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LOAN AND SECURITY AGREEMENT
BY AND AMONG
ETOYS INC.
AS PARENT,
AND
ETOYS DISTRIBUTION, LLC
AS BORROWER,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS THE ARRANGER AND ADMINISTRATIVE AGENT
DATED AS OF NOVEMBER 15, 2000
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TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION.............................................................................1
1.1 Definitions.....................................................................................1
1.2 Accounting Terms...............................................................................26
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 [intentionally omitted]........................................................................28
2.3 Borrowing Procedures and Settlements...........................................................28
2.4 Payments.......................................................................................35
2.5 Overadvances...................................................................................37
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations....................37
2.7 Cash Management................................................................................39
2.8 Crediting Payments; Float Charge...............................................................40
2.9 Designated Account.............................................................................41
2.10 Maintenance of Loan Accounts; Statements of Obligations........................................41
2.11 Fees...........................................................................................42
2.12 Letters of Credit..............................................................................42
2.13 LIBOR Option...................................................................................46
2.14 Capital Requirements...........................................................................48
3. CONDITIONS; TERM OF AGREEMENT...........................................................................49
3.1 Conditions Precedent to the Initial Extension of Credit........................................49
3.2 Conditions Subsequent to the Initial Extension of Credit.......................................51
3.3 Conditions Precedent to all Extensions of Credit...............................................52
3.4 Term...........................................................................................52
3.5 Effect of Termination..........................................................................52
3.6 Early Termination by Borrower..................................................................53
4. CREATION OF SECURITY INTEREST...........................................................................53
4.1 Grant of Security Interest.....................................................................53
4.2 Negotiable Collateral..........................................................................54
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................54
4.4 Delivery of Additional Documentation Required..................................................54
4.5 Power of Attorney..............................................................................54
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4.6 Right to Inspect...............................................................................55
4.7 Control Agreements.............................................................................55
5. REPRESENTATIONS AND WARRANTIES..........................................................................55
5.1 No Encumbrances................................................................................56
5.2 [intentionally omitted]........................................................................56
5.3 Eligible Inventory.............................................................................56
5.4 Equipment......................................................................................56
5.5 Location of Inventory and Equipment............................................................56
5.6 Inventory Records..............................................................................56
5.7 Location of Chief Executive Office; FEIN.......................................................56
5.8 Due Organization and Qualification; Subsidiaries...............................................56
5.9 Due Authorization; No Conflict.................................................................57
5.10 Litigation.....................................................................................58
5.11 No Material Adverse Change.....................................................................58
5.12 Fraudulent Transfer............................................................................58
5.13 Employee Benefits..............................................................................59
5.14 Environmental Condition........................................................................59
5.15 Brokerage Fees.................................................................................59
5.16 Intellectual Property..........................................................................59
5.17 Leases.........................................................................................59
5.18 DDAs...........................................................................................59
5.19 Complete Disclosure............................................................................59
5.20 Indebtedness...................................................................................60
6. AFFIRMATIVE COVENANTS...................................................................................60
6.1 Accounting System..............................................................................60
6.2 Collateral Reporting...........................................................................60
6.3 Financial Statements, Reports, Certificates....................................................61
6.4 [intentionally omitted]........................................................................63
6.5 Return.........................................................................................63
6.6 Maintenance of Properties......................................................................64
6.7 Taxes..........................................................................................64
6.8 Insurance......................................................................................64
6.9 Location of Inventory and Equipment............................................................65
6.10 Compliance with Laws...........................................................................65
6.11 Leases.........................................................................................66
6.12 Brokerage Commissions..........................................................................66
6.13 Existence......................................................................................66
6.14 Environmental..................................................................................66
6.15 Disclosure Updates.............................................................................66
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7. NEGATIVE COVENANTS......................................................................................67
7.1 Indebtedness...................................................................................67
7.2 Liens..........................................................................................68
7.3 Restrictions on Fundamental Changes............................................................68
7.4 Disposal of Assets.............................................................................68
7.5 Change Name....................................................................................68
7.6 Guarantee......................................................................................68
7.7 Nature of Business.............................................................................68
7.8 Prepayments and Amendments.....................................................................68
7.9 Change of Control..............................................................................69
7.10 Consignments...................................................................................69
7.11 Distributions..................................................................................69
7.12 Accounting Methods.............................................................................69
7.13 Investments....................................................................................69
7.14 Transactions with Affiliates...................................................................69
7.15 Suspension.....................................................................................70
7.16 [intentionally omitted]........................................................................70
7.17 Use of Proceeds................................................................................70
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees.............70
7.19 Securities Accounts............................................................................70
7.20 Financial Covenants............................................................................70
8. EVENTS OF DEFAULT.......................................................................................71
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................................................73
9.1 Rights and Remedies............................................................................73
9.2 Remedies Cumulative............................................................................75
10. TAXES AND EXPENSES......................................................................................75
11. WAIVERS; INDEMNIFICATION................................................................................76
11.1 Demand; Protest; etc...........................................................................76
11.2 The Lender Group's Liability for Collateral....................................................76
11.3 Indemnification................................................................................76
12. NOTICES.................................................................................................77
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................................................78
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................................................79
14.1 Assignments and Participations.................................................................79
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14.2 Successors.....................................................................................82
15. AMENDMENTS; WAIVERS.....................................................................................82
15.1 Amendments and Waivers.........................................................................82
15.2 Replacement of Holdout Lender..................................................................83
15.3 No Waivers; Cumulative Remedies................................................................83
16. AGENT; THE LENDER GROUP.................................................................................84
16.1 Appointment and Authorization of Agent.........................................................84
16.2 Delegation of Duties...........................................................................85
16.3 Liability of Agent.............................................................................85
16.4 Reliance by Agent..............................................................................85
16.5 Notice of Default or Event of Default..........................................................86
16.6 Credit Decision................................................................................86
16.7 Costs and Expenses; Indemnification............................................................86
16.8 Agent in Individual Capacity...................................................................87
16.9 Successor Agent................................................................................87
16.10 Lender in Individual Capacity..................................................................88
16.11 Withholding Taxes..............................................................................88
16.12 Collateral Matters.............................................................................90
16.13 Restrictions on Actions by Lenders; Sharing of Payments........................................91
16.14 Agency for Perfection..........................................................................92
16.15 Payments by Agent to the Lenders...............................................................92
16.16 Concerning the Collateral and Related Loan Documents...........................................92
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information........................................................................92
16.18 Several Obligations; No Liability..............................................................94
16.19 Legal Representation of Agent..................................................................94
17. GENERAL PROVISIONS......................................................................................94
17.1 Effectiveness..................................................................................94
17.2 Section Headings...............................................................................94
17.3 Interpretation.................................................................................94
17.4 Severability of Provisions.....................................................................95
17.5 Amendments in Writing..........................................................................95
17.6 Counterparts; Telefacsimile Execution..........................................................95
17.7 Revival and Reinstatement of Obligations.......................................................95
17.8 Designated Senior Debt.........................................................................95
17.9 Integration....................................................................................95
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EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule C-1 Revolver Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule P-2 Permitted Investments
Schedule 2.8(a) Cash Management Banks
Schedule 5.5 Locations of Inventory and Equipment
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Obligors
Schedule 5.8(c) Capitalization of Obligors' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
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SCHEDULE C-1
REVOLVER COMMITMENTS
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LENDER REVOLVER
COMMITMENT
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Foothill Capital $40,000,000
Corporation
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All Lenders $40,000,000
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is entered
into as of November 15, 2000, 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"), FOOTHILL CAPITAL CORPORATION,
a California corporation, as the arranger and administrative agent for the
Lenders (together with its successors, in such capacity, "AGENT"), and, on the
other hand, ETOYS INC., a Delaware corporation ("PARENT"), and ETOYS
DISTRIBUTION, LLC, a Delaware limited liability company ("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 that term is defined
in the Code), and any and all supporting obligations in respect thereof.
"ACQUISITION" means any purchase or other acquisition by Parent or its
Subsidiaries of the Stock of any other Person or all or substantially all of the
assets of any other Person.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 4.4.
"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, in any event: (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 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
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venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"AGENT" has the meaning set forth in the preamble hereto.
"AGENT ADVANCES" has the meaning set forth in SECTION 2.3(e)(i).
"AGENT'S ACCOUNT" means 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 323-266193
and maintained by Agent with The Chase Manhattan Bank, 4 New York Plaza, 15th
Floor, New York, New York 10004, ABA #▇▇▇▇▇▇▇▇▇.
"AGENT'S LIENS" means the Liens granted by Parent or 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 agents.
"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 after the date of the
execution and delivery of this Agreement up to the date that is the first
anniversary of the Closing Date, $800,000, and (b) during the period of time
from and including the date that is the first anniversary of the Closing Date up
to the date that is the second anniversary of the Closing Date, $400,000;
PROVIDED, HOWEVER, that in the event that (i) the Obligations are prepaid with
the proceeds from, and concurrent with, the consummation of a public or private
offering of subordinated Indebtedness or equity securities of Parent, or (ii) if
Borrower has been unable under the terms of this Agreement to borrow in excess
of the Core Borrowing Base for a period of 90 consecutive days at any time after
the Closing Date (the "CORE BORROWING PERIOD"), and at no time thereafter has
the Borrower been able to borrow amounts in excess of the Core Borrowing Base,
or (iii) if Borrower has been unable under the terms of this Agreement to borrow
in excess of the Core Borrowing Base for the Core Borrowing Period, but Borrower
is, after the Core Borrowing Period, able to again borrow amounts in excess of
the Core Borrowing Base and elects under SECTION 3.6 to terminate this Agreement
and refinance the Obligations, which refinancing closes no later than 90 days
after the date Borrower is first able after the Core Borrowing Period to again
borrower amounts in excess of the Core Borrowing Base, then the Applicable
Prepayment Premium shall be reduced by 50%.
"ASSIGNEE" has the meaning set forth in SECTION 14.1.
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"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(a)
(after giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder).
"BABYCENTER" means BabyCenter, Inc., a Delaware corporation.
"BABYCENTER ADVERTISING" means BabyCenter Advertising, LLC, a Delaware
limited liability company.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, as in effect
from time to time.
"BASE LIBOR 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 (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 11:00 a.m. (California
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 LIBOR 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 one-half of one percentage point.
"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 (or comparable
managers) of Parent or any committee thereof duly authorized to act on behalf
thereof.
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"BOOKS" means all of Borrower's 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 its Records
relating to its business operations or financial condition, and all of its 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).
"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 LIBOR 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.
"CANADIAN OBLIGORS" means eKids Canada Ltd., a New Brunswick
corporation, eToys Canada, and BabyCenter Canada Ltd., a New Brunswick
corporation.
"CANADIAN SECURITY AGREEMENT" means a security agreement executed and
delivered by the Canadian Obligors in favor of Agent, in form and substance
reasonably satisfactory to Agent, as such agreement may be amended, supplemented
or modified from time to time.
"CANADIAN SECURITY DOCUMENTS" means, collectively, such instruments,
agreements, and documents governed by the laws of Canada or any political
subdivision thereof, as Agent may require in order to secure the obligations of
the Canadian Obligors, including the Canadian Security Agreement.
"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 or
instrumentality thereof and backed by the full faith and credit of the United
States, in each case maturing within 1 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 1 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 1 year
from the date of acquisition thereof and,
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at the time of acquisition, having a rating of A-1 or P-1 (or the then
equivalent grade), or better, from S&P or ▇▇▇▇▇'▇, (d) certificates of
deposit or bankers' acceptances maturing within 1 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-2 or P-2
(or the then equivalent grade), 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, or (e) interests in money market or mutual funds that invest
substantially all of their assets in one or more of the foregoing.
"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, in form and substance reasonably satisfactory to Agent, each
of which is among Parent, Borrower, Agent, and one of the Cash Management Banks.
"CFC" means a controlled foreign corporation (as that term is defined
in the IRC).
"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 35%, or more, of the Stock of Parent 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) Parent
ceases to own and control, directly or indirectly, 100% of the outstanding
capital Stock of each of its Subsidiaries.
"CLOSING DATE" means the date of the making of the initial Advance (or
other extension of credit).
"CLOSING DATE BUSINESS PLAN" means the set of Projections of Parent for
the 3-year period following the Closing Date (on a year by year basis, and for
the 1-year period following the Closing Date, on a month by month basis), in
form and substance (including as to scope and underlying assumptions) reasonably
satisfactory to Agent.
"CODE" means the California Uniform Commercial Code, as in effect from
time to time.
"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) Books,
(c) Equipment,
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(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) money or other assets of Borrower that now or hereafter
comes into the possession, custody, or control of any member of the Lender
Group, and
(i) the 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, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, money,
deposit accounts, 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.
Anything contained in this Agreement to the contrary notwithstanding,
the term "Collateral" shall not include any Equipment or General Intangibles
that is now or hereafter held by Borrower as lessee, licensee, or debtor under
purchase money secured financing, in the event that: (a) as a result of the
grant of a security interest therein, Borrower's rights in or with respect to
such asset would be forfeited or Borrower would be deemed to have breached or
defaulted under the applicable lease, license, or other agreement that governs
such asset pursuant to restrictions contained in the applicable lease, license
or other agreement; and (b) any such restriction is effective and enforceable
under applicable law; PROVIDED, HOWEVER, that the term "Collateral" shall
include, at any time that the restrictions in the lease, license, or other
agreement are no longer effective and enforceable (including as a result of the
exercise of an option to purchase or the repayment of the secured financing) or
at any time that the applicable lessor, licensor or other applicable party's
consent is obtained to the grant of a security interest in and to such asset in
favor of Agent, (1) any and all proceeds of such assets, and (2) such assets.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee letter,
or acknowledgment agreement of any lessor, warehouseman, processor, consignee,
or other Person in possession of, having a Lien upon, or having rights or
interests in the Equipment or Inventory, in each case, in form and substance
reasonably satisfactory to Agent.
"COLLECTIONS" means ALL cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Parent, Borrower, or the other Obligors.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT C-1 delivered by the chief financial officer of Parent to Agent.
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"CONTINUING DIRECTOR" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Parent 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
Parent (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.
"CONTRIBUTION AGREEMENT" means a contribution agreement executed and
delivered by each Obligor (other than the Canadian Obligors), in form and
substance reasonably satisfactory to Agent.
"CONTROL AGREEMENT" means a control agreement, in form and substance
reasonably satisfactory to Agent, executed and delivered by Parent or Borrower
(as applicable), Agent, and the applicable securities intermediary with respect
to a Securities Account or a bank with respect to a DDA.
"CORE BORROWING BASE" has the meaning set forth in SECTION 2.1(a).
"CREDIT CARD AGREEMENTS" means those certain agreements between Agent,
and the credit card clearinghouses and processors of Parent or Borrower (as
applicable) pursuant to which such credit card clearinghouses or processors
agree to transfer on a daily basis all credit card receipts of Parent or
Borrower, or other amounts payable by such clearinghouse or processor, into a
Cash Management Account, in form and substance reasonably satisfactory to Agent.
"CUSTOMER DEPOSIT RESERVE" means, as of any date of determination, a
reserve in an amount equal to the Dollar amount of deposits that have been
received by Parent or Borrower from their customers for goods that have yet to
be delivered.
"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 demand deposit account 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.
"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.
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"DEFAULTING LENDER RATE" means (a) the Base Rate for the first 3 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 account number 5300152165 of Borrower
maintained with the Designated Account Bank, or such other deposit account of
Borrower (located within the United States) that has been designated as such, in
writing, by Borrower to Agent.
"DESIGNATED ACCOUNT BANK" means Union Bank of California, N.A., whose
office is located at South ▇▇▇▇▇▇▇▇ Street, 10 Floor, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, and whose ABA number is ▇▇▇▇▇▇▇▇▇.
"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 reasonably satisfactory to
Agent.
"DOLLARS" or "$" means United States dollars.
"DOMESTIC SUBSIDIARIES" means each of Parent's Subsidiaries that is not
a CFC.
"ELIGIBLE INVENTORY" means Inventory of Borrower consisting of first
quality finished goods held for sale in the ordinary course of Borrower's
business located at one of the business locations of Borrower 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; PROVIDED, HOWEVER, that such
criteria may be fixed and revised from time to time by Agent in Agent's
Permitted Discretion to address the results of any audit or appraisal performed
by Agent from time to time after the Closing Date. In determining the amount to
be so included, Inventory shall be valued at the lower of cost or market on a
basis consistent with Borrower's historical accounting practices, such valuation
net of purchase price variances, cost test variances and overstatement of
Inventory relating to the relationship between Borrower and Fingerhut. An item
of Inventory shall not be included in Eligible Inventory if:
(a) Borrower does not have good, valid, and marketable title
thereto,
(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 by Parent or Borrower
or in a contract warehouse, in each case, unless it is segregated or otherwise
separately identifiable from goods of others, if any, stored on the premises,
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(d) it is not subject to a valid and perfected first priority
security Agent's Lien, with the exception of statutory Liens in favor of
landlords for rent not yet deliquent,
(e) it consists of goods returned or rejected by Parent's or
Borrower's customers, or
(f) it consists of goods that are quarantined, obsolete or slow
moving, work-in-process, raw materials, or goods that constitute spare parts,
packaging and shipping materials, supplies used or consumed in Borrower's
business, ▇▇▇▇ and hold goods, defective goods, "seconds," or Inventory acquired
on consignment.
"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 $1,000,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $1,000,000,000, 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
$1,000,000,000, (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.
"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 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 employee health and
safety or Hazardous Materials, including CERCLA; RCRA; the Federal Water
Pollution Control Act, 33 USC Section 1251 ET SEQ; the Toxic Substances
Control Act, 15 USC, Section 2601 ET SEQ; the Clean Air Act, 42 USC Section
7401 ET SEQ.; the Safe Drinking Water Act, 42 USC. Section 3803 ET SEQ.; the
Oil Pollution Act of 1990, 33 USC. Section 2701 ET SEQ.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC. Section 11001
ET SEQ.; the Hazardous Material Transportation Act, 49 USC Section 1801 ET
SEQ.; and the Occupational Safety
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and Health Act, 29 USC. Section 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.
"EQUIPMENT" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles),
tools, parts, goods (other than consumer goods, farm products, or Inventory),
wherever located, 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).
"ETOYS CANADA" means eToys Canada Ltd., a New Brunswick corporation.
"ETOYS EUROPE" means eToys Europe Inc., a Delaware corporation.
"ETOYS NV" means eToys Europe N.V., a company limited by shares
organized under the laws of The Netherlands.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as in effect
from time to time.
"FEE LETTER" means that certain fee letter, dated as of even date
herewith, between Borrower and Agent, in form and substance reasonably
satisfactory to Agent.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"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
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"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 Parent, eToys Europe, BabyCenter, BabyCenter
Advertising, eKids, Inc., a Delaware corporation, PMJ Corporation, a Delaware
corporation, or each of the Canadian Obligors, as the context requires.
"GUARANTOR SECURITY AGREEMENT" means a security agreement executed and
delivered by each Guarantor (other than the Canadian Obligors) in favor of
Agent, in form and substance reasonably satisfactory to Agent.
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"GUARANTY" means that certain general continuing guaranty executed and
delivered by each Guarantor in favor of Agent, for the benefit of the Lender
Group, in form and substance reasonably 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.
"INCREASED MINIMUM LIQUIDITY" means, as of any date of determination,
Qualified Cash Amount in excess of $30,000,000 (which amount shall include a
minimum of $10,000,000 of Cash Equivalents in a Securities Account subject to a
Control Agreement (which Control Agreement shall prohibit Parent or Borrower
from making withdrawals therefrom if such withdrawals would reduce the balance
in such Securities Account to below $10,000,000)).
"INDEBTEDNESS" means (a) all obligations of a Person for borrowed
money, (b) all obligations of a Person evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of such
Person in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of a Person under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of a Person, irrespective of whether such obligation or liability
is assumed, but only to the extent of the lesser of the fair market value of the
assets that are the subject of such Lien or the amount of the obligations or
liability that is secured by the Lien, (e) all obligations of a Person for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of such Person's business and repayable in accordance with
customary trade practices), and (f) any obligation of a Person guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse to such Person) any obligation of any
other Person that would be Indebtedness under any of the clauses (a) through (e)
above.
"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
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moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"INTERCOMPANY SUBORDINATION AGREEMENT" means a subordination agreement
executed and delivered by Parent and its Subsidiaries and Agent, the form and
substance of which is reasonably satisfactory to Agent.
"INTEREST PERIOD" means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, 3,
or (if generally available in the market) 6 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 LIBOR 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 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 1, 2, 3, or 6 months after the date on which the
Interest Period began, as applicable, and (e) Borrower may not elect an Interest
Period that 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.
"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 from the
sale of goods or rendition of services in the ordinary course of business
consistent with past practice), 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
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
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"ISSUING LENDER" means Foothill 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.
"LANDLORD RESERVE" means a reserve in an amount equal to the greater of
(i) the number of months rent for which a landlord will have, under the
applicable statutory lien, a Lien in the assets of Borrower to secure the
payment of rent or other amounts under a lease, or (ii) 1 months rent under the
lease, for each leased location at which Borrower stores Inventory and as to
which a Collateral Access Agreement has not been received by Agent.
"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).
"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 Parent or Borrower under
any of the Loan Documents that are paid or incurred by the Lender Group, (b)
actual fees or charges paid or incurred by Agent in connection with the Lender
Group's transactions with Parent and 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) actual 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
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transactions contemplated by the Loan Documents or the Lender Group's
relationship with the Obligors, (h) Agent's and each Lender's reasonable fees
and expenses (including reasonable 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
reasonable attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning any Obligor 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.
"LENDER-RELATED PERSON" means, with respect to any Lender, such Lender,
together with such Lender's Affiliates, and the officers, directors, employees,
and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the context
requires.
"LETTER OF CREDIT USAGE" means, as of any date of determination, the
aggregate undrawn amount of all outstanding 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 RATE" means, for each Interest Period for each LIBOR Rate Loan,
the rate per annum determined by Agent (rounded upwards, if necessary, to the
next 1/100%) by DIVIDING (a) the Base LIBOR Rate for such Interest Period, BY
(b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and
as of the effective day of any change in the Reserve Percentage.
"LIBOR RATE LOAN" means each portion of an Advance that bears interest
at a rate determined by reference to the LIBOR Rate.
"LIBOR RATE MARGIN" means 2.75 percentage points.
"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.
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"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Canadian Security Documents,
the Cash Management Agreements, the Contribution Agreement, the Control
Agreements, the Disbursement Letter, the Fee Letter, the Guarantor Security
Agreement, the Guaranty, the Letters of Credit, the Officers' Certificate, the
Stock Pledge Agreement, the Trademark Security Agreement, the Intercompany
Subordination Agreement, 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 any Obligor and the Lender
Group in connection with this Agreement.
"MARKET VALUE" means, as of any date of determination, the valuation
per share of Stock determined as follows:
(i) If the Stock is listed on a national securities exchange, the
NASDAQ National Market System, the NASDAQ system, or another nationally
recognized exchange or trading system, the Market Value per share of
such Stock shall be deemed to be the last reported sale price per share
of such Stock thereon on the date of determination of Market Value; or,
if no such price is reported on such date, such price on the next
preceding Business Day (provided that if no such price is reported on
the next preceding Business Day, the Market Value per share of Stock
shall be determined pursuant to clause (ii)).
(ii) If the Stock is not listed on a national securities
exchange, the NASDAQ National Market System, the NASDAQ system or
another nationally recognized exchange or trading system, the Market
Value per share of such Stock shall be deemed to be the amount
determined by the Board of Directors in good faith, and certified in a
board resolution, to represent the fair market value per share of such
Stock; and, upon request of Agent, the Board of Directors (or a
representative thereof) shall promptly notify the Agent of the Market
Value per share of such Stock.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, prospects, operations, assets, liabilities or condition (financial or
otherwise) of Parent and its Subsidiaries, taken as a whole, (b) a material
impairment of the Obligors (taken as a whole) ability to perform their
obligations under the Loan Documents 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, as of any date of determination, (i)
from the Closing Date through December 31, 2000, $40,000,000, and (ii)
thereafter, for the
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period from January 1 through June 30 of each year, $30,000,000, and for the
period from July 1 through December 31 of each year, $40,000,000.
"MINIMUM AVAILABILITY" means, as of any date of determination, that the
sum of (a) the Qualified Cash Amount, and (b) Availability, exceeds $30,000,000.
"MINIMUM LIQUIDITY" means, as of any date of determination, a Qualified
Cash Amount PLUS Availability in excess of $15,000,000.
"NEGOTIABLE COLLATERAL" means all of Borrower's now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"NET LIQUIDATION PERCENTAGE" means the percentage of the book value of
Borrower's Inventory that is estimated to be recoverable in a wholesale
liquidation of such Inventory, such percentage to be as determined from time to
time by a qualified appraisal company selected by Agent.
"OBLIGOR" means Parent, Borrower, or the Guarantors, or any one or more
of them, as the context requires.
"OBLIGATIONS" means 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, 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 the Obligors 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 the Obligors are required to
pay or reimburse by the Loan Documents, by law, or otherwise. 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.
"OFFICERS' CERTIFICATE" means the representations and warranties of
officers form submitted by Agent to Borrower, together with Borrower's completed
responses to the inquiries set forth therein, the form and substance of such
responses to be reasonably satisfactory to Agent.
"ORIGINATING LENDER" has the meaning set forth in SECTION 14.1(e).
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"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARENT" has the meaning set forth in the preamble to this Agreement.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"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.
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions by
Parent or its Subsidiaries of Equipment that is substantially worn, damaged, or
obsolete in the ordinary course of the applicable Person's business, (b)
trade-ins by Parent or its Subsidiaries of Equipment in connection with the
purchase of replacement Equipment, (c) sales by Parent or its Subsidiaries of
Inventory to buyers in the ordinary course of business, (d) so long as no Event
of Default has occurred and is continuing or would result therefrom and so long
as no Overadvance would result therefrom, sales by Borrower of slow moving
Inventory in bulk to jobbers or other inventory liquidators in the ordinary
course of Borrower's business, (e) the use or transfer of money or Cash
Equivalents by Parent or its Subsidiaries in a manner that is not prohibited by
the terms of this Agreement or the other Loan Documents, (f) the licensing by
Parent or its Subsidiaries, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of the
applicable Person's business, (g) so long as no Event of Default has occurred
and is continuing, the sale by Parent or its Subsidiaries, without recourse and
in the ordinary course of business, of overdue accounts arising in the ordinary
course of business, but only in connection with the compromise or collection
thereof (and not as part of any bulk sale or financing of receivables), (h)
transfers or leases of assets by Parent to Borrower or by any Obligor (other
than Borrower) to any other Obligor, (i) transfers of condemned property to the
respective Governmental Authority that has condemned the same (whether by deed
in lieu of condemnation or otherwise), and transfers of properties that have
been subject to a casualty to the respective insurer of such property or its
designee as part of an insurance settlement, (j) Permitted Transactions, and (k)
so long as no Event of Default has occurred and is continuing, or would result
therefrom, any other sale, exchange, or other disposition of assets (exclusive
of Accounts, General Intangibles, or Negotiable Collateral, other than in
connection with the sale of the business out of which they arose) in an amount
not in excess of (1) $500,000 in any transaction or series of related
transactions, and (2) $500,000 in any twelve month period (the value of the
assets under clause (1) and (2) shall be determined on the basis of the fair
market value of such assets as mutually agreed upon by Borrower and Agent in
good faith and based upon the facts and circumstances as of the date of the
consummation of the applicable transaction).
"PERMITTED INVESTMENTS" means (a) Investments in Cash Equivalents, (b)
Investments existing as of the Closing Date specified on SCHEDULE P-2, (c) so
long as no Event of Default has occurred and is continuing or would result
therefrom, (i) Investments arising from non-cash cross-site licensing
arrangements, and (ii) Investments in Subsidiaries
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of Parent that are not Obligors not in excess of an aggregate amount in any
twelve-month period of $12,000,000, PROVIDED, that best efforts shall be made to
make any such Investment, to the extent it can be so made without material
adverse consequences to Parent, in the form of Indebtedness, which Indebtedness
may be secured or unsecured, but shall not be subordinated to any other
Indebtedness of any such Subsidiaries, (d) Investments in negotiable instruments
for collection, (e) advances made in connection with purchases of goods or
services, or Investments in exchange for goods or services or licenses of
intellectual property, in each case in the ordinary course of business, (f)
Investments by any Canadian Obligor in any other Canadian Obligor or Investments
by any Obligor (other than a Canadian Obligor) in any other Obligor (other than
a Canadian Obligor), provided that if any such Investment is in the form of
Indebtedness, such Indebtedness shall be subject to the terms and conditions of
the Intercompany Subordination Agreement, (g) Investments received in connection
with the bankruptcy or reorganization of account debtors or in settlement of
delinquent obligations of, and other disputes with, account debtors, and (f)
other Investments in an aggregate amount not to exceed $1,000,000 during any
twelve-month period.
"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 or sublessors 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 Borrower's 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) with respect to any Real Property, easements, rights of way, and
zoning restrictions that do not materially interfere with or impair the use or
operation thereof by Borrower, (l) any interest or title of a licensee or
licensor under any license agreement permitted by this Agreement, (m) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for sale of Inventory entered into in the ordinary course of
business, (n) Liens in favor of a banking institution arising as a matter of law
encumbering deposits (including the right of set-off) held by such banking
institution incurred in the ordinary course of business and which are within the
general parameters customary in the banking industry, (o) deposits made in the
ordinary course of business to secure liabilities for premiums to insurance
carriers, and (p) Liens on patents, trademarks, trade names, service marks,
copyrights, trade secrets or other intellectual property to the extent such
Liens arise solely from the granting of licenses composing Permitted
Dispositions thereto or from any Person in the ordinary course of business.
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"PERMITTED NON-CASH ACQUISITION" means an Acquisition so long as:
(a) no Default or Event of Default shall have occurred and be continuing or
would result from the consummation of the proposed Acquisition,
(b) the assets being acquired, or the Person whose Stock is being acquired,
are useful in or engaged in, as applicable, the business of Parent and its
Subsidiaries or a business reasonably related or complementary thereto,
(c) the consideration payable in respect of the proposed Acquisition (other
than fees, expenses and similar amounts incurred in connection therewith) shall
be composed solely of common Stock of Parent or other Stock of Parent that does
not require any current cash payment during the term of this Agreement,
(d) the aggregate Market Value (determined as of the date of consummation
of each Acquisition), of the consideration paid or payable with respect to all
Permitted Non-Cash Acquisitions which have closed during the twelve-month period
ended as of the closing date of the proposed Acquisition PLUS the Market Value
of the consideration payable in respect of the proposed Acquisition, shall not
exceed $3,000,000,
(e) in the case of (i) a Stock Acquisition of a Person that will not be a
CFC or (ii) an asset Acquisition by Parent or any of its Subsidiaries, Parent
has provided Agent with written confirmation, supported by reasonably detailed
calculations, that on a PRO FORMA basis, created by adding the historical
combined financial statements of Parent (including the combined financial
statements of any other Person or assets that were the subject of a prior
Permitted Acquisition during the relevant period) to the historical consolidated
financial statements of the Person to be acquired (or the historical financial
statements related to the assets to be acquired) pursuant to the proposed
Acquisition (adjusted to eliminate expense items that would not have been
incurred and include income items that would have been recognized, in each case,
if the combination had been accomplished at the beginning of the relevant
period; such eliminations and inclusions to be mutually agreed upon by Parent
and Agent), Borrower would have been in compliance with the financial covenants
in SECTION 7.20 hereof (to the extent applicable and excluding SECTION
7.20(b))for the 12 months ending as of the fiscal quarter ended immediately
prior to the proposed date of consummation of such proposed Acquisition for
which there are available financial statements,
(f) in the case of (i) a Stock Acquisition of a Person that will not be a
CFC, or (ii) an asset Acquisition, Agent has completed its audit, appraisal, and
standard due diligence with respect to the assets or Person that is to be the
subject of the proposed Acquisition and the results thereof are reasonably
satisfactory to Agent,
(g) in the case of (i) a Stock Acquisition of a Person that will be a CFC,
or (ii) an asset Acquisition by a CFC, Parent has provided to Agent prior
written notice thereof not less than 30 days prior to the anticipated closing
date of the subject Acquisition together with such documentation that Agent may
require demonstrating that after giving effect to the subject Acquisition, the
Parent and its Subsidiaries (taken as a whole) would not suffer a
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Material Adverse Change as a result of such proposed Acquisition (and Agent
shall have 10 Business Days from and after the receipt by Agent of such
documentation as Agent may request relative to the subject Acquisition to notify
Parent of its rejection or approval of the consummation of the subject
Acquisition),
(h) in the case of an asset Acquisition, the subject assets are being
acquired by any Obligor other than a Canadian Obligor,
(i) in the case of an Acquisition of a Person that will not be a CFC, the
subject Stock is being acquired in such Acquisition directly by Parent,
(j) in the case of an asset Acquisition, Borrower shall have executed and
delivered any and all security agreements, UCC-1 financing statements, fixture
filings, and other documentation reasonably requested by Agent in order to
include the newly acquired assets within the Collateral,
(k) in the case of a Stock Acquisition of a Person that will not be a CFC,
Parent shall have executed and delivered a supplement to the Stock Pledge
Agreement in order to include the Stock being acquired thereunder and shall have
delivered to Agent possession of the original Stock certificates respecting all
of the issued and outstanding shares of Stock of such acquired Person, together
with stock powers with respect thereto endorsed in blank,
(l) in the case of a Stock Acquisition of a Person that will not be a CFC,
the Parent shall have caused such acquired Person to execute and deliver a
joinder to the Guaranty and Guarantor Security Agreement in order to make such
Person a party thereto, together with any and all security agreements, UCC-1
financing statements, fixture filings, and other documentation reasonably
requested by Agent in order to cause such cause acquired Person to be obligated
with respect to the Obligations and to include the assets of the acquired Person
within the Collateral, and
(m) in the case of (i) a Stock Acquisition of a Person that will not be a
CFC, or (ii) an asset Acquisition, the agreements, instruments, and other
documents executed in connection with the proposed Acquisition provide that (A)
neither Parent nor any of its Subsidiaries shall, in connection with the
proposed Acquisition, assume or remain liable in respect of any Indebtedness of
the sellers, or other obligations of the sellers (except for obligations
incurred in the ordinary course of business in operating the property so
acquired and necessary and desirable to the continued operation of such
property), and (B) all property so acquired in connection with the proposed
Acquisition shall be free and clear of any and all Liens, except for Permitted
Liens (and, if any such property is subject to any Lien not permitted by this
clause (B) then, concurrently with the proposed Acquisition such Lien is
released).
"PERMITTED PROTEST" means the right 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
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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 the applicable Person in good faith, and (c) 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 principal amount outstanding at any one time not in excess of
$30,000,000.
"PERMITTED TRANSACTIONS" means, so long as Parent and Borrower give Agent
and Lenders not less than 30 days prior written notice and, prior to the
consummation thereof, comply with their obligations under SECTION 4.1 hereof in
connection therewith, any (a) merger, consolidation, reorganization, or
recapitalization, or reclassifications of Stock, between (i) Guarantors, (ii)
any Guarantor and Borrower, so long as Borrower is the surviving entity in such
transaction, and (iii) any Guarantor and Parent, so long as Parent is the
surviving entity in such transaction, (b) liquidation, winding up, or
dissolution by any Guarantor, so long as the properties and assets resulting
from such transactions are vested in or transferred to Parent or Borrower or
another Guarantor, (c) sale, assignment, lease, transfer, or other disposition
of, in one transaction or a series of transactions, all or any substantial part
of any Guarantor's property or assets, so long as the relevant properties or
assets that are the subject of such sale, assignment, lease, transfer, or other
disposition are sold, assigned, leased, transferred, or otherwise disposed of to
Parent or Borrower or another Guarantor.
"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.
"PROJECTIONS" means Parent's forecasted (a) balance sheets, (b) profit and
loss statements, and (c) cash flow statements, all prepared on a consistent
basis with Parent'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, the percentage obtained by dividing (i) such Lender's
Revolver Commitment, by (ii) the aggregate Revolver Commitments of all
Lenders,
(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,
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the percentage obtained by dividing (i) such Lender's Revolver Commitment, by
(ii) the aggregate Revolver Commitments of all Lenders,
(c) with respect to all other matters (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 each case, in the event all Revolver Commitments have been
terminated, 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.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations) incurred at the time
of, or within 180 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"QUALIFIED CASH AMOUNT" means, as of any date of determination, the amount
of cash and Cash Equivalents of Parent and its Domestic Subsidiaries that is on
deposit with banks, or in Securities Accounts with securities intermediaries, or
any combination thereof, and which such deposit account or Securities Account is
maintained by a branch office located within the United States of any bank or
securities intermediary and is subject to a Control Agreement or such cash or
Cash Equivalents deposits are otherwise subject to a perfected security interest
in favor of Agent, with priority acceptable to Agent.
"REAL PROPERTY" means any estates or interests in real property now owned
or hereafter acquired by Borrower and the improvements thereto.
"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 Section 9601.
"REPORT" has the meaning set forth in SECTION 16.17.
"REQUIRED AVAILABILITY" means Qualified Cash Amount PLUS Availability in an
aggregate amount of not less than $15,000,000.
"REQUIRED LENDERS" means, at any time, Lenders whose Pro Rata Shares
aggregate 51% of the Revolver Commitments, or if the Revolver Commitments have
been terminated irrevocably, 51% of the Obligations then outstanding.
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"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
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"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 became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"REVOLVER USAGE" means, as of any date determination, the sum of (a) the
aggregate principal amount of Advances then outstanding (including any amount
that the Lender Group may have paid for the account of Borrower pursuant to any
of the Loan Documents and which has not been reimbursed by Borrower) and (b) 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.
"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).
"6-1/4% NOTES INDENTURE" means that certain Indenture, dated as of December
6, 1999, between Parent and U.S. Bank Trust National Association, as trustee.
"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,
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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 reasonably satisfactory to Agent, executed and delivered by Parent,
BabyCenter, eToys Europe, and eToys Canada; PROVIDED, HOWEVER, that in the case
of Stock of a Subsidiary of Parent which is not a Domestic Subsidiary of Parent
or is not a Canadian Obligor, the applicable debtor shall not be required to
pledge more than 65% of the total combined voting power of all classes of Stock
of such CFC entitled to vote.
"SUBORDINATED DEBT" means Indebtedness of Parent, the terms and conditions
of which (including the subordination provisions relative thereto) are
satisfactory to Required Lenders in their reasonable discretion.
"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;
PROVIDED, HOWEVER, that references herein to Parent and its Subsidiaries, to
Borrower and its Subsidiaries, or other similar expressions shall not include
any CFCs owned by eToys Europe as of the Closing Date or acquired, directly or
indirectly, by eToys Europe after the Closing Date; it being understood that
each of the Canadian Obligors are included in such references.
"SWEEP NOTICE" has the meaning set forth in SECTION 2.7.
"SWEEP WITHDRAWAL NOTICE" has the meaning set forth in SECTION 2.7.
"SWING LENDER" means Foothill 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.
"TRADEMARK SECURITY AGREEMENT" means a trademark security agreement
executed and delivered by Parent, each Guarantor, and Borrower and Agent, the
form and substance of which is reasonably satisfactory to Agent.
"UNDERLYING ISSUER" means a 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.
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"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.
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" or the term "Parent" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth 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 agrees (severally, not jointly or
jointly and
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severally) to make advances ("ADVANCES") to Borrower in an aggregate 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, or (ii) the Borrowing Base LESS the Letter of Credit Usage. For purposes
of this Agreement, "BORROWING BASE," as of any date of determination, shall mean
an amount equal to:
(A) from and after the Closing Date up to and including (but not
after) December 31, 2000, 50% of the value of Borrower's Eligible Inventory, and
(B) from and after January 1, 2001, (1) the lesser of (a) 30% of the
value of Borrower's Eligible Inventory, and (b) 85% times the then extant Net
Liquidation Percentage times the book value of Borrower's Inventory (the "CORE
BORROWING BASE"), or (2) during any period that Borrower is maintaining
Increased Minimum Liquidity, 50% of the value of Borrower's Eligible Inventory,
PROVIDED, HOWEVER, that the maximum amount of Revolver Usage that is in excess
of the Core Borrowing Base shall not exceed $10,000,000.
(b) Anything to the contrary in SECTION 2.1(a) notwithstanding, Agent
shall have the right to establish 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, the Core Borrowing Base, or the Maximum
Revolver Amount, including reserves with respect to, without duplication, (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) 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, (iii) the Customer Deposit Reserve, and (iv) the Landlord Reserve.
In addition to the foregoing, Agent SHALL HAVE THE RIGHT TO HAVE THE INVENTORY
REAPPRAISED BY A QUALIFIED APPRAISAL COMPANY SELECTED BY AGENT FROM TIME TO TIME
AFTER THE CLOSING DATE FOR THE PURPOSE OF REDETERMINING THE NET LIQUIDATION
PERCENTAGE OF THE ELIGIBLE INVENTORY AND, AS A RESULT, REDETERMINING THE
BORROWING BASE; PROVIDED, HOWEVER, THAT IN THE ABSENCE OF THE OCCURRENCE AND
CONTINUATION OF AN EVENT OF DEFAULT, AGENT SHALL NOT BE ENTITLED TO CHARGE
BORROWER FOR THE COSTS OF MORE THAN TWO REAPPRAISALS IN ANY TWELVE-MONTH PERIOD.
(c) The Lenders 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.
(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.
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2.2 [INTENTIONALLY OMITTED].
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 10:00 a.m. (California time) on
the Business Day prior to the date that is the requested Funding Date specifying
(i) the amount of such Borrowing, and (ii) the requested Funding Date, which
shall be a Business Day; PROVIDED, HOWEVER, that in the case of a request for
Swing Loan in an amount of $5,000,000, or less, such notice will be timely
received if it is received by Agent no later than 10:00 a.m. (California 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 1:00 p.m.
(California 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
10:00 a.m. (California 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
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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 1 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 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 Revolver 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
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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
Revolver 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
Revolver 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 their
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 Revolver 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 so)
subject only to 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; PROVIDED
FURTHER, HOWEVER, that any such assumption of the Revolver 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
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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, or
(C) to pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs, 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.
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(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 2:00 p.m. (California 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 12:00 p.m. (California 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
12:00 p.m. (California 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 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.
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(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.
(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
Revolver Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no
failure by any Lender to perform its
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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 Revolver Usage does not exceed the Borrowing Base by more than
$4,000,000, (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 a 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) 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 and 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.
(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 with a Revolver Commitment 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 11:00
a.m. (California time) on the date specified herein. Any payment received
by Agent later than 11:00 a.m. (California 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) 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 have
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 do 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.
(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
Revolver Commitment or type of Obligation, as applicable, 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,
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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, to pay the principal of all Advances until paid in full
(applied first to reduce any Overadvance),
J. TENTH, 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,
K. ELEVENTH, to pay any other Obligations until paid in full, and
L. TWELFTH, 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 Default or Event of Default has
occurred and is continuing, SECTION 2.4(b) shall not be deemed to apply to
any
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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 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"), 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) 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 LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR
Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus
the Base Rate Margin.
(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
2.12(e)) which shall accrue at a rate equal to 1.25% per annum times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit.
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(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) 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 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 2 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 Revolver Commitments are outstanding.
Borrower hereby authorize 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 to Borrower's Loan Account,
which amounts thereafter constitute Advances hereunder and shall accrue interest
at the rate then applicable to Advances hereunder. 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
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.
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2.7 CASH MANAGEMENT.
(a) Each of Parent and Borrower shall (i)
establish and maintain cash management services of a type and on terms
reasonably satisfactory to Agent at one or more of the banks set forth on
SCHEDULE 2.7(a) (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 such Cash
Management Bank, 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 a bank account in Agent's name (a "CASH
MANAGEMENT ACCOUNT") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish
and maintain Cash Management Agreements with Agent and Parent or Borrower,
as applicable. Each such Cash Management Agreement shall provide, among other
things, that (i) all items of payment deposited in such Cash Management
Account and proceeds thereof are held by such Cash Management Bank as agent
or bailee-in-possession for 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) the Cash
Management Bank will take direction from Agent as to the procedures to be
followed for remittance of proceeds in the Cash Management Account. The
parties hereto agree that with respect to Collections received in the Cash
Management Account:
(i) from the Closing Date through December 31, 2000,
Agent is entitled to instruct the Cash Management Bank to
remit all Collections received in the Cash Management Account
to the Agent's Account,
(ii) if, on December 31, 2000, the Parent and its
Domestic Subsidiaries have Minimum Availability, the Agent
promptly shall direct the Cash Management Bank to remit all
Collections received in the Cash Management Account as
Borrower shall direct,
(iii) if, on December 31, 2000, the Parent and its
Domestic Subsidiaries do not have Minimum Availability, the
Cash Management Bank shall continue to remit all Collections
received in the Cash Management Account to the Agent's
Account,
(iv) in the event that Agent has instructed the Cash
Management Bank to remit Collections as Borrower directs
pursuant to clause (ii) above, and if, thereafter, the Parent
and its Domestic Subsidiaries fail, at any time, to have
Minimum Availability, the Agent may, at any time thereafter,
provide notice (a "SWEEP NOTICE") to the Cash Management Bank
to immediately commence remittance of all Collections received
in the Cash Management Account to the Agent's Account,
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(v) in the event that the Parent and its Domestic
Subsidiaries did not have Minimum Availability on December 31,
2000, the Agent promptly shall direct the Cash Management Bank
(a "SWEEP WITHDRAWAL NOTICE") to remit all Collections
received in the Cash Management Account as Borrower shall
direct at such time as the Parent has received net cash
proceeds from the issuance of Stock or Subordinated Debt in an
aggregate amount sufficient, when added to the sum of the
Qualified Cash Amount and Availability determined as of the
date Parent receives such net cash proceeds from the issuance
of Stock or Subordinated Debt, to equal at least $30,000,000,
and
(vi) in the event that at any time after the date
Agent sent the Sweep Withdrawal Notice to the Cash Management
Bank pursuant to clause (v) above, the Parent and its Domestic
Subsidiaries do not have Minimum Availability, the Agent may
provide a further Sweep Notice to the Cash Management Bank to
immediately commence remittance of all Collections received in
the Cash Management Account to the Agent's Account.
(c) So long as no Default or Event of Default has
occurred and is continuing, Borrower may amend SCHEDULE 2.7(a) OR (b) to add
or replace a Cash Management Account Bank or Cash Management Account;
PROVIDED, HOWEVER, that (i) such prospective Cash Management Bank shall be
reasonably 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 (which consent shall not be unreasonably withheld), and
(ii) prior to the time of the opening of such Cash Management Account, Parent
and Borrower and such prospective Cash Management Bank shall have executed
and delivered to Agent a Cash Management Agreement. Parent and Borrower shall
close any of their 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.
(d) 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 Parent and
Borrower are hereby deemed to have granted a Lien 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
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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 11:00
a.m. (California time). If any payment item is received into the Agent's
Account on a non-Business Day or after 11:00 a.m. (California 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 1 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 1 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 and shall apply irrespective of whether
or not there are any outstanding monetary Obligations and irrespective of
whether a Sweep Notice has been given to a Cash Management Bank by Agent; the
effect of such clearance or float charge being the equivalent of charging 1
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 the Advances requested by Borrower and made by Agent or the
Lenders hereunder. 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 ACCOUNTS; 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 the 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
of Borrower hereunder or under the other Loan Documents, 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. In addition, Agent
shall credit Borrower's Loan Account with the unused balance, if any, of the
expense deposit previously provided by Parent to Agent in connection with the
execution and delivery of a letter of intent between such parties. 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 (in the absence of
manifest error) such
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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 the amount
equal to (i) during the period from and including October 1st up to and
including December 31st of each year, 0.375% per annum times the result of
(A) the Maximum Revolver Amount, less (B) the sum of (y) the average Daily
Balance of Advances that were outstanding during the immediately preceding
month, plus (z) the average Daily Balance of the Letter of Credit Usage
during the immediately preceding month, (ii) during the period from and
including January 1st up to and including June 30th of each year, 0.375% per
annum times the result (if positive) of (A) $25,000,000, less (B) the sum of
(y) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus (z) the average Daily Balance of the Letter
of Credit Usage during the immediately preceding month, and (iii) during the
period from and including July 1st up to and including September 30th of each
year, 0.375% per annum times the result (if positive) of (A) $30,000,000,
less (B) the sum of (y) the average Daily Balance of all Advances that were
outstanding during the immediately preceding month, plus (z) 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, audit, appraisal, and valuation fees and
charges as follows, (i) a fee of $750 pay day, per auditor, plus
out-of-pocket expenses for each financial audit of Borrower performed by
personnel employed by Agent, (ii) if implemented, a one time charge of $3,000
plus out-of-pocket expenses for expenses for the establishment of electronic
collateral reporting systems, (iii) a fee of $1,500 per day per appraiser,
plus out-of-pocket expenses, for each appraisal of the Collateral performed
by personnel employed by Agent, and (iv) 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
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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 the
result of (A) the Borrowing Base, LESS (B) the amount of
outstanding Advances, or
(ii) the Letter of Credit Usage would exceed
$15,000,000, 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 have an expiry date no later
than 30 days prior to the Maturity Date and all such Letters 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 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Borrower shall have received written or telephonic notice of such L/C
Disbursement prior to 10:00 a.m., California 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 11:00 a.m., California time, on (i) the Business Day that
Borrower receives such notice, if such notice is received prior to 10:00 a.m.,
California 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
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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 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 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
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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 by Borrower that, as of the Closing
Date, the issuance charge imposed by the prospective Underlying Issuer is
.825% 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
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may, at any time within a reasonable 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.
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 based upon the LIBOR Rate.
Interest on LIBOR 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 the Obligations, (iii)
termination of this Agreement pursuant to the terms hereof, or (iv) the first
day of each month that such LIBOR Rate Loan is outstanding. 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
LIBOR 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 LIBOR Rate and
Agent shall have the right to convert the interest rate on all outstanding
LIBOR 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
11:00 a.m. (California time) at least 3 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 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. (California 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 LIBOR Rate Loan,
Borrower shall
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indemnify, defend, and hold Agent and the Lenders harmless
against any actual loss, cost, or expense incurred by Agent
or any Lender as a result of (a) the payment of any
principal of any LIBOR 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
LIBOR 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 LIBOR Rate Loan on the date
specified in any LIBOR Notice delivered pursuant hereto
(such losses, costs, and expenses, collectively, "FUNDING
LOSSES").
(iii) Borrower shall have not more than 10 LIBOR Rate
Loans in effect at any given time. Borrower only may exercise
the LIBOR Option for LIBOR Rate Loans of at least $500,000 and
integral multiples of $500,000 in excess thereof.
(c) PREPAYMENTS. Borrower may prepay LIBOR Rate
Loans at any time; PROVIDED, HOWEVER, that in the event that LIBOR 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 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) above.
(d) SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.
(i) The LIBOR 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 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
LIBOR 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 LIBOR
Rate and the method for determining the amount of such
adjustment, or (z) repay the LIBOR Rate Loans with respect to
which such adjustment is made (together with any amounts due
under clause (b)(ii) above).
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(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 LIBOR 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 LIBOR 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 LIBOR Rate Loans, and interest upon
the LIBOR 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 LIBOR 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 LIBOR Rate by acquiring
eurodollar deposits for each Interest Period in the amount of the LIBOR 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 parent 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 Revolver 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 Lender may notify
Borrower and Agent thereof. Following receipt of such notice, Borrower agree
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.
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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 reasonable satisfaction of Agent, of each
of the conditions precedent set forth below:
(a) the Closing Date shall occur on or before
November 30, 2000;
(b) Agent shall have received all financing
statements required by Agent, duly executed by the applicable Obligors, and
Agent shall have received searches reflecting that there are no Liens on the
Accounts and Inventory of Borrower and a letter from the Parent and Borrower,
in form satisfactory to Agent, that no financing statements have been filed
against the Accounts or Inventory of Borrower since the date of the received
searches;
(c) Agent shall have received each of the
following documents, in form and substance reasonably satisfactory to Agent,
duly executed, and each such document shall be in full force and effect:
(i) the Control Agreements,
(ii) the Disbursement Letter,
(iii) the Fee Letter,
(iv) the Canadian Security Documents,
(v) the Contribution Agreement,
(vi) the Guaranty,
(vii) the Cash Management Agreements,
(viii) the Guarantor Security Agreement,
(ix) the Officers' Certificate,
(x) the Stock Pledge Agreement, together with all
certificates representing the shares of Stock pledged
thereunder (with the exception of the certificates
representing the shares of Stock of eToys NV or the Canadian
Obligors), as well as Stock powers with respect thereto
endorsed in blank,
(xi) the Trademark Security Agreement, and
(xii) the Intercompany Subordination Agreement;
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(d) Agent shall have received a certificate from
the Secretary of each Obligor attesting to the resolutions of such Obligor's
board of directors authorizing its execution, delivery, and performance of
the Loan Documents to which such Obligor is a party and authorizing specific
officers of such Obligor to execute the same;
(e) Agent shall have received copies of each
Obligor's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Obligor;
(f) Agent shall have received a certificate of
status with respect to each Obligor, dated within 10 days of the Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Obligor, which certificate shall
indicate that such Obligor is in good standing in such jurisdiction;
(g) Agent shall have received certificates of
status with respect to each Obligor, 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 such Obligor)
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;
(h) 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 reasonably satisfactory to
Agent;
(i) Agent shall have either (i) applied the
applicable Landlord Reserve or (ii) received Collateral Access Agreements,
with respect to the following locations: (A) Olympic Boulevard, Los Angeles,
CA, (B) Commerce, CA, (C) Ontario, CA, (D) Greensboro, NC (two warehouses),
and (E) Danville, VA (two warehouses);
(j) Agent shall have received opinions of
Obligors' special counsel in form and substance reasonably satisfactory to
Agent;
(k) Agent shall have received a certificate of the
chief financial officer of Parent that all tax returns required to be filed
by Obligors have been timely filed and all taxes upon Obligors or their
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 Permitted Protests;
(l) Borrower shall have the Required Availability
after giving effect to the initial extensions of credit hereunder;
(m) Agent shall have completed its business,
legal, and collateral due diligence, including (i) a collateral audit and
review of Borrower's books and records and verification of Borrower's
representations and warranties to the Lender Group, the
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results of which shall be satisfactory to Agent, and (ii) an inspection of
each of the locations where Inventory is located, the results of which shall
be reasonably satisfactory to Agent;
(n) Agent shall have received completed reference
checks with respect to Obligors' senior management, the results of which are
reasonably satisfactory to Agent;
(o) Agent shall have received an appraisal of the
Liquidation Percentage applicable to Borrower's Inventory, the results of
which shall be reasonably satisfactory to Agent;
(p) Agent shall have received the Closing Date
Business Plan;
(q) Borrower shall pay all Lender Group Expenses
incurred in connection with the transactions evidenced by this Agreement;
(r) Agent shall have received copies of each of
the material documents governing Parent's $150,000,000 6.25% convertible
subordinated notes and its Series D Preferred Stock, together with a
certificate of the Secretary of Parent certifying each such document as being
a true, correct, and complete copy thereof;
(s) Borrower shall have received all licenses,
approvals or evidence of other actions required by any Governmental Authority
in connection with the execution and delivery by Borrower of this Agreement
or any other Loan Document or with the consummation of the transactions
contemplated hereby and thereby;
(t) Agent shall have received a letter from
Brentwood Credit Corporation qualifying the collateral description language
set forth in certain financing statements filed by Brentwood Credit
Corporation against Borrower, in form and substance reasonably satisfactory
to Agent; and
(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
reasonably satisfactory to Agent.
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, 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 a default hereunder):
(a) no later than 15 days after the Closing Date,
deliver to Agent the Credit Card Agreements;
(b) no later than 30 days after the Closing Date,
deliver to Agent the certificates representing the shares of Stock of eToys
NV and the Canadian Obligors pledged
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under the Stock Pledge Agreement, as well as Stock powers with respect
thereto endorsed in blank; and
(c) no later than 30 days after 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 reasonably satisfactory to Agent and its counsel.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation
of the Lender Group (or any member thereof) to make all Advances (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 their 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 and shall continue in
full force and effect for a term ending on November 15, 2002 (the "MATURITY
DATE"). The foregoing notwithstanding, the Lender Group, upon the election of
the Required Lenders, shall have the right to terminate its 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) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of their 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-
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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 have the option, at any
time upon 90 days prior written notice by Borrower to Agent, to terminate
this Agreement by paying to Agent, for the benefit of the Lender Group, in
cash, the Obligations (including 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 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender),
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 Revolver Commitments shall terminate and Borrower shall be
obligated to repay the Obligations (including 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 105% of the then extant Letter of
Credit Usage, or (ii) causing the original Letters of Credit to be returned
to the Issuing Lender), 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 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, 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 their 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,
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Borrower have no authority, express or implied, to dispose of any item or
portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and
if and to the extent that perfection or priority of Agent's security interest
is dependent on or enhanced by possession, Borrower, promptly upon the
request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 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 agrees
that it will hold in trust for the Lender Group, as the Lender Group's
trustee, any Collections that it receives and immediately will deliver said
Collections to Agent or a Cash Management Bank in their original form as
received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Agent, Borrower shall execute and deliver to Agent, any and
all financing statements, original financing statements in lieu of
continuation statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, and all other documents
(the "ADDITIONAL DOCUMENTS") that Agent may request in its Permitted
Discretion, in form and substance reasonably satisfactory to Agent, to
perfect and continue perfected or better perfect the Agent's Liens in the
Collateral (whether now owned or hereafter arising or acquired), 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. In addition, on such periodic
basis as Agent shall require, Borrower shall (a) provide Agent with a report
of all new patentable, copyrightable, or trademarkable materials acquired or
generated by Borrower during the prior period, (b) upon request of Agent,
cause all patents, copyrights, and trademarks acquired or generated by
Borrower that are necessary to the conduct of Borrower's business and 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, and (c) 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.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents 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
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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 (at
which time such appointment shall immediately terminate).
4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter 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. The foregoing to the contrary notwithstanding, so long as no
Event of Default has occurred and is continuing, such visits and inspections
by Agent and the Lenders shall be coordinated with Agent and the other
Lenders so as to limit the aggregate number of such visits and inspections
occurring after the Closing Date to no more than three in any twelve-month
period.
4.7 CONTROL AGREEMENTS. Borrower agrees that it will not transfer
assets out of any Securities Accounts other than as permitted under SECTION
7.19 and, if to another securities intermediary, unless Borrower, Agent, and
the substitute securities intermediary have entered into a Control Agreement.
No arrangement contemplated hereby or by any Control Agreement in respect of
any Securities Accounts or other Investment Property shall be modified by
Borrower without the prior written consent of Agent. Upon the occurrence and
during the continuance of a Default or Event of Default, Agent may 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.
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
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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 its
Collateral and its Real Property, free and clear of Liens except for
Permitted Liens.
5.2 [INTENTIONALLY OMITTED]
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from known defects. As to each item of Eligible
Inventory, such Inventory is
(a) owned by Borrower free and clear of all Liens
other than Liens in favor of Agent,
(b) either located at one of the locations set
forth on SCHEDULE E-1 or in transit from one such location to another such
location,
(c) not located on real property leased by
Borrower or in a contract warehouse, in each case, unless segregated or
otherwise separately identifiable from goods of others, if any, stored on the
premises,
(d) not goods that have been returned or rejected
by Borrower's customers, and
(e) not goods that are obsolete or slow moving,
work-in-process, or that constitute spare parts, packaging and shipping
materials, supplies used or consumed in Borrower's business, ▇▇▇▇ and hold
goods, defective goods, "seconds," or Inventory acquired on consignment.
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. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party and 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 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of each Obligor is located at the address indicated in SCHEDULE 5.7,
and each Obligor's FEIN is identified in SCHEDULE 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
(a) Each Obligor is duly organized and existing
and in good standing under the laws of the jurisdiction of its organization
and qualified to do business in any state
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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 each Obligor, 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 each Obligor's capital Stock, including any right
of conversion or exchange under any outstanding security or other instrument.
Other than as described on SCHEDULE 5.8(b), no Obligor is 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.
(c) Set forth on SCHEDULE 5.8(c), is a complete
and accurate list of each Obligor'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 the applicable
Obligor. All of the outstanding capital Stock of each such Subsidiary has
been validly issued and is fully paid and non-assessable.
(d) Except as set forth on SCHEDULE 5.8(b), there
are no subscriptions, options, warrants, or calls relating to any shares of
any Obligor's Subsidiaries' capital Stock, including any right of conversion
or exchange under any outstanding security or other instrument. Other than as
described on SCHEDULE 5.8(b), no Obligor or any of its respective
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of any Obligor's
Subsidiaries' capital Stock or any security convertible into or exchangeable
for any such capital Stock.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) As to each Obligor, the execution, delivery,
and performance by such Obligor of this Agreement and the Loan Documents to
which it is a party have been duly authorized by all necessary action on the
part of such Obligor.
(b) As to each Obligor, the execution, delivery,
and performance by such Obligor of this Agreement and the Loan Documents to
which it is a party do not and will not (i) violate any material provision of
federal, state, or local law or regulation applicable to any Obligor, the
Governing Documents of any Obligor, or any order, judgment, or decree of any
court or other Governmental Authority binding on any Obligor, (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 any Obligor,
(iii) result in or require the creation or imposition of any Lien of any
nature whatsoever upon any properties or assets of Obligor, other than
Permitted Liens, or (iv) require any approval of any Obligor's
interestholders or any approval or consent of any Person under any material
contractual obligation of any Obligor.
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(c) Other than the filing of financing statements,
the execution, delivery, and performance by each Obligor of this Agreement
and the Loan Documents to which such Obligor 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) As to each Obligor, the Loan Documents to
which such Obligor is a party, and all other documents contemplated hereby
and thereby, when executed and delivered by such Obligor will be the legally
valid and binding obligations of such Obligor, enforceable against such
Obligor 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.
(e) Upon the completion of the necessary filings
and recordings relating to the Collateral in the appropriate offices and
jurisdictions and the delivery to and continued possession by Agent of all
instruments, investments property, chattel paper and documents as to which
perfection only is available by possession, the Agent's Liens are validly
created, perfected, and first priority Liens, subject only to Permitted Liens
5.10 LITIGATION. Other than those matters disclosed on SCHEDULE
5.10, there are no actions, suits, or proceedings pending or, to the best
knowledge of Parent and Borrower, threatened against any of the Obligors, or
any of their Subsidiaries, as applicable, except for (a) matters that are
fully covered by insurance (subject to customary deductibles), and (b)
matters arising after the Closing Date that, if decided adversely to
Obligors, or any of their Subsidiaries, as applicable, reasonably could not
be expected to result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Obligors that have been delivered by Obligors 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, Obligors'
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 Obligors since the date of the latest financial statements submitted to
the Lender Group on or before the Closing Date.
5.12 FRAUDULENT TRANSFER.
(a) The Obligors, taken as a whole, are Solvent.
(b) No transfer of property is being made by any
Obligor and no obligation is being incurred by any Obligor 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 Obligors.
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5.13 EMPLOYEE BENEFITS. None of Obligors, any of their Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on SCHEDULE 5.14,
(a) to Parent's and Borrower's knowledge, none of Obligors' properties or
assets has ever been used by Obligors 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 Parent's and Borrower's knowledge, none of
Obligors' 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) none of Obligors have received notice that a
Lien arising under any Environmental Law has attached to any revenues or to
any Real Property owned or operated by Obligors, and (d) none of Obligors
have 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 any Obligor resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15 BROKERAGE FEES. Parent and Borrower have 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 Obligors in connection herewith.
5.16 INTELLECTUAL PROPERTY. Each Obligor 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 each
Obligor is the owner or is an exclusive licensee.
5.17 LEASES. Obligors enjoy peaceful and undisturbed possession
under all leases material to the business of Obligors and to which Obligors
are a party or under which Obligors are operating. All of such leases are
valid and subsisting and no material default by Obligors exists under any of
them.
5.18 DDAS. Set forth on SCHEDULE 5.18 are all of the DDAs of each
Obligor, including, with respect to each depository (i) the name and address
of that depository, and (ii) the account numbers of the accounts maintained
with such depository.
5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Obligors 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 Obligors in writing to the Agent or any Lender will be,
true and
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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 Closing Date Projections
represent, and as of the date on which any other Projections are delivered to
Agent, such additional Projections represent Parent's and Borrower's good
faith best estimate of its future performance for the periods covered thereby
(it being understood that such Projections are subject to significant
contingencies and uncertainties, many of which are beyond the control of
Parent and Borrower, and no assurance can be given that such Projections will
be realized).
5.20 INDEBTEDNESS. Set forth on SCHEDULE 5.20 is a true and complete
list of all Indebtedness of each Obligor outstanding immediately prior to the
Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.
6. AFFIRMATIVE COVENANTS.
Parent and Borrower covenants and agrees that, so long as
any credit hereunder shall be available and until full and final payment of
the Obligations, Obligors shall and shall cause each of their respective
Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Obligors 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.
6.2 COLLATERAL REPORTING. Provide Agent (and if so requested by
Agent, with copies for each Lender) with the following documents at the
following times in form reasonably satisfactory to Agent:
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Semi-weekly (a) during the period from November 1 through
December 31 of each year, (i) Inventory reports
specifying Borrower's cost and the retail market
value of its Inventory, by category, with additional
detail showing additions to and deletions from the
Inventory, and (ii) a detailed calculation of the
Borrowing Base.
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Weekly (b) during any period other than during the period
set forth in item (a), (i) Inventory reports
specifying Borrower's cost and the retail market
value of its Inventory, by category, with additional
detail showing additions to and deletions from the
Inventory a sales journal, collection journal, and
credit register since the last such schedule and (ii)
a detailed calculation of the Borrowing Base as of
such date, and
(c) a report detailing all cash or Cash Equivalents
on deposit with banks or in Securities Accounts with
securities intermediaries, including the name,
address and contact person at each such bank or
securities intermediary, and the Dollar value of any
such deposits; PROVIDED, HOWEVER, the foregoing shall
not apply to the cash collateral securing outstanding
letters of credit on deposit with Bank of America (in
account number 1459300648) and with Imperial Bank (in
account number 4305940002).
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Monthly (not (d) a summary aging, by vendor, of Borrower's
later than the accounts payable and any book overdraft,
10th day of each
month) (e) a report regarding returns, disputes, or claims,
and
(f) a listing of outstanding Accounts.
--------------------------------------------------------------------------------
Quarterly (g) a report regarding Borrower's accrued, but
unpaid, AD VALOREM taxes.
--------------------------------------------------------------------------------
Upon request by Agent (h) copies of invoices in connection with the
Accounts, credit memos, remittance advices, deposit
slips, shipping and delivery documents in connection
with the Accounts and, for Inventory and Equipment
acquired by Borrower, purchase orders and invoices,
and
(i) such other reports as to the Collateral, or the
financial condition of Parent or Borrower as Agent
may request.
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In addition, each of Parent and 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.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent, with
copies to each Lender:
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(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 fiscal
quarters in a fiscal year) after the end of each month during each of Parent's
fiscal years,
(i) a company prepared consolidated balance sheet,
income statement, and statement of cash flow covering Parent's
and its Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial
officer of Parent 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
Parent and its Subsidiaries,
B. the representations and warranties of
Obligors 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 Parent and Borrower have
taken, are taking, or propose 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 100
days after the end of each of Parent's fiscal years, financial statements of
Parent 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),
(c) as soon as available, but in any event within 30
days after the start of each of Parent's fiscal years, copies of Parent's
Projections, in form and substance (including as to scope and underlying
assumptions) reasonably satisfactory to Agent, for the forthcoming 2 years, year
by year, and for the forthcoming fiscal year, month by month,
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certified by the chief financial officer of Parent as being such officer's good
faith best estimate of the financial performance of Parent and its Subsidiaries
during the period covered thereby,
(d) if and when filed by any Obligor,
(i) 10-Q quarterly reports, Form 10-K annual reports,
and Form 8-K current reports,
(ii) any other filings made by any Obligor with the
SEC,
(iii) copies of Parent's federal income tax returns,
and any amendments thereto, filed with the Internal Revenue
Service, and
(iv) any other information that is provided by Parent
to its shareholders generally,
(e) if and when filed by any Obligor and as requested
by Agent, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) any Obligor conducts business or is required to pay
any such excise tax, (ii) where any Obligor's failure to pay any such applicable
excise tax would result in a Lien on the properties or assets of any Obligor, or
(iii) where any Obligor's failure to pay any such applicable excise tax
reasonably could be expected to result in a Material Adverse Change,
(f) as soon as Parent or 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 Parent and Borrower propose
to take with respect thereto, and
(g) upon the request of Agent, any other report
reasonably requested by Agent relating to the financial condition of Parent and
Borrower.
In addition to the financial statements referred to above,
Parent agrees to deliver financial statements prepared on both a consolidated
and consolidating basis and that no Obligor, or any Subsidiary of an Obligor,
will have a fiscal year different from that of Parent. Parent and Borrower agree
that their independent certified public accountants are authorized to
communicate with Agent and to release to Agent whatever financial information
concerning Obligors that Agent reasonably may request. Each of Parent and
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 [INTENTIONALLY OMITTED]
6.5 RETURN. Cause returns and allowances as between Obligors and their
Account Debtors, to be, in all material respects, on the same basis and in
accordance with the usual
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customary practices of the applicable Obligor, 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 any
Obligor, the applicable Obligor promptly shall determine the reason for such
return and, if the applicable Obligor accepts such return, issue a credit
memorandum in the appropriate amount to such Account Debtor.
6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all of their
properties which are necessary or useful in the conduct of their business in
good working order and condition, ordinary wear and tear excepted, and comply at
all times, in all material respects, with the provisions of all leases to which
they are parties as lessee, so as to prevent any material loss or forfeiture
thereof or thereunder.
6.7 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Obligors
or any of their 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. Parent and
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 the applicable Obligor has made such payments or deposits.
Parent and Obligors shall deliver satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which any Obligor is required to pay any
such excise tax.
6.8 INSURANCE.
(a) At Parent's and 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.
Parent and Borrower also shall maintain business interruption, public liability,
and product liability insurance, as 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. As of the Closing Date, Agent (on behalf of the Lenders)
agrees that the policies of insurance currently maintained by Parent and
Borrower meet each of the foregoing requirements and continued maintenance of
such policies will satisfy the foregoing provisions. 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 $500,000,
without any liability to Obligors whatsoever
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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. The foregoing notwithstanding, Borrower may, at or within 30 days
of the date of the receipt of any such payment by Agent, request that Agent (on
behalf of the Lenders) disburse to Borrower such monies and Agent agrees and is
authorized to disburse such monies solely for the repair, replacement, or
restoration of the asset that has been damaged, if all of the following
conditions are satisfied: (i) no Default or Event of Default has occurred and is
continuing or would result from any such disbursement, (ii) Borrower has cash,
Cash Equivalents, Availability or business interruption insurance proceeds in
amounts sufficient, in Agent's reasonable judgment, to ensure that Borrower will
be able to make payment as and when due of each of its Obligations that will be
payable during the period of such repair, replacement, or restoration, (iii)
Agent is reasonably satisfied that the amount of such cash, cash equivalents,
borrowing availability, or insurance proceeds will be sufficient fully to
repair, replace, or restore the affected assets, (iv) completion of the repair,
replacement, or restoration of the affected assets is to be completed in
accordance with plans submitted to and approved by Agent, which approval shall
not be unreasonably withheld or delayed, (v) completion of the repair,
replacement, or restoration shall be effected with reasonable promptness and
shall be of a value (the "Replaced Value") that is (A) at least equal to the
replacement value (the "Destroyed Value") of the assets destroyed or condemned
prior to such destruction or condemnation, or (B) of a value less than the
Destroyed Value so long as the difference between the Destroyed Value and the
Replaced Value is applied to the prepayment of the Obligations without premium,
in such order or manner as the Required Lenders may elect, and (vi) all monies
paid by Borrower to Agent may be commingled with other funds of Agent and will
not bear interest pending disbursement hereunder. In the event Agent fails to
receive timely such written designation or the conditions set forth in the
following sentence are not satisfied, the payment shall be applied in the manner
set forth in the immediately preceding sentence.
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 10 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 or fixture
filings necessary to perfect and continue perfected the Agent's Liens on such
assets and also provides to Agent a Collateral Access Agreement.
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,
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and orders the non-compliance with which, 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 any Obligor is a party or by which any Obligor'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. Parent and Borrower agree
and acknowledge that payment of all such brokerage commissions or finders fees
shall be the responsibility of Parent and Borrower, and Parent 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. Other than as may be affected by the consummation of
Permitted Transactions, at all times preserve and keep in full force and effect
each Obligor's valid existence and good standing and any rights and franchises
material to Obligors' businesses.
6.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by any
Obligor 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 release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Obligor and take any Remedial Actions required to ▇▇▇▇▇ said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Agent with written notice within 10 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 any Obligor, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Obligor, 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 DISCLOSURE UPDATES. Promptly and in no event later than 5 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, acknowledgment,
filing, or recordation thereof.
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7. NEGATIVE COVENANTS.
Parent and Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final payment of the
Obligations, Parent and Borrower will not and will not permit any of their
respective 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) Subordinated Debt in an aggregate principal
amount outstanding (inclusive of interest that is paid-in-kind and added to the
outstanding principal balance thereof) at any one time not to exceed
$100,000,000;
(e) Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, provided that
such Indebtedness is extinguished within 3 Business Days of its incurrence;
(f) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), and (d) 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 Obligors'
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the principal amount of the Indebtedness so refinanced,
renewed, or extended or add of one or more of the Obligors as liable with
respect to thereto if such additional Obligors were not liable with respect to
the original Indebtedness, (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 the
applicable Obligor, 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;
(g) Indebtedness permitted under SECTION 7.6 hereof;
and
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(h) Indebtedness composing Permitted Investments.
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. Other than the consummation of
Permitted Transactions or Permitted Non-Cash Acquisitions,
(a) Enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock.
(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 Transactions or Permitted
Dispositions, convey, sell, lease, license, assign, transfer, or otherwise
dispose of any of the assets of any Obligor.
7.5 CHANGE NAME. Other than in connection with a Permitted Transaction,
change any Obligor's name, FEIN, corporate structure or identity, or add any new
fictitious name; PROVIDED, HOWEVER, that an Obligor may change its name 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, such Obligor provides any
financing statements or similar filings necessary to perfect and continue
perfected Agent's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person, except (a) guarantees by one or
more Obligors of Indebtedness of one or more other Obligors permitted to exist
under SECTION 7.1 hereof, and (b) endorsements of instruments or items of
payment for deposit to the account of Obligors or which are transmitted or
turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Obligors' business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted
by SECTION 7.1(D), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Obligor, other than the Obligations in accordance with this
Agreement, and
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(b) Except in connection with a refinancing permitted
by SECTION 7.1(d), directly or indirectly, amend, modify, alter, increase, or
change any of the material 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.
7.11 DISTRIBUTIONS. Other than distributions by one Obligor to another
Obligor or the declaration and payment of dividends by an Obligor to another
Obligor, make any distribution or declare or pay any dividends (in cash or other
property, other than common Stock) on, or purchase, acquire, redeem, or retire
any of any Obligor's Stock, of any class, whether now or hereafter outstanding;
PROVIDED, HOWEVER, that Parent may repurchase, redeem, or otherwise acquire for
value any of its Stock upon the death, disability, or termination of employment
of its employees, officers, or directors so long as the aggregate amount of
repurchases, redemptions, or other acquisitions for value does not exceed an
aggregate amount of $1,000,000 in any twelve-month period.
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
or storage of Obligors' accounting records without said accounting firm or
service bureau agreeing to provide Agent information regarding the Collateral or
Obligors' 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 Obligors shall not have cash or Cash Equivalents on deposit with
banks or in Securities Accounts with securities intermediaries (other than such
amounts on deposit with banks or in Securities Accounts subject to Control
Agreements or otherwise subject to perfected security interests in favor of
Agent, with priority acceptable to Agent) in an aggregate amount in excess of
$100,000 outstanding at any one time; PROVIDED, HOWEVER, the foregoing shall not
apply to the cash collateral securing outstanding letters of credit on deposit
with Bank of America (in account number 1459300648) and with Imperial Bank (in
account number 4305940002); PROVIDED FURTHER, HOWEVER, that Borrower shall
immediately deposit any balance of such cash collateral into a Securities
Account subject to a Control Agreement upon the expiration of the letters of
credit for which such cash collateral provides security.
7.14 TRANSACTIONS WITH AFFILIATES. Except (i) as set forth on SCHEDULE
7.14, (ii) for transactions between or among (A) the Canadian Obligors, or (B)
one of the Obligors (other than the Canadian Obligors) and another of the
Obligors (other than the Canadian Obligors),
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(iii) for compensation and indemnification arrangements with officers and
directors of the Parent and its Subsidiaries, and (iv) reasonable fees paid to
members of the governing bodies of Parent and its Subsidiaries, directly or
indirectly enter into or permit to exist any transaction with any Affiliate of
any Obligor except for transactions that are in the ordinary course of Obligors'
business, upon fair and reasonable terms, that, if material, are fully disclosed
to Agent, and that are no less favorable to Obligors than would be obtained in
an arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Other than as permitted hereunder, suspend or go out
of a substantial portion of its business.
7.16 [INTENTIONALLY OMITTED]
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, 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) consistent with
the terms and conditions hereof, for its lawful and permitted purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without Borrower providing 15 days prior written notification thereof to Agent
and so long as, at the time of such written notification, the applicable Obligor
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens and also provides to Agent a Collateral
Access Agreement with respect to such new location. The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent (which consent shall not be
unreasonably withheld, but which consent may be conditioned upon receipt of a
Collateral Access Agreement from such bailee, warehouseman, or similar party).
7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Agent shall have received a Control Agreement in respect of such
Securities Account. Obligors agree to 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, Obligors may use and withdraw (but
not in derogation of the definition of "Increased Minimum Liquidity") such
assets (and the proceeds thereof) to the extent not prohibited by this
Agreement.
7.20 FINANCIAL COVENANTS.
(a) Fail to maintain Minimum Liquidity at any time.
(b) Make capital expenditures during the fiscal
periods set forth below in excess of the amount set forth in the following table
for the applicable period:
------------------------------- ---------------------------- ----------------------------
FROM THE CLOSING DATE UNTIL FROM APRIL 1, 2001 UNTIL FROM APRIL 1, 2002 UNTIL
MARCH 31, 2001 MARCH 31, 2002 MARCH 31, 2003
------------------------------- ---------------------------- ----------------------------
$4,000,000 $20,000,000 $20,000,000
------------------------------- ---------------------------- ----------------------------
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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 fail 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)); PROVIDED, HOWEVER, that in the case of Overadvances that are
caused by the charging of interest, fees, or Lender Group Expenses to the Loan
Account, such event shall not constitute an Event of Default if, within 3
Business Days of Borrower's receipt of telephonic or other notice of such
Overadvance, Borrower eliminates such Overadvance;
8.2 If any Obligor fails or neglects to (a) perform, keep, or observe
any covenant or other provision contained in SECTIONS 6.2, 6.3, 6.7, 6.9, 6.10,
AND 6.11 hereof and such failure or neglect continues for a period of 5 days
after the date on which such failure or neglect first occurs, or (b) perform,
keep, or observe any covenant or other provision contained in any Section of
this Agreement (other than a Section that is expressly dealt with elsewhere in
this SECTION 8), including failure to satisfy a condition subsequent set forth
in SECTION 3.2 within the time period stated, or the other Loan Documents (other
than a Section of such other Loan Documents dealt with elsewhere in this Section
8) and such failure or neglect is not cured within 15 days after the date on
which such failure or neglect first occurs, or (c) perform, keep, or observe any
covenant or other provision contained in SECTION 6 (other than a subsection of
Section 6 that is dealt with elsewhere in this Section 8), or SECTION 7 of this
Agreement or any comparable provision contained in any of the other Loan
Documents;
8.3 If any portion of an Obligor's property or assets with a value
greater than $1,000,000 individually or in the aggregate, is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any third Person and the same is not discharged before the earlier
of 30 days after the date it first arises or 5 days prior to the date on which
such property or asset is subject to forfeiture by such Obligor;
8.4 If an Insolvency Proceeding is commenced by Parent or any of its
Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Parent, or any of
its Subsidiaries, and any of the following events occur: (a) the applicable
Person 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
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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, such
Person, or (e) an order for relief shall have been entered therein;
8.6 If any one or more of the Obligors is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of the business affairs of the Obligors taken as a whole;
8.7 If (a) a notice of Lien, levy, or assessment is filed of record
with respect to any Obligor's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, 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 any Obligor's properties or
assets and the same is not paid on the payment date thereof, or (b) notices of
Lien, levy, or assessment in an aggregate amount in excess of $1,000,000 are
filed of record with respect to any Obligor's properties or assets 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 exceeding the
foregoing aggregate limitation, whether ▇▇▇▇▇▇ or otherwise, upon any Obligor's
properties or assets and the same is not paid on the payment date thereof;
8.8 If one or more judgments or other claims involving an aggregate
amount of $1,000,000, or more, in excess of the amount covered by insurance,
becomes a Lien or encumbrance upon any material portion of any Obligor's assets
and the same is not released, discharged, bonded against, or stayed pending
appeal before the earlier of 30 days after the date it first arises or 5 days
prior to the date on which such asset is subject to being forfeited by such
Obligor;
8.9 If (a) there is a default in any agreement to which an Obligor is a
party under which Indebtedness of such Obligor involving not less than
$1,000,000 is owing and such default (i) occurs at the final maturity of the
obligations thereunder, or (ii) results in a right of the holder of such
Indebtedness, irrespective of whether exercised, to accelerate the maturity of
such Obligor's obligations thereunder, and such default is not cured or waived
prior to the date that is the earlier of (y) the date that is 15 days after the
date on which such default first occurred, and (z) the date on which such
Obligor's obligations thereunder are accelerated or (iii) results in the
termination of such agreement; or
(b) If there is a default by an Obligor with respect
to any other material agreement which default reasonably likely could result (i)
in a Material Adverse Change, or (ii) in an award of damages in an amount of
$1,000,000, or greater;
8.10 If any Obligor or any of its Subsidiaries makes any payment on
account of 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;
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8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to the
Lender Group by any Obligor, its Subsidiaries, or any officer, employee, agent,
or director of any Obligor or any of its Subsidiaries;
8.12 If the obligation of any Guarantor under its Guaranty is limited
or terminated by operation of law or by such Guarantor thereunder;
8.13 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; or
8.14 Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Obligor, or a proceeding shall be commenced by
any Obligor, or by any Governmental Authority having jurisdiction over any
Obligor, seeking to establish the invalidity or unenforceability thereof, or any
Obligor shall deny that any Obligor has any liability or obligation purported to
be created under any Loan Document.
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 Parent
and Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
(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;
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(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 any Obligor,
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. Parent and 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 Borrower's Loan Account therefor.
With respect to any of Parent's or Borrower's owned or leased premises, Parent
and 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 Parent or 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 Parent or
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 Parent or 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) 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. Parent and Borrower hereby grants
to Agent a license or other right to use, without charge, Parent's or 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 Parent's
and Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender Group's benefit;
(j) Sell the Personal Property 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
Parent's or Borrower's premises) as Agent determines is commercially reasonable.
It is not necessary that the Personal Property Collateral be present at any such
sale;
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(k) Agent shall give notice of the disposition of the
Personal Property 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 Personal Property 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 Personal Property
Collateral that is perishable or threatens to decline speedily
in value or that is of a type customarily sold on a recognized
market;
(l) Agent, on behalf of the Lender Group may credit
bid and purchase at any public sale;
(m) 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;
(n) 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
(o) 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,
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 Parent or 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 reasonable
discretion and without prior notice to Parent or Borrower, may do any or all of
the following: (a) make payment of the same or any part thereof, (b) set up such
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reserves in Borrower's 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. Parent and 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, agents, 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 reasonable 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 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, Parent and Borrower shall have no obligation to any
Indemnified Person under this SECTION 11.3 with respect to any Indemnified
Liability that has resulted from the gross negligence or willful misconduct of
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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 Parent or Borrower were required to indemnify the
Indemnified Person receiving such payment, the Indemnified Person making such
payment is entitled to be indemnified and reimbursed by Parent or 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 Parent, 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 Parent, Borrower, or Agent, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Parent,
Borrower, or to Agent, as the case may be, at its address set forth below:
If to Borrower or
Parent: ETOYS INC.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: SKADDEN, ARPS, SLATE, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
If to Agent: FOOTHILL CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
with copies to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ Hilson, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
Agent and Borrower and Parent may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other parties. 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 3 Business Days after
the deposit thereof in the mail. Each of Parent and 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 STATE OF CALIFORNIA.
(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 LOS
ANGELES, STATE OF CALIFORNIA, 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).
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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 Revolver 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. Anything contained
herein to the contrary notwithstanding, (A) Agent agrees for the sole benefit of
Borrower that, so long as no Event of Default has occurred and is continuing,
Agent, in its capacity as a Lender, shall retain a Revolver Commitment of not
less than the lesser of (1) 50.1% of the Revolver Commitments, or (2)
$20,000,001, and (B) the consent of Agent and Borrower shall not be required,
the payment of any fees shall not be required, and, in the case of Agent, in its
capacity as a Lender, the foregoing minimum retained Revolver Commitment shall
not be applicable, if such 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 a 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
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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 their
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.
(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 Revolver Commitments arising therefrom. The Revolver Commitment allocated
to each Assignee shall reduce such Revolver 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 Obligations, the Revolver 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
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"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Revolver 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 Revolver 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 Revolver
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) except as permitted hereunder, 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) except as otherwise permitted hereunder,
release any Obligor from any obligation for the payment of money, or
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(j) change the definition of Borrowing Base or the
definitions of Eligible Inventory, Net Liquidation Percentage, Maximum
Revolver Amount, or change SECTION 2.1(B), or
(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,
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 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 not 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.
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 Revolver 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, or 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
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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.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints Foothill 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
Foothill 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 accounts 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
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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 agents,
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 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 the books or records or properties of any
of Borrower's 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.
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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.
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 their 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
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by outside collection agencies and auctioneer fees and costs of security
guards or insurance premiums paid to maintain the Collateral, whether or not
Borrower are 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, 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. Foothill 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 their Subsidiaries and Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents as though Foothill 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, Foothill or its Affiliates may
receive information regarding Borrower or their 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 Foothill 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
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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 their 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 their 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 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 any Lender is a "foreign corporation,
partnership or trust" within the meaning of the IRC and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441
or 1442 of the IRC, such Lender agrees with and in favor of Agent and
Borrower, to deliver to Agent and Borrower:
(i) if such Lender claims an exemption from
withholding tax pursuant to its portfolio interest exception,
(a) a statement of the Lender, signed under penalty of
perjury, that it is not a (I) a "bank" as described in Section
881(c)(3)(A) of the IRC, (II) a 10% shareholder (within the
meaning of Section 881(c)(3)(B) of the IRC), or (III) a
controlled foreign corporation
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described in Section 881(c)(3)(C) of the IRC, and (B) two
properly completed 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;
(ii) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, properly completed 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 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 such Lender, 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 under a United States tax treaty by providing
IRS Form W-8BEN 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 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 will treat such
Lender's IRS Form W-8BEN 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 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 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 or Borrower harmless for all amounts paid, directly or indirectly, by
Agent or Borrower as tax or otherwise, including penalties and interest, and
including any taxes imposed by any
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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 note or 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 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 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 evidence reasonably
satisfactory to Agent of such payment by Borrower.
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 Revolver 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 no Borrower
owned any 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
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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.
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
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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
Division 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 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,
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(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 Parent, Borrower, or their 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 such 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 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
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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 Revolver Commitments, to make an amount of such
credit not to exceed, in principal amount, at any one time outstanding, the
amount of their respective Revolver 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 Revolver
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, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇▇") only has represented
and only shall represent Foothill 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.
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 or resolved against 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.
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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.
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 DESIGNATED SENIOR DEBT. The Obligations are `Designated Senior
Debt' (as such term is defined in the 6-1/4% Notes Indenture) for purposes of
the 6-1/4% Notes Indenture.
17.9 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.
[Signature page to follow.]
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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.
ETOYS INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Executive Vice President and
Chief Financial Officer
ETOYS DISTRIBUTION, LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Title: Executive Vice President and
Chief Financial Officer
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent
and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------
Title: Vice President
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