EXHIBIT 4.2
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION (CENTRAL)
as Lender and Agent for Lenders
and
PAYLESS CASHWAYS, INC.
as Borrower
Dated: November 17, 1999
(i)
TABLE OF CONTENTS
Page
SECTION .............................................................1
SECTION 2. CREDIT FACILITIES...........................................10
2.1 Revolving Loans.............................................10
2.2 Letter of Credit Accommodations.............................11
2.3 Availability Reserves.......................................12
2.4 Commitments.................................................13
SECTION 3. INTEREST AND FEES...........................................13
3.1 Interest....................................................13
3.2 Closing Fee.................................................14
3.3 Servicing Fee...............................................14
3.4 Unused Line Fee.............................................14
3.5 Syndication Fee.............................................14
3.6 Changes in Laws and Increased Costs of Loans................14
SECTION 4. CONDITIONS PRECEDENT........................................15
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations............................................15
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations............................................17
SECTION 5. SECURITY INTEREST...........................................17
SECTION 6. COLLECTION AND ADMINISTRATION...............................18
6.1 Borrower's Loan Account.....................................18
6.2 Statements..................................................18
6.3 Collection of Accounts......................................19
6.4 Payments....................................................20
6.5 Authorization to Make Loans.................................20
6.6 Use of Proceeds.............................................20
6.7 Sharing of Payments, Etc....................................21
6.8 Settlement Procedures.......................................22
6.9 Mandatory Prepayments from the Sale of the Real Property
Collateral................................................23
SECTION 7. COLLATERAL REPORTING AND COVENANTS..........................23
7.1 Collateral Reporting........................................23
7.2 Accounts Covenants..........................................24
7.3 Inventory Covenants.........................................24
7.4 Power of Attorney...........................................25
7.5 Right to Cure...............................................25
7.6 Access to Premises..........................................25
SECTION 8. REPRESENTATIONS AND WARRANTIES..............................26
8.1 Corporate Existence, Power and Authority; Subsidiaries......26
(i)
(ii)
8.2 Financial Statements; No Material Adverse Change............26
8.3 Chief Executive Office; Collateral Locations................26
8.4 Priority of Liens; Title to Properties......................26
8.5 Tax Returns.................................................27
8.6 Litigation..................................................27
8.7 Compliance with Other Agreements and Applicable Laws........27
8.8 Environmental Compliance....................................28
8.9 Merchant Agreements.........................................28
8.10 Employee Benefits...........................................29
8.11 Bank Accounts...............................................29
8.12 Accuracy and Completeness of Information....................29
8.13 Survival of Warranties; Cumulative..........................29
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..........................30
9.1 Maintenance of Existence....................................30
9.2 New Collateral Locations....................................30
9.3 Compliance with Laws, Regulations, Etc......................30
9.4 Payment of Taxes and Claims.................................31
9.5 Insurance...................................................31
9.6 Financial Statements and Other Information..................32
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.....33
9.8 Encumbrances................................................33
9.9 Indebtedness................................................34
9.10 Loans, Investments, Guarantees, Etc.........................34
9.11 Dividends and Redemptions...................................35
9.12 Transactions with Affiliates................................35
9.13 Merchant Agreements.........................................35
9.14 Adjusted Net Worth..........................................35
9.15 Compliance with ERISA.......................................36
9.16 Additional Bank Accounts....................................36
9.17 Costs and Expenses. .......................................36
9.18 Year 2000 Compliance........................................37
9.19 Further Assurances..........................................37
SECTION 10. EVENTS OF DEFAULT AND REMEDIES..............................37
10.1 Events of Default...........................................37
10.2 Remedies....................................................39
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW...............................40
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.........................................40
11.2 Waiver of Notices...........................................41
11.3 Amendments and Waivers......................................41
11.4 Waiver of Counterclaims.....................................41
11.5 Indemnification.............................................41
SECTION 12. THE AGENT...................................................42
12.1 Appointment, Powers and Immunities..........................42
12.2 Reliance by Agent...........................................42
(ii)
(iii)
12.3 Events of Default...........................................42
12.4 Rights as a Lender..........................................43
12.5 Indemnification.............................................43
12.6 Non-Reliance on Agent and Other Lenders.....................43
12.7 Failure to Act..............................................44
12.8 Resignation of .............................................44
12.9 Consents and Releases of Collateral under
Financing Agreements......................................44
12.10 Collateral Matters..........................................44
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS............................45
13.1 Term........................................................45
13.2 Notices.....................................................46
13.3 Partial Invalidity..........................................46
13.4 Successors..................................................46
13.5 Assignments and Participations..............................47
13.6 Modification of Agreement...................................48
13.7 Entire Agreement............................................48
(iii)
(iv)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A.................Information Certificate
Schedule 1.54.............Real Property Collateral
Schedule 6.3..............Bank Accounts
Schedule 6.9..............Minimum Sales Price For Real Property Collateral
Schedule 8.4..............Existing Liens
Schedule 8.7..............Permits
Schedule 8.8..............Environmental Matters
Schedule 8.9..............Merchant Agreements
Schedule 9.9..............Existing Indebtedness
Schedule 9.10.............Loans, Investments, Guarantees
(iv)
1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") dated November 17, 1999
is entered into by and among Congress Financial Corporation (Central), an
Illinois corporation ("Congress"; and together with any other signatory hereto
designated as a "Lender" or any assignee of any Lender, each individually, a
"Lender" and, collectively, "Lenders"), Congress, as agent for Lenders (in such
capacity "Agent") and PAYLESS CASHWAYS, INC., a Delaware corporation
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lenders enter into certain
financing arrangements with Borrower pursuant to which Lenders may make loans
and provide other financial accommodations to Borrower; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrower on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrower, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns. The words
"hereof", "herein", "hereunder", "this Agreement" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. The word "including" when used in this Agreement shall mean
"including, without limitation". The words "ratable" or ratably" or words of
similar import when used in this Agreement shall refer to a sharing or
allocation based on the respective Pro Rata Shares (as defined below) of
Lenders. An Event of Default shall exist or continue or be continuing until such
Event of Default is waived in accordance with Section 11.3 or cured in a manner
satisfactory to Agent, if such Event of Default is capable of being cured as
determined by Agent. Any accounting term used herein unless otherwise defined in
this Agreement shall have the meanings customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following terms shall
have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, whether or not
evidenced by instruments or chattel paper, and whether or not earned by
performance, and including, without limitation Private Label Card Receivables,
Commercial Receivables and other Credit Card Receivables.
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1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not Reference Bank
actually holds or has made any such deposits or loans. The Adjusted Eurodollar
Rate shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to the difference between: (a) the aggregate net book value of all assets
of such Person and its subsidiaries, calculating the book value of inventory for
this purpose principally on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (b) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) provided
that in calculating the Adjusted Net Worth of Borrower, any extraordinary or
unusual or non-recurring gains or non-cash losses or charges, in each case after
the date hereof, shall be excluded from such calculation.
1.4 "Agent" shall mean Congress in its capacity as agent on behalf of
Lenders pursuant to the terms hereof and any replacement or successor agent
hereunder.
1.5 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Agent may from time to time establish and revise
in good faith reducing the amount of Loans and Letter of Credit Accommodations
that would otherwise be available to Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
that, as determined by Agent in good faith, do or may affect either (i) the
Collateral or any other property which is security for the Obligations or its
value, (ii) the assets of Borrower or any Obligor; or (iii) the security
interests and other rights of Agent held for the ratable benefit of Lenders
(including the enforceability, perfection and priority thereof) or (b) to
reflect Agent's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Agent is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) in respect of any state of facts which Agent determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default, or (d) to reflect outstanding Letter of Credit
Accommodations as provided in Section 2.2 hereof or (e) as otherwise provided in
Section 2.3 hereof or Section 6.9 hereof.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.7 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Illinois, and a day on which Reference Bank and Agent
are open for the transaction of business, except that if a determination of a
Business Day shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
1.8 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock, partnership interests or limited liability company
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).
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1.9 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of
Borrower to any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act); (b) the liquidation or dissolution of Borrower or the adoption of
a plan by the stockholders of Borrower relating to the dissolution or
liquidation of Borrower; and (c) the acquisition by any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership,
directly or indirectly, of fifty (50%) percent or more of the voting power of
the total outstanding Voting Stock of Borrower or the Board of Directors of
Borrower.
1.10 "CIBC" shall mean Canadian Imperial Bank of Commerce, as
Coordinating and Collateral Agent pursuant to the CIBC Credit Agreement, and its
successors and assigns.
1.11 "CIBC Credit Agreement" shall mean the Second Amended and Restated
Credit Agreement dated as of November 17, 1999 among Borrower, each of the
financial institutions from time to time parties thereto as lenders and CIBC.
1.12 "CIBC Access Agreement" shall mean the Access Agreement dated of
even date herewith between CIBC and Agent.
1.13 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.14 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.15 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Agent, from any owner and lessor of
premises to Borrower, or any other person to whom any Collateral is consigned or
who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of Agent in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, and agrees to permit Agent access to,
and the right to remain on, the premises of such lessor, consignee or other
person so as to exercise Agent's rights and remedies and otherwise deal with
such Collateral.
1.16 "Commercial Account Acknowledgment" shall have the meaning set
forth in Section 4.1(g) hereof.
1.17 "Commercial Account Agreement" shall mean the Amended and Restated
Merchant Agreement (Commercial), dated as of October 25, 1999, by and between
Borrower and the Commercial Account Purchaser and all schedules and addenda
thereto, as the same now exists or may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced.
1.18 "Commercial Account Purchaser" shall mean Household Bank,f.s.b.and
its successors and assigns.
1.19 "Commercial Receivables" shall mean all present and future rights
of Borrower to payment from the Commercial Account Purchaser under the
Commercial Account Agreement.
1.20 "Commitment" shall have the meaning set forth in Section 2.4
hereof.
1.21 "Commitment Percentage" shall mean, as to each Lender, the
percentage of the Maximum Credit provided for hereunder represented by such
Lender's Commitment. The Commitment Percentage of each Lender signing this
Agreement is set forth on the signature pages hereto below each Lender's
respective signature.
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1.22 "Cost" shall mean, as to the Inventory as of any date, the cost of
such Inventory as of such date, determined principally on a first-in-first-out
basis in accordance with GAAP.
1.23 "Credit Card Acknowledgments" shall mean, individually and
collectively, the agreements by Credit Card Issuers (including the Private Label
Card Issuer) or Credit Card Processors who are parties to Credit Card Agreements
in favor of Lenders and Agent acknowledging the first priority security interest
of Agent, for the ratable benefit of Lenders, in the monies due and to become
due to Borrower (including, without limitation, credits and reserves) under the
Credit Card Agreements, and agreeing to transfer all such amounts to the Blocked
Accounts, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.24 "Credit Card Agreements" shall mean all agreements now or
hereafter entered into by Borrower with any Credit Card Issuer or any Credit
Card Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, including, but not
limited to, the agreements set forth on Schedule 8.9 hereto, and the Private
Label Card Agreement.
1.25 "Credit Card Issuer" shall mean any person (other than Borrower)
who issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank credit or debit cards or other bank credit or debit
cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
other non-bank credit or debit cards, including, without limitation, credit or
debit cards issued by or through American Express Travel Related Services
Company, Inc., Novus Services, Inc. and the Private Label Card Issuer.
1.26 "Credit Card Processor" shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing transfer and/or payment
procedures with respect to any of Borrower's sales transactions involving credit
card or debit card purchases by customers using credit cards or debit cards
issued by any Credit Card Issuer.
1.27 "Credit Card Receivables" shall mean collectively, (a) all present
and future rights of Borrower to payment from any Credit Card Issuer, Credit
Card Processor or other third party arising from sales of goods or rendition of
services to customers who have purchased such goods or services using a credit
or debit card (including Private Label Card Receivables and (b) all present and
future rights of Borrower to payment from any Credit Card Issuer, Credit Card
Processor or other third party in connection with the sale or transfer of
Accounts arising pursuant to the sale of goods or rendition of services to
customers who have purchased such goods or services using a credit card or a
debit card, including, but not limited to, all amounts at any time due or to
become due from any Credit Card Issuer or Credit Card Processor under the Credit
Card Agreements or otherwise.
1.28 [Intentionally Omitted]
1.29 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower that
are acceptable to Agent based on the criteria set forth below. In general,
Eligible Inventory shall not include (a) packaging and shipping materials; (b)
supplies used or consumed in Borrower's business; (c) Inventory at premises
other than those owned and controlled by Borrower, except for Inventory at
retail store or distribution center locations of Borrower which are leased by it
if either (i) Agent shall have received a Collateral Access Agreement duly
authorized, executed and delivered by the owner and lessor of such premises or
(ii) if Agent has not received such Collateral Access Agreement, then Agent
shall have established an Availability Reserve in respect of amounts due or
to become due to the owner and lessor of such retail store location (without
limiting any other rights and remedies of Agent under this Agreement or under
the other Financing Agreements with respect to the establishment of Availability
Reserves or otherwise); d) Inventory subject to a security interest or lien in
favor of any person other than Lenders except those permitted in this Agreement;
(e) ▇▇▇▇ and hold goods;
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(f) Inventory which is not subject to the first priority, valid and perfected
security interest of Lender;(g) with respect to each category of Inventory, slow
moving Inventory above historical levels, (h) prepaid Inventory which Agent is
unable to verify as being located at any of the Borrower's retail stores or
distribution centers; (i) damaged and/or defective Inventory (j) returned
Inventory that is not held for resale; (k) Inventory to be returned to vendors;
(l) Inventory subject to deposits made by customers for sales of Inventory that
has not been delivered; (m) Inventory held after the applicable expiration
date thereof; (n) samples and (o) Inventory purchased or sold on consignment.
Genera criteria for Eligible Inventory may be established and revised from
time to time by Agent in good faith. Any Inventory which is not Eligible
Inventory shall nevertheless be part of the Collateral.
1.30 "Environmental Laws" shall mean all Federal, State and local laws,
legislation, rules, codes, licenses, permits (including any conditions imposed
therein), authorizations, judicial or administrative decisions, injunctions or
agreements between Borrower and any governmental authority, (a) relating to
pollution and the protection, preservation or restoration of the environment
(including air, water vapor, surface water, ground water, drinking water,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety, (b) relating to the
exposure to, or the use, storage, recycling, treatment, generation, manufacture,
processing, distribution, transportation, handling, labeling, production,
release or disposal, or threatened release, of Hazardous Materials, or (c)
relating to all laws with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Materials. The term "Environmental
Laws" includes (i) the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
and the Federal Safe Drinking Water Act of 1974, (ii) applicable state
counterparts to such laws, and (iii) any other law or regulation that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Materials.
1.31 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.32 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.33 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.34 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Agent) on or
about 9:00 a.m. (Chicago, Illinois time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to
Borrower in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrower.
1.35 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
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1.36 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.37 "Excess Availability" shall mean the amount, as determined by
Agent, calculated at any time, equal to: (a) the amount of the Loans which would
be available to Borrower as of such time based on the applicable lending
formulas multiplied by the Value of Eligible Inventory, as determined by Agent,
and subject to the applicable sublimits and Availability Reserves at such time
established by Agent hereunder minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Loans and Letter of Credit Accommodations, plus (ii) the
aggregate amount of all trade payables and other obligations of Borrower which
are more than thirty (30) days past due as of such time, plus (iii) the amount
of checks issued by Borrower to pay trade payables which are more than thirty
(30) days past due as of such time, but not yet sent.
1.38 "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as the same now exists or may hereafter from time to time be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.39 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.40 "Fortress" shall mean Fortress Investment Group, LLC, as successor
to UBS Mortgage Finance, Inc., and its successors and assigns.
1.41 "Fortress Access Agreement" shall mean an Access Agreement between
Fortress and Agent.
1.42 "Fortress Credit Agreement" shall mean the UBS Loan Agreement as
assigned by UBS to Fortress.
1.43 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.14 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Agent prior to
the date hereof.
1.44 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.45 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
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1.46 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.47 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
three-quarters of one (3/4%) percent per annum in excess of the Prime Rate and,
as to Eurodollar Rate Loans, a rate of two and three-quarters (2 3/4%) percent
per annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar
Rate applicable for the Interest Period selected by Borrower as in effect two
(2) Business Days after the date of receipt by Agent of the request of Borrower
for such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower); provided,
that, for the first Fiscal Year ending after the date hereof for which Borrower
has pre-tax income (exclusive of one-time or extraordinary gains), as reflected
in Borrower's annual audited financial statements delivered to Agent pursuant to
Section 9.6(a)(ii) hereof, of not less than One Million ($1,000,000) Dollars
and, so long as no Event of Default then exists and is continuing, effective as
of the first (1st) day of the month immediately following the receipt by Agent
of such financial statements, the Interest Rate shall as a one-time adjustment
be reduced to the rate of one-half of one (1/2%) percent per annum in excess of
the Prime Rate as to Prime Rate Loans and the rate of two and one-half (2 1/2%)
percent in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans.
If, however, following an interest rate reduction as provided immediately above,
Borrower has for any Fiscal Year pre-tax income (exclusive of one-time or
extraordinary gains) as reflected in Borrower's annual audited financial
statements delivered to Agent pursuant to Section 9.6(a)(ii) hereof, of less
than One Million ($1,000,000) Dollars effective as of the first (1st) day of the
month immediately following the receipt by Agent of such financial statements,
the Interest Rate shall be increased to the rate of three-quarters of one (3/4%)
percent per annum in excess of the Prime Rate as to Prime Rate Loans and the
rate of two and three-quarters (2 3/4%) percent per annum in excess of the
Adjusted Eurodollar Rate as to Eurodollar Rate Loans. Notwithstanding anything
to the contrary contained in this Agreement or in any of the other Financing
Agreements, the Interest Rate, as to Prime Rate Loans and Eurodollar Rate Loans,
shall mean the rate two (2%) percent per annum more than the otherwise
applicable Interest Rate, at Agent's option or at the written direction of the
Required Lenders,, without notice, (a) for the period on and after (i) the date
of termination or non-renewal hereof and until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower), or (ii) the date of the occurrence of any Event of Default, and for
so long as such Event of Default is continuing as determined by Agent and (b) on
the Loans at any time outstanding in excess of the amounts available to Borrower
under Section 2 (whether or not such excess(es), arise or are made with or
without Agent's knowledge or consent and whether made before or after an Event
of Default).
1.48 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.49 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Agent for the account of Borrower or any Obligor
or (b) with respect to which Agent has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrower of its obligations to such
issuer.
1.50 "Loans" shall mean the Revolving Loans.
1.51 "Maximum Credit" shall mean $260,000,000.
1.52 "Material Adverse Effect" shall mean a material adverse change in,
or a material adverse effect upon (a) the condition (financial or otherwise),
operations, business or affairs of Borrower or any Obligor, (b) the ability of
Borrower or any Obligor to repay any Obligations under any of the Financing
Agreements, or (c) Agent's or
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Lenders' rights or interests in its Collateral or of Agent's or Lenders' ability
to enforce the Obligations or realize upon its Collateral.
1.53 "Merchant Agreements" shall mean, collectively, the Commercial
Account Agreement and all Credit Card Agreements.
1.54 "Mortgage" or "Mortgages" shall mean (as the same may now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced) the mortgages, deeds of trust and security agreements executed by
Borrower in favor of Agent with respect to the Real Property and assets related
to such Real Property of Borrower located at each of the premises listed on the
attached Schedule 1.54.
1.55 "Net Recovery Cost Percentage" shall mean the fraction, expressed
as a percentage, (a) the numerator of which is the amount equal to the recovery
on the aggregate amount of the Inventory at such time on a "going out of
business sale" basis as set forth in the most recent acceptable appraisal of
Inventory received by Agent in accordance with Section 7.3, net of operating
expenses, liquidation expenses and commissions, and (b) the denominator of which
is the original Cost of the aggregate amount of the Inventory subject to
appraisal.
1.56 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Agent and any Lender and/or
any of their affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, arising under or related to this Agreement or any of the
transactions arising hereunder or related hereto, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including, without limitation, the payment of interest and other
amounts which would accrue and become due but for the commencement of such case,
whether or not such amounts are allowed or allowable in whole or in part in such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Agent or any Lender.
1.57 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.58 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.59 [Intentionally Omitted]
1.60 "Permits" shall have the meaning set forth in Section 8.7 hereof.
1.61 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.62 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.63 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
hereof.
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1.64 "Private Label Card" shall mean the private label credit card
issued by the Private Label Card Issuer bearing the name and design developed by
Borrower and approved by the Private Label Card Issuer, which is subject to the
arrangements of Borrower with the Private Label Card Issuer set forth in the
Private Label Card Agreement.
1.65 "Private Label Card Agreement" shall mean the First Amendment to
Amended and Restated Monogram Credit Card Bank of Georgia Program Agreement
dated as of August 1, 1998, by and between Borrower and the Private Label Card
Issuer and all schedules and addenda thereto, as the same now exists or may
hereafter be further amended, modified, supplemented, extended, renewed,
restated or replaced.
1.66 "Private Label Card Issuer" shall mean Monogram Credit Card Bank
of Georgia, a Georgia banking corporation, and its successors and assigns.
1.67 "Private Label Card Receivables" shall mean Credit Card
Receivables arising pursuant to the purchase by a retail customer of Inventory
from Borrower in the ordinary course of business using a Private Label Card.
1.68 "Pro Rata Share" shall mean, with respect to each Lender, its
proportionate share of the Loans and the risk under the Letter of Credit
Accommodations, based on its Commitment Percentage.
1.69 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
1.70 "Real Property Collateral" shall mean all existing and future Real
Property upon which Borrower has executed and delivered a Mortgage in favor of
Agent.
1.71 "Records" shall have the meaning set forth in Section 5.8 hereof.
1.72 "Reference Bank" shall mean First Union National Bank, or such
other bank as Agent may designate from time to time.
1.73 "Renewal Date" shall have the meaning set forth in Section 13.1
hereof.
1.74 "Required Lenders" shall mean, as of any date of determination
thereof, Lenders holding more than sixty-six and two-thirds (66 2/3%) percent of
the aggregate outstanding principal amount of Revolving Loans and outstanding
Letter of Credit Accommodations, or, if there are no Revolving Loans or Letter
of Credit Accommodations outstanding, then such term shall mean Lenders having
aggregate Commitment Percentages of more than sixty-six and two-thirds (66 2/3%)
percent.
1.75 "Revolving Loan Limit" shall mean $260,000,000.
1.76 "Revolving Loans" shall mean the loans now or hereafter made by
Lenders to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.77 "Settlement Period" shall have the meaning set forth in Section
6.8(b).
1.78 "UBS" shall mean UBS Mortgage Finance, Inc. and its successors
and assigns.
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1.79 "UBS Loan Agreement" shall mean (a) that certain Amended and
Restated Loan Agreement dated as of December 2, 1997 between Borrower and UBS,
as heretofore amended, and (b) that certain Loan Agreement dated as of December
2, 1997, among Borrower, the banks and financial institutions party thereto (the
"Synthetic Lease Banks") and BA Leasing and Capital Corporation as agent for the
Synthetic Lease Banks.
1.80 "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) Cost or (b) market value.
1.81 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder hereof into Capital
Stock of such Person described in clause (a) of this definition.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, each of the Lenders severally (and not jointly) agrees to fund its Pro
Rata Share of Loans to Borrower from time to time in amounts requested by
Borrower up to the aggregate amount equal to: (i) the lesser of: (A) the lesser
of (1) sixty-five (65%) percent multiplied by the Value of the Eligible
Inventory and (2) eighty-six (86%) percent of the product of the Value of the
Eligible Inventory multiplied by the Net Recovery Cost Percentage; and (B) the
Maximum Credit minus (ii) any Availability Reserves.
(b) Agent may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, reduce the lending formula
with respect to Eligible Inventory to the extent that Agent for the ratable
benefit of Lenders, determines, in good faith, that: (i) the number of days of
the turnover of the Inventory for any period has materially increased or (ii)
the nature, quality or mix of the Inventory has deteriorated or (iii) there is a
decrease in the Net Recovery Cost Percentage after the date hereof. In
determining whether to reduce the lending formula(s), Agent may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Inventory or in establishing Availability Reserves.
(c) The aggregate principal amount of the Loans and the Letter
of Credit Accommodations outstanding at any time shall not exceed the Maximum
Credit. In the event that the outstanding amount of the Loans, or the aggregate
amount of the outstanding Loans and Letter of Credit Accommodations, exceed the
amounts available under the lending formulas, the sublimits for Letter of Credit
Accommodations set forth in Section 2.2(d) or the Maximum Credit, as applicable,
such event shall not limit, waive or otherwise affect any rights of Agent, for
the ratable benefit of Lenders, in that circumstance or on any future occasions
and Borrower shall, upon demand by Agent, which may be made at any time or from
time to time, immediately repay to Agent, for the ratable benefit of Lenders,
the entire amount of any such excess(es) for which payment is demanded.
To the extent Agent shall have established an Availability
Reserve which is sufficient to address any event, condition or matter in a
manner satisfactory to Agent in good faith, Agent shall not exercise its rights
under Section 2.1(b) to reduce the lending formulas to address such event,
condition or matter. The amount of any reduction in the lending formula by Agent
pursuant to Section 2.1(b) or the establishment of any Availability Reserve
shall have
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a reasonable relationship to the matter which is the basis for such a
reduction or such Availability Reserve, as the case may be.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrower, Agent agrees, for the ratable risk of each
Lender according to its Pro Rata Share, to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Agent and the issuer thereof. Any payments made by
Agent, for the ratable benefit of each Lender according to its Pro Rata Share,
to any issuer thereof and/or related parties in connection with the Letter of
Credit Accommodations shall constitute additional Loans to Borrower.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Agent, for the ratable benefit of Lenders, a letter of
credit fee at a rate equal to two (2%) percent per annum on the daily
outstanding balance of the Letter of Credit Accommodations for the immediately
preceding month (or part thereof), payable in arrears as of the first day of
each succeeding month, except that Borrower shall pay to Agent, for the ratable
benefit of Lenders, such letter of credit fee, at Agent's option, without
notice, at a rate equal to four (4%) percent per annum for (i) the period from
and after the date of termination or non-renewal hereof until Agent, for the
ratable benefit of Lenders, has received full and final payment of all
Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the
period from and after the date of the occurrence of an Event of Default and for
so long as such Event of Default is continuing. Such letter of credit fee shall
be calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Loans available to Borrower (subject to the Revolving Loan
Limit and any Availability Reserves) are equal to or greater than (i) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) the percentage equal to one hundred (100%)
percent minus the then applicable percentage set forth in Section 2.1(a) above
multiplied by the Value of such Eligible Inventory, plus (B) freight, taxes,
duty and other amounts that Agent estimates must be paid in connection with such
Inventory upon arrival and for delivery to one of Borrower's locations for
Eligible Inventory; and (ii) if the proposed Letter of Credit Accommodation is
for any other purpose an amount equal to one hundred (100%) percent of the face
amount thereof and all other commitments and obligations made or incurred by
Agent or any Lender with respect thereto. Effective on the issuance of each
Letter of Credit Accommodations, an Availability Reserve shall be established in
the applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Agent's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Agent or any Lender in connection therewith,
shall not at any time exceed $35,000,000. At any time an Event of Default exists
or has occurred and is continuing, upon Agent's request, Borrower will either
furnish cash collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Agent, for the ratable benefit of Lenders, for the Letter of Credit
Accommodations, and in either case, the Loans otherwise available to Borrower
shall not be reduced as provided in Section to 2.2(c) the extent of such cash
collateral.
(e) Borrower shall indemnify and hold Agent and Lenders
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses which Agent or any Lender may suffer or incur in connection
with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including, but not limited to, any losses, claims,
damages, liabilities, costs and expenses due to any action taken by any issuer
or correspondent with respect to any Letter of Credit Accommodation. Borrower
assumes all risks with respect to the
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acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent.Borrower assumes all risks for, and agrees to pay, all foreign,
Federal, State and local taxes, duties and levies relating to any goods subject
to any Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. Borrower hereby releases and holds Agent and Lenders harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation. The provisions of this Section
2.2 (e) shall survive the payment of Obligations and the termination or non-
renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Agent or Lenders
in any manner. Agent and Lenders shall have no liability of any kind with
respect to any Letter of Credit Accommodation provided by an issuer other than
Agent or Lenders unless Agent has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect to such
Letter of Credit Accommodation. Borrower shall be bound by any interpretation
made in good faith by Agent, or any other issuer or correspondent under or in
connection with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrower. Agent shall have the sole and
exclusive right and authority to, and Borrower shall not: (i) at any time an
Event of Default exists or has occurred and is continuing, (A) approve or
resolve any questions of non-compliance of documents, (B) give any instructions
as to acceptance or rejection of any documents or goods or (C0 execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, and (ii) at all times, prior to the occurrence of an Event of Default,
with the consent of Borrower, and, after the occurrence of an Event of Default,
without the consent of Borrower, (A) grant any extensions of the maturity of,
time of payment for, or time of presentation of, any drafts, acceptances, or
documents and (B) agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral.
Agent may take such actions either in its own name, Lenders' name, or in
Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Agent, for the ratable benefit of
Lenders. Any duties or obligations undertaken by Agent to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or any
other agreement by Agent in favor of any issuer or correspondent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrower to Agent, for the ratable benefit of Lenders, and to apply in all
respects to Borrower.
2.3 Availability Reserves. (a) All Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Revolving Loan
Limit shall be subject to Agent's continuing right to establish and revise
Availability Reserves. Without limiting any other rights or remedies of Agent
and Lenders under this Agreement or any of the other Financing Agreements with
respect to the establishment of Availability Reserves or otherwise, Agent may
establish and revise Availability Reserves to reflect: (i) inventory shrinkage;
(ii) the aggregate amount of deposits, if any, received by Borrower from its
customers in respect of unfilled orders for merchandise; (iii) amounts due in
respect of sales, use and/or withholding taxes; and (iv) any rental payments,
service charges or other amounts due to lessors of real or personal property to
the extent Inventory or Records are located in or on such property or such
Records are needed to monitor or otherwise deal with the Collateral.
(b) In addition to and not in limitation of the foregoing, Borrower
hereby consents to the establishment of an availability reserve in the amount of
$3,000,000 (the "Fortress Access Agreement Reserve"). The Fortress Access
Agreement Reserve shall be established on the date hereof and shall continue
until such time as the Agent has received a Fortress Access Agreement in form
and substance satisfactory to Agent.
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2.4 Commitments. The aggregate amount of each Lender's share of the
Loans and Letter of Credit Accommodations shall not exceed the amount set forth
below such Lender's signature on the signature pages hereto, as the same may
from time to time be amended with the written acknowledgment of Agent. Such
amount for each Lender is referred to herein as such Lender's "Commitment".
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Agent, for the ratable benefit of
Lenders interest on the outstanding principal amount of the non-contingent
Obligations at the Interest Rate. All interest accruing hereunder on and after
the date of any Event of Default or termination or non-renewal hereof shall be
payable on demand.
(b) Borrower may from time to time request that Prime Rate
Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate
Loans continue for an additional Interest Period. Such request from Borrower
shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, two (2) Business Days after receipt by Agent of
such a request from Borrower, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, as of such date each of the following conditions is
satisfied as determined by Lender: (i no Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred and be continuing, (ii) no party hereto
shall have sent any notice of termination or non-renewal of this Agreement,
(iii) Borrower shall have complied with such customary procedures as are
established by Agent and specified by Agent to Borrower from time to time for
requests by Borrower for Eurodollar Rate Loans, (iv) no more than five (5)
Interest Periods may be in effect at any one time, (v) the aggregate amount of
the Eurodollar Rate Loans must be in an amount not less than $2,000,000 or an
integral multiple of $1,000,000 in excess thereof, and (vi) Agent shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Agent through Reference Bank and can be readily determined as of the date of the
request for such Eurodollar Rate Loan by Borrower. Any request by Borrower to
convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing
Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the
contrary contained herein, Agent, Lenders and Reference Bank shall not be
required to purchase United States Dollar deposits in the London interbank
market or other applicable Eurodollar Rate market to fund any Eurodollar Rate
Loans, but the provisions hereof shall be deemed to apply as if Agent, Lenders
and Reference Bank had purchased such deposits to fund the Eurodollar Rate
Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Agent has received and approved a request to continue such Eurodollar Rate Loan
at least two (2) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by
Agent to Borrower, convert to Prime Rate Loans in the event that (i) an Event of
Default or act, condition or event which with the notice or passage of time or
both would constitute an Event of Default, shall exist or have occurred, (ii)
this Agreement shall terminate or not be renewed, or (iii) the aggregate
principal amount of the Prime Rate Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate Loans continued, as the case
may be, at the beginning of an Interest Period shall at any time during such
Interest Period exceed either (A) the aggregate principal amount of the Loans
then outstanding, or (B) the Loans then available to Borrower under Section 2
hereof. Borrower shall pay to Agent, for the ratable benefit of Lenders, upon
demand by Agent (or Agent may, at its option, charge any loan account of
Borrower) any amounts required to compensate Agent, Lenders, Reference Bank or
any participant with Lenders for any loss (including loss
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of anticipated profits), cost or expense incurred by such person, as a result
of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any
of the foregoing.
(d) Interest shall be payable by Borrower to Agent, for the
ratable benefit of Lenders, monthly in arrears not later than the first day of
each calendar month and shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed. The interest rate on
non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or
decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the last day of the month in
which any such change occurs. In no event shall charges constituting interest
payable by Borrower to Agent exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or provision of
this Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Agent, for the ratable benefit
of Lenders, as a closing fee the amount of $2,600,000 which shall be fully
earned as of and payable on the date hereof.
3.3 Servicing Fee. Borrower shall pay to Agent, Agent's own account,
monthly a servicing fee in an amount equal to $5,000 for each month (or part
thereof) while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding, which fee shall be fully earned as of and
payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 Unused Line Fee. Borrower shall pay to Agent, for the ratable
benefit of Lenders, monthly an unused line fee at a rate equal to three-eighths
of one (3/8%) percent per annum calculated upon the amount by which the
Revolving Loan Limit exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
3.5 Syndication Fee. Borrower shall pay to Agent, for Agent's own
account, as a syndication fee the amount of $650,000 which shall be fully earned
as of and payable on the date hereof.
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Agent to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Agent, any Lender, any Participant of Congress or Reference
Bank to make or maintain Eurodollar Rate Loans or to comply with the terms
hereof in connection with the Eurodollar Rate Loans, or (B) shall result in the
increase in the costs to Agent, Lenders, any Participant of Congress or
Reference Bank of making or maintaining any Eurodollar Rate Loans or by an
amount deemed by Agent to be material, or (C) reduce the amounts received or
receivable by Agent for the ratable benefit of Lenders in respect thereof, by an
amount deemed by Agent to be material or (ii) the cost to Agent, Lenders, any
Participant of Congress or Reference Bank of making or maintaining any
Eurodollar Rate Loans shall otherwise increase by an amount deemed by Agent to
be material. Borrower shall pay to Agent, for the ratable benefit of Lenders,
upon demand by Agent (or Agent may, at its option, charge any loan account of
Borrower) any amounts required to compensate Agent, Lenders, any Participant of
Congress or Reference Bank for any loss (including loss of anticipated profits),
cost or expense incurred by such person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such person
to make or maintain the Eurodollar Rate Loans or any portion thereof. A
certificate
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of Agent setting forth the basis for the determination of such amount necessary
to compensate Agent as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.
(b)If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Agent other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrower shall
pay to Agent upon demand by Agent (or Agent may, at its option, charge any loan
account of Borrower) any amounts required to compensate Agent, Lenders, any
Participant of Congress or Reference Bank for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof. Agent shall provide Borrower with
a written statement setting forth the amount of any such additional loss.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lenders (or
Agent on behalf of Lenders) making the initial Loans and providing the initial
Letter of Credit Accommodations hereunder:
(a) Agent shall have received, in form and substance
satisfactory to Agent, all releases, terminations and such other documents as
Agent may request to evidence and effectuate the release and/or termination of
any interest in and to any assets and properties of Borrower and each Obligor,
other than liens and security interests permitted under Section 9.8 hereof, duly
authorized, executed and delivered, including, but not limited to, UCC
termination statements;
(b) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has valid perfected first priority security
interests in and liens upon the Collateral and any other property which is
intended to be security for the Obligations or the liability of any Obligor in
respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) Agent shall have received the CIBC Access Agreement
executed and delivered by CIBC;
(d) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Agent, and Agent shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Agent may have requested in
connection therewith, such documents where requested by Agent or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(e) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Agent's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Agent to
enforce the Obligations or realize upon the Collateral;
(f) Agent shall have completed a field review of the Records
and such other information with respect to the Collateral as Agent may require
to determine the amount of Loans available to Borrower (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Lender, together with such supporting
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documentation as may be necessary or appropriate, and other documents and
information that will enable Agent to accurately identify and verify the
Collateral), the results of which, in each case, shall be satisfactory
to Agent, not more than three (3) Business Days prior to the date hereof;
(g) Agent shall have received an agreement in favor of Lenders
and Agent from Commercial Account Purchaser acknowledging the first priority
security interest of Agent, for the ratable benefit of Lenders, in monies due
and to become due to Borrower (including, without limitation, credits and
reserves) under the Commercial Account Agreement as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, and agreeing to transfer all such amounts to the Blocked Accounts (the
"Commercial Account Acknowledgement");
(h) Agent shall have received, in form and substance
satisfactory to Agent, all consents, waivers, acknowledgments and other
agreements from third persons which Agent may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgments
by lessors, mortgagees and warehousemen of Agent's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Agent's
access to, and the right to remain on, the premises to exercise its rights and
remedies and otherwise deal with the Collateral;
(i) Borrower shall have established the Blocked Accounts and
Agent shall have received, in form and substance satisfactory to Agent, all
agreements with the depository banks and Borrower with respect to such Blocked
Accounts as Agent may require pursuant to Section 6.3 hereof, duly authorized,
executed and delivered by such depository banks and Borrower;
(j) Agent shall have received evidence, in form and substance
satisfactory to Agent, that all local banks used by Borrower for collections
from retail store locations have been irrevocably authorized and directed in
writing to remit such amounts to the Blocked Accounts;
(k) Agent shall have received Credit Card Acknowledgments in
each case, duly authorized, executed and delivered by the Credit Card Issuers
and Credit Card Processors;
(l) Agent shall have received a duly executed Private Label
Card Agreement and Commercial Account Agreement, the terms and provisions of
which shall be satisfactory to Agent;
(m) Agent shall have received, in form and substance
satisfactory to Agent, a valid and effective title insurance policy issued by a
company and agent acceptable to Agent (i) insuring the priority, amount and
sufficiency of the Mortgages, (ii) insuring against matters that would be
disclosed by surveys and (iii) containing any legally available endorsements,
assurances or affirmative coverage requested by Agent for protection of Lenders'
interests;
(n) the Excess Availability as determined by Agent, as of the
date hereof, shall not be less than $20,000,000 after giving effect to the
initial Loans made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder;
(o) Agent shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Agent, and certificates of insurance
policies and/or endorsements naming Agent and each Lender as loss payee with
respect to the Collateral;
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(p) Agent shall have received Commitments from Lenders
(including Congress) or Assignees of Congress in an aggregate amount equal to
the Maximum Credit;
(q) Agent shall have received, in form and substance
satisfactory to Agent, the opinion letter of counsel(s) to Borrower with respect
to the Financing Agreements and the security interests and liens of Agent with
respect to the Collateral and such other matters as Agent may request; and
(r) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Agent, in form and substance satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lenders (or Agent on behalf of Lenders) making Loans and/or providing Letter of
Credit Accommodations to Borrower, including the initial Loans and Letter of
Credit Accommodations and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representation or warranty expressly relates to an
earlier date and except for changes therein expressly permitted or expressly
contemplated by this Agreement; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Agent, for the ratable benefit of Lenders, a continuing security
interest in, a lien upon, and a right of set off against, and hereby assigns to
Agent, for the ratable benefit of Lenders, as security, the following property
and interests in property of Borrower, whether now owned or hereafter acquired
or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 Inventory;
5.3 Real Property Collateral;
5.4 all present and future tax and duty refunds (the "Refunds");
5.5 all present and future registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, and
customer lists (the "Intellectual Property");
5.6 all present and future contract rights relating to the Accounts,
Inventory, Real Property, Intellectual Property and Refunds; licenses, whether
as licensor or licensee, choses in action and other claims and general
intangibles (including, without limitation, all present and future amounts due
Borrower from any credit card issuer in
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connection with the purchase by such credit card issuer or any purchaser of
any accounts) relating to the Accounts, Inventory, Real Property, Intellectual
Property and Refunds; chattel paper, documents and instruments relating to the
Accounts, Inventory, Real Property, Intellectual Property and Refunds; bills
of lading, cargo receipts and other documents of title with respect to any
Inventory of Borrower; letters of credit, bankers' acceptances and guaranties
relating to the Accounts, Inventory, Real Property, Intellectual Property and
Refunds;
5.7 all present and future monies, securities and other investment
property, credit balances, deposits, deposit accounts and other property of
Borrower now or hereafter held or received by or in transit to Secured Party or
its affiliates or at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise which relate to the Accounts, Inventory, Real Property,
Intellectual Property and Refunds, and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of the
Accounts, Inventory, Real Property, Intellectual Property and Refunds,
including, without limitation, (i) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance relating to the Accounts, Inventory, Real Property, Intellectual
Property and Refunds, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party relating to the Accounts, Inventory, Real Property,
Intellectual Property and Refunds, (iii) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, the Accounts, Inventory, Real Property, Intellectual Property and
Refunds including, without limitation, returned, repossessed and reclaimed
goods, and (iv) deposits by and property of account debtor or other persons
securing the obligations of account debtors relating to the Accounts, Inventory,
Real Property, Intellectual Property and Refunds;
5.8 all of Borrower's present and future books of account of every kind
or nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to any of the Accounts, Inventory, Real Property,
Intellectual Property and Refunds, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which any of the foregoing are stored, including any rights of Borrower
with respect to the foregoing maintained with or by any other person
("Records"); and
5.9 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Agent's customary practices as in effect from time to
time.
6.2 Statements. Agent shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Agent
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Agent receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Agent.
Until such time as Agent shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Agent by Borrower.
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6.3 Collection of Accounts.
(a)Agent shall establish and maintain, at its expense, deposit
account arrangements and merchant payment arrangements with the banks set forth
on Schedule 6.3 hereto and after prior written notice to Agent, subject to
Section 9.16, such other banks as Borrower may hereafter select as are
acceptable to Agent. The banks set forth on Schedule 6.3 constitute all of the
banks with whom Borrower has deposit account arrangements and merchant payment
arrangements as of the date hereof and identifies each of the deposit accounts
at such banks to a retail store location of Borrower or otherwise describes the
nature of the use of such deposit account by Borrower.
(i) Borrower shall deposit all proceeds from sales
of Inventory in every form, including, without limitation, cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store receipts, from each retail store location of Borrower on each
Business Day into the deposit accounts of Borrower used solely for such purpose
and identified to each retail store location as set forth on Schedule 6.3. All
such funds deposited into the separate deposit accounts shall be sent by wire
transfer on a daily basis and all other proceeds of Collateral shall be sent by
wire transfer, to the Blocked Accounts as provided in Section 6.3(a)(ii) below.
Borrower shall irrevocably authorize and direct in writing,in form and substance
satisfactory to Agent, each of the banks into which proceeds from sales of
Inventory from each retail store location of Borrower are at any time deposited
as provided above to send all funds deposited in such account by wire transfer
on a daily basis to the Blocked Accounts. Such authorization and direction
shall not be rescinded, revoked or modified without the prior written consent of
Agent.
(ii) Borrower shall establish and maintain, at its
expense, deposit accounts with such banks as are acceptable to Agent (the
"Blocked Accounts") into which Borrower shall promptly either cause all amounts
on deposit in its deposit accounts used by each retail store location to be
sent as provided in Section 6.3(a)(i) above or shall itself deposit or cause to
be deposited all proceeds from sales of Inventory, all amounts payable to
Borrower from Credit Card Issuers, Credit Card Processors and the Commercial
Account Purchaser and all other proceeds of Collateral. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Agent, providing that all items received or deposited
in the Blocked Accounts are the property of Agent, for the ratable benefit
of Lenders, that the depository bank has no lien upon, or right of setoff
against, the Blocked Accounts, the items received for deposit therein, or the
funds from time to time on deposit therein and that the depository bank
will wire, or otherwise transfer, in immediately available funds, on a daily
basis, all funds received or deposited into the Blocked Accounts to such bank
account of Agent, as Agent may from time to time designate for such purpose
("Payment Account"). Borrower agrees that all amounts deposited in such
Blocked Accounts or other funds received and collected by Agent, whether
as proceeds of inventory or other Collateral or otherwise shall be the property
of Agent, for the ratable benefit of Lenders.
(b) For purposes of calculating the amount of the Loans
available to Borrower such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Agent of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Agent's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next Business Day.
For purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Agent in the Payment Account (the "Collection Period")
provided such payments or other funds and notice thereof are received in
accordance with Agent's usual and customary practices as in effect from time to
time and within sufficient time to credit Borrower's loan account on such day,
and if not, then on the next Business Day. The economic benefit of the
Collection Period shall be for Agent's sole account.
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(c) Borrower and all of its affiliates, subsidiaries,
directors, employees or agents shall, acting as trustee for Agent, receive, as
the property of Agent, for the ratable benefit of Lenders, any cash, checks,
credit card sales drafts, credit card sales or charge slips or receipts, notes,
drafts, all forms of store receipts or any other payment relating to and/or
proceeds of Accounts or other Collateral which come into their possession or
under their control and immediately upon receipt thereof, shall deposit or cause
the same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Agent, for the ratable benefit of Lenders,
provided, that, if at any time the Excess Availability shall be less than
$1,000,000, Borrower shall promptly upon Agent's request cause the portion
thereof representing sales and/or use taxes payable in connection with such
sales or otherwise to be deposited into a separate bank account or accounts
established for such purpose. In no event shall and such cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts, notes, drafts
or other payments be commingled with Borrower's own funds. Borrower agrees to
reimburse Agent on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Agent's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Agent, for the ratable benefit of Lenders, for such
amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Agent may designate from time
to time. Agent may apply payments received or collected from Borrower or for the
account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Agent determines, provided
that, all such payments shall be applied to Prime Rate Loans before being
applied to Eurodollar Rate Loans. At Agent's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Agent, for the ratable benefit of
Lenders, on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Agent is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Agent. Borrower
shall be liable to pay to Agent, for the ratable benefit of Lenders, and does
hereby indemnify and hold Agent and Lenders harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain
effective notwithstanding any contrary action which may be taken by Agent in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Agent, for the ratable benefit of
Lenders, is authorized to make the Loans and provide the Letter of Credit
Accommodations, for the account and risk of Lenders, based upon telephonic or
other instructions received from anyone purporting to be an officer of Borrower
or other authorized person or, at the discretion of Agent, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:30 a.m. Chicago, Illinois time on any day shall be deemed to have been made
as of the opening of business on the immediately following Business Day. All
Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Agent, for the account and risk of Lenders, to Borrower
hereunder only for: (a) payments to each of the persons listed in the
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disbursement direction letter furnished by Borrower to Agent on or about the
date hereof and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements or related to the transactions contemplated. All other Loans made or
Letter of Credit Accommodations provided by Agent to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating, working
capital and other proper corporate purposes of Borrower not otherwise prohibited
by the terms hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the Loans to be considered a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended.
6.7 Sharing of Payments, Etc.
(a) Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim Agent or a
Lender may otherwise have, each Lender shall be entitled, at its option (but
subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it for the account of Borrower at any of its
offices, in dollars or in any other currency, against any principal of or
interest on any unpaid Loans owed to such Lender or any other unpaid amount
payable to such Lender hereunder (regardless of whether such balances are then
due to Borrower), in which case it shall promptly notify Borrower and Agent
thereof; provided, that, such Lender's failure to give such notice shall not
affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from Borrower
payment of any principal of or interest on any Loan owing to it or payment of
any other amount under this Agreement or any other Financing Agreement through
the exercise of any right of setoff, banker's lien or counterclaim or similar
right or otherwise (other than from Agent as provided herein), and, as a result
of such payment, such Lender shall have received more of its Pro Rata Share of
the principal of or interest on the Loans or such other amounts then due
hereunder or thereunder by Borrower to such Lender than the percentage thereof
received by any other Lender, it shall promptly pay to Agent, for the benefit of
Lenders, the amount of such excess and simultaneously purchase from such other
Lenders a participation in the Loans or such other amounts, respectively, owing
to such other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with their respective Pro Rata
Shares. Amounts received by Agent under this Section 6.7(b) hereof shall be
treated as a payment received from Borrower. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.
(c) Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise, in a manner consistent with
this Section 6.7, all rights of setoff, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Loans or other amounts (as the case may be) owing to such
Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of Borrower. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section 6.7 applies, such Lender shall, to the extent
practicable, assign such rights to Agent for the benefit of Lenders and, in any
event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section 6.7 to share
in the benefits of any recovery on such secured claim.
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6.8 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and Lenders, Agent
shall, subject to the terms of this Section 6.8, make available, on behalf of
Lenders, the full amount of the Loans requested or charged to Borrower's loan
account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof,
without any requirement of prior notice to Lenders of the proposed Loans.
(b) With respect to all Loans made by Agent on behalf of
Lenders as provided in this Section 6.8, the amount of each Lender's Pro Rata
Share of the outstanding Loans shall be computed weekly, and shall be adjusted
upward or downward on the basis of the amount of the outstanding Loans as of
5:00 P.M. (Chicago, Illinois time) on the Business Day immediately preceding the
date of each settlement computation; provided, that, Agent retains the absolute
right at any time or from time to time to make the above described adjustments
at intervals more frequent than weekly. Agent shall deliver to each of the
Lenders after the end of each week, or at such lesser period or periods as Agent
shall determine, a summary statement of the amount of outstanding Loans for such
period (such week or lesser period or periods being hereinafter referred to as a
"Settlement Period"). If the summary statement is prior to 12:00 Noon (Chicago,
Illinois time) then such Lender shall make the settlement transfer described in
this Section by no later than 2:00 P.M. (Chicago, Illinois time) on the day such
summary statement was sent, and if such summary statement after 12:00 Noon
(Chicago, Illinois time) such Lender shall make such settlement transfer by no
later than 2:00 P.M. (Chicago, Illinois time) on the next Business Day following
the date of receipt. If, as of the end of any Settlement Period, the amount of a
Lender's Pro Rata Share of the outstanding Loans is more than such Lender's Pro
Rata Share of the outstanding Loans as of the end of the previous Settlement
Period, then such Lender shall forthwith (but in no event later than the time
set forth in the preceding sentence) transfer to Agent by wire transfer in
immediately available funds the amount of the increase; alternatively, if the
amount of a Lender's Pro Rata Share of the outstanding Loans in any Settlement
Period is less than the amount of such Lender's Pro Rata Share of the
outstanding Loans for the previous Settlement Period, Agent shall forthwith
transfer to such Lender by wire transfer in immediately available funds the
amount of the decrease. The obligation of each of the Lenders to transfer such
funds and effect such settlement shall be irrevocable and unconditional and
without recourse to or warranty by Agent. Each of Agent and Lenders agrees to
▇▇▇▇ its books and records at the end of each Settlement Period to show at all
times the dollar amount of its Pro Rata Share of the outstanding Loans and
Letter of Credit Accommodations.
(c) To the extent that Agent has made any such amounts
available and the settlement described above shall not yet have occurred, upon
repayment of any Loans by Borrower, Agent may apply such amounts repaid directly
to any amounts made available by Agent pursuant to this Section 6.8. In lieu of
weekly or more frequent settlements, Agent may at any time require each Lender
to provide Agent with immediately available funds representing its Pro Rata
Share of each Loan, prior to Agent's disbursement of such Loan to Borrower.
(d) Because Agent, on behalf of Lenders, may be advancing or
may be repaid Loans prior to the time when Lenders will actually advance or be
repaid Loans, interest and fees with respect to the outstanding Loans shall be
allocated by Agent to each Lender (including Agent), and the amount of each
Lender's Pro Rata Share shall be computed daily, in accordance with the amount
of the outstanding Loans actually advanced by and repaid to each Lender on each
day during each Settlement Period and shall accrue from and including the date
such Loans are advanced by Agent to but excluding the date such Loans are repaid
by Borrower in accordance with the terms of this Agreement or actually settled
by the applicable Lender as described in this Section 6.8. Provided that such
Lender has made all payments required to be made by it under this Agreement and
the other Financing Agreements, Agent will pay to such Lender, by wire transfer
to such Lender not later than 12:00 noon (Chicago, Illinois time) on or about
the tenth (10th) day of each month, such Lender's Pro Rata Share of interest and
fees actually received and collected from Borrower for the benefit of Lenders.
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(e) Nothing in this Section 6.8 or elsewhere in this Agreement
or the other Financing Agreements shall be deemed to require Agent to advance
funds on behalf of any Lender or to relieve any Lender from its obligation to
fulfill its Commitment hereunder or to prejudice any rights that Borrower may
have against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
6.9 Mandatory Prepayments from the Sale of the Real Property
Collateral. Notwithstanding anything to the contrary contained herein, so long
as no Event of Default exists and is continuing, Borrower shall be permitted to
sell any Real Property Collateral provided that, in each instance, Borrower
receives net proceeds from the sale of each such Real Property Collateral of not
less than the amount set forth on Schedule 6.9 hereof next to each respective
parcel of Real Property Collateral (the "Minimum Sales Price"). The net proceeds
from each such sale shall be remitted to Agent, for the ratable benefit of
Lenders, for application to the Loan in accordance with Section 6.4 hereof. In
addition to and not in limitation of Agent's right to establish Availability
Reserves hereunder, Borrower hereby expressly consents, each time that any Real
Estate Collateral is sold, to the establishment of a reserve in an amount equal
to the Minimum Sales Price for such Real Estate Collateral.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Agent with the
following documents in a form satisfactory to Agent:
(a) on a weekly basis or more frequently as Agent may request,
(i) inventory reports by categories and location (including (A) indicating the
amounts of Inventory at distribution centers and stores and (B) scheduling all
of Borrower's prepaid Inventory), (ii) reports of sales of Inventory, indicating
gross sales, returns, allowances and net sales, and (iii) reports of aggregate
Inventory purchases (including all costs related thereto, such as freight, duty
and taxes);
(b)on a monthly basis or more frequently as Agent may request,
(i) perpetual Inventory reports by category and location, (ii) a schedule of all
consigned Inventory, (iii) a slow moving Inventory report, and (iv) a schedule
of accounts payable;
(c) upon Agent's request, (i) copies of deposit slips and bank
statements, (ii) copies of purchase orders, invoices and delivery documents for
Inventory acquired by Borrower, (iii) reports on sales and use tax collections,
deposits and payments, including monthly sales and use tax accruals, and (iv)
reports by retail store location of sales and operating profits for each such
retail store location;
(d) as soon as available, but in any event not later than five
(5) Business Days after receipt by Borrower, the monthly statements received by
Borrower from any Credit Card Issuers or Credit Card Processors, together with
such additional information with respect thereto as shall be sufficient to
enable Agent to monitor the transactions pursuant to the Credit Card Agreements;
and
(e) such other reports as to the Collateral as Agent shall
request from time to time.
If any of Borrower's records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Agent and to
follow Agent's instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
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7.2 Accounts Covenants.
(a) Borrower shall notify Agent promptly of: (i) any notice of
a material default by Borrower under any of the Merchant Agreements or of any
default which might result in the Credit Card Issuer, Commercial Account
Purchaser or Credit Card Processor ceasing to make payments or suspending
payments to Borrower, (ii) any notice from any Credit Card Issuer, Commercial
Account Purchaser or Credit Card Processor that such person is ceasing or
suspending, or will cease or suspend, any present or future payments due or to
become due to Borrower from such person, or that such person is terminating or
will terminate any of the Merchant Agreements, and (iii) the failure of Borrower
to comply with any material terms of the Credit Card Agreements or any terms
thereof which might result in the Credit Card Issuer, Commercial Account
Purchaser or Credit Card Processor ceasing or suspending payments to Borrower.
(b) Agent may, at any time or times that an Event of Default
exists or has occurred, (i) notify any or all account debtors, Commercial
Account Purchaser, Credit Card Issuers and Credit Card Processors that the
Accounts have been assigned to Agent and that Agent has a security interest
therein and Agent may direct any or all account debtors, Commercial Account
Purchaser, Credit Card Issuers and Credit Card Processors to make payments of
Accounts directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Agent shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Agent,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Agent may request on or after an Event of Default, and promptly
following such physical inventory shall supply Agent with a report in the form
and with such specificity as may be reasonably satisfactory to Agent concerning
such physical count; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Agent, except for sales of Inventory in the ordinary course of Borrower's
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) upon Agent's request, Borrower
shall, at its expense, no more than three (3) times in any twelve (12) month
period; but at any time or times as Agent may request at Agent's expense, or at
any time or times as Agent may request at Borrower's expense on or after an
Event of Default, deliver or cause to be delivered to Agent written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Agent and by an appraiser acceptable to Agent, addressed to Agent or upon which
Agent is expressly permitted to rely; (e) upon Agent's request, Borrower shall,
at its expense, conduct through RGIS Inventory Specialists, Inc. or another
inventory counting service acceptable to Agent, a physical count of the
Inventory in form, scope and methodology acceptable to Agent no more than once
in any twelve (12) month period, but at any time or times as Agent may request
on or after an Event of Default, or at any time or times as Agent may request in
the event of test count variances in excess of the shrinkage reserve established
by Borrower, the results of which shall be reported directly by such inventory
counting service to Agent and Borrower shall promptly deliver confirmation in a
form satisfactory to Agent that appropriate adjustments have been made to the
inventory records of Borrower to reconcile the inventory count to Borrower's
inventory records; (f) Borrower shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (g) Borrower assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the
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Inventory; (h) Borrower shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate
Borrower to repurchase such Inventory except for the right of return given
to retail customers of Borrower in the ordinary course of the business of
Borrower in accordance with the then current return policy of Borrower; (i)
Borrower shall keep the Inventory in good and marketable condition; and (j)
Borrower shall not acquire or accept any Inventory on consignment or approval,
except to the extent such Inventory is reported to Agent in accordance with the
terms hereof.
7.4 Power of Attorney. Borrower hereby irrevocably designates and
appoints Agent (and all persons designated by Agent) as Borrower's true and
lawful attorney-in-fact, and authorizes Agent, in Borrower's or Agent's name,
to: (a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Agent deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Agent, and open and dispose of all
mail addressed to Borrower, (ix) sign Borrower's name on any verification of
Accounts and notices thereof to account debtors, (x) endorse Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any other
Collateral, and (xi) do all acts and things which are necessary, in Agent's
determination, to fulfill Borrower's obligations under this Agreement and the
other Financing Agreements; and (b) at any time to (i) take control in any
manner of any item of payment on or respecting Collateral or proceeds thereof to
the extent it has not been timely deposited into the Blocked Account in
accordance with the provisions of this Agreement, (ii) have access to any
lockbox or postal box into which any proceeds of Collateral is deposited, (iii)
endorse Borrower's name upon any items of payment on or respecting Collateral or
proceeds of Collateral and deposit the same in the Agent's account for
application to the Obligations, and (iv) execute in Borrower's name and file any
UCC financing statements or amendments thereto. Borrower hereby releases Agent
and its officers, employees and designees from any liabilities arising from any
act or acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Agent's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.5 Right to Cure. Agent may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Agent's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Agent and Lenders with
respect thereto. Agent may add any amounts so expended to the Obligations and
charge Borrower's account therefor, such amounts to be repayable by Borrower on
demand. Agent shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower. Any payment made or other action taken by Agent under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.6 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrower, (a) Agent or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including, without limitation, the Records, and (b) Borrower shall
promptly furnish to Agent such copies of such books and records or extracts
therefrom as Agent may request, and (c) Agent or its designee may use during
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normal business hours such of Borrower's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of Accounts
and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Agent and Lenders the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and providing Letter of Credit Accommodations by Lenders to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Agent or any Lender in or to
any of the Collateral. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder are all within Borrower's corporate powers, have been
duly authorized and are not in contravention of law or the terms of Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which Borrower is a party or by which
Borrower or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms. Borrower does not have
any subsidiaries except Lumber ▇▇▇▇, Inc..
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Agent or Lenders have been prepared in accordance with GAAP and
fairly present the financial condition and the results of operation of Borrower
as at the dates and for the periods set forth therein. Except as disclosed in
any interim financial statements furnished by Borrower to Agent or Lenders prior
to the date of this Agreement, there has been no material adverse change in the
assets, liabilities, properties and condition, financial or otherwise, of
Borrower, since the date of the most recent audited financial statements
furnished by Borrower to Agent or Lenders prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts and Inventory are
located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in the Information Certificate, subject to the right of Borrower to
establish new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned by
Borrower and sets forth the owners and/or operators thereof and to the best of
Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Agent, for the ratable benefit of Lenders, under this Agreement
and the other Financing Agreements constitute valid and perfected first priority
liens and security interests in and upon the Collateral subject only to the
liens indicated on Schedule 8.4 hereto and the other liens permitted under
Section 9.8 hereof. Borrower has good and marketable title to all of its
properties and assets subject to no liens, mortgages, pledges, security
interests, encumbrances or charges of any kind, except those granted to Agent,
for the ratable benefit of Lenders, and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
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8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Agent). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, and has collected, deposited and remitted in accordance with all
applicable laws all sales and/or use taxes applicable to the conduct of its
business, except taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed. Borrower has collected and deposited in a separate
bank account or remitted to the appropriate tax authority all sales and/or use
taxes applicable to its business required to be collected under the laws of the
United States and each possession or territory thereof, and each State or
political subdivision thereof, including any State in which Borrower owns any
Inventory or owns or leases any other property.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which is reasonably likely to result in any
material adverse change in the assets, business or prospects of Borrower or
would impair the ability of Borrower to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Agent
to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrower is not in default in any respect under, or in
violation in any respect of any of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrower is in compliance in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority relating to its business,
including, without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all Federal, State and local statutes, regulations,
rules and orders relating to consumer credit (including, without limitation, as
each has been amended, the Truth-in-Lending Act, the Fair Credit Billing Act,
the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and
regulations, rules and orders promulgated thereunder), all Federal, State and
local states, regulations, rules and orders pertaining to sales of consumer
goods (including, without limitation, the Consumer Products Safety Act of 1972,
as amended, and the Federal Trade Commission Act of 1914, as amended, and all
regulations, rules and orders promulgated thereunder), except any such defaults,
violations or non-compliance that, individually or in the aggregate, have not
resulted in, and could not reasonably be expected to result in, a Material
Adverse Effect.
(b) Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any governmental
agency required for the lawful conduct of its business (the "Permits"). The
Permits constitute all permits, licenses, approvals, consents, certificates,
orders or authorizations necessary for Borrower to own and operate its business
as presently conducted or proposed to be conducted where the failure to have
such Permits would have a material adverse effect on the business, performance,
operations or properties of Borrower or the legality, validity or enforceability
of this Agreement or the other Financing Agreements or the ability of Borrower
to perform its obligations under the Agreement or any of the other Financing
Agreements or the rights and remedies of Agent and Lenders under this Agreement
or any of the other Financing Agreements. All of the Permits are valid and
subsisting and in full force and effect. There are no actions, claims or
proceedings pending or, to the best
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of Borrower's knowledge, after due investigation, threatened that seek the
revocation, cancellation, suspension or modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, to Borrower's
knowledge, Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law in any material respect or any
license, permit, certificate, approval or similar authorization issued to
Borrower thereunder and the operations of Borrower comply in all material
respects with all applicable Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder.
(b) There is no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or any other
person pending or threatened with respect to any non-compliance with or
violation of the requirements of any applicable Environmental Law by Borrower
nor has there been any release, spill or discharge, overtly threatened or
actual, of any Hazardous Material on any properties of Borrower, releases,
spills or discharges from any properties at which Borrower has transported,
stored or disposed of any Hazardous Materials, or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental matter which affects Borrower or
its business, operations or assets in any material respect.
(c) Borrower has no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect in each case where the failure to obtain or
maintain such licenses, permits, certificates, approvals or similar
authorizations would have a material adverse effect on the assets or business of
Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Agent or any Lender to enforce any Obligations or realize upon any
Collateral.
8.9 Merchant Agreements. Set forth in Schedule 8.9 hereto is a correct
and complete list of (a) all of the Merchant Agreements and all other
agreements, documents and instruments existing as of the date hereof between or
among Borrower, any of its affiliates, the Commercial Account Purchaser, the
Credit Card Issuers, the Credit Card Processors and any of their affiliates, (b)
the percentage of each sale payable to the Commercial Account Purchaser, the
Credit Card Issuer or Credit Card Processor under the terms of the Merchant
Agreements, (c) all other fees and charges payable by Borrower under or in
connection with the Merchant Agreements, and (d) the term of such Merchant
Agreements. The Merchant Agreements constitute all of such agreements necessary
for Borrower to operate its business as presently conducted with respect to
credit cards and debit cards and no Accounts of Borrower arise from purchases by
customers of Inventory with credit cards or debit cards, other than those
Accounts purchased by the Commercial Account Purchaser and other than those
which are issued by Credit Card Issuers with whom Borrower has entered into one
of the Credit Card Agreements set forth on Schedule 8.9 hereto or with whom
Borrower has entered into a Credit Card Agreement in accordance with Section
9.13 hereof. Each of the Merchant Agreements constitutes the legal, valid and
binding obligations of Borrower and to the best of Borrower's knowledge, the
other parties thereto, enforceable in accordance with their respective terms and
are in full force and effect. No default or event of default, or act, condition
or event which after notice or passage of time or both, would constitute a
default or an event of default under any of the Merchant Agreements exists or
has occurred. Borrower and the other parties
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thereto have complied with all of the terms and conditions of the Merchant
Agreements to the extent necessary for Borrower to be entitled to receive all
payments thereunder. Borrower has delivered, or caused to be delivered to
Agent or Lenders, true, correct and complete copies of all of the Merchant
Agreements.
8.10 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection
with which Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to ERISA or a tax imposed the Code, including
any accumulated funding deficiency described in Section 8.10(c) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.10(d)
hereof.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower to be incurred with respect to any employee
benefit plan of Borrower or any of its ERISA Affiliates, other than for premiums
in the ordinary course under Section 4007 of ERISA. There has been no reportable
event (within the meaning of ERISA) or any other event or condition with respect
to any employee benefit plan of Borrower or any of its ERISA Affiliates which
presents a risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which Borrower
or any of its ERISA Affiliates is required under ERISA and the Code to have paid
under the terms of each employee benefit plan as contributions to such plan as
of the last day of the most recent fiscal year of such plan ended prior to the
date hereof, and no accumulated funding deficiency (as defined in ERISA and the
Code), whether or not waived, exists with respect to any employee pension
benefit plan, including any penalty or tax described in Section 8.10(a) hereof
and any deficiency with respect to vested accrued benefits described in Section
8.10(d) hereof.
(d) As of the last day of the most recent plan year, the
current value of all vested accrued benefits under all employee pension benefit
plans maintained by Borrower that are subject to Title IV of ERISA does not
exceed the current value of the assets of such plans allocable to such vested
accrued benefits, including any penalty or tax described in Section 8.10(a)
hereof and any accumulated funding deficiency described in Section 8.10(d)
hereof. The terms "current value" and "accrued benefit" have the meanings
specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
within the last ten years, ever been obligated to contribute to any
"multiemployer plan" (as such term is defined in ERISA) that is subject to Title
IV of ERISA.
8.11 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 6.3 hereto, subject to the
right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.12 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Agent or Lenders in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Information Certificate is true and correct in all material
respects on the date as of which such information is dated or certified and does
not omit any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a material adverse affect on the business, assets
or prospects of Borrower, which has not been fully and accurately disclosed to
Agent or Lenders in writing.
8.13 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be
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deemed to have been made again to Agent and Lenders on the date of each
additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless
of any investigation made or information possessed by Agent and Lenders.
The representations and warranties set forth herein shall be cumulative and
in addition to any other representations or warranties which Borrower shall now
or hereafter give, or cause to be given, to Agent and Lenders.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Agent thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Agent a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower (a) gives Agent twenty (20) days
prior written notice of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Agent such
agreements, documents, and instruments as Agent may deem reasonably necessary or
desirable to protect its interests in the Collateral at such location, including
UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall at all times comply in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders and duly observe all material requirements, of any
foreign, Federal, State or local governmental authority, including the
Occupational Safety and Health Act of 1970, as amended, the Code, the Fair Labor
Standards Act of 1938, as amended, and the rules and regulations thereunder, all
Federal, State and local statutes, regulations, rules and orders relating to
consumer credit (including, without limitation, as each has been amended, the
Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity
Act and the Fair Credit Reporting Act, and regulations, rules and orders
promulgated thereunder), all Federal, State and local statutes, regulations,
rules and orders pertaining to sales of consumer goods (including, without
limitation, the Consumer Products Safety Act of 1972, as amended, and the
Federal Trade Commission Act of 1914, as amended, and all regulations, rules and
orders promulgated thereunder) and all statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including all Environmental Laws, ,except where the failure to so
comply does not, individually or in the aggregate, and could not reasonably be
expected to, result in a Material Adverse Effect. .
(b) Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include periodic assessment of
such compliance by employees or agents of Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrower to Agent
upon Agent's written request. Borrower shall take prompt and appropriate action
to respond to any non-compliance with any of the Environmental Laws and shall
regularly report to Agent on such response.
(c) Borrower shall give written notice to Agent immediately
upon Borrower's receipt of any notice of, or Borrower's otherwise obtaining
knowledge of, (i) the occurrence of any event involving the release, spill
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or discharge, threatened or actual, of any Hazardous Material in violation of
any Environmental Law or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by Borrower or (B) the release, spill
or discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which has a Material Adverse Effect on
Borrower or its business, operations or assets or any properties at which
Borrower transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any material
non-compliance, with any Environmental Law, Borrower shall, at Agent's request
and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Agent to conduct such tests of the site where Borrower's
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Agent a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Agent and
Lender, their respective directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including attorneys' fees and
legal expenses) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material,
including the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of Borrower and the preparation and
implementation of any closure, remedial or other required plans. All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Agent or any Lender as a result of the financing arrangements provided for
herein and Borrower agrees to indemnify and hold Agent and each Lender harmless
with respect to the foregoing, and to repay to Agent and each Lender on demand
the amount thereof, and until paid by Borrower such amount shall be added and
deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require Borrower to pay any income or franchise taxes attributable
to the income of Agent or any Lender from any amounts charged or paid hereunder
to Agent or any Lender. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Agent as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Agent as Agent
shall require as proof of such insurance, and, if Borrower fails to do so, Agent
is authorized, but not required, to obtain such insurance at the expense of
Borrower. All policies shall provide for at least thirty (30) days prior written
notice to Agent of any cancellation or reduction of coverage and that Agent may
act as attorney for Borrower in obtaining, and at any time an Event of Default
exists or has occurred and is continuing, adjusting, settling, amending and
canceling such insurance. Borrower shall cause Agent and each Lender to be named
as a loss payee and an additional insured (but
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without any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender's loss payable endorsements to
all insurance policies in form and substance satisfactory to Agent. Such
lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Agent, for the ratable benefit of Lenders, as its
interests may appear and further specify that Agent shall be paid regardless of
any act or omission by Borrower or any of its affiliates. At its option, Agent
may apply any insurance proceeds received by Agent at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Agent may determine
or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Agent: (i) within thirty (30) days after the end of each fiscal month,
monthly unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and, if Borrower has any subsidiaries, audited
consolidating financial statements of Borrower and its subsidiaries (including
in each case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Agent, that
such financial statements have been prepared in accordance with GAAP, and
present fairly the results of operations and financial condition of Borrower and
its subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Agent in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or act, condition or event which,
with the passage of time or giving of notice or both, would constitute an Event
of Default.
(c) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Agent copies of all reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Without limiting the rights of Agent under any other
provision of this Agreement, as soon as available, but in any event not later
than three (3) days after the end of each calendar month, Borrower shall deliver
to Agent, in form and substance satisfactory to Agent, in each case certified by
the Chief Financial Officer of Borrower as true and correct, a statement
confirming the payment of rent and other amounts due to owners and lessors of
real property used by Borrower in the immediately preceding month. Borrower
shall also deliver to Agent, immediately upon receipt, copies of any default
notice received by Borrower from any owner or lessor of any Real Property.
(e) Borrower shall furnish or cause to be furnished to Agent
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Agent may, from time to time,
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reasonably request. Agent and Lenders are hereby authorized to deliver a copy of
any financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Agent, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrower and to disclose to Agent such information as they may have regarding
the business of Borrower. Any documents, schedules, invoices or other papers
delivered to Agent may be destroyed or otherwise disposed of by Agent one (1)
year after the same are delivered to Agent, except as otherwise designated by
Borrower to Agent in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrower shall not, directly or indirectly:
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or
(b) sell, assign, lease, transfer, abandon or otherwise
dispose of any stock or indebtedness to any other Person or any of its real or
personal property to any other Person, except for (i) sales of Inventory in the
ordinary course of business, (ii) sales of the Real Property Collateral in
accordance with Section 6.9 hereof, (iii) (A) sales of equipment and other real
property which Borrower has determined are no longer necessary in the conduct of
its business or (B) sales of any real or personal property which is subject to
the lien or security interest of CIBC and/or Fortress provided that , in each
instance, the sale of such equipment, real property or other assets will not
have a Material Adverse Effect upon the Borrower's assets or business, taken as
a whole; and (iv) provided no Default exists and is continuing, (A) sales of any
other assets provided that the aggregate amount of such assets shall not exceed
$2,000,000 per annum, or (B) sales by Borrower of any of Borrower's Capital
Stock, provided that, in each instance, the proceeds from such sale (other than
from the sale of any real or personal property which is subject to the lien or
security interest of CIBC and/or Fortress) are remitted to Agent for application
against the Loans then outstanding; or
(c) form or acquire any subsidiaries, or
(d) wind up, liquidate or dissolve, or
(e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except: (a) liens and security interests of Agent, for the ratable
benefit of Lenders; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books; (c)
non-consensual statutory liens (other than liens securing the payment of taxes)
arising in the ordinary course of Borrower's business to the extent: (i) such
liens secure indebtedness which is not overdue or (ii) such liens secure
indebtedness relating to claims or liabilities which are fully insured and being
defended at the sole cost and expense and at the sole risk of the insurer or
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have been
set aside on its books; (d) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of Real Property which do not interfere
in any material respect with the use of such Real Property or ordinary conduct
of the business of Borrower as presently conducted thereon or materially impair
the value of the Real Property which may be subject thereto; (e) purchase money
security interests in Equipment (including capital leases) and purchase money
mortgages on real estate not to exceed $10,000,000 in the aggregate at any time
outstanding so long as such security interests and
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mortgages do not apply to any property of Borrower other than the Equipment or
real estate so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case may be; (f)
liens or rights of setoff or credit balances of Borrower with Credit Card
Issuers but not liens on or rights of setoff against any other property or
assets of Borrower pursuant to the Credit Card Agreements (as in effect on
the date hereof) to secure the obligations of Borrower to the Credit Card
Issuers as a result of fees and chargebacks; and (g) liens or rights of setoff
or credit balances of Borrower with Commercial Account Purchaser but not liens
on or right of setoff against any other property of assets of Borrower, all as
more particularly set forth in the Commercial Acknowledgment; and (h) the liens
and security interests set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to
the extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;
(d) obligations or indebtedness existing as of the date hereof
set forth on Schedule 9.9 hereto ("Schedule 9.9 Indebtedness"), provided, that,
(i) notwithstanding anything to the contrary contained herein, Borrower may
refinance the Borrower's obligations to Fortress and/or CIBC, provided that in
connection therewith any such replacement lender executes and delivers an access
agreement substantially on the same terms as the Fortress Access Agreement or
CIBC Access Agreement, as the case may be, (ii) Borrower may only make regularly
scheduled payments of principal and interest in respect of the Schedule 9.9
Indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to the Schedule 9.9 Indebtedness as in effect on the
date hereof or make mandatory prepayments required to be made under the
agreements or instruments referred to on Schedule 9.9 hereto, (iii) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change in any
material respect the repayment terms of the Schedule 9.9 Indebtedness or the
repayment terms of any agreement, document or instrument related thereto as in
effect on the date hereof, or (B) redeem, retire, defease, purchase or otherwise
acquire the Schedule 9.9 Indebtedness (other than pursuant to clause (d)(i)
above) , or set aside or otherwise deposit or invest any sums for such purpose,
and (iv) Borrower shall furnish to Agent all notices or demands in connection
with such indebtedness either received by Borrower or on its behalf, promptly
after the receipt thereof, or sent by Borrower or on its behalf, concurrently
with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the Capital Stock or indebtedness or all or a substantial part of the
assets or property of any person, or guarantee, assume, endorse, or otherwise
become responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except: (a) the endorsement of instruments for collection or deposit in the
ordinary course of business; and (b) the existing loans, advances and guarantees
by Borrower outstanding as of the date hereof as set forth on Schedule 9.10
hereto; provided, that, as to such loans, advances and guarantees, (i) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire such guarantee or set aside or otherwise deposit or invest
any sums for such purpose and (ii) Borrower shall furnish to Agent all notices,
demands or other
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materials in connection with such loans, advances or guarantees either received
by Borrower or on its behalf, promptly after the receipt thereof, or sent
by Borrower or on its behalf, concurrently with the sending thereof, as the
case may be; and (c) investments in a maximum aggregate amount of $2,000,000;
provided, that, as to any of the foregoing, unless waived in writing by Agent,
Borrower shall take such actions as are deemed necessary by Agent to perfect
the security interest of Agent in such investments.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of Capital Stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing; except that so long as no Event of
Default exists or is continuing, Borrower may make payments in connection with a
reverse stock split or with respect to the exercise of any options relating to
any class of Capital Stock provided that the aggregate amount of all such
payments shall not exceed $1,000,000.
9.12 Transactions with Affiliates. Borrower shall not directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, employee, shareholder, director, agent or
any other person affiliated with Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain in
a comparable arm's length transaction with an unaffiliated person or (b) make
any payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any officer, employee, shareholder,
director or other person affiliated with Borrower except reasonable compensation
to officers, employees and directors for services rendered to Borrower in the
ordinary course of business. Any payments made under the CIBC Credit Agreement
shall not be deemed to be transactions with shareholders prohibited hereunder.
9.13 Merchant Agreements. Borrower shall (a) observe and perform all
material terms, covenants, conditions and provisions of the Merchant Agreements
to be observed and performed by it at the times set forth therein; (b) not do,
permit, suffer or refrain from doing anything, as a result of which there could
be a default under or breach of any of the terms of any of the Merchant
Agreements, (c) at all times maintain in full force and effect the Merchant
Agreements and not terminate, cancel, surrender, modify, amend, waive or release
any of the Merchant Agreements, or consent to or permit to occur any of the
foregoing; except, that, Borrower may terminate or cancel any of the Credit Card
Agreements in the ordinary course of the business of Borrower; provided, that,
Borrower shall give Agent not less than fifteen (15) days prior written notice
of its intention to so terminate or cancel any of the Credit Card Agreements;
(d) not enter into any new Credit Card Agreements with any new Credit Card
Issuer unless (i) Agent shall have received not less than thirty (30) days prior
written notice of the intention of Borrower to enter into such agreement
(together with such other information with respect thereto as Agent may request)
and (ii) Borrower delivers, or causes to be delivered to Agent, a Credit Card
Acknowledgment in favor of Agent, for the ratable benefit of Lenders; (e) give
Agent immediate written notice of any Credit Card Agreement entered into by
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may request;
and (f) furnish to Agent, promptly upon the request of Agent, such information
and evidence as Agent may require from time to time concerning the observance,
performance and compliance by Borrower or the other party or parties thereto
with the terms, covenants or provisions of the Merchant Agreements.
9.14 Adjusted Net Worth. Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $135,000,000.
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9.15 Compliance with ERISA.
(a) Borrower shall not with respect to any "employee benefit
plans" maintained by Borrower or any of its ERISA Affiliates: (i) terminate any
of such employee pension plans so as to incur any liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer
to exist any prohibited transaction involving any of such employee benefit plans
or any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under the Code or ERISA, (iii) fail to pay to any such employee benefit
plan any contribution which it is obligated to pay under ERISA, the Code or the
terms of such plan, (iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such employee benefit
plan, (v) allow or suffer to exist any occurrence of a reportable event or any
other event or condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such employee benefit plan that is a
single employer plan, which termination could result in any liability to the
Pension Benefit Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.15, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA.
9.16 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 6.3 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Agent and subject to such conditions thereto as Agent
may establish and (b) as to any accounts used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Agent.
9.17 Costs and Expenses. Borrower shall pay to Agent, for the ratable
benefit of Lenders, on demand all costs, expenses, filing fees and taxes paid or
payable in connection with the preparation, negotiation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, the rights of Agent, for the ratable benefit of Lenders, in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) cost and expenses for
insurance premiums, appraisal fees and search fees; (c) costs and expenses of
remitting loan proceeds, collecting checks and other items of payment, and
establishing and maintaining the Blocked Accounts, together with Agent's
customary charges and fees with respect thereto; (d) charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of Agent,
for the ratable benefit of Lenders, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Agent and/or Lenders arising out of the transactions contemplated hereby and
thereby (including preparations for and consultations concerning any such
matters); (g) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Agent during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a per diem charge
at the rate of $650 per person per day for Agent's examiners in the field and
office; and (h) the fees and disbursements of counsel (including legal
assistants) to Agent and Lenders in connection with any of the foregoing.
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9.18 Year 2000 Compliance. Borrower shall take all action which may be
required so that its computer-based information systems, including, without
limitation, all of its proprietary computer hardware and software and all
computer hardware and software leased or licensed from third parties (and
whether supplied by others or with which Borrower's systems interface) are able
to operate effectively and correctly process data using dates on or after
January 1, 2000. Compliance with the foregoing shall mean that the systems will
operate and correctly process data without human intervention such that (a)
there is correct century recognition, (b) calculations properly accommodate same
century and multi-century formulas and date values, (c) all leap years shall be
calculated corrected and (d) the information systems shall otherwise comply with
applicable industry standards and regulatory guidelines regarding the change of
the century and year 2000 compliance. Borrower shall, by no later than November
30, 1999, certify to Agent in writing that its information systems have been
modified, updated and reprogrammed as required by this Section. On and after
November 30, 1999, the computer-based information systems of Borrower shall be,
and with ordinary course upgrading and maintenance, will continue to be,
sufficient to permit Borrower to conduct its business without any adverse effect
as a result of the year 2000.
9.19 Further Assurances. At the request of Agent or any Lender at any
time and from time to time, Borrower shall, at its expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Agent, Agent may, at its option,
cease to make any further Loans or provide any further Letter of Credit
Accommodations until Agent has received such certificate and, in addition, Agent
has determined that such conditions are satisfied. Where permitted by law,
Borrower hereby authorizes Agent and Lenders to execute and file one or more UCC
financing statements signed only by Agents and Lenders.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrowers fail to pay any of the Obligations within
three (3) days after the same becomes due and payable; or (ii) any Borrower or
any Obligor fails to perform any of the covenants contained in this Agreement or
any of the other Financing Agreements other than as described in Section
10.1(a)(i) and such failure shall continue for twenty (20) days; provided, that,
such twenty (20) day period shall not apply in the case of (A) any failure to
observe any such covenant which is not capable of being cured at all or within
such twenty (20) day period or which has been the subject of a prior failure
within a six (6) month period or (B) an intentional breach of any Borrower or
any Obligor of any such covenant or (C) the failure to observe or perform any of
the covenants or provisions contained in Section 9.2, 9.7, 9.8, 9.9, 9.10, 9.11,
9.12, 9.13, 9.14, 9.16, 9.17 or 9.18 of this Agreement or any covenants or
agreements covering substantially the same matter as such sections in any of the
other Financing Agreements or (iii) any Borrower fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement or any of
the other Financing Agreements other than those described in Sections 10.1(a)(i)
and 10.1(a)(ii) above;
(b) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Agent, for the ratable benefit of
Lenders;
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(c) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $1,000,000 in any one case or in excess of
$5,000,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(d) any Obligor (being a natural person or a general partner
of an Obligor which is a partnership) dies or Borrower or any Obligor, which is
a partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(e) Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(f) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(h) any default by Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Agent or any Lender including, without
limitation, the CIBC Credit Agreement or the Fortress Credit Agreement, or any
capitalized lease obligations, contingent indebtedness in connection with any
guarantee, letter of credit, indemnity or similar type of instrument in favor of
any person other than Agent or any Lender, in any case in an amount in excess of
$5,000,000, which default continues for more than the applicable cure period, if
any, with respect thereto, or any default by Borrower or any Obligor under any
material contract (including, without limitation, any of the Merchant
Agreements), lease, license or other obligation to any person other than Agent
or any Lender, which default continues for more than the applicable cure period,
if any, with respect thereto;
(i) any Change of Control;
(j) (i) Commercial Account Purchaser shall send notice to
Borrower that it is ceasing to make or suspending payments to Borrower of
amounts due or to become due to Borrower or shall cease or suspend such
payments, or (ii) Commercial Account Purchaser shall send notice to Borrower
that it is terminating its arrangements with Borrower or Borrower notifies Agent
and Commercial Account Purchaser that Borrower is terminating its arrangements
with Commercial Account Purchaser unless thirty (30) days prior to any intended
termination, Borrower has entered into replacement financing with respect to the
Commercial Receivables, the terms and provisions of which shall be satisfactory
to Agent; or (iii) the termination of any financing arrangements with respect to
the Commercial Receivables as a result of any event of default under such
arrangements, which continues for more than the applicable cure period, if any,
with respect thereto;
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(k) the indictment of Borrower or any Obligor under any
criminal statute, or commencement of criminal or civil proceedings against
Borrower or any Obligor, pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture of any of the property of
Borrower or such Obligor;
(l) there shall be a material adverse change in the business
or assets of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Agent, for the ratable benefit of Lenders, shall have all rights
and remedies provided in this Agreement, the other Financing Agreements, the
Uniform Commercial Code and other applicable law, all of which rights and
remedies may be exercised without notice to or consent by Borrower or any
Obligor, except as such notice or consent is expressly provided for hereunder or
required by applicable law. All rights, remedies and powers granted to Agent,
for the ratable benefit of Lenders, hereunder, under any of the other Financing
Agreements, the Uniform Commercial Code or other applicable law, are cumulative,
not exclusive and enforceable, in Agent's discretion, alternatively,
successively, or concurrently on any one or more occasions, and shall include,
without limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower of this Agreement or any of
the other Financing Agreements. Agent, for the ratable benefit of Lenders, may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Agent, for the ratable benefit
of Lender, may, in its discretion and without limitation, (i) accelerate the
payment of all Obligations and demand immediate payment thereof to Agent, for
the ratable benefit of Lenders, (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(f) and 10.1(g), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Agent any part or all of the Collateral at any
place and time designated by Agent, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Agent or elsewhere) at such prices or
terms as Agent may deem reasonable, for cash, upon credit or for future
delivery, with Agent or any Lender having the right to purchase the whole or any
part of the Collateral at any such public sale, all of the foregoing being free
from any right or equity of redemption of Borrower, which right or equity of
redemption is hereby expressly waived and released by Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or leased by Agent
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Agent, for
the ratable benefit of Lenders. If notice of disposition of Collateral is
required by law, five (5) days prior notice by Agent to Borrower designating the
time and place of any public sale or the time after which any private sale or
other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Agent institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
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(c) Agent may apply the cash proceeds of Collateral actually
received by Agent, for the ratable benefit of Lenders, from any sale, lease,
foreclosure or other disposition of the Collateral to payment of the
Obligations, in whole or in part and in such order as Agent may elect, whether
or not then due. Borrower shall remain liable to Agent and Lenders for the
payment of any deficiency with interest at the highest rate provided for herein
and all costs and expenses of collection or enforcement, including attorneys'
fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Agent and Lenders may, at their option, without
notice, (i) cease making Loans or arranging for Letter of Credit Accommodations
or reduce the lending formulas or amounts of Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Agent, on behalf of Lenders, to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Borrower, Agent and Lenders irrevocably consent and submit
to the non-exclusive jurisdiction of the New York State Supreme Court, New York
County, and the United States District Court for the Southern District of New
York and waive any objection based on venue or forum non conveniens with respect
to any action instituted therein arising under this Agreement or any of the
other Financing Agreements or in any way connected with or related or incidental
to the dealings of the parties hereto in respect of this Agreement or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Agent or
any Lender shall have the right to bring any action or proceeding against
Borrower or its property in the courts of any other jurisdiction which Agent
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof 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, or,
at Agent or any Lenders' option, by service upon Borrower in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Borrower shall appear in answer to such process, failing which Borrower
shall be deemed in default and judgment may be entered by Agent or any Lender
against Borrower for the amount of the claim and other relief requested.
(d) BORROWER, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS
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RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, AGENT AND
LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWER, AGENT OR LENDERS MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Neither Agent nor any Lender shall have any liability to
Borrower (whether in tort, contract, equity or otherwise) for losses suffered by
Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Agent and Lenders,
that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Agent and Lenders
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Agent may elect to give shall entitle Borrower to
any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Agent, and as to amendments, as also signed by an authorized officer of
Borrower. Agent shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Agent. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Agent of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Agent or any Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Agent, Lenders
and their directors, agents, employees and counsel, harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, except for any losses, claims, damages,
liabilities, costs or expenses which result from the gross negligence or willful
misconduct of Lender or Agent as determined pursuant to a final non-appealable
order of a court of competent jurisdiction . To the extent that the undertaking
to indemnify, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion which it is permitted to pay under applicable law to Agent
and/or the affected Lenders in satisfaction of indemnified matters
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under this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder and under the other
Financing Agreements with such powers as are specifically delegated to Agent by
the terms of this Agreement and of the other Financing Agreements, together with
such other powers as are reasonably incidental thereto. Agent (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement
and in the other Financing Agreements, and shall not by reason of this Agreement
or any other Financing Agreement be a trustee or fiduciary for any Lender; (b)
shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Financing Agreement, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by Borrower or any Obligor or any other Person to perform any of its
obligations hereunder or thereunder; and (c) shall not be responsible to Lenders
for any action taken or omitted to be taken by it hereunder or under any other
Financing Agreement or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
Agent may deem and treat the payee of any note as the holder thereof for all
purposes hereof unless and until the assignment thereof pursuant to an agreement
(if and to the extent permitted herein) in form and substance satisfactory to
Agent shall have been delivered to and acknowledged by Agent.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by Required Lenders or all
of Lenders as is required in such circumstance, and such instructions of such
Lenders and any action taken or failure to act pursuant thereto shall be binding
on all Lenders.
12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of
the occurrence of an Event of Default or other failure of a condition precedent
to the Loans and Letter of Credit Accommodations hereunder, unless and until
Agent has received written notice from a Lender or Borrower specifying such
Event of Default or any unfulfilled condition precedent, and stating that such
notice is a "Notice of Default or Failure of Condition". In the event that Agent
receives such a Notice of Default or Failure of Condition, Agent shall give
prompt notice thereof to Lenders. Agent shall (subject to Section 12.7) take
such action with respect to any such Event of Default or failure of condition
precedent as shall be directed by Required Lenders; provided that, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to or by reason of such Event of Default or failure of condition precedent, as
it shall deem advisable in the best interest of Lenders. Without limiting the
foregoing, and notwithstanding the existence or occurrence and continuance of an
Event of Default or any other failure to satisfy any of the conditions precedent
set forth in Section 4 of this Agreement to the contrary, the Agent may, but
shall have no obligation to, continue to make
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Loans and issue or cause to be issued Letter of Credit Accommodations for the
ratable account and risk of Lenders from time to time if Agent believes making
such Loans or issuing or causing to be issued such Letter of Credit
Accommodations is in the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender
may assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against Borrower or any
Obligor or any of the Collateral or other property of Borrower or any Obligor.
12.4 Rights as a Lender. With respect to its Commitment and the Loans
made and Letter of Credit Accommodations issued or caused to be issued by it
(and any successor acting as Agent), so long as the Agent shall be a Lender
hereunder, it shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Agent in its individual capacity as Lender hereunder. Congress (and any
successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) lend money to, make investments in and generally engage
in any kind of business with Borrower and Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as Agent, and Congress and
its Affiliates may accept fees and other consideration from Borrower and
Obligors for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower hereunder and without limiting the Obligations of
Borrower hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that
it has, independently and without reliance on Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of Borrower and any Obligors and has made its own decision
to enter into this Agreement and that it will, independently and without
reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Financing Agreements. Agent shall not be required to keep
itself informed as to the performance or observance by Borrower or any Obligor
of any term or provision of this Agreement or any of the other Financing
Agreements or any other document referred to or provided for herein or therein
or to inspect the properties or books of Borrower or any Obligor. Agent will use
reasonable efforts to provide Lenders with any information received by Agent
from Borrower which is required to be provided to Lenders hereunder, with a copy
of any Notice of Default or Failure of Condition received by Agent from Borrower
or any Lender and with a copy of any notice of an Event of Default delivered by
Agent to Borrower; provided, that, Agent shall not be liable to any Lender for
any failure to do so, except to the extent that such failure is attributable to
Agent's own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent hereunder, Agent shall not have any duty or responsibility to
provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of Borrower or any of its Subsidiaries
(or any of their affiliates) that may come into the possession of Agent or any
of its Affiliates.
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12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by Agent by reason of taking or
continuing to take any such action.
12.8 Resignation of Agent. Subject to the appointment and acceptance of
a successor Agent as provided below, Agent may resign at any time by giving
notice thereof to Lenders and Borrower. Upon any such resignation, Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by Lenders, and the appointment accepted by such successor
Agent within thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of Lenders, appoint (without
the consent of Borrower) a successor Agent that shall be a bank, commercial
finance company or other financial institution. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent in accordance with the terms
hereof, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 12 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
12.9 Consents and Releases of Collateral under Financing Agreements.
Except as otherwise provided in Section 13.6 hereof with respect to certain
amendments or modifications to this Agreement, without the prior consent of each
Lender, Agent shall not release any Collateral or otherwise terminate any
security interest in or lien upon any of the Collateral under any of the
Financing Agreements, except that no such consent shall be required, and Agent
is hereby authorized (i) to release any security interest in or lien upon any of
the Collateral which is the subject of a disposition permitted hereunder or
under the other Financing Agreements, or (ii) to release, in any fiscal year of
Borrower, any security interest in or lien upon any of the Collateral the value
of which does not exceed $5,000,000
12.10 Collateral Matters.
(a) Except as otherwise expressly provided for in this
Agreement, Agent shall have no obligation whatsoever to any Lender or any other
Person to investigate, confirm or assure that the Collateral exists or is owned
by Borrower or any Obligor or is cared for, protected or insured or has been
encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letter of Credit Accommodations
hereunder, or whether any particular Availability Reserves are appropriate, or
that the liens and security interests granted to Agent herein or pursuant hereto
or otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its discretion, given Agent's own interest in the
Collateral as a Lender and that Agent shall have no duty or liability whatsoever
to any other Lender, other than liability for its own gross negligence or
willful misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction.
(b) Each Lender hereby appoints each other as agent for the
purpose of perfecting the security interest of Agent in assets which, in
accordance with Article 9 of the Uniform Commercial Code can be perfected only
by possession. Should any Lender (other than Agent) obtain possession of any
such Collateral, such Lender shall notify Agent thereof and, promptly upon
Agent's request therefor, shall deliver such Collateral to Agent or in
accordance with Agent's instructions.
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SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Agent or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrower shall pay to Agent, for the ratable benefit of
Lenders, in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Agent, for the ratable benefit of Lenders, in such amounts as
Agent determines are reasonably necessary to secure Agent and Lenders from loss,
cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Agent and Lenders have not yet
received final and indefeasible payment. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Agent, as Agent may, in its discretion, designate
in writing to Borrower for such purpose. Interest shall be due until and
including the next business day, if the amounts so paid by Borrower to the bank
account designated by Agent are received in such bank account later than 12:00
noon, Chicago, Illinois time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and the
continuing security interest of Agent, for the ratable benefit of Lenders, in
the Collateral and the rights and remedies of Agent and Lenders hereunder, under
the other Financing Agreements and applicable law, shall remain in effect until
all such Obligations have been fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lenders' lost
profits as a result thereof, Borrower agrees to pay to Agent, for the ratable
benefit of Lenders, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
------ ------
(i) 3% of Maximum Credit From the date hereof to and including
November 17, 2000.
(ii) 2% of Maximum Credit From November 18, 2000 to and including
November 17, 2001.
(iii) 1% of Maximum Credit From November 18, 2001 to and including
November17, 2002.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lenders as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Agent, for the ratable benefit of Lenders shall be entitled to such early
termination fee upon the occurrence of any
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Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Agent does not exercise its right to terminate this Agreement, but elects,
at its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination
fee provided for in this Section 13.1 shall be deemed included in the
Obligations.
(d) Notwithstanding anything to the contrary contained in
Section 13.1(c), in the event of the termination of this Agreement by Borrower
prior to the end of the then current term and the full and final repayment of
all of the Obligations and the receipt by Agent of cash collateral all as
provided in Section 13.1(a), Borrower shall not be required to pay the early
termination fee provided for above if each of the following conditions is
satisfied: (i) no Event of Default or act, condition or event which with notice
or passage of time or both would constitute an Event of Default shall exist or
have occurred and be continuing, (ii) Agent shall have received not less than
thirty (30) days prior written notice of the intention of Borrower to so
terminate this Agreement, and (iii) the final payment in full of all of the
Obligations is received simultaneously with (A) the refinancing of the Credit
Facility with proceeds of loans made by First Union National Bank or its
affiliates to Borrower; (B) the consummation of a public equity offering by
Borrower through Wheat First Securities, which equity offering shall be
registered under the Securities Act of 1933, as amended; (C) the consummation by
Borrower of a high-yield debenture or note offering; (D) in the event that
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as the investment advisor to the Borrower, is
successful in consummating a sale of substantially all of the assets of Borrower
or the merger of Borrower with and into an acquiring corporation; (E) the
refinancing of the Credit Facility with proceeds of loans made by First Union
National Bank, Congress or their respective affiliates in connection with the
consummation by the Borrower of a sale of substantially all of the assets of
Borrower or the merger of Borrower with and into an acquiring corporation, or
(F) any combination of the items (A) through (E).
13.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Agent and Lenders at their addresses set forth below and
to Borrower at its chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next Business Day, one (1) Business Day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
13.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lenders, Agent and Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders. No Lender may assign its rights and obligations under this
Agreement (or any part thereof) without the prior written consent of all Lenders
and Agent, except as permitted under Section 13.5(b) hereof. Any purported
assignment by a Lender without such prior express consent or compliance with
Section 13.5(b) where applicable, shall be void. The terms and provisions of
this Agreement and the other Financing Agreements are for the purpose of
defining the relative rights and obligations of Borrower, Agent and Lenders with
respect to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this Agreement or any
of the other Financing Agreements.
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13.5 Assignments and Participations.
(a) Congress may, in the ordinary course of its commercial
banking or finance business and in accordance with applicable law, at any time
sell to one or more banks, commercial finance companies or other financial
institutions ("Participants"), participating interests in all or a portion of
its rights and obligations under this Agreement and the other Financing
Agreements (including all or a part of its interest in the Obligations). In the
event of any such sale by Congress of a participating interest to a Participant,
Congress' obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, Congress shall remain solely responsible for
the performance thereof, Congress shall remain the holder of any such
obligations for all purposes under this Agreement and the other Financing
Agreements, and Borrower and Agent shall continue to deal solely and directly
with Congress in connection with Congress' rights and obligations under this
Agreement and the other Financing Agreements. Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall, to the maximum extent permitted by applicable law, be
deemed to have the right of setoff 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; provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with Congress the proceeds
thereof as provided in Section 6.7 hereof.
(b) Any Lender may, in accordance with applicable law, at any
time and from time to time assign to any Lender or any of its Affiliates, or may
assign, in connection with the sale of its business or all or substantially all
of its loan portfolio, with the written consent of Agent, to a bank, commercial
finance company or other financial institution (an "Assignee") all (or, with the
consent of Agent, less than all), of its Commitment, rights and obligations
under this Agreement and the other Financing Agreements, pursuant to an
assignment agreement, in form and substance satisfactory to Agent, executed by
such Assignee and such assigning Lender and delivered to Agent for its
acceptance and recording in its records. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such assignment agreement, the Assignee thereunder shall be a party hereto
and, to the extent provided in such assignment agreement, (i) have the rights
and obligations of a Lender hereunder with a Commitment and Commitment
Percentage as set forth therein, and (ii) the assigning Lender thereunder shall,
to the extent provided in such assignment agreement, be released from its
obligations under this Agreement (and, in the case of an assignment agreement
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such assigning Lender shall cease to be a
party hereto).
(c) Agent, on behalf of the Borrower, shall maintain at the
address of Agent referred to on the signature page of this Agreement, a copy of
each such assignment agreement delivered to it and a record of the names and
addresses of the Lenders and the Commitments of each Lender from time to time.
Such records maintained by Agent shall be conclusive, in the absence of manifest
error, and Borrower, Agent and Lenders may treat each Person whose name appears
in such records as the owner of a Loan or other Obligations hereunder as the
owner thereof for all purposes of this Agreement and the other Financing
Agreements, notwithstanding any notice to the contrary. The Agent's records
under this Section 13.5 shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an assignment agreement executed by an
assigning Lender and an Assignee, Agent shall (i) promptly accept such
assignment agreement and (ii) on the effective date determined pursuant thereto
record the information contained therein in Agent's records and give notice of
such acceptance and recordation to Lenders and Borrower. On or prior to such
effective date, Borrower, at its own expense, shall execute and deliver to Agent
(in exchange for notes of the assigning Lender) new notes to the order of such
Assignee corresponding to the Commitment assumed by it pursuant to such
assignment agreement and, if the assigning Lender has retained a Commitment
hereunder, a new note to the order of the assigning Lender in an amount equal to
the
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Commitment retained by it hereunder. Such new notes shall be dated the date
hereof and shall otherwise be in the form of the notes replaced thereby. The
notes surrendered to Agent shall be returned by Agent to Borrower marked
"cancelled".
(e) Except as otherwise provided in this Section 13.5, no
Lender shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the
Obligations owed to such Lender. Any Lender permitted to sell assignments and
participations under this Section 13.5 may furnish any information concerning
Borrower and its Subsidiaries and Affiliates in the possession of that Lender
from time to time to Assignees and Participants (including, prospective
Assignees and Participants).
(f) Borrower shall provide such assistance to Agent, as Agent
shall reasonably request, in connection with any assistance which Agent is
providing to any Lender permitted to sell assignments or participations under
this Section 13.5 in whatever manner reasonably necessary in order to enable or
effect any such assignment or participation, including (but not limited to) the
execution and delivery of any and all agreements, notes and other documents and
instruments as shall be reasonably requested and the delivery of informational
materials, appraisals or other documents for, and the participation of relevant
management in meetings and conference calls with, potential Assignees or
Participants. Borrower shall certify the correctness, completeness and accuracy
of all descriptions of Borrower and its affairs provided, prepared or reviewed
by Borrower that are contained in any selling materials and all other
information provided by it and included in such materials.
13.6 Modification of Agreement. Neither this Agreement nor any other
Financing Agreement nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by Agent and the Required Lenders; except, that, any change,
waiver, discharge or termination with respect to the following shall require the
consent of all Lenders: (a) the extension of the scheduled final maturity of the
Revolving Loans, or any portion thereof, or reduction in the rate or extension
of the time of payment of interest thereon or fees (other than as a result of
waiving or not requiring the applicability of any post-default increase in
interest rates or fees for outstanding Letter of Credit Accommodations or
increased interest rates on Revolving Loans in excess of the amounts then
available to Borrower), or reduction in the principal amount thereof, or
increase in the Commitment of any Lender over the amount thereof then in effect
or provided hereunder (it being understood that a waiver of any Event of Default
shall not constitute a change in the terms of any Commitment of any Lender); (b)
the release or subordination of a material amount of the Collateral (except as
expressly required by the Financing Agreements and except as permitted under
Section 12.9 hereof), (c) the amendment, modification or waiver of any provision
of this Section 13.6; (d) the reduction of any percentage specified in the
definition of Required Lenders; (e) the consent to the assignment or transfer by
Borrower of any of its rights and obligations under this Agreement; or (f) the
increase in the stated advance percentage under the lending formulas contained
in Section 2 hereof. Any Lender who does not consent to a proposed amendment,
consent or waiver requiring the approval of each Lender as contemplated by
clauses (a) through (f) above, agrees that, if such amendment, waiver or consent
has been approved by the Required Lenders, then, with the consent of the Agent,
any other Lender or Lenders shall have the right to purchase, in accordance with
the terms otherwise applicable to permitted assignment under Section 13.5, all
of such non-consenting Lender's Commitment and interests in the Revolving Loans
(and in the Collateral and the Financing Agreements) at their par value. No
provision of Section 12 may be amended without the prior written consent of
Agent.
13.7 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the
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event of any inconsistency between the terms of this Agreement and any
schedule or exhibit hereto, the terms of this Agreement shall govern.
IN WITNESS WHEREOF, Agent, Lenders and Borrower have caused these
presents to be duly executed as of the day and year first above written.
PAYLESS CASHWAYS, INC.
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: Vice President -- Treasury
Chief Executive Office:
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇'▇ Summit, Missouri 64063
CONGRESS FINANCIAL CORPORATION (CENTRAL),
in its individual capacity and as Agent
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: Senior Vice President
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Commitment: $260,000,000
Commitment
Percentage: 100%
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