EXHIBIT 10.1
EXECUTION VERSION
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
FACTORY CARD OUTLET OF AMERICA LTD.
AS BORROWER,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
▇▇▇▇▇ FARGO RETAIL FINANCE, LLC
AS THE ARRANGER, COLLATERAL AGENT AND ADMINISTRATIVE AGENT
DATED AS OF APRIL 9, 2002
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Table of Contents
Page
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1. DEFINITIONS AND CONSTRUCTION..............................................................................1
1.1. Definitions....................................................................................1
1.2. Accounting Terms..............................................................................25
1.3. Code..........................................................................................26
1.4. Construction..................................................................................26
1.5. Schedules and Exhibits........................................................................26
2. LOAN AND TERMS OF PAYMENT................................................................................26
2.1. Revolver Advances.............................................................................26
2.2. Reserved......................................................................................27
2.3. Borrowing Procedures and Settlements..........................................................27
2.4. Payments......................................................................................34
2.5. Overadvances..................................................................................36
2.6. Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations...................36
2.7. Cash Management...............................................................................38
2.8. Crediting Payments; Float Charge..............................................................39
2.9. Designated Account............................................................................39
2.10. Maintenance of Loan Account; Statements of Obligations........................................40
2.11. Fees..........................................................................................40
2.12. Letters of Credit.............................................................................41
2.13. LIBOR Option..................................................................................44
2.14. Capital Requirements..........................................................................46
3. CONDITIONS; TERM OF AGREEMENT............................................................................47
3.1. Conditions Precedent to the Initial Extension of Credit.......................................47
3.2. Conditions Subsequent to the Initial Extension of Credit......................................49
3.3. Conditions Precedent to all Extensions of Credit..............................................50
3.4. Term..........................................................................................50
3.5. Effect of Termination.........................................................................51
3.6. Early Termination by Borrower.................................................................51
4. CREATION OF SECURITY INTEREST............................................................................52
4.1. Grant of Security Interest....................................................................52
4.2. Control of Collateral.........................................................................52
4.3. Negotiable Collateral.........................................................................52
4.4. Collection of Accounts, General Intangibles, and Negotiable Collateral........................52
4.5. Delivery of Additional Documentation Required.................................................52
4.6. Power of Attorney.............................................................................53
4.7. Control Agreements............................................................................54
4.8. Right to Inspect; Inventories, Appraisals and Audits..........................................54
5. REPRESENTATIONS AND WARRANTIES...........................................................................54
5.1. No Encumbrances...............................................................................54
5.2. Reserved......................................................................................55
5.3. Eligible Inventory............................................................................55
5.4. Equipment.....................................................................................55
5.5. Location of Inventory and Equipment...........................................................55
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5.6. Inventory Records.............................................................................55
5.7. Legal Status..................................................................................55
5.8. Due Organization and Qualification; Subsidiaries..............................................55
5.9. Due Authorization; No Conflict................................................................56
5.10. Litigation....................................................................................57
5.11. No Material Adverse Change....................................................................57
5.12. Fraudulent Transfer...........................................................................58
5.13. Employee Benefits.............................................................................58
5.14. Environmental Condition.......................................................................58
5.15. Brokerage Fees................................................................................58
5.16. Intellectual Property.........................................................................58
5.17. Leases........................................................................................58
5.18. DDAs..........................................................................................58
5.19. Credit Card Receipts..........................................................................59
5.20. Indebtedness..................................................................................59
5.21. Payment of Taxes..............................................................................59
5.22. Bankruptcy Case Disclosure....................................................................59
5.23. Complete Disclosure...........................................................................59
6. AFFIRMATIVE COVENANTS....................................................................................59
6.1. Accounting System.............................................................................59
6.2. Collateral Reporting..........................................................................60
6.3. Financial Statements, Reports, Certificates...................................................60
6.4. Guarantor Reports.............................................................................62
6.5. Return........................................................................................62
6.6. Maintenance of Properties.....................................................................62
6.7. Taxes.........................................................................................62
6.8. Insurance.....................................................................................62
6.9. Location of Inventory and Equipment...........................................................63
6.10. Compliance with Laws..........................................................................63
6.11. Leases........................................................................................64
6.12. Brokerage Commissions.........................................................................64
6.13. Existence.....................................................................................64
6.14. Environmental.................................................................................64
6.15. Investment Proceeds, Etc......................................................................64
6.16. Plan..........................................................................................64
6.17. Bankruptcy Case...............................................................................65
6.18. Disclosure Updates............................................................................65
6.19. Excess Availability...........................................................................65
7. NEGATIVE COVENANTS.......................................................................................65
7.1. Indebtedness..................................................................................65
7.2. Liens.........................................................................................66
7.3. Restrictions on Fundamental Changes...........................................................66
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7.4. Disposal of Assets............................................................................66
7.5. Change of Name or Address.....................................................................66
7.6. Guarantee.....................................................................................66
7.7. Nature of Business............................................................................67
7.8. Prepayments and Amendments....................................................................67
7.9. Change of Control.............................................................................67
7.10. Consignments..................................................................................67
7.11. Distributions.................................................................................67
7.12. Accounting Methods............................................................................67
7.13. Investments...................................................................................68
7.14. Transactions with Affiliates..................................................................68
7.15. Store Openings and Closings...................................................................68
7.16. Suspension....................................................................................68
7.17. Reserved......................................................................................68
7.18. Use of Proceeds...............................................................................68
7.19. Inventory and Equipment with Bailees..........................................................68
7.20. Securities Accounts...........................................................................69
7.21. Financial Covenants...........................................................................69
7.22. Minimum Excess Availability and Retail Covenants..............................................69
7.23. Subordinated Debt.............................................................................69
(a) Make any payment or take any action in violation of the Subordination Agreement...........69
8. EVENTS OF DEFAULT........................................................................................69
9. THE LENDER GROUP'S RIGHTS AND REMEDIES...................................................................71
9.1. Rights and Remedies...........................................................................71
9.2. Remedies Cumulative...........................................................................73
10. TAXES AND EXPENSES.......................................................................................74
11. WAIVERS; INDEMNIFICATION.................................................................................74
11.1. Demand; Protest; etc..........................................................................74
11.2. The Lender Group's Liability for Collateral...................................................74
11.3. Indemnification...............................................................................74
12. NOTICES..................................................................................................75
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER...............................................................76
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS...............................................................77
14.1. Assignments and Participations................................................................77
14.2. Successors....................................................................................80
15. AMENDMENTS; WAIVERS......................................................................................80
15.1. Amendments and Waivers........................................................................80
15.2. Replacement of Holdout Lender.................................................................81
15.3. No Waivers; Cumulative Remedies...............................................................81
16. AGENT; THE LENDER GROUP..................................................................................82
16.1. Appointment and Authorization of Agent........................................................82
16.2. Delegation of Duties..........................................................................82
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16.3. Liability of Agent............................................................................82
16.4. Reliance by Agent.............................................................................83
16.5. Notice of Default or Event of Default.........................................................83
16.6. Credit Decision...............................................................................84
16.7. Costs and Expenses; Indemnification...........................................................84
16.8. Agent in Individual Capacity..................................................................85
16.9. Successor Agent...............................................................................85
16.10. Lender in Individual Capacity.................................................................85
16.11. Withholding Taxes.............................................................................86
16.12. Collateral Matters............................................................................88
16.13. Restrictions on Actions by Lenders; Sharing of Payments.......................................89
16.14. Agency for Perfection.........................................................................89
16.15. Payments by Agent to the Lenders..............................................................89
16.16. Concerning the Collateral and Related Loan Documents..........................................89
16.17. Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information..............................................................90
16.18. Several Obligations; No Liability.............................................................91
16.19. Legal Representation of Agent.................................................................91
17. GENERAL PROVISIONS.......................................................................................91
17.1. Effectiveness.................................................................................91
17.2. Section Headings..............................................................................92
17.3. Interpretation................................................................................92
17.4. Severability of Provisions....................................................................92
17.5. Amendments in Writing.........................................................................92
17.6. Counterparts; Telefacsimile Execution.........................................................92
17.7. Revival and Reinstatement of Obligations......................................................92
17.8. Integration...................................................................................92
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EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit D-1 Business Plan
Exhibit L-1 Form of LIBOR Notice
Schedule A-1 Agent's Account
Schedule C-1 Commitments
Schedule D-1 Designated Account
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.7 Cash Management Banks and Accounts
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.8(a) Good Standing
Schedule 5.8(b) Capitalization of Borrower
Schedule 5.10(a) Litigation
Schedule 5.10(b) Commercial Tort Claims
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.19 Credit Card Processors
Schedule 5.20 Permitted Indebtedness
Schedule 6.2 Collateral Reporting
Schedule 7.22 Minimum Excess Availability and Retail Covenants
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into
as of April 9, 2002 by and among, on the one hand, the lenders identified on the
signature pages hereof (such lenders, together with their respective successors
and assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), ▇▇▇▇▇ FARGO RETAIL FINANCE, LLC, as the
arranger, collateral agent and administrative agent for the Lenders and any
other holder of Obligations referred to below ("Agent"), and, on the other hand,
FACTORY CARD OUTLET OF AMERICA LTD., an Illinois corporation ("Borrower").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, Chattel Paper, or a
General Intangible.
"Accounts" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as such term is defined
from time to time in the Code), and any and all supporting obligations in
respect thereof.
"ACH Transactions" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) provided by ▇▇▇▇▇ Fargo or
its Affiliates for the account of Borrower or its Subsidiaries.
"Additional Documents" has the meaning set forth in Section 4.5.
"Adjustment Date" means the first full day of the first calendar
month after the Borrower delivers its annual audited financial statements to the
Agent in accordance with Section 6.3(b). The first Adjustment Date shall occur
upon the Borrower's delivery of its annual audited financial statements for its
fiscal year ending February 1, 2003.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, for purposes of Section 7.14 hereof: (a) any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a Person or 10% or more of the partnership or other ownership
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interests of a Person (other than as a limited partner of such Person) shall be
deemed to control such Person; (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person; and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed to be an Affiliate of such Person.
"Agent" means WFRF, solely in its capacity as administrative agent
and collateral agent for the Lenders hereunder and any other holder of
Obligations, and any successor thereto.
"Agent Advances" has the meaning set forth in Section 2.3(e)(i).
"Agent's Account" means the account identified on Schedule A-1.
"Agent's Liens" means the Liens granted by Borrower to Agent for the
benefit of the Lender Group under this Agreement or the other Loan Documents.
"Agent-Related Persons" means Agent, together with its Affiliates,
officers, directors, employees, and Agent.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and
including the date of the execution and delivery of this Agreement up to the
date that is the first anniversary of the Closing Date, 1.75% times the sum of
(i) the Maximum Revolver Amount, plus (ii) 102% of the aggregate amount of all
undrawn Letters of Credit on the date immediately prior to the date of
determination and (b) during the period of time from and including the date that
is the first anniversary of the Closing Date up to and including the date that
is the second anniversary of the Closing Date, 1.50% times the sum of (i) the
Maximum Revolver Amount, plus (ii) 102% of the aggregate amount of all undrawn
Letters of Credit on the date immediately prior to the date of determination.
"Assignee" has the meaning set forth in Section 14.1.
"Assignment and Acceptance" means an Assignment and Acceptance in the
form of Exhibit A-1.
"Authorized Person" means any officer or other employee of Borrower.
"Availability" means, as of any date of determination, if such date
is a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrower is entitled to borrow as Advances under Section 2.1, after
giving effect to all then outstanding Obligations (other than Bank Products
Obligations) and all sublimits and reserves applicable hereunder.
"Availability Reserves" means such reserves as Agent from time to
time determines in its Permitted Discretion as being appropriate to reflect the
impediments to Agent's ability to realize upon the Collateral. Without limiting
the generality of the foregoing, Availability Reserves may include (but are not
limited to) reserves based on the following: (a) two months' rent for any leased
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store location in a Landlord Lien State for which an acceptable Collateral
Access Agreement has not been received by Agent (irrespective of whether any
rent is currently due); (b) returns, customer credits, gift certificates and
frequent shopper programs; (c) payables (based upon payables which are 60 days
or more past due); (d) customer deposits; (e) taxes and other governmental
charges, including tax Liens, ad valorem, personal property, sales, and other
taxes which may have priority over the security interests of the Lender Group in
the Collateral; (f) held or post-dated checks issued by Borrower; (g) any
judgment lien against Borrower or Collateral; (h) Borrower's failure to pay when
due and payable undisputed indebtedness owing to any trade creditor; and (i)
Letters of Credit (including, without limitation, reserves based on the length
of the period between the drafting of a documentary Letter of Credit and
Borrower's receipt of the subject Inventory at one of the locations set forth on
Schedule E-1).
"Bailee Acknowledgment" means a record in form and substance
satisfactory to Agent authenticated by any bailee, warehouseman or other third
party in possession of any Equipment or Inventory acknowledging that it holds
possession of the applicable Inventory and/or Equipment for the benefit of
Agent, on behalf of the Lenders.
"Bank Product Agreements" means those certain cash management service
agreements entered into from time to time by Borrower or its Subsidiaries in
connection with any of the Bank Products.
"Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to ▇▇▇▇▇ Fargo or its Affiliates pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all such amounts that Borrower
is obligated to reimburse to Agent or any member of the Lender Group as a result
of Agent or such member of the Lender Group purchasing participations or
executing indemnities or reimbursement obligations with respect to the Bank
Products provided to Borrower or its Subsidiaries pursuant to the Bank Product
Agreements.
"Bank Products" means any service or facility extended to Borrower or
its Subsidiaries by ▇▇▇▇▇ Fargo or any Affiliate of ▇▇▇▇▇ Fargo including
without limitation: (a) credit cards, (b) credit card processing services, (c)
debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management,
including controlled disbursement, accounts or services, or (g) Hedge
Agreements.
"Bank Product Reserves" means, as of any date of determination, the
amount of reserves that Agent has established (based upon ▇▇▇▇▇ Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding.
"Bankruptcy Case" means, collectively, the cases under Chapter 11 of
the Bankruptcy Code commenced by the Borrower and FCPOC, styled In re Factory
Card Outlet Corp. and Factory Card Outlet of America Ltd., Chapter 11 Nos.
99-685 (EIK) through 99-686 (EIK).
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"Bankruptcy Code" means the United States Bankruptcy Code, as in
effect from time to time.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, or any successor court with jurisdiction over the
Bankruptcy Case.
"Base LIBO Rate" means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate in its Permitted Discretion
(rounded upwards, if necessary, to the next 1/16%), on the basis of the rates at
which Dollar deposits are offered to major banks in the London interbank market
on or about 2:00 p.m. (Boston, Massachusetts time) 2 Business Days prior to the
commencement of the applicable Interest Period, for a term and in amounts
comparable to the Interest Period and amount of the LIBO Rate Loan requested by
Borrower in accordance with this Agreement, which determination shall be
conclusive in the absence of manifest error.
"Base Rate" means, the rate of interest announced within ▇▇▇▇▇ Fargo
at its principal office in San Francisco as its "prime rate," with the
understanding that the "prime rate" is one of ▇▇▇▇▇ Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as ▇▇▇▇▇ Fargo may designate.
"Base Rate Loan" means each portion of an Advance that bears interest
at a rate determined by reference to the Base Rate.
"Base Rate Margin" means, as of Closing Date through (but not
including) the first Adjustment Date, 0.50% and thereafter the respective
amounts set forth in the following table. The Base Rate Margin shall be adjusted
according to the following table as of each Adjustment Date, provided that in no
event will the Base Rate Margin be reduced if an Event of Default has occurred
and is continuing. Adjustments, if any, to the initial Base Rate Margin shall be
determined by reference to the Borrower's EBITDA during its immediately prior
fiscal year as follows:
Annual EBITDA Base Rate Margin
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Greater than or equal to $12,000,001 0.00%
Greater than or equal to $9,000,000 but less than
$12,000,001 0.25%
Less than $9,000,000 0.50%
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"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"Board of Directors" means the board of directors of Borrower or any
committee thereof duly authorized to act on behalf thereof.
"Books" means all of Borrower's and its Subsidiaries' now owned or
hereafter acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of Borrower's or its Subsidiaries' Records relating to its or their business
operations or financial condition, and all of its or their goods or General
Intangibles related to such information).
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances made
on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender
in the case of a Swing Loan, or by Agent in the case of an Agent Advance.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Borrowing Base Certificate" means a certificate in the form of
Exhibit B-1, as such form may be revised from time to time by Agent.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close, except that, if
a determination of a Business Day shall relate to a LIBO Rate Loan, the term
"Business Day" also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
"Business Plan" means the set of Projections of Borrower for the
three-year period following the Closing Date (on a year by year basis, and for
the one-year period following the Closing Date, on a month by month basis), in
form and substance (including as to scope and underlying assumptions)
satisfactory to Agent and attached hereto as Exhibit D-1, together with any
amendment, modification or revision thereto approved by Agent in its Permitted
Discretion.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or ▇▇▇▇▇'▇,
(c) commercial paper maturing no more than 270 days from the date of acquisition
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thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or ▇▇▇▇▇'▇, and (d) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
▇▇▇▇▇'▇, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.
"Cash Management Bank" has the meaning set forth in Section 2.7(a).
"Cash Management Account" has the meaning set forth in Section
2.7(a).
"Cash Management Agreements" means those certain cash management
service agreements, each in form and substance satisfactory to Agent and each of
which is among Borrower, Agent, and one of the Cash Management Banks.
"Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 30% or more, of the Stock of Borrower having the right to vote for the
election of members of the Board of Directors, or (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors, or (c)
Borrower ceases to own and control, directly or indirectly, 100% of the
outstanding capital Stock of each of its Subsidiaries extant as of the Closing
Date.
"Chattel Paper" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "chattel paper," including,
without limitation, "tangible chattel paper" and "electronic chattel paper," as
such terms are defined from time to time in the Code, and any and all supporting
obligations in respect thereof.
"Closing Date" means the date of the making of the initial Advance
(or other extension of credit) hereunder or the date on which Agent sends
Borrower a written notice that each of the conditions precedent set forth in
Section 3.1 either have been satisfied or have been waived.
"Code" means the Uniform Commercial Code, as in effect from time to
time in The Commonwealth of Massachusetts.
"Collateral" means all of Borrower's now owned or hereafter acquired
right, title, and interest in and to each of the following:
(a) Accounts,
(b) Chattel Paper,
(c) DDAs,
(d) Documents,
(e) General Intangibles,
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(f) Goods (including, without limitation, Inventory and
Equipment),
(g) Instruments,
(h) Investment Property,
(i) Letter of Credit Rights,
(j) Real Property Collateral,
(k) the Commercial Tort Claims set forth on Schedule
5.10(b),
(l) money or other assets of Borrower that now or
hereafter come into the possession, custody, or
control of any member of the Lender Group, and
(m) any and all proceeds and products, whether tangible
or intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the
foregoing, and any and all Accounts, Books, General
Intangibles, (Goods, including without limitation
Equipment and Inventory), Investment Property,
Negotiable Collateral, Real Property, money, DDAs, or
other tangible or intangible property resulting from
the sale, exchange, collection, or other disposition
of any of the foregoing, or any portion thereof or
interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a waiver or consent in form and
substance satisfactory to Agent executed by any lessor of Real Property leased
by Borrower or any other Person having a Lien upon, or having rights or
interests in the Equipment or Inventory.
"Collateral Trust Agreement" means that certain Collateral Trust
Agreement dated as of April 9, 2002 among the Borrower, FCPOC and the Collateral
Trustee.
"Collateral Trustee" means ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇, in his capacity as
Collateral Trustee under the Collateral Trust Agreement, or any successor to
him.
"Collections" means all cash, checks, credit card slips or receipts,
notes, instruments, and other items of payment (including insurance proceeds,
proceeds of cash sales, rental proceeds, and tax refunds) of Borrower.
"Commercial Tort Claim" means any now existing or hereafter arising
"commercial tort claim," as such term is defined from time to time in the Code.
"Commitment" means, with respect to each Lender, its Revolver
Commitment and, with respect to all Lenders, their Revolver Commitments, in each
case as such Dollar amounts are set forth beside such Lender's name under the
applicable heading on Schedule C-1 or on the signature page of the Assignment
and Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 14.1.
"Committee" means the Official Committee of Unsecured Creditors
appointed in the Bankruptcy Case.
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"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 delivered by the chief financial officer of Borrower to
Agent.
"Confirmation Order" means an order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code, such order
to be in form, scope and substance satisfactory to the Agent in its Permitted
Discretion.
"Continuing Director" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Borrower on the Closing Date, and
(b) any individual who becomes a member of the Board of Directors after the
Closing Date if such individual was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any
such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.
"Control Agreement" means an agreement, in form and substance
satisfactory to Agent, executed and delivered by Borrower, Agent, and the
applicable securities intermediary or bank, which agreement is sufficient to
give Agent "control" over the subject Securities Account or DDA as provided in
the Code.
"Cost" means the calculated cost of Inventory, as determined from
invoices received by Borrower, Borrower's purchase journals or stock ledgers,
based upon Borrower's accounting practices, known to Agent, which practices are
in effect on the date on which this Agreement was executed. "Cost" does not
include any inventory capitalization costs inclusive of advertising, but may
include other charges used in Borrower's determination of cost of goods sold and
bringing goods to market, all within Agent's Permitted Discretion and in
accordance with GAAP.
"Credit Card Agreements" means those certain credit card receipts
agreements, each in form and substance reasonably satisfactory to Agent and each
of which is among Agent, Borrower and one of Borrower's Credit Card Processors.
"Credit Card Processor" means any Person that acts as a credit card
clearinghouse or processor of credit card payments accepted by Borrower.
"Creditors' Committee" means the statutory committee of unsecured
creditors appointed in the Bankruptcy Case.
"Daily Balance" means, with respect to each day during the term of
this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other "deposit account" (as such term is
defined from time to time in the Code) maintained by Borrower.
"Default" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
8
"Defaulting Lender" means any Lender that fails to make any Advance
(or other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.
"Defaulting Lender Rate" means (a) the Base Rate for the first three
days from and after the date the relevant payment is due, and (b) thereafter, at
the interest rate then applicable to Advances that are Base Rate Loans
(inclusive of the Base Rate Margin applicable thereto.
"Designated Account" means certain DDAs of Borrower identified on
Schedule D-1.
"DIP Facility" means that certain Debtor in Possession Loan and
Security Agreement among WFRF, as Agent and successor to Foothill Capital
Corporation, Borrower and FCPOC dated as of March 23, 1999, as amended from time
to time.
"Dilution Reserve" means, as of any date of determination, an amount
determined by Agent in its Permitted Discretion as being appropriate to reflect
the ability of Borrower or the Agent, as the case may be, to realize upon the
Accounts. Without limiting the generality of the foregoing, the Dilution Reserve
may be based on factors including, but not limited to, the following: the amount
of bad debt write-downs, discounts, advertising allowances, credits or other
dilutive items.
"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Agent regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is satisfactory to Agent.
"Disclosure Statement" means the Joint Disclosure Statement of
Borrower and FCPOC pursuant to Section 1125 of the Bankruptcy Code dated
February 5, 2002, prepared and transmitted in connection with the Plan.
"Document" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to any "document" as such term is
defined in the Code, and any and all supporting obligations in respect thereof.
"Dollars" or "$" means United States dollars.
"Due Diligence Letter" means the due diligence letter sent by Agent's
counsel to Borrower, together with Borrower's completed responses to the
inquiries set forth therein, the form and substance of such responses to be
satisfactory to Agent.
"EBITDA" means, with respect to any fiscal period, Borrower's and its
Subsidiaries consolidated net earnings (or loss), minus extraordinary gains,
plus interest expense, income taxes, Reorganization Expenses and depreciation
and amortization for such period, as determined in accordance with GAAP,
provided that for purposes of determining compliance with Section 7.21(a), the
foregoing shall be determined in accordance with GAAP as in effect on the
Closing Date.
"Effective Date" means the effective date of the Plan.
9
"Eligible Credit Card Accounts" means Accounts owed to Borrower from
Credit Card Processors arising from purchases by Borrower's customers on credit
cards, to the extent deemed eligible in the Agent's Permitted Discretion, net of
all applicable Reserves.
"Eligible In-Transit Inventory" means Inventory of Borrower that does
not qualify as Eligible Inventory solely because it is not at a location set
forth on Schedule E-1 or in transit among such locations and that meets the
following criteria, which criteria may be revised by Agent in its Permitted
Discretion from time to time after the Closing Date:
(a) the Inventory was the subject of a Qualified Import
Letter of Credit,
(b) such Inventory currently is in transit (whether by
vessel, air, or land) from a location outside of the
continental United States to a location set forth on
Schedule E-1 that is the subject of a Bailee
Acknowledgment or a Collateral Access Agreement,
(c) title to such Inventory has passed to Borrower,
(d) such Inventory is insured against types of loss,
damage, hazards, and risks, and in amounts,
satisfactory to Agent in its Permitted Discretion,
(e) such Inventory either
(1) is the subject of a negotiable ▇▇▇▇ of lading
that (x) is consigned to Agent (either directly or by means
of endorsements), (y) was issued by the carrier respecting
the subject Inventory, and (z) either is (I) in the
possession of Agent or a customs broker (in each case in
the States of California and Washington), or (II) the
subject of a telefacsimile copy that Agent has received
from the Underlying Issuer which issued the Underlying
Letter of Credit and as to which Agent also has received a
confirmation from such Underlying Issuer that such document
is in-transit by air-courier to Agent or a customs broker
(in each case, in the States of California and Washington),
or
(2) is the subject of a negotiable cargo receipt
and is not the subject of a ▇▇▇▇ of lading (other than a
negotiable ▇▇▇▇ of lading consigned to, and in the
possession of, a consolidator or Agent, or their respective
Agent) and such negotiable cargo receipt is (x) consigned
to Agent (either directly or by means of endorsements), (y)
that was issued by a consolidator respecting the subject
Inventory, (z) that either is (I) in the possession of
Agent or a customs broker (in each case in the States of
California and Washington), or (II) the subject of a
telefacsimile copy that Agent has received from the
Underlying Issuer which issued the Underlying Letter of
Credit and as to which Agent also has received a
confirmation from such Underlying Issuer that such document
is in-transit by air-courier to Agent or a customs broker
(in each case, in the States of California and Washington),
(f) Borrower has provided a certificate to Agent that
certifies that, to the best knowledge of Borrower,
such Inventory meets all of Borrower's
representations and warranties contained in the Loan
Documents concerning Eligible Inventory, that
10
Borrower knows of no reason why such Inventory would
not be accepted by Borrower when it arrives in the
States of California and Washington , and that the
shipment as evidenced by the documents conforms to
the related order documents, and
(g) the Underlying Letter of Credit has been drawn upon
in full and the Underlying Issuer has honored such
drawing and Agent has honored its obligations to the
Underlying Issuer under the applicable Qualified
Import Letter of Credit;
"Eligible Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower's business
located at one of Borrower's business locations set forth on Schedule E-1 (or
in-transit between any such locations), that complies with each of the
representations and warranties respecting Eligible Inventory made by Borrower in
the Loan Documents, and that is not excluded as ineligible by virtue of the one
or more of the criteria set forth below, which criteria may be fixed and revised
from time to time by Agent in its Permitted Discretion after the Closing Date.
In determining the value of Eligible Inventory, Inventory shall be valued at the
lower of Cost or market on a basis consistent with Borrower's accounting
practices less the aggregate amount of all Inventory Reserves.
An item of Inventory shall not be included in Eligible Inventory if:
(a) Borrower does not have good, valid and marketable
title thereto (including Inventory acquired on
consignment),
(b) it is not located at one of the locations in the
United States set forth on Schedule E-1 or in
transit from one such location to another such
location,
(c) it is located on real property leased (other than a
retail store location) by Borrower or in a contract
warehouse, in each case, unless it is subject to a
Collateral Access Agreement executed by the lessor,
(d) it is located at a retail store location leased by
Borrower that is not subject to a Collateral Access
Agreement and for which location Agent, from time to
time in its Permitted Discretion, may require a
Collateral Access Agreement,
(e) it is located in a contract warehouse or is otherwise
stored with a bailee, warehouseman or similar third
party unless it is subject to a Bailee Acknowledgment
executed by the bailee, warehouseman, or other third
party, as the case may be, and unless it is
segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises,
(f) it is not subject to a valid and perfected first
priority security Agent's Lien, or
(g) it consists of goods returned or rejected by
Borrower's customers.
"Eligible Transferee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
11
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender that was
party hereto as of the Closing Date, (e) so long as no Event of Default has
occurred and is continuing, any other Person approved by Agent and Borrower, and
(f) during the continuation of an Event of Default, any other Person approved by
Agent.
"Entered" means recorded by the clerk of the Bankruptcy Court on the
docket of the Bankruptcy Case.
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of Borrower or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facilities which received
Hazardous Materials generated by Borrower or any predecessor in interest.
"Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrower, relating
to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USCss.1251
et seq. the Toxic Substances Control Act, 15 USC,ss.2601 et seq. the Clean Air
Act, 42 USCss.7401 et seq.; the Safe Drinking Water Act, 42 USC.ss.3803 et seq.;
the Oil Pollution Act of 1990, 33 USC.ss.2701 et seq.; the Emergency Planning
and the Community Right-to-Know Act of 1986, 42 USC.ss.11001 et seq.; the
Hazardous Material Transportation Act, 49 USCss.1801 et seq.; and the
Occupational Safety and Health Act, 29 USC.ss.651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means 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, experts, or consultants, 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 Action.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
12
"Equipment" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "equipment" (as such term is defined
from time to time in the Code), fixtures and vehicles (including motor
vehicles), including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower aged in excess of historical
levels with respect thereto and all book overdrafts in excess of their
historical practices with respect thereto, in each case as determined by Agent
in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in
effect from time to time.
"Existing Lender" means WFRF, as agent and lender, in its capacity as
such under the DIP Facility.
"FCPOC" means Factory Card & Party Outlet Corporation, a Delaware
corporation, formerly known as Factory Card Outlet Corporation.
"Fee Letter" means that certain fee letter, dated as of even date
herewith, between Borrower and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"Final Order" means an order of the Bankruptcy Court (a) as to which
the time to appeal, petition for certiorari or move for reargument or rehearing
has expired and as to which no appeal, petition for certiorari or other
proceedings for reargument or rehearing shall then be pending, or (b) if an
appeal, writ of certiorari, reargument or rehearing thereof has been filed or
sought, such order of the Bankruptcy Court shall have been affirmed by the
highest court to which such order was appealed, or certiorari shall have been
denied or reargument or rehearing shall have been denied or resulted in no
modification of such order, and the time to take any further appeal, petition
for certiorari or move for reargument or rehearing shall have expired.
13
"Funding Date" means the date on which a Borrowing occurs.
"Funding Losses" has the meaning set forth in Section 2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "general intangibles" (as
such term is defined from time to time in the Code), and any and all supporting
obligations in respect thereof.
"Goods" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "goods," as that term is defined from
time to time in the Code, including, without limitation, any and all Inventory
and Equipment.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Guarantor" means FCPOC.
"Guarantor Pledge and Security Agreement" means a pledge and security
agreement executed and delivered by Guarantor in favor of Agent, for the benefit
of the Lender Group, in form and substance satisfactory to Agent.
"Guaranty" means that certain general continuing guaranty executed
and delivered by Guarantor in favor of Agent, for the benefit of the Lender
Group, in form and substance satisfactory to Agent.
"Hazardous Materials" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity," (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hedge Agreement" means any and all transactions, agreements, or
documents now existing or hereafter entered into between Borrower or its
Subsidiaries and ▇▇▇▇▇ Fargo or its Affiliates, which provide for an interest
rate, credit, commodity or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency option,
14
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging Borrower's or its Subsidiaries' exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security or
currency valuations or commodity prices.
"Indebtedness" means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of Borrower or its Subsidiaries, irrespective of
whether such obligation or liability is assumed, (e) all obligations for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of business and repayable in accordance with customary trade
practices), and (f) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intangible Assets" means, with respect to any Person, that portion
of the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"Instruments" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "instruments," including, without
limitation, any "promissory notes," as such terms are defined from time to time
in the Code, and any and all supporting obligations in respect thereof.
"Intellectual Property Security Agreement" means an intellectual
property security agreement, dated as of even date herewith, between Borrower
and Agent, in form and substance satisfactory to Agent.
"Interest Period" means, with respect to each LIBO Rate Loan, a
period commencing on the date of the making of such LIBO Rate Loan and ending
one, two or three months thereafter; provided, however, that (a) if any Interest
Period would end on a day that is not a Business Day, such Interest Period shall
be extended (subject to clauses (c)-(e) below) to the next succeeding Business
Day, (b) interest shall accrue at the applicable rate based upon the LIBO Rate
from and including the first day of each Interest Period to, but excluding, the
day on which any Interest Period expires, (c) any Interest Period that would end
on a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (d) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
15
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is one, two or three
months after the date on which the Interest Period began, as applicable, and (e)
Borrower may not elect an Interest Period which will end after the Maturity
Date.
"Inventory" means all Borrower's now owned or hereafter acquired
right, title, and interest with respect to inventory, including goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by Borrower as lessor, goods that are furnished by Borrower under a
contract of service, and raw materials, work in process, or materials used or
consumed in Borrower's business.
"Inventory Reserves" means such reserves as Agent determines from
time to time in its Permitted Discretion as being appropriate to reflect the
impediments to Agent's ability to realize upon the Collateral. Without limiting
the generality of the foregoing, Inventory Reserves may include (but are not
limited to) reserves based on the following: (a) the extent to which Inventory
consists of goods that (i) are obsolete, slow-moving, restrictive or custom
items, bills and hold goods, defective, damaged, prepared for return to vendor,
not first quality goods, work-in-process or raw materials or (ii) constitute
spare parts, packaging and shipping materials or supplies; (b) seasonality; (c)
shrinkage; (d) imbalance or change in Inventory character, composition or mix;
(e) markdowns; (f) the estimated costs relating to unpaid freight charges,
warehousing or storage charges, taxes, duties, and other similar unpaid costs
associated with the acquisition of Eligible In-Transit Inventory by Borrower;
and (g) the estimated reclamation claims of unpaid sellers of Inventory sold to
Borrower.
"Investment" means, with respect to any Person, any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Investment Property" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "investment property," as
such term is defined from time to time in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations thereunder, as in effect from time to time.
"Issuing Lender" means WFRF or any other Lender that, at the request
of Borrower and with the consent of Agent agrees, in such Lender's sole
discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C
Undertakings pursuant to Section 2.12.
"L/C" has the meaning set forth in Section 2.12(a).
"L/C Disbursement" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.
"L/C Undertaking" has the meaning set forth in Section 2.12(a).
16
"Leasehold Interests" means Borrower's leasehold estate or interest
in each of the properties at or upon which Borrower conducts business or
maintains any of the Collateral, together with Borrower's interest in any of the
improvements and fixtures located upon or appurtenant to each leasehold
interest, including without limitation, any rights of Borrower to payments,
proceeds of value of any kind or nature realized upon the sale or transfer of
such estate or interest.
"Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1.
"Lender Group" means, individually and collectively, each of the
Lenders (including the Issuing Lender) and Agent.
"Lender Group Expenses" means all (a) costs or expenses (including
taxes and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by the Lender Group, (b) fees or
charges paid or incurred by Agent in connection with the Lender Group's
transactions with Borrower, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation and UCC searches and including searches with the
patent and trademark office, the copyright office or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) costs and expenses incurred by Agent in the
disbursement of funds to or for the account of Borrower (by wire transfer or
otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of
checks, (e) reasonable costs and expenses paid or incurred by the Lender Group
to correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Agent related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by the Lender Group in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with Borrower or any guarantor of
the Obligations, (h) Agent's and each Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Agent's and
each Lender's reasonable fees and expenses (including attorneys fees charged by
a maximum of one law firm retained by each of Agent and each Lender ) incurred
in terminating, enforcing (including attorneys fees and expenses charged by a
maximum of one law firm retained by each of Agent and each Lender and incurred
in connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral.
17
"Lender-Related Person" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, and Agent of such Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
requires.
"Letter of Credit Rights" means all of Borrower's now owned or
hereafter acquired right, title, and interest with respect to "letter of credit
rights," as that term is defined from time to time in the Code, and any and all
supporting obligations in respect thereof.
"Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).
"LIBOR Notice" means a written notice in the form of Exhibit L-1.
"LIBOR Option" has the meaning set forth in Section 2.13(a).
"LIBO Rate" means, for each Interest Period for each LIBO Rate Loan,
the rate per annum determined by Agent (rounded upwards, if necessary, to the
next 1/16%) by dividing (a) the Base LIBO Rate for such Interest Period, by (b)
100% minus the Reserve Percentage. The LIBO Rate shall be adjusted on and as of
the effective day of any change in the Reserve Percentage.
"LIBO Rate Loan" means each portion of an Advance that bears interest
at a rate determined by reference to the LIBO Rate.
"LIBO Rate Margin" means, as of the Closing Date through (but not
including) the first Adjustment Date, 2.50%, and thereafter the respective
amounts set forth in the following table. The LIBO Rate Margin shall be adjusted
according to the following as of each Adjustment Date, provided that in no event
will the LIBO Rate Margin be reduced if an Event of Default has occurred and is
continuing. Adjustments, if any, to the initial LIBO Rate Margin shall be
determined by reference to the Borrower's EBITDA during its immediately prior
fiscal year as follows:
Annual EBITDA LIBO Rate Margin
------------- ----------------
Greater than or equal to $12,000,001 2.0%
Greater than or equal to $9,000,000 but less than $12,000,001 2.25%
Less than $9,000,000 2.50%
18
"Lien" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Bank Product Agreements,
the Cash Management Agreements, the Credit Card Agreements, all Control
Agreements, the Intellectual Property Security Agreement, the Disbursement
Letter, the Due Diligence Letter, the Fee Letter, the Guaranty, the Letters of
Credit, the Mortgages, the Perfection Certificate, the Guarantor Pledge and
Security Agreement, the Subordination Agreement, any Bank Product Agreement, any
certificates (including without limitation, the Borrowing Base Certificate and
the Compliance Certificate) from time to time delivered by Borrower pursuant to
this Agreement or any other Loan Document, any note or notes executed by
Borrower in connection with this Agreement and payable to a member of the Lender
Group, and any other agreement entered into, now or in the future, by Borrower
and the Lender Group in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, including, without limitation,
any material adverse deviation at any time from the Business Plan of the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower taken as a whole, (b) a material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group's ability to enforce the
Obligations or realize upon the Collateral or (c) a material impairment of the
enforceability or priority of the Agent's Liens with respect to the Collateral
as a result of an action or failure to act on the part of Borrower.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolver Amount" means $40,000,000.
"Mortgages" means, individually and collectively, one or more
mortgages, leasehold mortgages, deeds of trust, or deeds to secure debt,
executed and delivered by Borrower in favor of Agent, for the benefit of the
Lender Group, in form and substance satisfactory to Agent, that encumber the
Real Property Collateral and the related improvements thereto.
"Net Liquidation Percentage" means, at any date of determination, the
percentage of the Cost value of Borrower's Eligible Inventory that is estimated
to be recoverable in an orderly liquidation of such Eligible Inventory, net of
19
liquidation expenses, such percentage to be as determined from time to time by
Agent in its Permitted Discretion or by a qualified appraisal company selected
by Agent.
"Net Retail Liquidation Value" means, at any date of determination,
the result (expressed in Dollars) of the Net Liquidation Percentage times the
Cost value of Eligible Inventory as of such date.
"Obligations" means (a) all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations with respect to
outstanding Letters of Credit, Bank Product Obligations, premiums, liabilities
(including all amounts charged to Borrower's Loan Account pursuant hereto),
obligations, fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrower
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Group Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement
or in the Loan Documents to the Obligations shall include all amendments,
changes, extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.
For the purposes of Sections 2.3(c)(iii), 2.3(e), 2.6(a) and 14.1,
the definition of Required Lenders, and determining whether an Overadvance has
occurred under Section 2.5, the term "Obligations" shall not include Bank
Product Obligations.
"Originating Lender" has the meaning set forth in Section 14.1(e).
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" has the meaning set forth in Section 14.1(e).
"Pay-Off Letter" means a letter, in form and substance satisfactory
to Agent, from Existing Lender to Agent respecting the amount necessary to repay
in full all of the obligations of Borrower owing to Existing Lender and obtain a
release of all of the Liens existing in favor of Existing Lender in and to the
assets of Borrower.
"Perfection Certificate" means the certifications of officers
submitted by Agent to Borrower with respect to Borrower and to Guarantor with
respect to Guarantor, together with Borrower's and Guarantor's completed
responses as applicable, to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.
"Permitted Discretion" means a determination made in good faith and
in the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
20
"Permitted Dispositions" means (a) sales or other dispositions by
Borrower or its Subsidiaries of Equipment that is substantially worn, damaged,
or obsolete in the ordinary course of business, (b) sales by Borrower or its
Subsidiaries of Inventory to buyers in the ordinary course of business, (c) the
use or transfer of money or Cash Equivalents by Borrower or its Subsidiaries in
a manner that is not prohibited by the terms of this Agreement or the other Loan
Documents, and (d) the licensing by Borrower or its Subsidiaries, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of business.
"Permitted Investments" means (a) investments in Cash Equivalents,
(b) investments in negotiable instruments for collection, and (c) advances made
in connection with purchases of goods or services in the ordinary course of
business.
"Permitted Liens" means (a) Liens held by Agent for the benefit of
Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted
Protests, (g) Liens arising from deposits made in connection with obtaining
worker's compensation or other unemployment insurance, (h) Liens or deposits to
secure performance of bids, tenders, or leases incurred in the ordinary course
of business and not in connection with the borrowing of money, (i) Liens granted
as security for surety or appeal bonds in connection with obtaining such bonds
in the ordinary course of business, (j) Liens resulting from any judgment or
award that is not an Event of Default hereunder, (k) Liens with respect to the
Real Property Collateral that are exceptions to the commitments for title
insurance issued in connection with the Mortgages, as accepted by Agent, (l)
with respect to any Real Property that is not part of the Real Property
Collateral, easements, rights of way, and zoning restrictions that do not
materially interfere with or impair the use or operation thereof and (m) Liens
securing the Subordinated Debt and subordinated pursuant to the Subordination
Agreement.
"Permitted Protest" means the right of Borrower or any of its
Subsidiaries, as applicable, to protest any Lien (other than any such Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the Books in
such amount as is required under GAAP, (b) any such protest is instituted
promptly and prosecuted diligently by Borrower or any of its Subsidiaries, as
applicable, in good faith, and (c) other than with respect to Permitted Liens,
Agent is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Agent's
Liens.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not in excess of $5,000,000. In no
21
event shall Permitted Purchase Money Indebtedness include Indebtedness incurred
for the purpose of financing all or any part of the acquisition cost of any
Inventory.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than Real
Property.
"Plan" means the Borrower's and FCPOC's Amended Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code, dated February 5, 2002,
as amended from time to time and confirmed by the Bankruptcy Court pursuant to
the Confirmation Order.
"Projections" means Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Pro Rata Share" means:
(a) with respect to a Lender's obligation to make Advances
and receive payments of principal, interest, fees, costs, and
expenses with respect thereto, (x) prior to the Revolver Commitment
being reduced to zero, the percentage obtained by dividing (i) such
Lender's Revolver Commitment, by (ii) the aggregate Revolver
Commitments of all Lenders, and (y) from and after the time that the
Revolver Commitment has been terminated or reduced to zero, the
percentage obtained by dividing (I) the aggregate principal amount of
such Lender's Advances by (II) the aggregate principal amount of all
Advances,
(b) with respect to a Lender's obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and to receive
payments of fees with respect thereto, (x) prior to the Revolver
Commitment being reduced to zero, the percentage obtained by dividing
(i) such Lender's Revolver Commitment, by (ii) the aggregate Revolver
Commitments of all Lenders, and (y) from and after the time that the
Revolver Commitment has been terminated or reduced to zero, the
percentage obtained by dividing (I) the aggregate principal amount of
such Lender's Advances by (II) the aggregate principal amount of all
Advances,
(c) with respect to all other matters as to a particular
Lender (including the indemnification obligations arising under
Section 16.7), the percentage obtained by dividing (i) such Lender's
Revolver Commitment by (ii) the aggregate amount of Revolver
Commitments of all Lenders; provided, however, that in the event the
Revolver Commitments have been terminated or reduced to zero, Pro
Rata Share shall be the percentage obtained by dividing (A) the
principal amount of such Lender's Advances by (B) the principal
amount of all outstanding Advances.
22
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations) incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"Qualified Import Letter of Credit" means a Letter of Credit that (a)
is issued to facilitate the purchase by Borrower of Eligible Inventory, (b) is
in form and substance acceptable to Agent, and (c) is issued to support an
Underlying Letter of Credit that only is drawable by the beneficiary thereof by
the presentation of, among other documents, either (i) a negotiable ▇▇▇▇ of
lading that is consigned to Agent (either directly or by means of endorsements)
and that was issued by the carrier respecting the subject Eligible Inventory, or
(ii) a negotiable cargo receipt that is consigned to Agent (either directly or
by means of endorsements) and that was issued by a consolidator respecting the
subject Eligible Inventory; provided, however, that, in the latter case, no ▇▇▇▇
of lading shall have been issued by the carrier (other than a ▇▇▇▇ of lading
consigned to the consolidator or to Agent).
"Real Property" means any fee, leasehold or other estate or interest
in real property now or hereafter owned or leased hereafter acquired by Borrower
and the improvements thereto.
"Real Property Collateral" means the parcel or parcels of Real
Property identified on Schedule R-1 and any Real Property hereafter acquired by
Borrower.
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Remedial Action" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Reorganization Expenses" means all expenses incurred by Borrower and
FCPOC in connection with the administration of the Bankruptcy Case prior to the
Closing Date, measured in accordance with GAAP.
"Report" has the meaning set forth in Section 16.17.
"Required Lenders" means, at any time, (a) Agent, and (b) Lenders
whose Pro Rata Shares aggregate 50% of the Commitments, or if the Commitments
have been terminated irrevocably, 66 2/3% of the Obligations (other than Bank
Product Obligations) then outstanding.
"Reserve Percentage" means, on any day, for any Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
23
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"Reserves" means collectively, all Inventory Reserves, Availability
Reserves, Bank Products Reserves and any other reserve created by Agent
hereunder.
"Restricted Payment" has the meaning set forth in Section 7.11.
"Revolver Commitment" means, with respect to each Lender, its
Revolver Commitment, and with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender becomes a
Lender hereunder in accordance with the provisions of Section 14.1.
"Revolver Usage" means, as of any date of determination, the sum of
(a) the then extant amount of outstanding Advances, plus (b) the then extant
amount of the Letter of Credit Usage.
"Risk Participation Liability" means, as to each Letter of Credit,
all reimbursement obligations of Borrower to the Issuing Lender with respect to
an L/C Undertaking, consisting of (a) the amount available to be drawn or which
may become available to be drawn, (b) all amounts that have been paid by the
Issuing Lender to the Underlying Issuer to the extent not reimbursed by
Borrower, whether by the making of an Advance or otherwise, and (c) all accrued
and unpaid interest, fees, and expenses payable with respect thereto.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"Seasonal Period" means, during each calendar year, the period from
and after August 1 up to and including December 15.
"Securities Account" means a "securities account" as that term is
defined in the Code.
"Settlement" has the meaning set forth in Section 2.3(f)(i).
"Settlement Date" has the meaning set forth in Section 2.3(f)(i).
"Solvent" means, with respect to any Person on a particular date,
that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreement" means a stock pledge agreement, in form and
substance satisfactory to Agent, executed and delivered by Borrower with respect
to the pledge of the Stock owned by Borrower.
24
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"Subordinated Debt" has the meaning given to such term in the
Subordination Agreement.
"Subordinated Debt Documents" has the meaning given to such term in
the Subordination Agreement.
"Subordination Agreement" means that certain Intercreditor and
Subordination Agreement dated as of April 9, 2002 executed and delivered by
WFRF, Borrower, FCPOC and the Collateral Trustee (on behalf of the holders of
the Trade Conversion Notes (as such term is defined in the Plan) and the holders
of General Unsecured Claims (as such term is defined in the Plan)), the form and
substance of which is satisfactory to the Agent in its Permitted Discretion.
"Swing Lender" means WFRF or any other Lender that, at the request of
Borrower and with the consent of Agent agrees, in such Lender's sole discretion,
to become the Swing Lender hereunder.
"Swing Loan" has the meaning set forth in Section 2.3(d)(i).
"Taxes" has the meaning set forth in Section 16.11.
"Underlying Issuer" means a third Person which is the beneficiary of
an L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrower and, in the case of a proposed
Qualified Import Letter of Credit, has agreed, in writing, to hold documents of
title as agent for Agent.
"Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 17.7.
"▇▇▇▇▇ Fargo" means ▇▇▇▇▇ Fargo Bank, National Association, a
national banking association.
"WFRF" means ▇▇▇▇▇ Fargo Retail Finance, LLC.
1.2. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.
25
1.3. Code. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth from time to time in the Code
unless otherwise defined herein.
1.4. Construction. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5. Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1. Revolver Advances.
(a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, each Lender with a Revolver Commitment agrees
(severally, not jointly or jointly and severally) to make advances ("Advances")
to Borrower in an amount at any one time outstanding not to exceed such Lender's
Pro Rata Share of an amount equal to the lesser of (i) the Maximum Revolver
Amount less the Letter of Credit Usage and (ii) the Borrowing Base less the
Letter of Credit Usage less the aggregate amount of the Availability Reserves.
For purposes of this Agreement, "Borrowing Base," as of any date of
determination, shall mean an amount equal to the result of:
(A) the lesser of
(I) $500,000, or
(II) 85% of the amount of Eligible
Credit Card Accounts less the amount
if any, of the Dilution Reserve.
plus
(B) during the Seasonal Period, the lesser of (i)
70% of the Cost value of Eligible Inventory or
(ii) 90% of the then extant Net Retail
Liquidation Value or at all other times during
26
the term of this Agreement, the lesser of (i) 65%
of the Cost value of Eligible Inventory or (ii)
85% of the then extant Net Retail Liquidation
Value
minus
(C) the aggregate amount of Reserves, if any,
established by Agent under Section 2.1(b).
(b) Anything to the contrary in this Section 2.1 notwithstanding,
Agent in its Permitted Discretion shall have the right, without declaring an
Event of Default, to reduce its inventory advance rates or establish Reserves
(including Bank Products Reserves) in such amounts, and with respect to such
matters, as Agent in its Permitted Discretion shall deem necessary or
appropriate, against the Borrowing Base, including with respect to (i) sums that
Borrower is required to pay (such as taxes, assessments, insurance premiums, or,
in the case of leased assets, rents or other amounts payable under such leases)
and has failed to pay under any Section of this Agreement or any other Loan
Document, (ii) as determined by Agent in its Permitted Discretion based on
noncompliance with the covenants set forth in Sections 6 and 7, and (iii)
amounts owing by Borrower to any Person to the extent secured by a Lien on, or
trust over, any of the Collateral (other than any existing Permitted Lien set
forth on Schedule P-1 which is specifically identified thereon as entitled to
have priority over the Agent's Liens), which Lien or trust, in the Permitted
Discretion of Agent likely would have a priority superior to the Agent's Liens
(such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral. In addition to the foregoing, Agent
shall have the right to have the Inventory reappraised by a qualified appraisal
company selected by Agent in its Permitted Discretion from time to time after
the Closing Date for the purpose of redetermining the Net Liquidation Percentage
of the Eligible Inventory portion of the Collateral and, as a result,
redetermining the Borrowing Base.
(c) The Lenders with Revolver Commitments shall have no obligation to
make additional Advances hereunder to the extent such additional Advances would
cause the Revolver Usage to exceed the Maximum Revolver Amount or the Borrowing
Base.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2. Reserved.
2.3. Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent, which
notice must be received by Agent no later than 1:00 p.m. (Boston, Massachusetts
time) on the Business Day prior to the date that is the requested Funding Date
in the case of a request for an Advance specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business Day;
27
provided, however, that in the case of a request for Swing Loan in an amount of
$250,000, or less, such notice will be timely received if it is received by
Agent no later than 1:00 p.m. (Boston, Massachusetts time) on the Business Day
that is the requested Funding Date. At Agent's election, in lieu of delivering
the above-described written request, any Authorized Person may give Agent
telephonic notice of such request by the required time, with such telephonic
notice to be confirmed in writing within 24 hours of the giving of such notice.
(b) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i)
to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii)
if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of Section 2.3(d) in the amount of the requested
Borrowing; provided, however, that if Swing Lender declines in its sole
discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to
have the terms of Section 2.3(c) apply to such requested Borrowing.
(c) Making of Advances.
(i) In the event that Agent shall elect to have the terms of this
Section 2.3(c) apply to a requested Borrowing as described in
Section 2.3(b), then promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall notify the
Lenders, not later than 4:00 p.m. (Boston, Massachusetts time)
on the Business Day immediately preceding the Funding Date
applicable thereto, by telecopy, telephone, or other similar
form of transmission, of the requested Borrowing. Each Lender
shall make the amount of such Lender's Pro Rata Share of the
requested Borrowing available to Agent in immediately
available funds, to Agent's Account, not later than 3:00 p.m.
(Boston, Massachusetts time) on the Funding Date applicable
thereto. After Agent's receipt of the proceeds of such
Advances, upon satisfaction of the applicable conditions
precedent set forth in Section 3 hereof, Agent shall make the
proceeds thereof available to Borrower on the applicable
Funding Date by transferring immediately available funds equal
to such proceeds received by Agent to Borrower's Designated
Account; provided, however, that, subject to the provisions of
Section 2.3(i), Agent shall not request any Lender to make,
and no Lender shall have the obligation to make, any Advance
if Agent shall have actual knowledge that (1) one or more of
the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been waived, or
(2) the requested Borrowing would exceed the Availability on
such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to the
Closing Date or, with respect to any Borrowing after the
Closing Date, at least one Business Day prior to the date of
such Borrowing, that such Lender will not make available as
and when required hereunder to Agent for the account of
Borrower the amount of that Lender's Pro Rata Share of the
Borrowing, Agent may assume that each Lender has made or will
make such amount available to Agent in immediately available
funds on the Funding Date and Agent may (but shall not be so
required), in reliance upon such assumption, make available to
Borrower on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount
available to Agent in immediately available funds and Agent in
such circumstances has made available to Borrower such amount,
that Lender shall on the Business Day following such Funding
28
Date make such amount available to Agent, together with
interest at the Defaulting Lender Rate for each day during
such period. A notice submitted by Agent to any Lender with
respect to amounts owing under this subsection shall be
conclusive, absent manifest error. If such amount is so made
available, such payment to Agent shall constitute such
Lender's Advance on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to Agent
on the Business Day following the Funding Date, Agent will
notify Borrower of such failure to fund and, upon demand by
Agent, Borrower shall pay such amount to Agent for Agent's
account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Lender to make
any Advance on any Funding Date shall not relieve any other
Lender of any obligation hereunder to make an Advance on such
Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by
such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrower to Agent for the
Defaulting Lender's benefit, and, in the absence of such
transfer to the Defaulting Lender, Agent shall transfer any
such payments to each other non-Defaulting Lender member of
the Lender Group ratably in accordance with their Commitments
(but only to the extent that such Defaulting Lender's Advance
was funded by the other members of the Lender Group) or, if so
directed by Borrower and if no Default or Event of Default had
occurred and is continuing (and to the extent such Defaulting
Lender's Advance was not funded by the Lender Group), retain
same to be re-advanced to Borrower as if such Defaulting
Lender had made Advances to Borrower. Subject to the
foregoing, Agent may hold and, in its Permitted Discretion,
re-lend to Borrower for the account of such Defaulting Lender
the amount of all such payments received and retained by it
for the account of such Defaulting Lender. Solely for the
purposes of voting or consenting to matters with respect to
the Loan Documents, such Defaulting Lender shall be deemed not
to be a "Lender" and such Lender's Commitment shall be deemed
to be zero. This Section shall remain effective with respect
to such Lender until (x) the Obligations under this Agreement
shall have been declared or shall have become immediately due
and payable, (y) the non-Defaulting Lenders, Agent, and
Borrower shall have waived such Defaulting Lender's default in
writing, or (z) the Defaulting Lender makes its Pro Rata Share
of the applicable Advance and pays to Agent all amounts owing
by Defaulting Lender in respect thereof. The operation of this
Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, to relieve or excuse the
performance by such Defaulting Lender or any other Lender of
its duties and obligations hereunder, or to relieve or excuse
the performance by Borrower of its duties and obligations
hereunder to Agent or to the Lenders other than such
Defaulting Lender. Any such failure to fund by any Defaulting
Lender shall constitute a material breach by such Defaulting
Lender of this Agreement and shall entitle Borrower at its
option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting
Lender, such substitute Lender to be acceptable to Agent. In
connection with the arrangement of such a substitute Lender,
the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance Agreement in favor
of the substitute Lender (and agrees that it shall be deemed
to have executed and delivered such document if it fails to do
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so) subject only to being repaid its share of the outstanding
Obligations (other than Bank Product Obligations) (including
an assumption of its Pro Rata Share of the Risk Participation
Liability) without any premium or penalty of any kind
whatsoever; provided further, however, that any such
assumption of the Commitment of such Defaulting Lender shall
not be deemed to constitute a waiver of any of
the Lender Groups' or Borrower's rights or remedies against
any such Defaulting Lender arising out of or in relation to
such failure to fund.
(d) Making of Swing Loans.
(i) In the event Agent shall elect, with the consent of Swing
Lender, as a Lender, to have the terms of this Section 2.3(d)
apply to a requested Borrowing as described in Section 2.3(b),
Swing Lender as a Lender shall make such Advance in the amount
of such Borrowing (any such Advance made solely by Swing
Lender as a Lender pursuant to this Section 2.3(d) being
referred to as a "Swing Loan" and such Advances being referred
to collectively as "Swing Loans") available to Borrower on the
Funding Date applicable thereto by transferring immediately
available funds to Borrower's Designated Account. Each Swing
Loan is an Advance hereunder and shall be subject to all the
terms and conditions applicable to other Advances, except that
no such Swing Loan shall be eligible for the LIBOR Option and
all payments on any Swing Loan shall be payable to Swing
Lender as a Lender solely for its own account (and for the
account of the holder of any participation interest with
respect to such Swing Loan). Subject to the provisions of
Section 2.3(i), Agent shall not request Swing Lender as a
Lender to make, and Swing Lender as a Lender shall not make,
any Swing Loan if Agent has actual knowledge that (i) one or
more of the applicable conditions precedent set forth in
Section 3 will not be satisfied on the requested Funding Date
for the applicable Borrowing unless such condition has been
waived, or (ii) the requested Borrowing would exceed the
Availability on such Funding Date. Swing Lender as a Lender
shall not otherwise be required to determine whether the
applicable conditions precedent set forth in Section 3 have
been satisfied on the Funding Date applicable thereto prior to
making, in its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's Liens, shall
constitute Advances and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Advances
that are Base Rate Loans.
(e) Agent Advances.
(i) Agent hereby is authorized by Borrower and the Lenders, from
time to time in Agent's sole discretion, (1) after the
occurrence and during the continuance of a Default or an Event
of Default, or (2) at any time that any of the other
applicable conditions precedent set forth in Section 3 have
not been satisfied, to make Advances to Borrower on behalf of
the Lenders that Agent, in its Permitted Discretion, deems
necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the
likelihood of repayment of the Obligations (other than the
Bank Product Obligations), or (C) to pay any other amount
chargeable to Borrower pursuant to the terms of this
Agreement, including Lender Group Expenses and the costs,
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fees, and expenses described in Section 10 (any of the
Advances described in this Section 2.3(e) shall be referred to
as "Agent Advances"). Each Agent Advance is an Advance
hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Agent
Advance shall be eligible for the LIBOR Option and all
payments thereon shall be payable to Agent solely for its own
account (and for the account of the holder of any
participation interest with respect to such Agent Advance).
(ii) The Agent Advances shall be repayable on demand and secured by
the Agent's Liens granted to Agent under the Loan Documents,
shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to
Advances that are Base Rate Loans.
(f) Settlement. It is agreed that each Lender's funded portion of the
Advances is intended by the Lenders to equal, at all times, such Lender's Pro
Rata Share of the outstanding Advances. Such agreement notwithstanding, Agent,
Swing Lender, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("Settlement") with the Lenders
on a weekly basis, or on a more frequent basis if so
determined by Agent, (1) on behalf of Swing Lender, with
respect to each outstanding Swing Loan, (2) for itself, with
respect to each Agent Advance, and (3) with respect to
Collections received, as to each by notifying the Lenders by
telecopy, telephone, or other similar form of transmission, of
such requested Settlement, no later than 4:00 p.m. (Boston,
Massachusetts time) on the Business Day immediately prior to
the date of such requested Settlement (the date of such
requested Settlement being the "Settlement Date"). Such notice
of a Settlement Date shall include a summary statement of the
amount of outstanding Advances, Swing Loans, and Agent
Advances for the period since the prior Settlement Date.
Subject to the terms and conditions contained herein
(including Section 2.3(c)(iii)): (y) if a Lender's balance of
the Advances, Swing Loans, and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, then Agent shall, by
no later than 4:00 p.m. (Boston, Massachusetts time) on the
Settlement Date, transfer in immediately available funds to
the account of such Lender as such Lender may designate, an
amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of
the Advances, Swing Loans, and Agent Advances, and (z) if a
Lender's balance of the Advances, Swing Loans, and Agent
Advances is less than such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement
Date, such Lender shall no later than 4:00 p.m. (Boston,
Massachusetts time) on the Settlement Date transfer in
immediately available funds to the Agent's Account, an amount
such that each such Lender shall, upon transfer of such
amount, have as of the Settlement Date, its Pro Rata Share of
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the Advances, Swing Loans, and Agent Advances. Such amounts
made available to Agent under clause (z) of the immediately
preceding sentence shall be applied against the amounts of the
applicable Swing Loan or Agent Advance and, together with the
portion of such Swing Loan or Agent Advance representing Swing
Lender's Pro Rata Share thereof, shall constitute Advances of
such Lenders. If any such amount is not made available to
Agent by any Lender on the Settlement Date applicable thereto
to the extent required by the terms hereof, Agent shall be
entitled to recover for its account such amount on demand from
such Lender together with interest thereon at the Defaulting
Lender Rate.
(ii) In determining whether a Lender's balance of the Advances,
Swing Loans, and Agent Advances is less than, equal to, or
greater than such Lender's Pro Rata Share of the Advances,
Swing Loans, and Agent Advances as of a Settlement Date, Agent
shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received in good
funds by Agent with respect to principal, interest, fees
payable by Borrower and allocable to the Lenders hereunder,
and proceeds of Collateral. To the extent that a net amount is
owed to any such Lender after such application, such net
amount shall be distributed by Agent to that Lender as part of
such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no Agent
Advances or Swing Loans are outstanding, may pay over to Swing
Lender any payments received by Agent, that in accordance with
the terms of this Agreement would be applied to the reduction
of the Advances, for application to Swing Lender's Pro Rata
Share of the Advances. If, as of any Settlement Date,
Collections received since the then immediately preceding
Settlement Date have been applied to Swing Lender's Pro Rata
Share of the Advances other than to Swing Loans, as provided
for in the previous sentence, Swing Lender shall pay to Agent
for the accounts of the Lenders, and Agent shall pay to the
Lenders, to be applied to the outstanding Advances of such
Lenders, an amount such that each Lender shall, upon receipt
of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement
Dates, Swing Lender with respect to Swing Loans, Agent with
respect to Agent Advances, and each Lender (subject to the
effect of letter agreements between Agent and individual
Lenders) with respect to the Advances other than Swing Loans
and Agent Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the
daily amount of funds employed by Swing Lender, Agent, or the
Lenders, as applicable.
(g) Notation. Agent shall record on its books the principal amount of
the Advances owing to each Lender, including the Swing Loans owing to Swing
Lender, and Agent Advances owing to Agent, and the interests therein of each
Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting conclusive evidence, absent
manifest error, of the accuracy of the information contained therein. Agent
shall provide Borrower with a copy of such notations upon Borrower's written
request.
(h) Lenders' Failure to Perform. All Advances (other than Swing Loans
and Agent Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
32
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.
(i) Optional Overadvances. Any contrary provision of this
Agreement notwithstanding, the Lenders hereby authorize Agent
or Swing Lender, as applicable, and Agent or Swing Lender, as
applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing
Loans) to Borrower notwithstanding that an Overadvance exists
or thereby would be created, so long as (i) after giving
effect to such Advances (including a Swing Loan), the sum of
then extant amount of outstanding Advances, plus the then
extant amount of the Letter of Credit Usage does not exceed
the Borrowing Base by more than $5,000,000, (ii) after giving
effect to such Advances (including a Swing Loan) the
outstanding Revolver Usage (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount,
and (iii) at the time of the making of any such Advance
(including any Swing Loan), Agent does not believe, in good
faith, that the Overadvance created by such Advance will be
outstanding for more than 90 days. The foregoing provisions
are for the exclusive benefit of Agent, Swing Lender, and the
Lenders and are not intended to benefit Borrower in any way.
The Advances and Swing Loans, as applicable, that are made
pursuant to this Section 2.3(i) (a) shall be subject to the
same terms and conditions as any other Advance or Swing Loan,
as applicable, except that they shall not be eligible for the
LIBOR Option, (b) the rate of interest applicable thereto
shall be the rate applicable to Advances that are Base Rate
Loans under Section 2.6(c) hereof without regard to the
presence or absence of a Default or Event of Default and (c)
subject to the following terms and conditions:
(i) In the event Agent obtains actual knowledge that the Revolver
Usage exceeds the amounts permitted by the preceding
paragraph, regardless of the amount of, or reason for, such
excess, Agent shall notify Lenders as soon as practicable (and
prior to making any (or any additional) intentional
Overadvances (except for and excluding amounts charged to the
Loan Account for interest, fees, or Lender Group Expenses)
unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders
with Revolver Commitments thereupon shall, together with
Agent, jointly determine the terms of arrangements that shall
be implemented with Borrower and intended to reduce, within a
reasonable time, the outstanding principal amount of the
Advances to Borrower to an amount permitted by the preceding
paragraph. In the event Agent or any Lender disagrees over the
terms of reduction or repayment of any Overadvance, the terms
of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders.
(ii) Each Lender shall be obligated to settle with Agent as
provided in Section 2.3(f) for the amount of such Lender's Pro
Rata Share of any unintentional Overadvances by Agent reported
to such Lender, any intentional Overadvances made as permitted
under this Section 2.3(i), and any Overadvances resulting from
the charging to the Loan Account of interest, fees, or Lender
Group Expenses.
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2.4. Payments.
(a) Payments by Borrower.
(i) Except as otherwise expressly provided
herein, all payments by Borrower shall be made to Agent's
Account for the account of the Lender Group and shall be
made in immediately available funds, no later than 2:00
p.m. (Boston, Massachusetts time) on the date specified
herein. Any payment received by Agent later than 2:00 p.m.
(Boston, Massachusetts time), shall be deemed to have been
received on the following Business Day and any applicable
interest or fee shall continue to accrue until such
following Business Day.
(ii) Whenever any payment is due on a day other
than a Business Day, such payment shall be made on the
following Business Day, and such extension of time shall in
each instance be included in the computation of interest
and fees.
(iii) Unless Agent receives notice from Borrower
prior to the date on which any payment is due to the
Lenders that Borrower will not make such payment in full as
and when required, Agent may assume that Borrower has made
(or will make) such payment in full to Agent on such date
in immediately available funds and Agent may (but shall not
be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal
to the amount then due such Lender. If and to the extent
Borrower does not make such payment in full to Agent on the
date when due, each Lender severally shall repay to Agent
on demand such amount distributed to such Lender, together
with interest thereon at the Defaulting Lender Rate for
each day from the date such amount is distributed to such
Lender until the date repaid.
(b) Apportionment and Application of Payments.
(i) Except as otherwise provided with respect to Defaulting
Lenders and except as otherwise provided in the Loan Documents
(including letter agreements between Agent and individual
Lenders), aggregate principal and interest payments shall be
apportioned ratably among the Lenders (according to the unpaid
principal balance of the Obligations to which such payments
relate held by each Lender) and payments of fees and expenses
(other than fees or expenses that are for Agent's separate
account, after giving effect to any letter agreements between
Agent and individual Lenders) shall be apportioned ratably
among the Lenders having a Pro Rata Share of the type of
Commitment or Obligation to which a particular fee relates.
All payments shall be remitted to Agent and all such payments
(other than payments received while no Default or Event of
Default has occurred and is continuing and which relate to the
payment of principal or interest of specific Obligations or
which relate to the payment of specific fees), and all
proceeds of Accounts or other Collateral received by Agent,
shall be applied as follows:
(A) first, to pay any Lender Group Expenses then due to Agent
under the Loan Documents, until paid in full,
34
(B) second, to pay any Lender Group Expenses then due to the
Lenders under the Loan Documents, on a ratable basis, until
paid in full,
(C) third, to pay any fees then due to Agent (for its separate
accounts, after giving effect to any letter agreements between
Agent and the individual Lenders) under the Loan Documents
until paid in full,
(D) fourth, to pay any fees then due to any or all of the Lenders
(after giving effect to any letter agreements between Agent
and individual Lenders) under the Loan Documents, on a ratable
basis, until paid in full,
(E) fifth, to pay interest due in respect of all Agent Advances,
until paid in full,
(F) sixth, ratably to pay interest due in respect of the Advances
(other than Agent Advances) and the Swing Loans until paid in
full,
(G) seventh, to pay the principal of all Agent Advances until paid
in full,
(H) eighth, to pay the principal of all Swing Loans until paid in
full,
(I) ninth, so long as no Event of Default has occurred and is
continuing, and at Agent's election (which election Agent
agrees will not be made if an Overadvance would be created
thereby), to pay amounts then due and owing by Borrower or its
Subsidiaries in respect of Bank Products, until paid in full,
(J) tenth, so long as no Event of Default has occurred and is
continuing, to pay the principal of all Advances until paid in
full,
(K) eleventh, if an Event of Default has occurred and is
continuing, ratably (i) to pay the principal of all Advances
until paid in full, and (ii) to Agent, to be held by Agent,
for the benefit of ▇▇▇▇▇ Fargo or its Affiliates, as
applicable, as cash collateral in an amount up to the amount
of the Bank Products Reserve established prior to the
occurrence of, and not in contemplation of, the subject Event
of Default until Borrower's and its Subsidiaries' obligations
in respect of the then extant Bank Products have been paid in
full or the cash collateral amount has been exhausted,
(L) twelfth, if an Event of Default has occurred and is
continuing, to Agent, to be held by Agent, for the ratable
benefit of Issuing Lender and those Lenders having a Revolver
Commitment, as cash collateral in an amount up to 105% of the
then extant Letter of Credit Usage until paid in full,
(M) thirteenth, to pay any other Obligations due to the Agent or
any Lender from Borrower (including Bank Product Obligations)
until paid in full, and
35
(N) fourteenth, to Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under
applicable law.
(ii) Agent promptly shall distribute to each Lender, pursuant to
the applicable wire instructions received from each Lender in
writing, such funds as it may be entitled to receive, subject
to a Settlement delay as provided in Section 2.3(h).
(iii) In each instance, so long as no Event of Default has occurred
and is continuing, Section 2.4(b) shall not be deemed to apply
to any payment by Borrower specified by Borrower to be for the
payment of specific Obligations then due and payable (or
prepayable) under any provision of this Agreement.
(iv) For purposes of the foregoing, "paid in full" means payment of
all amounts owing under the Loan Documents according to the
terms thereof, including loan fees, service fees, professional
fees, interest (and specifically including interest accrued
after the commencement of any Insolvency Proceeding), default
interest, interest on interest, and expense reimbursements,
whether or not the same would be or is allowed or disallowed
in whole or in part in any Insolvency Proceeding.
(v) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained
in any other Loan Document, it is the intention of the parties
hereto that such priority provisions in such documents shall
be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.4 shall
control and govern.
2.5. Overadvances. If, at any time or for any reason, the amount of
Obligations (other than Bank Product Obligations) owed by Borrower to the Lender
Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or
percentage limitations set forth in Sections 2.1 or 2.12, (an "Overadvance"),
except with respect to optional Overadvances made pursuant to Section 2.3(i),
Borrower immediately shall pay to Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance with
the priorities set forth in Section 2.4(b), In addition, Borrower hereby
promises to pay the Obligations (including principal, interest, fees, costs, and
expenses) in Dollars in full to the Lender Group as and when due and payable
under the terms of this Agreement and the other Loan Documents.
2.6. Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations.
(a) Interest Rates. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows (i) if the
relevant Obligation is an Advance that is a LIBO Rate Loan, at a per annum rate
equal to the LIBO Rate plus the LIBO Rate Margin and (ii) otherwise, at a per
annum rate equal to the Base Rate plus the Base Rate Margin.
The foregoing notwithstanding, at no time shall any portion of the
Obligations (other than Bank Product Obligations) bear interest on the Daily
Balance thereof at a per annum rate less than five percent (5%). To the extent
that interest accrued hereunder at the rate set forth herein would be less than
36
the foregoing minimum daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to the minimum rate.
(b) Letter of Credit Fee. Borrower shall pay Agent (for the ratable
benefit of the Lenders with a Revolver Commitment, subject to any letter
agreement between Agent and individual Lenders), a Letter of Credit fee (in
addition to the charges, commissions, fees, and costs set forth in Section 2.13
which shall accrue at a rate equal to one percent (1%) per annum times the Daily
Balance of the undrawn amount of all outstanding standby Letters of Credit plus
the LIBO Rate Margin times the Daily Balance of the undrawn amount of all
outstanding documentary Letters of Credit.
(c) Default Rate. Upon the occurrence and during the continuation of
an Event of Default (and at the election of Agent or the Required Lenders),
(i) all Obligations (except for undrawn Letters of Credit and except for
Bank Product Obligations) that have been charged to the Loan Account
pursuant to the terms hereof shall bear interest on the Daily Balance
thereof at a per annum rate equal to two (2) percentage points above
the per annum rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be increased to two
percentage points above the per annum rate otherwise applicable
hereunder.
(d) Payment. Interest, Letter of Credit fees and all other fees
payable hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or Commitments are outstanding. Borrower
hereby authorizes Agent, from time to time, without prior notice to Borrower, to
charge such interest and fees, all Lender Group Expenses (as and when incurred),
the charges, commissions, fees, and costs provided for in Section 2.12(e) (as
and when accrued or incurred), the fees and costs provided for in Section 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including any amounts due and payable to ▇▇▇▇▇
Fargo or its Affiliates in respect of Bank Products up to the amount of the then
extant Bank Products Reserve) to Borrower's Loan Account, which amounts
thereafter shall constitute Advances hereunder and shall accrue interest at the
rate then applicable to Advances hereunder, and Agent shall deliver to Borrower
a statement of such charges. Any interest not paid when due shall be compounded
by being charged to Borrower's Loan Account and shall thereafter constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances that are Base Rate Loans hereunder.
(e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
37
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7. Cash Management.
(a) Borrower shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Agent at one or more of the
banks set forth on Schedule 2.7 (each a "Cash Management Bank"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of its Account Debtors forward payment of the amounts owed by them directly to
one of such Cash Management Banks, and (ii) deposit or cause to be deposited
promptly, and in any event no later than the first Business Day after the date
of receipt thereof, all Collections (including those sent directly by Account
Debtors to a Cash Management Bank) into one of the DDAs set forth on Schedule
2.7 (a "Cash Management Account") at one of the Cash Management Banks. If,
notwithstanding the provisions of this Section 2.7, Borrower receives or
otherwise has dominion over or control of any Collections, Borrower shall hold
such Collections in trust for Agent and shall not commingle such Collections
with any of Borrower's other funds or deposit such Collections in any account of
Borrower except as instructed by Agent.
(b) Borrower shall establish and maintain Cash Management Agreements
with Agent and each Cash Management Bank. Each such Cash Management Agreement
shall be a Control Agreement and provide, among other things, that (i) upon
notice from Agent, the Cash Management Bank will comply with instructions of
Agent directing the disposition of funds in the Cash Management Account without
further consent by Agent, (ii) the Cash Management Bank has no rights of setoff
or recoupment or any other claim against the applicable Cash Management Account,
other than for payment of its service fees and other charges directly related to
the administration of such Cash Management Account and for returned checks or
other items of payment, and (iii) it immediately will forward by daily sweep all
amounts in the applicable Cash Management Account to the Agent's Account.
(c) Borrower shall establish and maintain Credit Card Agreements with
Agent and each Credit Card Processor. Each such Credit Card Agreement shall
provide, among other things, that each such Credit Card Processor shall transfer
all proceeds of credit card charges for sales by Borrower received by it (or
other amounts payable by such Credit Card Processor) into a designated Cash
Management Account on a daily basis. Borrower shall not attempt to change any
direction or designation set forth in the Credit Card Agreements regarding
payment of charges without the prior written consent of Agent.
(d) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend Schedule 2.7 to add or replace a Cash Management
Account Bank or Cash Management Account; provided, however, that (i) such
38
prospective Cash Management Bank shall be satisfactory to Agent and Agent shall
have consented in writing in advance to the opening of such Cash Management
Account with the prospective Cash Management Bank, and (ii) prior to the time of
the opening of such Cash Management Account, Borrower and such prospective Cash
Management Bank shall have executed and delivered to Agent a Cash Management
Agreement. Borrower shall close any of its Cash Management Accounts (and
establish replacement cash management accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days of notice from Agent that the
creditworthiness of any Cash Management Bank is no longer acceptable in Agent's
reasonable judgment, or as promptly as practicable and in any event within 60
days of notice from Agent that the operating performance, funds transfer, or
availability procedures or performance of the Cash Management Bank with respect
to Cash Management Accounts or Agent's liability under any Cash Management
Agreement with such Cash Management Bank is no longer acceptable in Agent's
reasonable judgment.
(e) The Cash Management Accounts shall be cash collateral accounts,
with all cash, checks and similar items of payment in such accounts securing
payment of the Obligations, and in which Borrower is hereby deemed to have
granted a Lien on each Cash Management Account to Agent.
2.8. Crediting Payments; Float Charge. The receipt of any payment
item by Agent (whether from transfers to Agent by the Cash Management Banks
pursuant to the Cash Management Agreements or otherwise) shall not be considered
a payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Agent's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrower shall be deemed not to have
made such payment and interest shall be calculated accordingly. Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by Agent only if it is received into the Agent's Account on a Business
Day on or before 2:00 p.m. (Boston, Massachusetts time). If any payment item is
received into the Agent's Account on a non-Business Day or after 2:00 p.m.
(Boston, Massachusetts time) on a Business Day, it shall be deemed to have been
received by Agent as of the opening of business on the immediately following
Business Day. From and after the Closing Date, Agent shall be entitled to charge
Borrower for one Business Day of `clearance' or `float' at the rate applicable
to Base Rate Loans under Section 2.6 on all Collections that are received by
Borrower (regardless of whether forwarded by the Cash Management Banks to
Agent). This across-the-board one Business Day clearance or float charge on all
Collections is acknowledged by the parties to constitute an integral aspect of
the pricing of the financing of Borrower; the effect of such clearance or float
charge being the equivalent of charging one Business Day of interest on such
Collections. The parties acknowledge and agree that the economic benefit of the
foregoing provisions of this Section 2.8 shall be for the exclusive benefit of
Agent.
2.9. Designated Account. Agent is authorized to make the Advances,
and Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(d). Borrower agrees to establish and maintain the Designated Account
with the Designated Account Bank for the purpose of receiving the proceeds of
39
the Advances requested by Borrower and made by Agent or the Lenders hereunder.
So long as no Default or Event of Default has occurred and is continuing,
Borrower may add or replace, the Designated Account Bank or the Designated
Account on 30 days prior written notice to Agent; provided, however, that (i)
such prospective Designated Account Bank shall be satisfactory to Agent and
Agent shall have consented in writing in advance to the opening of such
Designated Account with the prospective Designated Account Bank, and (ii) prior
to the time of the opening of such Designated Account, Borrower, Agent and such
prospective Designated Account Bank shall have executed and delivered to Agent a
Control Agreement with respect to the Designated Account. Unless otherwise
agreed by Lender and Borrower, any Advance requested by Borrower and made by
Agent and the Lenders hereunder shall be made to the Designated Account. Unless
otherwise agreed by Agent and Borrower, any Advance, Agent Advance, or Swing
Loan requested by Borrower and made by Agent or the Lenders hereunder shall be
made to the Designated Account.
2.10. Maintenance of Loan Account; Statements of Obligations. Agent
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances (including Agent
Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
Borrower or for Borrower's account, the Letters of Credit issued by Issuing
Lender for Borrower's account, and with all other payment Obligations hereunder
or under the other Loan Documents (except for Bank Product Obligations),
including, accrued interest, fees and expenses, and Lender Group Expenses. In
accordance with Section 2.8, the Loan Account will be credited with all payments
received by Agent from Borrower or for Borrower's account, including all amounts
received in the Agent's Account from any Cash Management Bank. Agent shall
render statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 30 days after
receipt thereof by Borrower, Borrower shall deliver to Agent written objection
thereto describing the error or errors contained in any such statements.
2.11. Fees. Borrower shall pay to Agent the following fees and
charges, which fees and charges shall be non-refundable when paid (irrespective
of whether this Agreement is terminated thereafter) and shall be apportioned
among the Lenders in accordance with the terms of letter agreements between
Agent and individual Lenders:
(a) Unused Line Fee. On the first day of each month during the term
of this Agreement, an unused line fee in an amount equal to 0.25% per annum
times the result of (a) the Maximum Revolver Amount, less (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month, plus (ii) the average Daily Balance of the Letter of Credit
Usage during the immediately preceding month,
(b) Fee Letter Fees. As and when due and payable under the terms of
the Fee Letter, Borrower shall pay to Agent the fees set forth in the Fee
Letter, and
(c) Audit, Appraisal, and Valuation Charges. For the separate account
of Agent, the Borrower shall pay audit, appraisal, and valuation fees and
charges as follows: (i) a fee of $850 per day per auditor plus out-of-pocket
expenses for each financial audit of Borrower performed by personnel employed by
40
Agent not to exceed three such financial audits per fiscal year if no Event of
Default has occurred and is continuing, (ii) a fee of $1,500 per day per
appraiser, plus out-of-pocket expenses for appraisals of the Collateral
performed by personnel employed by Agent not to exceed three such appraisals per
fiscal year if no Event of Default has occurred and is continuing and (iii) the
actual charges paid or incurred by Agent if it elects to employ the services of
one or more third Persons to perform financial audits of Borrower, to appraise
the Collateral, or any portion thereof, or to assess Borrower's business
valuation.
2.12. Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the account of Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo) for the account of
Borrower. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Lender) to the Issuing Lender and Agent (reasonably in advance of the requested
date of issuance, amendment, renewal, or extension) a notice requesting the
issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking
to be amended, renewed, or extended, the date of issuance, amendment, renewal,
or extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the beneficiary
thereof (or of the Underlying Letter of Credit, as applicable), and such other
information as shall be necessary to prepare, amend, renew, or extend such L/C
or L/C Undertaking. If requested by the Issuing Lender, Borrower also shall be
an applicant under the application with respect to any Underlying Letter of
Credit that is to be the subject of an L/C Undertaking. The Issuing Lender shall
have no obligation to issue a Letter of Credit if any of the following would
result after giving effect to the requested Letter of Credit:
(i) the Letter of Credit Usage would exceed $10,000,000,
or
(ii) the Letter of Credit Usage would exceed the Borrowing
Base less the then-extant amount of outstanding
Advances, or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the then extant amount of
outstanding Advances.
Borrower and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrower immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 2:00 p.m., Boston, Massachusetts time, on the date that such L/C
Disbursement is made, if Borrower shall have received written or telephonic
41
notice of such L/C Disbursement prior to 1:00 p.m. (Boston, Massachusetts time)
on such date, or, if such notice has not been received by Borrower prior to such
time on such date, then not later than 2:00 p.m. (Boston, Massachusetts time) on
the Business Day that Borrower receives such notice, if such notice is received
prior to 1:00 p.m. (Boston, Massachusetts time) on the date of receipt, and, in
the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans
under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance
hereunder, Borrower's obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance. Promptly following receipt by
Agent of any payment from Borrower pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender,
then to such Lenders and the Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a), each Lender with a Revolver Commitment agrees to
fund its Pro Rata Share of any Advance deemed made pursuant to the foregoing
subsection on the same terms and conditions as if Borrower had requested such
Advance and Agent shall promptly pay to Issuing Lender the amounts so received
by it from the Lenders. By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuing Lender or the Lenders with a Revolver
Commitment, the Issuing Lender shall be deemed to have granted to each Lender
with a Revolver Commitment and each Lender with a Revolver Commitment shall be
deemed to have purchased, a participation in each Letter of Credit, in an amount
equal to its Pro Rata Share of the Risk Participation Liability of such Letter
of Credit, and each such Lender agrees to pay to Agent, for the account of the
Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing
Lender under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender with a Revolver Commitment hereby absolutely and
unconditionally agrees to pay to Agent, for the account of the Issuing Lender,
such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender
and not reimbursed by Borrower on the date due as provided in clause (a) of this
Section, or of any reimbursement payment required to be refunded to Borrower for
any reason. Each Lender with a Revolver Commitment acknowledges and agrees that
its obligation to deliver to Agent, for the account of the Issuing Lender, an
amount equal to its respective Pro Rata Share pursuant to this Section 2.12(b)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or Default
or the failure to satisfy any condition set forth in Section 3 hereof. If any
such Lender fails to make available to Agent the amount of such Lender's Pro
Rata Share of any payments made by the Issuing Lender in respect of such Letter
of Credit as provided in this Section, Agent (for the account of the Issuing
Lender) shall be entitled to recover such amount on demand from such Lender
together with interest thereon at the Defaulting Lender Rate until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by the Lender Group arising out of or in connection with
any Letter of Credit; provided, however, that Borrower shall not be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of the Issuing Lender or any other
member of the Lender Group. Borrower agrees to be bound by the Underlying
42
Issuer's regulations and interpretations of any Underlying Letter of Credit or
by Issuing Lender's interpretations of any L/C issued by Issuing Lender to or
for Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that the Lender Group shall
not be liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Undertakings may require Issuing Lender to
indemnify the Underlying Issuer for certain costs or liabilities arising out of
claims by Borrower against such Underlying Issuer. Borrower hereby agrees to
indemnify, save, defend, and hold the Lender Group harmless with respect to any
loss, cost, expense (including reasonable attorneys fees), or liability incurred
by the Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; provided, however, that Borrower shall
not be obligated hereunder to indemnify for any loss, cost, expense, or
liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group.
(d) Borrower hereby authorizes and directs any Underlying Issuer to
deliver to the Issuing Lender all instruments, documents, and other writings and
property received by such Underlying Issuer pursuant to such Underlying Letter
of Credit and to accept and rely upon the Issuing Lender's instructions with
respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by the
Issuing Lender relating to Underlying Letters of Credit shall be Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Agent for the account of the Issuing Lender; it being acknowledged
and agreed that the issuance charge imposed by the prospective Underlying Issuer
is 1.0% per annum times the face amount of each Underlying Letter of Credit,
that such issuance charge may be changed from time to time, and that the
Underlying Issuer also imposes a schedule of charges for amendments, extensions,
drawings, and renewals.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by the Underlying Issuer or
the Lender Group with any direction, request, or requirement (irrespective of
whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time to
time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or the Lender
Group any other condition regarding any Underlying Letter of
Credit or any Letter of Credit issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
43
period after the additional cost is incurred or the amount received is reduced,
notify Borrower, and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Agent of any amount due pursuant to this
Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
(g) Borrower acknowledges and agrees that certain of the Qualified
Import Letters of Credit may provide for the presentation of time drafts to the
Underlying Issuer. If an Underlying Issuer accepts such a time draft that is
presented under an Underlying Letter of Credit, it is acknowledged and agreed
that (i) the Letter of Credit will require the Issuing Lender to reimburse the
Underlying Issuer for amounts paid on account of such time draft on or after the
maturity date thereof, (ii)the pricing provisions hereof (including Sections
2.6(b) and 2.12(e)) shall continue to apply, until payment of such time draft on
or after the maturity date thereof, as if the Underlying Letter of Credit were
still outstanding, and (iii) on the date on which Issuing Lender makes payment
to the Underlying Issuer of the amounts paid on account of such time draft,
Borrower immediately shall reimburse such amount to Issuing Lender and such
amount shall constitute an L/C Disbursement hereunder.
2.13. LIBOR Option.
(a) Interest and Interest Payment Dates. In lieu of having interest
charged at the rate based upon the Base Rate, Borrower shall have the option
(the "LIBOR Option") to have interest on all or a portion of the Advances be
charged at a rate of interest based upon the LIBO Rate. Interest on LIBO Rate
Loans shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto, (ii) the occurrence of an Event of Default in
consequence of which the Required Lenders or Agent on behalf thereof elect to
accelerate the maturity of all or any portion of the Obligations, or (iii)
termination of this Agreement pursuant to the terms hereof. On the last day of
each applicable Interest Period, unless Borrower properly has exercised the
LIBOR Option with respect thereto, the interest rate applicable to such LIBO
Rate Loan automatically shall convert to the rate of interest then applicable to
Base Rate Loans of the same type hereunder. At any time that an Event of Default
has occurred and is continuing, Borrower no longer shall have the option to
request that Advances bear interest at the LIBO Rate and Agent shall have the
right to convert the interest rate on all outstanding LIBO Rate Loans to the
rate then applicable to Base Rate Loans hereunder.
(b) LIBOR Election.
(i) Borrower may, at any time and from time to time, so long as no
Event of Default has occurred and is continuing, elect to
exercise the LIBOR Option by notifying Agent prior to 2:00
p.m. (Boston, Massachusetts time) at least two Business Days
prior to the commencement of the proposed Interest Period (the
"LIBOR Deadline"). Notice of Borrower's election of the LIBOR
Option for a permitted portion of the Advances and an Interest
Period pursuant to this Section shall be made by delivery to
Agent of a LIBOR Notice received by Agent before the LIBOR
44
Deadline, or by telephonic notice received by Agent before the
LIBOR Deadline (to be confirmed by delivery to Agent of a
LIBOR Notice received by Agent prior to 5:00 p.m. (Boston,
Massachusetts time) on the same day). Promptly upon its
receipt of each such LIBOR Notice, Agent shall provide a copy
thereof to each of the Lenders having a Revolver Commitment.
(ii) Each LIBOR Notice shall be irrevocable and binding on
Borrower. In connection with each LIBO Rate Loan, Borrower
shall indemnify, defend, and hold Agent and the Lenders
harmless against any loss, cost, or expense incurred by Agent
or any Lender as a result of (a) the payment of any principal
of any LIBO Rate Loan other than on the last day of an
Interest Period applicable thereto (including as a result of
an Event of Default), (b) the conversion of any LIBO Rate Loan
other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or
prepay any LIBO Rate Loan on the date specified in any LIBOR
Notice delivered pursuant hereto (such losses, costs, and
expenses, collectively, "Funding Losses"). Funding Losses
shall, with respect to Agent or any Lender, be deemed to equal
the amount determined by Agent or such Lender to be the
excess, if any, of (i) the amount of interest that would have
accrued on the principal amount of such LIBO Rate Loan had
such event not occurred, at the LIBO Rate that would have been
applicable thereto, for the period from the date of such event
to the last day of the then current Interest Period therefor
(or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest Period
therefor), minus (ii) the amount of interest that would accrue
on such principal amount for such period at the interest rate
which Agent or such Lender would be offered were it to be
offered, at the commencement of such period, Dollar deposits
of a comparable amount and period in the London interbank
market. A certificate of Agent or a Lender delivered to
Borrower setting forth any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section
shall be conclusive absent manifest error.
(iii) Borrower shall have not more than five LIBO Rate Loans in
effect at any given time. Borrower only may exercise the LIBOR
Option for LIBO Rate Loans of at least $1,000,000 and integral
multiples of $100,000 in excess thereof.
(c) Prepayments. Borrower may prepay LIBO Rate Loans at any time;
provided, however, that in the event that LIBO Rate Loans are prepaid on any
date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections in accordance with Section
2.4(b) or for any other reason, including early termination of the term of this
Agreement or acceleration of all or any portion of the Obligations pursuant to
the terms hereof, Borrower shall indemnify, defend, and hold Agent and the
Lenders and their Participants harmless against any and all Funding Losses in
accordance with clause (b)(ii) above.
(d) Special Provisions Applicable to LIBO Rate.
(i) The LIBO Rate may be adjusted by Agent with respect to any
Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or
obtaining any eurodollar deposits or increased costs due to
45
changes in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including
changes in tax laws (except changes of general applicability
in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal
Reserve System (or any successor), excluding the Reserve
Percentage, which additional or increased costs would increase
the cost of funding loans bearing interest at the LIBO Rate.
In any such event, the affected Lender shall give Borrower and
Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and,
upon its receipt of the notice from the affected Lender,
Borrower may, by notice to such affected Lender (y) require
such Lender to furnish to Borrower a statement setting forth
the basis for adjusting such LIBO Rate and the method for
determining the amount of such adjustment, or (z) repay the
LIBO Rate Loans with respect to which such adjustment is made
(together with any amounts due under clause (b)(ii) above).
(ii) In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in
the interpretation of application thereof, shall at any time
after the date hereof, in the reasonable opinion of any
Lender, make it unlawful or impractical for such Lender to
fund or maintain LIBOR Advances or to continue such funding or
maintaining, or to determine or charge interest rates at the
LIBO Rate, such Lender shall give notice of such changed
circumstances to Agent and Borrower and Agent promptly shall
transmit the notice to each other Lender and (y) in the case
of any LIBO Rate Loans of such Lender that are outstanding,
the date specified in such Lender's notice shall be deemed to
be the last day of the Interest Period of such LIBO Rate
Loans, and interest upon the LIBO Rate Loans of such Lender
thereafter shall accrue interest at the rate then applicable
to Base Rate Loans, and (z) Borrower shall not be entitled to
elect the LIBOR Option until such Lender determines that it
would no longer be unlawful or impractical to do so.
(e) No Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBO
Rate. The provisions of this Section shall apply as if each Lender or its
Participants had match funded any Obligation as to which interest is accruing at
the LIBO Rate by acquiring eurodollar deposits for each Interest Period in the
amount of the LIBO Rate Loans.
2.14. Capital Requirements. If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its Borrower bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), will have the effect of reducing the return on such Lender's
or such holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
46
Lender may notify Borrower and Agent thereof. Following receipt of such notice,
Borrower agrees to pay such Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by such Lender of a statement in the amount and setting
forth in reasonable detail such Lender's calculation thereof and the assumptions
upon which such calculation was based (which statement shall be deemed true and
correct absent manifest error). In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
3. CONDITIONS; TERM OF AGREEMENT.
3.1. Conditions Precedent to the Initial Extension of Credit. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is subject
to the fulfillment, to the satisfaction of Agent, of each of the conditions
precedent set forth below:
(a) the Closing Date shall occur on or before May 15, 2002;
(b) Agent shall have filed all financing statements required by
Agent, duly executed by Borrower, and Agent shall have received searches
reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed, and each such document
shall be in full force and effect:
(i) the Guarantor Pledge and Security Agreement, together with all
certificates representing the shares of Stock pledged
thereunder, as well as Stock powers with respect thereto
endorsed in blank,
(ii) the Guaranty,
(iii) the Intellectual Property Security Agreement,
(iv) the Cash Management Agreements,
(v) the Credit Card Agreements,
(vi) the Subordination Agreement,
(vii) the Fee Letter,
(viii) the Pay-Off Letter, together with UCC termination statements
and other documentation evidencing the termination by Existing
Lender of its Liens in and to the properties and assets of
Borrower,
(ix) the Disbursement Letter, and
47
(x) the Perfection Certificates of each of Borrower and Guarantor.
(d) Agent shall have received a Collateral Access Agreement with
respect to Borrower's corporate headquarters and distribution center located at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇;
(e) Agent shall have received a certificate from an officer of
Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(f) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by an officer of Borrower;
(g) Agent shall have received a certificate of status with respect to
Borrower, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(h) Agent shall have received certificates of status with respect to
Borrower, each dated within 30 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing in such
jurisdictions;
(i) Agent shall have received a certificate from an officer of the
Guarantor attesting to the resolutions of the Guarantor's Board of Directors
authorizing its execution, delivery, and performance of the Loan Documents to
which the Guarantor is a party and authorizing specific officers of the
Guarantor to execute the same;
(j) Agent shall have received copies of the Guarantor's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by an officer of the Guarantor;
(k) Agent shall have received a certificate of status with respect to
the Guarantor, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of the
Guarantor, which certificate shall indicate that the Guarantor is in good
standing in such jurisdiction;
(l) Agent shall have received certificates of status with respect to
the Guarantor, each dated within 30 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of the Guarantor) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that the Guarantor is in good standing in such
jurisdictions;
48
(m) Agent shall have received a certificate of insurance, together
with the endorsements thereto, as are required by Section 6.8, the form and
substance of which shall be satisfactory to Agent;
(n) Agent shall have received opinions of Borrower's counsel in form
and substance satisfactory to Agent;
(o) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that, to the best of
Borrower's knowledge, all material tax returns required to be filed by Borrower
have been timely filed and all taxes upon Borrower or its properties, assets,
income, and franchises (including Real Property taxes and payroll taxes) have
been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest or which are being paid or otherwise discharged in accordance
with the Plan;
(p) Borrower shall have Excess Availability of not less than
$4,000,000 after payment of all amounts due under the Pay-Off Letter and any
other sums to be paid or Letters of Credit to be issued at the Closing Date;
(q) Agent shall have completed its business, legal, and collateral
due diligence, the results of which shall be reasonably satisfactory to Agent;
(r) Agent shall have received an appraisal of the Net Retail
Liquidation Value and Net Liquidation Percentage applicable to Borrower's
Inventory, the results of which shall be satisfactory to Agent;
(s) Agent shall have received the Closing Date Business Plan;
(t) Borrower shall pay all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
(u) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Agent;
(v) the Confirmation Order shall have been Entered and shall have
become a Final Order;
(w) the Effective Date shall have occurred concurrently with the
effectiveness of this Agreement;
(x) each of ▇▇▇▇▇ Fargo and the Senior Credit Committee of WFRF shall
have approved this Agreement and the transactions contemplated hereby; and
(y) each of the Subordinated Debt Documents shall be in form and
substance satisfactory to the Agent in its Permitted Discretion.
3.2. Conditions Subsequent to the Initial Extension of Credit. The
obligation of the Lender Group (or any member thereof) to continue to make
Advances (or otherwise extend credit hereunder) is subject to the fulfillment,
49
on or before the date applicable thereto, of each of the conditions subsequent
set forth below (the failure by Borrower to so perform or cause to be performed
constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Agent certified
copies of the policies of insurance, together with the endorsements thereto, as
are required by Section 6.8, the form and substance of which shall be
satisfactory to Agent and its counsel;
(b) use its reasonable efforts to deliver to Agent a Mortgage with
respect to Borrower's Leasehold Interest in its corporate headquarters and
distribution center located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ within 30
days of the Closing Date;
(c) within 30 days of the Closing Date, deliver to Agent Bailee
Acknowledgments with respect to each of the following locations: ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇.
(d) within 30 days of the Closing Date, deliver to Agent certificates
of status issued by the appropriate officers of those jurisdictions set forth on
Schedule 5.8(a); and
(e) within 30 days of the Closing Date, cause the Guarantor to
deliver to the Agent an original stock certificate of the Borrower issued to
Guarantor representing 2,500 shares of common stock of Borrower.
3.3. Conditions Precedent to all Extensions of Credit. The obligation
of the Lender Group (or any member thereof) to make any Advance (or to extend
any other credit hereunder) shall be subject to the following conditions
precedent:
(a) the representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct in all material respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against
Borrower, Agent, any Lender, or any of its Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4. Term. This Agreement shall become effective upon the execution
and delivery hereof by Borrower, Agent, and the Lenders, shall continue in full
force and effect for a term ending on April 9, 2005 (the "Maturity Date") and
shall automatically be renewed for up to a maximum of three successive two-year
periods thereafter. The foregoing notwithstanding, the Lender Group, upon the
election of the Required Lenders, shall have the right to terminate its
50
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5. Effect of Termination. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit and including all
Bank Products Obligations) immediately shall become due and payable without
notice or demand (including (a) either (i) providing cash collateral to be held
by Agent for the benefit of the Lenders in an amount equal to 102% of the then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to the Issuing Lender, and (b) providing cash collateral to be held
by Agent for the benefit of ▇▇▇▇▇ Fargo or its Affiliates with respect to the
then extant Bank Products Obligations). No termination of this Agreement,
however, shall relieve or discharge Borrower of its duties, Obligations, or
covenants hereunder and the Agent's Liens in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and the
Lender Group's obligations to provide additional credit hereunder have been
terminated. When this Agreement has been terminated and all of the Obligations
have been fully and finally discharged and the Lender Group's obligations to
provide additional credit under the Loan Documents have been terminated
irrevocably, Agent will, at Borrower's sole expense, execute and deliver any UCC
termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, the Agent's Liens and all notices of
security interests and liens previously filed by Agent with respect to the
Obligations.
3.6. Early Termination by Borrower. Borrower has the option, at any
time upon 90 days prior written notice to Agent, to terminate this Agreement by
paying to Agent, for the benefit of the Lender Group, in cash, the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Revolver Commitment in an amount equal to 102%
of the then extant Letter of Credit Usage, or (ii) causing the original Letters
of Credit to be returned to the Issuing Lender, and (b) providing cash
collateral to be held by Agent for the benefit of ▇▇▇▇▇ Fargo or its Affiliates
with respect to the then extant Bank Products Obligations), in full, together
with the Applicable Prepayment Premium (to be allocated based upon letter
agreements between Agent and individual Lenders). If Borrower has sent a notice
of termination pursuant to the provisions of this Section, then the Commitments
shall terminate and Borrower shall be obligated to repay the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Revolver Commitment in an amount equal to 102%
of the then extant Letter of Credit Usage, or (ii) causing the original Letters
of Credit to be returned to the Issuing Lender, and (b) providing cash
collateral to be held by Agent for the benefit of ▇▇▇▇▇ Fargo or its Affiliates
with respect to the then extant Bank Products Obligations), in full, together
with the Applicable Prepayment Premium, on the date set forth as the date of
termination of this Agreement in such notice. In the event of the termination of
this Agreement and repayment of the Obligations at any time prior to the
Maturity Date, for any other reason, including (a) termination upon the election
of the Required Lenders to terminate after the occurrence of an Event of
Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral in
any Insolvency Proceeding, or (iv) restructure, reorganization or compromise of
the Obligations by the confirmation of a plan of reorganization, or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender Group
51
as a result of such early termination, and by mutual agreement of the parties as
to a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrower shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.
4. CREATION OF SECURITY INTEREST.
4.1. Grant of Security Interest. Borrower hereby grants to Agent, for
the benefit of the Lender Group and any other holder of Obligations, a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents and in order
to secure prompt performance by Borrower of each of its covenants and duties
under the Loan Documents. The Agent's Liens in and to the Personal Property
Collateral shall attach to all Personal Property Collateral without further act
on the part of Agent or Borrower. Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrower has no authority, express or implied, to dispose of any
item or portion of the Collateral.
4.2. Control of Collateral. If from time to time any Collateral,
including any proceeds or supporting obligations, consists of property or rights
of Borrower in which the perfection or priority of Agent's security interest is
dependent upon or enhanced by Agent's gaining control of such Collateral,
Borrower shall immediately notify Agent and, at Agent's request, deliver the
appropriate Control Agreements or take such actions as may be necessary to give
Agent control over such Collateral as provided in the Code.
4.3. Negotiable Collateral. If from time to time any Collateral,
including any proceeds, is evidenced by or consists of letters of credit,
Instruments, Documents, Goods covered by Documents, Investment Property or
Chattel Paper, and if perfection or priority of Agent's security interest in
such Collateral is dependent on or enhanced by possession, Borrower, immediately
upon the request of Agent, shall endorse and deliver physical possession of such
Collateral to Agent.
4.4. Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time after the occurrence and during the continuation of an
Event of Default, Agent or Agent's designee may (a) notify Account Debtors of
Borrower that the Accounts, Chattel Paper, or General Intangibles have been
assigned to Agent or that Agent has a security interest therein, or (b) collect
the Accounts, Chattel Paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account. Borrower shall hold any
Collections that it receives in trust for the Lender Group, as the Lender
Group's trustee, and immediately will deliver said Collections to Agent or a
Cash Management Bank in their original form as received by Borrower.
4.5. Delivery of Additional Documentation Required. At any time upon
the reasonable request of Agent, Borrower shall execute and deliver to Agent,
any and all financing statements (including, without limitation, any amendments
thereto and any "in lieu" continuation statements), security agreements,
52
pledges, assignments, endorsements of certificates of title, bailee
acknowledgments and all other documents (the "Additional Documents") that Agent
may request in its Permitted Discretion, each in form and substance satisfactory
to Agent, to perfect and continue perfected or to better perfect the Agent's
Liens in the Collateral (whether now owned or hereafter arising or acquired), to
create and perfect Liens in favor of Agent in any Real Property acquired after
the Closing Date, and in order to fully consummate all of the transactions
contemplated hereby and under the other Loan Documents. To the maximum extent
permitted by applicable law, Borrower authorizes Agent to execute any such
Additional Documents in Borrower's name and authorize Agent to file such
executed Additional Documents in any appropriate filing office. Without limiting
the foregoing, Borrower shall (a) give the Agent prompt written notice of any
Commercial Tort Claim of Borrower not specifically identified herein and any
Letter of Credit Right of Borrower. Borrower shall grant to the Agent, for the
benefit of the Lender Group, a security interest in any such Commercial Tort
Claim or Letter of Credit Right and the proceeds thereof, and (b) on such
periodic basis as Agent shall require, (i) provide Agent with a report of all
new patentable, copyrightable or trademarkable materials acquired or generated
by Borrower during the prior period, (ii) cause all patents, copyrights, and
trademarks acquired or generated by Borrower that are not already the subject of
a registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrower's ownership thereof,
(iii) cause to be prepared, executed, and delivered to Agent supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights
and trademarks as being subject to the security interests created thereunder,
and (iv) execute and deliver to Agent at Agent's request Patent, Trademark or
Copyright Security Agreements with respect to such patents, trademarks or
copyrights for filing with the appropriate filing office.
4.6. Power of Attorney. Borrower hereby irrevocably makes, constitutes,
and appoints Agent (and any of Agent's officers, employees, or Agent designated
by Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign Borrower's name on any invoice or ▇▇▇▇ of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of Accounts, (d) endorse
Borrower's name on any Collection item that may come into the Lender Group's
possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under Borrower's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, Chattel Paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as Borrower's attorney, and
each and every one of its rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid and
performed and the Lender Group's obligations to extend credit hereunder are
terminated.
53
4.7. Control Agreements. No arrangement contemplated hereby or by any
Control Agreement in respect of any DDA or any Securities Accounts or other
Investment Property shall be modified by Borrower without the prior written
consent of Agent.
4.8. Right to Inspect; Inventories, Appraisals and Audits. Agent and
each Lender (through any of their respective officers, employees, or Agent)
shall have the right, from time to time hereafter and upon reasonable notice to
Borrower, to inspect the Books and to check, test, and appraise the Collateral
in order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral. Without limiting
the generality of the foregoing:
(a) At Borrower's expense, third parties acceptable to Agent shall
conduct physical inventories at all of Borrower's store locations once per
fiscal year and at its distribution center from time to time consistent with
existing practices on the Closing Date. Agent, at the expense of Borrower, may
participate in and/or observe each physical count and/or inventory of so much of
the Collateral as consists of Inventory which is undertaken on behalf of
Borrower. Without limiting any provision of this Agreement, Agent may establish
or expand the Availability Reserves and Inventory Reserves based on the results
of such physical inventories.
(b) Agent from time to time, but not more often than three times per
fiscal year if no Event of Default has occurred and is continuing, obtain or
conduct (in all events, at Borrower's expense) appraisals conducted by such
appraisers as are satisfactory to Agent.
(c) Agent contemplates conducting three commercial finance audits (in
each event, at Borrower's expense) of Borrower's Books, provided that such
audits may occur more frequently if an Event of Default has occurred and is
continuing.
(d) Agent from time to time (in all events, at Borrower's expense up to
an aggregate maximum of $5,000 per fiscal year) may undertake "merchant visits"
to all or any of Borrower's business premises and shall provide seven days prior
notice of each such visit to Borrower. Agent shall provide Borrower with a copy
of any non-company confidential results of such merchant visits upon Borrower's
written request.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects, as of the
date hereof, and shall be true, correct, and complete, in all material respects,
as of the Closing Date, and at and as of the date of the making of each Advance
(or other extension of credit) made thereafter, as though made on and as of the
date of such Advance (or other extension of credit) (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1. No Encumbrances. Borrower has good and indefeasible title to all
of the property composing the Collateral and the Real Property, free and clear
of Liens except for Permitted Liens.
54
5.2. Reserved.
5.3. Eligible Inventory. All Eligible Inventory is of good and
merchantable quality, free from defects. As to each item of Inventory that is
identified by Borrower as Eligible Inventory in a borrowing base report
submitted to Agent, such Inventory is located at one of the locations set forth
on Schedule E-1 or is in transit from one such location to another such location
and is not otherwise excluded as ineligible by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Inventory.
5.4. Equipment. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5. Location of Inventory and Equipment. Except as set forth on
Schedule 5.5, the Inventory and Equipment are not stored with a bailee,
warehouseman, or similar party. The Inventory and Equipment are located only at
the locations identified on Schedule 5.5.
5.6. Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7. Legal Status. Borrower represents and warrants that (a) Borrower's
exact legal name is that indicated on the applicable Perfection Certificate and
on the signature page hereof; (b) Borrower is an organization of the type, and
is organized in the jurisdiction, set forth in the applicable Perfection
Certificate; (c) the applicable Perfection Certificate accurately sets forth
Borrower's organizational identification number or accurately states that
Borrower has none; (d) the applicable Perfection Certificate accurately sets
forth Borrower's place of business or, if more than one, its chief executive
office, as well as Borrower's mailing address, if different; (e) all other
information set forth on the applicable Perfection Certificate pertaining to
Borrower is accurate and complete as of the date hereof and (f) there has been
no change in any of such information since the date on which the applicable
Perfection Certificate was signed by Borrower.
5.8. Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good standing under
the laws of the jurisdiction of its organization and, except as set forth on
Schedule 5.8(a), is qualified to do business in any state where the failure to
be so qualified reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8(b) is a complete and accurate description
of the authorized capital Stock of Borrower, by class, and, as of the Closing
Date, a description of the number of shares of each such class that are issued
and outstanding. Other than as described on Schedule 5.8(b), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
55
(c) Set forth on Schedule 5.8(c) is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
5.9. Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of Borrower.
(b) Subject to the Confirmation Order being entered and becoming a
Final Order, the execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents do not and will not (i) violate any provision
of federal, state, or local law or regulation applicable to Borrower, the
Governing Documents of Borrower, or any order, judgment, or decree of any court
or other Governmental Authority binding on Borrower, (ii) conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation of Borrower, (iii) result in
or require the creation or imposition of any Lien of any nature whatsoever upon
any properties or assets of Borrower, other than Permitted Liens, or (iv)
require any approval of Borrower's interestholders or any approval or consent of
any Person under any material contractual obligation of Borrower.
(c) Other than the filing of financing statements, fixture filings, and
Mortgages, the execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents to which Borrower is a party do not and will
not require any registration with, consent, or approval of, or notice to, or
other action with or by, any Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents and all other documents
contemplated hereby and thereby, when executed and delivered by Borrower will be
the legally valid and binding obligations of Borrower, enforceable against
Borrower in accordance with its respective terms, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors' rights generally.
(e) The Agent's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
(f) The execution, delivery, and performance by Guarantor of the Loan
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of Guarantor.
(g) The execution, delivery, and performance by Guarantor of the Loan
Documents to which it is a party do not and will not (i) violate any provision
of federal, state, or local law or regulation applicable to Guarantor, the
Governing Documents of Guarantor, or any order, judgment, or decree of any court
or other Governmental Authority binding on Guarantor, (ii) conflict with, result
56
in a breach of, or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation of Guarantor, (iii) result in
or require the creation or imposition of any Lien of any nature whatsoever upon
any properties or assets of Guarantor, other than Permitted Liens, or (iv)
require any approval of Guarantor's interestholders or any approval or consent
of any Person under any material contractual obligation of Guarantor. (h) The
execution, delivery, and performance by Guarantor of the Loan Documents to which
Guarantor is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.
(i) The Loan Documents to which Guarantor is a party, and all other
documents contemplated hereby and thereby, when executed and delivered by
Guarantor will be legally valid and binding obligations of Guarantor,
enforceable against Guarantor in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally.
5.10. Litigation.
(a) Other than those matters disclosed on Schedule 5.10 and immaterial
matters where the amount in controversy is less than $50,000, there are no
actions, suits, or proceedings pending or, to the best knowledge of Borrower,
threatened against Borrower, or any of its Subsidiaries, as applicable. Schedule
5.10 includes, as applicable, for each matter set forth thereon (i) the name,
docket number and jurisdiction for such matter, (ii) the status of such
proceeding, and (iii) whether such matter is covered by an insurance policy and,
if so, the insurance carrier, the policy number and the deductible amount
associated with such insurance policy.
(b) There are no actions, suits or proceedings pending or, to the best
knowledge of Borrower, threatened against Borrower or any of its Subsidiaries,
as applicable, that question the validity or enforceability of this Agreement or
any other Loan Document or any action taken by Borrower in connection therewith.
(c) Schedule 5.10(b) lists all Borrower's Commercial Tort Claims
existing as of the date hereof.
5.11. No Material Adverse Change. All financial statements relating to
Borrower or Guarantor that have been delivered by Borrower or Guarantor to the
Lender Group have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects,
Borrower's (or Guarantor's, as applicable) financial condition as of the date
thereof and results of operations for the period then ended. There has not been
a Material Adverse Change with respect to Borrower (or Guarantor, as applicable)
since the date of the latest financial statements submitted to the Lender Group
on or before the Closing Date.
57
5.12. Fraudulent Transfer.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower and no obligation
is being incurred by Borrower in connection with the transactions contemplated
by this Agreement or the other Loan Documents with the intent to hinder, delay,
or defraud either present or future creditors of Borrower.
5.13. Employee Benefits. None of Borrower, any of its Subsidiaries, or
any of its ERISA Affiliates maintains or contributes to any Benefit Plan other
than those listed on Schedule 5.13.
5.14. Environmental Condition. Except as set forth on Schedule 5.14,
(a) to Borrower's knowledge, none of Borrower's properties or assets has ever
been used by Borrower or by previous owners or operators in the disposal of, or
to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport was in violation, in any material respect, of applicable Environmental
Law, (b) to Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) Borrower has not
received notice that a Lien arising under any Environmental Law has attached to
any revenues or to any Real Property owned or operated by Borrower, and (d)
Borrower has not received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower resulting in the releasing
or disposing of Hazardous Materials into the environment.
5.15. Brokerage Fees. Borrower has not utilized the services of any
broker or finder in connection with Borrower's obtaining financing from the
Lender Group under this Agreement and no brokerage commission or finders fee is
payable by Borrower in connection herewith.
5.16. Intellectual Property. Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.16 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which Borrower is the owner or is an exclusive
licensee.
5.17. Leases. Borrower enjoys peaceful and undisturbed possession under
all leases material to the business of Borrower and to which Borrower is a party
or under which Borrower is operating. All of such leases are valid and
subsisting and no material default by Borrower exists under any of them that
will not be cured in connection with Borrower's assumption of such leases
pursuant to the applicable provisions of the Bankruptcy Code and the Plan.
5.18. DDAs. Set forth on Schedule 5.18 are all of the DDAs of Borrower,
including, with respect to each depositary (i) the name and address of that
depositary, and (ii) the account numbers of the accounts maintained with such
depositary.
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5.19. Credit Card Receipts. Schedule 5.19 sets forth each of Borrower's
Credit Card Processors and all arrangements to which Borrower is a party with
respect to the payment to Borrower of the proceeds of all credit card charges
for sales by Borrower.
5.20. Indebtedness. Set forth on Schedule 5.20 is a true and complete
list of all Indebtedness of Borrower outstanding immediately prior to the
Closing Date that is to remain outstanding after the Closing Date. Such Schedule
accurately reflects the aggregate principal amount of such Indebtedness and the
principal terms thereof.
5.21. Payment of Taxes. Except where the failure to do so could not
reasonably be expected to have a Material Adverse Change, (a) all tax returns
required to be filed by Borrower have been timely filed and (b) all taxes upon
Borrower or its properties, assets, income and franchises (including real
property taxes and payroll taxes) which are not the subject of a Permitted
Protest or which are being paid or otherwise discharged in accordance with the
Plan have been paid prior to delinquency.
5.22. Bankruptcy Case Disclosure. The Disclosure Statement was prepared
in good faith and was true and accurate in all material respects as of February
5, 2002 and was not incomplete by intentionally omitting to state any material
fact necessary to make such information contained therein (taken as a whole) not
misleading. No intentional effort was undertaken by Borrower or any other Person
to procure the Confirmation Order by any means prohibited by the Bankruptcy Code
or other applicable law.
5.23. Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrower in writing to Agent or any Lender will be, true and accurate
in all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not misleading in any material respect at
such time in light of the circumstances under which such information was
provided. On the Closing Date, the Business Plan represents, and as of the date
on which any other Business Plan is delivered to Agent, such additional Business
Plans represent Borrower's good faith best estimate of its future performance
for the periods covered thereby.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall and shall cause each of its Subsidiaries to do all of the following:
6.1. Accounting System. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent. Borrower also shall keep an inventory
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
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6.2. Collateral Reporting. Provide Agent (and if so requested by Agent,
with copies for each Lender) with the documents set forth on Schedule 6.2 in
accordance with the delivery schedule set forth thereon.
6.3. Financial Statements, Reports, Certificates. Deliver to Agent,
with copies to each Lender:
(a) as soon as available, but in any event within 30 days (45 days in
the case of a month that is the end of one of the first three fiscal quarters in
a fiscal year) after the end of each month during each of Borrower's fiscal
years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and
its Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
Borrower to the effect that:
(A) the financial statements delivered hereunder have
been prepared in accordance with GAAP (except for the
lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material
respects the financial condition of Borrower and its
Subsidiaries,
(B) the representations and warranties of Borrower
contained in this Agreement and the other Loan
Documents are true and correct in all material
respects on and as of the date of such certificate,
as though made on and as of such date (except to the
extent that such representations and warranties
relate solely to an earlier date), and
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the
extent of any non-compliance, describing such
non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto),
and
(iii) for each month that is the date on which a financial covenant
in Section 7.20 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of
such period with the applicable financial covenants contained
in Section 7.20,
(b) as soon as available, but in any event within 90 days after the
end of each of Borrower's fiscal years,
(i) financial statements of Borrower and its Subsidiaries for each
such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified,
without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial
statements to include a balance sheet, income statement, and
statement of cash flow and, if prepared, such accountants'
letter to management),
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(ii) a certificate of such accountants addressed to Borrower
stating that such accountants do not have knowledge of the
existence of any Default or Event of Default under Sections
7.21 or 7.22,
(c) as soon as available, but in any event within 30 days prior to
the start of each of Borrower's fiscal years,
(i) copies of the Business Plan, in form and substance (including
as to scope and underlying assumptions) satisfactory to Agent,
in its sole discretion, for the forthcoming three years, year
by year, and for the forthcoming fiscal year, month by month,
certified by the chief financial officer of Borrower as being
such officer's good faith best estimate of the financial
performance of Borrower and its Subsidiaries during the period
covered thereby (it being understood that Agent may in its
Permitted Discretion, but shall not be under any obligation
to, revise financial, Excess Availability and retail covenants
set forth in Sections 7.20 and 7.21 as a result of its review
of such Business Plans and/or create or expand Reserves),
(d) if and when filed by Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
(iii) copies of Borrower's federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service,
and
(iv) any other material information that is provided by Borrower to
its shareholders generally,
(e) if and when filed by Borrower and as requested by Agent,
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) Borrower conducts business or is required to pay any
such excise tax other than such taxes which were or will be discharged or which
are currently unpaid but will be paid in accordance with the Plan, (ii) where
Borrower's failure to pay any such applicable excise tax would result in a Lien
on the properties or assets of Borrower, or (iii) where Borrower's failure to
pay any such applicable excise tax reasonably could be expected to result in a
Material Adverse Change,
(f) as soon as Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default, notice thereof and a statement of
the curative action that Borrower proposes to take with respect thereto, and
(g) upon the request of Agent, any other report reasonably requested
relating to the financial condition of Borrower.
In addition to the financial statements referred to above, Borrower
agrees to deliver financial statements prepared on both a consolidated and
consolidating basis and that neither Borrower nor any Subsidiary of Borrower
will have a fiscal year different from that of Borrower. Borrower agrees that
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its independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning Borrower
that Agent reasonably may request. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Agent pursuant to
or in accordance with this Agreement, and agree that Agent may contact directly
any such accounting firm or service bureau in order to obtain such information.
6.4. Guarantor Reports. Cause Guarantor to deliver its annual
financial statements at the time when Borrower provides its audited financial
statements to Agent and copies of all federal income tax returns as soon as the
same are available and in any event no later than 30 days after the same are
required to be filed by law.
6.5. Return. Cause returns and allowances as between Borrower and its
Account Debtors to be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to Borrower,
Borrower promptly shall determine the reason for such return and, if Borrower
accepts such return, issue a credit memorandum (with a copy to be sent to Agent)
in the appropriate amount to such Account Debtor. If, at a time when an Event of
Default has occurred and is continuing, any Account Debtor returns any Inventory
to Borrower, Borrower promptly shall determine the reason for such return and,
if Agent consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with a copy to be sent to Agent) in the appropriate amount to
such Account Debtor.
6.6. Maintenance of Properties. Maintain and preserve all of its
properties which are necessary or useful in the proper conduct to its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the provisions of all leases to which it is a party as lessee,
so as to prevent any loss or forfeiture thereof or thereunder.
6.7. Taxes. Cause all material assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its assets to be paid in full, before delinquency or
before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrower will make timely payment or deposit of all tax payments and withholding
taxes required of it by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish Agent with proof satisfactory to Agent
indicating that Borrower has made such payments or deposits. Borrower shall
promptly deliver satisfactory evidence of payment of applicable excise taxes in
each jurisdictions in which Borrower is required to pay any such excise tax if
requested by Agent.
6.8. Insurance.
(a) At Borrower's expense, maintain insurance respecting its property
and assets wherever located, covering loss or damage by fire, theft, explosion,
and all other hazards and risks as ordinarily are insured against by other
Persons engaged in the same or similar businesses. Borrower also shall maintain
business interruption, public liability, and product liability insurance, as
62
well as insurance against larceny, embezzlement, and criminal misappropriation.
All such policies of insurance shall be in such amounts and with such insurance
companies as are reasonably satisfactory to Agent. Borrower shall deliver copies
of all such policies to Agent with a satisfactory lender's loss payable
endorsement naming Agent as sole loss payee or additional insured, as
appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Agent in the event of cancellation of the policy for any reason whatsoever.
(b) Borrower shall give Agent prompt notice of any loss covered by
such insurance. Agent shall have the exclusive right to adjust any losses
payable under any such insurance policies in excess of $150,000, without any
liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Agent to be applied at the option of the Required Lenders either to the
prepayment of the Obligations or shall be disbursed to Borrower under staged
payment terms reasonably satisfactory to the Required Lenders for application to
the cost of repairs, replacements, or restorations. Any such repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction.
(c) Borrower shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 6.8, unless Agent is included thereon as named insured with the
loss payable to Agent under a lender's loss payable endorsement or its
equivalent. Borrower immediately shall notify Agent whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and copies of such policies promptly
shall be provided to Agent.
(d) If Borrower obtains a key person life insurance policy with
respect to any of its employees, officers or directors, Borrower shall furnish
Agent with an "Absolute Assignment" of such key person life insurance policy,
shall record each such "Absolute Assignment: with the issuer of such policy, and
shall furnish proof of such issuer's acceptance of such assignment. All proceeds
payable under such key person life insurance policy shall be payable to Agent to
be applied on account of the Obligations in accordance with Section 2.4(b).
6.9. Location of Inventory and Equipment. Keep the Inventory and
Equipment only at the locations identified on Schedule 5.5; provided, however,
that Borrower may amend Schedule 5.5 so long as such amendment occurs by written
notice to Agent not less than 30 days prior to the date on which the Inventory
or Equipment is moved to such new location, so long as such new location is
within the continental United States, and so long as, at the time of such
written notification, Borrower provides any financing statements, fixture
filings or other documents necessary to perfect and continue perfected the
Agent's Liens on such assets and also provides to Agent a Bailee Acknowledgment
or Collateral Access Agreement, if and as applicable.
6.10. Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
63
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.11. Leases. Pay when due all rents and other amounts payable under
any leases to which Borrower is a party or by which Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
6.12. Brokerage Commissions. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrower's obtaining
financing from the Lender Group under this Agreement. Borrower agrees and
acknowledges that payment of all such brokerage commissions or finders fees
shall be the sole responsibility of Borrower, and Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrower's obtaining financing from the
Lender Group under this Agreement.
6.13. Existence. At all times preserve and keep in full force and
effect Borrower's valid existence and good standing and any rights and
franchises material to Borrower's businesses.
6.14. Environmental.
(a) Keep any property either owned or operated by Borrower free of
any Environmental Liens or post bonds or other financial assurances sufficient
to satisfy the obligations or liability evidenced by such Environmental Liens,
(b) comply, in all material respects, with Environmental Laws and provide to
Agent documentation of such compliance which Agent reasonably requests, (c)
promptly notify Agent of any known release of a Hazardous Material of any
reportable quantity from or onto property owned or operated by Borrower and take
any Remedial Actions required, including but not limited to cooperating with the
actions of those responsible for said release, to ▇▇▇▇▇ said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Agent with written notice within 15 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of Borrower, (ii) commencement of any
Environmental Action which reasonably could be expected to result in a Material
Adverse Change or notice that an Environmental Action which reasonably could be
expected to result in a Material Adverse Change will be filed against Borrower,
and (iii) notice of a violation, citation, or other administrative order which
reasonably could be expected to result in a Material Adverse Change.
6.15. Investment Proceeds, Etc. The proceeds of any Investment from
any source in Borrower or any Subsidiary of Borrower and any other funds
received by Borrower other than from ordinary course business operations
(including, without limitation, tax refunds, damage awards, or insurance or
condemnation proceeds) shall be deposited directly into the Agent's Account to
be applied on account of the Obligations in accordance with Section 2.4(b).
6.16. Plan. Comply with all requirements of the Plan and the
Subordinated Debt Documents, including the payment as and when due of all
liabilities under the Plan.
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6.17. Bankruptcy Case. Take all necessary action to close the
Bankruptcy Case as soon after the Effective Date as is reasonably practicable.
6.18. Disclosure Updates. Promptly and in no event later than five
Business Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
6.19. Excess Availability. Commencing on the first Business Day after
the Closing Date and continuing throughout the Term of this Agreement, Borrower
at all times (including, without limitation, immediately prior to Closing and
after giving effect to any payments made on account of the Subordinated Debt)
shall have Excess Availability not less than $3,000,000.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not and will not permit any of its Subsidiaries to do any of the following:
7.1. Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit;
(b) Indebtedness set forth on Schedule 5.20;
(c) Permitted Purchase Money Indebtedness;
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not, in Agent's reasonable
judgment, materially impair the prospects of repayment of the Obligations by
Borrower or materially impair Borrower's creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to Borrower, and (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension
Indebtedness must be include subordination terms and conditions that are at
least as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness;
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(e) Indebtedness composing Permitted Investments;
(f) the Subordinated Debt;
(g) Indebtedness secured by Permitted Liens; and
(h) in addition to the Indebtedness permitted by clauses (a) through
(g), other unsecured Indebtedness subordinated in all respects to the
Obligations in an aggregate amount not to exceed $3,000,000 at any time
outstanding; provided, however, that prior to incurring such Indebtedness,
Borrower shall obtain the written consent of Agent thereto and all intercreditor
and subordination terms and conditions with respect to such Indebtedness shall
be satisfactory to the Agent in its Permitted Discretion.
7.2. Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3. Restrictions on Fundamental Changes.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock or otherwise change Borrower's type of
organization, jurisdiction of organization or other legal or corporate
structure.
(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4. Disposal of Assets. Other than Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of any of
Borrower's assets.
7.5. Change of Name or Address. Change Borrower's name or
organizational identification number or relocate Borrower's chief executive
office to a new location; provided, however, that Borrower may change its name
or chief executive office location upon at least 30 days prior written notice by
Borrower to Agent of such change and so long as, at the time of such written
notification, Borrower provides (i) any financing statements, fixture filings or
other agreements or documents necessary to perfect and continue perfected
Agent's Liens and (ii) in the case of such a relocation, if the new chief
executive office location is leased by Borrower, a Collateral Access Agreement
with respect thereto.
7.6. Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Agent.
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7.7. Nature of Business. Make any change in the principal nature of
Borrower's business.
7.8. Prepayments and Amendments.
(a) Except in connection with any refinancing permitted by Section
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of Borrower, other than the Obligations in accordance with this Agreement or as
permitted by Section 7.18, and
(b) Except in connection with any refinancing permitted by Section
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Sections
7.1(b) or (c).
7.9. Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10. Consignments. Consign any Inventory or sell any Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale, except in accordance with Borrower's customary return policy applicable to
the return of Inventory purchased by the Borrower's retail customers in the
ordinary course of the Borrower's business.
7.11. Distributions. Except as expressly provided below, declare,
order, pay or make any Restricted Payment or set aside any sum or property
therefor or exercise any set-off or similar rights of Borrower, if any, with
respect to any indebtedness that is the subject of an intercreditor and
subordination agreement.
As used herein, the term "Restricted Payment" means (i) any cash
dividend or other cash distribution or payment, direct or indirect, on or on
account of any shares of any class of stock of Borrower now or hereafter
outstanding other than dividends or distributions made to Guarantor to pay taxes
attributable to Borrower as and when due; (ii) any dividend or other
distribution in respect of, or redemption, purchase or other acquisition, direct
or indirect, of any shares of any class of stock of Borrower now or hereafter
outstanding or of any warrants, options or rights to purchase any such stock
(including, without limitation, the repurchase of any such stock, warrant,
option or right or any refund of the purchase price thereof in connection with
the exercise by the holder thereof of any right of rescission or similar
remedies with respect thereto); and (iii) any direct salary, non-salary
managerial fees, fee (consulting, management or other), fringe benefit,
allowance or other expense directly or indirectly paid or payable by Borrower
(as compensation or otherwise) to any shareholder or Affiliate of Borrower
(other than to an employee, to the extent of such employee's compensation;
provided that the terms of such compensation are approved by the applicable
board of directors or the compensation committee thereof) or any partner,
shareholder or Affiliate thereof.
7.12. Accounting Methods. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
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or storage of Borrower's accounting records without said accounting firm or
service bureau agreeing to provide Agent information regarding the Collateral or
Borrower's financial condition.
7.13. Investments. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment, or incur any liabilities (including
contingent obligations) for or in connection with any Investment; provided,
however, that Borrower and its Subsidiaries shall not have Permitted Investments
(other than in the Cash Management Accounts) in deposit accounts or Securities
Accounts in excess of $50,000 outstanding at any one time unless Borrower or any
of its Subsidiaries, as applicable, and the applicable securities intermediary
or bank have entered into a Control Agreement or similar arrangements governing
such Permitted Investments, as Agent shall determine in its Permitted
Discretion, to perfect (and further establish) the Agent's Liens in such
Permitted Investments.
7.14. Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any transaction with any Affiliate of Borrower except for (a)
transactions that are in the ordinary course of Borrower's business, upon fair
and reasonable terms, that are fully disclosed to Agent, and that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a non-Affiliate, (b) loans to employees of Borrower in an aggregate amount not
to exceed $50,000 at any time outstanding and (c) royalty and other payments
made by Borrower to FCPOC pursuant to the Royalty and Licensing Agreement dated
as of June 29, 1997 between Borrower and FCPOC and pursuant to other licensing
agreements between Borrower and FCPOC provided that all such agreements are on
customary terms and the parties thereto are fairly compensated on an
arm's-length basis.
7.15. Store Openings and Closings. Commit to open, open or close any
location at which Borrower maintain, offer for sale or store any of the
Collateral unless Borrower has provided Agent prior written notice of such
commitment, opening or closing and (i) in the case of any such opening, such
opening is consistent with the Business Plan or (ii) in the case of any such
closing, Agent has consented in writing to the manner in which Borrower shall
effect such closing, including, without limitation, any third party agent that
Borrower proposes to employ in connection therein.
7.16. Suspension. Suspend or go out of a substantial portion of its
business.
7.17. Reserved.
7.18. Use of Proceeds. Use the proceeds of the Advances for any
purpose other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing to Existing
Lender, (ii) to pay working capital needs and all amounts due under the Plan and
(iii) to pay transactional fees, costs, and expenses incurred in connection with
this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, and (b) thereafter, consistent with the terms and conditions
hereof, for its lawful and permitted purposes.
7.19. Inventory and Equipment with Bailees. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
68
warehouseman, or similar party unless Agent has granted its prior written
consent and Borrower has delivered to Agent a Bailee Acknowledgment with respect
to the applicable Inventory and/or Equipment.
7.20. Securities Accounts. Establish or maintain any Securities
Account unless Agent shall have received a Control Agreement in respect of such
Securities Account. Borrower shall not transfer assets out of any Securities
Account; provided, however, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Borrower may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.21. Financial Covenants.
(a) Minimum EBITDA. Fail to maintain, measured on a rolling
twelve-month basis and tested monthly, EBITDA equal to or greater than 80% of
the Borrower's projected "Total EBITDAR" specified in the Business Plan for the
twelve months ending on the last day of each calendar month commencing April 30,
2002.
(b) Maximum Capital Expenditures. Make capital expenditures in any
fiscal year in excess of 115% of the projected capital expenditures specified in
the Business Plan for each such fiscal year.
7.22. Minimum Excess Availability and Retail Covenants. Fail to
observe or comply with each of the covenants set forth on Schedule 7.22.
7.23. Subordinated Debt.
(a) Make any payment or take any action in violation of the
Subordination Agreement.
(b) Make any payment or prepayment on the Subordinated Debt (other
than regularly scheduled payments of principal or interest) unless Agent has
received notice of such payment (and any calculations supporting the amount of
such payment) in writing at least fifteen days prior to the date of such
payment.
(c) Enter into any amendment to the Subordinated Debt Documents
unless Agent has received at least 10 days' prior written notice of such
amendment.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts)), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement or in
any of the other Loan Documents and such failure continues for a period of five
69
Business Days (provided that any failure which is not subject to remedy or cure
shall give rise to an Event of Default immediately upon its occurrence);
8.3 If any material portion of Borrower's or any of its Subsidiaries'
assets is attached, seized, subjected to a writ or distress warrant, levied
upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower or any of
its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Borrower, or any
of its Subsidiaries and any of the following events occur: (a) Borrower or the
Subsidiary consents to the institution of the Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 45 calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, Agent (including any
successor agent) and each other member of the Lender Group shall be relieved of
their obligation to extend credit hereunder, (d) an interim trustee is appointed
to take possession of all or any substantial portion of the properties or assets
of, or to operate all or any substantial portion of the business of, Borrower or
any of its Subsidiaries, or (e) an order for relief shall have been entered
therein;
8.6 If Borrower or any of its Subsidiaries is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to Borrower's or any of its Subsidiaries' assets by the United States,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether ▇▇▇▇▇▇ or
otherwise, upon Borrower's or any of its Subsidiaries' assets and the same is
not paid on the payment date thereof;
8.8 If a judgment or other claim for an amount which, either
separately or when aggregated with the amount of any other judgment or claim,
equals or exceeds $1,000,000, becomes a Lien or encumbrance upon any portion of
Borrower's or any of its Subsidiaries' properties or assets;
8.9 If there is a default in any material agreement to which Borrower
or any of its Subsidiaries is a party and such default (a) occurs at the final
maturity of the obligations thereunder or (b) results in a right by the other
party thereto, irrespective of whether exercised, to accelerate the maturity of
Borrower's or its Subsidiaries' obligations thereunder, to terminate such
agreement, or to refuse to renew such agreement pursuant to an automatic renewal
right therein;
8.10 Any event occurs, whether or not insured or insurable, as a
result of which revenue-producing activities cease or are substantially
curtailed at any facility of Borrower generating more than 10% of Borrower's
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consolidated revenues for Borrower's fiscal year preceding such event and such
cessation or curtailment continues for more than 30 days.
8.11 If Borrower or any of its Subsidiaries makes any payment on
account of the Subordinated Debt or any other Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or material misrepresentation
exists now or hereafter in any warranty, representation, statement, or Record
made to the Lender Group by Borrower, its Subsidiaries, or any officer,
employee, agent, or director of Borrower or any of its Subsidiaries;
8.13 If the obligation of any Guarantor under its Guaranty is limited
or terminated by operation of law or by such Guarantor thereunder;
8.14 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby;
8.15 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 Borrower, or a proceeding shall be commenced by
Borrower, or by any Governmental Authority having jurisdiction over Borrower,
seeking to establish the invalidity or unenforceability thereof, or Borrower
shall deny that Borrower has any liability or obligation purported to be created
under any Loan Document;
8.16 If the Confirmation Order shall be revoked or amended or
otherwise shall not be in full force and effect to the same extent such order
was in effect on the Closing Date; or
8.17 If any claim (or class of claims) under the Plan shall be deemed
to be secured by a Lien on the Borrower's assets senior in priority to the
Agent's Liens, other than the claims set forth in classes 2, 3, 4, 5 and 6 of
the Plan.
8.18 If any default or event of default shall occur under any of the
Subordinated Debt Documents.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1. Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may authorize and
instruct Agent to do any one or more of the following on behalf of the Lender
Group (and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by
Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
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(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents as
to any future liability or obligation of the Lender Group, but without affecting
any of the Agent's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers advisable, and in such
cases, Agent will credit the Loan Account with only the net amounts received by
Agent in payment of such disputed Accounts after deducting all Lender Group
Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for the
Lender Group, segregate all returned Inventory from all other assets of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of the Lender Group;
(f) Without notice to or demand upon Borrower or Guarantor, make such
payments and do such acts as Agent considers necessary or reasonable to protect
its security interests in the Collateral. Borrower agrees to assemble the
Personal Property Collateral if Agent so requires, and to make the Personal
Property Collateral available to Agent at a place that Agent may designate which
is reasonably convenient to both parties. Borrower authorizes Agent to enter the
premises where the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and to pay,
purchase, contest, or compromise any Lien that in Agent's determination appears
to conflict with the Agent's Liens and to pay all expenses incurred in
connection therewith and to charge the Loan Account therefor. With respect to
any of Borrower's owned or leased premises, Borrower hereby grants Agent a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of the Lender Group's rights or
remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by the Lender
Group (including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of Borrower
held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by the Lender Group, and any amounts received in the Cash
Management Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Notify any securities intermediary to liquidate the applicable
Securities Account or any related Investment Property maintained or held thereby
and remit the proceeds thereof to the Agent's Account;
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(j) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Borrower hereby grants to Agent a license or other
right to use, without charge, Borrower's labels, patents, copyrights, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to the Lender Group's benefit; (k) Sell, or
cause to be sold, the Collateral at either a public or private sale, or both, by
way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Agent determines is
commercially reasonable. It is not necessary that the Collateral be present at
any such sale;
(l) Agent shall give notice of the disposition of the Collateral as
follows:
(i) Agent shall give Borrower a notice in writing of the time and
place of public sale, or, if the sale is a private sale or
some other disposition other than a public sale is to be made
of the Collateral, the time on or after which the private sale
or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least 10
days before the earliest time of disposition set forth in the
notice; no notice needs to be given prior to the disposition
of any portion of the Collateral that is perishable or
threatens to decline speedily in value or that is of a type
customarily sold on a recognized market;
(m) Agent, on behalf of the Lender Group, may credit bid and purchase
at any public sale;
(n) Agent may seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral or to operate same and, to
the maximum extent permitted by law, may seek the appointment of such a receiver
without the requirement of prior notice or a hearing;
(o) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents; and
(p) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Agent to Borrower.
9.2. Remedies Cumulative. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
73
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and with notice to Borrower, may do any or all of the following: (a) make
payment of the same or any part thereof, (b) set up such reserves in the Loan
Account as Agent deems necessary to protect the Lender Group from the exposure
created by such failure, or (c) in the case of the failure to comply with
Section 6.8 hereof, obtain and maintain insurance policies of the type described
in Section 6.8 and take any action with respect to such policies as Agent deems
prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses
and any such payments shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1. Demand; Protest; etc. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which Borrower may in any way be liable.
11.2. The Lender Group's Liability for Collateral. Borrower hereby
agrees that: (a) so long as the Lender Group complies with its obligations, if
any, under the Code, Agent shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrower.
11.3. Indemnification. Borrower shall pay, indemnify, defend, and
hold the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, Agent, and attorneys-in-fact (each, an "Indemnified Person") harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration
of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby, and (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
74
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event,
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). The foregoing to the contrary notwithstanding,
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by Borrower or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Borrower or Agent, as applicable, may designate to each other
in accordance herewith), or telefacsimile to Borrower or to Agent, as the case
may be, at its address set forth below:
75
If to Borrower: Factory Card Outlet of America Ltd.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Sonnenschein, Nath & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent or
to Lender Group: ▇▇▇▇▇ Fargo Retail Finance, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇
Exchange Place
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Agent and Borrower may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other party. All notices or demands sent in accordance with this Section 12
other than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or three Business Days after the deposit
thereof in the mail. Borrower acknowledges and agrees that notices sent by the
Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
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(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK,
COMMONWEALTH OF MASSACHUSETTS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND THE
LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(B).
BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1. Assignments and Participations.
(a) Any Lender may, with the written consent of Agent (provided that
no written consent of Agent shall be required in connection with any assignment
and delegation by a Lender to an Eligible Transferee), assign and delegate to
one or more assignees (each an "Assignee") all, or any ratable part of all, of
the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that Borrower and Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses, and related information with respect to the
Assignee, have been given to Borrower and Agent by such Lender and the Assignee,
(ii) such Lender and its Assignee have delivered to Borrower and Agent an
Assignment and Acceptance in form and substance satisfactory to Agent, and (iii)
the assignor Lender or Assignee has paid to Agent for Agent's separate account a
processing fee in the amount of $5,000, and provided further that prior to the
occurrence of an Event of Default, no assignment shall be made without
Borrower's prior consent, which shall not be unreasonably withheld or delayed.
Anything contained herein to the contrary notwithstanding, the consent of Agent
shall not be required (and payment of any fees shall not be required) if such
77
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor Lender
(with a copy to Borrower) that it has received an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall affect a novation between
Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto, (3)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance, (4) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement, (5)
such Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender, including but
not limited to the obligations set forth in Section 16.11.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance and receipt and acknowledgment by
Agent of such fully executed Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of Agent,
sell to one or more commercial banks, financial institutions, or other Persons
not Affiliates of such Lender (a "Participant") participating interests in its
78
Obligations, the Commitment, and the other rights and interests of that Lender
(the "Originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged; (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations; (iii) Borrower, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents; (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or a material portion of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums; and (v) all amounts
payable by Borrower hereunder shall be determined as if such Lender had not sold
such participation; except that, if amounts outstanding under this Agreement are
due and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall be derivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to the other Lenders, Agent, Borrower, the Collections, the
Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the Lenders
among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
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14.2. Successors. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided,
however, that Borrower may not assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 14.1 hereof and, except as expressly required
pursuant to Section 14.1 hereof, no consent or approval by Borrower is required
in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1. Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrower and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all of the Lenders affected thereby and
Borrower and acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any loan or
other extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document,
(d) change the percentage of the Commitments that is required to take
any action hereunder,
(e) amend this Section or any provision of the Agreement providing
for consent or other action by all Lenders,
(f) release Collateral other than as permitted by Section 16.12,
(g) change the definition of "Required Lenders,"
(h) contractually subordinate any of the Agent's Liens,
(i) release Borrower or Guarantor from any obligation for the payment
of money, or
(j) change the definitions of Borrowing Base, Dilution, Dilution
Reserve, Eligible Inventory, Eligible In-Transit Inventory, Maximum Revolver
Amount, Net Retail Liquidation Value, Net Liquidation Percentage or change
Section 2.1(b); or
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(k) amend any of the provisions of Section 16,
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, as
applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
Lender, as applicable, under this Agreement or any other Loan Document. The
foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
Borrower, shall not require consent by or the agreement of Borrower.
15.2. Replacement of Holdout Lender.
(a) If any action to be taken by the Lender Group or Agent hereunder
requires the unanimous consent, authorization, or agreement of all Lenders, and
a Lender ("Holdout Lender") fails to give its consent, authorization, or
agreement, then Agent, upon at least 5 Business Days prior irrevocable notice to
the Holdout Lender, may permanently replace the Holdout Lender with one or more
substitute Lenders (each, a "Replacement Lender"), and the Holdout Lender shall
have no right to refuse to be replaced hereunder. Such notice to replace the
Holdout Lender shall specify an effective date for such replacement, which date
shall not be later than 15 Business Days after the date such notice is given.
(b) Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Letter of Credit.
15.3. No Waivers; Cumulative Remedies. No failure by Agent or any
Lender to exercise any right, remedy or option under this Agreement or any other
Loan Document, nor any delay by Agent or any Lender in exercising the same, will
operate as a waiver thereof. No waiver by Agent or any Lender will be effective
unless it is in writing, and then only to the extent specifically stated. No
waiver by Agent or any Lender on any occasion shall affect or diminish Agent's
and each Lender's rights thereafter to require strict performance by Borrower of
any provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.
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16. AGENT; THE LENDER GROUP.
16.1. Appointment and Authorization of Agent. Each Lender hereby
designates and appoints WFRF as its representative under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this Section 16.
The provisions of this Section 16 are solely for the benefit of Agent and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that WFRF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections, and related matters, (b) execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as
provided in the Loan Documents, (d) exclusively receive, apply, and distribute
the Collections as provided in the Loan Documents, (e) open and maintain such
bank accounts and cash management arrangements as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents, and (g) incur and pay
such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
16.2. Delegation of Duties. Agent may execute any of its duties under
this Agreement or any other Loan Document by or through Agent, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3. Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
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contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrower or any of its
Subsidiaries or Affiliates.
16.4. Reliance by Agent. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
16.5. Notice of Default or Event of Default. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a "notice of default." Agent promptly will notify
the Lenders of its receipt of any such notice or of any Event of Default of
which Agent has actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to Section 16.4, Agent shall take
such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with Section 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
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16.6. Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7. Costs and Expenses; Indemnification. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies
and auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrower is obligated to reimburse Agent
or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent
is authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders. In the event
Agent is not reimbursed for such costs and expenses from Collections received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
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or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
16.8. Agent in Individual Capacity. WFRF and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrower and its
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though WFRF were not Agent hereunder, and, in
each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, WFRF or its Affiliates may receive information regarding Borrower or
its Affiliates and any other Person (other than the Lender Group) party to any
Loan Documents that is subject to confidentiality obligations in favor of
Borrower or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include WFRF in its individual capacity.
16.9. Successor Agent. Agent may resign as Agent upon 45 days notice
to the Lenders. If Agent resigns under this Agreement, the Required Lenders
shall appoint a successor Agent for the Lenders. If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers, and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers, and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 16 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is 45 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
16.10. Lender in Individual Capacity. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though such Lender were not a Lender
hereunder without notice to or consent of the other members of the Lender Group.
The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
85
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.
16.11. Withholding Taxes.
(a) If Agent or any Lender is not a "U.S. Person" within the meaning
of the IRC and Agent or such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the IRC, Agent agrees with
and in favor of Borrower to deliver to Borrower, and such Lender agrees with and
in favor of Agent and Borrower, to deliver to Agent and Borrower:
(i) if Agent or such Lender claims an exemption from withholding
tax pursuant to its portfolio interest exception, (a) a
statement of Agent or such Lender, as applicable, signed under
penalty of perjury, that it is not (I) a "bank" as described
in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder
(within the meaning of Sections 881(c)(3)(B) and 871(h)(3) of
the IRC), or (III) a controlled foreign corporation described
in Section 881(c)(3)(C) of the IRC and related to the payor
within the meaning of Section 864(d)(4) of the IRC, and (B)
two properly completed and executed copies of IRS Forms
W-8BEN, before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent
or Borrower;
(ii) if Agent or such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, two properly completed and executed copies of IRS Form
W-8BEN before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent
or Borrower;
(iii) if such Agent or Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because
it is effectively connected with a United States trade or
business of Agent or such Lender, as applicable, two properly
completed and executed copies of IRS Form W-8ECI before the
first payment of any interest is due under this Agreement and
at any other time reasonably requested by Agent or Borrower;
(iv) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax by providing IRS Form W-8BEN or IRS Form W-8ECI and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrower to such Lender, such Lender agrees to notify Agent and
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Borrower of the percentage amount in which it is no longer the beneficial owner
of Obligations of Borrower to such Lender. To the extent of such percentage
amount, Agent and Borrower will treat such Lender's IRS Form W-8BEN or IRS Form
W-8ECI as no longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent or Borrower did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Agent or Borrower of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
Agent and Borrower harmless for all amounts paid, directly or indirectly, by
Agent or Borrower, as applicable, as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Borrower hereunder or under any other Loan
Document will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits or overall gross profits of a Lender, or
(ii) to the extent that such tax results from a change in the circumstances of
the Lender, including a change in the residence, place of organization, or
principal place of business of the Lender, or a change in the branch or lending
office of the Lender participating in the transactions set forth herein) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as "Taxes"). If any Taxes are so levied or
imposed, Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under any note, including any amount paid pursuant to
this Section 16.11(e) after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein; provided, however,
that Borrower shall not be required to increase any such amounts payable to
Agent or any Lender (i) that is not organized under the laws of the United
States, if such Person fails to comply with the other requirements of this
Section 16.11, or (ii) if the increase in such amount payable results from
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Agent's or such Lender's own willful misconduct or gross negligence. Borrower
will furnish to Agent as promptly as possible after the date the payment of any
Taxes is due pursuant to applicable law certified copies of tax receipts or
other documentation satisfactory to the Agent in its Permitted Discretion
evidencing such payment by Borrower. In the event that Agent or any Lender
receives a refund or credit in respect of a withholding tax paid by Borrower
pursuant to this Section 16.11, as long as no Event of Default has occurred and
is continuing, Agent or such Lender shall deposit the amount of such refund or
credit in Borrower's Designated Account.
16.12. Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent, at its option and
in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrower
of all Obligations, (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under Section 7.4
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry), (iii) constituting property
in which Borrower owned no interest at the time the security interest was
granted or at any time thereafter, or (iv) constituting property leased to
Borrower under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon
request by Agent or Borrower at any time, the Lenders will confirm in writing
Agent's authority to release any such Liens on particular types or items of
Collateral pursuant to this Section 16.12; provided, however, that (1) Agent
shall not be required to execute any document necessary to evidence such release
on terms that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrower in respect of)
all interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the Lenders
to assure that the Collateral exists or is owned by Borrower or is cared for,
protected, or insured or has been encumbered, or that the Agent's Liens have
been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent's
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise provided herein.
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16.13. Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express
consent of Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the request of Agent, set off against the Obligations, any amounts
owing by such Lender to Borrower or any deposit accounts of Borrower now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by Agent, take or cause to
be taken any action, including, the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral the purpose of which is, or could be, to give
such Lender any preference or priority against the other Lenders with respect to
the Collateral.
(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations arising under, or relating to, this Agreement or
the other Loan Documents, except for any such proceeds or payments received by
such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender's ratable portion of all such distributions
by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or
in immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
16.14. Agency for Perfection. Agent hereby appoints each other Lender
as its agent (and each Lender hereby accepts such appointment) for the purpose
of perfecting the Agent's Liens in assets which, in accordance with Article 9 of
the Code can be perfected only by possession. Should any Lender obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent's request therefor shall deliver such Collateral to Agent or
in accordance with Agent's instructions.
16.15. Payments by Agent to the Lenders. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.
16.16. Concerning the Collateral and Related Loan Documents. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
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powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
16.17. Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information. By becoming a party to
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and collectively, "Reports") prepared by Agent, and
Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i) make
any representation or warranty as to the accuracy of any Report, and (ii) shall
not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon the Books, as well as on representations of
Borrower's personnel,
(d) agrees to keep all Reports and other material, non-public
information regarding Borrower and its Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner;
it being understood and agreed by Borrower that in any event such Lender may
make disclosures (a) to counsel for and other advisors, accountants, and
auditors to such Lender, (b) reasonably required by any bona fide potential or
actual Assignee or Participant in connection with any contemplated or actual
assignment or transfer by such Lender of an interest herein or any participation
interest in such Lender's rights hereunder, (c) of information that has become
public by disclosures made by Persons other than such Lender, its Affiliates,
assignees, transferees, or Participants, or (d) as required or requested by any
court, governmental or administrative agency, pursuant to any subpoena or other
legal process, or by any law, statute, regulation, or court order; provided,
however, that, unless prohibited by applicable law, statute, regulation, or
court order, such Lender shall notify Borrower of any request by any court,
governmental or administrative agency, or pursuant to any subpoena or other
legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof, and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
Borrower; and (ii) to pay and protect, and indemnify, defend and hold Agent, and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses, and other amounts (including,
attorneys fees and costs) incurred by Agent and any such other Lender preparing
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a Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrower, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Borrower the
additional reports or information reasonably specified by such Lender, and, upon
receipt thereof from Borrower, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.
16.18. Several Obligations; No Liability. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 16.7, no member of the Lender Group shall
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.
16.19. Legal Representation of Agent. In connection with the
negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of remedies,
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇") only has represented and only shall represent
WFRF in its capacity as Agent and as a Lender. Each other Lender hereby
acknowledges that ▇▇▇▇▇▇ does not represent it in connection with any such
matters.
17. GENERAL PROVISIONS.
17.1. Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
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17.2. Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
17.3. Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Agent, the Lender Group or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4. Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
17.5. Amendments in Writing. This Agreement only can be amended by a
writing in accordance with Section 15.1.
17.6. Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis, except as otherwise specifically provided therein or therefor.
17.7. Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or Guarantor or the transfer to the
Lender Group of any property should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
17.8. Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
FACTORY CARD OUTLET OF AMERICA LTD.
an Illinois corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
▇▇▇▇▇ FARGO RETAIL FINANCE, LLC,
as Agent and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Signature Page to Loan and Security Agreement
94
SCHEDULE A-1
AGENT'S ACCOUNT
An account at a bank designated by Agent from time to time as the
account into which Borrower shall make all payments to Agent for the benefit of
the Lender Group and into which the Lender Group shall make all payments to
Agent under this Agreement and the other Loan Documents; unless and until Agent
notifies Borrower and the Lender Group to the contrary, Agent's Account shall be
that certain deposit account bearing account number 323-074367 and maintained by
Agent with ▇▇ ▇▇▇▇▇▇ Chase Bank, ABA # ▇▇▇▇▇▇▇▇▇.
SCHEDULE C-1
COMMITMENTS
====================================== ===================================
LENDER REVOLVER COMMITMENT
-------------------------------------- -----------------------------------
▇▇▇▇▇ Fargo Retail Finance, LLC
$40,000,000
-------------------------------------- -----------------------------------
-------------------------------------- -----------------------------------
-------------------------------------- -----------------------------------
-------------------------------------- -----------------------------------
-------------------------------------- -----------------------------------
TOTAL: $40,000,000
====================================== ===================================
SCHEDULE D-1
DESIGNATED ACCOUNT
Account number 422579016 of Borrower maintained with Borrower's
Designated Account Bank, or such other deposit account of Borrower (located
within the United States) that has been designed as such, in writing, by
Borrower to Agent.
"Designated Account Bank" means Firstar NA, whose office is located
at _________Chicago, Illinois, and whose ABA number is ____________.
SCHEDULE E-1
ELIGIBLE INVENTORY LOCATIONS
SCHEDULE P-1
PERMITTED LIENS
SCHEDULE R-1
REAL PROPERTY COLLATERAL
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
SCHEDULE 6.2
COLLATERAL REPORTING
Borrower shall provide Agent (and if so requested by Agent, with
copies for each Lender) with the following documents at the following times in
form satisfactory to Agent:
(a) Borrowing Base Certificate. Borrower shall provide to Agent, on
Wednesday of each week, a signed Borrowing Base Certificate (in the form of
Exhibit B-1, as such form may be revised from time to time by Agent). Such
Certificate may be sent to Agent electronically (with an electronic signature)
or by facsimile transmission, provided, that in each case, upon request by
Agent, the original thereof is forwarded to Agent on the date of such
transmission. No adjustments to the Borrowing Base Certificate may be made
without supporting documentation and such other documentation as may be
reasonably requested by Agent from time to time.
(b) Weekly Reports. Weekly, not later than Wednesday for the
immediately preceding fiscal week:
(i) "flash sales report" by geographical market (Borrower's format in
use on the Closing Date is acceptable);
(c) Monthly Reports. Monthly, Borrower shall provide to Agent
original counterparts of (each in such form as Agent from time to time may
specify):
(i) Within 15 days of the end of each month for the immediately
preceding month:
(A) purchases and A/P analysis report in Agent's format;
(B) sales audit report and Inventory summary by location and
merchandise class;
(C) inventory certificate in Agent's format;
(D) rent, tax and insurance compliance certificate in Agent's format;
(E) a report on Inventory returns by Borrower to vendor and NIL
Merchandise (Borrower's format in use on the Closing Date is acceptable);
(F) open to spend;
(G) open payables report; and
(H) P.O. pending report (Borrower's format in use on the Closing Date
is acceptable).
(ii) Within 30 days of the end of each month for the immediately
preceding month:
(A) reconciliation of the stock ledger to the general ledger and the
calculation of availability; and
(B) statement of store activity in Agent's format.
(iii) For purposes of items(c)(i) and (c)(ii) above, the first
"preceding month" in respect of which the items required by that Section shall
be provided shall be _____ 200_.
In addition, Borrower agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
SCHEDULE 7.22
MINIMUM EXCESS AVAILABILITY AND RETAIL COVENANTS
A. Minimum Excess Availability. At all times during the term of this
Agreement, Excess Availability shall not be less than $3,000,000.
B. Retail Performance Covenant: Minimum Gross Margin Test. During the
term of this Agreement, tested as of the end of each calendar month (commencing
with the month ending April 30, 2002) and measured on a trailing three month
average basis, Gross Margin shall equal or exceed 85% of the projected Gross
Margin set forth in Borrower's Business Plan. For purposes of the foregoing,
Gross Margin shall be measured in Dollars and shall equal, for any period, the
result of the Borrower's sales for such period minus the Borrower's cost of
goods sold for such period.