EXHIBIT 10.1
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REVOLVING CREDIT AGREEMENT
Dated as of January 27, 1998
Among
CAMELOT MUSIC, INC.,
as Borrower
THE LENDERS PARTY HERETO
and
THE CHASE MANHATTAN BANK,
as Agent
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TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS................................................. 1
1.1 Defined Terms............................................ 1
1.2 Other Definitional Provisions............................ 18
SECTION 2 AMOUNT AND TERMS OF COMMITMENT.............................. 19
2.1 Commitments.............................................. 19
2.2 Notes ................................................. 19
2.3 Commitment Fee........................................... 20
2.4 Arrangement Fee.......................................... 20
2.5 Procedure for Borrowing.................................. 20
2.6 Conversion and Continuation Options...................... 21
2.7 Termination or Reduction of Commitments.................. 22
2.8 Optional and Mandatory Prepayments; Repayments of
Loans.................................................. 22
2.9 Interest Rates and Payment Dates......................... 23
2.10 Computation of Interest and Fees......................... 24
2.11 Agent Fees............................................... 25
2.12 Inability to Determine Interest Rate..................... 25
2.13 Pro Rata Treatment and Payments.......................... 25
2.14 Illegality............................................... 26
2.15 Requirements of Law...................................... 27
2.16 Taxes ................................................. 28
2.17 Indemnity................................................ 30
2.18 Proceeds of Loans and Letters of Credit.................. 31
SECTION 3 LETTERS OF CREDIT........................................... 31
3.1 L/C Commitment........................................... 31
3.2 Procedure for Issuance of Letters of Credit.............. 31
3.3 Letter of Credit Fees and Other Charges.................. 32
3.4 L/C Participations....................................... 33
3.5 Reimbursement Obligation of the Borrower. ............... 34
3.6 Obligations Absolute..................................... 34
3.7 Letter of Credit Payments................................ 35
3.8 Application.............................................. 35
SECTION 4 REPRESENTATIONS AND WARRANTIES.............................. 36
4.1 Financial Condition...................................... 36
4.2 No Change................................................ 37
4.3 Corporate Existence; Compliance with Law................. 37
4.4 Corporate Power; Authorization........................... 37
4.5 Enforceable Obligations.................................. 38
4.6 No Legal Bar............................................. 38
4.7 No Material Litigation................................... 38
4.8 Investment Company Act................................... 38
4.9 Federal Regulation....................................... 38
4.10 Taxes ................................................. 39
4.11 Subsidiaries............................................. 39
4.12 Ownership of Property and Assets......................... 39
4.13 ERISA ................................................. 39
4.14 Copyrights, Permits, Trademarks and Licenses............. 40
4.15 No Default............................................... 41
4.16 Security Documents....................................... 41
4.17 Environmental Matters.................................... 41
4.18 Accuracy and Completeness of Information................. 42
4.19 Insurance................................................ 43
SECTION 5 CONDITIONS PRECEDENT........................................ 43
5.1 Conditions to Initial Loan and Letter of Credit
and Effectiveness of Agreement......................... 43
5.2 Conditions to Each Loan and Letter of Credit............. 47
SECTION 6 AFFIRMATIVE COVENANTS....................................... 50
6.1 Financial Statements, Reports, etc. ..................... 50
6.2 Payment of Obligations................................... 52
6.3 Conduct of Business and Maintenance of Existence......... 53
6.4 Maintenance of Property; Insurance....................... 53
6.5 Inspection of Property; Books and Records;
Discussions; Inventory Review.......................... 53
6.6 Notices ................................................. 54
6.7 Supplemental Collateral; Guarantees...................... 54
6.8 Environmental Laws....................................... 55
6.9 Employee Benefits........................................ 56
6.10 Further Assurances....................................... 57
SECTION 7 NEGATIVE COVENANTS.......................................... 57
7.1 Indebtedness............................................. 57
7.2 Limitation on Liens...................................... 58
7.3 Limitation on Contingent Obligations..................... 60
7.4 Prohibition of Fundamental Changes....................... 61
7.5 Prohibition on Sale of Assets............................ 61
7.6 Limitation on Investments, Loans and Advances............ 62
7.7 Capital Expenditures..................................... 63
7.8 Consolidated EBITDA...................................... 63
7.9 Limitation on Dividends.................................. 64
7.10 Transactions with Affiliates............................. 64
7.11 Limitation on Changes in Fiscal Year..................... 65
7.12 Limitation on Lines of Business.......................... 65
7.13 Failure to Maintain Trade Credit......................... 65
7.14 Concentration Account.................................... 65
SECTION 8 EVENTS OF DEFAULT........................................... 66
SECTION 9 THE AGENT; THE ISSUING BANK................................. 69
9.1 Appointment.............................................. 69
9.2 Delegation of Duties..................................... 70
9.3 Exculpatory Provisions................................... 70
9.4 Reliance by Agent........................................ 70
9.5 Notice of Default........................................ 71
9.6 Non-Reliance on Agent and Other Lenders.................. 71
9.7 Indemnification.......................................... 72
9.8 The Agent in its Individual Capacity..................... 72
9.9 Successor Agent.......................................... 72
9.10 Issuing Bank as Issuer of Letters of Credit.............. 72
SECTION 10 MISCELLANEOUS.............................................. 73
10.1 Amendments and Waivers.................................. 73
10.2 Notices................................................. 74
10.3 No Waiver; Cumulative Remedies.......................... 75
10.4 Survival of Representations and Warranties.............. 75
10.5 Payment of Expenses and Taxes........................... 75
10.6 Successors and Assigns; Participations and
Assignments........................................... 77
10.7 Adjustments; Set-off.................................... 80
10.8 Counterparts............................................ 80
10.9 Integration............................................. 81
10.10 Governing Law; No Third Party Rights.................... 81
10.11 Acknowledgements........................................ 81
10.12 Submission to Jurisdiction; Waivers..................... 81
SCHEDULES
Schedule I Addresses of Lenders; Commitment Amounts
Schedule 1.1(a) Mortgaged Property
Schedule 4.7 Material Litigation
Schedule 4.11 Subsidiaries
Schedule 4.12 Fee and Leased Properties
Schedule 4.13 Defined Benefit Plans
Schedule 4.14 Trademarks and Copyrights
Schedule 7.1 Indebtedness
Schedule 7.2 Liens
Schedule 7.3(d) Contingent Obligations
EXHIBITS
EXHIBIT A Form of Assignment and Acceptance
EXHIBIT B Form of Borrower Pledge Agreement
EXHIBIT C Form of Borrower Security Agreement
EXHIBIT D Form of Borrowing Base Certificate
EXHIBIT E Form of Camelot Distribution Mortgage
EXHIBIT F Form of Holdings Guarantee
EXHIBIT G Form of Holdings Pledge Agreement
EXHIBIT H Form of Subsidiaries Guarantee
EXHIBIT I Form of Subsidiaries Security Agreement
EXHIBIT J Form of Note
EXHIBIT K Form of Opinion of White & Case, Counsel to
the Loan Parties
EXHIBIT L-1 Form of Opinion of ▇▇▇▇▇ & ▇▇▇▇▇, Special
Real Estate Counsel to Camelot Distribution
EXHIBIT L-2 Form of Opinion of Obermayer, Rebmann,
▇▇▇▇▇▇▇ & Hippel LLP, Special Pennsylvania
Counsel to the Borrower
EXHIBIT M Form of Borrowing Certificate
REVOLVING CREDIT AGREEMENT, dated as of January 27, 1998, among
CAMELOT MUSIC, INC., a Pennsylvania corporation (the "Borrower"), the several
lenders from time to time parties hereto (the "Lenders") and THE CHASE MANHATTAN
BANK, a New York banking corporation, as agent for the Lenders (in such
capacity, the "Agent").
INTRODUCTORY STATEMENT
On August 9, 1996 (the "Petition Date"), the Borrower and certain of
its Subsidiaries and/or Affiliates (collectively, the "Camelot Debtors") filed
voluntary petitions under Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") and continued in the possession of their
assets and in the management of their businesses pursuant to Sections 1107 and
1108 of the Bankruptcy Code.
On December 12, 1997, the Bankruptcy Court entered an order (the
"Confirmation Order") confirming the Camelot Debtors' Second Amended Joint
Chapter 11 Plan of Reorganization (as in effect on the date hereof, the
"Reorganization Plan").
In connection with the confirmation and implementation of the
Reorganization Plan, the Lenders have agreed, subject to the terms and
conditions hereof, to make available to the Borrower revolving credit loans and
other extensions of credit in an aggregate amount not to exceed $50,000,000.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1 DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined in the
preamble and the Introductory Statement hereto shall have the meanings set forth
therein, and the following terms shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Agent as its prime rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by the Agent in
connection with extensions of credit to debtors); "Base CD Rate" shall mean
the sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) a fraction, the numerator of which is one and the denominator of which
is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will,
under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if
such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York
City received at approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Agent from three New York City negotiable certificate
of deposit dealers of recognized standing selected by it; and "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Agent from three federal funds brokers of recognized standing selected by
it. Any change in the ABR due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
"Affiliate": of any Person (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 10% or more of the securities having ordinary voting power for
the election of directors of such Person, whether by ownership of
securities, contract, proxy or otherwise, or (y) to direct or cause the
direction of the management and policies of such Person, whether by
ownership of securities, contract, proxy or otherwise.
"Aggregate Outstanding Extensions of Credit": as to any Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount of
all Loans made by such Lender then outstanding and (b) such Lender's
Commitment Percentage of the L/C Obligations then outstanding.
"Agreement": this Revolving Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Application": an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"Asset Sale": any sale, sale-leaseback, transfer or other disposition
by any Loan Party of any of its property or assets, including the stock of
any Subsidiary of the Borrower (other than (a) in the ordinary course of
business, (i) the sale or rental of Inventory, (ii) the sale or discount of
accounts receivable in connection with the collection or compromise thereof
or (iii) the sale of property which is obsolete, worn out or otherwise no
longer useful in the Loan Parties' business and (b) the issuance of Capital
Stock in connection with the exercise of employee stock options).
"Assignment and Acceptance": an assignment and acceptance,
substantially in the form of Exhibit A.
"Available Commitment": as to any Lender, at a particular time, an
amount equal to the excess, if any, of (a) such Lender's Commitment over
(b) such Lender's Aggregate Outstanding Extensions of Credit.
"Board": the Board of Governors of the Federal Reserve System.
"Borrower Pledge Agreement": the pledge agreement, substantially in
the form of Exhibit B, to be made by the Borrower in favor of the Agent,
for the benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Borrower Security Agreement": the Security Agreement, substantially
in the form of Exhibit C, to be made by the Borrower in favor of the Agent,
for the benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Borrowing Base": means, as at any date of determination (a) during
the Peak Period, thirty-five percent (35%) of Eligible Inventory and (b)
during the Non- Peak Period, thirty percent (30%) of Eligible Inventory.
The Borrowing Base shall be computed using the Borrowing Base Certificate
most recently provided by the Borrower to the Agent pursuant to subsection
6.1(i); provided, however, the Agent shall have the right to review and
adjust, in its reasonable judgment, any computation of the Borrowing Base
(but not the percentages set forth above) to the extent such computation of
the Borrowing Base pursuant to such Borrowing Base Certificate is not in
accordance with this Agreement.
"Borrowing Base Certificate": a certificate, substantially in the form
of Exhibit D, executed and certified by a Responsible Officer of the
Borrower, which shall include appropriate exhibits and schedules as
referred to therein.
"Borrowing Date": any Business Day specified in (a) a Borrowing Notice
pursuant to subsection 2.5 as a date on which the Borrower requests the
Lenders to make Loans hereunder or (b) an Application pursuant to
subsection 3.2 as a date on which the Borrower requests the Issuing Bank to
issue a Letter of Credit hereunder.
"Borrowing Notice": as defined in subsection 2.5.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close, provided that when used in connection with a Eurodollar Loan, the
term "Business Day" shall also exclude any day on which banks are not open
for dealings in Dollar deposits in the London interbank market.
"Camelot Distribution": Camelot Distribution Co., Inc., a Delaware
corporation and a Subsidiary of the Borrower.
"Camelot Distribution Mortgage": the mortgage, substantially in the
form of Exhibit E, to be executed and delivered by Camelot Distribution in
favor of the Agent, for the benefit of the Lenders, as the same may be
amended, supplemented, or otherwise modified from time to time.
"Capital Expenditures": for any period, all amounts which would, in
accordance with GAAP, be set forth as capital expenditures (exclusive of
any amount attributable to capitalized interest) on the consolidated
statement of cash flows or other similar statement of the Borrower and its
consolidated Subsidiaries for such period.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cases": the Chapter 11 cases of the Camelot Debtors pending in the
Bankruptcy Court.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than one year from
the date of acquisition, (b) certificates of deposit, time deposits and
bank holding company commercial paper with maturities of one year or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding one year and overnight bank deposits, in each case with, or
backed by the assets of, any Lender or any domestic commercial bank having,
at the time of purchase, combined capital and surplus in excess of
$100,000,000, (c) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (a) and
(b) entered into with any financial institution meeting the qualifications
specified in clause (b) above, (d) commercial paper issued by any Lender or
the parent corporation of any Lender, and commercial paper rated A-1 or the
equivalent thereof by Standard & Poor's Ratings Group ("S&P") or P-1 or the
equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's") and in
each case maturing within one year after the date of acquisition and (e)
marketable direct obligations issued by the District of Columbia or any
State of the United States or any political subdivision or instrumentality
thereof having at the time of purchase thereof a rating from either S&P or
Moody's in one of their two highest grades.
"Cash Management Bank": Chase (including its Affiliates) in its
capacity as the principal concentration bank in the cash management system
of the Loan Parties or any successor to Chase in such capacity.
"C/D Assessment Rate": for any day the net annual assessment rate
(rounded upwards, if necessary, to the next 1/100 of 1%) determined by the
Agent to be payable on such day to the Federal Deposit Insurance
Corporation or any successor ("FDIC") for FDIC's insuring time deposits
made in Dollars at offices of the Agent in the United States.
"C/D Reserve Percentage": for any day as applied to any Base CD Rate,
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board for determining the maximum reserve requirement for
a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity of
30 days or more.
"Change in Law": with respect to any Lender, the adoption of any law,
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or any change therein or in the interpretation or application
thereof by any Governmental Authority having jurisdiction over such Lender,
in each case after the Closing Date.
"Chase": The Chase Manhattan Bank, a New York banking corporation, and
its successors.
"Closing Date": the date on which this Agreement has been executed and
the conditions precedent to the effectiveness of this Agreement and the
making of the initial Loan or the issuance of the initial Letter of Credit
set forth in subsection 5.1 have been satisfied or waived.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commercial L/C": a commercial documentary Letter of Credit under
which the Issuing Bank agrees to make payments in Dollars for the account
of the Borrower in respect of obligations of a Loan Party in connection
with the purchase of goods or services in the ordinary course of business.
"Commitment": as to any Lender at any time, during the Non-Peak
Period, its Non-Peak Period Commitment, or during the Peak Period, its Peak
Period Commitment, as the case may be.
"Commitment Percentage" as to any Lender at any time, the percentage
of the aggregate Commitments then constituted by such Lender's Commitment.
"Commitment Period": the period from and including the Closing Date to
but not including the Termination Date.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code.
"Concentration Account": Account No. 323088910 or any successor
account established and maintained by the Borrower at the office of the
Cash Management Bank and which shall be used to concentrate at least three
times each week all store deposits and any other funds received by any Loan
Party from the operation of their businesses or otherwise.
"Consolidated EBITDA": for any period, the Consolidated Net Income for
such period, plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) taxes measured by income, (b) interest expense (less
interest income), amortization or writeoff of debt discount, debt issuance,
warrant and other equity issuance costs and commissions, discounts,
redemption premium and other fees and charges associated with the Loans or
Standby L/Cs, (c) depreciation and amortization expense, (d) amortization
of Inventory write-up under APB 16, amortization of intangibles (including,
but not limited to, goodwill and costs of interest-rate caps) and
organization costs, (e) non-cash amortization of Financing Leases, (f) any
non-recurring charge or restructuring charge which in accordance with GAAP
is excluded from operating income, (g) the cumulative effect of any change
in accounting principles, and (h) any other write-downs, write-offs,
extraordinary losses, minority interests and other non-cash charges in
determining such Consolidated Net Income for such period.
"Consolidated Net Income": for any period, the consolidated net income
(or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, excluding extraordinary gains
or losses.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, dividends
or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor,
(c) to purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of any such primary obligation against
loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount (based on the maximum reasonably anticipated net
liability in respect thereof as determined by the Borrower in good faith)
of the primary obligation or portion thereof in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated net liability in respect thereof (assuming
such Person is required to perform thereunder) as determined by the
Borrower in good faith.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Disclosure Materials": collectively, (a) the materials distributed to
the Lenders pursuant to this Agreement and (b) the Disclosure Statement,
dated November 7, 1997, distributed to the Lenders in connection with
voting on the Reorganization Plan.
"Distribution Center": the real property and improvements thereon
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, owned and
operated prior to the Effective Date by the Borrower and assigned to
Camelot Distribution in connection with the Reorganization Plan.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Effective Date": January 27, 1998, being the date on which the
Reorganization Plan became effective, as provided therein.
"Eligible Inventory": means, as at any date of determination, the
value determined at the lower of cost or market on a first-in, first-out
basis of all Inventory owned by and in the possession of the Loan Parties
and located in the United States of America, less (without duplication, and
only to the extent included in Inventory): (a) Inventory held, or claimed
to be held, on consignment or similar arrangement; (b) Inventory held at
the Distribution Center for return to vendors (to the extent not accounted
for in clauses (c) through (g) below); (c) store supplies; (d) reserve for
penalties, representing the amount the Loan Parties do not expect to
recover from vendors upon the return of merchandise; (e) Reserve for
Slow-moving Items; (f) reserve for video returns; and (g) reserve for
shrink (each of the above referenced reserves shall be taken from the books
and records of the Loan Parties determined in a manner consistent with the
Borrower's historic practices; provided, however, the Agent shall have the
right to review and adjust, in its reasonable judgment, any such reserves
for purposes of calculating the Borrowing Base to the extent the Agent
determines that any such reserves are unreasonable).
"Environmental Laws": any and all Federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority or requirements of law
(including court-ordered requirements of common law) regulating or imposing
liability or standards of conduct concerning, environmental or safety and
health protection matters, including, without limitation, Hazardous
Materials, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
average (rounded upward to the nearest 1/100th of 1%) of the respective
rates notified to the Agent by each of the Reference Lenders as the rate at
which such Reference Lender is offered Dollar deposits at or about 10:00
A.M., New York City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar Loans
are then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount comparable
to the amount of its Eurodollar Loan to be outstanding during such Interest
Period.
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
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1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both,
has been satisfied.
"Fee Property": as defined in subsection 4.12.
"Financing Lease": (a) any lease of property, real or personal, the
obligations under which are capitalized on a consolidated balance sheet of
the Borrower and its consolidated Subsidiaries and (b) any other such lease
to the extent that the then present value of any rental commitment
thereunder should, in accordance with GAAP, be capitalized on a balance
sheet of the lessee.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantees": the collective reference to the Holdings Guarantee, the
Subsidiaries Guarantee and any other guarantee which may from time to time
be executed and delivered by a Loan Party pursuant to subsection 6.7.
"Guarantor": any Person delivering a Guarantee contemplated by this
Agreement.
"Hazardous Materials": any hazardous materials, hazardous wastes,
hazardous pesticides, hazardous or toxic substances, defined, listed,
classified or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, petroleum, any other petroleum
products (including gasoline, crude oil or any fraction thereof)
polychlorinated biphenyls and urea-formaldehyde insulation.
"Holdings": Camelot Music Holdings, Inc., a Delaware corporation and
the owner of all of the Capital Stock of the Borrower.
"Holdings Guarantee": the Guarantee, substantially in the form of
Exhibit F, to be made by Holdings in favor of the Agent, for the benefit of
the Lenders, as the same may be amended, supplemented or otherwise modified
from time to time.
"Holdings Pledge Agreement": the pledge agreement, substantially in
the form of Exhibit G, to be made by Holdings in favor of the Agent, for
the benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Indebtedness": of a Person, at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (b)
the undrawn face amount of all letters of credit issued for the account of
such Person and, without duplication, all drafts drawn thereunder and
unpaid reimbursement obligations with respect thereto, (c) all liabilities
(other than Lease Obligations) secured by any Lien on any property owned by
such Person, even though such Person has not assumed or become liable for
the payment thereof (provided that if the Person has not assumed or
otherwise become liable in respect of such Indebtedness, such Indebtedness
shall be deemed to be in an amount equal to the fair market value of the
property to which such Lien relates as determined in good faith by such
Person), (d) Financing Leases, (e) all indebtedness of such Person arising
under acceptances issued or created for the account of such Person, but
excluding trade and other accounts payable and accrued expenses incurred in
the ordinary course of business and payable in accordance with such
Person's customary practices and (f) any other indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument.
"Insolvency": with respect to a Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of such term as used in Section
4245 of ERISA.
"Insolvent": with respect to a Multiemployer Plan, the condition that
such Plan is insolvent as such term is used in Section 4245 of ERISA.
"Interest Payment Date": (a) for ABR Loans, the last day of each
February, May, August and November to occur while such Loans are
outstanding and (b) for Eurodollar Loans, the last day of the Interest
Period applicable to such Eurodollar Loan.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two or three months thereafter, as selected by
the Borrower in its Borrowing Notice or its notice of conversion, as
the case may be, given with respect thereto; and
(b) thereafter, with respect to such Eurodollar Loan, each period
commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two or three months
thereafter as selected by the Borrower by irrevocable notice to the
Agent not less than three Business Days prior to the last day of the
then current Interest Period with respect to such Eurodollar Loan;
provided that the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day which is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(ii) any Interest Period for any Eurodollar Loan that would
otherwise extend beyond the Termination Date shall end on the
Termination Date, or if the Termination Date shall not be a Business
Day, on the next preceding Business Day;
(iii) if the Borrower shall fail to give notice as provided above
in clause (b), it shall be deemed to have selected a conversion of a
Eurodollar Loan into an ABR Loan (which conversion shall occur
automatically and without need for compliance with the conditions for
conversion set forth in subsection 2.6); and
(iv) any Interest Period that begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month.
"Inventory": means all goods, merchandise and other personal property
which are held for sale or rental by the Loan Parties, including those held
for display or demonstration or out on lease, rental or to be furnished
under a contract of service, or are raw materials, components, work in
process or materials used or consumed, or to be used or consumed in the
business of the Loan Parties.
"Issuing Bank": Chase, as issuer of the Letters of Credit.
"L/C Cash Collateral Account": the account to be established by the
Borrower under the sole dominion and exclusive control of the Agent
maintained at the office of the Agent at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ designated as the "Camelot Music L/C Cash Collateral Account" that
shall be used solely for the purposes set forth in subsections 2.8 and
3.4(c) and any other provision of this Agreement which requires the cash
collateralization of L/C Obligations.
"L/C Limit": (a) during the period from the Closing Date until the
Wall Closing Date, $1,000,000, (b) during the period from and including the
Wall Closing Date through the two month anniversary of the Wall Closing
Date, $25,000,000 and (c) after such two month anniversary of the Wall
Closing Date, $5,000,000.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to subsection 3.5.
"L/C Participating Interest": an undivided participating interest in
the face amount of each issued and outstanding Letter of Credit and the
Application relating thereto.
"Lease Obligations": of the Loan Parties, at any time, the rental
commitments of the Loan Parties, determined on a consolidated basis, under
leases for real and/or personal property (net of rental commitments from
sub-leases thereof), excluding obligations under Financing Leases.
"Leased Property": as defined in subsection 4.12.
"Letters of Credit": the collective reference to the Commercial L/Cs
and the Standby L/Cs.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including without limitation, any conditional
sale or other title retention agreement) and any Financing Lease having
substantially the same economic effect as any of the foregoing.
"Loan Documents": the collective reference to this Agreement, the
Notes, the Guarantees, the Security Documents, the Borrowing Base
Certificates, the Letters of Credit, the Applications and any other
instrument or agreement executed and delivered in connection herewith or
therewith (including without limitation, any amendments or waivers of any
thereof), as each of the foregoing may be amended, supplemented or
otherwise modified from time to time.
"Loan Parties": the collective reference to the Borrower and the
Guarantors.
"Loans": as defined in subsection 2.1(a).
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Loan Parties taken as a whole or (b) the validity or enforceability of any
of the material terms of this Agreement or any of the other Loan Documents
or the material rights or remedies, taken as a whole, of the Agent or the
Lenders hereunder or thereunder.
"Maturity Date": January 27, 2002.
"Mortgaged Property": the real property listed on Schedule 1.1(a) and
any other real property encumbered by a Mortgage.
"Mortgages": the collective reference to the Camelot Distribution
Mortgage and any other mortgage which may from time to time be executed and
delivered by a Loan Party pursuant to subsection 6.7.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds": the aggregate cash proceeds received by any Loan Party
in respect of:
(a) any issuance or borrowing of any debt securities or loans
other than Indebtedness permitted under subsection 7.1;
(b) any Asset Sale; and
(c) any cash payments (other than in respect of interest)
received in respect of promissory notes delivered to any such Loan
Party in respect of an Asset Sale;
in each case net of (without duplication): (i) the amount required to repay
any Indebtedness (other than the Loans) secured by a Lien on any assets of
any Loan Party that are collateral for any such debt securities or loans
that are sold or otherwise disposed of in connection with such Asset Sale,
(ii) the reasonable expenses (including legal fees and brokers' and
underwriters' commissions, lenders fees or credit enhancement fees, in any
case, paid to third parties or, to the extent permitted hereby, Affiliates)
incurred in effecting such issuance or sale and (iii) any taxes reasonably
attributable to such sale and reasonably estimated by any such Loan Party
to be actually payable.
"Non-Excluded Taxes": as defined in subsection 2.16.
"Non-Peak Period": any time during the Commitment Period other than
the Peak Period.
"Non-Peak Period Commitment": as to any Lender, its obligation to make
Loans to the Borrower pursuant to subsection 2.1 and to purchase its L/C
Participating Interest in any Letter of Credit, in an aggregate amount not
to exceed the amount set forth under such Lender's name opposite the
caption "Non-Peak Period Commitment" on Schedule I hereto or on Schedule 1
to the Assignment and Acceptance by which such Lender acquired its
Commitment, as the same may be reduced from time to time pursuant to
subsections 2.7 or 2.8 or adjusted pursuant to subsection 10.6(c).
"Note": as defined in subsection 2.2.
"Participant": as defined in subsection 10.6(b).
"Participating Lender": any Lender (other than the Issuing Bank) with
respect to its L/C Participating Interest in each Letter of Credit.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Peak Period": the period from and including October 1 through and
including December 31 of each calendar year during the Commitment Period.
"Peak Period Commitment": as to any Lender, its obligation to make
Loans to the Borrower pursuant to subsection 2.1 and to purchase its L/C
Participating Interest in any Letter of Credit, in an aggregate amount
(inclusive of such Lender's Non-Peak Period Commitment) not to exceed the
amount set forth under such Lender's name opposite the caption "Peak Period
Commitment" on Schedule I hereto or on Schedule 1 to the Assignment and
Acceptance by which such Lender acquired its Commitment, as the same may be
reduced from time to time pursuant to subsections 2.7 or 2.8 or adjusted
pursuant to subsection 10.6(c).
"Permitted Holder": (a) a holder on the Effective Date of a Class 1-A
Claim under and as defined in the Reorganization Plan, (b) members of the
Borrower's senior management team on the Effective Date and (c) any
Affiliate of any Person described in the preceding clauses (a) and (b).
"Permitted Liens": Liens permitted to exist under subsection 7.2.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority, limited liability company or other entity of
whatever nature.
"Plan": at any particular time, any employee benefit plan as defined
in Section 3(3) of ERISA and not excluded by Section 4(b) of ERISA and
subject to Title IV of ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreements: the collective reference to the Holdings Pledge
Agreement, the Borrower Pledge Agreement, and any other pledge agreement
which may from time to time be executed and delivered by a Loan Party
pursuant to subsection 6.7.
"Prime Rate": as defined in the definition of ABR.
"Properties": as defined in subsection 4.17(a).
"Reference Lenders": Chase and Societe Generale.
"Regulation U": Regulation U of the Board, as from time to time in
effect.
"Reorganization": with respect to a Multiemployer Plan, the condition
that such Plan is in reorganization as such term is used in Section 4241 of
ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA other than those events as to which the thirty day notice period is
waived under PBGC Reg. ss. 4043.
"Required Lenders": Lenders holding in the aggregate at least 51% of
the total Commitments at such time (or, if the Commitments have then
terminated or are no longer in effect, the Aggregate Outstanding Extensions
of Credit at such time).
"Requirement of Law": as to any Person, the Articles or Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation, order, or
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property, or to which such Person or any of its property is subject.
"Reserve for Slow-moving Items": means, as at any date of
determination, the amount reflected as "reserve for slow-moving items" on
the books and records of the Loan Parties determined in a manner consistent
with the Borrower's historic practices; provided, however, the Agent shall
have the right to review and adjust, in its reasonable judgment, this
reserve for purposes of calculating the Borrowing Base to the extent the
Agent determines such reserve to be unreasonable.
"Responsible Officer": with respect to any Person, the president,
chief executive officer, the chief operating officer, the chief financial
officer, vice president-finance or treasurer of such Person, but, in any
event, with respect to financial matters, the chief financial officer of
such Person.
"Security Agreements: the collective reference to the Borrower
Security Agreement, the Subsidiaries Security Agreement and any other
security agreement which may from time to time be executed and delivered by
a Loan Party pursuant to subsection 6.7.
"Security Documents": the collective reference to the Security
Agreements, the Pledge Agreements and the Mortgages.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA
and which is not a Multiemployer Plan.
"Standby L/C": an irrevocable Letter of Credit under which the Issuing
Bank agrees to make payments in Dollars for the account of the Borrower in
respect of obligations of a Loan Party incurred pursuant to (a) contracts
made or performances undertaken or to be undertaken or like matters
relating to contracts to which such Loan Party is or proposes to become a
party in the ordinary course of such Loan Party's business, including,
without limiting the foregoing, for insurance purposes or in respect of
advance payments or as bid or performance bonds or for any other purpose
for which a standby letter of credit might customarily be issued or (b) the
Wall Acquisition Agreement.
"Subsidiaries Guarantee": the Guarantee, substantially in the form of
Exhibit H, to be made by each Subsidiary in favor of the Agent, for the
benefit of the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiaries Security Agreement": the Security Agreement,
substantially in the form of Exhibit I, to be made by each Subsidiary in
favor of the Agent, for the benefit of the Lenders, as the same may be
amended, supplemented or otherwise modified from time to time.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, directly or
indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Termination Date": the earlier to occur of (a) the Maturity Date and
(b) any date on which the Commitments shall otherwise terminate hereunder.
"The Wall": The Wall Music, Inc., a Pennsylvania corporation.
"Transferee": as defined in subsection 10.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, and any amendments thereof.
"Wall Acquisition Agreement": the Asset Purchase Agreement dated as of
December 10, 1997, by and among the Borrower, ▇▇ ▇▇▇▇▇ Group Holdings
(USA), Inc. and The Wall, as the same may be amended, supplemented or
otherwise modified from time to time.
"Wall Closing Date": the "Closing Date" as defined in the Wall
Acquisition Agreement.
"Wall Transaction": the acquisition by the Borrower or Camelot
Northeast Region, Inc. of substantially all of the assets of The Wall
pursuant to the Wall Acquisition Agreement.
"Wall Transaction Documents": the collective reference to the Wall
Acquisition Agreement and any other instrument or agreement executed and
delivered in connection with the Wall Acquisition Agreement, as each of the
foregoing may be amended, supplemented or otherwise modified from time to
time.
"Withdrawal Liability": as defined under Part I of Subtitle E of Title
IV of ERISA.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes, any other Loan Document or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes, any other Loan Document and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Loan Parties not defined in subsection 1.1 and accounting
terms partly defined in subsection 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to the singular and plural forms of such terms.
SECTION 2 AMOUNT AND TERMS OF COMMITMENT
2.1 Commitments. (a) Subject to the terms and conditions hereof, each
Lender agrees to make revolving credit loans (individually, a "Loan", and
collectively, the "Loans") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Commitment Percentage of the then outstanding
L/C Obligations, does not exceed the amount of such Lender's Commitment at such
time. During the Commitment Period, the Borrower may use the Commitments by
borrowing, prepaying the Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof, and/or by having the Issuing
Bank issue Letters of Credit, having such Letters of Credit expire undrawn upon
or if drawn upon, reimbursing the Issuing Bank for such drawing, and having the
Issuing Bank issue new Letters of Credit.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Aggregate Outstanding Extensions of Credit for all Lenders shall
not at any time exceed the Borrowing Base at such time and no Loan shall be made
or Letter of Credit issued in violation of the foregoing.
(c) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans or (iii) a combination thereof, as determined by the Borrower and upon
notice to the Agent in accordance with subsections 2.5 and 2.6; provided that no
Loan shall be made as a Eurodollar Loan after the day that is one month prior to
the Maturity Date.
2.2 Notes. The Loans made by each Lender to the Borrower shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit J (each, a "Note"), with appropriate insertions, payable to the order of
such Lender and representing the obligation of the Borrower to pay the lesser of
(a) the amount of the Peak Period Commitment of such Lender and (b) the
aggregate unpaid principal amount of all Loans made by such Lender to the
Borrower, with interest thereon as prescribed in subsection 2.9. Each Lender is
hereby authorized to record the Borrowing Date, the Type and the amount of each
Loan made by such Lender, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the length
of the Interest Period with respect thereto on the schedule annexed to and
constituting a part of its Note and, in the absence of manifest error, any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure of any Lender to make such
recordation (or any error in such recordation) shall not affect the obligations
of the Borrower hereunder or under such Note. Each Note shall (i) be dated the
Closing Date, (ii) be stated to mature on the Maturity Date and (iii) provide
for the payment of interest in accordance with subsection 2.9. Interest on each
Note shall be payable on the dates specified in subsection 2.9(e).
2.3 Commitment Fee. The Borrower agrees to pay to the Agent, for the
account of each Lender, a non-refundable commitment fee from and including the
Closing Date to and including the Termination Date, computed at the rate of 3/8
of 1% per annum on the average daily amount of the Available Commitment of such
Lender during the period for which payment is made (whether or not the Borrower
shall have satisfied the applicable conditions to borrowing or issuance of a
Letter of Credit set forth in Section 5). Such commitment fee shall be payable
in arrears on each Interest Payment Date applicable to ABR Loans, commencing on
the first such date to occur following the Closing Date.
2.4 Arrangement Fee. The Borrower agrees to pay a non-refundable
arrangement fee, payable to the Agent in advance on the Closing Date, for the
account of each Lender, equal to 1% of such Lender's Peak Period Commitment.
2.5 Procedure for Borrowing. The Borrower may borrow under the
Commitments on any Business Day, provided that, with respect to any borrowings,
the Borrower shall give the Agent irrevocable notice (a "Borrowing Notice"),
which notice must be received by the Agent (a) prior to 12:00 noon, New York
City time, three Business Days prior to the requested Borrowing Date (or if the
Closing Date occurs on the date this Agreement is executed and delivered, for
Loans made on the Closing Date, on the requested Borrowing Date) if all or any
part of the Loans are to be Eurodollar Loans and (b) prior to 10:00 a.m., New
York City time, on the requested Borrowing Date if the borrowing is solely of
ABR Loans, and specifying (i) the amount of the borrowing, (ii) whether such
Loans are initially to be Eurodollar Loans or ABR Loans or a combination thereof
and (iii) if the borrowing is to be entirely or partly Eurodollar Loans, the
length of the Interest Period for such Eurodollar Loans. Each borrowing under
the Commitments shall be in an amount equal to the lesser of (A) $500,000 or a
whole multiple of $50,000 in excess thereof and (B) the Available Commitments.
Not later than 1:00 p.m., New York City time, on the Borrowing Date specified in
such notice, each Lender shall make available to the Agent at the office of the
Agent specified in subsection 10.2 (or at such other location as the Agent may
direct) an amount in immediately available funds equal to the amount of the Loan
to be made by such Lender. Loan proceeds received by the Agent hereunder shall
promptly be made available to the Borrower by the Agent crediting the account of
the Borrower on the books of such office with the aggregate of the amounts made
available to the Agent by the Lenders and in like funds as received by the
Agent.
2.6 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Loans that are Eurodollar Loans into ABR Loans by
giving the Agent irrevocable notice of such election, to be received by the
Agent prior to 12:00 noon, New York City time, at least three Business Days
prior to the proposed conversion date, provided that any such conversion of
Eurodollar Loans shall only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert all or a
portion of Loans that are ABR Loans to Eurodollar Loans by giving the Agent
irrevocable notice of such election, to be received by the Agent prior to 12:00
noon, New York City time, at least three Business Days prior to the proposed
conversion date, specifying the Interest Period selected therefor, and, subject
to the last sentence of this subsection, such conversion shall be made on the
requested conversion date or, if such requested conversion date is not a
Business Day, on the next succeeding Business Day. Upon receipt of any notice
pursuant to this subsection, the Agent shall promptly notify each Lender
thereof. All or any part of the outstanding Loans may be converted as provided
herein; provided that (i) partial conversions of ABR Loans shall be in the
aggregate principal amount of $500,000 or a whole multiple of $50,000 in excess
thereof and the aggregate principal amount of the resulting Eurodollar Loans
outstanding in respect of any one Interest Period shall be at least $500,000 or
a whole multiple of $50,000 in excess thereof and (ii) no Loan that is an ABR
Loan shall be converted into a Eurodollar Loan (A) when any Event of Default has
occurred and is continuing or (B) after the date that is one month prior to the
Maturity Date.
(b) Any Loan that is a Eurodollar Loan may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Agent, in accordance with the applicable
provisions of the definition of the term "Interest Period" set forth in
subsection 1.1, of the length of the next Interest Period to be applicable to
such Loans; provided that no Loan that is a Eurodollar Loan shall be continued
as such (i) when any Event of Default has occurred and is continuing, (ii) after
the date that is one month prior to the Maturity Date or (iii) if the Borrower
fails to give such notice in accordance with the applicable provisions of the
definition of the term "Interest Period".
2.7 Termination or Reduction of Commitments. (a) The Borrower shall
have the right, upon not less than three Business Days' notice to the Agent and
subject to the provisions of this subsection, to terminate or, from time to
time, permanently reduce the Peak Period Commitments or the Non-Peak Period
Commitments. Any termination of the Commitments shall be accompanied by (i)
prepayment in full of the Loans and L/C Obligations constituting drawings under
any Letter of Credit which has not then been reimbursed and (ii)(A) replacement
of any then unexpired Letter of Credit and return thereof to the Issuing Bank
undrawn and marked "canceled" or (B) to the extent that the Borrower is unable
to replace any such Letter of Credit, the deposit of funds into the L/C Cash
Collateral Account until such Letter of Credit has been cash collateralized in
an amount equal to 105% of the face amount of such Letter of Credit. Upon (but
only upon) termination of the Commitments, any Letter of Credit then outstanding
which has been so cash collateralized shall no longer be considered a "Letter of
Credit" as defined in subsection 1.1 and any L/C Participating Interests granted
by the Issuing Bank to the Lenders in such Letter of Credit pursuant to
subsection 3.4(a) shall be deemed terminated (subject to automatic reinstatement
in the event that such cash collateral is returned and the Issuing Bank is not
fully reimbursed for any such L/C Obligations) but the Letter of Credit fees
payable under subsection 3.3 shall continue to accrue to the Issuing Bank (or,
the Issuing Bank and the Lenders in the event of any such automatic
reinstatement, as provided in subsection 3.3) with respect to such Letter of
Credit until the expiry thereof.
(b) In the case of termination of the Commitments, payment of interest
accrued on the amount of any prepayment relating thereto and any unpaid
commitment fee and any other obligation accrued hereunder shall be made on the
date of such termination. Any partial reduction of the Commitments shall be in
the amount of $500,000, or a whole multiple of $100,000 in excess thereof, and
shall, in each case, reduce permanently the amount of the Commitments then in
effect.
2.8 Optional and Mandatory Prepayments; Repayments of Loans. (a) The
Borrower may, at any time and from time to time, prepay the Loans, in whole or
in part, without premium or penalty (except, with respect to Eurodollar Loans
that are prepaid on a date other than the last day of the Interest Period with
respect thereto, as provided under subsection 2.17), upon (i) in the case of
prepayments of Eurodollar Loans, at least three Business Days' irrevocable
notice (which notice may be given by telephone (to be promptly confirmed in
writing, including by facsimile)) to the Agent and (ii) in the case of
prepayments of ABR Loans, irrevocable notice (which notice may be given by
telephone (to be promptly confirmed in writing, including by facsimile)) to the
Agent prior to 11:30 A.M., New York City time, on the date of such prepayment,
in each case specifying the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if
of a combination thereof, the amount allocable to each. Upon receipt of any such
notice the Agent shall promptly notify each Lender thereof. If any such notice
is given, the amount specified in such notice shall be due and payable on the
date specified therein, together with any amounts payable pursuant to subsection
2.17 in connection therewith. Partial prepayments of Loans under this paragraph
shall be in an aggregate principal amount of $250,000 or a whole multiple of
$50,000 in excess thereof.
(b) To the extent that the sum of the outstanding Loans and L/C
Obligations on any Business Day exceeds (i) the Commitments, including without
limitation, on the first Business Day of any Non-Peak Period during the
Commitment Period or as a result of a permanent reduction of the Commitments
pursuant to subsections 2.7(a) or 2.8(c), or (ii) the Borrowing Base, the
Borrower shall in each such case on the next Business Day pay in full an amount
equal to such excess first, to payment in full of all outstanding Loans, second,
to payment in full of any L/C Obligations constituting drawings under one or
more Letters of Credit which have not then been reimbursed, and third, to cash
collateralize any L/C Obligations constituting outstanding and undrawn Letters
of Credit by depositing an amount equal to 105% of the face amount of each
outstanding Letter of Credit in the L/C Cash Collateral Account.
(c) If any Loan Party shall receive in excess of $750,000 of Net
Proceeds from Asset Sales during any fiscal year then, unless the Required
Lenders shall otherwise agree, the amount of such Net Proceeds in excess of
$750,000 shall be applied to reduce permanently the Commitments within five
Business Days of the receipt by such Loan Party of such excess Net Proceeds.
(d) Notwithstanding the foregoing provisions of this Section 2, for a
period of not less than 45 consecutive days during the fiscal year beginning on
March 1, 1998 and each fiscal year thereafter, the aggregate outstanding
principal amount of all Loans shall be reduced to zero.
2.9 Interest Rates and Payment Dates. (a) Each ABR Loan shall bear
interest on the unpaid principal amount thereof at a rate per annum equal to the
ABR.
(b) Each Eurodollar Loan shall bear interest on the unpaid principal
amount thereof for each day during each Interest Period with respect thereto at
a rate per annum equal to the Eurodollar Rate determined for such Interest
Period, plus 1.75%.
(c) Interest on each Eurodollar Loan shall accrue from and including
the first day of the Interest Period applicable thereto to, but excluding, the
last day of such Interest Period.
(d) If all or a portion of (i) the principal amount of any Loan or
(ii) any interest payable thereon shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise) such Loan, and any such overdue
amount shall, without limiting the rights of the Agent and the applicable
Lenders under Section 8, bear interest at a rate per annum that would be
otherwise applicable thereto pursuant to the foregoing provisions of this
subsection, plus 2%, from the date of nonpayment until such amount is paid in
full (after as well as before judgment).
(e) Interest on the Loans shall be payable in arrears on each
applicable Interest Payment Date, provided that interest accruing pursuant to
paragraph (d) of this subsection shall be payable on demand.
2.10 Computation of Interest and Fees. (a) Commitment and all other
fees and, whenever it is calculated on the basis of the Prime Rate, interest
shall be calculated on the basis of a 365- (or 366- as the case may be) day year
for the actual days elapsed; and, otherwise, interest shall be calculated on the
basis of a 360-day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Agent shall as soon as practicable notify the Borrower and the
Lenders of the effective date and the amount of each such change in interest
rate.
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
and the Lenders in the absence of manifest error. The Agent shall, at the
request of the Borrower, deliver to the Borrower a statement showing the
quotations used by the Agent in determining the Eurodollar Rate.
(c) If at any time any Reference Lender's Commitment shall terminate
(other than on termination of all the Commitments), such Reference Lender shall
thereupon cease to be a Reference Lender and, if as a result of the foregoing,
there shall only be one Reference Lender remaining, then the Agent, after
consultation with the Borrower and the Lenders, shall, by notice to the Borrower
and the Lenders, designate another Lender as a Reference Lender so that there
shall at all times be at least two Reference Lenders.
(d) Each Reference Lender shall use its reasonable best efforts to
furnish quotations of rates to the Agent as contemplated hereby. If any
Reference Lender shall be unable or otherwise fails to supply such rates to the
Agent upon its request, the rate of interest shall be determined on the basis of
the quotations of the remaining Reference Lenders or Reference Lender.
2.11 Agent Fees. The Borrower agrees to pay to the Agent, for its own
account, a non-refundable agent's fee, in an amount per annum equal to $50,000,
payable in advance on the Closing Date and annually thereafter on each one-year
anniversary of the Closing Date prior to be termination of the Commitments and
payment in full of the Loans, the L/C Obligations and any other amounts payable
pursuant to any Loan Document to the Agent, the Lenders or the Issuing Bank.
2.12 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Agent shall have received notice from the Required Lenders
that the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as ABR Loans, (y) any Loans that were to have been converted or
continued on the first day of such Interest Period to Eurodollar Loans shall be
converted to or continued as ABR Loans and (z) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period, to ABR Loans.
Until such notice has been withdrawn by the Agent (and the Agent agrees to do so
promptly when the relevant circumstance no longer exists), no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Loans to Eurodollar Loans.
2.13 Pro Rata Treatment and Payments. (a) Each borrowing of Loans by
the Borrower from the Lenders and any reduction of the Commitments of the
Lenders hereunder shall be made pro rata according to the respective Commitment
Percentages of the Lenders. Each payment (including each prepayment) made on
account of principal of and interest on the Loans shall be made pro rata
according to the respective amounts of the Loans then held by the Lenders. All
payments (including prepayments) to be made on account of principal, interest
and fees shall be made without set off or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Agent, for the
account of the Lenders, at the Agent's office specified in subsection 10.2 in
Dollars and in immediately available funds. The Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder would become due and payable on a day other than a Business
Day, such payment shall become due and payable on the next succeeding Business
Day and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make the amount which would
constitute its Commitment Percentage of such borrowing available to the Agent,
the Agent may assume that such Lender is making such amount available to the
Agent and the Agent may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. If such amount is not made available to the
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Agent, on demand, such amount with interest thereon at a rate equal to
the daily average Federal Funds Effective Rate for the period until such Lender
makes such amount immediately available to the Agent. A certificate of the Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive, absent manifest error. If such Lender's Commitment
Percentage of such borrowing is not in fact made available to the Agent by such
Lender within three Business Days of such Borrowing Date, the Agent shall also
be entitled to recover such amount with interest thereon at the rate per annum
applicable to the ABR Loans hereunder, on demand, from the Borrower, without
prejudice to any rights which the Borrower or the Agent may have against such
Lender hereunder. Nothing contained in this subsection shall relieve any Lender
which has failed to make available its ratable portion of any borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
(c) The failure of any Lender to make the Loan to be made by it on any
Borrowing Date shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on such Borrowing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on such Borrowing Date.
2.14 Illegality. Notwithstanding any other provision of this
Agreement, if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled until such time as such restriction no longer applies,
(b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law and (c) all Loans thereafter made by such Lender shall
be ABR Loans until such time as such restriction no longer applies. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to subsection
2.17.
2.15 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law from any central bank or other Governmental Authority or in
the interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority, in any such case, made subsequent to the
date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Letter of Credit, any Application
or any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes
covered by subsection 2.16 and changes in the rate of tax on the overall
net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law after the date hereof regarding capital
adequacy or in the interpretation or application thereof or compliance by such
Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof shall have the effect
of reducing the rate of return on such Lender's or such controlling
corporation's capital as a consequence of its obligations hereunder to a level
below that which such Lender or such controlling corporation could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or such controlling corporation's policies with respect to capital
adequacy and using averaging and attribution methods which are reasonable) by an
amount deemed by such Lender to be material, then from time to time, the
Borrower shall promptly pay to such Lender such additional amount or amounts as
will compensate such Lender on an after-tax basis for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower (with a copy
to the Agent) of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender in reasonable detail to the Borrower (with a copy to
the Agent) shall be conclusive in the absence of manifest error. The agreements
in this subsection shall survive the termination of this Agreement and repayment
of the Notes and all other amounts payable hereunder. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of paragraph (a)
of this subsection with respect to such Lender, it will, if requested by the
Borrower and to the extent permitted by law or by the relevant Governmental
Authority, endeavor in good faith to avoid or minimize the increase in costs or
reduction in payments resulting from such event; provided, however, that such
avoidance or minimization can be made in such a manner that such Lender, in its
sole determination, suffers no economic, legal or regulatory disadvantage.
2.16 Taxes. (a) Except as provided in the immediately succeeding
sentence, all payments made by the Borrower under this Agreement and any Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
taxes on or measured by net income and franchise taxes (imposed in lieu of net
income taxes) imposed on the Agent or any Lender as a result of a present or
former connection between the Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising from the
Agent or such Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or any Note). If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Lender hereunder or under any Note, the amounts so
payable to the Agent or such Lender shall be increased to the extent necessary
to yield to the Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that the Borrower shall
not be required to increase any such amounts payable to any Lender that is not a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) if such Lender fails to comply with the requirements of paragraph (b) of
this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as practicable thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any such failure.
The agreements in this subsection shall survive the termination of this
Agreement and repayment of the Notes and all other amounts payable hereunder.
(b) Each Lender that is not a United States person (as such term is
defined under Section 7701(a)(30) of the Code) incorporated under the laws of
the United States or a state thereof shall, as promptly as possible deliver to
the Borrower and the Agent (i) two accurate, duly completed, properly executed
copies of United States Internal Revenue Service Form 1001 or Form 4224, or
successor applicable form, as the case may be, and (ii) if applicable for
purposes of United States back-up withholding tax, an Internal Revenue Service
Form W-8 or successor applicable form. Thereafter, each such Lender shall, as
promptly as practicable:
(x) deliver to the Borrower and the Agent two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(y) obtain such extensions of time for filing and completing such
forms or certifications as may reasonably be requested by the Borrower or
the Agent;
unless in any such case, after the Closing Date (or in the case of a Transferee,
after the date on which such Transferee becomes a Participant or Lender
hereunder) the adoption of any law, rule, regulation, policy, guideline or
directive or any change therein or in the interpretation or application thereof
by any Governmental Authority relating to the deducting or withholding of income
taxes has occurred which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advises the Borrower and the Agent. Such Lender
shall certify (A) in the case of a Form 1001 or Form 4224 or any successor
applicable form, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(B) in the case of a Form W-8, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 10.6 shall, upon the effectiveness of the
related transfer, provide all of the forms and statements required pursuant to
this subsection, provided that in the case of a Participant such Participant
shall furnish all such required forms and statements to the Lender from which
the related participation shall have been purchased.
(c) Notwithstanding anything to the contrary contained in this
subsection, if a Lender is a conduit entity participating in a conduit financing
arrangement (as defined in Section 7701(l) of the Code and the Treasury
Regulations issued thereunder) with respect to any payments made by the Borrower
under this Agreement or under any Note, the Borrower shall not be obligated to
pay additional amounts to such Lender pursuant to this subsection to the extent
that the amount of United States taxes exceeds the amount that would have
otherwise been payable had such Lender not been a conduit entity participating
in a conduit financing arrangement.
(d) If a Lender (or the Agent on behalf of a Lender) receives a refund
of, or in respect of, any Non-Excluded Taxes for which the Borrower has paid
additional amounts pursuant to subsection 2.16(a) or, after the payment of such
amounts, such Lender receives a tax credit, deduction or other benefit by reason
of the payment or accrual of such Non-Excluded Taxes, such Lender shall as
promptly as possible pay to the Borrower an amount equal to such refund, credit,
deduction or other tax benefit. Nothing in this subsection shall require a
Lender to disclose its tax returns to the Borrower.
2.17 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense (it being understood that the
Borrower shall not be required to indemnify any Lender for lost profits) which
such Lender may sustain or incur as a consequence of (a) default by the Borrower
in making a borrowing of, conversion into or continuation of Eurodollar Loans
after the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of a Eurodollar Loan after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day which is not the last day of an Interest
Period with respect thereto. This covenant shall survive the termination of this
Agreement and repayment of the Notes and all other amounts payable hereunder.
2.18 Proceeds of Loans and Letters of Credit. The Borrower shall use
the proceeds of the Loans to provide working capital for, to finance Inventory
purchases by, and for other general corporate purposes of the Loan Parties
(including to make cash payments and/or distributions, under, and in connection
with, the implementation of the Reorganization Plan and the Wall Acquisition
Agreement), and the Letters of Credit shall be issued to support the purchase of
Inventory by the Loan Parties and for other general corporate purposes of the
Loan Parties.
SECTION 3 LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
the Issuing Bank, in reliance on the agreements of the other Lenders set forth
in subsection , agrees to issue Letters of Credit for the account of the
Borrower on any Business Day during the Commitment Period in such form as may be
approved from time to time by the Issuing Bank; provided that the Issuing Bank
shall not issue any Letter of Credit if, after giving effect to such issuance,
(i) the L/C Obligations would exceed the L/C Limit, (ii) the Available
Commitment would be less than zero or (iii) subsection 2.1(b) would be violated.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either a Standby L/C
or a Commercial L/C;
(ii) expire no later than the Maturity Date; and
(iii) if the Termination Date occurs prior to the expiration of
any such Letter of Credit, such Letter of Credit shall be replaced and
returned to the Issuing Bank undrawn and marked "canceled" on or prior
to Termination Date or to the extent that the Borrower is unable to
replace any such Letter of Credit, the Borrower shall deposit funds
into the L/C Cash Collateral Account until such Letter of Credit has
been cash collateralized in an amount equal to 105% of the face amount
of such Letter of Credit.
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any Participating Lender to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit (a) if the conditions precedent to the issuance of such Letter of
Credit contained in subsection 5.2 are not satisfied and (b) earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Bank and the Borrower. The Issuing Bank
shall furnish a copy of such Letter of Credit to the Borrower promptly following
the issuance thereof.
3.3 Letter of Credit Fees and Other Charges. (a) In lieu of any letter
of credit commissions and fees provided for in any Application relating to
Standby L/Cs (other than standard issuance, amendment and negotiation fees), the
Borrower agrees to pay the Agent, for the account of the Issuing Bank and the
Participating Lenders, with respect to each Standby L/C issued for the account
of the Borrower, a Standby L/C fee of 2% per annum (of which the Issuing Bank
shall retain for its own account, as the issuing bank and not on account of its
L/C Participating Interest therein, 1/4 of 1% per annum) on the amount available
to be drawn under such Standby L/C, payable in arrears on the last day of each
Interest Payment Date applicable to ABR Loans.
(b) In lieu of any letter of credit commissions and fees provided for
in any Application relating to Commercial L/Cs (other than standard issuance,
amendment and negotiation fees), the Borrower agrees to pay the Agent, for the
account of the Issuing Bank and the Participating Lenders, with respect to each
Commercial L/C issued for the account of the Borrower, a Commercial L/C fee of
3/4 of 1% (of which the Issuing Bank shall retain for its own account, as the
issuing bank and not on account of its L/C Participating Interest therein, 1/8
of 1%), on the maximum face amount of such Commercial L/C, payable in arrears on
the last day of each Interest Payment Date applicable to ABR Loans.
(c) For purposes of any payment of fees required pursuant to this
subsection, the Agent agrees to provide to the Borrower a statement of any such
fees to be so paid; provided that the failure by the Agent to provide the
Borrower with any such statement shall not relieve the Borrower of its
obligation to pay such fees.
(d) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Bank for such normal and customary costs and expenses as
are incurred or charged by the Issuing Bank in issuing, effecting payment under,
amending or otherwise administering any Letter of Credit.
(e) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the Participating Lenders all fees received
by the Agent for their respective accounts pursuant to this subsection.
3.4 L/C Participations. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each Participating Lender, and, to induce the Issuing
Bank to issue Letters of Credit hereunder, each Participating Lender irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Bank, on the terms and conditions hereinafter stated, for such Participating
Lender's own account and risk an undivided interest equal to such Participating
Lender's Commitment Percentage of the Issuing Bank's obligations and rights
under each Letter of Credit issued hereunder and the amount of each draft paid
by the Issuing Bank thereunder. Each Participating Lender unconditionally and
irrevocably agrees with the Issuing Bank that, if a draft is paid under any
Letter of Credit for which the Issuing Bank is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such Participating
Lender shall pay to the Issuing Bank upon demand and in immediately available
funds, if notified prior to 12:00 noon New York City time on such date;
otherwise on the next succeeding Business Day at the Issuing Bank's address for
notices specified herein an amount equal to such Participating Lender's
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
(b) If any amount required to be paid by any Participating Lender to
the Issuing Bank pursuant to clause (a) of this subsection in respect of any
unreimbursed portion of any payment made by the Issuing Bank under any Letter of
Credit is paid to the Issuing Bank within three Business Days after the date
such payment is due, such Participating Lender shall pay to the Issuing Bank on
demand an amount equal to the product of (i) such amount, times (ii) the daily
average Federal Funds Effective Rate, as quoted by the Issuing Bank, during the
period from and including the date such payment is required to the date on which
such payment is immediately available to the Issuing Bank, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any such amount required to be
paid by any Participating Lender pursuant to clause (a) of this subsection is
not in fact made available to the Issuing Bank by such Participating Lender
within three Business Days after the date such payment is due, the Issuing Bank
shall be entitled to recover from such Participating Lender, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans hereunder. A certificate of the Issuing Bank submitted
to any Participating Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any Participating Lender its
pro rata share of such payment in accordance with clause (a) of this subsection,
the Issuing Bank receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise, including proceeds of the L/C Cash
Collateral Account applied thereto by the Issuing Bank), or any payment of
interest on account thereof, the Issuing Bank will distribute to such
Participating Lender its pro rata share thereof; provided, however, that in the
event that any such payment received by the Issuing Bank shall be required to be
returned by the Issuing Bank, such Participating Lender shall return to the
Issuing Bank the portion thereof previously distributed by the Issuing Bank to
it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees
to reimburse the Issuing Bank in accordance with subsection 3.5(b) in respect of
any draft presented under any Letter of Credit and paid by the Issuing Bank for
the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other
costs or expenses incurred by the Issuing Bank in connection with such payment.
Each such payment shall be made to the Issuing Bank at its address for notices
specified herein in lawful money of the United States of America and in
immediately available funds.
(b) If any draft shall be presented for payment under any Letter of
Credit, the Issuing Bank shall promptly notify the Borrower of the date and
amount thereof. The Borrower shall reimburse the Issuing Bank pursuant to
subsection 3.5(a) with respect to any drawing under any Letter of Credit on (i)
the Business Day on which such drawing is paid by the Issuing Bank, if notice of
such drawing is given to the Borrower by the Issuing Bank prior to 12:00 Noon,
New York City time, on the date such drawing is paid, or (ii) the first Business
Day after notice of such drawing is given to the Borrower by the Issuing Bank,
if such notice is given after 12:00 Noon, New York City time, on the date such
drawing is paid, and, if such drawing is reimbursed after the date of such
drawing, interest shall be payable on the amount of such drawing for the period
from the date such drawing is paid by the Issuing Bank until reimbursed by the
Borrower at the rate applicable to ABR Loans. If any amount payable under this
subsection is not paid when due, interest shall be payable on such amount from
the date such amount becomes payable under this subsection until payment in full
thereof at the rate applicable to overdue ABR Loans.
3.6 Obligations Absolute. (a) Subject to subsection 3.6(b), the
Borrower's obligations under this Section 3 shall be absolute and unconditional
under any and all circumstances and irrespective of any set-off, counterclaim or
defense to payment which the Borrower may have or has had against the Issuing
Bank, any Participating Lender or any beneficiary of a Letter of Credit.
(b) The Borrower also agrees with the Issuing Bank that, in the
absence of gross negligence or willful misconduct by the Issuing Bank, the
Issuing Bank shall not be responsible for, and the Borrower's reimbursement
obligations under subsection shall not be affected by, among other things, (i)
the validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or (ii) any dispute between or among the Borrower and any beneficiary of any
Letter of Credit or any other party to which such Letter of Credit may be
transferred or (iii) any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Bank to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing Bank
to the Borrower in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
3.8 Application. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4 REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Loans, and to induce the Issuing Bank to issue, and
the Participating Lenders to participate in, the Letters of Credit, the Borrower
hereby represents and warrants to each Lender, the Issuing Bank and the Agent,
as of the Closing Date and as of the making of any extension of credit hereunder
(unless such representation is expressly made as of a specific date, in which
case such representation and warranty is made as of such specific date):
4.1 Financial Condition. (a) The consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at March 1, 1997 and the related
consolidated statements of operations and of cash flows for the fiscal year
ended on such date, reported on by Coopers & ▇▇▇▇▇▇▇, LLC, copies of which have
heretofore been furnished to each Lender, are complete and correct in all
material respects and present fairly in all material respects in accordance with
GAAP the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operation
and their consolidated cash flows for the fiscal year then ended.
(b) The unaudited pro forma consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as at the Effective Date, certified by a
Responsible Officer of the Borrower, a copy of which has been heretofore
provided to each Lender, is the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries, adjusted to give effect to (i) the
Wall Transaction and each of the transactions contemplated by the Wall
Transaction Documents and (ii) the incurrence of the Loans and the issuance of
the Letters of Credit to be incurred or issued, as the case may be, on the
Closing Date. Such pro forma balance sheet, together with the notes thereto, was
prepared based on good faith assumptions and is based on the best information
available to the Borrower as of the date of delivery thereof, and reflects on a
pro forma consolidated basis the financial position of the Borrower and its
consolidated Subsidiaries as of the Effective Date, as adjusted, as described
above.
(c) The unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at August 30, 1997 and the related consolidated
statements of operations and cash flows for the fiscal quarter ended on such
date, certified by a Responsible Officer of the Borrower, copies of which have
heretofore been provided to each Lender, present fairly in all material respects
in accordance with GAAP, the financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the results of their consolidated
operations and their consolidated cash flows for the fiscal period then ended.
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as disclosed therein). Neither the
Borrower nor any of its consolidated Subsidiaries had at the date of the most
recent balance sheet referred to above, any material Contingent Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any material
interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto or expressly
permitted to be incurred hereunder.
4.2 No Change. Since March 1, 1997, there has been no change, and no
development or event involving a prospective change, which has had or could
reasonably be expected to have a Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of the Loan Parties
(a) is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (b) has full corporate power
and authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to use its corporate name
and to own, lease or otherwise hold its properties and assets and to carry on
its business as presently conducted other than such franchises, licenses,
permits, authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect, (c) is duly qualified as a
foreign corporation and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except such jurisdictions where
the failure so to qualify would not have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law, except where noncompliance would not
have a Material Adverse Effect.
4.4 Corporate Power; Authorization. Each of the Loan Parties has the
corporate power and authority to make, deliver and perform each of the Loan
Documents to which it is a party, and the Borrower has the corporate power and
authority and legal right to borrow hereunder and to have Letters of Credit
issued for its account hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of each of
the Loan Documents to which it is or will be a party and the Borrower has taken
all necessary corporate action to authorize the borrowings hereunder and the
issuance of Letters of Credit for its account hereunder. No consent or
authorization of, or filing with, any Person (including, without limitation, any
Governmental Authority) is required in connection with the execution, delivery
or performance by any Loan Party, or for the validity or enforceability against
such Loan Party, of any Loan Document, except as may be necessary to perfect the
Liens created pursuant to the Security Documents and except those consents,
authorizations and filings which have been obtained, made or waived.
4.5 Enforceable Obligations. This Agreement, and each of the other
Loan Documents and the Wall Transaction Documents have been or will be, duly
executed and delivered on behalf of each Loan Party that is a party hereto or
thereto and each of the Wall Transaction Documents constitutes, and this
Agreement and each of the other Loan Documents will constitute upon execution
and delivery, the legal, valid and binding obligation of such Loan Party, and is
enforceable against such Loan Party in accordance with their terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
4.6 No Legal Bar. The execution, delivery and performance of each Loan
Document and each Wall Transaction Document and the incurrence or issuance of
and use of the proceeds of the Loans and of drawings under the Letters of Credit
will not violate any Requirement of Law or any Contractual Obligation existing
on the Effective Date applicable to or binding upon each Loan Party or any of
its properties or assets, and will not result in the creation or imposition of
any Lien on any of its properties or assets pursuant to any Requirement of Law
applicable to such Loan Party, as the case may be, or any such Contractual
Obligation.
4.7 No Material Litigation. No litigation by, investigation known to
the Borrower by, or proceeding of, any Governmental Authority is pending against
any Loan Party with respect to the validity, binding effect or enforceability of
any Loan Document, any Wall Transaction Document, the Loans made hereunder, the
use of proceeds thereof, or of any drawings under a Letter of Credit and the
other transactions contemplated hereby and by the Wall Transaction Documents.
Except as set forth on Schedule 4.7 hereto, no lawsuits, claims, proceedings or
investigations pending or, to the best knowledge of the Borrower, threatened as
of the Closing Date against or affecting any Loan Party or any of its
properties, assets, operations or businesses, is reasonably likely, if adversely
decided, to have a Material Adverse Effect.
4.8 Investment Company Act. None of the Loan Parties is an "investment
company" or a company "controlled" by an "investment company" (as each of the
quoted terms is defined or used in the Investment Company Act of 1940, as
amended).
4.9 Federal Regulation. No part of the proceeds of any of the Loans or
any drawing under a Letter of Credit will be used for any purpose which violates
the provisions of Regulation G, T, U or X of the Board. No Loan Party is engaged
or will engage, principally or as one of its important activities, in the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted terms under
said Regulation U.
4.10 Taxes. Each Loan Party has filed or caused to be filed all
material tax returns which, to the knowledge of the Borrower, are required to be
filed and, except to the extent set forth in the Reorganization Plan, has paid
all taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any such tax returns, taxes, fees or other charges (a) the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves (or other sufficient provisions) in conformity
with GAAP have been provided on the books of the applicable Loan Party or (b)
which, if not paid or filed, could not reasonably be expected to have a Material
Adverse Effect).
4.11 Subsidiaries. The Subsidiaries of the Loan Parties on Schedule
4.11 constitute all of the Subsidiaries of the Loan Parties as of the Closing
Date, after giving effect to the consummation of the Wall Transaction.
4.12 Ownership of Property and Assets. Each Loan Party has good and
valid title to all its material assets in each case free and clear of all Liens
of any nature whatsoever except Permitted Liens. All of the Inventory is owned
by the Loan Parties. With respect to real property or interests in real
property, the applicable Loan Party has (i) fee title to all of its real
property listed on Schedule 4.12 under the heading "Fee Properties" (each, a
"Fee Property"), and (ii) good and valid title to the leasehold estates in all
of the real property leased by it and listed on Schedule 4.12 under the heading
"Leased Properties" (each, a "Leased Property"). The Fee Properties and the
Leased Properties constitute, as of the Closing Date, all of the real property
owned in fee or leased by the Loan Parties.
4.13 ERISA. No Loan Party or any Commonly Controlled Entity would be
liable for any material amount pursuant to Sections 4062, 4063, 4064 or 4069 of
ERISA, if any Single Employer Plan were to terminate. No Loan Party or any
Commonly Controlled Entity has been involved in any transaction that would cause
such Loan Party to be subject to any material liability with respect to a Plan
to which such Loan Party or any Commonly Controlled Entity contributed or was
obligated to contribute during the six-year period ending on the date this
representation is made or deemed made under Sections 4062, 4069 or 4212(c) of
ERISA. No Loan Party or any Commonly Controlled Entity has incurred any material
liability under Title IV of ERISA which would become or remain a liability of
such Loan Party after the Closing Date and the consummation of the Wall
Transaction. No Loan Party, or any director, officer or employee thereof, or any
of the Plans (to the best knowledge of the Borrower with respect to any Plan
that is a Multiemployer Plan), or any trust created thereunder, or any fiduciary
thereof, has engaged in a transaction or taken any other action or omitted to
take any action involving any such Plan which would constitute a prohibited
transaction within the meaning of Section 406 of ERISA which is not otherwise
exempted, or would cause it to be subject to either a material liability or a
material civil penalty assessed pursuant to Sections 409 or 502 of ERISA or a
material tax imposed pursuant to Sections 4975 or 4976 of the Code. Each of the
Plans (to the best knowledge of the Borrower with respect to any Multiemployer
Plan) has been operated and administered in all material respects in accordance
with applicable laws, including, but not limited to, ERISA and the Code. There
are no material pending or, to the best knowledge of the Borrower, threatened
claims by or on behalf of any of the Plans (to the best knowledge of the
Borrower with respect to any Multiemployer Plan) or any fiduciary of such Plan,
by any employee or beneficiary covered under any such Plan or fiduciary, or
otherwise involving any such Plan or fiduciary (other than routine claims for
benefits). No condition exists and no event has occurred with respect to any
Multiemployer Plan which presents a material risk of a complete or partial
withdrawal under Subtitle E of Title IV of ERISA, nor has any Loan Party or any
Commonly Controlled Entity been notified that any such Multiemployer Plan is
Insolvent or in Reorganization, which Insolvency or Reorganization would result
in a material liability of such Plan. No Loan Party nor any Commonly Controlled
Entity has been a party to any transaction or agreement to which the provisions
of Section 4204 of ERISA were applicable pursuant to which such Loan Party or
Commonly Controlled Entity has any material liability to a Multiemployer Plan.
No Loan Party nor any Commonly Controlled Entity is obligated to contribute to a
Multiemployer Plan, on behalf of any current or former employee of the Borrower
or any Commonly Controlled Entity. None of the Plans or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of each of the Plans which could
reasonably be expected to result in a material liability of such Plans. No
contribution failure has occurred with respect to any Plan sufficient to give
rise to a lien under Section 302(f) of ERISA in favor of any Plan. No Loan Party
has any defined benefit plans (as defined in Section 3(35) of ERISA) other than
as listed on Schedule 4.13.
4.14 Copyrights, Permits, Trademarks and Licenses. Schedule 4.14 sets
forth a true and complete list of all material trademarks (registered or
unregistered), trade names, service marks and copyrights and applications
therefor owned, used or filed by or licensed to any Loan Party and, with respect
to registered trademarks (if any), contains a list of all jurisdictions in which
such trademarks are registered or applied for and all registration and
application numbers. Except as disclosed on Schedule 4.14, a Loan Party owns or
has the right to use, without payment to any other party, trademarks (registered
or unregistered), trade names, service marks, copyrights and applications
therefor referred to on such Schedule. To the best knowledge of the Borrower, no
claims are pending by any Person with respect to the ownership, validity,
enforceability or any Loan Party's use of any such trademarks (registered or
unregistered), trade names, service marks, copyrights or applications therefor,
challenging or questioning the validity or effectiveness of any of the foregoing
in any jurisdiction, domestic or foreign.
4.15 No Default. None of the Loan Parties is in default in the payment
or performance of any of its Contractual Obligations in any respect which could
reasonably be expected to have a Material Adverse Effect. None of the Loan
Parties is in default under any order, award or decree of any Governmental
Authority or arbitrator binding upon or affecting it or them or by which any of
its or their properties or assets may be bound or affected in any respect which
could reasonably be expected to have a Material Adverse Effect and no such
order, award or decree could reasonably be expected to have a Material Adverse
Effect or materially adversely affect the ability of any Loan Party to perform
its obligations under any Loan Document to which it is a party.
4.16 Security Documents. Upon execution and delivery thereof, the
Security Documents will be effective to create, in favor of the Agent, for the
benefit of the Lenders, legal, valid and enforceable Liens on and security
interests in all right, title, estate and interest of the Borrower and the other
Loan Parties, as the case may be, in and to the collateral described therein
and, upon the filing and recording of all necessary and appropriate recordings
and filings in all appropriate public offices and the taking of any other
actions required by law, the Liens and security interests created by each of the
Security Documents will constitute perfected security interests in all such
right, title, estate and interest of the Borrower and the other Loan Parties
prior to all other Liens, existing or future, except for Permitted Liens,
provided that the enforceability of such Liens and security interests is subject
to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
to general equitable principles (whether considered in a proceeding in equity or
at law).
4.17 Environmental Matters. Except as could not reasonably be expected
to have a Material Adverse Effect, to the best knowledge of the Borrower:
(a) each parcel of real property owned or operated by any Loan Party
(the "Properties") does not contain, and has not previously contained, in,
on or under including, without limitation, the soil and groundwater
thereunder, any Hazardous Materials in amounts or concentrations that
constitute or constituted a material violation of, or could reasonably give
rise to material liability under, Environmental Laws;
(b) the Properties and all operations and facilities at the Properties
are in material compliance with all applicable Environmental Laws, and
there is no contamination or violation of any Environmental Law which could
materially interfere with the continued operation of, or materially impair
the fair saleable value of, the Properties;
(c) no Loan Party has received or is aware of any complaint, notice of
violation, alleged violation, or notice of investigation or of potential
liability under Environmental Laws with regard to the Properties or the
operations of the Loan Parties, nor does the Borrower have knowledge that
any such action has been threatened;
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under the Properties, nor have any Hazardous
Materials been transported from the Properties, in material violation of or
in a manner that could reasonably give rise to liability under any
Environmental Laws; and
(e) there are no governmental administrative actions or judicial
proceedings pending or, to the best knowledge of the Borrower, threatened,
under any Environmental Law to which any Loan Party is a party with respect
to the Properties, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other
administrative or judicial requirements, other than permits authorizing
operations at facilities at the Properties, outstanding under any
Environmental Law with respect to the Properties.
4.18 Accuracy and Completeness of Information. The factual statements
contained in the financial statements referred to in subsection 4.1, this
Agreement, the other Loan Documents, the Disclosure Materials, the
Reorganization Plan, the Wall Transaction Documents and any other certificates
or documents furnished or to be furnished, to the Agent or the Lenders or the
Bankruptcy Court from time to time in connection with this Agreement, the other
Loan Documents, the Disclosure Materials, the Reorganization Plan and the Wall
Transaction Documents, taken as a whole, do not and will not, to the best
knowledge of the Borrower, as of the date when made, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances in which the same were furnished or made, all except as otherwise
qualified herein or therein, such knowledge qualification being given only with
respect to factual statements made by Persons other than the Loan Parties.
4.19 Insurance. All policies of insurance of any kind or nature owned
by or issued to any Loan Party, including, without limitation, policies of life,
fire, theft, product liability, public liability, property damage, other
casualty, employee fidelity, workers' compensation, employee health and welfare,
title, property and liability insurance, are in full force and effect and are of
a nature and provide such coverage as is sufficient and as is customarily
carried by companies of the size and character of the Loan Parties, taken as a
whole.
SECTION 5 CONDITIONS PRECEDENT
5.1 Conditions to Initial Loan and Letter of Credit and Effectiveness
of Agreement. This Agreement shall become effective upon, and the obligation of
each Lender to make its initial Loan and the obligation of the Issuing Bank to
issue the initial Letter of Credit are subject to, the satisfaction or waiver by
the Required Lenders of each of the following conditions precedent, provided
that no Lender shall make its initial Loan prior to the satisfaction of the
additional conditions precedent contained in subsection 5.2(f):
(a) Loan Documents. The Agent shall have received (i) a counterpart of
this Agreement for each Lender executed and delivered by a duly authorized
officer of the Borrower, (ii) for the account of each Lender, a Note of the
Borrower conforming to the requirements hereof and executed by a duly
authorized officer of the Borrower, (iii) a counterpart of each of the
Holdings Guarantee and the Subsidiaries Guarantee for each Lender, each
executed and delivered by a duly authorized officer of each party thereto
and (iv) a counterpart of each Security Document for each Lender, each
executed and delivered by a duly authorized officer of each party thereto.
(b) Supporting Documents. The Agent shall have received for each Loan
Party:
(i) a copy of the certificate of incorporation of such Loan
Party, as amended, certified as of a recent date by the Secretary of
State of the state of its incorporation;
(ii) a certificate of such Secretary of State, dated as of a
recent date, as to the good standing of and payment of taxes by such
Loan Party set forth in clause (i) above and as to the charter
documents on file in the office of such Secretary of State; and
(iii) a certificate executed by the President or any Vice
President and the Secretary or Assistant Secretary of such Loan Party
dated the Closing Date, and certifying (A) that attached thereto is a
true and complete copy of the by-laws of such Loan Party as in effect
on the date of such certification, (B) that attached thereto is a true
and complete copy of resolutions adopted by the Board of Directors (or
in the case of Holdings, authorized pursuant to the Reorganization
Plan and the Confirmation Order) of (1) in the case of the Borrower,
the Borrower authorizing the requesting of the Loans and the issuance
of Letters of Credit hereunder, and (2) in the case of each Loan Party
(including the Borrower), such Loan Party authorizing the execution,
delivery and performance in accordance with their respective terms of
each Loan Document to be executed by it and any other documents
required or contemplated hereunder or thereunder, the granting of the
security interests contemplated hereby, and any other matters as
reasonably requested by the Agent and the Lenders, (C) that the
certificate of incorporation of such Loan Party has not been amended
since the date of the last amendment thereto indicated on the
certificate of the Secretary of State furnished pursuant to clause (i)
above and (D) as to the incumbency and specimen signature of each
officer of such Loan Party executing this Agreement, the Notes to be
executed by it and the Loan Documents or any other document delivered
by it in connection herewith or therewith (such certificate to contain
a certification by another officer of such Loan Party as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (iii)).
(c) Pro Forma Balance Sheet. The Agent shall have received a pro forma
consolidated balance sheet of Holdings and its consolidated Subsidiaries as
at the Effective Date, adjusted to give effect to the consummation of the
transactions contemplated by the Reorganization Plan and the Wall
Transaction, which pro forma balance sheet shall be in form and substance
reasonably satisfactory to the Agent.
(d) Fees and Expenses. The Agent and each Lender shall have received
all facility and other fees, expenses and other consideration required to
be paid or delivered on or before the Closing Date (including, without
limitation, all fees and expenses owing as of the Closing Date required to
be paid pursuant to subsection 10.5).
(e) Legal Opinion. The Agent shall have received, with a counterpart
for each Lender, the following executed legal opinions:
(i) the executed legal opinion of White & Case, counsel to the
Borrower and the other Loan Parties, substantially in the form of
Exhibit K;
(ii) the executed legal opinion of ▇▇▇▇▇ & ▇▇▇▇▇, special real
estate counsel to Camelot Distribution, substantially in the form of
Exhibit L-1; and
(iii) the executed legal opinion of Obermayer, Rebmann, ▇▇▇▇▇▇▇ &
Hippel LLP, special Pennsylvania counsel to the Borrower,
substantially in the form of Exhibit L-2.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Agent may reasonably
require.
(f) Pledged Stock; Stock Powers. The Agent shall have received the
certificates representing the shares pledged pursuant to the Holdings
Pledge Agreement and the Borrower Pledge Agreement, together with an
undated stock power for each such certificate executed in blank by a duly
authorized officer of Holdings or the Borrower, as the case may be, each
endorsed in blank by a duly authorized officer of Holdings or the Borrower,
as the case may be.
(g) Actions to Perfect Liens. The Agent shall have received evidence
in form and substance reasonably satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation,
the filing of duly executed financing statements on form UCC-1, necessary
or, in the reasonable opinion of the Agent, desirable to perfect the Liens
created by the Security Documents shall have been completed.
(h) Surveys. The Agent shall have received, and the title insurance
company issuing the policy referred to in subsection 5.1(i) (the "Title
Insurance Company") shall have received, a map or plat of the Mortgaged
Property, dated a date reasonably satisfactory to the Agent and the Title
Insurance Company by an independent professional licensed land surveyor
reasonably satisfactory to the Agent and the Title Insurance Company.
(i) Title Insurance Policy. The Agent shall have received in respect
of the Mortgaged Property a mortgagee's title policy or marked up
unconditional binder for such insurance dated the Closing Date. Such policy
shall (i) be in an amount reasonably satisfactory to the Agent; (ii) be
issued at ordinary rates; (iii) insure that the Camelot Distribution
Mortgage creates a valid Lien on the Mortgaged Property free and clear of
all defects and encumbrances, except such as may be approved by the Agent;
(iv) name the Agent for the benefit of the Lenders as an insured
thereunder; (v) be in the form of ALTA Loan Policy - 1970 (Amended
10/17/70); (vi) contain such endorsements and affirmative coverage as the
Agent may reasonably request and (vii) be issued by title companies
reasonably satisfactory to the Agent (including any such title companies
acting as co-insurers or reinsurers, at the option of the Agent). The Agent
shall have received evidence satisfactory to it that all premiums in
respect of each such policy, and all charges for mortgage recording tax, if
any, have been paid.
(j) Flood Insurance. To the extent required by applicable law, the
Agent shall have received (i) evidence of a policy of flood insurance
reasonably acceptable to the Agent which (A) covers any Mortgaged Property
located in an area identified as an area having special flood hazards by
the Secretary of Housing and Urban Development or other applicable agency,
and (B) otherwise complies with such applicable law and (ii) confirmation
that the Borrower has received the notice required pursuant to Section
208(e)(3) of Regulation H of the Board.
(k) Copies of Documents. The Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the
title policy or policies referred to in subsection 5.1(i) and a copy,
certified by such parties as the Agent may deem appropriate, of all other
documents affecting the Mortgaged Property.
(l) Insurance. The Agent shall have received (i) a schedule describing
all insurance maintained by each Loan Party pursuant to subsection 6.4 and
(ii) certificates of insurance for each policy set forth on such schedule
insuring against casualty and other usual and customary risks.
(m) Borrowing Base Certificate. The Agent shall have received a
Borrowing Base Certificate (dated no more than seven (7) days prior to the
making of the initial Loan or the issuance of the initial Letter of Credit)
showing a Borrowing Base sufficient to allow the making of such Loan or the
issuance of such Letter of Credit in accordance with subsection 2.1(b).
(n) Information. The Agent and each Lender shall have received such
information (financial or otherwise) as may be reasonably requested by the
Agent or any Lender.
(o) Environmental Compliance. Each Loan Party shall have granted the
Agent and each Lender access to and the right to inspect all reports,
audits and other internal information of such Loan Party relating to
environmental matters, and the Agent and each Lender shall be satisfied
that the Loan Parties are in compliance in all material respects with all
applicable Environmental Laws and regulations and be satisfied with the
costs of maintaining such compliance.
(p) Confirmation Order; Reorganization Plan. The Agent and each Lender
shall have received a true and correct copy of the Confirmation Order which
(i) shall be in form and substance reasonably satisfactory to the Agent and
in full force and effect, and shall not have been stayed, reversed,
modified or amended and (ii) shall approve and authorize the transactions
contemplated by this Agreement, the other Loan Documents, the Wall
Transaction Documents and the Reorganization Plan and otherwise shall not
be inconsistent with the provisions hereof and thereof, provided that if
the approval and authorization of the transactions contemplated by the Wall
Transaction Documents are contained in a separate order of the Bankruptcy
Court, such order (i) shall be in form and substance reasonably
satisfactory to the Agent and in full force and effect, and shall not have
been stayed, reversed, modified or amended and (ii) shall not be
inconsistent with the provisions of the Loan Documents, the Wall
Transaction Documents and the Reorganization Plan. The Reorganization Plan
shall not have been amended, supplemented or otherwise modified after the
deadline for voting to accept or reject the Reorganization Plan, except for
such amendments, supplements or modifications thereto which are (A) purely
technical or corrective in nature or (B) not inconsistent, in the
reasonable judgment of the Agent, with the terms of this Agreement, the
other Loan Documents and the Wall Transaction Documents. The Transfer
Agreements (as defined in the Reorganization Plan) shall have been executed
and delivered by the parties thereto and the transactions contemplated
thereby to occur on or before the Effective Date shall have been
consummated.
(q) Available Trade Credit. The Agent and each of the Lenders shall be
reasonably satisfied that trade credit will be made available to the Loan
Parties after the Closing Date in amounts and on terms consistent with the
Borrower's post- Effective Date budget/projections.
(r) Cash Payment to Pre-Petition Secured Lenders. Each holder on the
Effective Date of a Class 1-A Claim under and as defined in the
Reorganization Plan shall have received payment in cash in respect of such
holder's claim in accordance with, and subject to, the terms of the
Reorganization Plan, including, without limitation, the Exchange Option and
the Prepetition Lender Secured Claim Option (as such terms are defined in
the Reorganization Plan).
5.2 Conditions to Each Loan and Letter of Credit. The obligation of
each Lender to make any Loan and the obligation of the Issuing Bank to issue any
Letter of Credit is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date, provided that no Lender shall make its
initial Loan prior to the satisfaction of the additional conditions precedent
contained in subsection 5.2(f):
(a) Notice. The Agent shall have received a Borrowing Notice with
respect to each Loan or an Application with respect to each Letter of
Credit, as the case may be.
(b) Representations and Warranties. Each of the representations and
warranties made in or pursuant to Section 4 or which are contained in any
other Loan Document shall be true and correct in all material respects on
and as of the date of such Loan or of the issuance of such Letter of Credit
as if made on and as of such date (unless stated to relate to a specific
earlier date, in which case, such representations and warranties shall be
true and correct in all material respects as of such earlier date),
including that there shall not have occurred any Material Adverse Effect
since the Closing Date.
(c) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such Borrowing Date or after
giving effect to such Loan to be made or such Letter of Credit to be issued
on such Borrowing Date, and the proposed Loan and its intended use are
consistent with the terms of this Agreement.
(d) Fees. The Borrower shall have paid to the Agent and the Lenders
the then unpaid balance of all accrued and unpaid fees and expenses then
due and payable under and pursuant to this Agreement.
(e) Borrowing Certificate. The Agent shall have received, with a copy
for each Lender, a certificate executed by a Responsible Officer of the
Borrower, substantially in the form of Exhibit M, certifying that (i) the
requested Loan or Letter of Credit and the application or use thereof are
consistent with the terms of this Agreement, (ii) no Default or Event of
Default has occurred and is continuing, (iii) all of the conditions set
forth in subsection 5.2 to such Loan or Letter of Credit have been
satisfied and (iv) after giving effect to the making of such Loan or the
issuance of such Letter of Credit, as the case may be, subsection 2.1(b)
will not be violated.
(f) Additional Conditions Precedent to Initial Loan. In the case of
such Lender's initial Loan only, in addition to the satisfaction of the
conditions precedent contained in subsection 5.2(a) through (e) above,
(i) The Agent shall have received for each Lender, a copy of the
Wall Acquisition Agreement and any of the other Wall Transaction
Documents reasonably requested by the Agent, certified by a
Responsible Officer of the Borrower.
(ii) The Wall Closing Date shall have occurred and the Wall
Transaction shall have been consummated pursuant to the Wall
Transaction Documents for an aggregate cash purchase price not to
exceed $47,000,000 (excluding the face amount of the Standby L/C to be
issued on the closing of the Wall Transaction), subject to adjustment
as provided therein, and all of the conditions precedent set forth in
the Wall Acquisition Agreement shall have been satisfied, and no
material provision of the Wall Transaction Documents shall have been
amended, supplemented, waived or otherwise modified without the prior
written consent of the Agent and the Lenders, which consent shall not
be unreasonably withheld. The Agent shall be reasonably satisfied with
the Wall Transaction Documents in all respects.
(iii) The Agent shall have received, with a copy for each Lender,
(A) a new Schedule 4.12 (Fee and Leased Properties) and a new Schedule
4.14 (Trademarks and Copyrights) to this Agreement and (B) a new
Schedule 4 (Trademarks and Trademark Licenses) and a new Schedule 6
(Inventory and Equipment) to the Subsidiaries Security Agreement, in
each case, giving effect to the Wall Transaction; upon satisfaction of
the conditions precedent contained in this subsection 5.2(f) this
Agreement and the Subsidiaries Security Agreement shall each be deemed
amended to substitute the Schedules delivered pursuant to this
paragraph (iii) for the corresponding Schedules delivered on the
Closing Date.
(iv) The Agent shall have received evidence in form and substance
reasonably satisfactory to it that any further filings, recordings,
registrations and any other actions, including without limitation, the
filing of duly executed financing statements on form UCC-1, necessary
or, in the reasonable opinion of the Agent, desirable to perfect the
Liens created by the Security Documents, after giving effect to the
Wall Transaction, shall have been completed.
Each borrowing by the Borrower hereunder and the issuance of each Letter of
Credit by the Issuing Bank hereunder shall constitute a representation and
warranty by the Borrower as of the applicable Borrowing Date that the conditions
in this subsection have been satisfied as of such Borrowing Date.
SECTION 6 AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan, Note or L/C Obligation (other than L/C Obligations that have
been cash collateralized in the manner set forth in subsection 2.7) remains
outstanding and unpaid, any amount remains available to be drawn under any
Letter of Credit or any other amount is owing to any Lender, the Agent or the
Issuing Bank hereunder or under any of the other Loan Documents, unless the
Required Lenders otherwise consent in writing, it shall or shall cause each
other Loan Party to:
6.1 Financial Statements, Reports, etc. Furnish to the Agent and each
Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end of
such fiscal year and the related consolidated statements of income, cash
flows and stockholders' equity of the Borrower and its consolidated
Subsidiaries for such fiscal year, setting forth in each case in
comparative form the figures for the previous year and, in the case of the
consolidated balance sheet referred to above, reported on, without any
"going concern" or like qualification or exception or any other material
qualifications (other than with respect to the Cases and related matters),
by independent certified public accountants of nationally recognized
standing; all such financial statements to be complete and correct in all
material respects and to be prepared in reasonable detail and in accordance
with GAAP;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, commencing with the first fiscal quarter ending after
the Closing Date, (i) the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of each such
quarter and the related unaudited consolidated statements of income, cash
flows and stockholders' equity of the Borrower and its consolidated
Subsidiaries for such quarterly period and the portion of the fiscal year
of the Borrower through such date, setting forth in each case in
comparative form the figures for the corresponding quarter and year to date
portion of the previous year, certified by the chief financial officer of
the Borrower as being fairly stated in all material respects; all such
financial statements to be complete and correct in all material respects
(subject to normal year-end audit adjustments and the absence of footnotes)
and to be prepared in reasonable detail and in accordance with GAAP and
(ii) a discussion and analysis by management of the results of the Loan
Parties' operations, including the status of Inventory, returns and trade
credit;
(c) as soon as available, but in any event not later than 30 days
after the end of each fiscal month occurring during each fiscal year of the
Borrower (other than the last fiscal month of any fiscal quarter), (i) the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such fiscal month and the related unaudited
consolidated statements of income, cash flows and stockholders' equity of
the Borrower and its consolidated Subsidiaries for such fiscal month and
the portion of the fiscal year through the end of such fiscal month,
setting forth in each case in comparative form the consolidated figures for
the corresponding month of the previous year, certified by the chief
financial officer of the Borrower as being fairly stated in all material
respects (subject to normal year-end audit adjustments and the absence of
footnotes); all such financial statements to be complete and correct in all
material respects (subject to normal year-end audit adjustments and the
absence of footnotes) and to be prepared in reasonable detail and in
accordance with GAAP, (ii) a report as of the last day of such fiscal month
comparing the Inventory at stores operated by the Loan Parties and at the
Loan Parties' warehouses at such date with the comparable prior year period
and (iii) a report on such fiscal month detailing the operating and
non-operating expenses of the Loan Parties and comparing such expenses to
the comparable prior year period and (iv) other information reasonably
requested by the Agent regarding the Loan Parties' operations, including
the status of Inventory, returns and trade credit;
(d) concurrently with the delivery of the consolidated financial
statements referred to in subsection 6.1(a), a letter from the independent
certified public accountants reporting on such financial statements stating
that in making the audit necessary to express their opinion on such
financial statements no knowledge was obtained of any Default or Event of
Default to the extent relating to accounting matters, including without
limitation, subsections 7.7 and 7.8;
(e) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a), (b) and (c), a certificate of the chief
financial officer of the Borrower (i) stating that, to the best of such
officer's knowledge, no Default or Event of Default has occurred and is
continuing except as specified in such certificate, (ii) showing in
reasonable detail (in the case of the financial statements referred to in
subsections 6.1(a) and (b)) as of the end of the related period the figures
and calculations supporting such statement in respect of subsections 7.7
and 7.8, (iii) if not specified in the financial statements delivered
pursuant to paragraph (a), (b) or (c) of this subsection, as the case may
be, specifying the aggregate amount of depreciation, depletion and
amortization charged on the books of the applicable Loan Party, during such
period, and indicating the number of stores closed during the preceding
month and the status of the leases with respect to such closed stores;
(f) promptly upon receipt thereof, copies of all final reports
submitted to any Loan Party by independent certified public accountants in
connection with each annual, interim or special audit of the books of any
such Loan Party made by such accountants, including, without limitation,
any final comment letter submitted by such accountants to management in
connection with their annual audit;
(g) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available to
the public generally by any Loan Party, if any, and all regular and
periodic reports and all final registration statements and final
prospectuses, if any, filed by any Loan Party with any securities exchange
or with the Securities and Exchange Commission or any Governmental
Authority succeeding to any of its functions;
(h) promptly after the same is available, copies of all pleadings,
motions, applications, judicial information, financial information and
other documents filed by or on behalf of any Loan Party with the Bankruptcy
Court or the United States Trustee in the Cases;
(i) an accurate, duly completed Borrowing Base Certificate as soon as
available but in any event on or before (i) during any period when Loans or
L/C Obligations are outstanding, Tuesday of each week, for the week ending
on the immediately preceding Saturday, together with the weekly
"Supplemental Reportings" referenced in such Borrowing Base Certificate and
(ii) 20 calendar days after each fiscal month, as of the end of the
immediately preceding fiscal month, together with the monthly "Supplemental
Reportings" referenced in such Borrowing Base Certificate; and
(j) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of each Loan Party, or
compliance with the terms of any material loan or financing agreements, as
the Agent or any Lender may reasonably request.
6.2 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations and liabilities of whatever nature, except (a) when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of any Loan Party or (b) for delinquent obligations which
do not have a Material Adverse Effect.
6.3 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it, and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all material rights, material privileges,
franchises, copyrights, trademarks and trade names necessary or desirable in the
normal conduct of its business except for rights, privileges, franchises,
copyrights, trademarks and trade names the loss of which would not in the
aggregate have a Material Adverse Effect and comply with all applicable
Requirements of Law except to the extent that the failure to comply therewith
would not, in the aggregate, have a Material Adverse Effect.
6.4 Maintenance of Property; Insurance. (a) Keep all material property
useful and necessary in its business in good working order and condition
(ordinary wear and tear excepted);
(b) Maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and with only such
deductibles as are usually maintained by, and against at least such risks (but
including, in any event, public liability insurance) as are usually insured
against in the same general area, by companies engaged in the same or a similar
business; and
(c) Maintain such other insurance as may be required by law.
6.5 Inspection of Property; Books and Records; Discussions; Inventory
Review. (a) Keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its
business and activities which permit financial statements to be prepared in
conformity with GAAP and all Requirements of Law; and permit representatives of
the Agent or any Lender upon reasonable notice to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be requested upon reasonable
notice, and to discuss the business, operations, assets and financial and other
condition of the Loan Parties with officers and employees thereof and with their
independent certified public accountants;
(b) From time to time upon the reasonable request of the Agent, permit
the Agent or any professionals retained by the Agent to conduct evaluations and
appraisals of (i) the Borrower's practices in the computation of the Borrowing
Base and (ii) the Inventory; and
(c) In connection with any evaluation and appraisal relating to the
computation of the Borrowing Base, make such adjustments to the Borrowing Base
as the Agent shall reasonably request based upon the results of such evaluation
and appraisal.
6.6 Notices. Promptly give notice to the Agent and each Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of any litigation, investigation or proceeding which may exist at
any time between any Loan Party and any Governmental Authority, or receipt
of any notice of any environmental claim or assessment against any Loan
Party by any Governmental Authority, which in any such case could
reasonably be expected to have a Material Adverse Effect;
(c) of any litigation or proceeding against any Loan Party (i) in
which more than $1,000,000 of the amount claimed is not covered by
insurance or (ii) in which injunctive or similar relief is sought which if
obtained could reasonably be expected to have a Material Adverse Effect;
and
(d) of a change known to any Loan Party in the business, assets,
condition (financial or otherwise) or results of operations of the Loan
Parties which could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and (in the cases of clauses (a) through (c)) stating what
action the Loan Parties propose to take with respect thereto.
6.7 Supplemental Collateral; Guarantees. (a) If any Loan Party shall
form or create any Subsidiary on or after the Closing Date, (i) such newly
created Subsidiary shall become a Loan Party and shall within five Business Days
thereafter execute and deliver a guarantee in favor of the Agent, for the
benefit of the Lenders, substantially in the form of the Subsidiaries Guarantee
or otherwise become a party to the Subsidiaries Guarantee pursuant to
documentation satisfactory to the Agent, (ii) each stockholder that is a Loan
Party of such newly created Subsidiary shall promptly thereafter pledge 100% of
the issued and outstanding stock of such Subsidiary owned by such stockholder
pursuant to a pledge agreement substantially in the form of the Borrower Pledge
Agreement or otherwise become a party to the Borrower Pledge Agreement pursuant
to documentation satisfactory to the Agent, (iii) such newly created Subsidiary
shall promptly thereafter execute and deliver a security agreement in favor of
the Agent, for the benefit of the Lenders, substantially in the form of the
Subsidiaries Security Agreement or otherwise become a party to the Subsidiaries
Security Agreement pursuant to documentation satisfactory to the Agent, (and if
such newly created Subsidiary shall have an interest in any real property with a
fair market value (as determined in good faith by the Borrower) greater than
$500,000, a mortgage substantially in the form of the Camelot Distribution
Mortgage), (iv) cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may be necessary or
as the Agent may reasonably request in order to ▇▇▇▇▇ ▇ ▇▇▇▇ on substantially
all of such newly created Subsidiary's property in favor of the Agent, for the
benefit of the Lenders, and otherwise to carry out the purpose of this
subsection (including, without limitation, the execution and delivery of other
security documents, UCC financing statements and similar documents), each of
which guarantees, pledge agreements, security agreements and mortgages shall be
accompanied by such resolutions, incumbency certificates and legal opinions as
are reasonably requested by the Agent.
(b) Upon the acquisition by any Loan Party of any material property
(including, without limitation, any real property with a fair market value (as
determined in good faith by the Borrower) greater than $500,000) or any interest
therein that is not subject to a Lien created pursuant to a Security Document,
the Borrower shall, or shall cause such other Loan Party to, execute and deliver
to the Agent, for the benefit of the Lenders, appropriate mortgages, pledge
agreements and security agreements and the like covering such property or
interest in such property, all in form and substance reasonably satisfactory to
the Agent, together with such further acts, documents and assurances as may be
necessary or as the Agent may reasonably request in order to carry out the
purpose of this subsection (including, without limitation, the execution and
delivery of UCC financing statements and similar documents), each of which
mortgages, pledge agreements and security agreements shall be accompanied by
such resolutions, incumbency certificates and legal opinions as are reasonably
requested by the Agent.
6.8 Environmental Laws. (a) Comply with, and use all reasonable
efforts to insure compliance by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply with and maintain, and
require that all tenants and subtenants obtain and comply with and maintain, any
and all licenses, approvals, registrations or permits required by applicable
Environmental Laws, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions, required under applicable
Environmental Laws, and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities respecting Environmental
Laws, except to the extent that the same are being contested in good faith by
legal proceedings; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of or noncompliance with
any Environmental Laws applicable to the real property owned or operated by any
Loan Party, any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this subsection shall survive termination of this Agreement
and repayment of the Notes and all other amounts payable hereunder.
6.9 Employee Benefits. Furnish to the Agent:
(a) as soon as reasonably possible, and in any event within 30 days,
after any Responsible Officer of any Loan Party or any Commonly Controlled
Entity knows that any Reportable Event has occurred that alone or together with
any other Reportable Event could reasonably be expected to result in liability
of any Loan Party to the PBGC in an aggregate amount exceeding $500,000, a
statement of a Responsible Officer of the Borrower setting forth details as to
such Reportable Event and the action, if any, which such Loan Party or any
affected Commonly Controlled Entity proposes to take with respect thereto,
together with a copy of the notice, if any, of such Reportable Event given to
the PBGC;
(b) as soon as reasonably possible, and in any event within 10 days,
after receipt thereof by any Responsible Officer of any Loan Party or any
Commonly Controlled Entity, a copy of any notice that any Loan Party or any
Commonly Controlled Entity receives from the PBGC relating to the intention of
the PBGC to terminate any Plan or Plans or to appoint a trustee to administer
any such Plan;
(c) within 10 days after the due date for filing with the PBGC
pursuant to Section 412(n) of the Code a notice of failure of any Loan Party or
any Commonly Controlled Entity to make a required installment or other payment
with respect to a Plan, a statement of a Responsible Officer of the Borrower
setting forth details as to such failure and the action that such Loan Party or
any Commonly Controlled Entity proposes to take with respect thereto, together
with a copy of any such notice given to the PBGC; and
(d) as soon as reasonably possible, and in any event within 30 days,
after receipt thereof by any Responsible Officer of any Loan Party or any
Commonly Controlled Entity from the sponsor of a Multiemployer Plan, a copy of
each notice received by any Loan Party or any Commonly Controlled Entity from
such sponsor or the PBGC concerning (i) the imposition of Withdrawal Liability,
(ii) a determination by such sponsor or the PBGC that a Multiemployer Plan is,
or is expected to be, terminated or in reorganization, both within the meaning
of Title IV of ERISA or (iii) an increase in the amount or rate of contributions
required to be made by a Loan Party or Commonly Controlled Entity to a
Multiemployer Plan.
6.10 Further Assurances. Upon the request of the Agent, promptly
perform or cause to be performed any and all acts and execute or cause to be
executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which the Agent deems
reasonably necessary or advisable to maintain in favor of the Agent, for the
benefit of the Lenders, Liens created by any of the Security Documents that are
duly perfected in accordance with all applicable Requirements of Law.
SECTION 7 NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan, Note or L/C Obligation (other than L/C Obligations that have
been cash collateralized in the manner set forth in subsection 2.7) remains
outstanding and unpaid, any amount remains available to be drawn under any
Letter of Credit or any other amount is owing to any Lender, the Agent or the
Issuing Bank hereunder or under any of the other Loan Documents, unless the
Required Lenders shall otherwise consent in writing, it shall not, and shall not
permit any other Loan Party to, directly or indirectly:
7.1 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness outstanding on the Closing Date or after giving
effect to the Wall Transaction and, in each case, reflected on Schedule
7.1, but excluding the refinancing of any such Indebtedness;
(b) Indebtedness under this Agreement, the Notes, the Letters of
Credit and the other Loan Documents;
(c) Indebtedness of the Loan Parties in respect of Financing Leases
incurred after the Closing Date in an aggregate amount not to exceed (i)
$8,000,000 incurred to acquire, install and implement a "point of sale"
system and (ii) $1,000,000 at any one time outstanding in respect of any
other Financing Leases incurred after the Closing Date;
(d) Indebtedness of any Loan Party to any other Loan Party;
(e) Indebtedness of the Loan Parties incurred to finance the
acquisition of fixed or capital assets (whether pursuant to a loan, a
Financing Lease or otherwise), other than as permitted under subsection
7.1(c)(i), in an aggregate principal amount not to exceed, when added to
Indebtedness permitted under subsection 7.1(f) and Contingent Obligations
permitted under subsection 7.3(c), $5,000,000 at any time outstanding;
(f) additional Indebtedness of the Loan Parties, provided that (i)
such Indebtedness shall not mature or otherwise require any amortization of
principal prior to the Maturity Date and (ii) the aggregate principal
amount of all such Indebtedness shall not exceed, when added to
Indebtedness permitted under subsection 7.1(e) and Contingent Obligations
permitted under subsection 7.3(c), $5,000,000 at any time outstanding; and
(g) Indebtedness of all Persons which become Loan Parties after the
Closing Date in connection with, or Indebtedness which is assumed by any
Loan Party at the time of, any acquisition or merger permitted under
subsections 7.4 and 7.6, provided, that (i) the aggregate principal amount
of all such Indebtedness shall not exceed, when added to investments
permitted under subsection 7.6(g), $10,000,000, (ii) such Indebtedness
existed at the time any such Person became, or such Indebtedness was
assumed by, a Loan Party and was not created in anticipation of the
acquisition or merger and (iii) immediately after giving effect to such
acquisition or merger, no Default or Event of Default shall have occurred
and be continuing.
7.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets, income or profits, whether now owned or
hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of any such Loan Party, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations which are not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of any such Loan Party, in
accordance with GAAP;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, tenders, trade or
government contracts (other than for borrowed money), leases, licenses,
statutory obligations, surety and appeal bonds, performance bonds, utility
obligations and other obligations of a like nature incurred in the ordinary
course of business;
(e) easements (including, without limitation, reciprocal easement
agreements), rights-of-way, building, zoning and similar restrictions,
utility agreements, covenants, reservations, encroachments, changes, and
other similar encumbrances or title defects incurred, or licenses, leases
or subleases granted to others, in the ordinary course of business, which
do not in the aggregate materially detract from the aggregate value of the
properties of the Loan Parties, taken as a whole, or in the aggregate
materially interfere with or adversely affect in any material respect the
ordinary conduct of the business of the Loan Parties on the properties
subject thereto, taken as a whole;
(f) Liens in favor of the Agent and the Lenders granted pursuant to
the Loan Documents;
(g) Liens existing on the Closing Date or after giving effect to the
Wall Transaction and, in each case, listed on Schedule 7.2;
(h) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of the Commercial L/Cs;
(i) mortgages, liens, security interests, restrictions or encumbrances
that have been placed by any developer, landlord or other third party on
property over which any such Loan Party has easement rights or on any
Leased Property and subordination or similar agreements relating thereto;
(j) Liens on goods which a Loan Party (acting as consignee) has agreed
to sell on a consignment basis in the ordinary course of business;
(k) Liens on property (but solely on such property and the proceeds
thereof) acquired pursuant to a Financing Lease permitted under subsection
7.1(c) to secure the Indebtedness under such Financing Lease;
(l) Liens securing or consisting of Indebtedness of the Loan Parties
permitted under subsection 7.1(e) to be incurred to finance the acquisition
of fixed or capital assets, provided that (i) such Liens are created within
90 days after the acquisition of such fixed or capital assets, (ii) such
Liens do not at any time encumber any property other than the property
acquired with such Indebtedness and (iii) except as to Financing Leases,
the principal amount of Indebtedness secured by any such Lien shall at no
time exceed 100% of the original purchase price of such assets (in the case
of a purchase) or the fair value of such assets at the time acquired as
determined in good faith by the board of directors of the relevant Loan
Party (in all other cases);
(m) Liens on the property or assets of a Person which becomes a Loan
Party after the Closing Date in connection with, or Liens on the property
or assets which are acquired by any Loan Party at the time of, any
acquisition or merger permitted under subsections 7.4 and 7.6, which Liens
secure Indebtedness of the Loan Parties permitted by subsection 7.1(g),
provided that (i) such Liens existed at the time such Person became a Loan
Party or such asset was acquired and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any additional property
or assets of such Person after the time such Person became a Loan Party or
such asset was acquired, and (iii) the amount of Indebtedness or other
obligations secured thereby is not increased; and
(n) other Liens in an aggregate amount not to exceed $100,000,
provided that such Liens do not secure or consist of Indebtedness.
7.3 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist any Contingent Obligation except:
(a) the Guarantees;
(b) guarantees by any Loan Party of the obligations of any other Loan
Party, including, without limitation, in respect of the purchase of
Inventory in the ordinary course of business;
(c) other guarantees by the Loan Parties incurred in the ordinary
course of business in an aggregate amount not to exceed, when added to
Indebtedness permitted under subsections 7.1(e) and (f), $5,000,000 at any
one time outstanding;
(d) Contingent Obligations existing on the Closing Date and described
on Schedule 7.3(d); and
(e) guarantees of obligations to third parties in connection with
relocation of employees of any Loan Party, in an amount which, together
with all loans and advances made pursuant to subsection 7.6(f), shall not
exceed $1,000,000 at any time outstanding.
7.4 Prohibition of Fundamental Changes. Enter into any merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Loan Party may be merged or consolidated with or into any
other Loan Party, provided that in the case of any merger or consolidation
involving the Borrower, the Borrower shall be the continuing or surviving
corporation; and
(b) in connection with the Wall Transaction or an acquisition or
merger permitted under subsection 7.6(g).
7.5 Prohibition on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to, any Person other than to
the Borrower or a wholly-owned Subsidiary of the Borrower except:
(a) for the sale or other disposition of any leaseholds, any real
property (other than the Mortgaged Property) owned in fee by any Loan Party
or any tangible personal property that, in the reasonable judgment of such
Loan Party has become uneconomic, obsolete, worn out or otherwise no longer
useful in such Loan Party's business, and which in each case is disposed of
in the ordinary course of business;
(b) for sales or other dispositions of Inventory, property, plant,
equipment or other tangible personal property made in the ordinary course
of business (including without limitation, the sale of Inventory by Camelot
Distribution to the other Subsidiaries of the Borrower);
(c) for the transfer of assets pursuant to the Transfer Agreements (as
defined in the Reorganization Plan);
(d) for the sale or other disposition by any Loan Party of other
assets, provided that the aggregate net book value of all dispositions
described in this clause shall not exceed $750,000 in any fiscal year;
(e) subject to compliance with subsection 6.7, that any Subsidiary of
the Borrower may sell, lease, transfer or otherwise dispose of any or all
of its assets (upon voluntary liquidation or otherwise) to, or merge with
and into, the Borrower or a wholly-owned Subsidiary thereof and any
Subsidiary of the Borrower may sell or otherwise dispose of, or part with
control of any or all of, the stock of any Subsidiary to the Borrower or
any wholly-owned Subsidiary of the Borrower;
(f) leases of Fee Properties and other real property owned in fee in
the ordinary course of business, including without limitation, the lease by
Camelot Distribution to the Borrower of a portion of the Distribution
Center for use as the Borrower's corporate headquarters;
(g) the sale or discount of accounts receivable in connection with the
compromise or collection thereof in the ordinary course of business; and
(h) subject to the other terms and provisions of this Agreement,
leases or subleases (or assignments of leases) of any property of a Loan
Party in the ordinary course of business.
7.6 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or make any other investment in
(including, without limitation, any acquisition of all or any substantial
portion of the assets, and any acquisition of a business or a product line, of
other companies, other than the acquisition of Inventory, materials and
equipment in the ordinary course of business), any Person, except:
(a) any Loan Party may make loans or advances to any other Loan Party;
(b) (i) subject to compliance with subsection 6.7, any Subsidiary may
make investments in the Borrower (by way of capital contribution or
otherwise) and (ii) any Loan Party may make investments in, or create, any
wholly-owned Subsidiary (by way of capital contribution or otherwise) or
make investments permitted by subsection 7.5(e);
(c) any Loan Party may invest in, acquire and hold Cash Equivalents;
(d) any Loan Party may make payroll advances in the ordinary course of
business;
(e) any Loan Party may acquire and hold receivables owing to it, if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, provided that
nothing in this clause shall prevent any Loan Party from offering such
concessionary trade terms, or from receiving such investments in connection
with the bankruptcy or reorganization of their respective suppliers or
customers or the settlement of disputes with such customers or suppliers
arising in the ordinary course of business, as management deems reasonable
in the circumstances;
(f) any Loan Party may make travel and entertainment advances and
relocation and other loans to officers and employees of any Loan Party,
provided that the aggregate principal amount of all such loans and advances
outstanding at any one time, together with the guarantees of such loans and
advances made pursuant to subsection 7.3(e), shall not exceed $1,000,000 at
any one time outstanding; and
(g) the Loan Parties may make investments in connection with the
acquisition by or merger into a Loan Party in an aggregate principal amount
not to exceed, when added to Indebtedness permitted under subsection
7.1(g), $10,000,000.
7.7 Capital Expenditures. Make or commit to make any Capital
Expenditures (other than the Wall Transaction or acquisitions or mergers
permitted under subsections 7.4 and 7.6, to the extent treated as Capital
Expenditures), except that the Loan Parties may make or commit to make Capital
Expenditures (a) with respect to the acquisition, installation and
implementation of a "point of sale" system, in an aggregate amount not to
exceed, when added to Indebtedness permitted under subsection 7.1(c)(i),
$8,000,000 and (b) otherwise, not exceeding the amount set forth below (the
"Base Amount") for each of the fiscal years of the Borrower (or other period)
set forth below:
Fiscal Year
or Period Base Amount
------------ -----------
Closing Date through 2/28/98 $ 4,000,000
1998 17,000,000
1999 19,400,000
2000 21,400,000
2001 22,500,000
provided, however, that for any fiscal year of the Borrower, the Base Amount set
forth above for such fiscal year may be increased by a maximum of $2,000,000 by
carrying over any portion of the Base Amount not spent in the immediately
preceding fiscal year (but not in any year prior thereto).
7.8 Consolidated EBITDA. Permit Consolidated EBITDA (a) for the period
commencing on December 1, 1997 and ending on February 28, 1998 to be less than
$15,000,000 and (b) for any period of four consecutive fiscal quarters beginning
with the first fiscal quarter to occur after February 28, 1998 to be less than
$32,000,000 (inclusive of the operations of The Wall for any such fiscal quarter
prior to the closing of the Wall Transaction).
7.9 Limitation on Dividends. Declare any dividends on any shares of
any class of stock, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, retirement or
other acquisition of any shares of any class of stock, or any warrants or
options to purchase such stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of any Loan Party, except that:
(a) any Subsidiary may pay dividends to the Borrower or to any other
Subsidiary;
(b) the Borrower may pay or make dividends or distributions to any
holder of its Capital Stock in the form of additional shares of Capital
Stock of the same class and type;
(c) so long as immediately after any declaration and payment thereof,
(i) no Default or Event of Default shall have occurred and be continuing
and (ii) there shall be Available Commitments in excess of (A) $40,000,000,
during the Peak Period, and (B) $25,000,000, during the Non-Peak Period,
the Borrower may pay cash dividends during any fiscal year to the holders
of its Capital Stock in an aggregate amount not to exceed 30% of
Consolidated Net Income for the immediately preceding fiscal year as set
forth on the audited financial statements for such fiscal year delivered
pursuant to subsection 6.1(a); and
(d) Holdings or the Borrower may purchase Capital Stock of Holdings
(including, without limitation, options to acquire the same) from
directors, officers and employees of any Loan Party in connection with
stock option plans and employment and severance arrangements so long as no
Default or Event of Default shall have then occurred and be continuing or
would result therefrom and such purchases are made in the ordinary course
of business.
7.10 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
(a) otherwise permitted under this Agreement, (b) between or among Loan Parties
in the ordinary course of business or (c) in the ordinary course of any Loan
Party's business and upon fair and reasonable terms no less favorable to such
Loan Party than it would obtain in a hypothetical comparable arm's-length
transaction with a Person not an Affiliate, provided, however, that nothing in
this subsection shall prohibit any Loan Party from engaging in the following
transactions: (i) the performance of any such Loan Party's obligations under any
employment contract, collective bargaining agreement, employee benefit plan,
related trust agreement or any other similar arrangement heretofore or hereafter
entered into in the ordinary course, (ii) payment of compensation to employees,
officers, directors or consultants in the ordinary course of business, (iii)
maintenance of benefit programs or arrangements for employees, officers or
directors, including, without limitation, vacation plans, health and life
insurance plans, deferred compensation plans, and retirement or savings plans
and similar plans, (iv) the assumption by the Borrower of leases covering the
Leased Property and assignment thereof to its Subsidiaries and (v) the lease by
Camelot Distribution to the Borrower of a portion of the Distribution Center for
use as the Borrower's corporate headquarters.
7.11 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Borrower to end on a day other than the Saturday on or closest to February
28.
7.12 Limitation on Lines of Business. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Loan Parties were engaged on the Closing Date or businesses related or similar
thereto.
7.13 Failure to Maintain Trade Credit. Fail to maintain trade credit
in amounts and on terms at least as favorable to the Loan Parties as set forth
in the Borrower's post-Effective Date budget/projections.
7.14 Concentration Account. From and after the two month anniversary
of the Closing Date, (a) fail to maintain a system of cash management that (i)
concentrates at least three times each week in the Concentration Account
established and maintained with the Cash Management Bank all funds received and
used in the Loan Parties' business and (ii) is otherwise consistent with the
Borrower's currently existing cash management system, except to the extent
modified with the consent of the Cash Management Bank and the Required Lenders
and (b) permit any cash received and used in the business of the Loan Parties to
be held by any Loan Party or deposited in any account other than the
Concentration Account, or permit any collections by the Loan Parties, whether on
account of payments in respect of sales of Inventory or otherwise, to be held by
any Loan Party or deposited in any account other than the Concentration Account,
provided, that (i) subject to the requirement to concentrate cash at least three
days each week in the Concentration Account, the Loan Parties may continue to
maintain bank accounts at local banks proximate to retail store locations, if
the Cash Management Bank does not maintain a branch office in such locations,
(ii) the Borrower may establish and maintain "trust fund" bank accounts in
amounts reasonably determined to be necessary to pay "trust fund" tax
obligations and (iii) the Loan Parties may continue to maintain cash at the
store locations in accordance with past practices, so long as the aggregate
amount of cash maintained at store locations does not exceed $500,000 at any one
time.
SECTION 8 EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Loan Party shall fail to (i) pay any principal of any Note
when due in accordance with the terms hereof or thereof or to reimburse the
Issuing Bank in accordance with subsection 3.5 or (ii) pay any interest on
any Note or any other amount payable hereunder within three days after any
such interest or other amount becomes due in accordance with the terms
hereof or thereof; or
(b) (i) Any Loan Party shall default in the observance or performance
of any agreement contained in subsections 2.8(d) or 6.7(a) or Section 7 of
this Agreement, Section 5 of any Pledge Agreement, Section 4 of any
Security Agreement, Section 10 of the Holdings Guarantee, Section 11 of the
Subsidiaries Guarantee or Sections 3 through 9 of the Camelot Distribution
Mortgage, (ii) the Borrower shall fail to deliver a Borrowing Base
Certificate pursuant to subsection 6.1(i) within seven (7) days after such
Borrowing Base Certificate was due pursuant to such subsection or (iii)
with respect to any Subsidiary which becomes a Loan Party after the Closing
Date, or if any additional Security Documents are executed by any Loan
Party after the Closing Date, such Loan Party shall default in the
observance or performance of the corresponding provisions of the pledge
agreement, guarantee, security agreement or mortgage to which it is a
party; or
(c) Any representation or warranty made or deemed made by any Loan
Party in any Loan Document or which is contained in any certificate,
document or financial or other statement furnished by it at any time under
or in connection with this Agreement shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section 8)
and such default shall continue unremedied for a period of thirty (30) days
after notice to any Loan Party by the Agent or any Lender or knowledge on
the part of any Loan Party; or
(e) Any Loan Party shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Notes, the L/C Obligations and
any inter-company debt) or in the payment of any Contingent Obligation,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Contingent Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness or Contingent Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Contingent Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity, any applicable grace period having expired, or such Contingent
Obligation to become payable, any applicable grace period having expired;
in each case, provided that no Default or Event of Default shall exist
under this paragraph unless the aggregate principal amount of all such
Indebtedness and/or Contingent Obligations under which any default or other
event or condition referred to in this paragraph shall have occurred shall
be equal to at least $1,000,000; or
(f) (i) Any Loan Party shall commence any case, proceeding or other
action (other than the Cases) (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or any Loan Party shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against any Loan Party
any case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
any Loan Party any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) any Loan Party shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) any Loan Party shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan which is not otherwise exempted, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived,
shall exist with respect to any Plan, (iii) a Reportable Event shall occur
with respect to, or proceedings shall have been commenced by the PBGC to
have a trustee appointed, or a trustee shall be appointed, to administer or
to terminate, any Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) any Loan Party or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan; and in each case in clauses (i) through (v) above, such event or
condition, together with all other such events or conditions relating to a
Plan, if any, would be reasonably likely to subject any Loan Party to any
tax, penalty or other liabilities which in the aggregate could reasonably
be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered after the
Closing Date against any Loan Party involving in the aggregate a liability
(to the extent not paid or covered by insurance) of $1,000,000 or more and
all such judgments or decrees shall not have been vacated, stayed or bonded
pending appeal within the time required by the terms of such judgment; or
(i) Any Loan Document shall cease, for any reason, to be in full force
and effect or any Loan Party shall so assert in writing, or any Security
Document shall cease to be effective to grant a perfected Lien on the
collateral described therein with the priority purported to be created
thereby subject to such exceptions as may be permitted therein; or
(j) (i) the Borrower shall cease to own and control, of record and
beneficially, directly, 100% of each class of outstanding Capital Stock of
each of its Subsidiaries listed on Schedule 4.11, in each case free and
clear of all Liens other than Permitted Liens; (ii) Holdings shall cease to
own and control, of record and beneficially, directly, 100% of each class
of outstanding Capital Stock of the Borrower; or (iii) any Person, other
than a Permitted Holder, whether singly or in concert with one or more
Persons other than a Permitted Holder shall, directly or indirectly, have
acquired, or acquire the power to vote or direct the voting of, 35% or
more, on a fully diluted basis, of the outstanding common stock of
Holdings;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above, automatically (1) the Commitments
shall immediately terminate and the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes shall
immediately become due and payable, and (2) all obligations of the Borrower in
respect of the Letters of Credit, although contingent and unmatured, shall
become immediately due and payable and the Issuing Bank's obligations to issue
the Letters of Credit shall immediately terminate and (B) if such event is any
other Event of Default, either or both of the following actions may be taken:
(1) with the consent of the Required Lenders, the Agent may, or upon the request
of the Required Lenders, the Agent shall, by notice to the Borrower, declare the
Commitments and the Issuing Bank's obligations to issue the Letters of Credit to
be terminated forthwith, whereupon the Commitments and such obligations shall
immediately terminate; and (2) with the consent of the Required Lenders, the
Agent may, or upon the request of the Required Lenders, the Agent shall, by
notice of default to the Borrower, (x) declare all or a portion of the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement, the Notes and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable, and (y)
require the Borrower upon demand to forthwith deposit in the L/C Cash Collateral
Account cash in an amount equal to the sum of 105% of the then outstanding L/C
Obligations and to the extent the Borrower shall fail to furnish such funds as
demanded by the Agent, the Agent shall be authorized to debit the accounts of
the Borrower maintained with the Agent or any other accounts maintained with any
Lender in connection with the cash management system or otherwise in such amount
for the deposit of such amounts in the L/C Cash Collateral Account. Except as
expressly provided above in this Section 8, presentment, demand, protest and all
other notices of any kind are hereby expressly waived.
SECTION 9 THE AGENT; THE ISSUING BANK
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints Chase as the Agent under this Agreement and irrevocably authorizes
Chase as Agent for such Lender, to take such action on its behalf under the
provisions of the Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of the Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into the Loan Documents or otherwise exist against the Agent.
9.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and each of the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care, except as otherwise provided in subsection 9.3.
9.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with the Loan Documents (except for its or such Person's
own gross negligence or willful misconduct), or (ii) responsible in any manner
to any of the Lenders for any recitals, statements, representations or
warranties made by any Loan Party or any officer thereof contained in the Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, the
Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of the Loan Documents or for any failure of any
Loan Party to perform its obligations thereunder. The Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, any Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under any Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders (or, where unanimous consent of the Lenders
is expressly required hereunder, such Lenders) as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under any Loan Document in
accordance with a request of the Required Lenders (or, where unanimous consent
of the Lenders is expressly required hereunder, such Lenders), and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall promptly give notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders; provided that unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
9.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Loan Parties, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the 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 credit analysis, appraisals and decisions in taking or not taking action
under the Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Loan Parties. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Loan Parties which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Loan Parties and without
limiting the obligation of the Loan Parties to do so), ratably according to the
amounts of their respective aggregate Commitments (or, to the extent the
Commitments have been terminated, according to their respective Aggregate
Outstanding Extensions of Credit) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of the Loan Documents or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the termination of this Agreement and repayment of the Notes and all
other amounts payable hereunder.
9.8 The Agent in its Individual Capacity. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Loan Parties as though the Agent were not the Agent hereunder.
With respect to its Loans made or renewed by it and any Note issued to it, the
Agent shall have the same rights and powers, duties and liabilities under the
Loan Documents as any Lender and may exercise the same as though it were not the
Agent and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacities.
9.9 Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Lenders. If the Agent shall resign as Agent under the Loan
Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders whereupon such successor agent shall succeed to
the rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent under the Loan
Documents.
9.10 Issuing Bank as Issuer of Letters of Credit. Each Lender hereby
acknowledges that the provisions of this Section 9 shall apply to the Issuing
Bank, in its capacity as issuer of the Letters of Credit, in the same manner as
such provisions are expressly stated to apply to the Agent, except that the
obligations to indemnify the Issuing Bank shall be ratable among the Lenders in
accordance with their respective Commitments (or, if the Commitments have been
terminated, their respective Aggregate Outstanding Extensions of Credit).
SECTION 10 MISCELLANEOUS
10.1 Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, neither this Agreement nor any other Loan Document may be
amended, supplemented, waived or modified except in accordance with the
provisions of this subsection. With the written consent of the Required Lenders,
the Agent and the respective Loan Parties may, from time to time, enter into
written amendments, supplements or modifications to any Loan Document for the
purpose of adding any provisions to any Loan Document to which they are parties
or changing in any manner the rights of the Lenders or of any such Loan Parties
thereunder or waiving, on such terms and conditions as the Agent may specify in
such instrument, any of the requirements of any such Loan Document or any
Default or Event of Default and its consequences; provided, however, that:
(a) no such waiver and no such amendment, supplement or modification
shall: (i) extend the final maturity date of any Note, or reduce the rate
or extend the time of payment of interest thereon, or reduce any fee
payable to the Lenders hereunder, or reduce the principal amount of any
Loan, or amend, modify or waive any provision of this subsection, or change
the percentage specified in the definition of Required Lenders, or consent
to the assignment or transfer by any Loan Party of any of its rights and
obligations under any Loan Document, or waive, amend or modify any
provision of this Agreement which provides for the unanimous consent or
approval of the Lenders, in each case, without the written consent of each
Lender directly affected thereby; or (ii) change the amount of any Lender's
Commitment, or amend the definition of Borrowing Base or the definition of
any defined term used therein, or release any funds on deposit in the L/C
Cash Collateral Account (other than to pay L/C Obligations), or waive the
condition precedent set forth in subsections 5.2(c) (unless the related
Default or Event of Default could be waived by the Required Lenders) or
5.2(f), in each case, without the written consent of each Lender directly
affected thereby;
(b) without the consent of all of the Lenders, no such waiver and no
such amendment, supplement or modification shall release (i) all or
substantially all of the collateral granted to the Agent, for the benefit
of the Lenders, pursuant to the Security Documents or (ii) any Guarantor
from its obligations under a Guarantee except in connection with (A) the
transfer of substantially all of such Guarantor's assets to another Loan
Party or (B) the sale of such Guarantor as permitted pursuant to the terms
of this Agreement;
(c) no such waiver and no such amendment, supplement or modification
shall amend, modify or waive any provision of Section 3 without the written
consent of the Issuing Bank; and
(d) no such waiver and no such amendment, supplement or modification
shall amend, modify or waive any provision of Section 9 without the written
consent of the then Agent and Issuing Bank.
Any such waiver and any such amendment, supplement or modification described in
this subsection shall apply equally to each of the Lenders and shall be binding
upon each Loan Party, the Lenders, the Agent and Issuing Bank and all future
holders of the Notes. Any extension of a Letter of Credit by the Issuing Bank
shall be treated hereunder as a new Letter of Credit. In the case of any waiver,
the Loan Parties, the Lenders, the Agent and Issuing Bank shall be restored to
their former position and rights hereunder and under the outstanding Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three Business Days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when sent and confirmation of receipt received, addressed as follows in
the case of each Loan Party, the Agent, the Issuing Bank and as set forth on
Schedule I in the case of any Lender, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the Notes:
The Borrower: Camelot Music, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: White & Case
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
The Agent and The Chase Manhattan Bank
Issuing Bank: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
provided that any notice, request or demand to or upon the Agent or the Lenders
pursuant to subsections 2.5, 2.6, 2.7, 2.8 or 3.2 shall not be effective until
received and provided further that the failure to provide the copies of notices
to the Borrower provided for in this subsection shall not result in any
liability to the Agent.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Agent for all of its reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation, execution and
administration of, and any amendment, supplement or modification to, the Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation of the transactions contemplated hereby and thereby,
including, without limitation, the reasonable fees and disbursements of counsel
to the Agent (including, without limitation, any allocated costs of in-house
counsel) and the reasonable costs and expenses of the Agent (including the
allocated costs of the Agent's collateral examination department) in connection
with its periodic field examinations and monitoring of the Inventory and any
other evaluation and appraisal relating to the computation of the Borrowing
Base, (b) to pay or reimburse the Agent and each Lender for all of their
respective reasonable out-of-pocket costs and expenses incurred in connection
with the enforcement or preservation of any rights under any Loan Document and
any other documents prepared in connection therewith, including, without
limitation, the reasonable fees and disbursements of counsel to the Agent and
each Lender (including, without limitation, any allocated costs of in-house
counsel) incurred in connection with such enforcement or preservation, (c) to
pay or reimburse each Lender and the Agent for all their reasonable costs and
expenses incurred in connection with, and to pay, indemnify, and hold the Agent
and each Lender harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever arising out of or in
connection with, the enforcement or preservation of any rights under any Loan
Document and any such other documents, including, without limitation, reasonable
fees and disbursements of counsel to the Agent and each Lender (including,
without limitation, any allocated costs of in-house counsel) incurred in
connection with the foregoing and in connection with advising the Agent and such
Lender with respect to their rights and responsibilities under this Agreement
and the documentation relating hereto, (d) to pay, indemnify, and to hold the
Agent and each Lender harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes (other than withholding taxes), if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, any Loan Document and any such other
documents and (e) to pay, indemnify, and hold the Agent and each Lender and
their respective officers and directors harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation, reasonable fees and disbursements of counsel)
which may be incurred by or asserted against the Agent or the Lenders (i)
arising out of or in connection with any investigation, litigation or proceeding
related to this Agreement, the other Loan Documents, the proceeds of the Loans
and the transactions contemplated by or in respect of such use of proceeds, or
any of the other transactions contemplated hereby, whether or not the Agent or
any of the Lenders is a party thereto, including, without limitation, any of the
foregoing relating to the violation of, noncompliance with or liability under,
any Environmental Law applicable to the operations of the Loan Parties or any of
the facilities and properties owned, leased or operated by any Loan Party, or
(y) without limiting the generality of the foregoing, by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to make payments under, Letters of Credit (it being agreed that nothing in this
subsection is intended to limit the Borrower's obligations under subsection 3.5)
(all the foregoing, collectively, the "indemnified liabilities"), provided that
the Borrower shall have no obligation hereunder with respect to indemnified
liabilities of the Agent or any Lender or any of their respective officers and
directors arising from the gross negligence or willful misconduct of the Agent
or any such Lender or their respective directors or officers. The agreements in
this subsection shall survive termination of this Agreement and repayment of the
Notes and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Agent, the Issuing Bank all future holders of the Notes, and their
respective successors and assigns, except that the Borrower may neither assign
nor transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
or lending business and in accordance with applicable law, at any time sell to
one or more banks, financial institutions or other entities ("Participants")
participating interests in any Loan owing to such Lender, any participating
interest in the Letters of Credit of such Lender, any Note held by such Lender,
any Commitment of such Lender or any other interest of such Lender hereunder;
provided that any such sale of a participating interest in the Commitments shall
be of a constant, and not a varying, percentage of such Lender's Peak Period and
Non-Peak Period Commitments. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Note for all purposes under this Agreement
and the Borrower and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. The Borrower agrees that if amounts outstanding under this Agreement
and the Notes are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note; provided, that such right of
set-off shall be subject to the obligation of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
subsection 10.7. The Borrower also agrees that each Participant shall be
entitled to the benefits of subsections 2.15 and 2.17 with respect to its
participation in the Letters of Credit and in the Commitments and the Loans
outstanding from time to time as if it were a Lender; provided, that, in the
case of subsection 2.15, such Participant shall have complied with the
requirements of said subsection, and provided, further, that no Participant
shall be entitled to receive any greater amount pursuant to any such subsection
than the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred. Each Lender agrees that the
participation agreement pursuant to which any Participant acquires its
participating interest (or any other document) may afford voting rights to such
Participant, or any right to instruct such Lender with respect to voting
hereunder, provided that only such voting rights as pertain to items that
require unanimous Lender consent may be so transferred.
(c) Any Lender may, in the ordinary course of its commercial banking
or lending business and in accordance with applicable law, (i) at any time and
from time to time assign all or any part of its rights and obligations under
this Agreement and the Notes to any Lender or any Affiliate thereof, or (ii)
with the consent of the Agent (which shall not be unreasonably withheld) at any
time and from time to time assign to one or more additional banks, financial
institutions or other entities (each, an "Assignee"), all or any part of its
rights and obligations under this Agreement and the Notes, in each case,
pursuant to an Assignment and Acceptance, executed by such Assignee, such
transferor Lender (and, in the case of an assignment pursuant to clause (ii) of
this subsection, by the Agent), and delivered to the Agent for its acceptance
and recording in the Register (as defined below); provided that (A) unless an
assignment is of all of a Lender's rights and obligations under a Note, any such
assignment pursuant to clause (ii) of this subsection shall be in a principal
amount of $2,500,000 or more, (B) in the event of an assignment of less than all
of a Lender's rights and obligations, such Lender after any such assignment
shall retain Peak Period Commitments and/or Loans and/or L/C Participating
Interests aggregating at least $2,500,000 and (C) any such assignment of a
Lender's Commitments shall be of a constant, and not a varying percentage of
such Lender's Peak Period and Non-Peak Period Commitments. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment as set
forth therein and (y) the assigning Lender thereunder shall, to the extent of
the interest transferred, as reflected in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a transferor
Lender's rights and obligations under this Agreement, such transferor Lender
shall cease to be a party hereto).
(d) The Agent shall maintain at its address referred to in subsection
10.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Lenders
and the Peak Period and Non-Peak Period Commitments of, the principal amount of
Loans owing to, and the L/C Participating Interests of, each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the Loan or L/C
Participating Interest recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, by the Agent), together with payment to
the Agent by the assigning Lender and/or Assignee of a registration and
processing fee of $4,000 if the Assignee is not a Lender prior to the execution
of such supplement and $1,000 if the Assignee is a Lender or an Affiliate
thereof, the Agent shall (i) promptly accept such Assignment and Acceptance and
(ii) on the effective date determined pursuant thereto record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower. On or prior to such effective date,
the Borrower at its own expense, shall execute and deliver to the Agent (in
exchange for the Note of the assigning Lender) a new Note to the order of such
Assignee in an amount equal to the Peak Period Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment, a Note to the order of the assigning Lender in an amount equal to
the Peak Period Commitment retained by it hereunder. Such new Notes shall be
dated the Closing Date and shall otherwise be in the form of the Note replaced
thereby.
(f) Each Lender agrees that it will use reasonable efforts to keep
confidential and protect the confidentiality of any non-public information
concerning the Loan Parties, provided to such Lender by or on behalf of any Loan
Party pursuant to this Agreement. Notwithstanding the foregoing, the Borrower
authorizes each Lender to disclose to any Participant or Assignee (each, a
"Transferee") and any prospective Transferee, in each case who has agreed to
treat such information as confidential any and all financial information in such
Lender's possession concerning the Loan Parties which has been delivered to such
Lender by or on behalf of any such Loan Party pursuant to this Agreement or
which has been delivered to such Lender by the Borrower in connection with such
Lender's credit evaluation of the Loan Parties prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
do not prohibit any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of any of its Loans or L/C
Participating Interests or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off pursuant to
events or proceedings of the nature referred to in subsection 8(f) or otherwise)
in a greater proportion than any such payment to and collateral received by, any
other Lender, if any, in respect of such other Lender's Loans or L/C
Participating Interests, as the case may be, or interest thereon, such
benefitted Lender shall purchase for cash from the other Lenders such portion of
each such other Lender's Loans or L/C Participating Interests, as the case may
be, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the other Lenders; provided, however, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such benefitted Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another Lender's
Loans and/or L/C Participating Interests may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion. The Agent
shall promptly give the Borrower notice of any set-off, provided that the
failure to give such notice shall not affect the validity of such set-off.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon the occurrence and during the continuance of any Event of
Default in respect of any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
10.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
10.9 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the other Loan Parties party to any
thereof, the Agent and the Lenders with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Agent or any Lender relative to subject matter hereof or thereof not
expressly set forth or referred to herein or in any other Loan Document.
10.10 Governing Law; No Third Party Rights. THIS AGREEMENT AND THE
NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK. This Agreement is solely for the benefit of
the parties hereto and their respective successors and assigns, and, except as
set forth in subsection 10.6, no other Persons shall have any right, benefit,
priority or interest under, or because of the existence of, this Agreement.
10.11 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to any Loan Party arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between
Agent and the Lenders, on the one hand, and the Loan Parties, on the other
hand, in connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by this Agreement or the
other Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders and the Agent or among the Loan
Parties, the Agent and the Lenders.
10.12 Submission to Jurisdiction; Waivers. (a) Each party to this
Agreement hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Loan Documents,
or for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of New
York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such party
at its address set forth in subsection 10.2 or at such other address of
which the Agent shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to ▇▇▇ in any other jurisdiction.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN PARAGRAPH (A)
ABOVE AND ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CAMELOT MUSIC, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Excecutive Vice President
THE CHASE MANHATTAN BANK, as Agent,
Issuing Bank and a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
SOCIETE GENERALE
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and Director
SCHEDULE I
LIST OF ADDRESSES FOR NOTICES TO LENDERS;
COMMITMENT AMOUNTS
THE CHASE MANHATTAN BANK
Address for Notice:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
NON-PEAK PERIOD COMMITMENT AMOUNT: 10,500,000.00
PEAK PERIOD COMMITMENT AMOUNT: 15,000,000.00
COMMITMENT PERCENTAGE: 30.00%
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Address for Notice:
Bank of America
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
NON-PEAK PERIOD COMMITMENT AMOUNT: $7,000,000.00
PEAK PERIOD COMMITMENT AMOUNT: 10,000,000.00
COMMITMENT PERCENTAGE: 20.00%
FIRST UNION NATIONAL BANK
Address for Notice:
First Union National Bank
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
NON-PEAK PERIOD COMMITMENT AMOUNT: $7,000,000.00
PEAK PERIOD COMMITMENT AMOUNT: 10,000,000.00
COMMITMENT PERCENTAGE: 20.00%
SOCIETE GENERALE
Address for Notice:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
NON-PEAK PERIOD COMMITMENT AMOUNT: $7,000,000.00
PEAK PERIOD COMMITMENT AMOUNT: 10,000,000.00
COMMITMENT PERCENTAGE: 20.00%
▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL
PRIME RATE INCOME TRUST
Address for Notice:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
NON-PEAK PERIOD COMMITMENT AMOUNT: $3,500,000.00
PEAK PERIOD COMMITMENT AMOUNT: $5,000,000.00
COMMITMENT PERCENTAGE: 10.00%