitions of any capitalized terms set forth in such
section which are set forth in the Congress Loan Agreement (as in effect on the
date of this Agreement) shall be incorporated by reference in this Agreement
(without regard to any amendment, supplement, modification or waiver relating
thereto or the termination or expiration thereof) to the same extent as if set
forth at length herein, except that all references to the term "Lender" shall
mean the Lenders, and the Borrowers and Guarantors jointly and severally agree
to cause the Borrowers and Guarantors to perform and observe their covenants,
agreements and obligations under said Section 9, so long as
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the Obligations (whether or not due) remain unpaid in full in cash,
including without limitation all principal of and accrued and unpaid interest
on the Loans.
6.02. Liens. No Borrower or Guarantor shall create, incur, assume or
suffer to exist any Lien on any of its assets or properties including, without
limitation, the Collateral, except the Permitted Liens.
6.03. Indebtedness. No Borrower or Guarantor shall incur, create, assume,
become or be liable in any manner with respect to, or permit to exist, any
obligation or Indebtedness, except (a) Indebtedness to Congress under the
Congress Loan Agreement, (b) Indebtedness permitted under the Congress Loan
Agreement but only to the extent such Indebtedness exists as of the date
hereof, and (c) Indebtedness permitted under the Loan Documents.
6.04. Post-Closing Date Covenants. Within 30 days following the Closing
Date, the Borrowers shall cause (i) each of the parties to whom the letter
agreements annexed hereto as Exhibit J are addressed to execute and deliver to
the Lenders letter agreements substantially in the form of the agreements
annexed as Exhibit J hereto in favor of the Lenders, with all references to
"Congress" being replaced with "the Lenders", (ii) UCC-3 termination
statements, satisfactory to Lenders in all respects, with respect to any and
all Liens filed against the property or assets of any Borrower or Guarantor by
LaSalle National Bank or The CIT Group, including without limitation all such
statements described on Schedule VIII hereto, to be executed by the appropriate
Borrower or Guarantor and filed in the appropriate jurisdictions and (iii) file
any and all documentation, satisfactory to Lenders in all respects, with the
appropriate Governmental Authority or other Person in order to establish The
Rug Barn, Inc. as the owner of the trademarks and copyrights listed on Schedule
IX hereto.
6.05. Overadvances. No Borrower or Guarantor shall incur, create,
assume, become or be liable in any manner with respect to, or permit to exist
any Indebtedness under the credit facility provided by Congress pursuant to the
Congress Loan Agreement which constitutes an overadvance under such facility.
ARTICLE VII
DEFAULTS
7.01. Events of Default. An Event of Default shall mean the occurrence or
existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of law):
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(a) The Borrowers shall fail to pay when due any of the Obligations;
or
(b) Any representation or warranty made by the Borrowers or
Guarantors under this Agreement or any other Loan Document or any
statement made by the Borrowers or Guarantors in any financial statement,
certificate, report or document furnished to any Lender pursuant to or in
connection with this Agreement or any other Loan Document, shall prove to
have been false or misleading in any material respect as of the time when
made (including by omission of material information necessary to make
such representation, warranty or statement, in light of the circumstances
under which it was made, not misleading), or any of the Borrowers or
Guarantors shall fail to observe or perform any of the covenants or
provisions contained in this Agreement or any of the other Loan
Documents; or
(c) Any "Event of Default" shall have occurred under the Congress
Loan Agreement; or
(d) Any Congress Debt Document shall be amended, modified or
supplemented subsequent to the date hereof without the prior written
consent of the Lenders; or
(e) The ▇▇▇▇▇▇ ▇▇▇▇▇ License shall cease to be in effect or shall be
terminated; or
(f) Any Borrower or any Guarantor (i) shall institute any proceeding
or voluntary case seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official
for any Borrower or any Guarantor or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, (iii) shall make a general assignment for the benefit of
creditors, or (iv) shall take any action to authorize or effect any of
the actions set forth above in this subsection (f); or
(g) Any proceeding shall be instituted against any Borrower or any
Guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or
other similar official for any
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Borrower or any Guarantor or for any substantial part of its property,
and either such proceeding shall remain undismissed or unstayed for a
period of 45 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against
it or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property) shall occur;
or
(h) Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Borrower or any Guarantor, or a
proceeding shall be commenced by any of the Borrowers, or by any
Governmental Authority or other regulatory body having jurisdiction over
any Borrower or any Guarantor, seeking to establish the invalidity or
unenforceability thereof, or any Borrower or any Guarantor shall deny in
writing that such Borrower or any Guarantor has any liability or
obligation purported to be created under any Loan Document; or
(i) The security interests purported to be created by the Security
Documents shall cease to be, or shall be asserted by any Borrower or any
of the Guarantors not to be, a valid, perfected, first priority security
interest in the Collateral covered thereby, subordinate to no other Lien
except for Permitted Liens; or
(j) The Guarantee shall cease to be, or shall be asserted by any
Borrower or any Guarantor not to be, in full force and effect and
enforceable in accordance with its terms, or any of the Borrowers or the
Guarantors shall contest or deny in writing the validity or enforceability
of any of the Obligations; or
(k) Any Borrower shall request or permit an overadvance under the
credit facility provided by Congress pursuant to the Congress Loan
Agreement, without the prior written consent of the Lenders.
7.02. Consequences of an Event of Default. If an Event of Default
shall occur and be continuing or shall exist, the Lenders may by notice to the
Borrowers,
(a) declare all Obligations, including, without limitation the
Loans, all interest thereon and all other amounts, to be immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers, and an action therefor
shall immediately accrue; or
(b) give notice to the Borrowers of the occurrence and
continuance of an Event of Default;
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provided, however, that upon the occurrence of any Event of Default described
in subsections (f) or (g) of Section 7.01, all Obligations, including, without
limitation, the Loans, all interest thereon and all other amounts, shall
immediately become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrowers.
7.03. Certain Remedies. If an Event of Default occurs, the Lenders may
exercise all rights and remedies which they may have hereunder or under any
other Loan Document or at law or in equity or otherwise. All such remedies
shall be cumulative and not exclusive.
7.04. Certain Events of Default. The Lenders hereby agree that any "Event
of Default" under the Congress Loan Agreement that is waived by Congress
pursuant to Section 3 of that certain Amendment and Consent, dated May 23,
1997, by and among, the Borrowers and the Guarantors, shall not constitute or
be deemed to constitute to an Event of Default under this Agreement.
ARTICLE VIII
GUARANTEE
8.01. Guarantee. Each of the Guarantors, for consideration received,
jointly and severally unconditionally and irrevocably guarantees to the Lenders
the due and punctual payment of the Obligations, whether or not arising after
the commencement of a proceeding under any Bankruptcy Law (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding, and whether or not recovery of any such obligation or
liability may be barred by a statute of limitations or such obligation or
liability may otherwise be unenforceable. All Obligations shall be
conclusively presumed to have been created in reliance on the Guarantee. The
Guarantee is a continuing guaranty of the Obligations and may not be revoked
and shall not otherwise terminate unless and until any and all Obligations have
been indefeasibly paid and performed in full, in cash.
8.02. Nature of Guarantee. The liability of each Guarantor under the
Guarantee is independent of and not in consideration of or contingent upon the
liability of the Borrowers or any other Guarantor and a separate action or
actions may be brought and prosecuted against any Guarantor, whether or not any
action is brought or prosecuted against the Borrowers or any other Guarantor or
whether any Borrower or any other Guarantor is joined in any such action or
actions. The Guarantee given by each Guarantor shall be construed as a
continuing, absolute and unconditional guaranty of payment (and not merely of
collection) without regard to:
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(a) the legality, validity or enforceability of the Term Notes, this
Agreement or any other Loan Document, any of the Obligations, any Lien on
Collateral, the security interest granted under this Agreement or any Security
Document or the Guarantee given by any other Guarantor;
(b) any defense (other than payment), set-off or counterclaim that may at
any time be available to the Borrowers or any other Guarantor against, and any
right of setoff at any time held by, the Lenders; or
(c) any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor or any Borrower), whether or not similar to any of
the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrowers or any other Guarantor, in
bankruptcy or in any other instance.
Any payment by any Borrower or any Guarantor or other circumstance that
operates to toll any statute of limitations applicable to such Persons shall
also operate to toll the statute of limitations applicable to each Guarantor.
8.03. Authorization. Each Guarantor authorizes the Lenders, without
notice to or further assent by such Guarantor, and without affecting any
Guarantor's liability hereunder (regardless of whether any subrogation or
similar right that such Guarantor may have or any other right or remedy of such
Guarantor is extinguished or impaired), from time to time to do any or all of
the following:
(a) permit the Borrowers to increase or create Obligations, or terminate,
release, compromise, subordinate, extend, accelerate or otherwise change the
amount or time, manner or place of payment of, or rescind any demand for
payment or acceleration of, the Obligations or any part thereof, consent or
enter into supplemental loan agreements or otherwise amend the terms and
conditions of the Loan Documents or any provision thereof;
(b) take and hold Collateral from the Borrowers or any other Person,
perfect or refrain from perfecting a Lien on such Collateral, and exchange,
enforce, subordinate, release (whether intentionally or unintentionally), or
take or fail to take any other action in respect of, any such Collateral or
Lien or any part thereof;
(c) exercise in such manner and order as they elect in their sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration
of, any of the remedies or rights of the Lenders against the Borrowers or any
Guarantor in respect of any Obligation or any Collateral;
(d) release, add or settle with any Guarantor or any Borrower in respect
of the Guarantee or the Obligations;
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(e) accept partial payments on the Obligations and apply any and all
payments or recoveries from any Guarantor or any Borrower or Collateral to such
of the Obligations as Lenders may elect in their sole discretion, whether or
not such Obligations are secured or guaranteed;
(f) refund at any time, at Lenders' sole discretion, any payments or
recoveries received by Lenders in respect of any Obligations or Collateral; and
(g) otherwise deal with any Borrower, any Guarantor and any Collateral as
Lenders may elect in their sole discretion.
8.04. Right to Demand Full Performance. In the event of any demand for
payment or performance by Lenders from any Guarantor hereunder, Lenders shall
have the right to demand their full claims and to receive all dividends or
other payments in respect thereof until the Obligations have been paid in full,
and the Guarantors shall continue to be jointly and severally liable hereunder
for any balance which may be owing to Lenders by the Borrowers under this
Agreement, the Term Notes or any other Loan Document. The retention by the
Lenders of any security, prior to the realization by the Lenders of their
rights to such security upon foreclosure thereon, shall not, as between the
Lenders and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Obligations due to the Lenders by the
Borrowers or any part thereof. Without limiting Section 9.05 or any other
provision of this Agreement, each Guarantor, promptly after demand, will
reimburse the Lenders for all costs and expenses of collecting such amount
under, or enforcing this Guarantee, including, without limitation, the
reasonable fees and expenses of counsel.
8.05. Certain Waivers. Each Guarantor waives:
(a) the right to require the Lenders to proceed against the Borrowers
or any other Guarantor, to proceed against or exhaust any Collateral or to
pursue any other remedy in Lenders' power whatsoever and the right to have the
property of any Borrower or any other Guarantor first applied to the discharge
of the Obligations;
(b) all rights and benefits under applicable law purporting to reduce a
guarantor's obligations in proportion to the obligation of the principal or
providing that the obligation of a surety or guarantor must neither be larger
nor in other respects more burdensome than that of the principal;
(c) the benefit of any statute of limitations affecting the Obligations
or any Guarantor's liability hereunder;
(d) any requirement of marshaling or any other principle of election of
remedies;
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(e) any right to assert against the Lenders any defense (legal or
equitable), set-off, counterclaim and other right that any Guarantor may now or
any time hereafter have against any Borrower or any other Guarantor;
(f) presentment, demand for payment or performance (including diligence
in making demands hereunder), notice of dishonor or nonperformance, protest,
acceptance and notice of acceptance of this Guarantee, and, except to the
extent expressly required by the Loan Documents, all other notices of any kind,
including (i) notice of any action taken or omitted by the Lenders in reliance
hereon, (ii) notice of any default by the Borrowers or any other Guarantor,
(iii) notice that any portion of the Obligations is due, (iv) notice of any
action against the Borrowers or any other Guarantor, or any enforcement of
other action with respect to any Collateral, or the assertion of any right of
the Lenders hereunder; and
(g) all defenses that at any time may be available to any Guarantor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect.
8.06. The Guarantors Remain Obligated in Event the Borrowers Are No Longer
Obligated to Discharge Obligations. It is the express intention of the Lenders
and the Guarantors that if for any reason any Borrower has no legal existence,
is or becomes under no legal obligation to discharge the Obligations owing to
the Lenders by the Borrowers or if any of the Obligations owing by the
Borrowers to the Lenders becomes irrecoverable from any Borrower by operation
of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Guarantors contained in this Article VIII
shall nevertheless be binding upon the Guarantors, as principal debtor, until
such time as all such Obligations have been paid in full in cash to the Lenders
and all Obligations owing to the Lenders by the Borrowers have been discharged,
and the Guarantors shall be responsible for the payment thereof to the Lenders
upon demand.
8.07. Severability of Void Obligations under Guarantee. The obligations
of any Guarantor hereunder shall be limited to the maximum amount that would
not render its obligations hereunder subject to avoidance under Section 548 of
the Bankruptcy Code or any applicable provisions of comparable state law.
8.08. Guarantee Is in Addition to Other Security. This Guarantee shall be
in addition to and not in substitution for any other guarantees or other
security which the Lenders may now or hereafter hold in respect of the
Obligations owing to the Lenders by the Borrowers and (except as may be
required by law) the Lenders shall be under no obligation to marshal in favor
of each of the Guarantors any other guarantees or other security or any moneys
or other assets which the Lenders may be entitled to receive or upon which any
Lender may have a claim.
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8.09. Release of Security Interest. Without limiting the generality of
the foregoing, each Guarantor hereby consents and agrees, to the fullest extent
permitted by applicable law, that the rights of the Lenders hereunder, and the
liability of the Guarantors hereunder, shall not be affected by any and all
releases for any purpose of any Collateral from the security interest created
by any Security Document and that this Guarantee shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by any Lender upon the
insolvency, bankruptcy or reorganization of any Borrower or otherwise, all as
though such payment had not been made.
8.10. No Bar to Further Actions. Except as provided by law, no action or
proceeding brought or instituted under this Article VIII and the Guarantee and
no recovery or judgment in pursuance thereof shall be a bar or defense to any
further action or proceeding which may be brought under this Article VIII and
the Guarantee by reason of any further default or defaults under this Article
VIII and the Guarantee or in the payment of any of the Obligations owing by the
Borrowers.
8.11. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of
the Lenders, any right, power, privilege or remedy under this Article VIII and
the Guarantee shall operate as a waiver thereof, nor shall any single or
partial exercise of any rights, power, privilege or remedy preclude any other
or further exercise thereof, or the exercise of any other rights, powers,
privileges or remedies. The rights and remedies herein provided for are
cumulative and not exclusive of any rights or remedies provided in law or
equity.
(b) Nothing contained in this Article VIII shall limit the right of
the Lenders to take any action to accelerate the maturity of the Obligations
pursuant to Article VII and as set forth in this Agreement or the other Loan
Documents or to pursue any rights or remedies hereunder or thereunder or under
applicable law.
8.12. Lenders' Duties; Notice to Lenders.
(a) Any provision in this Article VIII or elsewhere in this Agreement or
any other Loan Document allowing the Lenders to request any information or to
take any action authorized by, or on behalf of any Guarantor, shall be
permissive and shall not be obligatory on the Lenders.
(b) The Lenders shall not be required to inquire into the existence,
powers or capacities of any Borrower, any Guarantor or the officers, directors
or agents acting or purporting to act on their respective behalf.
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8.13. Successors and Assigns. All terms, agreements and conditions of
this Article VIII shall extend to and be binding upon each Guarantor and its
successors and permitted assigns and shall inure to the benefit of and may be
enforced by the Lenders and their respective successors and assigns.
8.14. Release of Guarantee. Concurrently with the payment in full in cash
of all of the Obligations, the Guarantors shall be released from and relieved
of their obligations under this Article VIII. If any of the Obligations are
revived and reinstated after the termination of this Guarantee, then all of the
obligations of the Guarantors under this Guarantee shall be revived and
reinstated as if this Guarantee had not been terminated until such time as the
Obligations are paid in full, in cash, and each Guarantor shall enter into an
amendment to this Guarantee, reasonably satisfactory to the Lenders, evidencing
such revival and reinstatement.
8.15. Execution of Guarantee. To evidence the Guarantee, each Guarantor
hereby agrees to execute a notation relating to the Guarantee to be endorsed on
each Term Note. Each Guarantor agrees that this Agreement shall be executed on
behalf of each Guarantor by its Chairman of the Board, its President, its Chief
Executive Officer, Chief Operating Officer or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries.
8.16. No Subrogation; Certain Agreements.
(a) EACH GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION, INDEMNITY
OR REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS TO ENFORCE ANY POWER,
RIGHT OR REMEDY THAT THE LENDERS MAY NOW OR HEREAFTER HAVE IN RESPECT OF THE
OBLIGATIONS AGAINST THE BORROWERS OR ANY OTHER GUARANTOR, ANY AND ALL BENEFITS
OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL, WHETHER REAL OR PERSONAL
PROPERTY, NOW OR HEREAFTER HELD BY THE LENDERS, AND ANY AND ALL OTHER RIGHTS
AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) ANY GUARANTOR MAY HAVE AGAINST
ANY BORROWER OR ANY OTHER GUARANTOR, UNDER APPLICABLE LAW OR OTHERWISE, AT LAW
OR IN EQUITY, BY REASON OF ANY PAYMENT UNDER THE GUARANTEE, UNLESS AND UNTIL
THE OBLIGATIONS SHALL HAVE BEEN PAID IN FULL IN CASH.
(b) Each Guarantor assumes the responsibility for being and keeping
itself informed of the financial condition of each other Guarantor and of all
other circumstances bearing upon the risk of nonpayment of the Obligations or
the Guarantee of any other Guarantor that diligent inquiry would reveal, and
agrees that the Lenders shall have no duty to advise any Guarantor of
information regarding such condition or any such circumstances.
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8.17. Bankruptcy; No Discharge. (a) Without limiting Section 8.02 or any
other provision of this Article VIII, the Guarantee shall not be discharged or
otherwise affected by any bankruptcy, reorganization or similar proceeding
commenced by or against any Borrower or any other Guarantor, including (i) any
discharge of, or bar or stay against collecting, all or any part of the
Obligations in or as a result of any such proceeding, whether or not assented
to by the Lenders, (ii) any disallowance of all or any portion of any claim for
repayment of the Obligations, (iii) any use of cash or other collateral in any
such proceeding, (iv) any agreement or stipulation as to adequate protection in
any such proceeding, (v) any failure by any Lender to file or enforce a claim
against any Borrower or any other Guarantor or its estate in any bankruptcy or
reorganization case, (vi) any amendment, modification, stay or cure of any
Lender's rights that may occur in any such proceeding, (vii) any election by
any Lender under Section 1112(b)(2) of the Bankruptcy Code, or (viii) any
borrowing or grant of a Lien under Section 364 of the Bankruptcy Code. Each
Guarantor understands and acknowledges that by virtue of this Guarantee, it has
specifically assumed any and all risks of any such proceeding with respect to
the Borrowers and each other Guarantor.
(b) Notwithstanding anything in this Article VIII to the contrary, any
Event of Default under Section 7.01(f) or (g) of this Agreement shall render
all Obligations automatically due and payable for purposes of the Guarantee,
without demand on the part of the Lenders.
(c) Notwithstanding anything to the contrary herein contained, the
Guarantee (and any Lien on the Collateral securing the Guarantee or the
Obligations) shall continue to be effective or be reinstated, as the case may
be, if at any time any payment, or any part thereof, of any or all of the
Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned
by any Lender in connection with any bankruptcy, reorganization or similar
proceeding involving any Borrower, any other Guarantor or otherwise, if the
proceeds of any Collateral are required to be returned by any Lender under any
such circumstances, or if any Lender elects to return any such payment or
proceeds or any part thereof in its sole discretion, all as though such payment
had not been made or such proceeds not been received.
ARTICLE IX
MISCELLANEOUS
9.01. Holidays. Except as otherwise provided herein, whenever any payment
or action to be made or taken hereunder or under the Notes, or the other Loan
Documents shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day and
such extension
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of time shall be included in computing interest or fees, if any, in connection
with such payment or action.
9.02. Amendments and Waivers. No amendment or modification of any
provision of this Agreement or of any of the Notes or of any other Loan
Document shall be effective without the prior written agreement of the Lenders
and the Borrowers and Guarantors and no termination or waiver of any provision
of this Agreement (including, without limitation, Section 2.07 hereof) or of
any of the Term Notes or consent to any departure by the Borrowers and
Guarantors therefrom, shall in any event be effective without the written
concurrence of the Lenders, which the Lenders shall have the right to grant or
withhold at their sole discretion. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Borrowers or the Guarantors in any case
shall entitle the Borrowers or Guarantors to any other or further notice or
demand in similar or other circumstances.
9.03. No Implied Waiver; Cumulative Remedies. No course of dealing and no
delay or failure of the Lenders in exercising any right, power or privilege
under this Agreement, the Notes or any other Loan Document shall affect any
other or future exercise thereof or exercise of any other right, power or
privilege; nor shall any single or partial exercise of any such right, power or
privilege or any abandonment or discontinuance of steps to enforce such a
right, power or privilege preclude any further exercise thereof or of any other
right, power or privilege. The rights and remedies of the Lenders under this
Agreement, the Term Notes and the other Loan Documents are cumulative and not
exclusive of any rights or remedies which the Lenders have hereunder or
thereunder or at law or in equity or otherwise. The Lenders may exercise their
rights and remedies against the Borrowers, the Guarantors and the Collateral as
the Lenders may elect, and regardless of the existence or adequacy of any other
right or remedy.
9.04. Notices.
(a) Unless otherwise provided herein, all notices, requests, demands,
directions and other communications (collectively "notices") under the
provisions of this Agreement, the Term Notes or any other Loan Document shall
be in writing and shall be mailed (by certified mail, postage prepaid and
return receipt requested), telecopied, or delivered and shall be effective (i)
if mailed, three days after being deposited in the mails, (ii) if telecopied,
when sent, confirmation received and (iii) if delivered, upon delivery. All
notices shall be sent to the applicable party at the address stated on the
signature page hereof or in accordance with the last unrevoked written
direction from such party to the other parties hereto.
(b) Without limiting Section 9.06 or any other provision of this
Agreement, the Lenders may rely, and shall be fully protected in relying, on
any notice purportedly made by or on behalf of the Borrowers or the Guarantors
and the Lenders
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shall have no duty to verify the identity or authority of any Person giving
such notice. The preceding sentence shall apply to all notices whether or not
made in a manner authorized or required by this Agreement or any other Loan
Document.
9.05. Expenses; Taxes; Attorneys' Fees; Indemnification. The Borrowers
agree to pay or cause to be paid, on demand, and to save the Lenders harmless
against liability for the payment of, all reasonable out-of-pocket expenses,
regardless of whether the transactions contemplated hereby are consummated,
including but not limited to reasonable fees and expenses of counsel for the
Lenders, accounting, due diligence, periodic field audits, investigation,
monitoring of assets, miscellaneous disbursements, examination, travel, lodging
and meals, incurred by the Lenders from time to time arising from or relating
to: (a) the negotiation, preparation, execution, delivery, performance and
administration of this Agreement and the other Loan Documents, (b) any
requested amendments, waivers or consents to this Agreement or the other Loan
Documents whether or not such documents become effective or are given, (c) the
preservation and protection of any of the Lenders' rights under this Agreement
or the other Loan Documents, (d) the defense of any claim or action asserted or
brought against any Lender by any Person that arises from or relates to this
Agreement, any other Loan Document, such Lender's claims against the Borrowers
or the Guarantors, or any and all matters in connection therewith, (e) the
commencement or defense of, or intervention in, any court proceeding arising
from or related to this Agreement or any other Loan Document, (f) the filing of
any petition, complaint, answer, motion or other pleading by any Lender, or the
taking of any action in respect of the Collateral or other security, in
connection with this Agreement or any other Loan Document, (g) the protection,
collection, lease, sale, taking possession of or liquidation of, any Collateral
or other security in connection with this Agreement or any other Loan Document,
(h) any attempt to enforce any lien or security interest in any Collateral or
other security in connection with this Agreement or any other Loan Document,
(i) any attempt to collect from the Borrowers or the Guarantors, (j) the
receipt of any advice with respect to any of the foregoing, (k) all
Environmental Liabilities and Costs arising from or in connection with the
past, present or future operations of any of the Borrowers or any of the
Guarantors involving any damage to real or personal property or natural
resources or harm or injury alleged to have resulted from any Release of
Hazardous Materials on, upon or into such property, (l) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Hazardous Materials present or arising out of the
operations of any facility of the Borrowers, the Guarantors or their respective
Subsidiaries, or (m) any costs or liabilities incurred in connection with any
Environmental Lien. Without limitation of the foregoing or any other provision
of any Loan Document: (x) the Borrowers agree to pay all stamp, document,
transfer, recording or filing taxes or fees (including, without limitation,
mortgage recording taxes) and similar impositions now or hereafter determined
by the Lenders to be payable in connection with this Agreement or any other
Loan Document, and the Borrowers agree to indemnify and hold the Lenders
harmless from
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and against any and all present or future claims, liabilities or losses with
respect to or resulting from any omission to pay or delay in paying any such
taxes, fees or impositions, and (y) if the Borrowers or the Guarantors fail to
perform any covenant or agreement contained herein or in any other Loan
Document, any Lender may itself perform or cause performance of such covenant
or agreement, and the expenses of such Lender incurred in connection therewith
shall be reimbursed on demand by the Borrowers. The Borrowers agree to
indemnify and defend the Lenders and their directors, officers, employees,
affiliates, partners, shareholders, counsel and agents and any affiliate of any
of the foregoing (collectively, the "Indemnified Parties") from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages,
costs or expenses of any nature whatsoever (including, without limitation,
fees, expenses and disbursements of counsel and amounts paid in settlement)
incurred by, imposed upon or asserted against any of them arising out of or by
reason of any investigation, litigation or other proceeding brought or
threatened relating to, or otherwise arising out of or relating to, the
execution of this Agreement, the Letter Agreement or any other Loan Document,
the transactions contemplated hereby or thereby or any Loan or proposed Loan
hereunder (including, but without limitation, any use made or proposed to be
made by the Borrowers, the Guarantors or any of their Affiliates of the
proceeds of any thereof, or the delivery or use or transfer of or the payment
or failure to pay under any Loan) but excluding any such losses, liabilities,
claims, damages, costs or expenses to the extent finally judicially determined,
by a final and non-appealable order of a court of competent jurisdiction, to
have directly resulted directly from the gross negligence or willful misconduct
of the Indemnified Party.
9.06. Several and Not Joint; Limited Liability. (a) Notwithstanding
anything herein or in any other Loan Document to the contrary, or any document
or instrument executed and delivered in connection herewith, the parties hereto
agree that the obligations, liabilities and indemnities of each Lender
hereunder shall be several and not joint, and no Lender shall have any
liability hereunder for any breach by any other Lender of any obligation of
such Lender set forth herein or in any other Loan Document.
(b) The Borrowers and Guarantors hereby acknowledge and agree that
neither this Agreement nor any other Loan Document is being executed on behalf
of the partners of any Lender that is a limited partnership as individuals and
the obligations of this Agreement are not binding upon any of the partners,
officers, employees or beneficiaries of such Lender individually but are
binding only upon the assets and property of such Lender, and the Borrowers and
Guarantors agrees that no beneficiary, partner, employee or officer of such
Lender may be held personally liable or responsible for any obligations of such
Lender arising out of this Agreement or any other Loan Document. With respect
to obligations of each Lender arising out of this Agreement or any other Loan
Document, the Borrowers and Guarantors shall look for payment or satisfaction
of any claim solely to the assets and property of such Lender.
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(c) Magten represents and warrants to the Borrowers and Guarantors that
it has full power and authority to execute and deliver this Agreement as agent
or as general partner, as applicable, for the Lenders on whose behalf Magten is
executing this Agreement as set forth on the signature pages hereto. Except
for the foregoing representations and warranties, the Borrowers and Guarantors
hereby acknowledge and agree that Magten shall not have any personal obligation
or liability to the Borrowers and Guarantors under this Agreement or any other
Loan Document but that it is acting solely for and on behalf of the
aforementioned Lenders, and without limiting the generality of the foregoing,
the Borrowers and Guarantors shall have no recourse against Magten for the
performance or satisfaction of any obligation under this Agreement or any other
Loan Document, but shall look for payment or satisfaction of any claim arising
under this Agreement or any other Loan Document solely to the assets and
properties of the Lenders.
9.07. Application. Except to the extent, if any, expressly set forth in
this Agreement or in the Loan Documents, each Lender shall have the right to
apply any payment received or applied by it in connection with the Obligations
to such of the Obligations then due and payable as it may elect.
9.08. Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
9.09. Governing Law. This Agreement and the Term Notes shall be deemed to
be contracts under the laws of the State of New York, without regard to choice
of law principles, and for all purposes shall be governed by and construed and
enforced in accordance with the laws of said State.
9.10. Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein (it being agreed that
with respect to the Letter Agreement, this Agreement only supersedes those
transactions contemplated by the Senior Bridge Facility (as defined therein)
and not any other transactions contemplated thereunder; provided, that any
provision obligating the Borrowers or Guarantors to pay for Lenders' fees or
expenses in connection with the Senior Bridge Facility shall not be superseded
hereby).
9.11. Duration; Survival. All representations and warranties of the
Borrowers and Guarantors contained herein or made in connection herewith shall
survive the making of the Loans and shall not be waived by the execution and
delivery of this
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Agreement, the Term Notes or any other Loan Document, any investigation by or
knowledge of the Lenders, the making of any Loan hereunder, or any other event
whatsoever. All covenants and agreements of the Borrowers and the Guarantors
contained herein shall continue in full force and effect from and after the
date hereof so long as the Borrowers may borrow hereunder and until the
Obligations have been paid in full in cash. Without limitation, it is
understood that all obligations of the Borrowers and the Guarantors to make
payments to or indemnify the Lenders (including, without limitation,
obligations arising under Section 9.05 hereof) shall survive the payment in
full of the Term Notes and all Obligations and of all other obligations of the
Borrowers and the Guarantors thereunder and hereunder, termination of this
Agreement and all other events whatsoever and whether or not any Loans are made
hereunder.
9.12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
9.13. Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns except that the Borrowers and the Guarantors
may not assign or transfer any of their rights hereunder or thereunder without
the prior written consent of the Lenders.
9.14. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE BORROWERS AND THE GUARANTORS, AND THE LENDERS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE TERM NOTES OR ANY OTHER LOAN
DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE LENDERS OR ANY BORROWER OR GUARANTOR IN CONNECTION HEREWITH OR
THEREWITH. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO
ENTER INTO THIS AGREEMENT.
9.15. Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each Lender may, and is hereby authorized to, at any time
from time to time, without notice to the Borrowers or the Guarantors (any such
notice being expressly waived by the Borrowers and the Guarantors) and to the
fullest extent permitted by law, set off and apply any and all deposits
(general or special, time or demand, provision or final) at any time held and
other indebtedness at any time owing by such
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Lender to or for the credit or the account of the Borrowers and the Guarantors
against any and all Obligations of the Borrowers or the Guarantors now or
hereafter existing under the Loan Documents, irrespective of whether or not
such Lender shall have made any demand hereunder or thereunder and although
such Obligations may be contingent or unmatured. Each Lender agrees promptly
to notify the Borrowers and the Guarantors after any such setoff and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such setoff and application. The
rights of the Lenders under this Section 9.15 are in addition to the other
rights and remedies (including, without limitation, other rights of setoff
under applicable law or otherwise) which the Lenders may have.
9.16. Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
9.17. Forum Selection and Consent to Jurisdiction. Any litigation based
hereon, or arising out of, under or in connection with, this Agreement or any
other Loan Document, or any course of conduct, course of dealing, statement
(whether verbal or written) or action of the Lenders or any Borrower or
Guarantor may be brought and maintained exclusively in the courts of the State
of New York situated in New York County or the United States District Court for
the Southern District of New York; provided, however, that any suit seeking
enforcement against any Collateral or other property may be brought, at the
Lenders' option, in the courts of any jurisdiction where such Collateral or
other property may be found. The Borrowers and the Guarantors hereby expressly
and irrevocably submit to the jurisdiction of the courts of the State of New
York and of the United States District Court for the Southern District of New
York for the purpose of any such litigation and irrevocably agree to be bound
by any judgment rendered thereby in connection with such litigation. The
Borrowers and the Guarantors further irrevocably consent to the service of
process (i) by registered or certified mail, postage prepaid, to the Borrowers
and the Guarantors at their addresses set forth on the signature pages hereto,
such service to become effective two days after such mailing, or (ii) by
personal service within or without the State of New York. Nothing herein shall
affect the right of the Lenders to service of process in any other manner
permitted by law. The Borrowers and the Guarantors hereby expressly and
irrevocably waive, to the fullest extent permitted by law, any objection which
they may now or hereafter have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in an inconvenient forum. To the extent that the
Borrowers and the Guarantors have or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) with respect to themselves or their property, the Borrowers and the
Guarantors hereby irrevocably waive such immunity in respect of their
obligations under this Agreement and the other Loan Documents.
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the date first
above written.
BORROWERS:
THE RUG BARN, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notices:
Highway ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HOME INNOVATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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DHA HOME, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇ AND COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Katten, Muchin & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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LENDERS:
GENERAL MOTORS EMPLOYEES Percentage Interest: 37.25%
DOMESTIC GROUP PENSION TRUST
By: MELLON BANK, N.A., as Trustee
By:
---------------------------
Name:
Title:
Address for Notices:
c/o Magten Asset Management
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. First
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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▇▇▇▇▇▇ MASTER RETIREMENT Percentage Interest: 17.00%
TRUST
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
c/o Magten Asset Management Corp.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. First
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ Percentage Interest: 21.40%
OF LOS ANGELES
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
MAGTEN OFFSHORE FUND LTD. Percentage Interest: 3.50%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
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MAGTEN PARTNERS, L.P. Percentage Interest: 3.67%
By: MAGTEN ASSET MANAGEMENT
CORP., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
MAGTEN GROUP TRUST Percentage Interest: 2.37%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Approved: CUSTODIAL TRUST
COMPANY
By: _________________________
Name:
Title:
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
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NAVY EXCHANGE SERVICE Percentage Interest: 6.93%
COMMAND RETIREMENT TRUST
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
WESTERN UNION PENSION TRUST Percentage Interest: 5.38%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
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SATURN FUND LTD. Percentage Interest: 2.50%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Address for Notices:
Use same address as for ▇▇▇▇▇▇
MASTER RETIREMENT TRUST.
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GUARANTORS:
DECORATIVE HOME ACCENTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notices:
Highway ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DRAYMORE MFG. CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HOME INNOVATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Katten, Muchin & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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================================================================================
CREDIT AGREEMENT,
dated as of May 23, 1997,
among
THE RUG BARN, INC.,
HOME INNOVATIONS, INC.,
DHA HOME, INC.
AND ▇.▇. ▇▇▇▇▇▇ AND COMPANY,
AS BORROWERS,
------------
DECORATIVE HOME ACCENTS, INC.,
DRAYMORE MFG. CORP.
AND HOME INNOVATIONS, INC.,
AS GUARANTORS,
-------------
and
THE LENDERS LISTED ON THE SIGNATURE PAGES HERETO,
AS LENDERS
----------
================================================================================
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Table of Contents
-----------------
Page
----
ARTICLE I DEFINITIONS; CONSTRUCTION......................................1
1.01. Certain Definitions...............................................1
1.02. Construction.....................................................10
1.03. Accounting Principles............................................11
ARTICLE II THE TERM LOANS...............................................11
2.01. Term Loans.......................................................11
2.02. Initial Term Notes...............................................12
2.03. Subsequent Term Notes............................................12
2.04. Request for Subsequent Term Loan.................................12
2.05. Maturity Date....................................................12
2.06. Joint and Several Liability......................................13
2.07. Closing Fee......................................................14
2.08. Interest Rate....................................................14
2.09. Interest Payment Dates...........................................14
2.10. Payments ........................................................14
2.11. Use of Proceeds..................................................14
2.12. Taxes............................................................14
ARTICLE III CONDITIONS PRECEDENT TO LOANS...............................15
3.01. Conditions Precedent to Initial Term Loan........................15
3.02. Conditions Precedent to Subsequent Term Loan.....................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES...............................21
4.01. Corporate Existence, Power and Authority; Subsidiaries...........21
4.02. Financial Statements; No Material Adverse Change.................21
4.03. Chief Executive Office; Collateral Locations.....................21
4.04. Priority of Liens; Title to Properties...........................22
4.05. Maintenance of Equipment.........................................22
4.06. Tax Returns......................................................22
4.07. Litigation ......................................................22
4.08. Compliance with Other Agreements and Applicable Law..............22
4.09. Employee Benefits................................................23
4.10. Environmental Compliance.........................................23
4.11. Accuracy and Completeness of Information.........................24
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57
4.12. Survival of Warranties; Cumulative..............................24
4.13. Enforceability of Loan Documents................................24
4.14. Nature of Business..............................................25
4.15. Use of Proceeds.................................................25
4.16. Congress Debt Documents.........................................25
4.17. Registration and Transfer of Term Notes.........................25
ARTICLE V COLLATERAL...................................................26
5.01. Grant of Security Interest......................................26
5.02. Security for Secured Obligations................................29
5.03. Proceeds of Collateral..........................................29
ARTICLE VI AFFIRMATIVE AND NEGATIVE COVENANTS..........................29
6.01. Covenants Under Congress Loan Agreement.........................29
6.02. Liens...........................................................30
6.03. Indebtedness....................................................30
6.04. Post-Closing Date Covenants.....................................30
6.05. Overadvances....................................................30
ARTICLE VII DEFAULTS...................................................30
7.01. Events of Default...............................................30
7.02. Consequences of an Event of Default.............................32
7.03. Certain Remedies................................................33
7.04. Certain Events of Default.......................................33
ARTICLE VIII GUARANTEE.................................................33
8.01. Guarantee.......................................................33
8.02. Nature of Guarantee.............................................33
8.03. Authorization...................................................34
8.04. Right to Demand Full Performance................................35
8.05. Certain Waivers.................................................35
8.06. The Guarantors Remain Obligated in Event the Borrowers Are
No Longer Obligated to Discharge Obligations....................36
8.07. Severability of Void Obligations under Guarantee................36
8.08. Guarantee Is in Addition to Other Security......................36
8.09. Release of Security Interest....................................37
8.10. No Bar to Further Actions.......................................37
8.11. Failure to Exercise Rights Shall Not Operate as a Waiver;
No Suspension of Remedies.......................................37
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8.12. Lenders' Duties; Notice to Lenders.................................37
8.13. Successors and Assigns.............................................38
8.14. Release of Guarantee...............................................38
8.15. Execution of Guarantee.............................................38
8.16. No Subrogation; Certain Agreements.................................38
8.17. Bankruptcy; No Discharge...........................................39
ARTICLE IX MISCELLANEOUS...................................................39
9.01. Holidays...........................................................39
9.02. Amendments and Waivers.............................................40
9.03. No Implied Waiver; Cumulative Remedies.............................40
9.04. Notices............................................................40
9.05. Expenses; Taxes; Attorneys' Fees; Indemnification..................41
9.06. Several and Not Joint; Limited Liability...........................42
9.07. Application........................................................43
9.08. Severability.......................................................43
9.09. Governing Law......................................................43
9.10. Prior Understandings...............................................43
9.11. Duration; Survival.................................................43
9.12. Counterparts.......................................................44
9.13. Successors and Assigns.............................................44
9.14. Waiver of Jury Trial...............................................44
9.15. Right of Setoff....................................................44
9.16. Headings...........................................................45
9.17. Forum Selection and Consent to Jurisdiction........................45
Exhibits
--------
Exhibit A Form of Initial Term Notes
Exhibit B Form of Subsequent Term Notes
Exhibit C First Supplemental Indenture
Exhibit D Intercreditor Agreement
Exhibit E Letter Agreement
Exhibit F Pledge Agreements
Exhibit G Security Agreement
Exhibit H Collateral Assignment of Trademarks and Trademark
Licenses (Security Agreement)
Exhibit I Copyright Mortgage and Security Agreement
Exhibit J Landlord Waiver Letter Agreements
Exhibit K ▇▇▇▇▇▇ ▇▇▇▇▇ Letter Agreements
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Schedules
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Schedule I Real Property Collateral
Schedule II Wire Transfer Instructions
Schedule III Subsidiaries
Schedule IV Locations of Collateral
Schedule V Litigation
Schedule VI Compliance With Applicable Laws
Schedule VII Environmental Compliance
Schedule VIII UCC-3 Termination Statements
Schedule IX Certain Trademarks and Copyrights
iv