$100,000,000
LOAN AND SECURITY AGREEMENT
Dated as of September 10, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
and
PHAR-MOR, INC.
PHAR-MOR, INC., LLC
PHAR-MOR OF DELAWARE, INC.
PHAR-MOR OF FLORIDA, INC.
PHAR-MOR OF OHIO, INC.
PHAR-MOR OF VIRGINIA, INC.
PHAR-MOR OF WISCONSIN, INC.
as the Borrowers
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TABLE OF CONTENTS
Section Page
ARTICLE 1 INTERPRETATION OF THIS AGREEMENT
1.1 Definitions...............................................................2
1.2 Accounting Terms.........................................................21
1.3 Interpretive Provisions..................................................22
ARTICLE 2 LOANS AND LETTERS OF CREDIT
2.1 Total Facility...........................................................23
2.2 Revolving Loans..........................................................23
2.3 Letters of Credit........................................................28
ARTICLE 3 INTEREST AND FEES
3.1 Interest.................................................................33
3.2 Conversion and Continuation Elections....................................33
3.3 Maximum Interest Rate....................................................34
3.4 Closing Fee..............................................................35
3.5 Unused Line Fee..........................................................35
3.6 Letter of Credit Fee.....................................................35
3.7 Collateral Management Fee................................................36
ARTICLE 4 PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans..........................................................36
4.2 Termination of Facility..................................................36
4.3 Payments by the Borrowers................................................36
4.4 Payments as Revolving Loans..............................................37
4.5 Apportionment, Application and Reversal of Payments......................37
4.6 Indemnity for Returned Payments..........................................38
4.7 Agent's and Lenders' Books and Records; Monthly Statements...............38
ARTICLE 5 TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes ...................................................................39
5.2 Illegality...............................................................40
5.3 Increased Costs and Reduction of Return..................................40
5.4 Funding Losses...........................................................40
5.5 Inability to Determine Rates.............................................41
5.6 Certificates of Lenders..................................................41
5.7 Survival.................................................................41
ARTICLE 6 COLLATERAL
6.1 Grant of Security Interest...............................................41
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6.2 Perfection and Protection of Security Interest...........................42
6.3 Location of Collateral...................................................43
6.4 Title to, Liens on, and Sale and Use of Collateral.......................43
6.5 Appraisals...............................................................43
6.6 Access and Examination; Confidentiality..................................44
6.7 Collateral Reporting.....................................................45
6.8 Accounts.................................................................46
6.9 Collection of Accounts; Payments.........................................47
6.10 Inventory; Perpetual Inventory; Point-of-Sale Inventory.................48
6.11 Assigned Contracts......................................................48
6.12 Documents, Instruments, and Chattel Paper...............................49
6.13 Right to Cure...........................................................49
6.14 Power of Attorney.......................................................49
6.15 The Agent's and Lenders' Rights, Duties and Liabilities.................50
ARTICLE 7 BOOKS AND RECORDS, FINANCIAL INFORMATION, NOTICES
7.1 Books and Records........................................................51
7.2 Financial Information....................................................51
7.3 Notices to the Lenders...................................................53
ARTICLE 8 GENERAL WARRANTIES AND REPRESENTATIONS
8.1 Authorization, Validity, and Enforceability
of this Agreement and the Loan Documents................................55
8.2 Validity and Priority of Security Interest...............................55
8.3 Organization and Qualification...........................................55
8.4 Corporate Name; Prior Transactions.......................................56
8.5 Subsidiaries and Affiliates..............................................56
8.6 Financial Statements and Projections.....................................56
8.7 Capitalization...........................................................56
8.8 Solvency.................................................................57
8.9 Debt; ...................................................................57
8.10 Distributions...........................................................57
8.11 Title to Property.......................................................57
8.12 Leases; Premises........................................................57
8.13 Proprietary Rights......................................................57
8.14 Trade Names.............................................................58
8.15 Litigation..............................................................58
8.16 Restrictive Agreements..................................................58
8.17 Labor Disputes..........................................................58
8.18 Environmental Laws......................................................58
8.19 No Violation of Law.....................................................59
8.20 No Default..............................................................59
8.21 ERISA Compliance........................................................59
8.22 Taxes...................................................................59
8.23 Regulated Entities......................................................59
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8.24 Use of Proceeds; Margin Regulations.....................................60
8.25 No Material Adverse Change..............................................60
8.26 Full Disclosure.........................................................60
8.27 Material Agreements.....................................................60
8.28 Bank Accounts...........................................................60
8.29 Governmental Authorization..............................................60
8.31 Investment Banking and Finders' Fees....................................60
8.32 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . .60
ARTICLE 9 AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Taxes and Other Obligations..............................................61
9.2 Corporate Existence and Good Standing....................................61
9.3 Compliance with Law and Agreements; Maintenance of Licenses..............61
9.4 Maintenance of Property..................................................61
9.5 Insurance................................................................62
9.6 Environmental Laws.......................................................62
9.7 Compliance with ERISA....................................................63
9.8 Mergers, Consolidations or Sales.........................................63
9.9 Distributions; Capital Change; Restricted Investments....................63
9.10 Guaranties..............................................................64
9.11 Debt ...................................................................64
9.12 Prepayment..............................................................64
9.13 Transactions with Affiliates............................................65
9.14 Investment Banking and Finder's Fees....................................65
9.15 Business Conducted......................................................65
9.16 Liens...................................................................65
9.17 Sale and Leaseback Transactions.........................................65
9.18 New Subsidiaries........................................................65
9.19 Fiscal Year.............................................................66
9.20 Minimum Availability. . . . ...........................................66
9.21 [Intentionally Omitted].................................................66
9.22 [Intentionally Omitted].................................................66
9.23 Use of Proceeds.........................................................66
9.24 Plan of Reorganization..................................................66
9.25 Further Assurances......................................................67
ARTICLE 10 CONDITIONS PRECEDENT
10.1 Conditions Precedent to Effectiveness...................................67
10.2 Conditions Precedent to Each Loan.......................................68
ARTICLE 11 DEFAULT, REMEDIES
11.1 Events of Default.......................................................69
11.2 Remedies................................................................72
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ARTICLE 12 TERM AND TERMINATION
12.1 Term and Termination....................................................73
ARTICLE 13 AMENDMENTS, WAIVER, ASSIGNMENTS, PARTICIPATIONS
13.1 No Waivers; Cumulative Remedies.........................................74
13.2 Amendments and Waivers..................................................74
13.3 Assignments; Participations.............................................75
ARTICLE 14 THE AGENT
14.1 Appointment and Authorization...........................................77
14.2 Delegation of Duties....................................................77
14.3 Liability of Agent......................................................77
14.4 Reliance by Agent.......................................................77
14.5 Notice of Default.......................................................78
14.6 Credit Decision.........................................................78
14.7 Indemnification.........................................................79
14.8 Agent in Individual Capacity............................................79
14.9 Successor Agent.........................................................79
14.10 Withholding Tax........................................................80
14.11 Collateral Matters.....................................................81
14.12 Restrictions on Actions by Lenders; Sharing of Payments................82
14.13 Agency for Perfection..................................................82
14.14 Concerning the Collateral and the Related Loan Documents...............82
14.15 Field Audit and Examination Reports; Disclaimer by Lenders.............83
ARTICLE 15 MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral....................83
15.2 Severability............................................................83
15.3 Governing Law; Choice of Forum; Service of Process......................84
15.4 Waiver of Jury Trial....................................................84
15.5 Survival of Representations and Warranties..............................85
15.6 Other Security and Guaranties...........................................85
15.7 Fees and Expenses.......................................................85
15.8 Notices.................................................................86
15.9 Waiver of Notices.......................................................88
15.10 Binding Effect.........................................................88
15.11 Indemnity of the Agent and the Lenders by the Borrowers................88
15.12 Final Agreement........................................................88
15.13 Counterparts...........................................................88
15.14 Captions...............................................................88
15.15 Right of Setoff........................................................89
15.16 Joint and Several Liability............................................89
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EXHIBITS
Exhibit 1.1(B) Form of Short-Form Trademark Security Agreement
Exhibit 1.1(D) Form of Supplemental Trademark Security Agreement
Exhibit 1.1(E) Form of Trademark Assignment
Exhibit 2.2(b) Form of Notice of Borrowing
Exhibit 3.2(b) Form of Notice of Conversion/Continuation
Exhibit 6.2(b) Form of Landlord's Lien Waiver
Exhibit 6.7(c) Form of Availability Certificate
Exhibit 6.9(a) Form of Payment Account Agreement
Exhibit 13.3 Form of Assignment and Acceptance
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SCHEDULES
Schedule 1.1(A) Financial Statements
Schedule 1.1(B) Permitted Liens under Plan of Reorganization
Schedule 1.1(D) Premises
Schedule 6.3 Location of Collateral
Schedule 6.4 Permitted Liens on Collateral
Schedule 8.5 Subsidiaries and Affiliates
Schedule 8.6 Plan of Reorganization Debt
Schedule 8.7 Capitalization
Schedule 8.11 Title to Property
Schedule 8.13 Proprietary Rights
Schedule 8.17 Labor Disputes
Schedule 8.18 Environmental Laws
Schedule 8.21 ERISA Compliance
Schedule 8.27 Material Agreements
Schedule 8.28 Bank Accounts
Schedule 9.5 Insurance
Schedule 9.9(a) Management Agreements
Schedule 10.1(c) Unfunded Consolidated Pension Liabilities
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Amended and Restated Loan and Security Agreement, dated as of
September 10, 1998, by and among (i) the financial institutions listed on the
signature pages hereof, (ii), BankAmerica Business Credit, Inc., a Delaware
corporation ("BABC"), as agent for the Lenders (as defined below) (in its
capacity as agent, the "Agent"), and (iii) Phar-Mor, Inc., a Pennsylvania
corporation, ("Phar-Mor"), Phar-Mor of Florida, Inc., a Pennsylvania
corporation, Phar-Mor of Ohio, Inc., an Ohio corporation, Phar-Mor of Virginia,
Inc., a Virginia corporation, Phar-Mor of Wisconsin, Inc., a Wisconsin
corporation, Phar-Mor of Delaware, Inc., a Delaware corporation and Phar-Mor,
Inc., LLC, a Pennsylvania limited liability company (each individually,
including Phar-Mor, a "Borrower" and collectively the "Borrowers").
W I T N E S S E T H
WHEREAS, Phar-Mor and its debtor subsidiaries including all of
the other Borrowers (other than Phar-Mor of Delaware, Inc. and Phar-Mor Inc.,
LLC) filed petitions for relief under chapter 11 of the United States Bankruptcy
Code on August 17, 1992, with the United States Bankruptcy Court for the
Northern District of Ohio (the "Bankruptcy Court"), case numbers 92-41599
through 92-41614; and
WHEREAS, on August 29, 1995, the Bankruptcy Court entered an
order confirming the Debtors' Third Amended Joint Plan of Reorganization, dated
May 25, 1995 (the "Plan of Reorganization"); and
WHEREAS, the Borrowers required a credit facility to provide
working capital for their operations and for general corporate purposes after
confirmation of the Plan of Reorganization; and
WHEREAS, the Borrowers requested the Lenders and the Lenders
agreed to make available to the Borrowers a revolving line of credit for loans
and letters of credit in an amount not to exceed in the aggregate $100,000,000
pursuant to a Loan and Security Agreement dated as of September 11, 1995 (the
"Existing Agreement"); and
WHEREAS, the Borrowers and the Lenders desire to amend the
Existing Agreement to, among other things, extend the termination date and
eliminate certain covenants, and for the purpose of convenience only, restate in
its entirety the Existing Agreement; and
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WHEREAS, the parties hereto have acknowledged and agreed that
this Agreement and the transactions contemplated hereby are not intended to be a
novation of the indebtedness under the Existing Agreement outstanding on the
date hereof (the "Existing Debt");
NOW, THEREFORE, in consideration of the premises, the Existing
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 10.1 hereof, hereby amended and
restated in its entirety to read as follows:
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of the Borrowers' now owned or hereafter
acquired or arising accounts, and any other rights to payment for the sale or
lease of goods or rendition of services, whether or not they have been earned by
performance.
"Account Debtor" means each Person obligated in any way on or
in connection with an Account.
"Acquire" means, with respect to any Borrower, to become the
owner of any Proprietary Right not owned by such Borrower as of the date hereof,
whether through (i) the purchase, assignment, conveyance or other transfer of
such right, title and interest from a third party or (ii) Borrower's use,
creation, invention, discovery or other development of trademarks, copyrights or
other items included in the Proprietary Rights.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agent" means BABC, solely in its capacity as agent for the
Lenders, and shall include any successor agent.
"Agent Account" means the Agent's account into which (i)
collections of Accounts and other proceeds of Collateral deposited in the
Payment Account may be transferred pursuant to the terms of the Payment Account
Agreement or as otherwise described in Section 6.9 and (ii) any payments may be
made by any Borrower pursuant to Section 4.4(b) or Section 6.9(c).
"Agent Advances" has the meaning specified in Section 2.2(i).
"Agent's Liens" means the Liens granted to the Agent for the
benefit of the Agent and the ratable benefit of the Lenders pursuant to this
Agreement and the other Loan Documents.
"Agent-Related Persons" means the Agent and any successor
agent, together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact
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of such Persons and Affiliates.
"Aggregate Availability" means, at any time of determination,
(a) the lesser of (i) the Maximum Revolver Amount or (ii) the sum of (A)
eighty-five percent (85%) of the Net Amount of Eligible Accounts of all of the
Borrowers; plus (B) fifty-eight percent (58%) of the value of Eligible Inventory
of all of the Borrowers; minus (b) the sum of (i) the unpaid balance of Loans
outstanding at such time to any Borrower, (ii) the aggregate amount of Pending
Revolving Loans requested at such time by any Borrower, (iii) the aggregate
undrawn amount of all outstanding Letters of Credit issued on behalf of any
Borrower, (iv) the aggregate amount of all unpaid reimbursement obligations in
respect of the Letters of Credit issued on behalf of any Borrower, (v) all
Environmental Compliance Reserves established with respect to any Borrower, (vi)
all Landlord's Lien Waiver Reserves established with respect to any Borrower,
and (vii) all other reserves which the Agent deems necessary in the exercise of
its Permitted Discretion to maintain with respect to any Borrower's account,
including reserves for any amounts which the Agent or any Lender may be
obligated to pay in the future for the account of any Borrower.
"Agreement" means this Amended and Restated Loan and Security
Agreement, including all Exhibits and Schedules attached hereto.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Margin" means
(a) with respect to Reference Rate Loans, 0.50%; and
(b) with respect to LIBOR Loans, 2.0%; provided that if
the most recent Financial Statements of Phar-Mor delivered pursuant to Section
7.2(b) with respect to any period ending on or after June 30, 1998 shows that
Net Worth is less than $50,000,000, then the applicable margin from the date of
delivery of such Financial Statements to the date of delivery of the next such
Financial Statements for all Reference Rate Loans and Libor Loans outstanding
between such delivery dates shall be 1% for Reference Rate Loans and 2.5% for
Libor Loans.
"Assigned Contracts" means, collectively, all of the rights
and remedies of any Borrower under, and all moneys and claims for money due or
to become due to any Borrower under (a) all insurance agreements and policies
under which such Borrower is an insured, beneficiary or loss payee, (b) all
agreements, if any, between any Borrower and the issuers of credit cards or
processors/servicers of credit card receipts and(c) any and all amendments,
supplements, extensions and renewals of the foregoing agreements, and any and
all financing statements filed by any Borrower on collateral securing such
rights, remedies, moneys and claims for money due or to become due thereunder,
including all rights and claims of any Borrower now or hereafter existing: (i)
under any insurance, indemnities, warranties, liens and guarantees provided for
or arising out of or in connection with any of the foregoing agreements; (ii)
for any damages arising out of or for breach or default under or in connection
with any of the foregoing agreements; (iii) to all other amounts from time to
time paid or payable under or in connection with any of the foregoing
agreements; or (iv) to exercise or enforce any and all covenants, remedies,
powers and privileges thereunder.
"Assignee" has the meaning specified in Section 13.3(a).
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"Assignment and Acceptance" has the meaning specified in
Section 13.3(a).
"Attorney Costs" means and includes all reasonable fees,
expenses and disbursements of any law firm or other external counsel engaged by
the Agent, the allocated cost of internal legal services of the Agent and all
expenses and disbursements of internal counsel of the Agent.
"Availability" means, at any time of determination, for any
Borrower, (a) the lesser of (i) the Maximum Revolver Amount or (ii) the sum of
(A) eighty-five percent (85%) of the Net Amount of Eligible Accounts of such
Borrower; plus (B) fifty-eight percent (58%) of the value of Eligible Inventory
of such Borrower; minus (b) the sum of (i) the unpaid balance of Loans
outstanding at such time to such Borrower, (ii) the aggregate amount of Pending
Revolving Loans requested at such time by such Borrower, (iii) the aggregate
undrawn amount of all outstanding Letters of Credit issued on behalf of such
Borrower, (iv) the aggregate amount of all unpaid reimbursement obligations in
respect of the Letters of Credit issued on behalf of such Borrower, (v) all
Environmental Compliance Reserves established with respect to such Borrower,
(vi) all Landlord's Lien Waiver Reserves established with respect to such
Borrower, and (vii) all other reserves which the Agent deems necessary in the
exercise of its Permitted Discretion to maintain with respect to such Borrower's
account, including reserves for any amounts which the Agent or any Lender may be
obligated to pay in the future for the account of such Borrower.
"Availability Certificate" has the meaning specified in
Section 6.7(c).
"Avatex Corporation" means Avatex Corporation, a Delaware
Corporation.
"BABC Loan" and "BABC Loans" have the meanings specified in
Section 2.2(h).
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. ss. 101 et seq.), as amended.
"Bankruptcy Court" has the meaning specified in the Recitals.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans made on the same day by the Lenders to any Borrower (or by BABC
in the case of a Borrowing funded by BABC Loans or by the Agent in the case of a
Borrowing consisting of an Agent Advance).
"Business Day" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in New York, New York or San Francisco,
California, are required or permitted to be closed, and (b) with respect to all
notices, determinations, fundings and
5
payments in connection with the LIBOR Rate or LIBOR Loans, any day that is a
Business Day pursuant to clause (a) above and that is also a day on which
trading is carried on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not
paid) during a Fiscal Year in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including those costs arising in connection
with the direct or indirect acquisition of such asset by way of increased
product or service charges or offset items or in connection with a Capital
Lease. For the purposes hereof, payments due for the acquisition by any Borrower
of rental video cassette tapes shall not constitute Capital Expenditures.
"Capital Lease" means any lease of property by Phar-Mor or any
of its Subsidiaries which, in accordance with GAAP, is or should be capitalized
on the consolidated balance sheet of Phar-Mor or for which the amount of the
asset and liability thereunder, as if so capitalized, should be disclosed in a
footnote to such balance sheet.
"Change of Control" means (i) the occurrence of one or more
sales, transfers or other dispositions of the common stock or other voting
securities ("Capital Stock") of Phar-Mor, or securities convertible into or
exchangeable for such Capital Stock, or rights to acquire such Capital Stock, to
one or more purchasers, or (ii) the occurrence of any other event, such that
after, or as a direct result of, such sale, transfer, disposition, or event (A)
any "person" or related "group" of persons (within the meaning of Sections
13(d)(3) and 14(d)(2) of the Exchange Act), other than the Avatex Corporation
and its Affiliates, initially becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 50% of the total voting power of the
then outstanding Capital Stock of Phar-Mor (calculated on a fully diluted basis
in accordance with GAAP (the "Voting Stock") or (B) any "person" or related
"group" of persons (within the meaning of Sections 13(d)(3) and 14(d)(2) of the
Exchange Act), other than Avatex Corporation and its Affiliates, acquires
directly or indirectly the power to elect a majority of the directors onto the
board of directors of Phar-Mor; provided that a Change of Control will be deemed
not to have occurred if a "group" becomes the ultimate "beneficial owner" of
more than 50% of the total voting power of the then outstanding Voting Stock, so
long as a majority of the voting power of the Voting Stock ultimately
"beneficially owned" by such "group" is ultimately "beneficially owned" by the
Avatex Corporation and its Affiliates.
"Closing Date" means September 11, 1995.
"Closing Fee" has the meaning specified in Section 3.4.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute, and regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Collateral Management Fee" has the meaning specified in
Section 3.7.
6
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on the signature pages of this Agreement 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 13.3, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
13.3, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders, which as of the Closing Date, equals
$100,000,000.
"Confirmation Order" means the Final Order of the Bankruptcy
Court confirming the Plan of Reorganization.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
"Continuation/Conversion Date" has the meaning specified in
Section 3.2.
"Debt" means all liabilities, obligations and indebtedness of
any Person, of any kind or nature, now or hereafter owing, arising, due or
payable, howsoever evidenced, created, incurred, acquired or owing, whether
primary, secondary, direct, contingent, fixed or otherwise, and including: (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) such
Person's trade payables and contractual liabilities and obligations to its
suppliers, vendors and customers; (d) all obligations and liabilities of any
Person secured by any Lien on such Person's property, even though such Person
shall not have assumed or become liable for the payment thereof; provided,
however, that all such obligations and liabilities which are limited in recourse
to such property shall be included in Debt only to the extent of the book value
of such property as would be shown on a balance sheet of such Person prepared in
accordance with GAAP; (e) all obligations or liabilities created or arising
under any Capital Lease or conditional sale or other title retention agreement
with respect to property used or acquired by such Person, even if the rights and
remedies of the lessor, seller or lender thereunder are limited to repossession
of such property; (f) all obligations and liabilities under Guaranties made by
such Person; and (g) all obligations and liabilities under any swap, cap or
other financial arrangement.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the otherwise applicable Interest Rate
(calculated, in the case of LIBOR Loans, as if the Applicable Margin in effect
was at all times equal to two percent (2%)) plus (b) two percent (2%). Each
Default Rate shall be adjusted simultaneously with any change in the applicable
Interest Rate. In addition, with respect to Letters of Credit not cash
collateralized pursuant to Section 2.3(i), the Default Rate shall mean an
increase in the Letter of Credit Fee by two percent (2%).
"Distribution" means, in respect of any corporation or limited
liability company: (a) the payment or making of any dividend or other
distribution of property in respect of capital stock or other capital interests
(or any options or warrants for such stock or other
7
capital interests) of such corporation or limited liability company, other than
distributions in capital stock or other capital interests (or any options or
warrants for such stock or other capital interests) of the same class; or (b)
the redemption, purchase, retirement or other acquisition of, or any defeasance,
sinking fund payment or other setting aside of funds in respect of, any capital
stock or other capital interests (or any options or warrants for such stock or
units or other capital stock) of such corporation or limited liability company.
"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States.
"Effective Date" has the meaning given to that term in the
Plan of Reorganization. The Effective Date shall occur on or not later than the
Closing Date.
"Eligible Accounts" means all Accounts of any Borrower which
the Agent in the exercise of its Permitted Discretion determines to be Eligible
Accounts. Without limiting the discretion of the Agent to establish other
criteria of ineligibility, Eligible Accounts shall not include any Account:
(a) with respect to which more than 90 days have elapsed since
the date of the original invoice therefor or it is more than 60 days past due;
(b) with respect to which any of the representations,
warranties, covenants, and agreements contained in Section 6.8 are not or have
ceased to be complete and correct or have been breached;
(c) with respect to which, in whole or in part, a check,
promissory note, draft, trade acceptance or other instrument for the payment of
money has been received, presented for payment and returned uncollected for any
reason;
(d) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: death or judicial
declaration of incompetency of an Account Debtor who is an individual; the
filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States, any state or territory thereof, or any
foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the
Account Debtor, including the appointment of or taking possession by a
"custodian," as defined in the Bankruptcy Code; the institution by or against
the Account Debtor of any other type of insolvency proceeding (under the
bankruptcy laws of the United States or otherwise) or of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against,
or winding up of affairs of, the Account Debtor; the sale, assignment, or
transfer of all or any material part of the assets of the Account Debtor; the
nonpayment generally by the Account Debtor of its debts as they become due; or
the cessation of the business of the Account Debtor as a going concern;
(e) if fifty percent (50%) or more of the aggregate dollar
amount of
8
outstanding Accounts owed at such time by the Account Debtor thereon is
classified as ineligible under the other criteria set forth herein or otherwise
established by the Agent;
(f) owed by an Account Debtor which: (i) does not maintain its
chief executive office in the United States; (ii) is not organized under the
laws of the United States or any state thereof; or (iii) is the government of
any foreign country or sovereign state, or of any state, province, municipality,
or other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof; except to the extent that such
Account is secured or payable by a letter of credit satisfactory to the Agent in
its discretion;
(g) owed by an Account Debtor which is an Affiliate or
employee of the Borrower;
(h) as to which either the perfection, enforceability, or
validity of the Agent's Lien in such Account, or the Agent's right or ability to
obtain direct payment to the Agent of the proceeds of such Account, is governed
by any federal, state, or local statutory requirements other than those of the
UCC;
(i) which is owed by an Account Debtor to which such Borrower
is indebted in any way, or which is subject to any right of setoff or recoupment
by the Account Debtor, unless the Account Debtor has entered into an agreement
acceptable to the Agent to waive setoff rights; or if the Account Debtor thereon
has disputed liability or made any claim with respect to any other Account due
from such Account Debtor; but in each such case only to the extent of such
indebtedness, setoff, recoupment, dispute, or claim;
(j) which is owed by the government of the United States of
America, or any department, agency, public corporation, or other instrumentality
thereof;
(k) which is owed by any state, municipality, or other
political subdivision of the United States of America, or any department,
agency, public corporation, or other instrumentality thereof;
(l) which represents a sale on a ▇▇▇▇-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or other repurchase or
return basis;
(m) which is evidenced by a promissory note or other
instrument or by chattel paper;
(n) if the Agent believes, in the exercise of its reasonable
judgment, that the prospect of collection of such Account is impaired or that
the Account may not be paid by reason of the Account Debtor's financial
inability to pay;
(o) with respect to which the Account Debtor is located in the
states of New Jersey, Minnesota, Indiana, West Virginia, or any other state
requiring the filing of a "Business Activity Report" or similar document in
order to bring suit or otherwise enforce a Borrower's remedies against such
Account Debtor in the courts or through any judicial process of such state,
unless such Borrower has qualified to do business in New Jersey, Minnesota,
Indiana, West Virginia, or such other states, or has filed a "Notice of Business
Activities Report" with the applicable division of taxation, the department of
revenue, or with such other state offices, as appropriate, for the then-current
year, or is exempt from such filing requirement;
9
(p) which arises out of a sale not made in the ordinary course
of such Borrower's business;
(q) as to which the goods giving rise to such Account have not
been shipped and delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by such Borrower and, if
applicable, accepted by the Account Debtor, or the Account Debtor revokes its
acceptance of such goods or services;
(r) which arises out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the granting of a Lien
by such Borrower to the Agent with respect to such Account;
(s) which is owed by an Account Debtor that is a vendor or
supplier to such Borrower or any of its Subsidiaries or Affiliates; or
(t) which is not subject to a first priority and perfected
security interest in favor of the Agent for the benefit of the Lenders.
If any Account at any time ceases to be an Eligible Account by
reason of any of the foregoing exclusions or any failure to meet any other
eligibility criteria established by the Agent in the exercise of its Permitted
Discretion then such Account shall promptly be excluded from the calculation of
Eligible Accounts.
"Eligible Inventory" means Inventory of any Borrower, valued
at the lower of cost (determined on a first-in, first-out basis) or market, that
constitutes undamaged first quality finished goods and that: (a) is located at
the Premises or on premises otherwise reasonably acceptable to the Agent,
provided, however, that Inventory located on premises leased to such Borrower
shall not be Eligible Inventory unless such Borrower shall have delivered to the
Agent (i) a copy certified by a Responsible Officer of a current and legally
valid, binding and enforceable lease agreement relating to such premises
containing a landlord's lien waiver in form and substance acceptable to the
Agent or (ii) an executed landlord's lien waiver substantially in the form of
Exhibit 6.2(b) or otherwise in form and substance acceptable to the Agent; and
(b) is owned legally and beneficially by such Borrower and upon which the Agent
for the benefit of the Lenders has a first priority perfected security interest.
Without limiting in any way the Agent in the exercise of its Permitted
Discretion to establish other criteria of eligibility, none of the following
shall constitute Eligible Inventory: Inventory in the possession of any Person
other than such Borrower; work-in-process; spare parts; packaging and shipping
materials; supplies; ▇▇▇▇-and-hold Inventory; pre-paid, returned, held for
return or in- transit Inventory (other than Inventory in transit between any of
the Premises); defective Inventory; perishable Inventory in excess of $5,000,000
or which is subject to a Lien; out-of- season seasonal Inventory; Inventory
delivered to such Borrower on consignment; Inventory subject to gift
certificates or merchandise credits; and any other Inventory which Agent, in the
exercise of its Permitted Discretion, deems ineligible as the basis for any
Loan. If any Inventory at any time ceases to be Eligible Inventory, such
Inventory shall promptly be excluded from the calculation of Eligible Inventory.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
10
"Environmental Compliance Reserve" means any reserves which
the Agent, after the Closing Date, establishes from time to time for amounts
that are reasonably likely to be expended by any Borrower in order for such
Borrower and its operations and property (a) to comply with any notice from a
Governmental Authority asserting material non-compliance with Environmental Laws
or (b) to correct any such material non-compliance identified in a report
delivered to the Agent and the Lenders pursuant to Section 9.6.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case relating to environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (a) any liability under any Environmental Laws or (b) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means, with respect to any Borrower, all of such
Borrower's now owned and hereafter acquired machinery, equipment, furniture,
furnishings, fixtures, leasehold improvements and other tangible personal
property (except Inventory), including shelving, displays, units, data
processing hardware and systems, motor vehicles with respect to which a
certificate of title has been issued, aircraft, dies, tools, jigs, and office
equipment, as well as all of such types of property leased by such Borrower and
all of such Borrower's rights and interests with respect thereto under such
leases (including options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and auxiliary
parts and supplies used or to be used in connection therewith, and all
substitutes for any of the foregoing, and all manuals, drawings, instructions,
warranties and rights with respect thereto; wherever any of the foregoing is
located.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with any Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by any Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by any Borrower or any
ERISA Affiliate from a Multi-employer Plan or notification that a Multi-
11
employer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multi-employer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multi-employer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any Borrower or any ERISA Affiliate.
"Event of Default" has the meaning specified in Section 11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York for the Business
Day preceding such day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published for any such preceding
Business Day, the rate for such day will be the arithmetic mean as determined by
the Agent of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City selected by the
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Final Order" means an order or judgment, the operation or
effect of which has not been stayed, and as to which order or judgment (or any
revision, modification or amendment thereof), the time to appeal or seek review
or rehearing has expired and as to which, in the reasonable opinion of the
Lenders, no material appeal or petition for review or rehearing has been taken
or is pending.
"Financial Statements" means, according to the context in
which it is used, the consolidated financial statements for Phar-Mor dated as of
June 27, 1998 and for the period then ended, attached hereto as Schedule 1.1(A),
or any financial statements required to be given to the Lenders pursuant to this
Agreement.
"Fiscal Year" means each Borrower's fiscal year for financial
accounting purposes. The current Fiscal Year of each Borrower began on June 28,
1998, and will end on July 3, 1999.
"Funding Date" means the date on which a Borrowing occurs or
the date any Letter of Credit is issued hereunder.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature
12
and authority within the U.S. accounting profession), which are applicable to
the circumstances as of the date of determination.
"General Intangibles" means all of the Borrowers' now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrowers of every kind and
nature (other than Accounts), including all contract rights, Proprietary Rights,
corporate or other business records, goodwill, computer software, customer
lists, registrations, tax refund claims, any funds which may become due to any
Borrower in connection with the termination of any Plan or other employee
benefit plan or any rights thereto and any other amounts payable to any Borrower
from any Plan or other employee benefit plan, rights and claims against carriers
and shippers, rights to indemnification, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, including all insurance covering any Collateral, and any
letter of credit, guarantee, claim, security interest or other security held by
or granted to any Borrower to secure payment by an Account Debtor of any of the
Accounts.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty" means, with respect to any Person, all obligations
of such Person which in any manner directly or indirectly guarantee or assure,
or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligation of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including any such obligations
incurred through an agreement, contingent or otherwise: (a) to purchase the
guaranteed obligations or any property constituting security therefor; (b) to
advance or supply funds for the purchase or payment of the guaranteed
obligations or to maintain a working capital or other balance sheet condition;
or (c) to lease property or to purchase any debt or equity securities or other
property or services.
"Indemnified Liabilities" has the meaning specified in Section
15.11.
"Interest Period" means, as to any LIBOR Loan, the period
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as a LIBOR Loan, and
ending on the date one, two, or three months thereafter as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the preceding Business Day; and
(ii) any 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
13
at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Termination
Date.
"Interest Rate" means each or any of the interest rates,
including the Default Rate, set forth in Section 3.1.
"Inventory" means all of the Borrowers' now owned and
hereafter acquired inventory, goods, merchandise, and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, other materials and supplies of any
kind, nature or description which are or might be consumed in the Borrowers'
businesses or used in connection with the packing, shipping, advertising,
selling or finishing of such goods, merchandise and such other personal
property, and all documents of title or other documents representing them.
"IRS" means the Internal Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Joint and Several Guaranty" means the Joint and Several
Guaranty, dated as of September 11, 1995, and executed and delivered by the
parties thereto to the Agent and the Lenders under the Existing Agreement, as
amended under the Reaffirmation of Guaranty and Stock Pledge Agreement.
"Landlord's Lien Waiver Reserve" means all reserves which the
Agent from time to time establishes in the good faith exercise of its reasonable
judgment at any time after the Closing Date, in an aggregate amount equal to
three (3) months rental payments in respect of any leased premises of any
Borrower unless the Agent and the Lenders shall have received (a) with respect
to those Premises as to which no separate express landlord's lien waiver exists
(which Premises are indicated on Schedule 1.1 (D)), within one hundred and
eighty (180) days from the Closing Date, a copy certified by a Responsible
Officer of a current and legally valid, binding and enforceable lease agreement
relating to such premises containing a landlord's lien waiver in form and
substance acceptable to the Agent or (b) a landlord's lien waiver substantially
in the form of Exhibit 6.2(b) or otherwise in form and substance acceptable to
the Agent in respect of such leased premises.
"Latest Projections" means: (a) on the Closing Date and
thereafter until the Agent receives new projections pursuant to Section 7.2(e),
the projections of Phar-Mor's balance sheets, and statements of income and
expenses, cash flow and stockholders' equity, on a consolidated basis for the
period commencing on July 2, 1995 and ending on June 29, 1996, and delivered to
the Agent prior to the Closing Date; and (b) thereafter, the projections most
recently received by the Agent pursuant to Section 7.2(e).
"L/C Issuer" means Bank of America or any other issuer of
Letters of Credit acceptable to the Agent and Phar-Mor.
"Lender" and "Lenders" mean the financial institutions listed
on the signatory pages hereof, together with their respective successors and
assigns, and shall include the Agent to the extent of any Agent Advance
outstanding and BABC to the extent of any BABC Loan outstanding; provided that
no such Agent Advance or BABC Loan shall be taken into
14
account in determining the Majority Lenders or any Lender's Pro Rata Share.
"Letter of Credit" has the meaning specified in Section
2.3(a).
"Letter of Credit Fee" has the meaning specified in Section
3.6.
"LIBOR Interest Payment Date" means, with respect to a LIBOR
Loan, the last day of each Interest Period applicable to such Loan, and in the
case of a two-month LIBOR Loan, the last Business Day of the first month of such
loan, and in the case of a three-month LIBOR Loan, the last Business Day of each
of the first and second month of such loan.
"LIBOR Loan" means a Revolving Loan during any period in which
it bears interest at the LIBOR Rate.
"LIBOR Rate" means, for any Interest Period, with respect to
LIBOR Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/16th of 1.0%) determined by the Agent as
follows:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1.0%) in
effect on such day (whether or not applicable to any Lender)
under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded
upward to the next 1/16 of 1%) notified to the Agent by Bank
of America as the rate of interest at which dollar deposits in
the approximate amount of the Borrowing to be made or
continued as, or converted into, a LIBOR Borrowing and having
a maturity comparable to such Interest Period would be offered
by Bank of America's applicable lending office to major banks
in the London eurodollar market at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of
such Interest Period.
"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including a security interest, charge, claim, or lien arising from
a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes or any
nonterminated or unreleased financing statement; and (b) to the extent not
included under clause (a), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property.
15
"Loan Account" means any loan account for any Borrower, each
of which shall be maintained with the Agent.
"Loan Documents" means this Agreement, the Joint and Several
Guaranty, the Payment Account Agreement, Short-Form Trademark Security
Agreement, the Stock Pledge Agreement, each Supplemental Trademark Security
Agreement, the Trademark Assignment, the Reaffirmation of Guaranty and Stock
Pledge Agreement and any other agreements, instruments and documents heretofore,
now or hereafter evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, or any other aspect of the transactions
contemplated by this Agreement.
"Loans" means, collectively, all loans and advances, including
BABC Loans and Agent Advances, provided for in Article 2.
"Majority Lenders" means, at any time (a) the Lenders whose
Pro Rata Shares aggregate at least 66 2/3% of the Commitments or (b) if BABC's
Pro Rata Share is less than 50% of the Commitments, the Lenders, which shall in
no event be less than two (2), whose Pro Rata Shares aggregate more than 50% of
the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Change" means (a) a material adverse change
in the operations, business, properties or condition (financial or otherwise) of
Phar-Mor and its Subsidiaries taken as a whole or the Collateral or (b) a
material adverse change upon (i) the legality, validity, binding effect or
enforceability against any Borrower of any material provision of any Loan
Document or (ii) the ability of the Agent or the Majority Lenders to enforce any
of their rights under any Loan Document against any Borrower.
"Maximum Rate" has the meaning specified in Section 3.3.
"Maximum Revolver Amount" means $100,000,000.
"Merchandise Letter of Credit" means a documentary Letter of
Credit issued for the account of any Borrower to provide the intended means of
making payment when due by such Borrower for the purchase of Inventory and
available for drawing against presentation of, inter alia, negotiable documents
of title covering such Inventory.
"Multi-employer Plan" means a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
"Net Amount of Eligible Accounts" means, at any time, the
gross amount of Eligible Accounts less sales, excise or similar taxes, and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.
"Net Worth" means, at any date: (a) the book value (after
deducting related depreciation, obsolescence, amortization, valuation, and other
proper reserves as determined in accordance with GAAP) at which the assets of
Phar-Mor and its Subsidiaries would be shown on a consolidated balance sheet of
Phar-Mor and its Subsidiaries at such date prepared in
16
accordance with GAAP (excluding any write up in the book value of any fixed
assets resulting from a revaluation effective after April 30, 1996); less (b)
the amount at which Phar-Mor and its Subsidiaries' liabilities would be shown on
such balance sheet, including as liabilities which, in accordance with GAAP,
would be shown on such balance sheet.
"Notice of Borrowing" has the meaning specified in Section
2.2(b).
"Notice of Continuation/Conversion" has the meaning specified
in Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts, owing by any Borrower to
the Agent and/or any Lender, arising under or pursuant to any of the Loan
Documents, whether or not evidenced by any note, or other instrument or
document, whether arising from an extension of credit, opening of a letter of
credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct
or indirect (including those acquired by assignment from others, and any
participation by the Agent and/or any Lender in any Borrower's debts owing to
others), absolute or contingent, due or to become due, primary or secondary, as
principal or guarantor, and including all principal, interest, charges,
expenses, fees, attorneys' fees, filing fees and any other sums chargeable to
any of the Borrowers under any of the Loan Documents.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, any of the Loan Documents.
"Participating Lender" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by such
Lender under this Agreement, and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.
"Payment Account" means an account in the name of Phar-Mor
maintained on behalf of all the Borrowers at PNC Bank National Association or a
bank acceptable to the Agent which has executed a Payment Account Agreement
acceptable to the Agent, into which collections of Accounts and other proceeds
of Inventory and other Collateral are deposited as described in Section 6.9.
"Payment Account Agreement" has the meaning specified in
Section 6.9.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, for any Borrower
the aggregate principal amount of all Revolving Loans requested by such Borrower
in any Notice(s) of Borrowing received by the Agent which have not yet been
advanced.
"Pension Plan" means, with respect to any Borrower, a pension
plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which
such Borrower sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a Multi-employer Plan has
made contributions at any time during the immediately preceding six (6) plan
years.
17
"Permitted Acquisitions" has the meaning specified in Section
9.20.
"Permitted Discretion" means the Agent's reasonable and good
faith judgment based upon any factor which it believes in good faith: (a) will
or could adversely affect the value of any Collateral, the enforceability or
priority of the Agent's Liens and security interests with respect thereto or the
amount which the Agent would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the collection or liquidation of,
or realization upon, such Collateral; (b) suggests that any collateral report or
financial information delivered to the Agent by any Person on behalf of any
Borrower is incomplete, inaccurate or misleading in any material respect; (c)
materially increases the likelihood of a bankruptcy, reorganization or other
insolvency proceeding involving any Borrower or any Subsidiary thereof or any of
the Collateral; or (d) creates or reasonably could be expected to create or
result in an Event of Default. In exercising such judgment, the Agent may
consider such factors already included in or tested by the definitions of
Eligible Accounts or Eligible Inventory, as well as any of the following: (i)
changes in any concentration of risk with respect to Accounts or Inventory and
(ii) any other factors that change the credit risk of lending to any Borrower on
the security of the Collateral. The burden of establishing lack of good faith or
the lack of the Agent's reasonableness shall be on the applicable Borrower or
Lender, as the case may be.
"Permitted Liens" means:
(a) the Agent's Liens;
(b) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings diligently pursued and as to
which adequate financial reserves have been established on the applicable
Borrower's books and records and a stay of enforcement of any such Lien is in
effect.
(c) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(d) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons, provided
that the payment thereof is not at the time required by Section 9.1;
(e) Reservations, exceptions, encroachments, easements, rights
of way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any Real Estate; provided that they do not in the
aggregate materially detract from the value of the Real Estate or materially
interfere with its use in the ordinary conduct of the business of any Borrower;
(f) Judgment and other similar Liens arising in connection
with court proceedings; provided that (i) the existence of such Liens is being
contested in good faith and by appropriate proceedings diligently pursued, (ii)
adequate financial reserves have been
18
established on the applicable Borrower's books and records, (iii) a stay of
enforcement of any such Liens is in effect, (iv) the priority of any such Liens
is subordinate to that of the Agent's Liens, and (v) the existence of any
judgment or court proceedings upon which such Liens are based does not otherwise
constitute an Event of Default under this Agreement;
(g) Liens in effect on the Effective Date, including Liens
granted or assumed by any Borrower pursuant to and in accordance with the Plan
of Reorganization, in each case as set forth on Schedule 1.1 (B) and the Liens
set forth on Schedule 6.4;
(h) [Intentionally Omitted];
(i) Liens upon assets granted or assumed in connection with
the acquisition of such assets by any Borrower after the Closing Date; provided
that (i) the Debt incurred to finance each such acquisition is permitted by
Section 9.11 and (ii) each such Lien attaches (A) within 180 days after the
acquisition of such assets and (B) only to the assets acquired with the Debt
secured thereby.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, limited liability company, unincorporated
organization, association, corporation, Governmental Authority, or any other
entity.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which any Borrower sponsors or maintains or to which such
Borrower makes, is making, or is obligated to make contributions and includes
any Pension Plan.
"Plan of Reorganization" has the meaning specified in the
Recitals.
"Premises" means the stores, warehouses and land identified by
addresses on Schedule 1.1(D), together with all buildings, improvements, and
fixtures thereon and all tenements, hereditaments, and appurtenances belonging
or in any way appertaining thereto, and which constitutes all of the real
property in which any Borrower or any Subsidiary has any interests on the
Closing Date.
"Property" means, as to any Person, any interest in any kind
of property or asset owned, leased or operated by such Person, whether real,
personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of the Borrowers' now owned and
hereafter Acquired: trademarks (including service marks, brand names,
certification marks, collective marks, trade dress and trade names; to the
extent that security interests under applicable law may be granted, licenses
(including licenses and alcoholic beverage licenses), franchises and permits;
all extensions, renewals and reissues of each of the foregoing; all goodwill of
the Borrowers' businesses related to each of the foregoing; with respect to each
of the foregoing, all proceeds (including all income, royalties, damages and
payments) now or hereafter due and/or payable, and the right to receive any such
proceeds, including damages and payments for any past, present or future
infringements or misappropriations thereof; and all rights to ▇▇▇ for past,
present and future infringements or misappropriations of each of the foregoing.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed
19
as a percentage), the numerator of which is the amount of such Lender's
Commitment and the denominator of which is the sum of the amounts of all of the
Lenders' Commitments.
"Reaffirmation of Guaranty and Stock Pledge Agreement" means
the Reaffirmation of Guaranty and Stock Pledge Agreement, dated as of the date
of this Agreement, and delivered by the Borrowers party thereto to Agent on the
effective date of this Agreement.
"Real Estate" means all of the present and future interests of
any Borrower, as owner, lessee, sublessee or otherwise, in any of the Premises,
including any interest arising from an option to purchase or lease the Premises
or any portion thereof.
"Reference Rate" means, for any day, the rate of interest in
effect for such day as publicly announced from time to time by Bank of America
in San Francisco, California, as its "reference rate" (the "reference rate"
being a rate set by Bank of America based upon various factors including Bank of
America's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate). Any change in the reference
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change. Each Interest
Rate based upon the Reference Rate shall be adjusted simultaneously with any
change in the Reference Rate.
"Reference Rate Loan" means a Revolving Loan during any period
in which it bears interest at the Reference Rate.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"Reportable Event" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Reports" has the meaning specified in Section 14.15.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of its
property is subject.
"Responsible Officer" means the chief executive officer, the
chief financial officer, the president or the treasurer of Phar-Mor, or any
other officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants, the chief financial officer
or the treasurer of Phar-Mor, or any other officer having substantially the same
authority and responsibility.
"Restricted Investment" means any acquisition of property by
any Borrower in exchange for cash or other property, whether in the form of an
acquisition of stock, debt, or other indebtedness or obligation, or the purchase
or acquisition of any other property, or a loan, advance, capital contribution,
or subscription, except acquisitions of the following:
20
(a) assets to be used in the business of such Borrower so long as the
acquisition costs thereof constitute Permitted Acquisitions or Capital
Expenditures permitted hereunder; (b) goods held for sale or lease or to be used
by such Borrower in the ordinary course of business; (c) current assets arising
from the sale or lease of goods or the rendition of services in the ordinary
course of business of such Borrower; and (d) (i) direct obligations of the
United States of America, or any agency thereof, or obligations guaranteed by
the United States of America, provided that such obligations mature within one
year from the date of acquisition thereof, (ii) repurchase agreements secured by
the obligations described in the preceeding clause (i), (iii) securities of an
open-ended management investment company registered under the Investment Company
Act of 1940, as amended, of which 75% of its assets comprise obligations
described in clauses (i) and (ii) above, (iv) certificates of deposit maturing
within one year from the date of acquisition, bankers' acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States or
any state thereof and the unsecured debt securities of which are rated A+ or
better by Standard & Poor's Corporation or A1 or better by ▇▇▇▇▇'▇ Investors
Service, Inc., and (v) commercial paper given a rating of "A2" or better by
Standard & Poor's Corporation or "P2" or better by ▇▇▇▇▇'▇ Investors Service,
Inc. and maturing not more than 90 days from the date of creation thereof.
"Revolving Loans" has the meaning specified in Section 2.2(a).
"Settlement" has the meaning specified in Section 2.2(j).
"Settlement Date" has the meaning specified in Section 2.2(j).
"Short-Form Trademark Security Agreement" means the Short-Form
Trademark Security Agreement, dated as of September 11, 1995, and executed and
delivered by the Borrowers party thereto to the Agent under the Existing
Agreement, and any Short-Form Trademark Security Agreement, substantially in the
form of Exhibit 1.1.(B), executed and delivered by the Borrowers party thereto
to the Agent on or after the date of this Agreement.
"Solvent" means when used with respect to any Person that (a)
the fair value of all its assets is in excess of the total amount of its debts
(including contingent liabilities); (b) it is able to pay its debts as they
mature; (c) it does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage; and (d) it is not "insolvent" as such term is defined in Section 101(32)
of the Bankruptcy Code.
"Standby Letter of Credit" means any Letter of Credit other
than a Merchandise Letter of Credit.
"Stated Termination Date" means September 10, 2001.
"Stock Pledge Agreement" means the Stock Pledge Agreement,
dated as of September 11, 1995, and executed and delivered by Phar-Mor to the
Agent under the Existing Agreement, as amended by the Reaffirmation of Guaranty
and Stock Pledge Agreement dated as of the date of this Agreement.
"Subsidiary" means any corporation or limited liability
company of which more than fifty percent (50%) of the outstanding securities of
any class or classes, the holders
21
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions),
is at the time, directly or indirectly through one or more intermediaries, owned
by any Borrower and/or one or more of its Subsidiaries.
"Supplemental Trademark Security Agreement" means any
Supplemental Trademark Security Agreement, substantially in the form of Exhibit
1.1(D), executed and delivered from time to time by any Borrower to the Agent.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Lender or the Agent, as the case may be,
is organized or maintains a lending office.
"Termination Date" means the earliest to occur of (i) the
Stated Termination Date, (ii) the date the Agreement is terminated either by
Phar-Mor pursuant to Section 4.2 or by the Majority Lenders pursuant to Section
12.1, and (iii) the date this Agreement is otherwise terminated for any reason
whatsoever.
"Trademark Assignment" means the Trademark Assignment
Agreement, dated as of September 11, 1995, and executed and delivered by the
Borrowers party thereto to the Agent under the Existing Agreement, and any
Trademark Assignment Agreement, substantially in the form of Exhibit 1.1.(E),
executed and delivered by the Borrowers party thereto to the Agent on or after
the date of this Agreement.
"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of New York or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the fair market
value of that Plan's assets, determined or estimated by the Plan's independent
actuary as of the most recent valuation date using reasonable actuarial
assumptions used in the preparation of the Plan's most recent valuation.
"Unused Letter of Credit Subfacility" means an amount equal to
$50,000,000 minus the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit plus (b) the aggregate unpaid reimbursement obligations with
respect to all Letters of Credit.
"Unused Line Fee" has the meaning specified in Section 3.5.
1.2 Accounting Terms. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
22
1.3 Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced; (ii) the term "including" is not limiting and means
"including without limitation"; and (iii) in the computation of periods of time
from a specified date to a later specified date, the word "from" means "from and
including", the words "to" and "until" each mean "to but excluding" and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto
and restatements, but only to the extent such amendments and other modifications
and restatements are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, each of
the Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lender's involvement in their preparation.
(h) All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein.
(i) Wherever appropriate in the context, each masculine,
feminine, or
23
neuter pronoun shall also include the other genders.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Total Facility. Subject to all of the terms and conditions
of this Agreement, the Lenders severally agree to make available a total credit
facility of up to the Maximum Revolver Amount for the Borrowers' use from time
to time during the term of this Agreement. The total credit facility shall be
comprised of a revolving line of credit consisting of revolving loans and
letters of credit as described in Sections 2.2 and 2.3.
2.2 Revolving Loans. (a) Amounts. Subject to the satisfaction
of the conditions precedent set forth in Article 10, each Lender severally
agrees, upon the request by Phar-Mor from time to time on any Business Day
during the period from the Closing Date to the Termination Date, to make
revolving loans (the "Revolving Loans") to any Borrower, in amounts not to
exceed (except with respect to BABC Loans) such Lender's Pro Rata Share of the
lesser of such Borrower's Availability or the Aggregate Availability. The
Lenders, however, in their discretion (subject to Section 13.2), may elect to
make Revolving Loans or participate (as provided for in Section 2.3(f)) in the
credit support or enhancement provided through the Agent to the L/C Issuer in
excess of any Borrower's Availability or the Aggregate Availability on one or
more occasions, but if they do so, neither the Agent nor the Lenders shall be
deemed thereby to have changed the limits of the Maximum Revolver Amount, such
Borrower's Availability or the Aggregate Availability or to be obligated to
exceed such limits on any other occasion.
(b) Procedure for Borrowing. (i) Each Borrowing shall be made
upon the delivery by Phar-Mor of (A) an Availability Certificate pursuant to
Section 6.7(c) and (B) an irrevocable written notice to the Agent in the form of
a Notice of Borrowing, substantially in the form of Exhibit 2.2(b) (which notice
must be received by the Agent prior to 12:00 noon (New York City time) (x) three
Business Days prior to the requested Funding Date, in the case of LIBOR Loans,
and (y) on the requested Funding Date, in the case of Reference Rate Loans, in
each case specifying:
(1) the Borrower;
(2) the amount of the Borrowing;
(3) the requested Funding Date, which shall be a
Business Day;
(4) whether the Revolving Loans requested are to be
Reference Rate Loans or LIBOR Loans; and
(5) the duration of the Interest Period if the requested
Revolving Loans are to be LIBOR Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing comprised of LIBOR
Loans, such Interest Period shall be one month; provided, however, that with
respect to any Borrowings to be made on the Closing Date, such Borrowings will
consist of Reference Rate Loans only.
(ii) After giving effect to any Borrowing, there may not be
more than six
24
(6) different Interest Periods in effect.
(iii) Each LIBOR Borrowing shall be in an aggregate principal
amount of not less than $2,500,000 or any greater amount that is an integral
multiple of $500,000.
(iv) With respect to any request for Reference Rate Loans, in
lieu of delivering the above-described Notice of Borrowing Phar-Mor may give the
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 but the Agent shall be entitled to rely on the telephonic notice in
making Revolving Loans.
(c) Reliance upon Authority. On or prior to the Closing Date
and thereafter prior to any change with respect to any of the information
contained in the following clauses (i) and (ii), Phar-Mor shall deliver to the
Agent a writing setting forth (i) the account of each Borrower to which the
Agent is authorized to transfer the proceeds of the Revolving Loans requested
pursuant to this Section 2.2 (which account shall be reasonably satisfactory to
the Agent), and (ii) the names of the Responsible Officers authorized to request
Revolving Loans, and shall provide the Agent with a specimen signature of each
such officer. The Agent shall be entitled to rely conclusively on such officer's
authority to request Revolving Loans on behalf of any Borrower, the proceeds of
which are to be transferred to any of the accounts specified by Phar-Mor
pursuant to the immediately preceding sentence, until the Agent receives written
notice to the contrary. The Agent shall have no duty to verify the identity of
any individual representing himself as one of the Responsible Officers
authorized to make such requests on its behalf.
(d) No Liability. The Agent shall not incur any liability to
any Borrower as a result of acting upon any notice referred to in Sections
2.2(b) and (c), which notice the Agent believes in good faith to have been given
by an officer duly authorized by Phar-Mor to request Revolving Loans on behalf
of any Borrower or for otherwise acting in good faith under this Section 2.2,
and the crediting of Revolving Loans to the applicable Borrower's deposit
account, or transmittal to such Person as Phar-Mor shall direct, shall
conclusively establish the obligation of such Borrower to repay such Revolving
Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic
notice in lieu thereof) made pursuant to Section 2.2(b) shall be irrevocable and
the applicable Borrower shall be bound to borrow the funds requested therein in
accordance therewith.
(f) Agent's Election. Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to Section 2.2(b), the
Agent shall elect, in its discretion, (i) to have the terms of Section 2.2(g)
apply to such requested Borrowing, or (ii) to request BABC to make a BABC Loan
pursuant to the terms of Section 2.2(h) in the amount of the requested
Borrowing; provided, however, that if BABC declines in its sole discretion to
make a BABC Loan pursuant to Section 2.2(h), the Agent shall elect to have the
terms of Section 2.2(g) apply to such requested Borrowing.
(g) Making of Revolving Loans.
(i) In the event that the Agent shall elect to have the terms
of this Section 2.2(g) apply to a requested Borrowing as described in Section
2.2(f), then promptly after receipt of a Notice of Borrowing or telephonic
notice pursuant to Section 2.2(b), the Agent shall notify
25
the Lenders 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 the Agent in same day funds, to
such account of the Agent as the Agent may designate, not later than 3:00 p.m.
(New York City time) on the Funding Date applicable thereto. After the Agent's
receipt of the proceeds of such Revolving Loans, upon satisfaction of the
applicable conditions precedent set forth in Article 10, the Agent shall make
the proceeds of such Revolving Loans available to the applicable Borrower on the
applicable Funding Date by transferring same day funds equal to the proceeds of
such Revolving Loans received by the Agent to the account of such Borrower
designated in writing by Phar-Mor; provided, however, that the amount of
Revolving Loans so made on any date shall in no event exceed the lesser of the
Aggregate Availability or the Availability of such Borrower on such date.
(ii) Unless the Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to the Agent for
the account of a Borrower the amount of that Lender's Pro Rata Share of the
Borrowing, the Agent may assume that each Lender has made such amount available
to the Agent in immediately available funds on the Funding Date and the Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the applicable Borrower on such date a corresponding amount. If and
to the extent any Lender shall not have made its full amount available to the
Agent in immediately available funds and the Agent in such circumstances has
made available to the applicable Borrower such amount, that Lender shall on the
Business Day following such Funding Date make such amount available to the
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Agent submitted 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 the Agent shall constitute such
Lender's Loan on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to the Agent on the Business Day following the
Funding Date, the Agent will notify Phar-Mor of such failure to fund and, upon
demand by the Agent, the applicable Borrower to whom such Borrowing was made
shall pay such amount to the Agent for the 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 Loans
comprising such Borrowing. The failure of any Lender to make any Loan on any
Funding Date shall not relieve any other Lender of any obligation hereunder to
make a Loan on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender on
any Funding Date.
(h) Making of BABC Loans. In the event the Agent shall elect,
with the consent of BABC, to have the terms of this Section 2.2(h) apply to a
requested Borrowing as described in Section 2.2(f), BABC may, in its sole
discretion, make a Revolving Loan in the amount of such Borrowing (any such
Revolving Loan made solely by BABC pursuant to this Section 2.2(h) being
referred to as a "BABC Loan" and such Revolving Loans being referred to
collectively as "BABC Loans") available to the applicable Borrower on the
Funding Date applicable thereto by transferring same day funds to an account of
such Borrower, designated in writing by Phar-Mor. Each BABC Loan is a Revolving
Loan hereunder and shall be secured by the Collateral and subject to all the
terms and conditions applicable to other Revolving Loans except that all
payments thereon shall be payable to BABC solely for its own account (and for
the account of the holder of any participation interest with respect to such
Revolving Loan). The
26
Agent shall not request BABC to make any BABC Loan if (i) the Agent shall have
received written notice from any Lender, or otherwise has actual knowledge, that
one or more of the applicable conditions precedent set forth in Article 10 will
not be satisfied on the requested Funding Date for the applicable Borrowing, or
(ii) the requested Borrowing would exceed the lesser of the Aggregate
Availability or the Availability of the applicable Borrower on such Funding
Date. BABC shall not otherwise be required to determine whether the applicable
conditions precedent set forth in Article 10 have been satisfied or the
requested Borrowing would exceed the lesser of the Aggregate Availability or the
Availability of the applicable Borrower on the Funding Date applicable thereto
prior to making, in its sole discretion, any BABC Loan.
(i) Agent Advances. (i) Subject to the limitations set forth
in the provisos contained in this Section 2.2(i), the Agent is hereby authorized
by the Borrowers and the Lenders, from time to time in the Agent's sole
discretion, (1) after the occurrence of a Default or an Event of Default or (2)
at any time that any of the other applicable conditions precedent set forth in
Article 10 have not been satisfied, to make Revolving Loans to any Borrower on
behalf of the Lenders which the Agent, in its reasonable business judgment,
deems necessary or desirable (A) to preserve or protect the Collateral, or any
portion thereof, (B) to enhance the likelihood of, or maximize the amount of,
repayment of the Loans and other Obligations, or (C) to pay any other amount
chargeable to any Borrower pursuant to the terms of this Agreement, including
costs, fees and expenses as described in Section 15.7 (any of the advances
described in this Section 2.2(i) being hereinafter referred to as "Agent
Advances"); provided, that the Agent shall not make any Agent Advance to any
Borrower if the amount thereof would exceed the lesser of the Aggregate
Availability or the Availability of the applicable Borrower on the Funding Date
applicable thereto; and provided, further, that the Majority Lenders may at any
time thereafter revoke the Agent's authorization contained in this Section
2.2(i) to make Agent Advances, any such revocation to be in writing and to
become effective upon the Agent's receipt thereof.
(ii) The Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Reference Rate
Loans from time to time. The Agent shall notify each Lender in writing of each
such Agent Advance.
(j) Settlement. It is agreed that each Lender's funded portion
of each Revolving Loan is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding
such agreement, the Agent, BABC, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by any Borrower) that in order to
facilitate the administration of this Agreement and the other Loan Documents,
settlement among them as to the Revolving Loans, the BABC Loans and the Agent
Advances shall take place on a periodic basis in accordance with the following
provisions:
(i) The Agent shall request settlement ("Settlement") with the
Lenders on a weekly basis, or on a more frequent basis if so determined by the
Agent, (1) on behalf of BABC, with respect to each outstanding BABC Loan, (2)
for itself, with respect to each outstanding Agent Advance, and (3) with respect
to collections received by notifying the Lenders by telecopy, telephone or other
similar form of transmission, of such requested Settlement, no later than 12:00
noon (New York City time) on the date of such requested Settlement (the
"Settlement Date"). Each Lender (other than BABC in the case of BABC Loans and
the Agent in the case of an Agent Advance) shall make the amount of such
Lender's Pro Rata Share of the outstanding principal amount of the BABC Loans
and Agent Advances with respect to which
27
Settlement is requested available to the Agent, for itself or for the account of
BABC, in same day funds, to such account of the Agent as the Agent may
designate, not later than 3:00 p.m. (New York City time), on the Settlement Date
applicable thereto, regardless of whether the applicable conditions precedent
set forth in Article 10 have then been satisfied. Such amounts made available to
the Agent shall be applied against the amounts of the applicable BABC Loan or
Agent Advance and, together with the portion of such BABC Loan representing
BABC's Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders.
If any such amount is not made available to the Agent by any Lender on the
Settlement Date applicable thereto, the Agent shall be entitled to recover such
amount on demand from such Lender together with interest thereon at the Federal
Funds Rate for the first three (3) days from and after the Settlement Date and
thereafter at the highest Interest Rate then applicable to the Revolving Loans.
(ii) Notwithstanding the foregoing, not more than one (1)
Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a BABC Loan or Agent Advance),
each other Lender shall irrevocably and unconditionally purchase and receive
from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by any
Lender, the Agent shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Federal Funds Rate for the first
three (3) days from and after such demand and thereafter at the highest Interest
Rate then applicable to the Revolving Loans.
(iii) From and after the date, if any, on which any Lender
purchases an undivided interest and participation in any BABC Loan or Agent
Advance pursuant to subsection (ii) above, the Agent shall promptly distribute
to such Lender at such address as such Lender may request in writing, such
Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such BABC Loan or
Agent Advance.
(iv) Between Settlement Dates, the Agent, to the extent no
Agent Advances or BABC Loans are outstanding, may pay over to BABC any payments
received by Agent, which in accordance with the terms of the Agreement would be
applied to the reduction of the Revolving Loans, for application to BABC's Pro
Rata Share of the Revolving Loans. If, as of any Settlement Date, collections
received since the then immediately preceding Settlement Date have been applied
to BABC's Pro Rata Share of the Revolving Loans other than to BABC Loans or
Agent Advances, as provided for in the previous sentence, BABC shall pay to the
Agent for the accounts of the Lenders, to be applied to the outstanding
Revolving Loans 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 Revolving Loans. During the period between Settlement Dates, BABC with
respect to BABC Loans, the Agent with respect to Agent Advances, and each Lender
with respect to the Revolving Loans other than BABC Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates payable under the
Agreement on the actual average daily amount of funds employed by BABC, the
Agent and the other Lenders.
(k) Notation. The Agent shall record on its books the
principal amount
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of the Revolving Loans owing to each Lender, including the BABC Loans owing to
BABC, and the Agent Advances owing to the Agent, 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 Revolving Loans in
its books and records, including computer records, such books and records
constituting rebuttably presumptive evidence, absent manifest error, of the
accuracy of the information contained therein.
(l) Lenders' Failure to Perform. All Loans (other than BABC
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (a) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Loans hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Loans hereunder, and (b) no failure by any Lender to
perform its obligation to make any Loans hereunder shall excuse any other Lender
from its obligation to make any Loans hereunder.
2.3 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of the Borrowers herein set forth, the Agent agrees to cause to be
issued by the L/C Issuer for the account of any Borrower, and to provide credit
support or other enhancement in connection with one or more stand-by or
documentary letters of credit (each such letter of credit, a "Letter of Credit"
and such letters of credit, collectively, the "Letters of Credit") in accordance
with this Section 2.3 from time to time during the term of this Agreement.
(b) Amounts; Outside Expiration Date. The Agent shall not have
any obligation to take steps to cause to be issued any Letter of Credit at any
time: (i) if the maximum undrawn amount of the requested Letter of Credit is
greater than the Unused Letter of Credit Subfacility at such time; (ii) if the
maximum undrawn amount of the requested Letter of Credit and all commissions,
fees, and charges due from the applicable Borrower in connection with the
opening thereof exceed the lesser of the Aggregate Availability or the
Availability of such Borrower at such time; or (iii) which has an expiration
date later than the Stated Termination Date or more than twelve (12) months in
the case of Standby Letters of Credit (other than Standby Letters of Credit
which are automatically renewable for one or more successive periods not to
exceed one year or the Stated Termination Date) or one hundred eighty (180) days
in the case of Merchandise Letters of Credit, in each case from the date of
issuance.
(c) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Article 10, the
obligation of the Agent to cause to be issued any Letter of Credit is subject to
the following conditions precedent having been satisfied in a manner
satisfactory to the Agent:
(i) L/C Application. Phar-Mor, on behalf of the Borrower requesting
the Letter of Credit, shall have delivered to the L/C Issuer, at such times and
in such manner as the L/C Issuer may prescribe, an application in form and
substance satisfactory to the L/C Issuer for the issuance of the Letter of
Credit and such other documents as may be required pursuant to the terms
thereof, and the form and terms of the proposed Letter of Credit shall be
satisfactory to the Agent and the L/C Issuer; and
29
(ii) No Prohibition. As of the date of issuance, no order of any
court, arbitrator or Governmental Authority shall purport by its terms to enjoin
or restrain money center banks generally from issuing letters of credit of the
type and in the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the L/C Issuer refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
(i) Request for Issuance. Phar-Mor shall give the Agent not less
than two (2) Business Days' prior written notice, containing the original
signature of a Responsible Officer, of a request for the issuance of a Letter of
Credit accompanied by an Availability Certificate pursuant to Section 6.7(c).
Such notice shall be irrevocable and shall specify the Borrower for whose
account such Letter of Credit is to be issued, the original face amount of the
Letter of Credit requested, the effective date (which date shall be a Business
Day) of issuance of such requested Letter of Credit, whether such Letter of
Credit may be drawn in a single or in partial draws, the date on which such
requested Letter of Credit is to expire (which date shall be a Business Day),
the purpose for which such Letter of Credit is to be issued and whether such
Letter of Credit is a Standby Letter of Credit or a Merchandise Letter of
Credit, and the beneficiary of the requested Letter of Credit. Phar-Mor shall
attach to such notice the proposed form of the Letter of Credit that the Agent
is requested to cause to be issued.
(ii) Issuance. If (A) the amount of the requested Letter of Credit
is not greater than the Unused Letter of Credit Subfacility and (B) the issuance
of such requested Letter of Credit and all commissions, fees, and charges due
from the Borrower on whose behalf the Letter of Credit is to be issued in
connection with the opening thereof would not exceed the lesser of the Aggregate
Availability or the Availability of such Borrower, the Agent shall cause the L/C
Issuer to issue the requested Letter of Credit on such requested effective date
of issuance.
(iii) Notice of Issuance. Promptly after the issuance of any Letter
of Credit, the Agent shall give notice to each Lender of the issuance of such
Letter of Credit.
(iv) No Extensions or Amendment. The Agent shall not be obligated
to cause any Letter of Credit to be extended or amended unless the requirements
of Sections 2.3(b) and 2.3(d) are met as though a new Letter of Credit were
being requested and issued. With respect to any Letter of Credit which contains
any "evergreen" or automatic renewal provision, each Lender shall be deemed to
have consented to any such extension or renewal unless any such Lender shall
have provided to the Agent, not less than thirty (30) days prior to the last
date on which the L/C Issuer can in accordance with the terms of the applicable
Letter of Credit decline to extend or renew such Letter of Credit, written
notice that it declines to consent to any such extension or renewal; provided,
that if all of the requirements of this Section 2.3 are met and no Default or
Event of Default exists, no Lender shall decline to consent to any such
extension or renewal.
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(e) Payments Pursuant to Letters of Credit.
(i) Payment of Letter of Credit Obligations. The Borrower for whose
account a Letter of Credit was issued agrees to reimburse the L/C Issuer for any
draw under such Letter of Credit immediately upon demand, and to pay the L/C
Issuer the amount of all other obligations and other amounts payable to the L/C
Issuer under or in connection with such Letter of Credit immediately when due,
irrespective of any claim, counterclaim, setoff, recoupment, defense, deduction
or other right which any Borrower may have at any time against such issuer or
any other Person.
(ii) Revolving Loans to Satisfy Reimbursement Obligations. In the
event that the L/C Issuer honors a draw under any Letter of Credit and the
Borrower for whose account such Letter of Credit was issued shall not have
repaid such amount to the L/C Issuer pursuant to Section 2.3(e)(i), the Agent
shall, upon receiving notice of such failure, notify each Lender of such
failure, and each Lender shall unconditionally pay to the Agent, for the account
of the L/C Issuer, as and when provided herein below, an amount equal to such
Lender's Pro Rata Share of the amount of such payment in Dollars and in same day
funds. If the Agent so notifies the Lenders prior to 12:00 noon (New York City
time) on any Business Day, each Lender shall make available to the Agent the
amount of such payment, as provided in the immediately preceding sentence, on
such Business Day. Such amounts paid by the Lenders to the Agent shall
constitute Revolving Loans which shall be deemed to have been requested by
Phar-Mor on behalf of the Borrower for whose account such Letter of Credit was
issued, pursuant to Section 4.4.
(f) Participations.
(i) Purchase of Participations. Immediately upon issuance of any
Letter of Credit in accordance with Section 2.3(d), each Lender shall be deemed
to have irrevocably and unconditionally purchased and received without recourse
or warranty, an undivided interest and participation in the credit support or
enhancement provided through the Agent to such issuer in connection with the
issuance of such Letter of Credit, equal to such Lender's Pro Rata Share of the
face amount of such Letter of Credit (including all obligations of the Borrower
for whose account such Letter of Credit was issued with respect thereto, and any
security therefor or guaranty pertaining thereto).
(ii) Sharing of Reimbursement Obligation Payments. Whenever the
Agent receives a payment from a Borrower on account of reimbursement obligations
in respect of a Letter of Credit as to which the Agent has previously received
for the account of the L/C Issuer thereof payment from a Lender pursuant to
Section 2.3(e)(ii), the Agent shall promptly pay to such Lender such Lender's
Pro Rata Share of such payment from such Borrower in Dollars. Each such payment
shall be made by the Agent on the Business Day on which the Agent receives
immediately available funds paid to such Person pursuant to the immediately
preceding sentence, if received prior to 12:00 noon (New York City time) on such
Business Day and otherwise on the next succeeding Business Day.
(iii) Documentation. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, reimbursement
agreements executed in connection therewith, application for any Letter of
Credit and credit support or enhancement provided through the Agent in
connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably by requested by such Lender.
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(iv) Obligations Irrevocable. The obligations of each Lender to
make payments to the Agent with respect to any Letter of Credit or with respect
to any credit support or enhancement provided through the Agent with respect to
a Letter of Credit, and the obligations of each Borrower to make payments to the
Agent, for the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever, including any of the following
circumstances:
(A) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right
which any Borrower may have at any time against a beneficiary named in a Letter
of Credit or any transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), any Lender, the Agent, the L/C Issuer, or any
other Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions (including
any underlying transactions between any Borrower or any other Person and the
beneficiary named in any Letter of Credit);
(C) any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(D) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents; or
(E) the occurrence of any Default or Event of Default.
(g) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of any Borrower received by the Agent with respect to
any Letter of Credit (or any guaranty by any Borrower or reimbursement
obligation of any Borrower relating thereto) and distributed by the Agent to the
Lenders on account of their respective participations therein is thereafter set
aside, avoided or recovered from the Agent in connection with any receivership,
liquidation or bankruptcy proceeding, the Lenders shall, upon demand by the
Agent, pay to the Agent their respective Pro Rata Shares of such amount set
aside, avoided or recovered, together with interest at the rate required to be
paid by the Agent upon the amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(i) Letter of Credit Fee. Each Borrower agrees to pay to the Agent
with respect to each Letter of Credit issued on its behalf, for the account of
the Lenders, the Letter of Credit Fee specified in, and in accordance with the
terms of, Section 3.6.
(ii) Issuer Fees and Charges. Each Borrower agrees to pay to the
L/C Issuer, or to the Agent, solely for the L/C Issuer's account, such fees and
other charges as are charged by the L/C Issuer for letters of credit issued by
it on such Borrower's behalf, including its standard fees for issuing,
administering, amending, renewing, paying and canceling letters of credit and
all other fees associated with issuing or servicing letters of credit, as and
when assessed.
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(iii) Indemnification; Exoneration.
(A) Indemnification. In addition to amounts payable as
elsewhere provided in this Section 2.3, each Borrower agrees to protect,
indemnify, pay and save the Lenders and the Agent harmless from and against any
and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which any Lender or the Agent
may incur or be subject to as a consequence, direct or indirect, of the issuance
of any Letter of Credit on its behalf or the provision of any credit support or
enhancement in connection therewith.
(B) Assumption of Risk by the Borrowers. As among the
Borrowers, the Lenders, and the Agent, each Borrower assumes all risks of the
acts and omissions of, or misuse of any of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Lenders and the Agent shall not be responsible
for: (1) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any Person in connection with the application for
and issuance of and presentation of drafts with respect to any of the Letters of
Credit, even if it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (2) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (3) the failure of the beneficiary of any Letter of Credit to comply
duly with conditions required in order to draw upon such Letter of Credit; (4)
errors, omissions, interruptions, or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (5) errors in interpretation of technical terms; (6) any loss or
delay in the transmission or otherwise of any document required in order make a
drawing under any Letter of Credit or of the proceeds thereof; (7) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or (8) any consequences arising from causes
beyond the control of the Lenders or the Agent, including any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
Governmental Authority. None of the foregoing shall affect, impair or prevent
the vesting of any rights or powers of the Agent or any Lender under this
Section 2.3.
(C) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by the Agent or any Lender under or in connection with any of the
Letters of Credit or any related certificates, if taken or omitted in the
absence of gross negligence or willful misconduct, shall not put the Agent or
any Lender under any resulting liability to any Borrower or relieve any Borrower
of any of its obligations hereunder to any such Person.
(i) Cash Collateral. If any Letter of Credit is outstanding upon
the occurrence of an Event of Default or, notwithstanding the provisions of
Section 2.3(b), upon the termination of this Agreement, then upon such Event of
Default or termination each Borrower shall deposit with the Agent, for the
benefit of the Agent and the ratable benefit of the Lenders, with respect to
each Letter of Credit then outstanding on its behalf, cash in amounts necessary
to reimburse the Agent and the Lenders for (i) the greatest amount for which
each Standby Letter of Credit may be drawn and one hundred and five per cent
(105%) of the greatest amount for which each Merchandise Letter of Credit may be
drawn, (ii) payments made by the Agent or the Lenders under each such Letter of
Credit or under any credit support or enhancement provided through the Agent
with respect thereto and (iii) all commissions, fees and charges due
33
from such Borrower for each such Letter of Credit. Such deposit of cash shall be
held by the Agent, for the ratable benefit of the Lenders, as security for, and
to provide for the payment of, the aggregate undrawn amount of such Letters of
Credit remaining outstanding.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding monetary Obligations shall
bear interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Reference
Rate or the LIBOR Rate and Sections 3.1(a)(i) or (ii), as applicable, but not to
exceed the Maximum Rate. Subject to the provisions of Section 3.2, any of the
Loans may be converted into, or continued as, Reference Rate Loans or LIBOR
Loans in the manner provided in Section 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to the Agent in
accordance with the terms of this Agreement specifying the basis for determining
the interest rate applicable thereto, then those Loans shall be Reference Rate
Loans and shall bear interest at a rate determined by reference to the Reference
Rate until notice to the contrary has been given to the Agent and such notice
has become effective. Except as otherwise provided herein, the outstanding
monetary Obligations shall bear interest as follows:
(i) For all Reference Rate Loans, at a fluctuating per annum
rate equal to the Reference Rate plus the Applicable Margin; and
(ii) For all LIBOR Loans, at a per annum rate equal to the
LIBOR Rate plus the Applicable Margin.
Each change in the Reference Rate shall be reflected in the
interest rate described in (i) above as of the effective date of such change.
All interest charges shall be computed on the basis of a year of 360 days and
actual days elapsed (which results in more interest being paid than if computed
on the basis of a 365-day year). Interest accrued on all (A) Reference Rate
Loans will be payable in arrears on the first day of each month hereafter and
(B) LIBOR Loans will be payable on the applicable LIBOR Interest Payment Dates.
(b) Default Rate. If any Default or Event of Default occurs
and is continuing and the Majority Lenders in their discretion so elect, then,
while any such Default or Event of Default is outstanding, all of the
Obligations shall bear interest at the Default Rate applicable thereto.
3.2 Conversion and Continuation Elections. (a) A Borrower may,
upon delivery by Phar-Mor of an irrevocable written notice to the Agent in
accordance with Subsection 3.2(b):
(i) elect, as of any Business Day, in the case of Reference
Rate Loans to convert (a "Notice of Conversion") any such Loans (or any part
thereof in an amount not less than $2,500,000, or that is in an integral
multiple of $500,000 in excess thereof) into LIBOR Loans; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue (a "Notice of Continuation" and together with a Notice of
Conversion, a "Notice of Continuation/Conversion") any LIBOR Loans having
Interest Periods expiring on such day (or
34
any part thereof in an amount not less than $2,500,000, or that is in an
integral multiple of $500,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Loans in respect of
any Borrowing is reduced, by payment or prepayment of part thereof to be less
than $2,500,000, such LIBOR Loans shall automatically convert into Reference
Rate Loans, and on and after such date the right to continue such Loans as, and
convert such Loans into, LIBOR Loans, as the case may be, shall terminate.
(b) Phar-Mor shall deliver a Notice of
Continuation/Conversion, substantially in the form of Exhibit 3.2(b), to be
received by the Agent not later than 12:00 noon (New York City time) at least
three (3) Business Days in advance of the date on which the continuation or
conversion is to be effected (the "Continuation/Conversion Date") if the Loans
are to be continued as or converted into or LIBOR Loans and specifying:
(i) the Borrower;
(ii) the proposed Continuation/Conversion Date;
(iii) the aggregate amount of Reference Rate Loans to be
converted or LIBOR Loans to be continued; and
(iv) the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Loans, the applicable Borrower has failed to select timely a new
Interest Period to be applicable to LIBOR Loans or if any Default or Event of
Default then exists, such Borrower shall be deemed to have elected to convert
such LIBOR Loans into Reference Rate Loans effective as of the expiration date
of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Continuation/Conversion. All continuations and conversions shall
be made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.
(e) During the existence of a Default or Event of Default, no
Borrower may elect to have a Loan converted into or continued as a LIBOR Loan.
(f) After giving effect to any continuation or conversion of
Loans, there may not be more than six (6) different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate
provided for hereunder exceed the maximum rate permissible for corporate
borrowers under applicable law for loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this
35
Section 3.3, have been paid or accrued if the interest rates otherwise set forth
in this Agreement had at all times been in effect, then any Borrower of any Loan
in respect of which the interest rate but for this Section 3.3 would have
exceeded the Maximum Rate shall, to the extent permitted by applicable law, pay
the Agent, for the account of the Lenders, an amount equal to the difference
with respect to such Loan between (a) the lesser of (i) the amount of interest
which would have been charged if the Maximum Rate had, at all times, been in
effect or (ii) the amount of interest which would have accrued had the interest
rates otherwise set forth in this Agreement, at all times, been in effect and
(b) the amount of interest actually paid or accrued under this Agreement. In the
event that a court determines that the Agent and/or any Lender has received with
respect to such Loan interest and other charges hereunder in excess of the
Maximum Rate, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations other than interest, in the
inverse order of maturity, and if there are no Obligations outstanding, the
Agent and/or such Lender shall refund to such Borrower such excess.
3.4 Closing Fee. The Borrowers agree to pay the Agent a
closing fee (the "Closing Fee") in the amount of $150,000 for the ratable
account of the Lenders. The Closing Fee shall be fully earned on payment. The
Agent, the Lenders and the Borrowers agree that the Closing Fee shall be paid
pursuant to Section 4.4.
3.5 Unused Line Fee. The Borrowers agree to pay, on the first
day of each month and on the Termination Date, to the Agent, for the ratable
account of the Lenders, an unused line fee (the "Unused Line Fee") at the rates
per annum set forth below corresponding to the applicable level of average daily
outstanding amounts. The average daily amount shall be an amount by which the
amount of $100,000,000 exceeds the sum of the average daily outstanding amount
of all Loans and the undrawn amount of all outstanding Letters of Credit, during
the immediately preceding month or shorter period if calculated on the
Termination Date. The Unused Line Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed. All payments received by the
Agent on account of Accounts or as proceeds of other Collateral shall be deemed
to be credited to the applicable Loan Accounts immediately upon receipt for
purposes of calculating the Unused Line Fee pursuant to this Section 3.5.
Average Daily
Outstanding Amount Applicable Rate
>=$25,000,000 .25%
<$25,000,000 but > $15,000,000 .30%
<=$15,000,000 .35%
3.6 Letter of Credit Fee. Each Borrower agrees to pay to the
Agent, for the ratable account of the Lenders, for each Letter of Credit issued
on its behalf (a) a fee (the "Letter of Credit Fee") equal to one and
one-quarter percent (1.25%) per annum of the undrawn amount of each Letter of
Credit issued for such Borrower's account and (b) all out-of-pocket costs, fees
and expenses incurred by the Agent in connection with the application for,
issuance of, time of, or amendment to such Letter of Credit, which costs, fees
and expenses have been previously disclosed by the Agent to Phar-Mor, and as the
same may be changed or supplemented from time to time; provided that in the case
of any Standby Letter of Credit, the "standby fee" shall not exceed an amount
equal to the greater of one-half of one percent (0.5%) per annum and $250 per
annum, and in the case of any Merchandise Letter of Credit, the "negotiation
fee" shall not exceed an amount equal to the greater of one-eighth of one
percent
36
(0.125%) of the negotiated amount and $85. The accrued amount of any Letter of
Credit Fee shall be payable monthly in arrears on the first day of each month
immediately following any month or part thereof during which each such Letter of
Credit remains outstanding and on the Termination Date. The Letter of Credit Fee
shall be computed on the basis of a 360-day year for the actual number of days
elapsed.
3.7 Collateral Management Fee. The Borrowers agree to pay to
the Agent, solely for its own account, on the effective date of this Agreement
and each anniversary thereafter, a collateral management fee ("Collateral
Management Fee") in the amount of $100,000. The Agent, the Lenders and the
Borrowers agree that the Collateral Management Fee shall be paid from the
proceeds of Revolving Loans deemed to have been requested by Phar-Mor pursuant
to Section 4.4.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. (a) Each Borrower agrees to repay the
outstanding principal balance of its Revolving Loans, plus all accrued but
unpaid interest thereon, on the Termination Date. Each Borrower may prepay its
Revolving Loans at any time, and reborrow subject to the terms of this
Agreement; provided, however, that with respect to any LIBOR Loans prepaid by
such Borrower prior to the expiration date of the Interest Period applicable
thereto, such Borrower agrees to pay to the Lenders the amounts described in
Section 5.4.
(b) In addition, and without limiting the foregoing, each
Borrower agrees to pay immediately without notice or demand by the Agent, for
the account of the Lenders, the amount which on any date is equal to the
positive difference of (i) the sum of (A) the unpaid balance of Loans
outstanding on such date to such Borrower, (B) the aggregate amount of Pending
Revolving Loans on request on such date by such Borrower, (C) the aggregate
undrawn amount of all Letters of Credit outstanding on such date issued on
behalf of such Borrower, (D) the aggregate amount of all reimbursement
obligations unpaid on such date in respect of the Letters of Credit issued on
behalf of such Borrower, (E) all Environmental Compliance Reserves maintained on
such date with respect to such Borrower, (F) all Landlord's Lien Waiver Reserves
maintained on such date with respect to such Borrower, and (G) all other
reserves which the Agent in the exercise of its Permitted Discretion is
maintaining on such date with respect to such Borrower's account, including
reserves for any amounts which the Agent or any Lender may be obligated to pay
in the future for the account of such Borrower minus (ii) the sum of (A)
eighty-five percent (85%) of the Net Amount of Eligible Accounts on such date of
such Borrower plus (B) fifty-eight percent (58%) of the value of Eligible
Inventory on such date of such Borrower.
4.2 Termination of Facility. The Borrowers may terminate this
Agreement upon at least thirty (30) Business Days' notice from Phar-Mor to the
Agent and the Lenders, upon (a) the payment in full of all outstanding Revolving
Loans, together with accrued interest thereon, and the cancellation or cash
collateralization of all outstanding Letters of Credit in accordance with
Section 2.3(i), (b) the payment in full in cash of all other Obligations
together with accrued interest thereon, and (c) with respect to any LIBOR Loans
prepaid in connection with such termination prior to the expiration date of the
Interest Period applicable thereto, the payment of the amounts described in
Section 5.4.
4.3 Payments by the Borrowers. (a) All payments to be made by
the Borrowers shall be made irrespective of any claim, counterclaim, set-off,
recoupment, defense, deduction or other right which any Borrower may have at any
time against the Agent, any Lender or any other Person. Except as otherwise
expressly provided herein, all payments by the Borrowers
37
shall be made to the Agent for the account of the Lenders at the Agent's address
set forth in Section 15.8, and shall be made in Dollars and in immediately
available funds, no later than 2:00 p.m. (New York City time) on the date
specified herein. Any payment received by the Agent later than 2:00 p.m. (New
York City time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from Phar-Mor prior to
the date on which any payment is due to the Lenders that a Borrower will not
make such payment in full as and when required, the Agent may assume that each
applicable Borrower has made such payment in full to the Agent on such date in
immediately available funds and the 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 such
Borrower has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount distributed to such Lender, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
4.4 Payments as Revolving Loans. (a) All payments of
principal, interest, reimbursement obligations in connection with Letters of
Credit, fees, premiums and other sums payable under any Loan Document, including
all reimbursement for expenses pursuant to Section 15.7, may, at the option of
the Agent, in its sole discretion, subject only to the terms of this Section
4.4, be paid from the proceeds of Revolving Loans made hereunder, whether made
following a request by Phar-Mor pursuant to Section 2.2 or a deemed request as
provided in this Section 4.4(a). Subject to subsection (b) below, each Borrower
hereby irrevocably authorizes the Agent to charge its Loan Account for the
purpose of paying principal, interest, reimbursement obligations in connection
with Letters of Credit, fees, premiums and other sums payable hereunder,
including reimbursing expenses pursuant to Section 15.7, and agrees that all
such amounts charged shall constitute Revolving Loans (including BABC Loans and
Agent Advances) and that all such Revolving Loans so made shall be deemed to
have been requested by Phar-Mor on behalf of such Borrower pursuant to Section
2.2.
(b) Notwithstanding Section 4.4(a), if no Loans are
outstanding as of the close of business on the date that any (i) fees payable
hereunder, including the Closing Fee, the Unused Line Fee, the Letter of Credit
Fee and the Collateral Management Fee, (ii) amounts payable under Article 5,
(iii) indemnity payments pursuant to Section 15.11 and (iv) reimbursement for
expenses pursuant to Section 15.7, are due from any Borrower, the Agent shall
notify Phar-Mor of the aggregate amount of such sums then owing by such Borrower
and provided that such Borrower pays such amount into the Agent's Account by
automated clearing house or federal wire transfer by the next Business Day
following delivery of such notice, then such payment shall be deemed to have
been paid on the date of such notice and no interest on such amount shall
accrue.
4.5 Apportionment, Application and Reversal of Payments.
Aggregate principal and interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Loans to which such
payments relate held by each Lender) and payments
38
of the fees shall, as applicable, be apportioned ratably among the Lenders. All
payments shall be remitted to the Agent and all such payments not relating to
principal or interest of specific Loans, or not constituting payment of specific
fees, and all proceeds of Accounts or other Collateral received by the Agent,
shall be applied, ratably, subject to the provisions of this Agreement, first,
to pay any fees, or expense reimbursements then due to the Agent from any
Borrower; second, to pay any fees or expense reimbursements then due to the
Lenders from any Borrower; third, to pay interest due in respect of all
Revolving Loans, including BABC Loans and Agent Advances; fourth, to pay or
prepay principal of the BABC Loans and Agent Advances; fifth, to pay or prepay
principal of the Revolving Loans (other than BABC Loans and Agent Advances) and
unpaid reimbursement obligations in respect of Letters of Credit; or sixth, to
the payment of any other Obligation due to the Agent or any Lender by any
Borrower. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by Phar-Mor, or unless an Event of Default is outstanding,
neither the Agent nor any Lender shall apply any payments which it receives to
any LIBOR Loan, except (a) on the expiration date of the Interest Period
applicable to any such LIBOR Loan, or (b) in the event, and only to the extent,
that there are no outstanding Reference Rate Loans. The Agent shall promptly
distribute to each Lender, pursuant to the applicable wire transfer instructions
received from each Lender in writing, such funds as it may be entitled to
receive, subject to a Settlement delay as provided for in Section 2.2(j). The
Agent and the Lenders shall have the continuing and exclusive right to apply and
reverse and reapply any and all such proceeds and payments to any portion of the
Obligations.
4.6 Indemnity for Returned Payments. If, after receipt of any
payment of, or proceeds applied to the payment of, all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment or proceeds to any Person, because such payment or application of
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, then the Obligations or part thereof intended to
be satisfied shall be revived and continue and this Agreement shall continue in
full force as if such payment or proceeds had not been received by the Agent or
such Lender, and each Borrower shall be liable to pay to the Agent, and hereby
does indemnify the Agent and the Lenders and hold the Agent and the Lenders
harmless for, the amount of such payment or proceeds surrendered. The provisions
of this Section 4.6 shall be and remain effective notwithstanding any contrary
action which may have been taken by the Agent or any Lender in reliance upon
such payment or application of proceeds, and any such contrary action so taken
shall be without prejudice to the Agent's and the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions of
this Section 4.6 shall survive the termination of this Agreement.
4.7 Agent's and Lenders' Books and Records; Monthly
Statements. Each Borrower agrees that the Agent's and each Lender's books and
records showing the Obligations and the transactions pursuant to this Agreement
and the other Loan Documents shall be admissible in any action or proceeding
arising therefrom, and shall constitute rebuttably presumptive proof thereof,
irrespective of whether any Obligation is also evidenced by a promissory note or
other instrument. The Agent will provide to Phar-Mor a monthly statement of
Loans, payments, and other transactions pursuant to this Agreement. Such
statement shall be deemed correct, accurate, and binding on the Borrowers and an
account stated (except for reversals and reapplications of payments made as
provided in Section 4.5, corrections of errors discovered by the Agent, manifest
errors or errors resulting from the Agent's bad faith or willful
39
misconduct), unless Phar-Mor notifies the Agent in writing to the contrary
within one hundred eighty (180) days after such statement is rendered. In the
event a timely written notice of objections is given by Phar-Mor, only the items
to which exception is expressly made will be considered to be disputed by the
Borrowers.
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes. (a) Any and all payments by any Borrower to each Lender or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Borrowers jointly and severally agree to pay all Other Taxes.
(b) Each Borrower agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Lender or the Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within thirty (30)
days after the date the Lender or the Agent makes written demand therefor.
(c) If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender or the Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions or withholdings been made;
(ii) such Borrower shall make such deductions and
withholdings;
(iii) such Borrower agrees to pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) such Borrower agrees also to pay to each Lender or the
Agent for the account of such Lender, at the time interest is paid, all
additional amounts which the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such Taxes or
Other Taxes had not been imposed.
(d) Within thirty (30) days after the date of any payment by
any Borrower of Taxes or Other Taxes, such Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) If any Borrower is required to pay additional amounts to
any Lender or the Agent pursuant to subsection (c) of this Section, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of any office it specifies as its
"lending office" so as to eliminate any such additional payment by such Borrower
which may thereafter accrue, if such change in the judgment of such Lender is
not otherwise disadvantageous to such Lender.
40
5.2 Illegality. (a) If any Lender determines that the
introduction of any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of Law, has made
it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable lending office to
make LIBOR Loans, then, on notice thereof by such Lender to Phar-Mor through the
Agent, any obligation of such Lender to make LIBOR Loans shall be suspended
until such Lender notifies Phar-Mor through the Agent that the circumstances
giving rise to such determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
LIBOR Loan, each Borrower agrees, upon Phar-Mor's receipt of notice of such fact
and demand from such Lender (with a copy to the Agent), to prepay in full its
LIBOR Loans of that Lender then outstanding, together with interest accrued
thereon and amounts required under Section 5.4, either on the last day of the
Interest Period thereof, if the Lender may lawfully continue to maintain such
LIBOR Loans to such day, or immediately, if the Lender may not lawfully continue
to maintain such LIBOR Loan. If any Borrower is required to so prepay any LIBOR
Loan, then concurrently with such prepayment, such Borrower shall borrow from
the affected Lender, in the amount of such repayment, a Reference Rate Loan.
5.3 Increased Costs and Reduction of Return. (a) If any Lender
determines that, due to either (i) the introduction of or any change in the
interpretation of any law or regulation after the Closing Date or (ii) the
compliance by such Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law) introduced
after the Closing Date, there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining any LIBOR Loans, then each
Borrower of such LIBOR Loans agrees to be liable for, and shall from time to
time, upon demand (with a copy of such demand to be sent to the Agent), to pay
to the Agent for the account of such Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by such Lender or any corporation controlling such Lender with any
Capital Adequacy Regulation introduced after the Closing Date, affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and determines that the amount
of such capital is increased as a consequence of its Commitments, loans, credits
or obligations under this Agreement, then, upon demand of such Lender to
Phar-Mor through the Agent, each Borrower agrees to pay to the Lender, from time
to time as specified by the Lender, additional amounts sufficient to compensate
the Lender for such increase.
5.4 Funding Losses. Each Borrower agrees to reimburse each
Lender and hold each Lender harmless from any loss or expense which the Lender
may sustain or incur as a consequence of:
(a) the failure of such Borrower to make on a timely basis any
payment of principal of any LIBOR Loan;
(b) the failure of such Borrower to borrow, continue or
convert a Loan after
41
Phar-Mor, on behalf of such Borrower, has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Continuation/Conversion;
(c) the prepayment or other payment (including after
acceleration thereof) of an LIBOR Loan on a day that is not the last day of the
relevant Interest Period; including any such loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain its LIBOR Loans
or from fees payable to terminate the deposits from which such funds were
obtained.
5.5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR
Loan, or that the LIBOR Rate for any requested Interest Period with respect to a
proposed LIBOR Loan does not adequately and fairly reflect the cost to the
Lenders of funding such Loan, the Agent will promptly so notify Phar-Mor and
each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR
Loans hereunder shall be suspended until the Agent revokes such notice in
writing. Upon receipt of such notice, Phar-Mor may revoke any Notice of
Borrowing or Notice of Continuation/Conversion then submitted by it. If Phar-Mor
does not revoke such Notice, the Lenders shall make, convert or continue the
Loans, as proposed by such Borrower, in the amount specified in the applicable
notice submitted by Phar-Mor, but such Loans shall be made, converted or
continued as Reference Rate Loans instead of LIBOR Loans.
5.6 Certificates of Lenders. Any Lender claiming reimbursement
or compensation under this Article 5 shall deliver to Phar-Mor (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Lender hereunder and such certificate shall be conclusive and binding on
the applicable Borrower in the absence of manifest error.
5.7 Survival. The agreements and obligations of the Borrowers
in this Article 5 shall survive the payment of all other Obligations.
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest. (a) As security for all
Obligations, each Borrower hereby grants to the Agent, for the benefit of the
Agent and the ratable benefit of the Lenders, a continuing security interest in,
lien on, and right of set-off against, all of the following property of such
Borrower, whether now owned or existing or hereafter acquired or arising,
regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights, letters of credit, Assigned
Contracts, chattel paper, instruments, notes, documents, and documents of title;
(iv) all General Intangibles;
(v) all money, securities and other property of any kind of
such Borrower in the possession or under the control of the Agent or any Lender,
any assignee of or participant
42
in the Obligations, or a bailee of any such party or such party's affiliates;
(vi) all deposit accounts, credits and balances with and other
claims against the Agent or any Lender or any of its affiliates or any other
financial institution in which such Borrower maintains deposits;
(vii) all books, records and other property related to or
referring to any of the foregoing, including books, records, account ledgers,
data processing records, computer software and other property and General
Intangibles at any time evidencing or relating to any of the foregoing; and
(viii) all accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing, including, but not limited to,
proceeds of any insurance policies, claims against third parties, and
condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing and all other property of any Borrower in
which the Agent or any Lender may at any time be granted a Lien, including the
shares of capital stock of the Borrowers other than Phar-Mor pledged by Phar-Mor
pursuant to the Stock Pledge Agreement, is herein collectively referred to as
the "Collateral."
(b) All of the Obligations shall be secured by all of the
Collateral. The Agent may, subject to the provisions of Articles 13 and 14, in
its sole discretion, (i) exchange, waive, or release any of the Collateral, (ii)
apply Collateral and direct the order or manner of sale thereof as the Agent may
determine, and (iii) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Agent's
or any Lender's right to take any other action with respect to any other
Collateral.
6.2 Perfection and Protection of Security Interest. (a) Each
Borrower shall, at its expense, perform all steps requested by the Agent at any
time to perfect, maintain, protect, and enforce the Agent's Liens, including:
(i) (x) executing and filing UCC financing and continuation statements and
amendments thereto in form and substance satisfactory to the Agent and (y)
executing and delivering to the Agent and recording with the appropriate
Governmental Authority the Supplemental Trademark Security Agreement in
accordance with the provisions of Section 6.7(b); (ii) delivering to the Agent
the originals of all instruments, documents, and chattel paper, and all other
Collateral of which the Agent determines it should have physical possession in
order to perfect and protect the Agent's security interest therein, duly
pledged, endorsed or assigned to the Agent without restriction; (iii) delivering
to the Agent negotiable warehouse receipts covering any portion of the
Collateral located in warehouses and for which negotiable warehouse receipts are
issued by third parties; (iv) when an Event of Default exists, transferring
Inventory to warehouses designated by the Agent; (v) placing notations on its
books of account to disclose the Agent's security interest; (vii) delivering to
the Agent all letters of credit on which such Borrower is named beneficiary; and
(viii) taking such other steps as are deemed necessary or desirable by the Agent
to maintain and protect the Agent's Liens. To the extent permitted by applicable
law, the Agent may file, without such Borrower's signature, one or more
financing statements disclosing the Agent's Liens. Each Borrower agrees that a
carbon, photographic, photostatic, or other reproduction of this Agreement or of
a financing statement is sufficient as a financing statement.
(b) If any Inventory aggregating in excess of $250,000 is in
the possession or
43
control of any warehouseman, bailee or any of a Borrower's agents or processors,
then Phar-Mor shall notify the Agent thereof and shall notify such Person of the
Agent's security interest in such Collateral and, upon the Agent's request,
instruct such Person to hold all such Collateral for the Agent's account subject
to the Agent's instructions. If at any time any Collateral is located on any
premises of any Borrower which is not owned by such Borrower, then Phar-Mor
shall so inform the Agent, and with respect to those Premises as to which no
express landlord's lien waiver exists (which Premises are indicated on Schedule
1.1(D)), within one hundred and eighty (180) days from the Closing Date, such
Borrower shall deliver a copy certified by a Responsible Officer of a current
and legally valid, binding and enforceable lease agreement containing a
landlord's lien waiver in form and substance acceptable to the Agent or obtain
written lien waivers, substantially in the form of Exhibit 6.2(b) hereof, or
otherwise in form and substance acceptable to the Agent, of all present and
future Liens to which the owner or lessor of such premises may be entitled to
assert against the Collateral.
(c) From time to time, each Borrower shall, upon the Agent's
reasonable request, execute and deliver confirmatory written instruments
pledging to the Agent, for the benefit of the Agent and the ratable benefit of
the Lenders, the Collateral with respect to such Borrower, but such Borrower's
failure to do so shall not affect or limit the Agent's security interest or the
Agent's other rights in and to the Collateral with respect to such Borrower. So
long as this Agreement is in effect and until all Obligations have been fully
satisfied, the Agent's Liens shall continue in full force and effect in all
Collateral (whether or not deemed eligible for the purpose of calculating the
Availability or as the basis for any advance, loan, extension of credit, or
other financial accommodation).
6.3 Location of Collateral. Each Borrower represents and
warrants to the Agent and the Lenders that: (a) Schedule 6.3 is a correct and
complete list of its chief executive office, the location of its books and
records, the locations of its Collateral, and the locations of all of its other
places of business, in each case by legal entity and (b) Schedule 6.3 correctly
identifies any of such facilities and locations that are not owned by it and
sets forth the names of the owners and lessors or sublessors of and, to the best
of its knowledge, the holders of any mortgages on, such facilities and
locations. Each Borrower covenants and agrees that it will not (i) maintain any
Collateral at any location other than those locations listed for it on Schedule
6.3, (ii) otherwise change or add to any of such locations, or (iii) change the
location of its chief executive office from the location identified in Schedule
6.3, unless Phar-Mor gives the Agent at least thirty (30) days' prior written
notice thereof and executes any and all financing statements and other documents
that the Agent requests in connection therewith. Without limiting the foregoing,
each Borrower represents that, except for Inventory in transit in the ordinary
course of business, all of its Inventory is, and covenants that all of its
Inventory will be, located either (A) on premises owned by it, (B) on premises
leased by it; provided that the requirements of Section 6.2(b) with respect to
such lease are complied with, or (C) in a public warehouse; provided that the
Agent has received an executed bailee letter from the applicable public
warehouseman in form and substance satisfactory to the Agent.
6.4 Title to, Liens on, and Sale and Use of Collateral. Each
Borrower represents and warrants to the Agent and the Lenders and agrees with
the Agent and the Lenders that: (a) all of its Collateral with respect to it is
and will continue to be owned by it free and clear of all Liens whatsoever,
except for the Liens described in clauses (a) and (h) of the definition of
Permitted Liens or any other Permitted Lien expressly identified on Schedule
6.4; (b) it will use, store, and maintain its Collateral with all reasonable
care and will use such Collateral for lawful purposes only; and (c) it will not,
without the Agent's prior written approval, sell, or
44
dispose of or permit the sale or disposition of any of the Collateral except for
sales of Inventory in the ordinary course of business. The inclusion of proceeds
in the Collateral shall not be deemed to constitute the Agent's or any Lender's
consent to any sale or other disposition of the Collateral except as expressly
permitted herein.
6.5 Appraisals. Whenever (i) a Default or Event of Default
exists, (ii) a Material Adverse Change occurs, (iii) a substantial change occurs
in the composition of Inventory held for sale by any Borrower, or (iv) a
regulatory requirement so mandates, then each Borrower shall, at its expense and
upon the Agent's request, provide the Agent with appraisals or updates thereof
of any or all of the Collateral from an appraiser, and prepared on a basis,
satisfactory to the Agent, such appraisals and updates to include information
required by applicable law and regulation and by the internal policies of the
Lenders.
6.6 Access and Examination; Confidentiality. (a) The Agent,
accompanied by any Lender which so elects, may at all reasonable times (and at
any time when a Default or Event of Default exists) have access to, examine,
audit, make extracts from or copies of and inspect any or all of any Borrower's
records, files, and books of account and the Collateral, and discuss any
Borrower's affairs with any Borrower's officers and management. Each Borrower
will deliver to the Agent any instrument necessary for the Agent to obtain
records from any service bureau maintaining records for such Borrower. The Agent
may, and at the direction of the Majority Lenders shall, at any time when a
Default or Event of Default exists, and at the applicable Borrower's expense,
make copies of any or all of any Borrower's books and records, or require any
Borrower to deliver such copies to the Agent, and use any Borrower's respective
personnel, supplies, and premises as may be reasonably necessary for maintaining
or enforcing the Agent's Liens. The Agent shall have the right, at any time, in
the Agent's name or in the name of a nominee of the Agent, to verify the
validity, amount or any other matter relating to the Accounts, Inventory, or
other Collateral, by mail, telephone, or otherwise.
(b) The Borrowers agree that, subject to the prior consent of
Phar-Mor for uses other than in a traditional tombstone, which consent shall not
be unreasonably withheld or delayed, the Agent and each Lender may use the names
of any Borrower in advertising and promotional material and in conjunction
therewith disclose the general terms of this Agreement. The Agent and each
Lender agrees to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by Phar-Mor and provided to the Agent or such Lender under this
Agreement or any other Loan Document, and neither the Agent, nor such Lender nor
any of their respective Affiliates shall use any such information other than in
connection with or in enforcement of this Agreement and the other Loan
Documents, except to the extent that such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Agent or such Lender, or (ii) was or becomes available on a nonconfidential
basis from a source other than a Borrower, provided that such source is not
bound by a confidentiality agreement with any Borrower known to the Agent or
such Lender; provided, further, that the Agent and any Lender may disclose such
information (1) at the request or pursuant to any requirement of any
Governmental Authority to which the Agent or such Lender is subject or in
connection with an examination of the Agent or such Lender by any such
Governmental Authority; (2) pursuant to subpoena or other court process; (3)
when required to do so in accordance with the provisions of any applicable
requirement of law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Agent, any Lender or their respective Affiliates may be
party; (5) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan
45
Document; (6) to the Agent's or such Lender's independent auditors, accountants,
attorneys and other professional advisors; (7) to any Affiliate of the Agent or
such Lender, or to any Participating Lender or assignee under any Assignment and
Acceptance, actual or potential, provided that such affiliate, Participating
Lender or assignee agrees to keep such information confidential to the same
extent required of the Agent and the Lenders hereunder; and (8) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which any Borrower is party or is deemed party with the Agent
or such Lender.
6.7 Collateral Reporting. (a) Phar-Mor shall provide the Agent
with the following documents at the following times in form satisfactory to the
Agent: (i) on a monthly basis within thirty (30) days of the end of the month
or, if Aggregate Availability on any date falls below $25,000,000, then for each
week following such date until the Agent notifies Phar-Mor to the contrary, on a
weekly basis within six (6) Business Days following the Saturday of any week,
(A) Inventory reports by Borrower and categories of merchandise, identifying
therein Inventory acquired on consignment and (B) an aging of Phar-Mor's
consolidated Accounts by creditor, together with a reconciliation, as the case
may be, to the previous month's or week's aging of Phar-Mor's consolidated
Accounts and to Phar-Mor's general ledger; (ii) on a monthly basis within
forty-five (45) days of the end of the month, an aging of Phar-Mor's
consolidated accounts payable; (iii) upon request, copies of invoices in
connection with Phar-Mor's consolidated Accounts, customer statements, credit
memos, remittance advices and reports, deposit slips, and shipping and delivery
documents in connection with Phar-Mor's consolidated Accounts and for Inventory
acquired by any Borrower, purchase orders and invoices; (iv) such other reports
as to the Collateral of any Borrower as the Agent shall reasonably request from
time to time; (v) within forty-five (45) days of the end of each fiscal quarter,
copies of all reports of cycle counts of each Borrower's Inventory prepared in
such fiscal quarter, showing variances, reconciliations and adjustments between
such cycle counts and such Borrower's store Inventory records, conducted and
prepared in each case in a manner consistent with such Borrower's historic
practice (subject to normal, in the ordinary course of business month-end
adjustments with respect to information provided pursuant to clause (A) above);
and (vi) with the delivery of each of the foregoing, a certificate of a
Responsible Officer certifying as to the accuracy and completeness of the
foregoing as of the date of delivery of such certificate (subject to normal, in
the ordinary course of business month-end adjustments with respect to
information provided pursuant to clause (A) and (B) above). If any of a
Borrower's records or reports of the Collateral are prepared by an accounting
service or other agent, such Borrower hereby authorizes such service or agent to
deliver such records, reports, and related documents to the Agent, for
distribution to the Lenders.
(b) (i) Within fifteen (15) Business Days after any Borrower
Acquires a trademark included in the Proprietary Rights, or a registration or
application related thereto, or applies in any jurisdiction for the registration
of a trademark included in the Proprietary Rights, Phar-Mor shall provide the
Agent with (i) notice of such Acquisition or application, as appropriate,
identifying the Acquired Proprietary Right, each Acquired registration or
pending application therefor (including for each, the name of the registrant,
the filing number, filing date and date of issuance, as applicable), and the
date of first use, and (ii) if such Acquired Proprietary Right is a trademark
registered in the United States, or if such application is for the registration
in the United States of a trademark, an executed original Supplemental Trademark
Security Agreement (effective as of the date on which such Borrower first
Acquired such trademark, which date shall not be earlier than the date of this
Agreement). At the Agent's
46
request, such Borrower shall promptly, but in no event more than one (1)
Business Day after such request, duly record such Supplemental Trademark
Security Agreement in the U.S. Patent and Trademark Office.
(ii) Within fifteen (15) Business Days after any Borrower
Acquires a copyright, license, patent or other similar intangible (other than a
trademark) that is material in the conduct of such Borrower's business, Phar-Mor
shall notify the Agent thereof and upon the Agent's request, such Borrower shall
take such action as the Agent may reasonably request to grant and perfect such
security interest therein.
(c) Phar-Mor shall provide to the Agent (i) on the Closing
Date, (ii) within three (3) days following the Agent's written request, and
(iii) on the day Phar-Mor delivers pursuant to Section 2.2(b) a notice
requesting the making of a Revolving Loan or pursuant to Section 2.3(d) a notice
requesting the issuance of a Letter of Credit, in each case a certificate from
Phar-Mor showing (A) as of the date of the most recent report delivered under
Section 6.7(a)(i), for each Borrower such Borrower's Eligible Accounts, Eligible
Inventory, the information for each Borrower reported under Section 6.7(a)(i)
and any other information reasonably required by the Agent and (B) as of the
date of the certificate, the respective amounts of each enumerated item under
clauses (b) of the definitions of "Aggregate Availability" and "Availability",
in each case for each Borrower, which certificate shall be substantially in the
form of Exhibit 6.7(c) and shall be certified as complete and accurate as of the
date of delivery by the chief financial officer of Phar-Mor (an "Availability
Certificate"). Each Borrower agrees that the Agent shall not be bound by any
Availability Certificate and that the Agent shall have the right to determine
the Aggregate Availability and the Availability of any Borrower as provided in
the definitions of "Aggregate Availability" and "Availability" in Section 1.1.
6.8 Accounts. (a) Each Borrower hereby represents and warrants
to the Agent and the Lenders, with respect to such Borrower's Accounts, that:
(i) each existing Account represents, and each future Account will represent, a
bona fide sale or lease and delivery of goods by such Borrower, or rendition of
services by such Borrower, in the ordinary course of such Borrower's business;
(ii) each existing Account is, and each future Account will be, for a liquidated
amount payable by the Account Debtor thereon on the terms set forth in the
invoice therefor or in the schedule thereof delivered to the Agent, without any
claim, counterclaim, setoff, recoupment, defense, deduction or other right which
the Accounts Debtor may have at any time against such Borrower except those
known to such Borrower and disclosed to the Agent and the Lenders pursuant to
this Agreement; (iii) no payment will be received with respect to any Account,
and no credit, discount, or extension, or agreement therefor will be granted on
any Account, except as reported to the Agent and the Lenders in accordance with
this Agreement; (iv) each copy of an invoice delivered to the Agent by such
Borrower will be a genuine copy of the original invoice sent to the Account
Debtor named therein; and (v) all goods described in each invoice will have been
delivered to the Account Debtor and all services to be rendered by such Borrower
described in each invoice will have been performed.
(b) Each Borrower agrees it shall not re-date any invoice or
sale or make sales on extended dating beyond that customary in such Borrower's
business or extend or modify any Account. If such Borrower becomes aware of any
matter adversely affecting either the collectability of any Eligible Account
involving an amount greater than $250,000 or any Account Debtor of Eligible
Accounts, including information regarding the Account Debtor's creditworthiness,
such Borrower will promptly so advise the Agent.
47
(c) Each Borrower agrees it shall not accept any note or other
instrument (except a check or other instrument for the immediate payment of
money) with respect to any Account without the Agent's written consent. If the
Agent consents to the acceptance of any such instrument, it shall be considered
as evidence of the Account and not payment thereof and such Borrower will
promptly deliver such instrument to the Agent, endorsed by such Borrower to the
Agent in a manner satisfactory in form and substance to the Agent. Regardless of
the form of presentment, demand, notice of protest with respect thereto, such
Borrower shall remain liable thereon until such instrument is paid in full.
(d) Each Borrower shall notify the Agent promptly of all
disputes and claims in excess of $250,000 with any Account Debtor with respect
to an Eligible Account, and agrees to settle, contest, or adjust such dispute or
claim at no expense to the Agent or any Lender. No discount, credit or allowance
shall be granted to any such Account Debtor without the Agent's prior written
consent, except for discounts, credits and allowances made or given in the
ordinary course of such Borrower's business when no Event of Default exists
hereunder. The Agent may, and at the direction of the Majority Lenders shall, at
all times when an Event of Default exists hereunder, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms which the
Agent or the Majority Lenders, as applicable, shall consider advisable and, in
all cases, the Agent will credit such Borrower's Loan Account with only the net
amounts received by the Agent in payment of any Accounts.
6.9 Collection of Accounts; Payments. (a) Until the Agent
notifies Phar-Mor on behalf of the Borrowers to the contrary, each Borrower
shall make collection of all Accounts and other proceeds of Inventory or other
Collateral for the Agent, shall receive all payments as the Agent's trustee, and
shall immediately deposit all payments in their original form duly endorsed in
blank into the Payment Account (either directly or following deposit thereof in
a deposit account maintained or established by each Borrower at a bank
acceptable to the Agent). Each Borrower shall direct each of the banks at which
deposit accounts are established by such Borrower to transfer, by same-day
depositary, automated clearing house or federal wire transfer, on a daily basis
into the Payment Account all amounts on deposit in such deposit account.
Notwithstanding the foregoing sentence, each Borrower shall be entitled to
retain cash at each store operated by such Borrower in amounts as are necessary
for the day-to-day operation of each such store consistent with past practices
in respect of each such store but not to exceed $20,000 per store. The Payment
Account shall be maintained pursuant to an agreement (the "Payment Account
Agreement") among the Borrowers, the Agent and the relevant financial
institution substantially in the form of Exhibit 6.9(a) hereto, which shall
provide, among other things, that amounts on deposit in the Payment Account may
be withdrawn by Phar-Mor on behalf of any Borrower until such time as such
financial institution shall have received written notice from the Agent, which
notice may only be given upon the occurrence of an Event of Default or at any
time that the Aggregate Availability is less than $20,000,000. Upon receipt of
such notice by such financial institution, all funds in the Payment Account
shall become subject to the sole dominion and control of the Agent and the Agent
shall have the right, upon written notice to the relevant financial institution,
to instruct the financial institution to remit all amounts on deposit or
thereafter deposited in the Payment Account to the Agent Account on a daily
basis. On or before the Closing Date, Phar-Mor shall deliver to the Agent the
Payment Account Agreement relating to the Payment Account. Each Borrower agrees
to indemnify each Lender and the Agent against, and reimburse each on demand
for, all costs (without duplication) incurred by the Agent or any Lender in
connection with the Payment Account Agreement. Notwithstanding the termination
of this Agreement, until all of the Obligations shall have been
48
fully paid and satisfied, the Borrowers shall continue to deposit, or cause to
be deposited, into the Payment Account all collections of Accounts and other
proceeds of Inventory or other Collateral.
(b) All payments, including immediately available funds
received by the Agent at a bank designated by it, received by the Agent on
account of Accounts or as proceeds of other Collateral will be the Agent's sole
property for the benefit of the Lenders and will be credited to the applicable
Borrower's Loan Account (conditional upon final collection) upon receipt by the
Agent if received at its account in New York City by 2:00 p.m. (New York City
time).
(c) In the event the Borrowers repay all of the Obligations
upon the termination of this Agreement or upon acceleration of the Obligations,
other than through the Agent's receipt of payments on account of the Accounts or
proceeds of the other Collateral, such payment will be credited (conditional
upon final collection) to the applicable Borrower's Loan Account upon the
Agent's receipt of such funds in the Agent Account in New York City if payment
is received by 11:00 a.m. (New York City time).
6.10 Inventory; Perpetual Inventory; Point-of-Sale Inventory.
Each Borrower represents and warrants to the Agent and the Lenders and agrees
that all of the Inventory owned by such Borrower is and will be held for sale or
lease, or is to be furnished in connection with the rendition of services, in
the ordinary course of such Borrower's business, and is and will be fit for such
purposes. Each Borrower will keep its Inventory in good and marketable
condition, at its own expense. Each Borrower will conduct a physical count of
the Inventory at least once per Fiscal Year, after and during the continuation
of an Event of Default, and at such other times as the Agent requests, and
provide the Agent and Lenders with the results of such counts. At all times each
Borrower will maintain a perpetual inventory reporting system with respect to
inventory located at each warehouse listed on Schedule 6.3 and a "point-of-sale"
inventory reporting system with respect to Inventory located at each store
listed on Schedule 6.3. Each Borrower agrees it will not, without the Agent's
written consent, sell any Inventory on a ▇▇▇▇- and-hold, guaranteed sale, sale
and return, sale on approval, consignment, or other repurchase or return basis.
6.11 Assigned Contracts. Each Borrower shall fully perform all
of its obligations under each of such Borrower's Assigned Contracts, and shall
enforce all of its rights and remedies thereunder as it deems appropriate in its
business judgment; provided, however, that such Borrower shall not take any
action or fail to take any action with respect to its Assigned Contracts which
would result in a waiver or other loss of any material right or remedy of such
Borrower thereunder. Without limiting the generality of the foregoing, each
Borrower shall take all action necessary or appropriate to permit, and shall not
take any action which would have any materially adverse effect upon, the full
enforcement of all indemnification rights under its Assigned Contracts. Each
Borrower agrees it shall not, without the Agent's and the Majority Lender's
prior written consent, modify, amend, supplement, compromise, satisfy, release,
or discharge any of its Assigned Contracts, any collateral securing the same,
any Person liable directly or indirectly with respect thereto, or any agreement
relating to any of its Assigned Contracts or the collateral therefor. Each
Borrower shall cause Phar-Mor to notify the Agent and the Lenders in writing,
promptly after such Borrower becomes aware thereof, of any event or fact which
could give rise to a claim by it for indemnification under any of its Assigned
Contracts, and shall diligently pursue such right and report to the Agent on all
further developments with respect thereto. Each Borrower shall remit directly to
the Agent for application to the Obligations in such order as the Majority
Lenders shall determine, all amounts
49
received by such Borrower as indemnification or otherwise pursuant to its
Assigned Contracts. If any Borrower shall fail after the Agent's demand to
pursue diligently any right under its Assigned Contracts, or if an Event of
Default then exists, the Agent may, and at the direction of the Majority Lenders
shall, directly enforce such right in its own or such Borrower's name and may
enter into such settlements or other agreements with respect thereto as the
Agent or the Majority Lenders, as applicable, shall determine. In any suit,
proceeding or action brought by the Agent for the benefit of the Lenders under
any Assigned Contract for any sum owing thereunder or to enforce any provision
thereof, each Borrower shall indemnify and hold the Agent and Lenders harmless
from and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaims, recoupment, or reduction of liability whatsoever of the
obligor thereunder arising out of a breach by such Borrower of any obligation
thereunder or arising out of any other agreement, indebtedness or liability at
any time owing from such Borrower to or in favor of such obligor or its
successors. All such obligations of such Borrower shall be and remain
enforceable only against such Borrower and shall not be enforceable against the
Agent. Notwithstanding any provision hereof to the contrary, each Borrower shall
at all times remain liable to observe and perform all of its duties and
obligations under its Assigned Contracts, and the Agent's or any Lender's
exercise of any of their respective rights with respect to the Collateral shall
not release each such Borrower from any of such duties and obligations. Neither
the Agent nor any Lender shall be obligated to perform or fulfill any Borrower's
duties or obligations under its Assigned Contracts or to make any payment
thereunder, or to make any inquiry as to the nature or sufficiency of any
payment or property received by it thereunder or the sufficiency of performance
by any party thereunder, or to present or file any claim, or to take any action
to collect or enforce any performance, any payment of any amounts, or any
delivery of any property.
6.12 Documents, Instruments, and Chattel Paper. Each Borrower
represents and warrants to the Agent and the Lenders that (a) all documents,
instruments, and chattel paper describing, evidencing, or constituting its
Collateral, and all signatures and endorsements thereon, are and will be
complete, valid, and genuine, and (b) all goods evidenced by such documents,
instruments, and chattel paper are and will be owned by such Borrower, free and
clear of all Liens other than the Liens described in clauses (a) and (h) of the
definition of Permitted Liens.
6.13 Right to Cure. The Agent may, in its discretion, and
shall, at the direction of the Majority Lenders, pay any amount or do any act
required of any Borrower hereunder or under any other Loan Document in order to
preserve, protect, maintain or enforce the Obligations, the Collateral or the
Agent's Liens therein, and which any Borrower fails to pay or do, including
payment of any judgment against any Borrower, any insurance premium, any
warehouse charge, any finishing or processing charge, any landlord's lien claim,
and any other Lien upon or with respect to the Collateral. All payments that the
Agent makes under this Section 6.13 and all out-of-pocket costs and expenses
that the Agent pays or incurs in connection with any action taken by it
hereunder shall be an Obligation secured by the Collateral and shall be charged
to the applicable Borrower's Loan Account as a Revolving Loan deemed to have
been requested in accordance with Section 4.4. Any payment made or other action
taken by the Agent under this Section 6.13 shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed thereafter as
herein provided.
6.14 Power of Attorney. Each Borrower hereby appoints the
Agent and the Agent's designee as such Borrower's attorney, with power: (a) when
an Event of Default exists, (i) to endorse such Borrower's name on any checks,
notes, acceptances, money orders, or other
50
forms of payment or security that come into the Agent's or any Lender's
possession, (ii) to sign the Borrower's name on any invoice, ▇▇▇▇ of lading,
warehouse receipt or other document of title relating to any Collateral, on
drafts against customers, on assignments of Accounts, on notices of assignment,
and on other public records, (iii) to notify the post office authorities to
change the address for delivery of such Borrower's mail to an address designated
by the Agent and to receive, open and dispose of all mail addressed to such
Borrower, (iv) to file, prosecute, defend, issue, maintain, enforce or otherwise
take action in respect to the Proprietary Rights, (v) to grant or issue
licenses, or, to the extent permitted by an applicable license, sublicenses,
whether general, special or otherwise, and whether on an exclusive or
nonexclusive basis, to the Proprietary Rights to any party or parties,
throughout the world for such term or terms, on such conditions, and in such
manner, as the Agent shall in its sole discretion determine, and (vi) to carry
out any other obligation or duty of such Borrower under this Agreement,
including the right, to assign, pledge, convey or otherwise transfer title in or
dispose of the Proprietary Rights to any party; (b) to do all things necessary
to carry out this Agreement; (c) to sign the Borrower's name on any financing or
continuation statement; (d) to send requests for verification of Accounts to
customers or Account Debtors; and (e) to clear Inventory, the purchase of which
was financed with Letters of Credit, through customs in such Borrower's name,
the Agent's name or the name of the Agent's designee, and to sign and deliver to
customs officials powers of attorney in such Borrower's name for such purpose.
Each Borrower ratifies and approves all acts of such attorney. None of the
Lenders or the Agent nor their attorneys, in the absence of gross negligence or
willful misconduct, will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
6.15 The Agent's and Lenders' Rights, Duties and Liabilities.
Each Borrower assumes all responsibility and liability arising from or relating
to the use, sale or other disposition of the Collateral. Neither the Agent, nor
any Lender, nor any of their respective officers, directors, employees or
agents, in the absence of gross negligence or willful misconduct, shall be
liable or responsible in any way for the safekeeping of any of the Collateral,
or for any loss or damage thereto, or for any diminution in the value thereof,
or for any act of default of any warehouseman, carrier, forwarding agency or
other person whomsoever, all of which shall be at the Borrowers' sole risk. The
Obligations shall not be affected by any failure of the Agent or any Lender to
take or omit to take any other action with respect to the Collateral, any
security therefor, any agreement relating thereto, any insurance applicable
thereto, or any Person liable directly or indirectly in connection with any of
the foregoing, or to perfect the Agent's Liens or to collect or realize upon the
Collateral, nor shall loss of or damage to the Collateral release any Borrower
from any of the Obligations. If an Event of Default exists, the Agent may (but
shall not be required to), and at the direction of the Majority Lenders shall,
without notice to or consent from any Borrower, ▇▇▇ upon or otherwise collect,
extend the time for payment of, modify or amend the terms of, compromise or
settle for cash, credit, or otherwise upon any terms, grant other indulgences,
extensions, renewals, compositions, or releases, without discharging or
otherwise affecting the liability of any Borrower for the Obligations or under
this Agreement or any other agreement now or hereafter existing between the
Agent and/or any Lender and any Borrower.
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ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records. Phar-Mor shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 7.2(a). Phar-Mor shall, by means of appropriate entries,
reflect in such accounts and in all Financial Statements accurate liabilities
and reserves for all taxes and accurate provision for depreciation and
amortization of property and bad debts, all in accordance with GAAP. Each
Borrower shall maintain at all times books and records pertaining to its
Collateral in such detail, form and scope as the Agent or any Lender shall
reasonably require, including records of (a) all payments received and all
credits and extensions granted with respect to the Accounts; (b) the return,
rejections, repossession, stoppage in transit, loss, damage, or destruction of
any Inventory; and (c) all other dealings affecting the Collateral.
7.2 Financial Information. Phar-Mor shall promptly furnish to
the Agent, in sufficient copies for distribution by the Agent to each Lender,
all such financial information with respect to Phar-Mor and its subsidiaries as
the Agent or any Lender shall reasonably request, and notify its auditors and
accountants that the Agent, on behalf of the Lenders, is authorized to obtain
such information directly from them. Without limiting the foregoing, Phar-Mor
will furnish to the Agent, in sufficient copies for distribution by the Agent to
each Lender, in such detail as the Agent or the Lenders shall request, the
following:
(a) As soon as available, but in any event not later than one
hundred and twenty (120) days after the close of the Fiscal Year in the case of
the Fiscal Year ended immediately preceding the Closing Date and not later than
ninety (90) days after the close of each subsequent Fiscal Year, audited
consolidated balance sheets, and statements of income and expense, cash flow and
stockholders' equity for Phar-Mor for such Fiscal Year, and the accompanying
notes thereto, setting forth in each case in comparative form figures for the
previous Fiscal Year, all in reasonable detail, fairly presenting the
consolidated financial position and the results of operations of Phar-Mor as at
the date thereof and for the Fiscal Year then ended, and prepared in accordance
with GAAP. Such statements shall be examined in accordance with generally
accepted auditing standards and accompanied by a report thereon unqualified as
to scope by Deloitte & Touche LLP or any other independent certified public
accountants selected by Phar-Mor and reasonably satisfactory to the Agent.
Phar-Mor, simultaneously with retaining such independent public accountants to
conduct such annual audit, shall send a letter to such accountants, with a copy
to the Agent and the Lenders, notifying such accountants that one of the
purposes for retaining such accountants' services and having audited financial
statements prepared by them is for use by the Agent and the Lenders.
(b) As soon as available, but in any event not later than
thirty (30) days after the end of each fiscal month, unaudited consolidated
balance sheets of Phar-Mor as at the end of such month, and unaudited
consolidated statements of income and expense, cash flow and stockholders'
equity for Phar-Mor for such month and for the period from the beginning of the
Fiscal Year to the end of such month, except that such statements covering the
last month of the Fiscal Year shall be furnished not later than sixty (60) days
after the end of such fiscal month and shall not include statements of
stockholders' equity, all in reasonable detail, fairly presenting the
consolidated financial position and results of operations of Phar-Mor as at the
date thereof and for such periods, and prepared in accordance with GAAP applied
consistently with the
52
audited Financial Statements required to be delivered pursuant to Section
7.2(a), together with a schedule of Phar-Mor's sales, gross margin (in dollars)
and gross profit determined in such case on a consolidated basis by category of
merchandise for such month and comparative figures for the same month of the
prior year. Phar-Mor shall certify by a certificate signed by its the chief
financial officer that all such statements have been prepared in accordance with
GAAP and present fairly, subject to normal year-end adjustments, Phar-Mor's
consolidated financial position as at the dates thereof and its consolidated
results of operations for the periods then ended.
(c) [Intentionally Omitted]
(d) With each of the annual audited Financial Statements
delivered pursuant to Section 7.2(a), and within forty-five (45) days after the
end of each fiscal quarter, a certificate of the chief financial officer of
Phar-Mor stating that, except as explained in reasonable detail in such
certificate, (A) all of the representations and warranties of each Borrower
contained in this Agreement and the other Loan Documents are correct and
complete in all material respects as at the date of such certificate as if made
at such time, (B) each Borrower is, at the date of such certificate, in
compliance in all material respects with all of its respective covenants and
agreements in this Agreement and the other Loan Documents, and (C) no Default or
Event of Default then exists or existed during the period covered by such
Financial Statements. If such certificate discloses that a representation or
warranty is not correct or complete, or that a covenant has not been complied
with, or that a Default or Event of Default existed or exists, such certificate
shall set forth what action the Borrowers have taken or propose to take with
respect thereto.
(e) No sooner than sixty (60) days prior to and not more than
thirty (30) days after the beginning of each Fiscal Year, annual business plans
(to include forecasted consolidated balance sheets, statements of income and
expenses and statements of cash flow) for Phar-Mor and its Subsidiaries as at
the end of and for each month of such Fiscal Year.
(f) Upon request of the Agent after the filing thereof with
the PBGC and the IRS, a copy of each annual report or other filing filed with
respect to each Plan of any Borrower.
(g) Promptly upon the filing thereof, copies of all reports,
if any, to or other documents filed by any Borrower or any of its Subsidiaries
with the Securities and Exchange Commission under the Exchange Act, and all
reports, notices, or statements sent or received by any Borrower or any of its
Subsidiaries to or from the holders of any equity interests of the Borrower
(other than non-material correspondence sent by shareholders of the Borrower to
the Borrower) or any of its Subsidiaries or of any Debt for borrowed money of
any Borrower or any of its Subsidiaries registered under the Securities Act of
1933, as amended, or to or from the trustee under any indenture under which the
same is issued.
(h) As soon as available, but in any event not later than
fifteen (15) days after Phar-Mor's receipt thereof, a copy of all final
management reports and management letters prepared for Phar-Mor by Deloitte &
Touche LLP or any other independent certified public accountants of Phar-Mor.
(i) Promptly upon the distribution thereof, copies of any and
all proxy statements, financial statements, and reports which Phar-Mor makes
available to its stockholders.
(j) Upon request, make available for review by the Agent or
any Lender at the
53
offices of each Borrower at which its books of accounts and general ledger are
maintained, a copy of each tax return filed by each Borrower or by any of its
Subsidiaries.
(k) Such additional information as the Agent and/or any Lender
may from time to time reasonably request regarding the financial and business
affairs of each Borrower or any of its Subsidiaries.
7.3 Notices to the Lenders. Each Borrower shall cause Phar-Mor
to notify the Agent, in writing of the following matters at the following times:
(a) Within three (3) Business Days after becoming aware of any
Default or Event of Default.
(b) Within three (3) Business Days after becoming aware of the
assertion by the holder of any capital stock or other capital interest of any
Borrower or its Subsidiaries thereof or of any Debt, individually or in the
aggregate, in an outstanding principal amount in excess of $3,000,000, that a
default exists with respect thereto or that the applicable Borrower is not in
compliance with the terms thereof, or the threat or commencement by such holder
of any enforcement action because of such asserted default or non-compliance.
(c) Within three (3) Business Days after becoming aware of any
material adverse change in any Borrower's or any Subsidiary's property,
business, operations, or condition (financial or otherwise).
(d) Within three (3) Business Days after becoming aware of any
pending or threatened action, suit, proceeding, or counterclaim by any Person,
or any pending or threatened investigation by a Governmental Authority, which
action, suit, proceeding, counterclaim or investigation seeks damages in excess
of $5,000,000 in the case of any claim for personal injury and $1,000,000 in the
case of any other claim (in each case which amounts shall not be fully covered
by insurance), or which may otherwise materially and adversely affect the
Collateral, the repayment of the Obligations, the Agent's or any Lender's rights
under the Loan Documents, or any Borrower's or any Subsidiary's property,
business, operations, or condition (financial or otherwise).
(e) Within three (3) Business Days after becoming aware of any
pending or threatened strike, work stoppage, unfair labor practice claim, or
other labor dispute affecting any Borrower or any of its Subsidiaries in a
manner which could reasonably be expected to have a Material Adverse Change.
(f) Within three (3) Business Days after becoming aware of any
violation of any law, statute, regulation, or ordinance of a Governmental
Authority affecting any Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Change.
(g) Within three (3) Business Days after receipt of any notice
of any violation by any Borrower or any of its Subsidiaries of any Environmental
Law which could reasonably be expected to have a Material Adverse Change or that
any Governmental Authority has asserted that any Borrower or any of its
Subsidiaries is not in compliance with any Environmental Law or is investigating
any Borrower's or any Subsidiary's compliance therewith.
(h) Within three (3) Business Days after receipt of any
written notice that any Borrower or any of its Subsidiaries is or may be liable
to any Person as a result of the Release
54
or threatened Release of any Contaminant or that any Borrower or any of its
Subsidiaries is subject to investigation by any Governmental Authority
evaluating whether any remedial action is needed to respond to the Release or
threatened Release of any Contaminant which, in either case, is reasonably
likely to give rise to liability in excess of $1,000,000.
(i) Within three (3) Business Days after receipt of any
written notice of the imposition of any Environmental Lien against any property
of any Borrower or any of its Subsidiaries.
(j) Any change in any Borrower's name, state of incorporation,
or form of organization, trade names or trade dress under which any Borrower
will sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
(k) Within ten (10) Business Days after any Borrower or any
ERISA Affiliate knows or has reason to know, that an ERISA Event or a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) which
could reasonably be expected to have a material adverse economic effect on such
Borrower has occurred, and, when known, any action taken or threatened by the
IRS, the DOL or the PBGC with respect thereto.
(l) Upon request, or, in the event that such filing reflects a
significant change with respect to the matters covered thereby which could
reaonably be expected to have a material adverse economic effect on any
Borrower, within ten (10) Business Days after the filing thereof with the PBGC,
the DOL or the IRS, as applicable, copies of the following: (i) each annual
report (form 5500 series) prepared or received by such Borrower and, including
Schedule B thereto, filed with the PBGC, the DOL or the IRS with respect to each
Plan, (ii) a copy of each funding waiver request prepared or received by such
Borrower and filed with the PBGC, the DOL or the IRS with respect to any Plan
and all communications received by such Borrower or any ERISA Affiliate from the
PBGC, the DOL or the IRS with respect to such request, and (iii) a copy of each
other filing or notice prepared or received by such Borrower and filed with the
PBGC, the DOL or the IRS, with respect to each Plan of such Borrower or any
ERISA Affiliate.
(m) Upon request, copies of each actuarial report for any Plan
or Multi-employer Plan and annual report for any Multi-employer Plan; and within
ten (10) Business Days after receipt thereof by any Borrower or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC's intention to
terminate a Plan or to have a trustee appointed to administer such Plan; (ii)
any favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code; or (iii) any notice
from a Multi- employer Plan regarding the imposition of withdrawal liability.
(n) Within ten (10) Business Days after the occurrence
thereof: (i) any amendment adopted or agreed to by any Borrower or any ERISA
Affiliate, or knowledge of an amendment otherwise adopted, to any existing Plan
which increases any Borrower's annual costs with respect thereto by an amount in
excess of $5,000,000, or the establishment of any new Plan or the commencement
of contributions to any Plan by any Borrower or ERISA Affiliate to which no
Borrower or ERISA Affiliate was previously contributing or (ii) any failure by
any Borrower or any ERISA Affiliate to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment.
55
(o) Within ten (10) Business Days after any Borrower or any
ERISA Affiliate knows or has reason to know that any of the following events has
or will occur: (i) a Multi- employer Plan has been or will be terminated; (ii)
the administrator or plan sponsor of a Multi- employer Plan intends to terminate
a Multi-employer Plan; or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.
Each notice given under this Section shall describe the
subject matter thereof in reasonable detail, and shall set forth the action that
the Borrowers, their Subsidiaries, or any of their ERISA Affiliates, as
applicable, have taken or propose to take with respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each Borrower warrants and represents to the Agent and the
Lenders as follows:
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents. Each Borrower has the power (corporate or
otherwise) and authority to execute, deliver and perform this Agreement and the
other Loan Documents, to incur the Obligations, and to grant to the Agent Liens
upon and security interests in its Collateral. Each Borrower has taken all
necessary corporate or other action (including obtaining approval of its
stockholders or members if necessary) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Governmental
Authority, and no consent of any other Person, is required in connection with
any Borrower's execution, delivery and performance of this Agreement and the
other Loan Documents, except for those already duly obtained and UCC filings
duly made. This Agreement and the other Loan Documents have been duly executed
and delivered by each Borrower, and constitute the legal, valid and binding
obligation of each Borrower, enforceable against it in accordance with its terms
without defense, setoff or counterclaim. Each Borrower's execution, delivery,
and performance of this Agreement and the other Loan Documents do not and will
not conflict with, or constitute a violation or breach of, or constitute a
default under, or result in the creation or imposition of any Lien upon the
property of any Borrower or any of its Subsidiaries by reason of the terms of
(a) any contract, mortgage, Lien, lease, agreement, indenture, or instrument to
which any Borrower or any of its Subsidiaries is a party or which is binding
upon it, (b) any Requirement of Law applicable to any Borrower or any of its
Subsidiaries, or (c) the certificate or articles of incorporation or by-laws or
certificate of organization of any Borrower as each has been amended under the
Plan of Reorganization.
8.2 Validity and Priority of Security Interest. The provisions
of this Agreement, and the other Loan Documents create legal and valid Liens on
all the Collateral in favor of the Agent, for the benefit of the Agent and the
ratable benefit of the Lenders, and such Liens constitute perfected and
continuing Liens on all the Collateral, having priority over all other Liens on
the Collateral.
8.3 Organization and Qualification. Each Borrower (a) is duly
incorporated or formed and organized and validly existing in good standing under
the laws of the state of its incorporation or formation, (b) is qualified to do
business as a foreign corporation or limited liability company and is in good
standing in each jurisdiction in which the failure to so qualify or be in good
standing could reasonably be expected to cause a material adverse change in such
56
Borrower's business, operations, prospects, property, or condition (financial or
otherwise), and (c) has all requisite power and authority to conduct its
business and to own its property.
8.4 Corporate Name; Prior Transactions. Each Borrower has not,
during the period commencing on August 17, 1992 and ending on the effective date
of this Agreement been known by or used any other corporate or fictitious name,
or been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property outside of the
ordinary course of business.
8.5 Subsidiaries and Affiliates. (a) Schedule 8.5 is a correct
and complete list of the name and relationship to each Borrower of each and all
of such Borrower's Subsidiaries and other Affiliates. Each Subsidiary (i) is
duly incorporated or formed and organized and validly existing in good standing
under the laws of its state of incorporation or formation set forth on Schedule
8.5, (ii) is qualified to do business as a foreign corporation or limited
liability company and in good standing in each jurisdiction in which the failure
to so qualify or be in good standing could reasonably be expected to cause a
material adverse change in any such Subsidiary's business, operations,
prospects, property, or condition (financial or otherwise) and (iii) has all
requisite power and authority to conduct its business and own its property.
(b) (i) No Subsidiary of any Borrower, except for the
Subsidiaries of Phar-Mor that are Borrowers hereunder, (A) owns any material
assets or has any interest in any of the Inventory, Collateral, Property or Real
Estate or other assets used in the business or operations of any Borrower, (B)
engages in any business activity of any kind whatsoever or (C) has any material
liability, and (ii) Phar-Mor owns all of the issued and outstanding capital
stock or other equity interests of all of the other Borrowers.
8.6 Financial Statements and Projections. (a) Phar-Mor has
delivered to the Agent and the Lenders (i) the audited consolidated balance
sheet and related statements of income and expense, cash flow and stockholders'
equity for Phar-Mor as of June 28, 1997, and for the Fiscal Year then ended,
accompanied by the report thereon of its independent certified public
accountants, Deloitte & Touche LLP and (ii) the unaudited consolidated balance
sheet and related statements of income and expense, cash flow and stockholders'
equity for Phar-Mor as of June 27, 1998 and for period then ended. Such
financial statements are attached hereto as Schedule 1.1(A). All such financial
statements have been prepared in accordance with GAAP and present accurately and
fairly the consolidated financial position of Phar-Mor as at the dates thereof
and the results of operations for the periods then ended.
(b) The Latest Projections when submitted to the Lenders as
required herein represent Phar-Mor's best estimate of the future financial
performance of Phar-Mor and its consolidated Subsidiaries for the periods set
forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which Phar-Mor believes are fair and reasonable
in light of current and reasonably foreseeable business conditions at the time
submitted to the Lender.
8.7 Capitalization. The authorized and outstanding capital
stock or othe equity interests of each Borrower is set forth on Schedule 8.7 and
all such outstanding stock or other capital interests is duly authorized,
validly issued, fully paid and non-assessable, and the Persons owning
beneficially and of record more than ten percent (10%) of any class of stock or
other capital interests, and the percentage amounts of their holdings, are set
forth on
57
such Schedule.
8.8 Solvency. Each Borrower is Solvent prior to and after
giving effect to the making of any Revolving Loans on the Closing Date and the
issuance of any Letters of Credit on the Closing Date, and shall remain Solvent
during the term of this Agreement.
8.9 Debt; Cash Collateral. (a) As at the effective date of
this Agreement and after giving effect to the making of Revolving Loans, if any,
on the effective date of this Agreement, no Borrower or any of its Subsidiaries
has any Debt, except (i) the Obligations, (ii) Debt set forth on the most recent
Financial Statements delivered to the Agent, (iii) trade payables and other
contractual obligations arising in the ordinary course of business, and (iv)
Debt to be paid in accordance with the Plan of Reorganization, and which is
described in Schedule 8.6.
8.10 Distributions. Since July 2, 1994 no Distribution has
been declared, paid, or made upon or in respect of any capital stock or other
securities of any Borrower or any Subsidiary other than pursuant to the Plan of
Reorganization.
8.11 Title to Property. Except as disclosed on Schedule 8.11,
(a) no Borrower owns in fee simple any real property and (b) each Borrower has
good, indefeasible, and merchantable title to all of its Property (including the
assets reflected on the most recent Financial Statements delivered to the Agent
and the Lenders, except for Inventory disposed of in the ordinary course of
business since the date thereof), free of all Liens except Permitted Liens.
8.12 Leases; Premises. Schedule 1.1(D) sets forth a correct
and complete list, identified by Borrower, of all real estate leased or
subleased by any Borrower in its operations and business and each of such leases
and subleases is valid and enforceable in accordance with its terms and is in
full force and change, and no default by any party to any such lease or sublease
exists. Except as set forth on Schedule 1.1(D), no Borrower conducts any
operations or business and, except for Inventory in transit, no Inventory is
held at any location other than at the Premises set forth on Schedule 1.1(D).
8.13 Proprietary Rights. Schedule 8.13 sets forth a correct
and complete list of the following items included in the Proprietary Rights: all
the trademarks of each Borrower (including service marks, brand names,
certification marks, collective marks, trade dress and trade names, whether
registered or at common law), and all registrations and applications related
thereto. None of the Proprietary Rights is subject to any threatened or pending
claim or litigation or any licensing agreement or similar arrangement except as
set forth on Schedule 8.13. Each Borrower owns or is licensed or otherwise has
the right to use all of the Proprietary Rights that are reasonably necessary for
the operation of its business and, to the best of each Borrower's knowledge,
none of the Proprietary Rights infringes on or conflicts with any other Person's
property or rights, and no other Person's property infringes on or conflicts
with the Proprietary Rights. The Proprietary Rights described on Schedule 8.13
constitute all of the property of such type necessary to the current and
anticipated future conduct of any Borrower's business. No (i) patents, (ii)
material copyrights or (iii) material licenses, agreements, franchises, permits
or other rights to use the proprietary rights of a third party, are used by any
Borrower in the conduct of its business. Except as set forth on Schedule 8.13,
the trademarks listed thereon and the registrations relating to material
trademarks are valid, subsisting, unexpired, enforceable and have not
58
been abandoned. Each application for the registration in any jurisdiction of a
trademark included in the Proprietary Rights (including, where applicable, each
application for a renewal) has been duly and properly filed, and each
registration thereof has been duly and properly issued.
8.14 Trade Names. All trade names or trade dress under which
any Borrower or any of its Subsidiaries will sell Inventory or create Accounts,
or to which instruments in payment of Accounts may be made payable, are listed
on Schedule 8.13.
8.15 Litigation. There is no pending or (to the best of each
Borrower's knowledge) threatened, action, suit, proceeding, or counterclaim by
any Person, or investigation by any Governmental Authority, or any basis for any
of the foregoing, which could reasonably be expected to cause a Material Adverse
Change.
8.16 Restrictive Agreements. No Borrower nor any of its
Subsidiaries is a party to any contract or agreement, or subject to any charter
or other corporate restriction, which affects the ability of any Borrower to
execute, deliver, and perform the Loan Documents and repay the Obligations or
which materially and adversely affects or, insofar as any Borrower can
reasonably foresee, could materially and adversely affect, the property,
business, operations, or condition (financial or otherwise) of any Borrower or
any of its Subsidiaries, or would in any respect cause a Material Adverse
Change.
8.17 Labor Disputes. Except as set forth on Schedule 8.17, (a)
there is no collective bargaining agreement or other labor contract covering
employees of any Borrower or any of its Subsidiaries, (b) no such collective
bargaining agreement or other labor contract is scheduled to expire during the
term of this Agreement, (c) no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of
any Borrower or any of its Subsidiaries or for any similar purpose, and (d)
there is no pending or (to the best of each Borrower's knowledge) threatened,
strike, work stoppage, unfair labor practice claim, or other labor dispute
against or affecting any Borrower or any of its Subsidiaries or their respective
employees the occurrence of which would cause a Material Adverse Change.
8.18 Environmental Laws. Except as set forth on Schedule 8.18
or to the extent not creating or resulting in a Material Adverse Change, (a) no
Borrower nor any of its Subsidiaries has generated, handled, used, stored, or
disposed of any hazardous or toxic waste or substance, as defined pursuant to
Environmental Laws, on or off its Premises, except in substantial compliance
with Environmental Laws, (b) each Borrower and its Subsidiaries has complied in
all material respects with all Environmental Laws applicable to transfer,
construction on, and operation of its Premises, Property and business and has
all necessary permits for its current operations and such permits are in good
standing, (c) no Borrower nor any of its Subsidiaries has any material
contingent liability with respect to non-compliance with Environmental Laws or
the generation, handling, use, storage, or disposal of hazardous or toxic wastes
or substances, and (d) no Borrower nor any of its Subsidiaries has (i) received
any summons, claim, complaint, order or similar notice that (A) it is not
currently in compliance with, (B) any Governmental Authority is investigating
its compliance with, or (C) it has or, as a potentially responsible person may
have any liability as a result of any violation of, or non-compliance with, in
each case any Environmental Laws or (ii) filed any notice under any requirement
of Environmental Laws reporting a possible non-compliance with such laws.
59
8.19 No Violation of Law. No Borrower nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation could reasonably be
expected to cause a Material Adverse Change.
8.20 No Default. No Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which any such Borrower or any of its Subsidiaries
is a party or by which it is bound, which default could reasonably be expected
to cause a Material Adverse Change.
8.21 ERISA Compliance. Except as set forth on Schedule 8.21:
(a) Each Plan which any Borrower sponsors or maintains and, to
the best knowledge of any Borrower, each other Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which any Borrower sponsors or maintains and, to
the best knowledge of any Borrower, each other Plan which is intended to qualify
under Section 401(a) of the Code is so qualified except where the failure to so
qualify such Plan could reasonably be expected not to have a material adverse
economic effect on such Borrower. Each Borrower and each ERISA Affiliate has
made all required material contributions to any Plan subject to Section 412 of
the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or, to the best knowledge of each
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Change. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Change.
(c) (i) No ERISA Event has occurred which is continuing or in
respect of which there is or may be any liability of any Borrower or ERISA
affiliate which is not reflected in the Financial Statements of such Borrower
for the period ended June 3, 1995 nor is any ERISA Event reasonably expected to
occur; (ii) no Pension Plan other than a Multi- employer Plan has any Unfunded
Pension Liability; (iii) no Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) no Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any material liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Section 4201 or 4243 of ERISA with respect to a
Multi-employer Plan; and (v) no Borrower nor any ERISA Affiliate has engaged in
a transaction that reasonably could be subject to Section 4069 or 4212(c) of
ERISA.
8.22 Taxes. Each Borrower and its Subsidiaries have filed all
federal and other tax returns and reports required to be filed, and have paid
all federal and other taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable.
8.23 Regulated Entities. No Borrower, any Person controlling
any Borrower, or any of its Subsidiaries, is an "Investment Company" within the
meaning of the Investment
60
Company Act of 1940, as amended. No Borrower is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Debt.
8.24 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for working capital and general corporate purposes.
No Borrower nor any Subsidiary is engaged in the business of purchasing or
selling Margin Stock or extending credit for the purpose of purchasing or
carrying Margin Stock.
8.25 No Material Adverse Change. No Material Adverse Change
has occurred since June 3, 1995.
8.26 Full Disclosure. None of the representations or
warranties made by any Borrower or any of its Subsidiaries in the Loan Documents
as of the date such representations and warranties are made or deemed made, and
none of the statements contained in any schedule, exhibit, report, statement or
certificate furnished by or on behalf of any Borrower in connection with the
Loan Documents (including the offering and disclosure materials delivered by or
on behalf of any Borrower or any of its Subsidiaries to the Lenders prior to the
Closing Date), contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
8.27 Material Agreements. Schedule 8.27 contains a complete
and accurate list of all material agreements to which any Borrower or any of its
Subsidiaries is a party or is bound as of the date hereof.
8.28 Bank Accounts. Schedule 8.28 contains a complete and
accurate list of all bank accounts maintained by any Borrower with any bank or
other financial institution.
8.29 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Borrower or
any of its Subsidiaries of this Agreement or any other Loan Document, except for
UCC filings already made.
8.30 [Intentionally Omitted].
8.31 Investment Banking and Finders' Fees. No Borrower nor any
of its Subsidiaries has paid or agreed to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
finder's fee, or broker's fee to any Person in connection with this Agreement.
8.32 YEAR 2000. On the basis of Borrowers' review and
assessment of their systems and equipment and inquiry made of such Borrowers'
material suppliers, vendors and customers, Borrowers' reasonably believe that
the "Year 2000 problem" (that is, the inability of computers, as well as
embedded microchips in non-computing devices, to perform properly date-sensitive
functions with respect to certain dates prior to and after December 31, 1999),
including costs of remediation, will not result in a material adverse
61
change in the operations, business, properties, condition or prospects
(financial or otherwise) of Borrowers. Borrowers have developed feasible
contingency plans to adequately ensure uninterrupted and unimpaired business
operation in the event of failure of its own or a third party's systems or
equipment due to the Year 2000 problem, including those vendors, customers, and
suppliers, as well as a general failure of or interruption in its communications
and delivery infrastructure.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower covenants to the Agent and each Lender that, so
long as any of the Obligations remain outstanding or this Agreement is in
effect:
9.1 Taxes and Other Obligations. Such Borrower shall, and
shall cause each of its Subsidiaries to, (a) file when due all tax returns and
other reports which it is required to file; (b) pay, or provide for the payment,
when due, of all taxes, fees, assessments and other governmental charges against
it or upon its property, income and franchises, make all required withholding
and other tax deposits, and establish adequate financial reserves for the
payment of all such items, and provide to the Agent and the Lenders, upon
request, satisfactory evidence of its timely compliance with the foregoing; and
(c) pay when due all Debt owed by it and all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, and all other
indebtedness owed by it and perform and discharge in a timely manner all other
obligations undertaken by it; provided, that neither such Borrower nor any of
its Subsidiaries need pay any tax, fee, assessment, or governmental charge, that
(i) it is contesting in good faith by appropriate proceedings diligently
pursued, (ii) such Borrower or its Subsidiaries, as the case may be, has
established accurate reserves therefor as provided in GAAP, (iii) does not
result in the imposition of a Lien (other than a Permitted Lien described in
clause (b) of the definition thereof) because of such non-payment; provided,
further, that if the amount thereof exceeds $1,000,000, such Borrower shall
cause Phar-Mor promptly to notify in writing the Agent of such non-payment.
9.2 Corporate Existence and Good Standing. Such Borrower shall
have, and shall cause each of its Subsidiaries to have, all requisite power and
authority to conduct its business and to maintain its corporate or limited
liability company existence and its qualification and good standing in all
jurisdictions in which the failure to maintain such qualification or good
standing could reasonably be expected to have a material adverse change on such
Borrower's or such Subsidiary's property, business, operations, prospects, or
condition (financial or otherwise), other than for any of such Borrower's
Subsidiary which is merged or consolidated pursuant, in each case, to Section
9.8.
9.3 Compliance with Law and Agreements; Maintenance of
Licenses. Such Borrower shall comply, and shall cause each of its Subsidiaries
to comply, in all material respects with all Requirements of Law of any
Governmental Authority having jurisdiction over it or its business. Such
Borrower shall, and shall cause each of its Subsidiaries to, obtain and maintain
all licenses, permits, franchises, and governmental authorizations necessary to
own its property and to conduct its business as conducted on the Closing Date.
9.4 Maintenance of Property. Such Borrower shall, and shall
cause each of its Subsidiaries to, maintain all of its property necessary and
useful in the conduct of its business, in good operating condition and repair,
ordinary wear and tear excepted.
62
9.5 Insurance. (a) Such Borrower, as of the Closing Date, has
insured the Collateral with insurers, under policies and in amounts that are
acceptable to the Agent and the Lenders and which are set forth on Schedule 9.5
and which are hereby acknowledged as acceptable. Such Borrower shall maintain
such insurance throughout the term of this Agreement (including flood insurance
and shall comply with the additional requirements of the "National Flood
Insurance Program", in the event of a designation of the area in which any
Collateral is located as "flood prone" or a "flood risk area," as such terms are
defined in the Flood Disaster Protection Act of 1973) (i) with insurers that are
as financially sound and rated as highly by Best's Rating Guide as its insurer
as of the Closing Date and (ii) under policies and in amounts that are
substantially equivalent to the policies and amounts as of the Closing Date
taking into account business and/or asset growth, the availability of additional
coverage or changes in standards of insurance and what is then customary for
Persons engaged in the same or similar business, subject to the reasonable
request of the Agent for changes due to changes in the Agent's reasonable
internal policy requirements (applied uniformly to similarly situated
borrowers), or the Agent's regulatory requirements. The Borrowers shall pay,
upon the Lenders' requests, all reasonable fees to determine whether any of the
Collateral is located in a "flood prone" or a "flood risk" area to the extent
the Borrowers have not provided information upon which to base such
determination.
(b) Such Borrower shall cause the Agent, for the benefit of
the Agent and the ratable benefit of the Lenders, to be named in each such
policy, other than policies that do not cover any of the Collateral, as secured
party and loss payee and/or additional insured, in a manner acceptable to the
Agent. Each policy of insurance shall contain a clause or endorsement requiring
the insurer to give not less than thirty (30) days' prior written notice to the
Agent in the event of cancellation of the policy for any reason whatsoever and a
clause or endorsement stating that the interest of the Agent shall not be
impaired or invalidated by any act or neglect of such Borrower or any of its
Subsidiaries or the owner of any premises for purposes more hazardous than are
permitted by such policy. All premiums for such insurance shall be paid by such
Borrower when due, and certificates of insurance and, if requested by the Agent
or any Lender, photocopies of the policies, shall be delivered to the Agent, in
each case in sufficient copies for distribution by the Agent to each of the
Lenders. If such Borrower fails to procure such insurance or to pay the premiums
therefor when due, the Agent may, and at the direction of the Majority Lenders
shall, do so from the proceeds of Revolving Loans.
(c) Phar-Mor shall promptly notify the Agent and the Lenders
of any loss, damage, or destruction to any Collateral, whether or not covered by
insurance. The Agent is hereby authorized to collect all insurance proceeds
relating to Collateral directly, and after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall apply such proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 4.5.
9.6 Environmental Laws. (a) Such Borrower shall, and shall
cause each of its Subsidiaries to, conduct its business in compliance with all
Environmental Laws applicable to it, including those relating to the generation,
handling, use, storage, and disposal of any Contaminant. Such Borrower shall,
and shall cause each of its Subsidiaries to, take prompt and appropriate action
to respond to any non-compliance with Environmental Laws and shall regularly
report to the Agent and the Lenders on such response.
(b) Without limiting the generality of the foregoing, such
Borrower shall submit to the Agent and the Lenders annually, commencing on the
first Anniversary Date, and on each
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Anniversary Date thereafter, an update of the status of each environmental
compliance or liability issue. The Agent or any Lender may request copies of
technical reports prepared by such Borrower and its communications with any
Governmental Authority to determine whether such Borrower or any of its
Subsidiaries is proceeding reasonably to correct, cure or contest in good faith
any alleged non-compliance or environmental liability. Such Borrower shall, at
the Agent's or the Majority Lenders' request and at such Borrower's expense, (a)
retain an independent environmental engineer acceptable to the Agent to evaluate
the site, including tests if appropriate, where the non-compliance or alleged
non-compliance with Environmental Laws has occurred and prepare and deliver to
the Agent, in sufficient quantity for distribution by the Agent to the Lenders,
a report setting forth the results of such evaluation, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (b) provide to the Agent and the Lenders a supplemental
report of such engineer whenever the scope of the environmental problems, or the
response thereto or the estimated costs thereof, shall change in any material
respect.
9.7 Compliance with ERISA. Such Borrower shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in
all material respects with the applicable provisions of ERISA, the Code and
other federal or state law; (b) cause each Plan which it sponsors or maintains
which is qualified under Section 401(a) of the Code to maintain such
qualification; (c) make all required contributions to any Plan subject to
Section 412 of the Code; (d) not engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan; and (e) not
engage in a transaction that reasonably could be subject to Section 4069 or
4212(c) of ERISA.
9.8 Mergers, Consolidations or Sales. Except in accordance
with the Plan of Reorganization, such Borrower shall not transfer, sell, assign,
pledge or otherwise dispose of any of the issued and outstanding capital stock
or other securities held by it of any of its Subsidiaries, nor shall such
Borrower or any of its Subsidiaries enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, abandon, or
otherwise dispose of all or any part of its or any of its Subsidiaries'
property, or wind up, liquidate or dissolve, or agree to do any of the
foregoing, except for (a) sales of Inventory in the ordinary course of its
business, (b) sales or other dispositions of Equipment in the ordinary course of
business that are obsolete or no longer useable by such Borrower in its
business, and (c) mergers or consolidations of any of such Borrower's
Subsidiaries into such Borrower occurring after thirty (30) days prior written
notice thereof to the Agent; provided that in any such merger or consolidation,
such Borrower shall be the surviving corporation.
9.9 Distributions; Capital Change; Restricted Investments.
Such Borrower shall not, and shall not permit any of its Subsidiaries (a)
directly or indirectly to declare or make, or incur any liability to make, any
Distribution, except Distributions (i) to such Borrower by its Subsidiaries, and
(ii) by such Borrower to any other Borrower or, in the case of a Distribution by
Phar-Mor to members of Phar-Mor's management, in accordance with any agreement
between Phar-Mor and management, which agreements are set forth in Schedule
9.9(a), (b) to make any change in its capital structure which could have a
Material Adverse Change, or (c) to make any Restricted Investment except (i)
capital contributions or loans made by such Borrower
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to any other Borrower, (ii) the making of loans by such Borrower so long as the
aggregate amount of all loans by any Borrowers shall not exceed in the aggregate
$5,000,000 at any time outstanding and (iii) acquisitions of stock of publicly
traded or privately held companies, the cost of which at the time of acquisition
shall not exceed (when combined with loans under clause (ii) above) $20,000,000
in the aggregate, provided that at the time of making any such stock acquisition
no Event of Default is continuing.
9.10 Guaranties. Such Borrower shall not, and shall not permit
any of its Subsidiaries to make, issue, or become liable on any Guaranty, except
(i) Guaranties in favor of the Agent and (ii) Guaranties of any lease
obligations for Equipment or real estate leases entered into by any other
Borrower.
9.11 Debt. (a) Such Borrower shall not, and shall not suffer
or permit any of its Subsidiaries to incur or maintain any Debt, other than: (i)
the Obligations, (ii) trade payables and contractual obligations to suppliers,
vendors and customers incurred in the ordinary course of business, (iii) Debt
incurred to finance the purchase of Equipment constituting Capital Expenditures,
so long as, with respect to all such Capital Expenditures, the principal amount
of Debt for any such purchase of Equipment does not exceed the purchase price of
such Equipment, (iv) Debt existing on the effective date of this Agreement and
reflected in the consolidated balance sheet of Phar-Mor as of August 1, 1998,
(v) Debt of any Borrower owing to any other Borrower, (vi) Guaranties permitted
pursuant to Section 9.10, (vii) Debt incurred as a result of the refinancing of
any Debt otherwise permitted hereunder; provided that such Debt shall (A) bear
interest at a rate that cannot exceed the interest rate that is then accruing on
the obligations being refinanced, (B) provide for principal amortization in
amounts the same as or less than that required under the obligations being
refinanced, (C) not mature prior to the maturity date of the obligations being
refinanced, and (D) remain unsecured and subordinated to the Obligations after
such refinancing to the same extent such Debt refinanced was unsecured and
subordinated, (viii) unsecured Debt on terms and conditions acceptable to the
Agent and the Majority Lenders and not contemplated under clauses (i) through
(viii) above, so long as such Debt shall not exceed $100,000,000 in the
aggregate for all of the Borrowers and all of their Subsidiaries at any time
outstanding, and (ix) interest rate hedging obligations entered into to provide
interest rate protection and which are reasonably acceptable to the Agent.
9.12 Prepayment. Such Borrower shall not, and shall not permit
any of its Subsidiaries, to prepay voluntarily any Debt, except for (i) the
Obligations in accordance with the terms of this Agreement, (ii) any Debt
permitted hereunder up to an amount equal to the average daily amount of excess
cash and cash equivalents of all Borrowers during the three month period ending
on the date immediately preceding the date of each prepayment (excess cash and
cash equivalents during such period being defined as (A) the average daily
amount of cash and cash equivalents of all Borrowers during such period less (B)
the sum of (1) the aggregate average daily balance of cash and cash equivalents
held by all stores of all Borrowers during such period, (2) the aggregate amount
of the average of one day's store deposits during such period represented by
checks payable to any Borrower for each store of each Borrower and (3) the
amount of cash and cash equivalents included in item (A) above that is deemed
"restricted" by the Agent in the exercise of its Permitted Discretion) less the
sum of (A) the average amount of Loans outstanding to all Borrowers for the same
period, (B) the amount of any prepayments made by all Borrowers under this
Section 9.12 during such period, and (C) the amount that was available for
Permitted Acquisitions for all Borrowers at the beginning of such
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period; provided that no Loans are outstanding at the time of such prepayment
and that no Event of Default has occurred and is continuing, and (iii) the
prepayment of Debt secured by Equipment sold pursuant to Section 9.8(b) to the
extent of the net proceeds of such sales.
9.13 Transactions with Affiliates. Except as set forth below,
such Borrower shall not, and shall not permit any of its Subsidiaries to sell,
lease, transfer, distribute, or pay any money or property, including any fees or
expenses of any nature (including any fees or expenses for management services),
to any Affiliate, or lend or advance money or property to any Affiliate, or
invest in (by capital contribution or otherwise) or purchase or repurchase any
stock or other securities interest or indebtedness, or any property, of any
Affiliate, or become liable on any Guaranty of the indebtedness, dividends, or
other obligations of any Affiliate. Notwithstanding the foregoing, (i) such
Borrower and its Subsidiaries may engage in transactions with Affiliates (other
than Subsidiaries who are not Borrowers) in the ordinary course of business, in
amounts and upon terms fully disclosed to the Agent and the Lenders, and no less
favorable to such Borrower or such Subsidiary than would be obtained in a
comparable arm's- length transaction with a third party who is not an Affiliate
and (ii) an investment of approximately $5,000,000 in Avatex Corporation by
Phar-Mor, Inc. as of August 29, 1998 may be maintained.
9.14 Investment Banking and Finder's Fees. Each Borrower shall
defend and indemnify the Agent and the Lenders against and hold them harmless
from all claims of any Person for any investment banking or related fee,
underwriter's fee, finder's fee, or broker's fee claimed by such Person in
connection with the Agreement, and all costs and expenses (including attorneys'
fees) incurred by the Agent and/or any Lender in connection therewith.
9.15 Business Conducted. Such Borrower shall not (i) engage
directly or indirectly, in any line of business other than the businesses in
which the Borrower is engaged on the Closing Date, (ii) transfer, sell, assign,
lease, pledge, abandon or otherwise dispose of any of its interests in any of
its Inventory, Collateral, Property or Real Estate or any of its other assets
used in its business or operations to any of its non-Borrower Subsidiaries or
(iii) permit any of its non-Borrower Subsidiaries to engage in any business of
any kind whatsoever or to own any material asset or have any material liability.
Phar-Mor shall own at all times all of the issued and outstanding capital stock
and other capital interests of all of the other Borrowers.
9.16 Liens. Such Borrower shall not, and shall not permit any
of its Subsidiaries to create, incur, assume, or permit to exist any Lien on any
Property now owned or hereafter acquired by any of them, except Permitted Liens.
9.17 Sale and Leaseback Transactions. Such Borrower shall not,
and shall not permit any of its Subsidiaries, directly or indirectly, to enter
into any arrangement with any Person providing for such Borrower or such
Subsidiary to lease or rent property that such Borrower or such Subsidiary has
sold or will sell or otherwise transfer to such Person.
9.18 New Subsidiaries. Such Borrower shall not, directly or
indirectly, organize, create, acquire or permit to exist any Subsidiary other
than (a) those listed on Schedule 8.5 and (b) any Subsidiary organized, created
or acquired with ten (10) Business Days written prior notice to the Agent;
provided that with respect to any such Subsidiary, (i) such Subsidiary shall not
engage directly or indirectly, in any line of business other than the business
in which the Borrowers were engaged on the Closing Date, (ii) such Subsidiary
shall execute and deliver a supplement to this Agreement and the other Loan
Documents pursuant to which it shall become
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a party to, shall assume all rights, duties and obligations under, and shall
grant continuing security interests to the Agent for the benefit of the Agent
and the ratable benefit of the Lenders in all of its Property that would
constitute Collateral under this Agreement and the other Loan Documents as if it
had been an original signatory hereto and thereto on the Closing Date, and (iii)
all Persons holding the capital stock or other equity interest of such
Subsidiary shall have pledged such stock or other equity interest to and for the
benefit of the Agent and the Lenders.
9.19 Fiscal Year. If the Borrowers desire to change their
Fiscal Year, then prior to the effective date thereof, the Borrowers and the
Lenders shall have entered into a written agreement amending or modifying the
financial covenants and any other provisions of this Agreement affected thereby,
in form and substance reasonably satisfactory to the Lenders.
9.20 Permitted Acquisitions. Such Borrower and its
Subsidiaries may spend, for the sole purpose of acquiring existing retail
operations (within the contiguous United States), including real property on
which any such operations are situated and any personal property located therein
other than Inventory, provided that such operations are to be used in the same
or similar line of business currently operated by such Borrower ("Permitted
Acquisitions"), an amount (which may be permanently reduced at the election of
the Borrowers by written notice thereof to the Agent) which in the aggregate for
Phar-Mor on a consolidated basis does not exceed $30,000,000; provided further
that such Borrower shall not acquire any Inventory in connection with a
Permitted Acquisition unless (i) written notice thereof is given by Phar-Mor to
the Agent, (ii) ten (10) Business Days prior to the closing date of such
acquisition, Borrower gives the Agent evidence reasonably satisfactory to the
Agent that such Inventory is free and clear of all Liens, (iii) such Borrower
acquires good and marketable title to such Inventory, and (iv) on the closing
date of such acquisition, such Borrower grants to the Agent for the benefit of
the Agent and the ratable benefit of the Lenders a first priority perfected
security interest in such Inventory and delivers to the Agent an opinion of
counsel with respect thereto in form and substance reasonably satisfactory to
the Agent.
9.21 Minimum Availability. Aggregate Availability shall at all
times be at least $20,000,000.
9.22 [Intentionally Omitted].
9.23 Use of Proceeds. Such Borrower shall not, and shall not
permit any Subsidiary to (a) use any portion of the Loan proceeds, directly or
indirectly (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of such Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act or (b) make any of the
investments described in clause (d)(iv) of the definition of Restricted
Investments if at such time any Loans are outstanding.
9.24 Plan of Reorganization. Without the prior written consent
of the Agent and the Majority Lenders, such Borrower shall not, and shall not
permit any of its Subsidiaries to, cause or permit the Plan of Reorganization to
be amended or modified after the Closing Date, or to waive without prior notice
to the Agent any of the conditions contained therein in any material respect.
Phar-Mor shall promptly furnish copies to the Agent of all motions,
applications, pleadings, notices and other documents filed by any party in
interest with the Bankruptcy Court, and all orders, judgments, opinions, rulings
and other notices entered by the Bankruptcy Court, in connection with the
chapter 11 cases of Phar-Mor and its debtor affiliates,
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in each case after the Effective Date.
9.25 Further Assurances. Such Borrower shall execute and deliver,
or cause to be executed and delivered, to the Agent and/or the Lenders such
documents and agreements, and shall take or cause to be taken such actions, as
the Agent or any Lender may, from time to time, request to carry out the terms
and conditions of this Agreement and the other Loan Documents.
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Effectiveness. This
Agreement shall become effective when, and only when, the following conditions
precedent have been satisfied in a manner satisfactory to the Lender.
(a) Delivery of Documents; Compliance. This Agreement
and the other Loan Documents have been executed by each party thereto and each
Borrower shall have performed and complied with all covenants, agreements and
conditions contained herein and the other Loan Documents which are required to
be performed or complied with by such Borrower before or on the effective date
of this Agreement. The Agent shall have received copies certified by a
Responsible Officer of the certificate or articles of incorporation or
certificate of organization and by-laws, and certificates of qualification and
good standing for each jurisdiction referred to in clauses (a) and (b) of
Section 8.3, for Phar-Mor of Delaware, Inc. and Phar-Mor, Inc., LLC.
(b) Minimum Availability. Upon the making of any Loans
and the issuance of any Letters of Credit on the effective date of this
Agreement and with all its obligations current, the Aggregate Availability would
not be less than $20,000,000.
(c) Material Adverse Change. There shall have occured no
material adverse change in the assets, operations or consolidated financial
condition of Phar-Mor or in the Collateral since delivery to the Agent of the
most recent Financial Statements, and the Agent shall have received a
certificate of a Responsible Officer to that effect.
(d) Representations and Warranties. All representations
and warranties made hereunder and in the other Loan Documents shall be true and
correct in all material respects.
(e) No Default. No Default or Event of Default shall
exist on the effective date of this Agreement, or would exist after giving
effect to any Loans to be made on
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such date.
(f) Opinions. The Agent and the Lenders shall have
received such opinions of counsel for the Borrowers and their Subsidiaries as
the Agent or any Lender shall reasonably request, each such opinion to be in a
form, scope, and substance satisfactory to the Agent, the Lenders, and their
respective counsel.
(g) Financing Statements. The Agent shall have received
duly executed UCC-1 financing statements, duly filed on or before the effective
date of this Agreement under the UCC of all jurisdictions that the Agent may
deem necessary or desirable in order to perfect the Agent's Lien.
(h) Fees. The Borrowers shall have paid all fees and
expenses of the Agent and the Attorney Costs incurred in connection with any of
the Loan Documents and the transactions contemplated thereby.
(i) Insurance. The Agent shall have received evidence,
in form, scope, and substance, reasonably satisfactory to it, of all insurance
coverage as required by the Agreement.
(j) Examination. The Agent and the Lenders shall have
had an opportunity, if they so choose, to examine the books of account and other
records and files of the Borrowers and to make copies thereof, and to conduct a
pre-closing audit which shall include verification of Inventory, Accounts,
Aggregate Availability and the Availability of each Borrower, and the results of
such examination and audit shall have been satisfactory to the Agent and the
Lenders in all respects.
(k) Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement, the Loan Documents and all
documents, instruments, guaranties and other assignments incident hereto or
thereto or contemplated in connection herewith or therewith, whether or not
forms thereof are annexed hereto as Exhibits, shall be satisfactory in form and
substance to the Lenders, the Agent and their counsel.
Except as provided in a certificate signed by a Responsible
Officer and delivered to the Agent on the effective date of this Agreement the
execution and delivery of the Loan Documents by each Borrower on the effective
date of this Agreement shall be deemed to be a representation and warranty made
by such Borrower to the effect that all of the conditions precedent to the
making of the availability of the total credit facility provided in Section 2.1
have been satisfied, with the same effect as delivery to the Agent and the
Lenders of a certificate signed by a Responsible Officer, dated the effective
date of this Agreement to such effect.
Execution and delivery to the Agent by a Lender of a
counterpart to this Agreement shall be deemed confirmation by such Lender that
(i) all conditions precedent in this Section 10.1 have been fulfilled to the
satisfaction of such Lender and (ii) the decision of such Lender to execute and
deliver to the Agent an executed counterpart to this Agreement was made by such
Lender independently and without reliance on the Agent or any other Lender as to
the satisfaction of any condition precedent set forth in this Section 10.1.
10.2 Conditions Precedent to Each Loan. The obligation of the
Lenders to make Revolving Loans, and the obligation of the Agent to cause to be
issued Letters of Credit and the obligation of the Lenders to participate in
Letters of Credit, shall be subject to the further conditions precedent that on
and as of the date of any such extension of credit:
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(a) The following statements shall be true, and the acceptance
by any Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i) and (ii), with the same effect as the
delivery to the Agent and the Lenders of a certificate signed by a Responsible
Officer, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in this Agreement
and the other Loan Documents are 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 (i) any representation or warranty made pursuant to
Sections 8.5(a), 8.7, 8.12, 8.13, 8.14, 8.27 or 8.28 has been amended by written
notice thereof by Phar-Mor to the Agent and (ii) any other representation and
warranty not referred to in clause (i) above has been amended or waived, in each
case in writing by the Agent and the Majority Lenders; and
(ii) No event has occurred and is continuing, or would result from
such extension of credit, which constitutes a Default or an Event of Default.
(b) Without limiting Section 10.1 (b), the amount of the
Aggregate Availability shall be sufficient to make such Revolving Loans and to
cause such Letters of Credit to be issued without exceeding the Aggregate
Availability, and the Availability of each Borrower shall be sufficient to make
such Revolving Loans and to cause such Letters of Credit to be issued without
exceeding the Availability of such Borrower, provided, however, that the
foregoing conditions precedent are not conditions to each Lender participating
in or reimbursing BABC or the Agent for such Lenders' Pro Rata Share of any BABC
Loan or Agent Advance as provided in Sections 2.2(h) and (i).
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default. It shall constitute an event of
default ("Event of Default") if any one or more of the following shall occur for
any reason:
(a) any failure to pay the principal of or interest on any of
the Obligations when due, whether upon demand or otherwise;
(b) any representation or warranty made by any Borrower in
this Agreement or by any Borrower or any of its Subsidiaries in any of the other
Loan Documents, any Financial Statement, or any certificate furnished by any
Borrower or any of its Subsidiaries at any time to the Agent or any Lender shall
prove to be untrue in any material respect as of the date on which made or
furnished;
(c) any Borrower shall (i) fail to comply with any of the
covenants set forth in Article 9 (other than Sections 9.1, 9.2, 9.3, 9.4. 9.5(a)
and (c), 9.6 or 9.7) or Article 7 or (ii) fail to comply with any of the
covenants set forth in Sections 9.1, 9.2, 9.3, 9.4, 9.5(a) or (c), 9.6 or 9.7 if
such failure shall have existed for more than thirty (30) days (ten (10) days
for Section 9.5(a) and (c)) after the date that such Borrower discovers or
reasonably should have discovered, such failure; provided, however, that to the
extent that any covenant in Article 7 specifies the number of days within which
any Borrower must comply with any reporting requirement therein, such failure
shall have existed for the number of days specified in such covenant, plus
fifteen (15) days with respect to the covenants set forth in Sections 7.2(a),
7.2(b), 7.2(d) and 7.2(e) and five (5) days with respect to all other covenants
set forth in Article 7.
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(d) except as provided in Section 11.1(c), any default shall
occur in the observance or performance of any of the covenants and agreements
contained in this Agreement, any other Loan Documents, or any other agreement
entered into at any time to which any Borrower or any of its Subsidiaries and
the Agent or any Lender are party, or if any such agreement or document shall
terminate (other than in accordance with its terms or the terms hereof or with
the written consent of the Agent and the Majority Lenders) or become void or
unenforceable, without the written consent of the Agent and the Majority
Lenders;
(e) default shall occur with respect to any Debt for borrowed
money (other than the Obligations) in an outstanding principal amount which
exceeds, in the aggregate for all such Debt with respect to which default shall
have occurred, $3,000,000, or under any agreement or instrument under or
pursuant to which any such Debt or indebtedness may have been issued, created,
assumed, or guaranteed by any Borrower or any of its Subsidiaries, and such
default shall continue for more than the period of grace, if any, therein
specified, if the effect thereof (with or without the giving of notice or
further lapse of time or both) is to accelerate, or to permit the holders of any
such Debt or indebtedness to accelerate, the maturity of any such Debt; or any
such Debt or indebtedness shall be declared due and payable or be required to be
prepaid (other than by a regularly scheduled required prepayment) prior to the
stated maturity thereof;
(f) any Borrower or any of its Subsidiaries shall (i) file a
voluntary petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization, arrangement
or readjustment of its debts or for any other relief under the Bankruptcy Code
or under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, or consent to, approve of, or acquiesce in, any such
petition, action or proceeding; (ii) apply for or acquiesce in the appointment
of a receiver, assignee, liquidator, sequestrator, custodian, trustee or similar
officer for it or for all or any part of its property; (iii) make an assignment
for the benefit of creditors; or (iv) be unable generally to pay its debts as
they become due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of the debts of any Borrower or any of its Subsidiaries or for any
other relief under the Bankruptcy Code or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing and either
(i) such petition, action or proceeding shall not have been dismissed within a
period of sixty (60) days after its commencement or (ii) an order for relief
against such Borrower or such Subsidiary shall have been entered in such
proceeding;
(h) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for any Borrower or any of its Subsidiaries or for
all or any part of its property shall be appointed or a warrant of attachment,
execution or similar process shall be issued against any part of the property of
any Borrower or any of its Subsidiaries;
(i) any Borrower or any of its Subsidiaries shall file a
certificate of dissolution under applicable state law or shall be liquidated,
dissolved or wound-up or shall commence or have commenced against it any action
or proceeding for dissolution, winding-up or liquidation, or shall take any
corporate or limited liability company action in furtherance thereof;
(j) all or any material part of the property of any Borrower
or any of its Subsidiaries shall be nationalized, expropriated or condemned,
seized or otherwise appropriated,
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or custody or control of such property or of any Borrower or any of its
Subsidiaries shall be assumed by any Governmental Authority or any court of
competent jurisdiction at the instance of any Governmental Authority, except
where contested in good faith by proper proceedings diligently pursued where a
stay of enforcement is in effect;
(k) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(l) one or more Final Orders for the payment of money
aggregating in excess of $5,000,000 with respect to personal injury claims and
$1,000,000 with respect to any other claim, which amount shall not be fully
covered by insurance, shall be rendered against Borrower or any of its
Subsidiaries;
(m) any loss, theft, damage or destruction of any item or
items of Collateral or other property of any Borrower or any of its Subsidiaries
occurs which (i) materially and adversely affects the property, business,
operation, prospects, or condition of any Borrower or any of its Subsidiaries;
or (ii) is material in amount and is not adequately covered by insurance;
(n) there occurs a material adverse change in the operations,
business, property or condition (financial or otherwise) of the Borrowers, taken
as a whole; provided that such material adverse change results from an event,
situation or circumstance not otherwise encompassed by the covenants in this
Agreement;
(o) there is filed against any Borrower or any of its
Subsidiaries any civil or criminal action, suit or proceeding under any federal
or state racketeering statute (including the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred eighty (180) days, and (2) could result in the confiscation
or forfeiture of any material portion of the Collateral;
(p) for any reason other than the failure of the Agent to take
any action available to it to maintain perfection of the Agent's Liens, pursuant
to the Loan Documents, any Loan Document ceases to be in full force and effect
or any Lien with respect to any material portion of the Collateral intended to
be secured thereby ceases to be, or is not, valid, perfected and prior to all
other Liens (other than the Liens described in clauses (a) and (h) of the
definition of Permitted Liens or any other Permitted Liens expressly identified
on Schedule 6.4) or is terminated, revoked or declared void;
(q) (i) an ERISA Event shall occur with respect to a Pension
Plan or Multi- employer Plan which has resulted or could reasonably be expected
to result in liability of any Borrower under Title IV of ERISA to such Pension
Plan, Multi-employer Plan or the PBGC in an aggregate amount in excess of
$3,000,000 and which must be paid prior to the Stated Termination Date; (ii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans other
than Multi-employer Plans at any time exceeds $7,000,000; or (iii) any Borrower
or any ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multi-employer Plan in an
aggregate amount in excess of $2,500,000.
(r) there occurs a Change of Control.
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11.2 Remedies. (a) If a Default or an Event of Default exists,
the Agent may, in its discretion, and shall, at the direction of the Majority
Lenders, do one or more of the following at any time or times and in any order,
without notice to or demand on any Borrower: (i) reduce the Maximum Revolver
Amount, or the advance rates against Eligible Accounts and/or Eligible Inventory
used in computing the Aggregate Availability or the Availability of any
Borrower, or reduce one or more of the other elements used in computing the
Aggregate Availability and/or the Availability of any Borrower; (ii) restrict
the amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to
arrange for Letters of Credit. If an Event of Default exists, the Agent shall,
at the direction of the Majority Lenders, do one or more of the following, in
addition to the actions described in the preceding sentence, at any time or
times and in any order, without notice to or demand on any Borrower: (a)
terminate the Commitments and this Agreement; (b) declare any or all Obligations
to be immediately due and payable; provided, however, that upon the occurrence
of any Event of Default described in Sections 11.1(c), 11.1(f), 11.1(g), 11.1(h)
or 11.1(i), the Commitments shall automatically and immediately expire and all
Obligations shall automatically become immediately due and payable without
notice or demand of any kind; and (c) pursue its other rights and remedies under
the Loan Documents and applicable law.
(b) If an Event of Default exists: (i) the Agent shall have
for the benefit of itself and the ratable benefit of the Lenders, in addition to
all other rights of the Agent and the Lenders, the rights and remedies of a
secured party under the UCC; (ii) the Agent may, at any time, take possession of
the Collateral and keep it on any Borrower's premises, at no cost to the Agent
or any Lender, or remove any part of it to such other place or places as the
Agent may desire, or each Borrower shall, upon the Agent's demand, at such
Borrower's cost, assemble the Collateral and make it available to the Agent at a
place reasonably convenient to the Agent; (iii) the Agent may sell and deliver
any Collateral at public or private sales, for cash, upon credit or otherwise,
at such prices and upon such terms as the Agent deems advisable, in its sole
discretion, and may, if the Agent deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale; (iv) the
Agent (without assuming any obligations or liability thereunder), at any time,
shall have the exclusive right to enforce against any licensee or sublicensee
all rights and remedies of any Borrower in, to and under any one or more license
agreements with respect to the Collateral, and take or refrain from taking any
action under any license or sublicense thereof, and each Borrower hereby
releases the Agent and each Lender from, and agrees to hold the Agent and each
Lender free and harmless from and against, any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement other
than with respect to any claims as a result of any acts or omissions occurring
after the date that the duties and obligations of the Borrowers with respect to
such license agreements may have been terminated by reason of a sale, transfer
or other disposition of such license agreements as provided for herein; and (v)
in addition to the foregoing, in order to implement the assignment, sale or
other disposal of any of the Collateral pursuant to Section 11.2(a) hereof, the
Agent may, at any time, pursuant to the power of attorney granted under Section
6.14, execute and deliver on behalf of any Borrower, one or more instruments of
assignment of the trademarks (or any application or registration thereof), in
form suitable for filing, recording or registration in any country. Without in
any way requiring notice to be given in the following manner, each Borrower
agrees that any notice by the Agent of sale, disposition or other intended
action hereunder or in connection herewith, whether required by the UCC or
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otherwise, shall constitute reasonable notice to each such Borrower if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least five (5)
Business Days prior to such action to Phar-Mor's address specified in or
pursuant to Section 15.8. If any Collateral is sold on terms other than payment
in full at the time of sale, no credit shall be given against the Obligations
until the Agent or the Lenders receive payment, and if the buyer defaults in
payment, the Agent may resell the Collateral without further notice to any
Borrower. In the event the Agent seeks to take possession of all or any portion
of the Collateral by judicial process, each Borrower irrevocably waives: (a) the
posting of any bond, surety or security with respect thereto which might
otherwise be required; (b) any demand for possession prior to the commencement
of any suit or action to recover the Collateral; and (c) any requirement that
the Agent retain possession and not dispose of any Collateral until after trial
or final judgment. Each Borrower agrees that the Agent has no obligation to
preserve rights to the Collateral or marshal any Collateral for the benefit of
any Person. The Agent is hereby granted a license or other right to use, without
charge, each Borrower's labels, copyrights, name, trade secrets, trade names,
trade dress, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and each
Borrower's rights under all licenses and all franchise agreements shall inure to
the Agent's benefit. In the event of any such license, assignment, sale or other
disposition of the Collateral, or any of it, after the occurrence or during the
continuation as hereinabove provided of an Event of Default, each Borrower shall
supply its know-how and expertise relating to the manufacture and sale of the
products bearing or in connection with any trademark, copyright or other
Proprietary Right, and its customer lists and other records relating to any
trademark, copyright or other Proprietary Right, and to the distribution of said
products, to the Agent or its designee. The Borrowers agree to pay when due all
reasonable costs and expenses incurred in any transfer of a trademark or
copyright or other Proprietary Right, including any taxes, fees and reasonable
attorneys' fees (including the allocated costs and expenses of in-house
counsel), and all such costs shall be added to the Obligations. The proceeds of
sale shall be applied first to all expenses of sale, including attorneys' fees,
and then to the Obligations in whatever order the Agent elects. The Agent will
return any excess to Phar-Mor and each Borrower shall remain liable for any
deficiency.
(c) If an Event of Default occurs, each Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination. The term of this Agreement shall
end on the Stated Termination Date. The Agent upon direction from the Majority
Lenders may terminate this Agreement without notice upon the occurrence of an
Event of Default. Upon the effective date of termination of this Agreement for
any reason whatsoever, all Obligations (including all unpaid principal of and
accrued interest on the Loans) shall become immediately due and payable.
Notwithstanding the termination of this Agreement, until all Obligations are
indefeasibly paid and performed in full in cash, each Borrower shall remain
bound by the terms of this Agreement and those of the other Loan Documents and
shall not be relieved of any of its Obligations hereunder, and the Agent and the
Lenders shall retain all their rights and remedies hereunder and under the other
Loan Documents (including the security interest of the Agent, for the benefit of
the Agent and the ratable benefit of the Lenders, in and all rights and remedies
with respect
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to all then existing and after-arising Collateral).
ARTICLE 13
AMENDMENTS; WAIVER; ASSIGNMENTS; PARTICIPATIONS
13.1 No Waivers; Cumulative Remedies. No failure by the Agent
or any Lender to exercise any right, remedy, or option under this Agreement or
any present or future supplement thereto, or in any other Loan Document or any
other agreement between or among any Borrower and the Agent and/or any Lender,
or delay by the Agent or any Lender in exercising the same, will operate as a
waiver thereof. No waiver by the Agent or any Lender will be effective unless it
is in writing, and then only to the extent specifically stated. No waiver by the
Agent or the Lenders on any occasion shall affect or diminish the Agent's and
each Lender's rights thereafter to require strict performance by any Borrower of
any provision of this Agreement. The Agent's and each Lender's rights under this
Agreement will be cumulative and not exclusive of any other right or remedy
which the Agent or any Lender may have.
13.2 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 any Borrower therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Lenders (or by the Agent
at the written request of the Majority Lenders) and all of the Borrowers 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 the
Lenders and all of the Borrowers and acknowledged by the Agent, do any of the
following:
(a) increase or extend the 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 to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lender
or any of them to take any action hereunder;
(e) increase the advance rate with respect to Revolving Loans;
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section
14.11;
(h) change the definition of "Majority Lenders";
and, provided further, that no amendment, waiver or consent
shall, unless in writing and signed by the Agent, affect the rights or duties of
the Agent under this Agreement or any other Loan Document.
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13.3 Assignments; Participations.
(a) (i) Any Lender may, with prior written notice to the Agent
and Phar-Mor and the prior written consent of the Agent (which shall not be
unreasonably withheld), assign and delegate to one or more assignees (provided
that no written consent of the Agent shall be required in connection with any
assignment and delegation by a Lender to an Affiliate of such Lender) (each an
"Assignee") all, or any ratable part of all, of the Loans, the Commitments and
the other rights and obligations of such Lender hereunder, in a minimum amount
of $10,000,000; provided that after giving effect to such assignment, the
aggregate amount of the Loans, Commitments and other rights and obligations held
by such Lender is not less than $10,000,000; provided, further, that the
Borrowers and the Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (A)
written notice of such assignment shall have been given to Phar-Mor and the
Agent by such Lender, and payment instructions, addresses and related
information with respect to the Assignee shall have been given to the Agent by
the Assignee, (B) such Lender and its Assignee shall have executed and delivered
to Phar-Mor and the Agent an Assignment and Acceptance in the form of Exhibit
13.3 (the "Assignment and Acceptance"), and (C) the assignor Lender or Assignee
has paid to the Agent a processing fee in the amount of $2,500.
(ii) BABC agrees that it shall not assign any part of any
Loans, Commitments and other rights and obligations of BABC if, after giving
effect to such assignment, the aggregate amount of the then remaining Loans,
Commitments and other obligations of BABC would be less than the aggregate
amount of the Loans, Commitments and other obligations of the Lender which at
such time has the highest aggregate amount of Loans, Commitments and other
obligations of any of the Lenders other than BABC.
(b) From and after the date that the Agent notifies the
assignor Lender that the conditions in clauses (A) through (C) of Section
13.3(a)(i) have been satisfied (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations, including, but not
limited to, the obligation to participate in credit support or other enhancement
for Letters of Credit hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
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, such Lender shall cease to
be a party hereto).
(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: (i) 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; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (iii) 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
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and decision to enter into such Assignment and Acceptance; (iv) such Assignee
will, independently and without reliance upon the 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; (v) such Assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and (vi)
such Assignee agrees that it will perform in accordance with their terms 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, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time sell to one or more commercial
banks, financial institutions, or other Persons not Affiliates of any Borrower
(a "Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) 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) each Borrower and the Agent 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, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan Document
(other than in respect of the matters set forth in Sections 13.2(a) through (h)
inclusive), and all amounts payable by any 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.
(f) Notwithstanding any other provision in this Agreement, 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 FRB 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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ARTICLE 14
THE AGENT
14.1 Appointment and Authorization. Each Lender hereby
designates and appoints BABC as its Agent under this Agreement and the other
Loan Documents and each Lender hereby irrevocably authorizes the 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 it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. The
Agent agrees to act as such on the express conditions contained in this Article
14. The provisions of this Article 14 are solely for the benefit of the Agent
and the Lenders and no Borrower shall have any rights as a third party
beneficiary of any of the provisions contained herein. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the 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 the Agent.
Except as expressly otherwise provided in this Agreement, the 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 which the Agent is expressly entitled to take or assert under this
Agreement and the other Loan Documents, including (a) the determination of the
applicability of ineligibility criteria with respect to the calculation of the
Aggregate Availability or the Availability of any Borrower, (b) the making of
Agent Advances pursuant to Section 2.2(i), and (c) the exercise of remedies
pursuant to Section 11.2, and any action so taken or not taken shall be deemed
consented to by the Lenders.
14.2 Delegation of Duties. The 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. The 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.
14.3 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 any Borrower or any
Subsidiary or any Affiliate of any Borrower, or any officer 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 the
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 any 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 properties, books or records of any Borrower or any
Subsidiary or any Affiliate of any Borrower.
14.4 Reliance by Agent. (a) The Agent shall be entitled to
rely, and shall be
78
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 any
Borrower), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Lenders as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The 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 Majority
Lenders or all Lenders, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 10.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender.
14.5 Notice of Default. The 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 and fees required
to be paid to the Agent for the account of the Lenders, unless the Agent shall
have received written notice from a Lender or from Phar-Mor referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will promptly notify the Lenders of
its receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Lenders, or
all Lenders, as applicable in accordance with Section 11; provided, however,
that unless and until the Agent has received any such request, the 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.
14.6 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 the Agent hereinafter taken, including any review of the affairs
of any Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the 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 each Borrower and its Subsidiaries, 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 each 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 each Borrower and its Subsidiaries.
Except for notices, reports and other documents expressly herein required to be
79
furnished to the Lenders by the Agent, the 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 any Borrower or any of its Subsidiaries which
may come into the possession of any of the Agent-Related Persons, provided,
however, that the Agent shall provide any Lender with copies of any notice,
report or other document provided to the Agent by any of the Borrowers and
requested by such Lender pursuant to this Loan Agreement.
14.7 Indemnification. 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 each
Borrower and without limiting the obligation of any Borrower to do so), pro
rata, 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. Each Lender shall reimburse the Agent
upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the 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 the Agent is not reimbursed for such expenses by or on behalf
of any Borrower. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
14.8 Agent in Individual Capacity. BABC and its Affiliates shall have
the same rights as any other Lender to 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 any Borrower or any of its Subsidiaries and Affiliates of
any Borrower as though BABC were not the Agent hereunder and without notice to
or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BABC or its Affiliates may receive information regarding a Borrower
or any of its Subsidiaries or any Affiliates of any Borrower (including
information that may be subject to confidentiality obligations in favor of such
Borrower, Subsidiary or Affiliate) and acknowledge that the Agent shall be under
no obligation to provide such information to them. With respect to its Loans,
BABC 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 Agent, and the terms
"Lender" and "Lenders" include BABC in its individual capacity.
14.9 Successor Agent. The Agent (i) if BABC, shall resign if
the principal amount of its Commitments as a Lender at any time is less than $25
million and as a result thereof Phar-Mor requests BABC's resignation as Agent
and (ii) may resign as Agent upon thirty (30) days' notice to the Lenders. If
the Agent resigns under this Agreement, the Majority Lenders shall appoint from
among the Lenders a successor agent for the Lenders. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Lenders and Phar-Mor, a successor agent
from among the Lenders. 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 14 shall inure to its benefit as to any actions taken
or omitted to
80
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 thirty (30) 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 the Agent hereunder until such time, if any, as the
Majority Lenders appoint a successor agent as provided for above.
14.10 Withholding Tax. (a) If any Lender is a "foreign
corporation, partnership or trust" within the meaning of the Code and such
Lender claims exemption from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code, such Lender agrees with and in favor of the
Agent, to deliver to the Agent:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) 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 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and (iii) such other form or forms as may be
required under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent 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 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Borrowers to such Lender, such Lender
agrees to notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrowers to such Lender. To the extent
of such percentage amount, the Agent will treat such Lender's IRS Form 1001 as
no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Lender, such Lender agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the 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 the Agent, then the 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.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to
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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
the 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 the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to the Agent under
this Section, together with all costs and expenses (including Attorney Costs).
The obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of the Agent.
14.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release any Agent's Lien upon any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by the Borrowers of all Loans and reimbursement obligations
in respect of Letters of Credit, and the termination of all outstanding Letters
of Credit (whether or not any of such obligations are due) and all other
Obligations; (ii) constituting property being sold or disposed of if the
applicable Borrower certifies to the Agent that the sale or disposition is made
in compliance with Section 9.8 (and the Agent may rely conclusively on any such
certificate, without further inquiry); or (iii) constituting property in which
no Borrower owned an interest at the time the Lien was granted or at any time
thereafter. Except as provided above, the Agent will not release any of the
Agent's Liens without the prior written authorization of the Majority Lenders;
provided that the Agent may not release the Agent's Liens on Collateral valued
in the aggregate in excess of $1,000,000 without the prior written authorization
of all of the Lenders. Upon request by the Agent or Phar-Mor at any time, the
Lenders will confirm in writing the Agent's authority to release any Agent's
Liens upon particular types or items of Collateral pursuant to this Section
14.11.
(b) Upon receipt by the Agent of any authorization required
pursuant to this Section 14.11(a) from the Majority Lenders or Lenders, as
applicable, of the Agent's authority to release any Agent's Liens upon
particular types or items of Collateral, and upon at least five (5) Business
Days' prior written request by Phar-Mor, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Agent's Liens upon such Collateral;
provided, however, that (i) the Agent shall not be required to execute any such
document on terms which, in the Agent's opinion, would expose the Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) 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 any Borrower
in respect of) all interests retained by any Borrower, including (without
limitation) the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.
(c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by any 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 the 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, the Agent may act in any manner it may deem
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appropriate, in its sole discretion given the Agent's own interest in the
Collateral in its capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing,
except to the extent of its gross negligence or willful misconduct.
14.12 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express consent of
the Agent, and that it shall, to the extent it is lawfully entitled to do so,
upon the request of the Agent, set off against the Obligations, any amounts
owing by such Lender to any Borrower or any accounts of any 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 the 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) Subject to Section 4.5, 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 of any
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from the Agent pursuant to the terms of this Agreement, or (ii) payments
from the Agent in excess of such Lender's ratable portion of all such
distributions by the Agent, such Lender shall promptly (1) turn the same over to
the Agent, in kind, and with such endorsements as may be required to negotiate
the same to the Agent, or in same day funds, as applicable, for the account of
all of the Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (2) purchase, without recourse or
warranty, an undivided interest and participation in the Obligations owed to the
other Lenders so that such excess payment received shall be applied ratably as
among the Lenders in accordance with their Pro Rata Shares; provided, however,
that if all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
14.13 Agency for Perfection. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Lenders' security
interest in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession. Should any Lender (other than the Agent) obtain
possession of any such Collateral, such Lender shall notify the Agent thereof,
and, promptly upon the Agent's request therefor shall deliver such Collateral to
the Agent or in accordance with the Agent's instructions.
14.14 Concerning the Collateral and the Related Loan
Documents. Each Lender authorizes and directs the Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Agent and the ratable benefit of the Lenders. Each Lender agrees
that any action taken by the Agent or Majority Lenders in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral,
and the exercise by the Agent or the Majority Lenders of their respective powers
set forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
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14.15 Field Audit and Examination Reports; Disclaimer by
Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that the 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 the
Agent;
(b) expressly agrees and acknowledges that neither BABC nor
the Agent (i) makes any representation or warranty as to the accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or other party performing
any audit or examination will inspect only specific information regarding the
Borrowers and will rely significantly upon the Borrowers' books and records, as
well as on representations of the Borrowers' personnel;
(d) agrees to keep all Reports confidential and strictly for
its internal use, and not to distribute or use any Report in any other manner;
and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold the
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 any Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of any Borrower; and (ii) to pay and protect, and indemnify,
defend and hold the Agent and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses and
other amounts (including, without limitation attorney costs) incurred by the
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.
ARTICLE 15
MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the exercise of any other, all of which shall
be cumulative. The Agent and the Lenders may, without limitation, proceed
directly against each or any Borrower to collect the Obligations without any
prior recourse to the Collateral. No failure to exercise and no delay in
exercising, on the part of the Agent or any Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
15.2 Severability. The illegality or unenforceability of any
provision of this
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Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.
15.3 Governing Law; Choice of Forum; Service of Process.
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS; PROVIDED THAT PERFECTION
ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE
OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF NEW
YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER, THE AGENT AND EACH
LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH BORROWER, THE AGENT AND EACH LENDER
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING:
(1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS
FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 15.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS
TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
15.4 Waiver of Jury Trial. (a) EACH BORROWER, EACH LENDER AND
THE AGENT WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY
85
OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH BORROWER, EACH
LENDER AND THE AGENT AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) EACH BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST AGENT
OR ANY LENDER ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE
DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
15.5 Survival of Representations and Warranties. Each
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
15.6 Other Security and Guaranties. The Agent, may, without
notice or demand and without affecting any Borrower's obligations hereunder,
from time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
15.7 Fees and Expenses. Each Borrower agrees to pay to the
Agent, for its benefit, on demand, all costs and expenses that Agent pays or
incurs in connection with the negotiation, preparation, consummation,
administration (other than overhead expenses), enforcement, and termination of
this Agreement and the other Loan Documents, including: (a) Attorney Costs; (b)
costs and expenses (including attorneys' and paralegals' fees and disbursements
which shall include the allocated costs of Agent's in-house counsel fees and
disbursements) for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien and title searches; (d) taxes, fees and
other charges for filing financing statements and continuations, and other
actions to perfect, protect, and continue the Agent's Liens (including costs and
expenses paid or incurred by the Agent in connection with the consummation of
Agreement and the other Loan Documents); (e) sums paid or incurred to pay any
amount or take any action required of any Borrower under the Loan Documents that
any Borrower fails to pay or take; (f) costs of appraisals, inspections, and
verifications of the Collateral, including travel, lodging, and meals for
inspections of the Collateral and the Borrowers' operations by the Agent's and
each of the Lenders' agents plus the Agent's then customary charge for field
examinations and audits and the preparation of reports thereof (such
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charge is currently $750 per day (or portion thereof) for each agent or employee
of the Agent with respect to each field examination or audit plus reasonably
incurred out of pocket expenses), provided, that prior to the occurrence of an
Event of Default, the Agent shall not be entitled to reimbursement for any such
costs and fees incurred in connection with audits in excess of three (3) per
year; (g) costs and expenses of forwarding loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Payment Account;
(h) costs and expenses of preserving and protecting the Collateral; and (i)
costs and expenses (including attorneys' and paralegals' fees and disbursements
which shall include the allocated cost of Agent's in-house counsel fees and
disbursements) paid or incurred by the Agent, BABC or any Lender to obtain
payment of the Obligations, enforce the Agent's Liens, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the Loan Documents,
or to defend any claims made or threatened against the Agent or any Lender
arising out of the transactions contemplated hereby (including preparations for
and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by any Borrower. All of the foregoing costs and expenses
shall be charged to the applicable Borrower's Loan Account as Revolving Loans as
described in Section 4.4.
15.8 Notices. (a) Except as otherwise provided herein, all
notices, demands and requests that any party is required or elects to give to
any other shall be in writing, or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, but not limited to, delivery by overnight
mail and courier service, (b) four (4) days after it shall have been mailed by
United States mail, first class, certified or registered, with postage prepaid,
or (c) in the case of notice by such a telecommunications device, when properly
transmitted, in each case addressed to the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Bank of America NT & SA
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Legal Department
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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If to any Borrower:
Phar-Mor, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Phar-Mor, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ Berlin
Shereff ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
(b) Phar-Mor is hereby authorized by each Borrower (i) to
execute and deliver on its behalf to the Agent Notices of Borrowing, Notices of
Continuation/Conversion, and notices of requests for Letters of Credit and to
give any other notices, directions or requests required or permitted to be
delivered or made to the Agent or the Lenders by it under any provision of any
Loan Document and (ii) to receive on its behalf any notices, directions or
requests addressed to or for the attention of it from the Agent and/or the
Lenders delivered under any provision of any Loan Document. Any notice,
direction or request delivered or made by Phar-Mor to the Agent and/or the
Lenders or received by Phar-Mor from the Agent and/or the Lenders shall be
deemed to have been delivered, made or received by Phar-Mor on behalf of any or
all of the other applicable Borrowers.
(c) Any agreement of the Agent and the Lenders herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Borrowers. The Agent and the Lenders shall be entitled
to rely on the authority of any Person purporting to be a Person authorized by
the Borrowers to give such notice and the Agent and the Lenders shall not have
any liability to any Borrower or other Person on account of any action taken or
not taken by the Agent or the Lenders in reliance upon such telephonic or
facsimile notice. The
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obligation of the Borrowers to repay the Obligations shall not be affected in
any way or to any extent by any failure by the Agent and the Lenders to receive
a confirmation or by a confirmation which is at variance with the terms
understood by the Agent and the Lenders to be contained in the telephonic or
facsimile notice.
15.9 Waiver of Notices. Unless otherwise expressly provided
herein, each Borrower waives presentment, protest and notice of demand or
dishonor and protest as to any instrument, notice of intent to accelerate the
Obligations and notice of acceleration of the Obligations, as well as any and
all other notices to which it might otherwise be entitled. No notice to or
demand on any Borrower which the Agent or any Lender may elect to give shall
entitle any Borrower to any or further notice or demand in the same, similar or
other circumstances.
15.10 Binding Effect. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; provided, however, that no
interest herein may be assigned by any Borrower without prior written consent of
the Agent and each Lender. The rights and benefits of the Agent and the Lenders
hereunder shall, if such Persons so agree, inure to any party acquiring any
interest in the Obligations or any part thereof.
15.11 Indemnity of the Agent and the Lenders by the Borrowers.
Each Borrower agrees to indemnify and hold the Agent-Related Persons, and each
Lender and each of its respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
Attorney costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans and the termination,
resignation or replacement of the Agent or replacement of any Lender) be imposed
on, incurred by or asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by or referred to
herein, or the transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
bankruptcy, reorganization or insolvency proceeding or appellate proceeding)
related to or arising out of this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities"); provided, that no
Borrower shall have any obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.
15.12 Final Agreement. This Agreement and the other Loan
Documents are intended by the Borrowers, the Agent and the Lenders to be the
final, complete, and exclusive expression of the agreement between them. This
Agreement supersedes any and all prior oral or written agreements relating to
the subject matter hereof. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement or any other Loan Document shall be
made, except by a written agreement signed by each Borrower and a duly
authorized officer of each of the Agent and the requisite Lenders.
15.13 Counterparts. This Agreement may be executed in any
number of counterparts, and by the Agent, each Lender and each Borrower in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same agreement.
15.14 Captions. The captions contained in this Agreement are
for convenience of reference only, are without substantive meaning and should
not be construed to modify,
89
enlarge, or restrict any provision.
15.15 Right of Setoff. In addition to any rights and remedies
of the Lenders provided by law, if an Event of Default exists or the Loans have
been accelerated, each Lender is authorized at any time and from time to time,
without prior notice to any Borrower, any such notice being waived by each
Borrower to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of any Borrower against any and all Obligations owing
to such Lender, now or hereafter existing, irrespective of whether or not the
Agent or such Lender shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Borrower and the Agent after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.
15.16 Joint and Several Liability. (a) Each Borrower shall be
liable for all amounts due to the Agent and/or any Lender under this Agreement,
regardless of which Borrower actually receives Loans or other extensions of
credit hereunder or the amount of such Loans received or the manner in which the
Agent and/or such Lender accounts for such Loans or other extensions of credit
on its books and records and regardless of any reference herein to any
particular Borrower agreeing to make any payment to the Agent or any Lender.
Each Borrower's Obligations with respect to Loans made to it, and each
Borrower's Obligations arising as a result of the joint and several liability of
the Borrowers hereunder with respect to Loans made to the other Borrowers
hereunder, shall be separate and distinct obligations, but all such Obligations
shall be primary obligations of each Borrower.
(b) All representations and warranties, all covenants and all
obligations made or incurred by any Borrower hereunder shall be deemed to have
been made or incurred jointly and severally by all of the Borrowers. Without
limiting the foregoing, each Borrower's Obligations arising as a result of the
joint and several liability of the Borrowers hereunder with respect to Loans or
other extensions of credit made to the other Borrowers hereunder shall, to the
fullest extent permitted by law, be unconditional irrespective of (i) the
validity or enforceability, avoidance or subordination of the Obligations of the
other Borrowers or of any promissory note or other document evidencing all or
any part of the Obligations of the other Borrowers, (ii) the absence of any
attempt to collect the Obligations from any of the other Borrowers, any other
guarantor, or any other security therefor, or the absence of any other action to
enforce the same, (iii) the waiver, consent, extension, forbearance or granting
of any indulgence by the Agent and/or any Lender with respect to any provision
of any instrument evidencing the Obligations of the other Borrowers, or any part
thereof, or any other agreement now or hereafter executed by the other Borrowers
and delivered to the Agent and/or any Lender, (iv) the failure by the Agent
and/or any Lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or collateral for the
Obligations of the other Borrowers, (v) the Agent's and/or any Lender's
election, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or
grant of a security interest by the other Borrowers, as debtor-in-possession
under Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any
portion of the Agent's and/or any Lender's claim(s) for the repayment of the
Obligations of the other Borrowers under Section 502 of the Bankruptcy Code, or
(viii) any other circumstances which might constitute a legal or equitable
discharge or defense of a guarantor or of such or any other Borrower. With
respect to each Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to Loans or other
extensions of credit made to any of the other Borrowers hereunder, each Borrower
waives, until the Obligations shall have been paid
90
in full and the Loan Agreement shall have been terminated, any right to enforce
any right of subrogation or any remedy which the Agent and/or any Lender now has
or may hereafter have against any Borrower, any endorser or any guarantor of all
or any part of the Obligations, and any benefit of, and any right to participate
in, any security or collateral given to the Agent and/or any Lender to secure
payment of the Obligations or any other liability of any Borrower to the Agent
and/or any Lender.
(c) Upon any Event of Default, the Agent may proceed directly
and at once, without notice, against any Borrower to collect and recover the
full amount, or any portion of the Obligations, without first proceeding against
any other Borrower or any other Person, or against any security or collateral
for the Obligations. Each Borrower consents and agrees that the Agent shall be
under no obligation to marshal any assets in favor of such Borrower or against
or in payment of any or all of the Obligations.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
91
IN WITNESS WHEREOF, the parties have entered into this Amended
and Restated Loan and Security Agreement on the date first above written.
PHAR-MOR, INC.
By:________________________________
Name:
Title:
PHAR-MOR OF DELAWARE, INC.
By:_______________________________
Name:
Title:
PHAR-MOR OF FLORIDA, INC.
By:________________________________
Name:
Title:
PHAR-MOR OF OHIO, INC.
By:________________________________
Name:
Title:
PHAR-MOR OF VIRGINIA, INC.
By:________________________________
Name:
Title:
PHAR-MOR OF WISCONSIN, INC.
By:________________________________
Name:
Title:
PHAR-MOR, INC., LLC
By:_________________________________
Name:
Title:
BANKAMERICA BUSINESS CREDIT, INC., as the
Agent
By:________________________________
Name:
Title:
92
Commitment: BANKAMERICA BUSINESS CREDIT, INC.,
$50,000,000 as a Lender
By:________________________________
Name:
Title:
▇▇▇▇▇▇ FINANCIAL, INC.,
Commitment: as a Lender
$25,000,000 By:________________________________
Name:
Title:
LASALLE BUSINESS CREDIT, INC.,
Commitment: as a Lender
$15,000,000 By:________________________________
Name:
Title:
Commitment: BNY FINANCIAL CORP.,
$10,000,000 as a Lender
By:________________________________
Name:
Title: