Exhibit 4.2
U.S. $35,000,000
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of September 19, 1988
as amended and restated
as of May 6, 1996
Among
▇▇▇▇▇▇▇▇'▇, INC.,
THE BANKS FROM TIME TO TIME PARTY HERETO,
and
BANKAMERICA BUSINESS CREDIT, INC.,
as Agent for the Banks
TABLE OF CONTENTS
Section Page
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Certain Defined Terms.............................................. 2
1.2. Computation of Time Periods........................................ 25
1.3. Interpretive Provisions............................................ 25
ARTICLE II
AMOUNTS AND TERMS OF THE FACILITY
2.1. Revolving Credit Loans............................................. 26
2.2. Letters of Credit.................................................. 27
2.3. Notice of Borrowing; Notice of Conversion/Continuation............. 28
2.4. Fees............................................................... 31
2.5. [INTENTIONALLY OMITTED.]........................................... 31
2.6. Repayment.......................................................... 31
2.7. Settlement......................................................... 32
2.8. Interest........................................................... 32
2.9. [INTENTIONALLY OMITTED]............................................ 33
2.10. Optional Prepayments and Repayments; Early Termination
Fee................................................................ 33
2.11. Payments and Computations.......................................... 33
2.12. Taxes.............................................................. 34
2.13. Maximum Interest Rate.............................................. 36
2.14. Notation........................................................... 37
2.15. Yield Protection and Illegality.................................... 37
2.16. Inability to Determine Rates....................................... 39
2.17. Sharing of Payments, Etc........................................... 39
2.18. Receipt and Application of Monies.................................. 40
2.19. Agent's and Banks' Books and Records; Monthly
Statements......................................................... 41
ARTICLE III
CONDITIONS PRECEDENT
3.1. Conditions Precedent to Effectiveness of Agreement,
Making of Initial Loan and Issuance of Letters of Credit
on the Effective Date.............................................. 42
3.2. Additional Conditions Precedent to Effectiveness of
Agreement, Making of Initial Loan and Issuance of
Letters of Credit on the Effective Date............................ 44
3.3. Conditions Precedent to Each Borrowing............................. 47
3.4. Conditions Precedent to the Issuance of the Letters of
Credit............................................................. 48
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Section Page
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence; Compliance with Law........................... 49
4.2. Corporate Power; Authorization..................................... 50
4.3. Enforceable Obligations............................................ 51
4.4. Taxes.............................................................. 51
4.5. Full Disclosure; Offering Documents................................ 52
4.6. Financial Matters.................................................. 53
4.7. Litigation......................................................... 53
4.8. Capitalization of Borrower; Ownership of Subsidiaries;
No Other Ventures.................................................. 54
4.9. ERISA.............................................................. 55
4.10. Liens.............................................................. 56
4.11. Related Documents.................................................. 56
4.12. No Burdensome Restrictions; No Defaults............................ 56
4.13. Investment Company Act............................................. 57
4.14. Margin Regulations................................................. 57
4.15. Use of Proceeds.................................................... 58
4.16. Title and Condition of Assets; Inventory........................... 58
4.17. Insurance.......................................................... 58
4.18. Labor Matters...................................................... 59
4.19. Certain Debt....................................................... 59
4.20. Leases............................................................. 59
4.21. Solvency........................................................... 59
4.22. Intellectual Property.............................................. 59
4.23. Environmental Matters.............................................. 60
4.24. Certain Obligations................................................ 61
4.25. Note Covenant Defeasance........................................... 62
ARTICLE V
REPORTING COVENANTS
5.1. Financial Statements............................................... 62
5.2. Reporting Requirements............................................. 64
ARTICLE VI
FINANCIAL COVENANTS
6.1. Minimum EBDAIT..................................................... 67
6.2. Capital Expenditures............................................... 68
6.3. Minimum Interest Coverage Ratio.................................... 69
6.4. Minimum Net Worth.................................................. 69
6.5. [INTENTIONALLY OMITTED.]........................................... 70
6.6. [INTENTIONALLY OMITTED.]........................................... 70
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Section Page
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ARTICLE VII
ADDITIONAL AFFIRMATIVE COVENANTS OF BORROWER
7.1. Compliance with Laws, Etc.......................................... 70
7.2. Conduct of Business................................................ 71
7.3. Solvency........................................................... 71
7.4. Maintenance of Insurance........................................... 71
7.5. Application of Proceeds............................................ 71
7.6. Payment of Taxes, Etc.............................................. 71
7.7. Preservation of Corporate Existence, Etc........................... 72
7.8. Access and Inspections............................................. 72
7.9. Keeping of Books................................................... 72
7.10. Maintenance of Properties, Etc..................................... 72
7.11. [INTENTIONALLY OMITTED]............................................ 72
7.12. [INTENTIONALLY OMITTED]............................................ 72
7.13. Collection Accounts and Blocked Accounts........................... 72
7.14. Key-Man Life Insurance............................................. 73
7.15. Maintenance of Licenses and Permits................................ 73
7.16. Employee Plans..................................................... 73
7.17. Fiscal Year........................................................ 73
7.18. Appraisals......................................................... 73
7.19. Consents........................................................... 73
7.20. [INTENTIONALLY OMITTED.]........................................... 74
7.21. [INTENTIONALLY OMITTED.]........................................... 74
7.22. Mortgage........................................................... 74
7.23. Landlord Waivers................................................... 74
7.24. Lease Security..................................................... 74
7.25. Further Assurances................................................. 75
7.26. Dissolution of ▇▇▇▇ Lo............................................. 75
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Section Page
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ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
8.1. Liens, Etc......................................................... 75
8.2. Indebtedness....................................................... 77
8.3. [INTENTIONALLY OMITTED.]........................................... 78
8.4. Stock Payments, Etc................................................ 78
8.5. Mergers, Etc....................................................... 78
8.6. Investments in Other Persons....................................... 79
8.7. Contingent Obligations............................................. 79
8.8. Sale of Assets; Maintenance of Ownership of Stock; Sale
Leasebacks; Transfers of Real Property; Transfers of Assets........ 80
8.9. Change in Nature of Business....................................... 80
8.10. Capital Structure.................................................. 80
8.11. No Modifications to Related Documents.............................. 80
8.12. Transactions with Affiliates....................................... 81
8.13. Adverse Transactions............................................... 81
8.14. Accounting Changes................................................. 81
8.15. Speculative Transactions........................................... 82
8.16. Compliance with ERISA.............................................. 82
8.17. Limitation on the Formation of Subsidiaries After the
Effective Date..................................................... 82
8.18. Internal Revenue Code Section 338.................................. 82
8.19. [INTENTIONALLY OMITTED.]........................................... 82
8.20. [INTENTIONALLY OMITTED.]........................................... 83
8.21. Prepayments........................................................ 83
8.22. Investment Company Act............................................. 83
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default.................................................. 83
ARTICLE X
THE AGENT
10.1. Authorization and Action........................................... 87
10.2. Agent's Reliance, Etc.............................................. 88
10.3. BABC and Affiliates................................................ 88
10.4. Bank Credit Decision............................................... 89
10.5. Indemnification.................................................... 89
10.6. Successor Agent.................................................... 89
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Section Page
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ARTICLE XI
MISCELLANEOUS
11.1. Amendments, Etc.................................................... 90
11.2. Notices, Etc....................................................... 90
11.3. No Waiver; Remedies................................................ 91
11.4. Costs and Expenses; Indemnification................................ 91
11.5. Right of Set-off................................................... 92
11.6. Assignments and Participations..................................... 93
11.7. Binding Effect..................................................... 95
11.8. GOVERNING LAW...................................................... 95
11.9. Execution in Counterparts.......................................... 95
11.10. WAIVER OF JURY TRIAL............................................... 95
11.11. Waiver of Permitted Exceptions..................................... 95
11.12. Severability....................................................... 95
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TABLE OF EXHIBITS AND SCHEDULES
INDEX OF EXHIBITS EXHIBIT
[Intentionally omitted] A
Notice of Conversion/Continuation B
Form of Notice of Borrowing C
Form of Letter of Credit Request D
Form of Security Agreement E
Form of Landlord Lien Waiver F
[Intentionally omitted] G
Form of Intellectual Property Security Agreement H
Form of Opinion of Counsel to Borrower
and its Subsidiaries I
[Intentionally omitted] J
Form of Assignment and Acceptance K
[Intentionally omitted] L
[Intentionally omitted] M
[Intentionally omitted] N
[Intentionally omitted] O
Form of Loss Payee Endorsement P
Form of Negative Pledge Agreement Q
[Intentionally omitted] R
[Intentionally omitted] S
[Intentionally omitted] T
INDEX OF SCHEDULES SCHEDULE
List of Domestic Lending Offices 1
Depositary Accounts 2.18
Leases conditionally assigned 3.1(v)
Taxes 4.4
Litigation 4.7
Ownership of Borrowers; Subsidiaries;
No other Ventures 4.8
ERISA 4.9
Certain Debt 4.19
Leases 4.20
Intellectual Property 4.22
Environmental Matters 4.23
Existing Liens 8.1(i)
vi
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
September 19, 1988, as amended and restated as of May 6, 1996, among ▇▇▇▇▇▇▇▇'▇,
Inc. ("▇▇▇▇▇▇▇▇'▇"), a Delaware corporation; the Banks (as defined below) from
time to time party hereto; and BankAmerica Business Credit, Inc. ("BABC"), as
agent for the Banks (in that capacity, the "Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on August 26, 1988, ▇▇▇▇▇▇▇▇'▇ Acquisition Corp., a
Delaware corporation ("LAC"), entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") with Associated Dry Goods Corporation, pursuant to
which LAC acquired (the "Acquisition"), on the Initial Closing Date (as
hereinafter defined), all of the issued and outstanding shares of common stock,
no par value, of ▇▇▇▇▇▇▇▇'▇; and
WHEREAS, immediately following the consummation of the
Acquisition, LAC was merged with and into ▇▇▇▇▇▇▇▇'▇ (the "LAC Merger"); and
WHEREAS, ▇▇▇▇▇▇▇▇'▇ Holdings, Inc., a Maryland corporation
("Holdings Maryland"); ▇▇▇▇▇▇▇▇'▇, as successor in interest to LAC; the Banks
then party thereto, and Citibank, N.A. ("Citibank"), as predecessor Agent to
BABC, entered into a Credit Agreement (the "Original Credit Agreement") dated as
of September 19, 1988, pursuant to which Borrower (as hereinafter defined) and
Holdings (as defined below) requested at that time that the Banks provide funds
to enable Borrower and Holdings to consummate the Acquisition, to pay certain
expenses of the Acquisition and to provide for future working capital
requirements of ▇▇▇▇▇▇▇▇'▇; and
WHEREAS, ▇▇▇▇▇▇▇▇'▇ agreed at that time to secure its
obligations to the Banks in connection with such financing with, inter alia, a
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first perfected security interest in all of its and its Subsidiaries' present
and future tangible and intangible personal property and interests therein and
an assignment of ▇▇▇▇▇▇▇▇'▇ present and future interests in certain leaseholds;
and
WHEREAS, all of ▇▇▇▇▇▇▇▇'▇ obligations to the Banks in
connection with such financing were, and continue to be, guaranteed by all of
its Subsidiaries; and
WHEREAS, in connection with a refinancing by ▇▇▇▇▇▇▇▇'▇ and
Holdings of certain of their respective obligations incurred at the time of the
Acquisition, this Agreement was amended and restated as of October 14, 1993 (the
"1993 Closing Date"), pursuant to an Amended and Restated Credit Agreement dated
as of September 19, 1988 as amended and restated as of October 14, 1993 (as
amended, the "1993 Amended Credit Agreement"); and
1
WHEREAS, Holdings Maryland is about to be merged (the
"Maryland Merger") with and into New ▇▇▇▇▇▇▇▇'▇ Holdings, Inc., a Delaware
corporation which, after such merger, will change its name to ▇▇▇▇▇▇▇▇'▇
Holdings, Inc. ("Holdings Delaware"), with Holdings Delaware being the
corporation surviving the Maryland Merger; and
WHEREAS, ▇▇▇▇▇▇▇▇'▇ has been a wholly owned Subsidiary of
Holdings; and
WHEREAS, Holdings is about to be merged (the "Holdings
Merger") with and into Borrower, with Borrower being the corporation surviving
the Holdings Merger; and
WHEREAS, in connection with a refinancing by Borrower of
certain of its obligations, Borrower has requested that this Agreement be
amended and restated to, among other things, (i) increase the aggregate
Revolving Credit Loan Commitments hereunder to $35,000,000, (ii) amend
provisions relating to payment dates, interest calculation, fees or expenses and
certain financial and other covenants, (iii) reflect the Maryland Merger and the
Holdings Merger, (iv) reflect the refinancing of certain debt obligations of
Borrower and the issuance by Borrower of the Senior Notes and the New Common
Stock (as such terms are defined below), and (v) amend certain other terms,
conditions and other provisions of this Agreement; and
WHEREAS, BABC, as Agent and the sole Bank, has agreed,
subject to satisfaction of certain conditions set forth herein, to amend and
restate this Agreement as described above;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Certain Defined Terms. As used in this Agreement, the following
---------------------
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Account" means the right of Borrower or any of its Subsidiaries to
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payment for sale or lease and delivery of goods or rendition of services in the
ordinary course of business, including, without limitation, rights to payment
from VISA, MasterCard and Discover and other credit card companies.
"Acquisition" has the meaning specified in the first Whereas clause of
-----------
this Agreement.
2
"Adjusted Consolidated Net Income (Loss)" means the Consolidated Net
---------------------------------------
Income (Loss) of Borrower and its Consolidated Subsidiaries, plus any amount
deducted therefrom to amortize (i) the excess of the purchase price of the
assets acquired by Holdings in connection with the transactions contemplated by
the Stock Purchase Agreement and the documents related thereto over their book
value at the time of such acquisition and (ii) the book value of the leasehold
interests acquired by Holdings in connection with the transactions contemplated
by the Stock Purchase Agreement and the documents related thereto.
"Affiliate" means, as to any Person, any Subsidiary of such Person and
---------
any other Person which, directly or indirectly, controls, is controlled by, or
is under common control with, such Person and with respect to Borrower, includes
each officer or director or shareholder of Borrower. For purposes of this
definition: (1) "control" means the possession of the power to direct or cause
the direction of management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise and (2) direct or
indirect ownership of securities representing 10% or more of the total voting
power of the voting securities of any Person shall be deemed to be "control" of
such Person.
"Agent" has the meaning specified in the first paragraph of this
-----
Agreement.
"Agent Account" means the collection account, No. ▇▇▇-▇-▇▇▇▇▇▇,
-------------
established by the Agent at Chase Manhattan Bank, N.A. pursuant to documentation
satisfactory to the Agent.
"Agreement" means this Second Amended and Restated Credit Agreement
---------
together with all exhibits and schedules hereto, as the same has been and may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Applicable Margin" means
-----------------
(i) with respect to Reference Rate Loans, 0.75%; and
(ii) with respect to LIBOR Rate Loans, 2.20%.
"Asset Sale" means any sale or other disposition, or series of sales or
----------
other dispositions (including by merger or consolidation, and whether by
operation of law or otherwise) made after the Effective Date by Borrower or any
of its Subsidiaries to any Person (other than Borrower or any of its
Subsidiaries) of (i) all or substantially all of the stock of any of Borrower's
Subsidiaries, (ii) all or substantially all of the assets of Borrower or any of
its Subsidiaries or any division of any of them, (iii) any Intellectual Property
owned by Borrower or any of its subsidiaries, or (iv) any other asset or assets
of Borrower or any
3
of its Subsidiaries yielding net proceeds in excess of $100,000 not made in the
ordinary course of business.
"Assignment and Acceptance" means an assignment and acceptance, in
-------------------------
substantially the form of Exhibit K hereto, entered into by an assigning Bank
and an assignee.
"Availability" means, at any time, an amount equal to the lesser of
------------
(a) the excess of (i) the Borrowing Base at such time over (ii)
the sum of the aggregate amount of (x) all Revolving Credit Loans
outstanding at such time and any unpaid reimbursement obligations in
respect of Letters of Credit, (y) the aggregate undrawn amount of all
Letters of Credit which the Agent has, or has caused to be, issued or
obtained for Borrower's account and which are outstanding at such time,
and (z) all accounts payable of Borrower and its Subsidiaries more than
30 days past due at such time,
and
(b) the excess of (i) the aggregate Revolving Credit Loan
Commitments at such time over (ii) the sum of the aggregate amount of (x)
all Revolving Credit Loans outstanding at such time and any unpaid
reimbursement obligations in respect of Letters of Credit, (y) the
aggregate undrawn amount of all Letters of Credit which the Agent has, or
has caused to be, issued or obtained for Borrower's account and which are
outstanding at such time, and (z) all accounts payable of Borrower and
its Subsidiaries more than 30 days past due at such time.
"BABC" has the meaning specified in the first paragraph of this
----
Agreement.
"Bank of America" means Bank of America National Trust and Savings
---------------
Association, a national banking association, or any successor entity thereto.
"Banks" means BABC and any assignee thereof of an interest in any Loan
-----
pursuant to an assignment permitted by Section 11.6.
"Borrower" means ▇▇▇▇▇▇▇▇'▇.
--------
"Borrowing" means a borrowing consisting of Revolving Credit Loans made
---------
on the same day by the Banks ratably according to their respective Commitments.
4
"Borrowing Base" means, on any date,
--------------
(a) the sum of: (i) 60% of Eligible Inventory as of such date not
covered by any outstanding Merchandise Letter of Credit; and (ii) 50% of
Eligible Inventory as of such date covered by any outstanding Merchandise
Letter of Credit,
less
----
(b) the sum of: (i) the Environmental Compliance Reserve; and (ii)
all other reserves which the Agent in good faith and exercising its
reasonable credit judgment deems necessary or desirable to maintain with
respect to Borrower's account, including, without limitation, reserves
for any amounts which Agent may be obligated to pay in the future for the
account of Borrower and reserves against landlord liens; provided that
any such reserve created pursuant to this clause (ii) shall not be
effective until the fourth day after the Agent has sent notice thereof to
▇▇▇▇▇▇▇▇'▇.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a day
------------
on which banks in New York, New York or San Francisco, California, are required
or permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any
day that is a Business Day pursuant to clause (a) above and that is also a day
on which trading is carried on by and between banks in the London interbank
market.
"Capital Adequacy Regulation" means any guideline, request or directive
---------------------------
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank which is
generally applicable to banks.
"Capital Expenditure" means, for any period, with respect to Borrower and
-------------------
its Consolidated Subsidiaries, the aggregate of all expenditures by Borrower and
its Consolidated Subsidiaries (except interest capitalized during construction)
for property, plant and equipment (including renewals, improvements,
replacements and capitalized repairs) during such period which would be
reflected as additions to property, plant or equipment on a consolidated balance
sheet of Borrower and its Consolidated Subsidiaries prepared in accordance with
GAAP; provided, however, that Capital Expenditures shall not include any
-------- -------
payments made during such period pursuant to Capitalized Leases. For the purpose
of this definition, the purchase price of equipment which is purchased
simultaneously with the trade-in of existing equipment owned by Borrower or any
of its Consolidated Subsidiaries or with insurance proceeds shall be included in
Capital Expenditures only
5
to the extent of the gross amount of such purchase price less the reduction in
purchase price granted by the seller of such equipment for the existing
equipment being traded in at such time or the amount of such insurance proceeds.
"Capitalized Lease" means, as applied to any Person, any lease of
-----------------
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" means the capitalized amount of the
-----------------------------
obligations of Borrower or any of its Consolidated Subsidiaries under any
Capitalized Lease.
"Cash Flow" means, for any period, (i) Borrower's EBDAIT for such period
---------
less (ii) the sum of (a) Borrower's Consolidated Interest Expense for such
period and (b) all Capital Expenditures made during such period.
"Change in Control" means the occurrence of either of the following
-----------------
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than (A) any of Sefinco, Ltd., ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Inc. and ▇▇▇▇▇ Capital Management, Incorporated; (B) general
partners or Affiliates of any of the Persons described in clause (A); (C) family
members or relatives of the Persons described in Clause (B); (D) any trusts
created for the benefit of the Persons described in clause (B) or (C); (E) in
the event of incompetence or death of any of the Persons described in clause (B)
or (C), such Person's estate, executor, administrator, committee or other
personal representative or beneficiaries, is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have beneficial ownership of all shares that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total outstanding Voting Stock of the Company; (ii) at any time during the
term of this Agreement, individuals who at the beginning of such period
constituted the board of directors of the Company (together with any new
directors whose election to such board or whose nomination for election by the
stockholders of the Company, was approved by a vote of 66-2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such board of directors then in
office; (iii) Borrower consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates with or merges into or with Borrower, in
any such event pursuant to a transaction in which the outstanding Voting Stock
of Borrower is changed into or exchanged for cash, securities or other property,
other than any such transaction where the outstanding Voting Stock of Borrower
is not changed or
6
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of Borrower) or where (A) the outstanding Voting
Stock of the Company is changed into or exchanged for (x) Voting Stock of the
surviving corporation which is not Redeemable Capital Stock (as defined in the
Senior Note Indenture) or (y) cash, securities and other property (other than
Stock of the surviving corporation) in an amount which could be paid by Borrower
as a Restricted Payment (as defined in the Senior Note Indenture) as described
under Section 1009 of the Senior Note Indenture (and such amount shall be
treated as a Restricted Payment (as defined in the Senior Note Indenture)
subject to the provisions described under Section 1009 of the Senior Note
Indenture) and (B) no "person" or "group" owns immediately after such
transaction, directly or indirectly, more than 50% of the total outstanding
Voting Stock of the surviving corporation; or (iv) Borrower is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions described under Article Eight of
the Senior Note Indenture.
"Code" means the Internal Revenue Code of 1986 (or any successor
----
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and proceeds
----------
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is granted to the Agent for the benefit of the Agent and the Banks under
any of the Loan Documents.
"Collateral Documents" means, collectively, the Subsidiary Guaranty, the
--------------------
▇▇▇▇▇▇▇▇'▇ Pledge Agreement, the Security Agreement, the Mortgage, the
Intellectual Property Security Agreement, the Conditional Assignments of Lease
and all amendments, supplements, modifications, renewals, replacements,
consolidations, substitutions and extensions of any of the foregoing.
"Collection Account" means the account titled "Concentration Account,
------------------
Funding", account No. 000999392295, established by Borrower at The Fifth Third
Bank pursuant to documentation satisfactory to the Agent, or such other
collection account as may be established by Borrower, provided that the
documentation pursuant to which such account is opened and the bank at which
such account is opened (if a different bank) shall both be satisfactory to the
Agent.
"Commission" means the Securities and Exchange Commission.
----------
"Commitment Termination Date" means the earlier of (i) the Stated
---------------------------
Termination Date and (ii) the date of termination in whole of the Commitments
pursuant to Section 9.1.
7
"Commitments" means, collectively, the Revolving Credit Loan Commitments
-----------
of the Banks, and the "Commitment" of any Bank means the Revolving Credit Loan
Commitment of such Bank.
"Conditional Assignments of Lease" means the conditional assignments of
--------------------------------
lease executed by ▇▇▇▇▇▇▇▇'▇ on the Initial Closing Date, the 1993 Closing Date
and thereafter in favor of the Agent and the Banks.
"Consolidated Fixed Charges" means, for any period, the sum of (i)
--------------------------
Consolidated Interest Expense for such period, and (ii) the interest component
of Capitalized Leases for such period.
"Consolidated Interest Expense" means, for any period, gross cash
-----------------------------
interest expense for such period determined in conformity with GAAP, less the
sum of (i) interest capitalized during construction for such period and (ii)
interest income for such period.
"Consolidated Net Income (Loss)" means, for any period, the aggregate of
------------------------------
net income (or loss) from continuing operations of Borrower and its Consolidated
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, however, that there shall be excluded from such net income
(or loss): (i) all gains and all losses realized upon Asset Sales, purchase of
the Discount Notes, the 1993 Notes or the Senior Notes or upon the sale or other
disposition of any capital stock of any of Borrower's Consolidated Subsidiaries,
less all reasonable fees and expenses attributable thereto, including any
expense for taxes attributable thereto included in the computation of such net
income (or loss), (ii) the net income (or loss) of any Person that is accounted
for by the equity method of accounting, except to the extent of the amount of
dividends or distributions paid to Borrower during such period, (iii) the net
income (or loss) of any Person acquired by Borrower or any of its Consolidated
Subsidiaries in a transaction accounted for as a pooling of interests for any
period prior to the date of such acquisition, (iv) the net income (or loss) of
any of Borrower's Consolidated Subsidiaries to the extent that the declaration
or payment of dividends or similar distribution is prohibited under the terms of
its certificate of incorporation or any agreement (other than this Agreement),
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary, such exclusion under this clause (iv) to be
effective for so long as such prohibition continues, with the net income (or
loss) previously excluded on account of such prohibition to be again included
and to form part of "Consolidated Net Income (Loss)" for the purpose of any
determination, with respect to the period in which such income (or loss) is
incurred, made after the expiration of such restriction, and (v) all other
income or gain or loss from extraordinary items, less all reasonable fees and
expenses attributable thereto, including any expense for taxes attributable
thereto included in
8
the computation of such net income (loss), to the extent not excluded pursuant
to clause (i) above.
"Consolidated Subsidiary" means any Subsidiary of any Person the
-----------------------
financial statements of which are, or should be, consolidated with the financial
statements of such Person in accordance with GAAP.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
-----------
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste, including
any such substance regulated under any Environmental Law.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability, contingent or otherwise, of that Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent thereof by the Person incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement relating thereto will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations include, without
limitation: (a) the direct or indirect guarantee, endorsement (other than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another Person and (b) any liability of such Person for the obligations of
another Person through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
(ii) to maintain the solvency or any balance sheet item, level of income or
financial condition of another, or (iii) to make take-or-pay or similar
payments, if required, regardless of non-performance by any other party or
parties to an agreement, if in the case of any agreement described under
subclause (i), (ii) or (iii) of this sentence the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any Contingent
Obligation shall be equal to the present value of the portion of the obligation
so guaranteed or otherwise supported, in the case of known recurring
obligations, and the maximum amount of the portion of the obligation so
guaranteed or otherwise supported, in all other cases.
"Contractual Obligation" of any Person means any obligation, agreement,
----------------------
undertaking or similar provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of trust or other
instrument to
9
which such Person is a party or by which it or any of its property is bound or
to which any of its properties is subject.
"Controlled Group" means, as to any Person, all members of a controlled
----------------
group of corporations and all trades or businesses (whether or not incorporated)
which are under common control with such Person and which, together with such
Person, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code.
"Conversion/Continuation Date" means the date on which a Notice of
----------------------------
Conversion/Continuation becomes effective pursuant to Section 2.3.
"Depositary Accounts" means all of the deposit accounts established by
-------------------
Borrower and its Subsidiaries and listed on Schedule 2.18 hereto and any deposit
accounts established by Borrower or any of its Subsidiaries in the future.
"Depositary Banks" means all of the banks at which there are Depositary
----------------
Accounts.
"Default" means an event which with the passing of time or the giving of
-------
notice or both would become an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all times
------------
equal to the sum of (a) the otherwise applicable Interest Rate plus (b) two
percent (2.0%). Each Default Rate shall be adjusted simultaneously with any
change in the applicable Interest Rate.
"Discount Notes" means the 13.75% senior subordinated discount notes of
--------------
Holdings due 1999.
"Discount Notes Indenture" means the Indenture dated as of February 15,
------------------------
1989 between Holdings and Bankers Trust Company as the trustee for the holders
of Discount Notes.
"Discount Note Redemption" means the redemption in full of the Discount
------------------------
Notes at an aggregate redemption price of not more than 101.0% of the face
amount of such notes, plus accrued and unpaid interest on such notes.
"Dollars" and the sign "$" each mean the lawful money of the United
-------
States of America.
"Domestic Lending Office" means, with respect to any Bank, the office of
-----------------------
such Bank specified as its "Domestic Lending Office" opposite its name on
Schedule 1 hereto or such other office of such Bank as such Bank may from time
to time specify to Borrower and the Agent.
"Early Termination Fee" has the meaning specified in Section 2.10.
---------------------
10
"EBDAIT" means, for any period or Person, the Consolidated Net Income
------
(Loss) of such Person for such period, plus the sum of the following expenses of
a Person and its Consolidated Subsidiaries for such period: (i) Consolidated
Fixed Charges, (ii) consolidated tax expense, (iii) Non-Cash Charges, (iv)
employee stock option plan expenses, and (v) amortization of deferred
compensation.
"Effective Date" means the date on which this Second Amended and Restated
--------------
Credit Agreement becomes effective and the initial Loan is made or the initial
Letter of Credit is issued under this Second Amended and Restated Credit
Agreement; provided, however, that the Effective Date shall occur on or before
June 30, 1996.
"Eligible Inventory" means the lower of the book value (calculated under
------------------
the retail cost method of accounting) or market value (as determined by Agent,
in its reasonable discretion) of Inventory that constitutes first quality
finished goods, and: (a) is not, in the Agent's reasonable judgment, obsolete or
unmerchantable; (b) upon which the Agent has a first priority perfected security
interest; and (c) that the Agent otherwise deems eligible as the basis for
Revolving Credit Loans based on such other credit and collateral considerations
as the Agent may from time to time establish in its reasonable discretion;
provided that Agent shall not establish any new category of inventory excluded
from Eligible Inventory until seven days after notice thereof has been sent to
▇▇▇▇▇▇▇▇'▇. Without intending to limit the Agent's discretion to establish other
criteria of eligibility, at no time shall Eligible Inventory include (i)
packaging and shipping material, supplies, returned or defective Inventory or
Inventory delivered to Borrower on consignment, (ii) more than 25% of Reserve
Inventory or (iii) more than 25% of the cost value of merchandise credits and
gift certificates outstanding. The Agent does not intend to treat an item of
Inventory as eligible if any warranty or representation contained in this
Agreement or any of the Loan Documents applicable either to Eligible Inventory
in general or to any such specific inventory has been breached with respect to
such inventory.
"Employment Agreements" means, collectively, the employment agreement
---------------------
between Holdings, ▇▇▇▇▇▇▇▇'▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ dated as of September 19, 1988
and amended as of November 1, 1995 and April 5, 1996, and the employment
agreement between Holdings, ▇▇▇▇▇▇▇▇'▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ dated April 12,
1992 and amended as of April 5, 1996, as each such agreement may be amended from
time to time.
"Environmental Compliance Reserve" means all reserves which the Agent
--------------------------------
from time to time establishes for amounts that are reasonably required to be
expended in order for Borrower and Borrower's operations and properties to
comply with Environmental
11
Laws or in order to correct any violation by Borrower or Borrower's operations
or properties of Environmental Laws.
"Environmental Law" means the Comprehensive Environmental Response,
-----------------
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.),
the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.) and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.),
each as amended or supplemented from time to time, and any analogous future
federal, or present or future state or local, statutes and the regulations
promulgated pursuant thereto.
"Environmental Liabilities and Costs" means all liabilities, obligations,
-----------------------------------
responsibilities, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, expert and consulting
fees and costs of investigation and feasibility studies), interest, fines,
penalties, sanctions and interest incurred as a result of any claim or demand,
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, including any Environmental Law,
Permit, order or agreement with a Governmental Authority or other Person,
arising from environmental, health or safety conditions or a Release or
threatened Release resulting from the past, present or future operations of
Borrower or any of their Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time and any regulations promulgated thereunder.
"ERISA Event" means: (i) the occurrence of a Reportable Event with
-----------
respect to a Plan other than a Multiemployer Plan, (ii) the withdrawal of the
Borrower, Holdings or any member of their Controlled Group from a Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or cessation of operations described in Section 4062(e) with
respect to any Plan, (iii) the filing of a notice of intent to terminate a Plan
or the treatment of a Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC, (v)
the existence of an accumulated funding deficiency under Section 412 of the Code
or Section 302 of ERISA with respect to any Plan, whether or not waived, or the
filing of an application for an extension of an authorization period pursuant to
Section 412(e) of the Code or 304 of ERISA with respect to any Plan, (vi) the
withdrawal by the Borrower, Holdings or any member of their Controlled Group
from a
12
Multiemployer Plan, or (vii) any other event or condition which might reasonably
be expected in the judgment of the Majority Banks to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any material liability under Title IV
of ERISA other than PBGC premiums due but not delinquent under Section 4007 of
ERISA. No event described with respect to any Plan, including a Multiemployer
Plan, shall constitute an "ERISA Event" unless either of Borrower, Holdings or
any member of their Controlled Group could have any liability with respect to
such Plan.
"Event of Default" has the meaning specified in Section 9.1.
----------------
"Federal Funds Rate" means, for any period, a fluctuating interest rate
------------------
per annum equal for each day during such period to 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 for such day (or,
if such day is not a Business Day, for the next preceding 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 such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Exchange Act" means the Securities and Exchange Act of 1934, and
------------
regulations promulgated thereunder.
"Federal Reserve Board" means the Board of Governors of the Federal
---------------------
Reserve System or any successor thereto.
"Fiscal Quarter" means any three month accounting period in a Fiscal
--------------
Year.
"Fiscal Year" means the twelve month period ending on the Saturday
-----------
nearest to January 31 in each year.
"Funding Date" means the date on which a Borrowing occurs.
------------
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time; provided, however, that for
the purpose of Article VI GAAP shall be determined on the basis of such
principles in effect on the Effective Date and consistent with those used in the
preparation of the audited financial statements referred to in Section 4.6. In
the event that GAAP changes during the term of this Agreement such that the
covenants contained in Article VI would then be calculated in a different manner
or with different components or with components which are calculated
differently, (i) the parties hereto agree to enter into negotiations with
respect to amendments to this
13
Agreement or conforming those covenants as criteria for evaluating the
Borrower's financial condition to substantially the same criteria as were
effective prior to such change in GAAP, and (ii) the Borrower shall be deemed to
be in compliance with the affected covenants contained in Article VI during the
60 days following any change in GAAP if and to the extent that the Borrower
would have been in compliance therewith under GAAP as in effect immediately
before such change; provided, however, that this paragraph shall not be deemed
-------- -------
to require the Borrower, the Agent or the Banks to agree to modify any provision
of this Agreement or any of the other Loan Documents to reflect any such change
to GAAP and, if, after such 60 days, the parties, in their sole discretion, fail
to reach agreement on such modifications, the terms of this Agreement will
remain unchanged and the compliance by the Borrower with the covenants contained
in Article VI will be calculated in accordance with GAAP as in effect
immediately before such change.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Holdings" means, before the Maryland Merger, Holdings Maryland and, from
--------
and after the Maryland Merger, Holdings Delaware.
"Holdings Delaware" has the meaning specified in the seventh Whereas
-----------------
clause of this Agreement.
"Holdings Maryland" has the meaning specified in the third Whereas clause
-----------------
of this Agreement.
"Holdings Merger" has the meaning specified in the ninth Whereas clause
---------------
of this Agreement.
"Holdings Merger Agreement" means the Agreement of Merger between
-------------------------
Holdings Delaware and the Borrower.
"Indebtedness" of any Person means (i) all indebtedness of such Person
------------
for borrowed money or for the deferred purchase price of property or services,
(ii) all reimbursement and other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured, (iii) all
obligations evidenced by notes, bonds, debentures or similar instruments, (iv)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property, but
in such case only in an amount equal to the value of such property), (v) all
obligations which have been or should be, in accordance with GAAP, Capitalized
Lease Obligations, (vi) Contingent Obligations and all obligations (contingent
or otherwise) to purchase or otherwise acquire, or
14
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i), (ii), (iii), (iv)
or (v) above, (vii) all Indebtedness referred to in clause (i), (ii), (iii),
(iv) or (v) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, but in such case only in an amount equal to the
value of such property, and (viii) the Obligations; provided, however, that
Indebtedness shall not include trade payables arising in the ordinary course of
business of such Person.
"Initial Closing Date" means September 19, 1988.
--------------------
"Intellectual Property" has the meaning specified in the Intellectual
---------------------
Property Security Agreement.
"Intellectual Property Security Agreement" means the amended and restated
----------------------------------------
intellectual property security agreement originally entered into by Borrower on
the Initial Closing Date in favor of the Agent and the Banks, as the same has
been and may hereafter be amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms, including, without limitation,
as the same is amended and restated as of the Effective Date.
"Intercompany Accounts" means all assets and liabilities, however
---------------------
arising, which are due to Borrower from, which are due from Borrower to, or
which otherwise arise from any transaction by Borrower with, any Affiliate.
"Interest Coverage Ratio" means, for any period, the ratio obtained by
-----------------------
dividing (i) Borrower's EBDAIT for such period by (ii) Borrower's Consolidated
Interest Expense (other than interest accreted on the 1993 Notes) accrued for
such period, whether or not paid.
"Interest Period" means, as to any LIBOR Rate Loan, the period commencing
---------------
on the Funding Date of such Loan or on the Conversion/Continuation Date on which
the Loan is converted into or continued as a LIBOR Rate Loan, and ending on the
date one, two, or three months thereafter as selected by the Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the preceding Business Day;
15
(ii) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and
(iii) no Interest Period for any Revolving Loan shall extend
beyond the Commitment Termination Date.
"Interest Rate" means each or any of the interest rates set forth in
-------------
Section 2.8
"Inventory" means all of Borrower's now owned and hereafter acquired
---------
inventory, goods, merchandise, and other personal property, wherever located, to
be furnished under any contract of service or held for sale or lease, all raw
materials, work-in-process, finished goods, returned and repossessed goods, and
materials and supplies of any kind, nature or description which are or might be
used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
inventory goods, merchandise and such other personal property, and all documents
of title or other documents representing them.
"Investments" has the meaning specified in Section 8.6.
-----------
"IRS" means the Internal Revenue Service.
---
"LAC" has the meaning specified in the first paragraph of this Agreement.
---
"LAC Merger" has the meaning specified in the Second Whereas clause of
----------
this Agreement.
"Leases" has the meaning specified in Section 4.20.
------
"Letter of Credit" means a Standby Letter of Credit or a Merchandise
----------------
Letter of Credit issued or caused to be issued for the account of a Borrower
pursuant to Article 2.
"Letter of Credit Request" has the meaning specified in Section 2.2.
------------------------
"LIBOR Interest Payment Date" means, with respect to a LIBOR Rate Loan,
---------------------------
the last day of each Interest Period applicable to such Loan.
"LIBOR Interest Rate Determination Date" means each date of calculating
--------------------------------------
the LIBOR Rate for purposes of determining the interest rate with respect to an
Interest Period. The LIBOR Interest Rate Determination Date for any LIBOR Rate
Loan shall be
16
the second Business Day prior to the first day of the related Interest Period
for such LIBOR Rate Loan.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate
----------
Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/16th of 1.0%) determined by the Agent as follows:
LIBOR Rate = LIBOR
--------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for
-----------------------------
any day for any Interest Period the maximum reserve
percentage (expressed as a decimal, rounded upward
to the next 1/100th of 1.0%) in effect on such day
(whether or not applicable to any Bank) under
regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental
or other marginal reserve requirement) with respect
to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum
-----
(rounded upward to the next 1/16 of 1%) notified to
the Agent by Bank of America as the rate of interest
at which dollar deposits in the approximate amount
of the Loan to be made or continued as, or converted
into, a LIBOR Rate Loan and having a maturity
comparable to such Interest Period would be offered
by Bank of America's applicable lending office to
major banks in the London eurodollar market at
approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest
Period.
"LIBOR Rate Loan" means a Revolving Credit Loan during any period in
---------------
which it bears interest at the LIBOR Rate.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
----
lien, pledge, collateral or conditional assignment, charge, security interest or
encumbrance of any kind in respect of such asset. For the purpose of this
Agreement, any Person shall be deemed to own, subject to a Lien, any asset which
it has acquired or holds subject to the interest of a vendor or lessor under any
17
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan Documents" means this Agreement, the Collateral Documents, the
--------------
Negative Pledge Agreement.
"Loan Party" means Borrower and each Subsidiary of Borrower which is a
----------
party to any Loan Document.
"Loan(s)" means, collectively, the Revolving Credit Loans.
-------
"▇▇▇▇▇▇▇▇'▇" has the meaning specified in the first paragraph of this
----------
Agreement.
"▇▇▇▇▇▇▇▇'▇ Pledge Agreement" means the amended and restated pledge
---------------------------
agreement made by ▇▇▇▇▇▇▇▇'▇ on the Initial Closing Date in favor of the Agent
and the Banks, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with its terms, including, without limitation,
as the same is amended and restated as of the Effective Date.
"Majority Banks" means at any time Banks holding at least 66-2/3% of the
--------------
then aggregate unpaid principal amount of the Notes held by Banks, or, if no
such principal amount is then outstanding, Banks having at least 66-2/3% of the
Commitments.
"Management Shareholders" means, collectively, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
-----------------------
▇. ▇▇▇▇▇▇▇▇.
"Margin Stock" means "margin stock" as such term is defined in Regulation
------------
U of the Federal Reserve Board.
"Maryland Merger" has the meaning specified in the seventh Whereas clause
---------------
of this Agreement.
"Maryland Merger Agreement" means the Agreement of Merger between
-------------------------
Holdings Maryland and Holdings Delaware.
"Material Adverse Change" means a material adverse change in any of (i)
-----------------------
the financial condition, business or properties of Borrower and its Consolidated
Subsidiaries taken as a whole, or (ii) the legality, validity or enforceability
of any Loan Document or any Related Document.
"Material Adverse Effect" means an effect that would result in a Material
-----------------------
Adverse Change.
"Maximum Rate" has the meaning given to such term in Section 2.13.
------------
"Merchandise Letter of Credit" means a documentary Letter of Credit
----------------------------
issued for the account of the Borrower to provide
18
the intended means of making payment when due by the Borrower for the purchase
of Inventory and available for drawing against presentation of, inter alia,
negotiable documents of title covering such Inventory.
"Merger Agreement" means the Holdings Merger Agreement and the Maryland
----------------
Merger Agreement, collectively.
"Mortgage" has the meaning specified in Section 7.22.
--------
"Multiemployer Plan" means, as to any Person, at any time, a
------------------
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which such Person or any member of its Controlled Group is making, or is
obligated to make, contributions or has made, or been obligated to make,
contributions.
"Negative Pledge Agreement" means the negative pledge agreement entered
-------------------------
into by the Management Shareholders on the 1993 Closing Date in favor of the
Agent and the Banks.
"Net Worth" means, as at any date of determination and without
---------
duplication, an amount equal to the sum of: (a) the net worth of Borrower and
its Consolidated Subsidiaries as at February 3, 1996, plus (b) the cumulative
pre-tax net income (or loss) of Borrower and its Consolidated Subsidiaries from
February 3, 1996 through the date of determination; provided, that in
determining net income (or loss), no non-cash writeoffs (except those taken for
Inventory) will be included, plus (c) the cumulative amount of all contributions
to capital of Borrower from February 3, 1996 through the date of determination,
minus (d) the cumulative amount of all Stock Payments made by Borrower from
February 3, 1996 through the date of determination.
"New Common Stock" means the 4,107,800 shares of common stock of the
----------------
Borrower (including 535,800 shares issuable upon exercise of the over-allotment
option by the underwriters of the Offering), par value $.01 per share, of
Borrower offered and issued by Borrower pursuant to the Offering Documents.
"1993 Amended Credit Agreement" has the meaning specified in the sixth
-----------------------------
Whereas clause of this Agreement.
"1993 Amended Credit Agreement Default" means any Event of Default (as
-------------------------------------
defined in the 1993 Amended Credit Agreement) and event which with the passing
of time or the giving of notice or both would become an Event of Default (as
defined in the 1993 Amended Credit Agreement).
"1993 Closing Date" has the meaning specified in the sixth Whereas clause
-----------------
of this Agreement.
19
"1993 Notes" means the $55,700,000 aggregate principal amount of 10 1/2%
----------
senior secured notes due 1997 issued by Holdings on the 1993 Closing Date.
"1993 Notes Indenture" means the Indenture, dated as of October 14, 1993,
--------------------
between Holdings and United States Trust Company of New York as the trustee for
the holders of the 1993 Notes.
"1993 Note Purchase Agreement" means the Purchase Agreement in the form
----------------------------
delivered to the Banks pursuant to Section 3.1(e), to be entered into by
Holdings and the Purchasers listed therein, with respect to the sale of the 1993
Notes and 3,285,671 shares of Holdings Common Stock, $.008403361 par value per
share.
"1993 Note Redemption" means the redemption in full of the 1993 Notes at
--------------------
an aggregate redemption price of not more than 103.5% of the face amount of such
notes, plus accrued and unpaid interest on such notes.
"Non-Cash Charges" means, for any accounting period, the sum of (i) all
----------------
amounts treated as an expense for depreciation for such period, plus (ii) all
amounts treated as an expense for the amortization of leaseholds, deferred
transaction costs, goodwill and other intangibles of any kind for such period,
in each case for a Person and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Notice of Borrowing" means a notice of borrowing substantially in the
-------------------
form of Exhibit C hereto, delivered by Borrower to the Agent pursuant to Section
2.3.
"Notice of Conversion/Continuation" means a notice of
---------------------------------
conversion/continuation substantially in the form of Exhibit B hereto, delivered
by Borrower to the Agent pursuant to Section 2.3
"Obligations" means all loans, advances, debts, liabilities, obligations,
-----------
covenants and duties, including all obligations of Borrower or any of its
Subsidiaries under or in respect of Letters of Credit, owing by Borrower to any
Bank, the Agent, any Affiliate of any Bank or the Agent, or any Person entitled
to indemnification pursuant to Section 11.4, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
arising under this Agreement or under any other Loan Document, whether or not
for the payment of money, whether arising by reason of an extension of credit,
loan, guaranty, indemnification, foreign exchange or interest rate swap
transaction or in any other manner, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes all
interest (including interest accruing after the occurrence of an event described
in Section 9.1(f) and interest accruing at the Default Rate), charges, expenses,
fees, attorneys' fees and disbursements and any other sum
20
chargeable to Borrower or any of its Subsidiaries under this Agreement or any
other Loan Document.
"Offering" means Borrower's offer to issue the Senior Notes and the New
--------
Common Stock to the public pursuant to the Offering Documents.
"Offering Documents" means (i) the Form S-1 Registration Statement No.
------------------
33-97100 filed by Borrower with the Commission on September 19, 1995, as amended
by Amendment No. 1 to Form S-1 filed by Borrower with the Commission on April 8,
1996, and Amendment No. 2 to Form S-1 filed by Borrower on May 3, 1996 pursuant
to which Borrower will offer the Senior Notes and the New Common Stock to the
public, (ii) all documents filed by or on behalf of Borrower or any of its
Affiliates with the Commission in connection with the Offering, and (iii) all
amendments and supplements to any of the foregoing.
"Other Taxes" shall have the meaning given to such term in Section
-----------
2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permit" means any permit, approval, authorization, license, variance, or
------
permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Exceptions" shall mean such 1993 Amended Credit Agreement
--------------------
Defaults as shall have occurred and exist prior to the Effective Date solely as
a result of the Maryland Merger, the Holdings Merger, the Offering or the
Redemption.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a Governmental Authority.
"Plan" means any employee pension benefit plan as defined in Section 3(2)
----
of ERISA (including a Multiemployer Plan) that is covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code or
Section 302 of ERISA and is maintained for the employees of Borrower or Holdings
or any member of their Controlled Group or with respect to which Borrower or
Holdings or any member of their Controlled Group may incur any liability.
"Pledged Shares" means, collectively, the securities which are pledged as
--------------
security for the Obligations pursuant to the ▇▇▇▇▇▇▇▇'▇ Pledge Agreement.
21
"Qualified Issuer" means any commercial bank (i) which has capital and
----------------
surplus in excess of $500,000,000, (ii) which is in compliance with minimum
capitalization requirements of all applicable regulators, and (iii) the
outstanding long term debt securities of which are rated at least A by Standard
& Poor's Corporation or at least A-1 by ▇▇▇▇▇'▇ Investors Service, Inc., or
carry an equivalent rating by a nationally recognized rating agency if both of
the two named rating agencies cease publishing ratings of investments.
"Ratable Portion" means, with respect to any Bank, the quotient obtained
---------------
by dividing the Revolving Credit Loan Commitment of such Bank by the Revolving
Credit Loan Commitments of all of the Banks.
"Redemption" means the Discount Note Redemption, the 1993 Note Redemption
----------
and the Series A Preferred Stock Redemption, collectively.
"Reference Rate" means, for any day, the higher of: (a) the rate of
--------------
interest in effect for such day as publicly announced from time to time by Bank
of America in San Francisco, California, as its "reference rate" (the "reference
rate" being a rate set by Bank of America based upon various factors including
Bank of America's costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate), or (b) one-half percent
(0.50%) per annum above the latest Federal Funds Rate. Any change in the
reference rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change. Each
Interest Rate based upon the Reference Rate shall be adjusted simultaneously
with any change in the Reference Rate.
"Reference Rate Loan" means a Revolving Credit Loan during any period in
-------------------
which it bears interest at the Reference Rate.
"Related Documents" means the Negative Pledge Agreement, the Employment
-----------------
Agreements, the Discount Notes Indenture, the Discount Notes, the 1993 Notes
Indenture, the 1993 Notes, the 1993 Note Purchase Agreement, the Merger
Agreement, the Offering Documents, the New Common Stock, the Senior Notes and
the Senior Note Indenture.
"Release" means any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any
property owned by Borrower or any of its Subsidiaries, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
property.
"Release Direction" has the meaning specified in Section 2.18(b).
-----------------
22
"Remedial Action" means all actions required to (i) clean up, remove,
---------------
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent a Release or threatened Release or minimize further
release of Contaminants so they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, or (iii)
perform preremedial studies and investigations and post-remedial monitoring and
care.
"Reportable Event" means any of the events set forth in Section 4043(c)
----------------
of ERISA or the regulations thereunder but excluding those events as to which
the 30 day notice requirement has been waived.
"Requirement of Law" means, as to any Person, the charter and bylaws or
------------------
other organizational or governing documents of such Person, and all federal,
state and local laws, rules, regulations, orders, decrees or other
determinations of an arbitrator, court or other Governmental Authority,
including all disclosure requirements of ERISA and the requirements of
Environmental Laws, 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 Inventory" means, as of any time, inventory held as reserve
-----------------
inventory by Borrower for sale in future periods in accordance with current
practice.
"Responsible Officer" means with respect to any Person, an officer of
-------------------
such Person who is a signatory to any Loan Document or any other document
delivered hereunder.
"Revolving Credit Loan Commitment" means, as to each Bank, the commitment
--------------------------------
of such Bank to make Revolving Credit Loans to Borrower pursuant to Section
2.1(b) in the aggregate principal amount at any time outstanding not to exceed
the amount set forth opposite such Bank's name on the signature pages hereof
under the caption "Commitment."
"Revolving Credit Loans" means loans made by a Bank to Borrower pursuant
----------------------
to Section 2.1(b).
"Security Agreement" means the amended and restated security agreement,
------------------
originally entered into on the Initial Closing Date by Borrower and ▇▇▇▇ Lo in
favor of the Agent and the Banks, as the same has been and may hereafter be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms, including, without limitation, as the same is amended
and restated as of the Effective Date.
"Senior Note Indenture" means the Indenture, to be entered into between
---------------------
Borrower and United States Trust Company of New York, as Trustee for the holders
of the Senior Notes, relating
23
to the Senior Notes, in form and substance satisfactory to the Agent.
"Senior Notes" means the $100 million aggregate principal amount of
------------
senior notes due 2003 to be issued by Borrower.
"Series A Preferred Stock" means the Series A Preferred Stock, par value
------------------------
$0.005602241 per share, of Holdings, before the Holdings Merger, and of
Borrower, after the Holdings Merger.
"Series A Preferred Stock Redemption" means the redemption of all issued
-----------------------------------
and outstanding shares of Series A Preferred Stock at an aggregate redemption
price of not more than $0.56 per share.
"Shareholders' Agreement" means the agreement among Holdings and certain
-----------------------
of its shareholders, dated as of September 19, 1988, as amended.
"Solvent" means, with respect to any Person, that the present fair
-------
saleable value of the assets of such Person is, on the date of determination,
greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person as of such date and that, as of such
date, such Person is able to pay all liabilities of such Person as such
liabilities mature and does not have unreasonably small capital with which to
carry on its business. In computing the amount of contingent or unliquidated
liabilities at any time, such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
"Standby Letter of Credit" means any Letter of Credit other than a
------------------------
Merchandise Letter of Credit.
"Stated Termination Date" means the fourth anniversary of the Effective
-----------------------
Date.
"Stock" means all shares, options, interests, participations or other
-----
equivalents (regardless of how designated) of or in a corporation or equivalent
entity, whether voting or non-voting, and including, without limitation, common
stock, preferred stock or warrants or options for any of the foregoing.
"Stock Payment" means, with respect to any Person, any dividend payment
-------------
or other distribution of assets, properties, cash, rights, warrants, equity
interests, obligations or securities made by such Person on account of its Stock
or any purchase, redemption, defeasance or other acquisition for value or other
payment made by such Person in respect of its Stock (other than solely through
the issuance of such Person's own capital stock), now or hereafter outstanding,
or any management incentive or similar fee payable to a shareholder of such
Person in its capacity as a shareholder.
24
"Stock Purchase Agreement" has the meaning described in the first Whereas
------------------------
clause of this Agreement.
"Subsidiary" means, with respect to any Person, any corporation of which
----------
an aggregate of 50% or more of the outstanding stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is, directly or indirectly, now owned or hereafter
acquired by such Person and/or one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means the guaranties of the Obligations of Borrower
-------------------
by each Subsidiary of Borrower, originally entered into as of the Initial
Closing Date and in favor of the Agent and the Banks, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
its terms, including, without limitation, as the same is amended and restated as
of the Effective Date.
"Taxes" has the meaning specified in Section 2.12(a).
-----
"Voting Stock" means capital stock of the class or classes pursuant to
------------
which the holders thereof have general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
"▇▇▇▇ Lo" means ▇▇▇▇ Lo, Inc., a New York corporation and a wholly- owned
-------
Subsidiary of Borrower.
1.2. Computation of Time Periods. In this Agreement, in the computation of
---------------------------
periods of time from a specified date to a later specified date, the word "from"
means "from and including," and the words "to" and "until" each means "to but
excluding."
1.3. Interpretive Provisions (a) The words "herein," "hereof" and
-----------------------
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, as the same may from time to
time be amended or supplemented and not to any particular article, section,
subsection or clause in this Agreement.
(b) References herein to an article, section, subsection or clause
shall refer to the appropriate article, section, subsection or clause in this
Agreement.
(c) The word "including" as used herein means including without
limitation.
25
(d) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(e) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
(f) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(g) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(h) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(i) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
ARTICLE II
AMOUNTS AND TERMS OF THE FACILITY
2.1. Revolving Credit Loans.
----------------------
(a) [Intentionally omitted.]
(b) Each Bank severally agrees, on the terms and subject to the
conditions hereinafter set forth, to make revolving credit loans to Borrower
(each, a "Revolving Credit Loan") from time to time on any Business Day during
the period from the Effective Date until the Commitment Termination Date in the
aggregate principal amount at any time outstanding not to exceed such Bank's
Revolving Credit Loan Commitment, as such amount may be modified pursuant to
Section 11.6; provided, however, that in no event shall the aggregate amount of
-----------------
all outstanding Letters of Credit, the then outstanding Revolving Credit Loans
and unpaid
26
delinquent Obligations and the principal amount of the Revolving Credit Loan to
be made exceed the lesser of (i) the aggregate Revolving Credit Loan Commitments
and (ii) the Borrowing Base. The aggregate Revolving Credit Loan Commitments
shall not exceed $35,000,000. Within the limits of each Bank's Revolving Credit
Loan Commitment and subject to the mandatory and voluntary reductions required
or permitted herein, amounts of the Revolving Credit Loans prepaid may be
reborrowed pursuant to this Section 2.1(b); provided, however, that with respect
-----------------
to any LIBOR Rate Loans prepaid by the Borrower prior to the expiration date of
the Interest Period applicable thereto, the Borrower agrees to pay to the Banks
the amounts described in Section 2.15(c).
2.2. Letters of Credit.
-----------------
(a) BABC agrees on the terms and subject to the conditions
hereinafter set forth to cause one or more letters of credit (the "Letters of
Credit") to be issued from time to time during the period commencing on the
Effective Date and ending 30 days prior to the Commitment Termination Date in an
aggregate amount of up to $10,000,000, at the request of Borrower and in favor
of the beneficiary specified by Borrower in accordance with the provisions set
forth below; provided, however, that in no event shall the aggregate amount of
-----------------
all outstanding Letters of Credit, the face amount of the Letter of Credit to be
issued and the then outstanding Revolving Credit Loans and unpaid Obligations,
at any time exceed the lesser of (A) the aggregate Revolving Credit Loan
Commitments and (B) the Borrowing Base:
(i) Borrower shall give to the Agent one (1) Business Day's
prior written notice in substantially the form of Exhibit D hereto (a
"Letter of Credit Request") of any requested issuance of a Letter of
Credit under this Agreement; such notice shall be irrevocable and shall
specify the stated amount of the Letter of Credit requested, the
effective date (which shall be a Business Day) of issuance of the Letter
of Credit, whether such Letter of Credit may be drawn in a single or in
partial draws, the day such Letter of Credit is to expire (which shall be
a Business Day and (A) shall not be more than 180 days after the
effective date in the case of a Merchandise Letter of Credit; (B) shall
not be more than one year after the effective date in the case of a
Standby Letter of Credit; and (C) in any event, clauses (A) and (B)
notwithstanding, shall not be later than the Business Day preceding the
Commitment Termination Date), and the Person (including such Person's
address) for whose benefit the Letter of Credit is to be issued;
(ii) if BABC is not then the Agent, the Agent shall give BABC
prompt notice of its receipt of each Letter of Credit Request and the
details thereof; and
27
(iii) Borrower shall pay to BABC (A) a nonrefundable fee on the
aggregate amount of all outstanding Letters of Credit at a rate per annum
equal to one and one-half percent (1.5%) of the aggregate amount so
outstanding, which shall be payable monthly in arrears on the first day
of each month during the term that any Letter of Credit remains
outstanding, and (B) sums equal to the reasonable charges BABC may
assess, and expenses that BABC may pay or incur, relative to the issuance
of the Letters of Credit or to presentment to or to a payment by BABC
thereunder, which shall be payable on demand. Such fee is in addition to
any other standard fees, costs and expenses charged by BABC in connection
with arranging any Letter of Credit. All such fees, charges and expenses
payable to or by BABC will be charged to Borrower as Revolving Credit
Loans. During the continuance of an Event of Default, the fee payable
pursuant to clause (A) above shall be increased to three and one-half
percent (3.5%) per annum.
(b) Concurrently with the issuance of each Letter of Credit, BABC
shall be deemed to have sold and transferred to each Bank, and each Bank shall
be deemed to have purchased and received from BABC, in each case without any
further action on the part of any party, an undivided interest and
participation, to the extent of such Bank's Ratable Portion of the aggregate
Revolving Credit Loan Commitments, in and to each Letter of Credit and the
obligations of Borrower under this Agreement in respect of each Letter of
Credit. The amount available to be drawn under each Letter of Credit at the time
outstanding (assuming compliance with all conditions to drawing) shall be deemed
to be outstanding Revolving Credit Loans for purposes of determining (v) the
availability of additional Letters of Credit under Section 2.2(a), (w) the
amount of any repayment required to be made pursuant to Section 2.6(c), (x)
compliance with the conditions precedent to Borrowings under Article III, (y)
compliance with covenants under Article VI and (z) the occurrence of an Event of
Default under Article IX. Upon each drawing or payment under a Letter of Credit,
the amount of such drawing or payment shall become and be deemed to be, without
any further action on the part of any Person, a Revolving Credit Loan by
Borrower (subject to later adjustments pursuant to paragraph (c) below) made on
the date of such drawing or payment for all purposes under this Agreement.
2.3. Notice of Borrowing; Notice of Conversion/Continuation.
------------------------------------------------------
(a) (i) Whenever Borrower desires to borrow Revolving Credit Loans
under Section 2.1(b) or to convert or continue any Revolving Credit Loan
pursuant to this Section 2.3(a), Borrower, shall deliver to the Agent a Notice
of Borrowing or Notice of Conversion/Continuation, as the case may be, signed by
an authorized officer of Borrower, not later than (a) 11:00 a.m. (New York time)
on the requested Funding Date of such proposed Borrowing, continuation or
conversion, in the case of a Borrowing
28
of Reference Rate Loans, or (b) 11:00 a.m. (New York time) on the third Business
Day before the date of such proposed Borrowing, continuation or conversion, in
the case of a Borrowing or continuation of Libor Rate Loans or a conversion of
Reference Rate Loans into Libor Rate Loans. Notwithstanding any other provision
hereof to the contrary, no more than four (4) Borrowing(s) of Revolving Credit
Loans consisting of Libor Rate Loans may be outstanding at any time, and no
Borrowing(s) of Revolving Credit Loans consisting of Libor Rate Loans shall be
in an aggregate principal amount of less than $3,000,000 or any greater amount
which is an integral multiple of $1,000,000. In lieu of delivering the
above-described Notice of Borrowing or Notice of Conversion/Continuation, as the
case may be, the Borrower may give the Agent telephonic notice of any requested
Borrowing or conversion or continuation, as the case may be, by the required
time; provided, however, that such notice shall be confirmed in writing by
-----------------
delivery to the Agent (A) immediately of a telecopy of a Notice of Borrowing or
Notice of Conversion/Continuation, as the case may be, which has been signed by
an authorized officer of the Borrower, and (B) promptly (and in no event later
than three (3) Business Days after the Funding Date in respect of the applicable
Revolving Credit Loans) of a Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, containing the original signature
of an authorized officer of the Borrower. In the event that the terms of any
confirmatory Notice of Borrowing or Notice of Conversion/Continuation, as the
case may be, referred to in the proviso contained in the immediately preceding
sentence shall conflict with the telephonic notice with respect to which it was
delivered, the terms of the telephonic notice, as understood by the Agent, shall
govern. Notwithstanding anything in this Section 2.3(a) to the contrary, any
Revolving Credit Loans to be made to Borrower on the Effective Date shall
initially be made as Reference Rate Loans.
(ii) The Agent shall charge all Revolving Credit Loans and
other Obligations to a loan account of Borrower to be maintained by the Agent.
Each Bank shall, before 2:00 P.M. (New York City time) on the Funding Date
applicable thereto, make available for the account of its Domestic Lending
Office to the Agent at its address referred to in Section 11.2, in immediately
available funds, such Bank's Ratable Portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to Borrower
on the applicable Funding Date at the Agent's aforesaid address.
(iii) Any Notice of Borrowing and Notice of
Conversion/Continuation (or telephonic notice in lieu thereof) made pursuant to
this Section 2.3(a) shall be irrevocable. Promptly after receipt of a Notice of
Conversion/Continuation under this Section 2.3(a), the Agent shall notify each
Bank by telex, telecopy, telegram, telephone or other similar means of
29
transmission, of the proposed conversion or continuation, as the case may be.
(iv) Unless otherwise specified in a Notice of Borrowing, each
Loan to be made as part of a Borrowing shall be made as a Reference Rate Loan.
If a timely Notice of Conversion/Continuation as specified in Section 2.3(a)(i)
is not received from Borrower prior to the expiration of any Interest Period for
any outstanding Libor Rate Loan, Borrower shall be deemed to have elected to
convert such Libor Rate Loan into a Reference Rate Loan on the last day of the
expiring Interest Period; provided that if any Default or Event of Default shall
--------
have occurred and be continuing, Borrower shall be deemed to have converted, on
the last day of the applicable Interest Period, the Libor Rate Loan with respect
to which the Interest Period is ending into a Reference Rate Loan in a principal
amount equal to the principal amount of such Libor Rate Loan.
(v) During the existence of a Default or Event of Default, the
Borrower may not request a new LIBOR Rate Loan or elect to have a Loan converted
into or continued as a LIBOR Rate Loan.
(vi) Subject to the terms and conditions hereof and in
accordance with the procedures for conversions and continuations and the other
provisions set forth in this Section 2.3(a) and, in the case of any conversion
into, or continuation of, a Libor Rate Loan, provided that no Default or Event
of Default has occurred and is continuing, each Bank agrees (i) to convert
outstanding Revolving Credit Loans that are Reference Rate Loans into Libor Rate
Loans and (ii) to continue outstanding Revolving Credit Loans that are Libor
Rate Loans as Libor Rate Loans, in each case in an aggregate principal amount
not to exceed the principal amount of the Reference Rate Loans or Libor Rate
Loans, as the case may be, then outstanding. Each Bank will make such conversion
without an exchange of funds; provided that the Borrower shall pay to the Agent
--------
for the account of each Bank on the date of each such conversion accrued and
unpaid interest on the Libor Rate Loans of such Bank converted on such date.
(b) Unless the Agent shall have received notice from a Bank prior to
the date of any proposed Borrowing that such Bank will not make available to the
Agent such Bank's Ratable Portion of such proposed Borrowing, the Agent may
assume that such Bank has made such portion available to the Agent on the date
of such Borrowing in accordance with subsection (a) of this Section 2.3 and the
Agent may, in reliance upon such assumption, make available to Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made such Ratable Portion available to the Agent, such Bank and Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to Borrower until the date such amount is
30
repaid to the Agent, at (i) in the case of Borrower, the Interest Rate
applicable to the Loans comprising such Borrowing as set forth in this
Agreement, and (ii) in the case of such Bank, the Federal Funds Rate. If such
Bank shall repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Bank's Loan as part of such Borrowing for purposes of this
Agreement. If Borrower shall repay to the Agent such corresponding amount, such
payment shall not relieve such Bank of any obligation it may have to Borrower
hereunder.
(c) The failure of any Bank to make the Loan to be made by it as part
of any Borrowing shall not relieve any other Bank of its obligation, if any,
hereunder to make its Loan on the date of such Borrowing, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on the date of any Borrowing.
2.4. Fees.
----
(a) Borrower agrees to pay to each Bank a facility fee on the average
daily unused portion of such Bank's Revolving Credit Loan Commitment from the
Effective Date to the Commitment Termination Date at the rate of three- eighths
of one percent (0.375%) per annum on the unused portion of such Bank's Revolving
Credit Loan Commitment, which fee shall be payable monthly in arrears on the
first day of each month after the Effective Date during the term of such Bank's
Revolving Credit Loan Commitment, commencing with the first day of the first
full calendar month following the Effective Date and on the Commitment
Termination Date. All payments received by Agent on account of Accounts or as
proceeds of other Collateral shall be deemed to be credited to Borrower's loan
account immediately upon receipt for purposes of calculating the facility fee
pursuant to this Section 2.4.
(b) Borrower agrees to pay BABC a closing fee of $150,000 on the
Effective Date.
(c) Borrower agrees to pay BABC the fees in respect of Letters of
Credit referred to in Section 2.2(a)(iii).
(d) All fees payable hereunder shall be charged to Borrower's loan
account as Revolving Credit Loans.
2.5. [Intentionally omitted.]
------------------------
2.6. Repayment.
---------
(a) [Intentionally omitted.]
(b) Borrower shall repay the aggregate unpaid principal amount of the
Revolving Credit Loans, the aggregate undrawn amount of all outstanding Letters
of Credit and the aggregate amount of any unpaid reimbursement obligations in
respect
31
of all outstanding Letters of Credit on the Commitment Termination Date.
(c) If, at any time, the outstanding principal amount of the Revolving
Credit Loans, together with the aggregate amount of all outstanding Letters of
Credit and all other unpaid delinquent Obligations, shall exceed either (i) the
aggregate Revolving Credit Loan Commitments or (ii) the Borrowing Base, then
Borrower immediately shall repay the applicable Loans by the amount of such
excess.
(d) In connection with any repayment pursuant to this Section 2.6, if
any LIBOR Rate Loans are repaid prior to the expiration date of the Interest
Period applicable thereto, the Borrower shall also pay to the Banks the amounts
described in Section 2.15(c).
2.7. Settlement. The Agent will notify the Banks of the aggregate
----------
amount of Revolving Credit Loans outstanding at such times and at such
frequencies as the Agent in its sole discretion may determine, but in any event
not less frequently than weekly (the date of each such notice being a
"Settlement Date"). Upon receipt of any such notice, BABC or each of the other
Banks, as the case may be, will forthwith unconditionally pay to the Agent (for
distribution by the Agent to BABC or each of the other Banks, as the case may
be) such amount (a "Settlement Amount"), if any, as is necessary to cause the
aggregate unpaid principal amount of the Revolving Credit Loans to be shared by
the Banks in accordance with their Ratable Portions of the aggregate Revolving
Credit Loan Commitments. Upon each payment and distribution pursuant to the
preceding sentence, each Bank will be deemed from the date of such payment and
distribution for all purposes under the Loan Documents (including without
limitation in respect of interest accruing from such date on the principal
amount of such Revolving Credit Loans) to have outstanding Revolving Credit
Loans owed to it in the amount of its Ratable Portion of such Revolving Credit
Loans as aforesaid.
2.8. Interest.
--------
(a) Borrower shall pay interest on the aggregate unpaid principal
amount of the Loans at a rate determined by reference to the Reference Rate or
the LIBOR Rate and Sections 2.8(a)(i) or (ii), as applicable, but such rate
shall not exceed the Maximum Rate described in Section 2.13. Subject to the
provisions of Section 2.3, any of the Loans may be converted into, or continued
as, Reference Rate Loans or LIBOR Rate Loans in the manner provided in Section
2.3. Interest shall be computed daily on the basis of a year of 360 days and
actual days elapsed and will be payable monthly in arrears on the first day of
each month after the Effective Date. Except as otherwise provided herein, the
outstanding Obligations shall bear interest as follows:
32
(i) for all Revolving Credit Loans and other Obligations which
are not LIBOR Rate Loans, then at a fluctuating per annum rate equal to the
Reference Rate plus the Applicable Margin; and
(ii) for all Revolving Credit Loans and other Obligations which
are LIBOR Rate Loans, then at a per annum rate equal to the Libor Rate plus the
Applicable Margin.
(b) During the continuance of an Event of Default, including the
failure to pay any amount of principal when due hereunder (whether at the stated
maturity thereof or by acceleration or otherwise), all Obligations shall bear
interest, from the date of the occurrence of such Event of Default, payable on
demand, at the Default Rate applicable thereto.
2.9. [Intentionally omitted].
-----------------------
2.10. Optional Prepayments and Repayments; Early Termination Fee. Borrower
----------------------------------------------------------
may, at any time, repay the Revolving Credit Loans or prepay the Revolving
Credit Loans and permanently reduce the Revolving Credit Loan Commitments to
zero ($0) by tendering (i) an amount equal to the aggregate outstanding
Revolving Credit Loans to Agent together with written notice of Borrower's
intent to reduce such commitments, together with accrued interest to the date of
such repayment on the principal amount repaid and (ii) with respect to any LIBOR
Rate Loans to be prepaid prior to the expiration date of the Interest Period
applicable thereto, the amounts described in Section 2.15(c); provided, however,
that in such event, the Revolving Credit Loans and all unpaid interest and
Obligations must be immediately repaid in full and all outstanding Letters of
Credit shall be immediately cash collateralized to the satisfaction of BABC. In
the event of prepayment in full and reduction to zero ($0) of all Revolving
Credit Loans and Revolving Credit Loan Commitments prior to the Stated
Termination Date, Borrower agrees to pay to the Banks an early termination fee
(the "Early Termination Fee") determined in accordance with the following table:
Period during which early Early Termination Fee
termination occurs
On or prior to the first 2.0% of the Revolving Credit
anniversary of the Effective Loan Commitments
Date
After the first anniversary of 1.0% of the Revolving Credit
the Effective Date but prior Loan Commitments
to the Stated Termination Date
2.11. Payments and Computations.
-------------------------
(a) Borrower shall make each payment hereunder and under the
Obligations not later than 11:00 a.m. (New York City
33
time) on the day when due in U.S. dollars to the Agent at its address referred
to in Section 11.2 in immediately available funds. If any payment of principal
is made by a Borrower after such time, such payment shall be deemed to have been
made on the next Business Day. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or fees
ratably (other than amounts payable pursuant to Section 2.12) to the Banks in
accordance with their Ratable Portions for the account of their respective
Domestic Lending Offices, and like funds relating to the payment of any other
amount payable to any Bank to such Bank for the account of its Domestic Lending
Office, in each case to be applied in accordance with the terms of this
Agreement.
(b) Borrower hereby authorizes each Bank, if and to the extent payment
owed by Borrower to such Bank is not made when due hereunder or under any
Obligations, after giving Borrower one day's prior notice stating the account to
be charged and the amount, to charge from time to time against any or all of
Borrower's accounts with such Bank any amount so due.
(c) [Intentionally omitted.]
(d) Whenever any payment hereunder or under the Obligations shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day and such extension of time shall in such
case be included in the computation of payment of interest or fee, as the case
may be.
(e) Unless the Agent shall have received notice from Borrower prior to
the date on which any payment is due to the Banks hereunder that Borrower will
not make such payment in full, the Agent may assume that Borrower has made such
payment in full to the Agent on such date and the Agent may, in reliance upon
such assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent Borrower shall not
have so made such payment in full to the Agent, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, at the Federal
Funds Rate.
2.12. Taxes.
-----
(a) Any and all payments by Borrower hereunder shall be made, in
accordance with Section 2.11, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Agent, taxes measured by net income and franchise taxes
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as
34
"Taxes"). If Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Bank or the Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Bank or the Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
other Loan Documents (hereinafter referred to as "Other Taxes").
(c) Except if caused by a Bank's failure to supply a Form 1001 or Form
4224 (or successor form) to the extent required by Section 2.12(e) or 2.12(f),
Borrower will indemnify each Bank and the Agent for the full amount of Taxes and
Other Taxes (including any Taxes or Other Taxes imposed on amounts payable under
this Section 2.12) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, and will make payment under this indemnification within 30 days
from the date such Bank or the Agent (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, Borrower
will furnish to the Agent, at its address referred to in Section 11.2, the
original or a certified copy of a receipt evidencing payment thereof.
(e) If Borrower is required to make any payment referred to in
paragraphs (a) and (c) above, upon the written request of Borrower, each
relevant Bank shall (consistent with legal and regulatory restrictions)
designate a different Domestic Lending Office if such designation will avoid the
need for such payment or reimbursement and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. If Borrower fails to perform
its obligations under (a) and (c) above, Borrower shall indemnify such Bank for
any incremental taxes, interest or penalties that may become payable as a result
of any such failure; provided, however, that Borrower will not be required to
-----------------
make any payment to any Bank under this Section 2.12 with respect to the
withholding of United States federal income taxes if such withholding is
required in respect of such Bank by reason of such Bank's inability to furnish
under subparagraph (f) immediately below an extension or renewal of a Form 1001
or Form 4224 (or successor form), as applicable, unless such inability results
from
35
an amendment to or a change in any applicable law or regulation or in the
interpretation thereof by any regulatory authority (including without limitation
any change in an applicable tax treaty), which amendment or change becomes
effective after the Effective Date.
(f) Each Bank agrees that it shall deliver to Borrower (i) at least
three Business Days prior to the date such Bank (other than BABC) becomes a Bank
hereunder either (A) a statement that it is incorporated in the United States of
America or (B) if it is not so incorporated, two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 (or any successor form), as
appropriate, promulgated pursuant to the Code, indicating that such Bank is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes as permitted by the Code,
(ii) from time to time, such extensions or renewals of such forms (or successor
forms) as may reasonably be requested by Borrower, but only to the extent such
Bank determines that it may properly effect such extensions or renewals under
applicable tax treaties, laws, regulations and directives and (iii) in the event
of a transfer of any Loan to a Subsidiary or Affiliate of such Bank, two new
duly completed copies of Internal Revenue Service Form 1001 or 4224 (or any
successor form), as the case may be, for such Subsidiary or Affiliate. Borrower
shall be entitled to rely on such forms in its possession until receipt of any
revised or successor form pursuant to the preceding sentence.
(g) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 2.12 shall survive the payment in full of principal and interest
hereunder.
2.13. Maximum Interest Rate. In no event shall any interest rate provided
---------------------
for hereunder exceed the maximum rate permissible for corporate borrowers under
applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations under
this Agreement, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this Section 2.13, have been paid or accrued if the interest rates otherwise set
forth in this Agreement had at all times been in effect, then the Borrower
shall, to the extent permitted by applicable law, pay the Agent, for the account
of the Banks, an amount equal to the difference between (a) the lesser of (i)
the amount of interest which would have been charged
36
if the Maximum Rate had, at all times, been in effect or (ii) the amount of
interest which would have accrued had the interest rates otherwise set forth in
this Agreement, at all times, been in effect and (b) the amount of interest
actually paid or accrued under this Agreement. In the event that a court
determines that the Agent and/or any Bank has received interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be deemed
received on account of, and shall automatically be applied to reduce, the
Obligations other than interest, in the inverse order of maturity, and if there
are no Obligations outstanding, the Agent and/or such Bank shall refund to the
Borrower such excess.
2.14. Notation. The Agent shall record on its books, and upon Borrower's
--------
request, shall promptly advise Borrower of, the principal amount of the Loans
owing to each Bank from time to time. In addition, each Bank is authorized, at
such Bank's option, to note the date and amount of each payment or prepayment of
principal of such Bank's Loans in its books and records, including computer
records, such books and records constituting rebuttably presumptive evidence,
absent manifest error, of the accuracy of the information contained therein so
long as such records of the Banks match those of the Agent.
2.15. Yield Protection and Illegality.
-------------------------------
(a) (i) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Domestic Lending Office to
make LIBOR Rate Loans, then, on notice thereof by such Bank to the Borrower
through the Agent, any obligation of that Bank to make LIBOR Rate Loans shall be
suspended until the Bank notifies the Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
(ii) If a Bank determines that it is unlawful to maintain any
LIBOR Rate Loan, the Borrower shall, upon its receipt of reasonable notice of
such fact and demand from such Bank (with a copy to the Agent), prepay in full
such LIBOR Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 2.15(c), either on the last
day of the Interest Period thereof, if such Bank may lawfully continue to
maintain such LIBOR Rate Loans to such day, or immediately, if such Bank may not
lawfully continue to maintain such LIBOR Rate Loan. If the Borrower is required
to so prepay any LIBOR Rate Loan, then concurrently with such prepayment, the
Borrower shall borrow from the affected Bank, in the amount of such repayment, a
Reference Rate Loan.
(b) (i) If any Bank determines that, due to either (A) the
introduction of or any change in the interpretation of any
37
law or regulation or (B) the compliance by that Bank with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to such Bank
of agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then
the Borrower shall be liable for, and shall from time to time, upon demand (with
a copy of such demand to be sent to the Agent), pay to the Agent for the account
of such Bank, additional amounts as are sufficient to compensate such Bank for
such increased costs.
(ii) If any Bank shall have determined that (A) the introduction
of any Capital Adequacy Regulation, (B) any change in any Capital Adequacy
Regulation, (C) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (D) compliance by
the Bank or any corporation controlling such Bank with any Capital Adequacy
Regulation, affects or would affect the amount of capital required or expected
to be maintained by such Bank or any corporation controlling the Bank and
(taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment[s], loans, credits or obligations under this Agreement, then, upon
demand of such Bank to the Borrower through the Agent, the Borrower shall pay to
the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate such Bank for such increase.
(c) The Borrower shall reimburse each Bank and hold each Bank harmless
from any loss or expense which such Bank may sustain or incur as a consequence
of:
(i) the failure of the Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(ii) the failure of the Borrower to borrow, continue or convert a
Loan after the Borrower has given (or is deemed to have given) a Notice
of Borrowing or a Notice of Conversion/ Continuation;
(iii) the prepayment or other payment (including after
acceleration thereof) of a LIBOR Rate Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained.
(d) Any Bank claiming reimbursement or compensation under this Section
2.15 shall deliver to the Borrower (with a copy to the Agent) a certificate
setting forth in reasonable detail the
38
amount payable to such Bank hereunder and the basis for such calculation, and
such certificate shall be conclusive and binding on the Borrower in the absence
of manifest error.
(e) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of the Borrower in this
Section 2.15 shall survive the payment of all other Obligations.
(f) If any Bank is unable to make or continue a LIBOR Rate Loan due to
any of the events described in subsections (a) or (b) of this Section 2.15,
Borrower shall be entitled to prepay the Revolving Credit Loans in full and
permanently reduce the Revolving Loan Commitment to zero ($0) within 90 days
after receiving demand for payment pursuant to subsection (a)(ii) or (b)(i), as
the case may be, of this Section 2.15, without having to pay the Early
Termination Fee; provided that (x) such prepayment and early termination shall
comply in all other respects with all other terms of this Agreement and (y) such
prepayment in full shall be made by Borrower solely from the proceeds of a loan
to Borrower from one or more financial institutions that are not, at the time of
such prepayment, subject to the event or circumstances that caused such Bank to
have exercised the provisions of subsection (a)(ii) or (b)(i), as the case may
be, of this Section 2.15.
2.16. Inability to Determine Rates. If the Agent determines that for any
----------------------------
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or
that the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Rate Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Agent will promptly so notify the Borrower and each Bank.
Thereafter, the obligation of the Banks to make or continue LIBOR Rate Loans
hereunder shall be suspended until the Agent revokes such notice in writing.
Upon receipt of such notice, the Borrower may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Borrower does not
revoke such notice, the Banks shall make, convert or continue the Loans, as
proposed by the Borrower, in the amount specified in the applicable notice
submitted by the Borrower, but such Loans shall be made, converted or continued
as Reference Rate Loans instead of LIBOR Rate Loans.
2.17. Sharing of Payments, Etc. If, with respect to Borrower, any Bank
------------------------
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of the Loans made by it to
Borrower (other than pursuant to Section 2.2, 2.12 or 2.15) in excess of its
Ratable Portion of payments on account of such Loans obtained by all the Banks,
such Bank shall forthwith purchase from the other Banks such participations in
the Loans made by them as shall be necessary to cause such purchasing Bank to
share the excess payment ratably with each of them; provided, however, that if
-----------------
all or any
39
portion of such excess payment is thereafter recovered from such purchasing
Bank, such purchase from each Bank shall be rescinded and such Bank shall repay
to the purchasing Bank the purchase price to the extent of such recovery
together with an amount equal to such Bank's ratable share (according to the
proportion of (i) the amount of such Bank's required repayment to (ii) the total
amount so recovered from the purchasing Bank) of any interest or other amount
paid or payable by the purchasing Bank in respect of the total amount so
recovered. The relevant Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 2.17 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of Borrower in the amount of such participation.
2.18. Receipt and Application of Monies. Borrower and its Subsidiaries
---------------------------------
shall cause any monies paid in respect of any Account to be deposited, in kind,
directly by the Account debtor in a Depositary Account, and in the event
Borrower or any Subsidiary of Borrower (or any of their respective Affiliates,
stockholders, directors, officers, employees, agents or those Persons acting for
or on behalf of Borrower or a Subsidiary of Borrower with respect to any debts
owed to Borrower or a Subsidiary of Borrower) shall receive any monies (whether
consisting of cash and other receipts from retail stores, proceeds from the sale
or other disposal of any Inventory or other Collateral, credit card receipts or
otherwise), with reasonable promptness following receipt thereof, Borrower or
such Subsidiary shall deposit or cause the same (other than advances consisting
of Revolving Credit Loans) to be deposited, in kind, in the regular course of
Borrower's or such Subsidiary's business in a Depositary Account. The Borrower
shall instruct each bank that maintains a Depositary Account of the Borrower to
transfer, prior to the close of each Business Day, all amounts on deposit in
such account to the Collection Account. Borrower shall forward to BABC, in the
normal course of business, copies of a collection report, in form and substance
satisfactory to BABC, with respect to all such items of payment and the deposit
in the Depositary Accounts and transfers to the Collection Account thereof. The
Collection Account shall be maintained pursuant to an agreement ("Collection
Account Agreement") among the Borrower, the Agent and the relevant financial
40
institution, which shall provide, among other things, that amounts on deposit in
the Collection Account may be withdrawn by the Company until such time as such
financial institution shall have received written notice from the Agent upon the
occurrence of any of the circumstances described in the succeeding sentence.
Upon the occurrence and during the continuance of an Event of Default, or if
average daily Availability for any period of 60 consecutive days falls below
$13,000,000, or if at any time Availability is less than $10,000,000, all funds
in the Collection Account shall become subject to the sole dominion and control
of the Agent and the Agent shall have the right, upon written notice to the
relevant financial institution, to instruct any such financial institution to
remit all amounts deposited in the Collection Account to the Agent Account on a
daily basis. The Borrower agrees to indemnify each Bank and the Agent against,
and reimburse each on demand for, all costs (without duplication) incurred by
the Agent or any Bank in connection with the Collection Account Agreement.
Notwithstanding the termination of this Agreement, until all of the Obligations
shall have been fully paid and satisfied, the Borrower shall continue to
deposit, or cause to be deposited, into the Depositary Account all collections
of Accounts and other proceeds of Collateral. All payments received by the Agent
as proceeds of Accounts or other Collateral whether through deposit into the
Agent Account or otherwise will be the sole property of the Agent, for the
ratable benefit of the Banks, and will be credited to the Agent Account as
follows: (i) all cash payments received by the Agent at the Agent Account in New
York, New York, including, without limitation, payments made by wire transfer of
immediately available funds received by the Agent at or prior to 2:00 p.m. (New
York time) on any Business Day will be credited to the Agent Account as of the
date received, provided that Borrower shall have notified the Agent of its
intention to repay such amount on such day no later than 2:00 p.m. (New York
time); (ii) all cash payments received by the Agent at the Agent Account in New
York, New York, including, without limitation, payments made by wire transfer of
immediately available funds received by the Agent after 2:00 p.m. (New York
time) on any Business Day will be credited to the Agent Account as of the next
succeeding Business Day; and (iii) all payments in the form of checks and other
instruments received by the Agent at the Agent Account in New York, New York
will be credited to the Agent Account upon collection of immediately available
funds in connection therewith.
2.19. Agent's and Banks' Books and Records; Monthly Statements. The
--------------------------------------------------------
Borrower agrees that the Agent's books and records showing the Obligations and
the transactions pursuant to this Agreement and the other Loan Documents shall
be admissible in any action or proceeding arising therefrom, and shall consti
tute rebuttably presumptive proof thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument. The Agent
will provide to the Borrower a monthly statement of Loans, payments, and other
transactions pursuant to this Agreement. Such statement shall be deemed correct,
accurate, and binding on the Borrower and an account stated (except for
corrections of errors discovered by the Agent), unless the Borrower notifies the
Agent in writing to the contrary within thirty (30) days after such statement is
received. In the event a timely written notice of objections is given by the
Borrower, only the items to which exception is expressly made will be considered
to be disputed by the Borrower.
41
ARTICLE III
CONDITIONS PRECEDENT
3.1. Conditions Precedent to Effectiveness of Agreement, Making of Initial
Loan and Issuance of Letters of Credit on the Effective Date. The effectiveness
of this Agreement, the obligation of BABC to make its initial Loan on the
Effective Date, the obligation of BABC to cause to be issued any Letter of
Credit on the Effective Date and the obligation of the Banks to participate in
Letters of Credit issued on the Effective Date, are subject to satisfaction of
the conditions precedent that the Agent shall have received on the Effective
Date the following, each dated such day except as indicated below, in form and
substance satisfactory to BABC:
(a) A counterpart of this Agreement, together with all Schedules and
Exhibits hereto, executed by Borrower.
(b) A letter, dated the Effective Date, signed by each Loan Party, the
Agent and each Bank, acknowledging the date of the Effective Date.
(c) Certified copies of (i) the resolutions of the Board of Directors
of each Loan Party approving each Loan Document and each Related Document to
which it is a party and the consummation of the transactions contemplated
thereby, and (ii) all documents evidencing other necessary corporate action and
required governmental and third party approvals with respect to each Loan
Document and each Related Document.
(d) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying the names and true signatures of the Responsible Officers
of such Loan Party.
(e) A copy, certified as being complete and correct by a Responsible
Officer, of each Related Document and each document required to be delivered
thereunder or in connection therewith, including copies of all opinions of
counsel delivered thereunder. In the case of any opinions relating to any of the
Offering Documents, the New Common Stock, the Redemption, the Senior Notes and
the Senior Note Indenture, such opinions shall include written authorization
from such counsel stating that the Agent and the Banks may rely on such
counsel's opinion as though it were addressed to the Agent and the Banks.
(f) A copy of the articles or certificate of incorporation of each
Loan Party certified as of a recent date by the Secretary of State of the state
of incorporation of such Loan Party, together with (A) certificates of such
official attesting to the good standing of such Loan Party, (B) certificates or
telegrams (or telephonic confirmation in those jurisdictions where a telegram is
unavailable) from an official in each state in which such Loan
42
Party is qualified to do business, and (C) a copy of the bylaws of each Loan
Party, certified as of the Effective Date by the secretary or an assistant
secretary of such Loan Party.
(g) Evidence that the Receivables, Purchase and Service Agreement
among Citicorp Retail Services, Inc. ("CRS"), Holdings and Borrower dated May 7,
1993, as amended, has been terminated and is no longer in effect, that Holdings
and Borrower have no further liability thereunder, and that all Liens in favor
of CRS thereunder have been terminated.
(h) The Security Agreement, duly executed by Borrower and the Agent,
together with:
(i) evidence satisfactory to BABC that Financing Statements
(Forms UCC-1 and UCC-3) shall have been filed in all jurisdictions
as may be necessary or, in the opinion of the Agent, desirable to
perfect the Liens created by the Security Agreement; and
(ii) evidence of the insurance required by the terms of the
Security Agreement and Section 7.4 hereof.
(i) The Intellectual Property Security Agreement, duly executed by
Borrower.
(j) The audited financial statements of Holdings and its Consolidated
Subsidiaries as at February 3, 1996, certified by Ernst & Young LLP, required to
be furnished pursuant to Section 5.1(c) of the 1993 Amended Credit Agreement,
together with all other items and reports required to be furnished pursuant to
such section and a report, in reasonable detail, reconciling all differences
between such audited financial statements and the unaudited financial statements
of Holdings and its Consolidated Subsidiaries as at February 3, 1996, heretofore
furnished to BABC.
(k) A favorable opinion of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
special counsel to each Loan Party, in substantially the form of Exhibit I, and
as to such other matters as BABC may reasonably request.
(l) A letter agreement from Borrower and each of its Subsidiaries
providing such collection accounts and cash management system as shall be
satisfactory to the Agent.
(m) Copies of the articles or certificates of merger filed with
respect to the Maryland Merger, certified by the Secretary of State of the
States of Maryland and Delaware.
(n) A copy of the articles or certificate of merger filed with respect
to the Holdings Merger, certified by the Secretary of State of the State of
Delaware.
43
(o) Such other financial and other information regarding Borrower and
its Subsidiaries as any Bank may request.
(p) Evidence satisfactory to Agent that all Liens (other than Liens
permitted pursuant to Section 8.1(b)(ii) hereof) on property of Borrower for the
benefit of the holders of the Discount Notes and the 1993 Notes have been
terminated, together with copies of such termination statements, mortgage
satisfactions and other lien release documents as Agent may require.
(q) The Negative Pledge Agreement, duly executed by the Management
Shareholders.
(r) The Agent shall have received for the account of BABC a
certificate, signed by a Responsible Officer of Borrower, dated the date of such
Loan stating that the conditions specified in this Article 3 have been met.
(s) [Intentionally omitted.]
(t) [Intentionally omitted.]
(u) [Intentionally omitted.]
3.2. Additional Conditions Precedent to Effectiveness of Agreement, Making
of Initial Loan and Issuance of Letters of Credit on the Effective Date. The
effectiveness of this Agreement, the obligation of BABC to make its initial Loan
on the Effective Date, the obligation of BABC to cause to be issued any Letter
of Credit on the Effective Date and the obligation of the Banks to participate
in Letters of Credit issued on the Effective Date, are subject to the further
conditions precedent that:
(a) Each of the Related Documents shall be in form and substance
satisfactory to BABC.
(b) Borrower shall have established, and shall have caused each of its
Subsidiaries to establish, with the Agent such collection accounts as shall be
satisfactory to the Agent for the purpose of monitoring and managing the cash of
Borrower and its Subsidiaries.
(c) On the date of such Loan the following statements shall be true
and correct:
(i) No event has occurred and is continuing which constitutes a
1993 Amended Credit Agreement Default except the Permitted Exceptions;
(ii) The Holdings Merger shall have become effective and, as a
result thereof, all liabilities and indebtedness of Holdings Maryland,
Holdings Delaware and
44
▇▇▇▇▇▇▇▇'▇ to each other that existed prior to the Holdings Merger have
been extinguished;
(iii) All costs and accrued and unpaid fees and expenses
(including legal fees and expenses) referred to in Sections 2.4 and 11.4
to the extent then due and payable shall have been paid;
(iv) The dollar amount required to fund the Redemption does not
exceed $160,000,000 in the aggregate, consisting of not more than
$82,600,000, $56,250,000 and $21,150,000 to fund each of the Discount
Note Redemption, the 1993 Note Redemption and the Series A Preferred
Stock Redemption, respectively; deposit of such amounts into trust
accounts for the exclusive benefit of the holders of the Discount Notes
and the 1993 Notes will defease the obligations of the Borrower contained
in Article Eight and Sections 1007 through 1018 of the Discount Notes
Indenture and the obligations of the Borrower contained in Article Eight,
Sections 1007 through 1018 and Clauses (a) through (c) and (j) through
(m) of Section 501 of the 1993 Notes Indenture, and such amounts have
been deposited into such trust accounts for the exclusive benefit of the
holders of the Discount Notes and the 1993 Notes; and the Series A
Preferred Stock Redemption will render the shares of Series A Preferred
Stock to be no longer outstanding;
(v) all Liens for the benefit of the holders of the Discount Notes
and the 1993 Notes (other than the security interest in the trust funds
created for purposes of defeasing the Discount Notes and the 1993 Notes)
have been terminated;
(vi) The 1993 Amended Credit Agreement and all Loan Documents and
Related Documents (as such terms are defined in the 1993 Amended Credit
Agreement) shall not have been terminated and shall be in full force and
effect;
(vii) All necessary governmental and third party approvals in
connection with the financing provided hereunder, the Maryland Merger,
the Holdings Merger, the Offering and the Redemption have been obtained
and remain in effect, and all applicable waiting periods have expired
without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon, the
consummation of such financing, Holdings Merger, Offering and Redemption;
(viii) No judgment, order, injunction or other restraint
prohibiting or imposing materially adverse conditions upon the
consummation of the Maryland Merger, the Holdings Merger, the Offering,
the Redemption or the other transactions contemplated hereby exists;
45
(ix) Since February 3, 1996, there has not occurred any Material
Adverse Change, any development likely to have a Material Adverse Effect,
on the ability of Borrower, Holdings or any of their respective
Subsidiaries to perform their respective obligations, under the Loan
Documents or the Related Documents; there has not occurred any default or
an event which with the passage of time or the giving of notice would
constitute a default under any existing debt instrument of either of
Borrower or Holdings; there has been no commencement of or development in
litigation and there is no claim, action, suit, investigation or
proceeding (including shareholder or derivative litigation) pending or
threatened in any court or before any arbitrator or Governmental
Authority which has any reasonable likelihood of having a Material
Adverse Effect;
(x) The Offering shall have become effective; pursuant to the
Offering, Borrower shall have sold $100 million aggregate principal
amount of the Senior Notes for a net consideration consisting of cash in
an amount of not less than $95 million and shall have sold the New Common
Stock for a net consideration consisting of cash in an amount of not less
than $40 million; and all of such cash proceeds shall have been applied
to fund in part the Redemption; and
(xi) After giving effect to the transactions to be effected on the
Effective Date, including the Offering and the Redemption, the making of
the initial Loans and Letters of Credit hereunder and the payment or
accrual of all fees and expenses related to the foregoing, Borrower shall
have Availability hereunder of at least $10 million.
(d) Since February 3, 1996, there has occurred no material adverse
change in, and no development likely to have a material adverse effect on, the
markets for loan syndications generally or in capital markets generally or
otherwise, which would materially impair the syndication of or sale of interests
in the Loans by BABC.
(e) Since February 3, 1996, (i) there has occurred no material adverse
change or development likely to have a material adverse effect on the rights and
remedies of BABC or on the ability of Borrower to perform its obligations to
BABC, as determined by BABC, and (ii) BABC has not become aware of any
information or analysis which results in a material change in BABC's
understanding of Borrower and its Subsidiaries taken as a whole, or the proposed
transactions.
(f) BABC remains satisfied that the values of the assets, amount of
anticipated cash flow of Borrower, working capital requirements and total
liabilities including contingent liabilities, are not different in any material
and adverse respect from those determined by BABC from a review of the unaudited
46
financial statements of Holdings and its Consolidated Subsidiaries as at
February 3, 1996, heretofore furnished to BABC, including contingent liabilities
in respect of environmental matters and ERISA and benefit plans.
(g) BABC shall be satisfied with the procedures and arrangements for
defeasing the covenants in respect of the Discount Notes and the 1993 Notes and
that such covenants will be defeased in accordance with Section 402 of the
Discount Notes Indenture and Section 1203 of the 1993 Notes Indenture,
respectively, and will be redeemed in accordance with Article IX of the Discount
Notes Indenture and Article IX of the 1993 Notes Indenture, respectively, on or
before June 25, 1996.
(h) BABC shall be satisfied that all of the operations of Borrower and
its Subsidiaries comply in all material respects with all applicable trade
regulation, environmental, health and safety rules and regulations.
(i) BABC's review of and satisfaction with the final structure for and
the terms and conditions of, the documentation and the consummation of, and all
other matters relating to, the Maryland Merger, the Holdings Merger, the
Offering, the Redemption and the transactions to be effected in connection
therewith, including the aggregate principal amount of and terms and provisions
in respect of the Senior Notes, including the amortization, nature of covenants,
events of default, absence of security, and limitations on acceleration and
remedies, relating thereto, and any other financing obligations (absolute or
contingent) to be continued, incurred or guaranteed by Borrower and other
intercreditor arrangements, and the aggregate amount and timing of transaction
fees payable by or on behalf of Borrower.
(j) All other documentation entered into in connection with the ▇▇▇▇▇
and Merger, the Holdings Merger, the Offering, the Redemption and the
transactions to be effected in connection therewith shall be in form and
substance reasonably satisfactory to BABC and all conditions precedent
thereunder shall have been satisfied (except to the extent such conditions have
been waived with the prior consent of the Majority Banks).
(k) all Schedules referred to in this Agreement shall be delivered to
the Agent prior to the Effective Date, and such Schedules shall be in all
respects in form and substance satisfactory to the Agent.
(l) the form of all Exhibits referred to in this Agreement shall be
mutually agreed upon by Agent and Borrower prior to the Effective Date.
3.3. Conditions Precedent to Each Borrowing. The obligation of each Bank to
--------------------------------------
make any Loan (including BABC's initial Loan on the
47
Effective Date) shall be subject to the further conditions precedent that:
(a) The following statements shall be true and correct on the date of
such Loan, before and after giving effect thereto and to the application of the
proceeds from the Loans being made on such date:
(i) The representations and warranties contained in Article IV and
in each of the Collateral Documents are true and correct in all material
respects on and as of such date as though made on and as of such date;
(ii) No event has occurred and is continuing, or would result from
the Loans being made on such date, which constitutes a Default or an
Event of Default; and
(iii) The outstanding principal amount of the Revolving Credit
Loans (including the proposed Loan), together with the aggregate amount
of all outstanding Letters of Credit and unpaid Obligations does not
exceed either (i) the aggregate Revolving Credit Loan Commitments, or
(ii) the Borrowing Base.
(b) Each request for a Revolving Credit Loan shall be deemed to be an
affirmation that the statements in Section 3.3(a) hereof are true as of the date
of such request. The Agent shall have received for the account of each Bank a
certificate, signed by a Responsible Officer of Borrower, dated the date of such
Loan, stating that the conditions specified in Section 3.3(a) above have been
met.
(c) BABC shall have received a Notice of Borrowing in accordance with
Section 2.3 hereof;
(d) The Agent shall have received such other approvals, opinions or
documents as any Bank through the Agent may reasonably request upon reasonable
notice.
3.4. Conditions Precedent to the Issuance of the Letters of Credit. The
-------------------------------------------------------------
obligation of BABC to issue any Letters of Credit shall be subject to the
fulfillment (to the satisfaction of BABC) of the following conditions precedent:
(a) BABC shall have received a Letter of Credit Request in accordance
with Section 2.2 hereof;
(b) The following statements shall be true and correct on the date
such Letter of Credit is issued, before and after the issuance of such Letter of
Credit:
(i) The representations and warranties contained in Article IV and
in each of the Collateral
48
Documents are true and correct in all material respects on and as of such
date as though made on and as of such date; and
(ii) No event has occurred and is continuing, or would result from
the Letters of Credit being issued on such date, which constitutes a
Default or an Event of Default; and
(iii) The amount of such Letter of Credit, together with the
outstanding principal amount of the Revolving Credit Loans and the
aggregate amount of all other outstanding Letters of Credit and unpaid
Obligations, does not exceed either (i) the aggregate Revolving Credit
Loan Commitments, or (ii) the Borrowing Base.
(c) Each request for a Letter of Credit shall be deemed to be an
affirmation that the statements in Section 3.4(b) are true and correct as of the
date of such request. The Agent shall have received for the account of BABC a
certificate, signed by a Responsible Officer of Borrower, dated the date of the
issuance of such Letter of Credit, stating that the conditions specified in
Section 3.4(b) above have been met.
(d) The Agent shall have received such other approvals, opinions or
documents as BABC through the Agent may reasonably request upon reasonable
notice.
(e) All legal matters incident to such Letter of Credit shall be
satisfactory to counsel to BABC.
(f) As of the date of issuance, no order of any court, arbitrator or
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
the proposed issuer of such Letter of Credit refrain from, the issuance of
letters of credit generally or the issuance of such Letters of Credit.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks and the Agent to enter into this
Agreement and the Banks to make the Loans, Borrower represents and warrants to
the Banks and the Agent as follows:
4.1. Corporate Existence; Compliance with Law. Each Loan Party (i) is a
----------------------------------------
corporation duly organized, validly existing and in
49
good standing under the laws of the jurisdiction of its incorporation; (ii) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction in which the failure so to qualify could have a Material
Adverse Effect; (iii) has all requisite corporate power and authority and the
legal right to own, pledge, mortgage and operate its properties, to lease the
property it operates under lease, and to conduct its business as now or
currently proposed to be conducted; (iv) has all necessary licenses, permits,
consents and approvals from or by, has made all necessary filings with, and has
given all necessary notices to, all Governmental Authorities having jurisdiction
to the extent required for such ownership, operation and conduct, except where
the absence of the foregoing in this clause (iv) does not, in the aggregate,
have a Material Adverse Effect; (v) is in compliance with its certificate of
incorporation and bylaws; and (vi) is in compliance with all applicable
Requirements of Law except such non-compliance as would not, in the aggregate,
have a Material Adverse Effect.
4.2. Corporate Power; Authorization. The execution, delivery and
------------------------------
performance by each Loan Party of the Loan Documents and the Related Documents,
if any, to which it is a party, the incurrance of the Obligations and the
granting to the Agent of Liens upon and security interests in the Collateral,
and the consummation of the Maryland Merger, the Holdings Merger, the Offering,
the Redemption and the transactions to be effected on the Effective Date:
(a) are within such Loan Party's respective corporate powers;
(b) have been duly authorized by all necessary corporate action,
including the consent of shareholders where required;
(c) do not:
(i) contravene any Loan Party's charter or bylaws;
(ii) violate any Requirement of Law (including Regulation G, T, U
or X of the Federal Reserve Board);
(iii) conflict with or result in the breach of, or constitute a
default under, any Contractual Obligation binding on or affecting any
Loan Party, except for the Permitted Exceptions and such other conflicts,
breaches and defaults which could not, in the aggregate, have a Material
Adverse Effect;
(iv) result in the creation or imposition of any Lien upon any of
the property of any Loan Party, other than those in favor of the Agent
for the ratable benefit of the Agent and the Banks and, prior to the
completion of the 1993
50
Note Redemption and the Discount Note Redemption, with respect to certain
assets of Borrower for the ratable benefit of the holders of the 1993
Notes and the Discount Notes pursuant to subsection 1203(a) of the 1993
Notes Indenture and subsection 404(1) of the Discount Notes Indenture; or
(v) other than the consents referred to in Section 7.19, require
the consent, authorization by or approval of or notice to or filing or
registration with any Governmental Authority or other Person other than
those which have been obtained or which are not yet required to be
obtained or with respect to which extensions have been granted and, with
respect to those required to be obtained as of the Effective Date, copies
of which or the extensions granted with respect thereto have been
delivered pursuant to Section 3.1 to the Agent, each of which is in full
force and effect and none of which imposes materially adverse conditions
upon the Maryland Merger, the Holdings Merger, the Offering, the
Redemption or the transactions to be effected on the Effective Date.
4.3. Enforceable Obligations. This Agreement has been duly executed and
-----------------------
delivered by Borrower. On and after the Effective Date, this Agreement is, and
the other Loan Documents to which any Loan Party is or will be a party when
delivered hereunder will be, legal, valid and binding obligations of such Loan
Party, enforceable against such Loan Party in accordance with their respective
terms.
4.4. Taxes.
-----
(a) All federal, state and local tax returns, reports and statements
required to be filed by any Loan Party (and each Affiliate with which either of
Holdings or Borrower files or have filed consolidated, combined or unitary
returns) have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to be
filed, and all taxes and other impositions due and payable have been timely paid
prior to the date on which any fine, penalty, interest or late charge may be
added thereto for non-payment thereof, except where contested in good faith, by
appropriate proceedings, if adequate reserves therefor have been established on
the books of such Loan Party (and each Affiliate with which either of Holdings
or Borrower files or has filed consolidated, combined, or unitary returns) in
accordance with GAAP and where such non-payment in the aggregate would not have
a Material Adverse Effect. Each Loan Party has complied with all applicable
laws, rules and regulations relating to the withholding and payment of taxes and
has timely withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid over for all prior
periods and current periods to the extent due under all applicable laws except
where such nonpayment in the aggregate would not have a Material Adverse Effect.
No issue has
51
been raised in any such examination of Holdings' or Borrower's federal income
tax returns that, by application of similar principles, reasonably may be
expected to result in assertion of a material deficiency for any other taxable
year not so examined that has not been accrued on Borrower's audited financial
statements for its Fiscal Year ended February 3, 1996, that would be required to
be so accrued in accordance with GAAP.
(b) No property owned by any Loan Party is property which such Loan
Party is or will be required to treat as being owned by another Person pursuant
to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986 or is "tax-exempt use property" within the meaning of Section 168(h)(1)
of the Code. No Loan Party has filed a consent pursuant to Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
subsection (f) assets (as such term is defined in Section 341(f)(4) of the Code)
owned by any Loan Party. Except as listed on Schedule 4.4 hereto, no Loan Party
has agreed to or, is required to make any adjustment pursuant to Section 481(a)
of the Code by reason of a change in accounting method initiated by such Loan
Party and no Loan Party has any knowledge that the IRS has proposed any such
adjustment or change in accounting method.
4.5. Full Disclosure; Offering Documents. On the Effective Date and as of
-----------------------------------
the date furnished, the representations and warranties of each Loan Party in the
Loan Documents, and all certificates, documents and other information furnished
by or on behalf of any Loan Party to the Agent, its counsel or any Bank relating
to the financial condition, operations, business, properties or prospects of
Borrower or any of its respective Subsidiaries, are true and correct in all
material respects, and no such representations, warranties, certificates,
documents or other information contains any untrue statement of a material fact
or omits to state any material fact necessary to make the statements contained
herein or therein not misleading. On the date of this Agreement and as of the
date furnished, all assumptions made in connection with the projected financial
statements, forecasts or projections furnished to the Agent or any Bank are
reasonable under the circumstances and all such projected financial statements,
forecasts or projections are reasonably based on such information and
assumptions and on management's reasonable estimates as to the future
performance of Borrower and its Subsidiaries. On the Effective Date, the Related
Documents comply in all material respects with all applicable Requirements of
Law (including the Exchange Act) and do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading. There is no fact known to Borrower which it
has not disclosed to the Banks which would be reasonably likely to have a
Material Adverse Effect.
52
4.6. Financial Matters.
-----------------
(a) The consolidated balance sheets of Holdings and its Consolidated
Subsidiaries, as at January 28, 1995, April 30, 1995, July 31, 1995, October 31,
1995 and February 3, 1996, and the related statements of income, retained
earnings and changes in the financial position for the fiscal year or fiscal
quarter (as the case may be) then ended, certified (in the case of the January
28, 1995 and February 3, 1996 balance sheets and related statements) by Ernst &
Young LLP, copies of which have been furnished to each Bank, fairly present the
consolidated financial condition of Holdings and its Consolidated Subsidiaries
as at such dates and the consolidated results of the operations of Holdings,
Borrower and their Consolidated Subsidiaries for the periods ended on such
dates. The financial statements referred to in the preceding sentence are in
accordance with GAAP consistently applied.
(b) Since February 3, 1996, there has been no Material Adverse Change
or Effect and no development likely to have a Material Adverse Effect.
(c) Neither of Holdings or Borrower nor any of their Subsidiaries had
at February 3, 1996, any unrealized or anticipated loss, liability or obligation
(whether contingent, matured or otherwise), including liabilities for taxes or
Environmental Liabilities or Costs, loss contingency (as that term is defined in
Statement of Financial Accounting Standard No. 5), long-term lease or unusual
forward or long-term commitment which is not reflected in the audited balance
sheets referred to in subsection (a) above or in the notes thereto and which
would have a Material Adverse Effect.
(d) The Discount Notes, the 1993 Notes and the Series A Preferred
Stock have been redeemed in full pursuant to the Redemption, or adequate
provision for such redemption satisfactory to BABC has been made; and all Liens
securing the 1993 Notes have been released or provision for release of such
Liens satisfactory to BABC has been made.
4.7. Litigation. On the Effective Date, except as set forth on Schedule 4.7
----------
hereto, there are no pending or threatened actions or proceedings affecting any
Loan Party or any of their respective Subsidiaries before any court,
governmental agency or arbitrator in which there is a reasonable possibility of
an adverse determination that would have a Material Adverse Effect. Neither the
consummation of the Maryland Merger, the Holdings Merger, the Offering, the
Redemption and the transactions to be effected on the Effective Date nor the
performance by any Loan Party of any of the Loan Documents or Related Documents
to which it is a party is restrained or enjoined (either temporarily,
preliminarily or permanently) and no material adverse conditions have been
imposed upon any of the foregoing transactions.
53
4.8. Capitalization of Borrower; Ownership of Subsidiaries; No Other
---------------------------------------------------------------
Ventures.
--------
(a) On the Effective Date, the authorized capital stock of the
Borrower consists of 25,000,000 shares of Common Stock, par value $.01 per
share, 469,237 shares of Class B Common Stock, par value $.01 per share, and
41,500,000 shares of preferred stock, par value $.01 per share, of which
8,297,420 shares, 469,237 shares and 37,405,739 shares, respectively, are issued
and outstanding and owned of record as set forth on Schedule 4.8 hereto. Except
as set forth on Schedule 4.8 hereto, no authorized but unissued and no treasury
shares of capital stock of Borrower are subject to any option, warrant, right of
conversion or purchase or any similar right.
(b) Set forth on Schedule 4.8 hereto is a complete and accurate list
of all Subsidiaries of Borrower, showing as of the Effective Date (as to each
such Subsidiary,) the jurisdiction of its incorporation, the number of shares of
each class of capital stock authorized, the number outstanding, the percentage
of the outstanding shares of each such class owned (directly or indirectly) by
such Person and the identity of the holders of each such outstanding class of
capital stock. None of the shares listed on Schedule 4.8 hereto is covered by
any outstanding option, warrant, right of conversion or purchase or any similar
right, except as set forth on Schedule 4.8 hereto. All of the outstanding
capital stock of all such Subsidiaries has been validly issued, is fully paid
and non-assessable and is owned by Borrower (except as otherwise set forth on
Schedule 4.8 hereto), free and clear of all Liens. Neither Borrower nor any such
Subsidiary is a party to, or has knowledge of, any agreement restricting the
pledge, transfer or hypothecation (or realization of the security intended
thereby) of any shares of any such Subsidiary's capital stock other than the
Loan Documents. Except as set forth on Schedule 4.8 hereto, Borrower does not
own or hold, directly or indirectly, any capital stock or equity security of, or
any equity interest in, any Person other than such Subsidiaries.
(c) Except as set forth on Schedule 4.8 hereto, no Loan Party is
engaged in any joint venture or partnership with any other Person.
(d) Prior to the Maryland Merger, Holdings Maryland conducted no
business, had no material assets and had no material liabilities.
(e) The Maryland Merger and the Holdings Merger have each become
effective in compliance with all applicable Requirements of Law.
(f) At all times since February 3, 1996, ▇▇▇▇ Lo conducted no
business, had no material assets and had no material liabilities.
54
4.9. ERISA. Each Plan is listed on Schedule 4.9 hereto. Each Plan, other
-----
than a Multiemployer Plan, is in compliance in all material respects with the
applicable provisions of ERISA, the Code and any other applicable federal or
state law and rules and regulations promulgated thereunder. With respect to each
Plan (other than a Multiemployer Plan), all reports required under ERISA or any
other applicable law or regulation to be filed with the relevant Governmental
Authority, the failure of which to file could reasonably result in liability of
Borrower or any member of its Controlled Group, in excess of $500,000 have been
duly filed and all such reports are true and correct in all material respects as
of the date given. No Plan has been terminated (other than any Plan as to which
all liabilities have been fully paid or provided for solely from such terminated
Plan's assets without the requirement of any further contributions by Borrower
or any member of its Controlled Group after the original date of the notice of
intent to terminate given to either the Plan's participants or the PBGC) nor has
any accumulated funding deficiency (as defined in Section 412 of the Code or
Section 302 of ERISA) been incurred (without regard to any waiver granted under
Section 412 of the Code or Section 302 of ERISA) nor has any funding waiver from
the IRS been received or requested. Neither Borrower nor Holdings nor any member
of their Controlled Group has failed to make any contribution or pay any amount
due and owing to any Plan as required by Section 412 of the Code or Section 302
of ERISA or the terms of any such Plan prior to the due date under Section 412
of the Code and Section 302 of ERISA. Except as disclosed on Schedule 4.9
hereto, there has been no ERISA Event or any event requiring disclosure under
Section 4041(c)(3)(C), 4063(a) or 4043(c) of ERISA, and the applicable
regulations promulgated thereunder, with respect to any Plan, other than a
Multiemployer Plan as to which neither Borrower nor any member of its Controlled
Group could have any material liability. The present value of the benefit
liabilities, as defined in Title IV of ERISA, of each Plan (other than a
Multiemployer Plan) does not exceed the value of the assets of each such Plan as
of the most recent valuation date using Plan actuarial assumptions at such date
by more than $2,500,000. If the Borrower and each member of its Controlled Group
were to effect a complete withdrawal from each Multiemployer Plan on the
Effective Date, the aggregate withdrawal liability would not exceed $500,000.
There are no pending or, to the knowledge of Borrower, threatened material
claims, lawsuits or actions (other than routine claims for benefits in the
ordinary course) asserted or instituted against and neither Borrower nor any of
its Subsidiaries has knowledge of any threatened material litigation or claims
against (i) the assets of any Plan or its related trust or, to the knowledge of
the Borrower, against any fiduciary of any Plan with respect to the operation of
such Plan or (ii) the assets of any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA or, to the knowledge of the Borrower, against
any fiduciary thereof with respect to the operation of any such plan. Neither
Borrower nor any of its Subsidiaries has engaged in any prohibited transaction,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, which
55
would be reasonably likely to result in material liability to such Person.
Neither Borrower nor any member of its Controlled Group (i) has incurred or
reasonably expects to incur (a) any material liability under Title IV of ERISA
(other than premiums due under Section 4007 of ERISA to the PBGC) or (b) except
as disclosed on Schedule 4.9 hereto, any withdrawal liability (and no event has
occurred which with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 of ERISA as a result of a complete
or partial withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from
a Multiemployer Plan or (c) any liability under Section 4062 of ERISA to the
PBGC or to a trustee appointed under Section 4042 of ERISA, or (ii) except as
disclosed on Schedule 4.9 hereto, has withdrawn from any Multiemployer Plan.
Except as listed on Schedule 4.9 hereto, neither Borrower nor Holdings nor any
member of their Controlled Group nor any organization to which any of them is a
successor or parent corporation within the meaning of ERISA Section 4069(b) has
engaged in a transaction within the meaning of ERISA Section 4069. Except as
described on Schedule 4.9 hereto, neither Borrower, nor Holdings nor any of
their Subsidiaries maintains or has established any welfare benefit plan within
the meaning of Section 3(1) of ERISA which provides for continuing benefits or
coverage for any participant or any beneficiary of any participant after such
participant's termination of employment, except pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the
regulations thereunder, and except as may be provided at the expense of the
participant or the beneficiary of the participant. Borrower, Holdings and each
member of their Controlled Group which maintains a welfare benefit plan within
the meaning of Section 3(1) of ERISA has complied in all material respects with
any applicable notice and continuation requirements of COBRA and the regulations
thereunder.
4.10. Liens. There are no Liens of any nature whatsoever on any properties
-----
of Borrower or any of its Subsidiaries other than those permitted by Section
8.1. Except as disclosed on Schedule 8.1(i), the Liens granted by each Loan
Party to the Agent for the benefit of the Agent and the Banks pursuant to any
Loan Document to which it is a party are perfected first priority Liens in and
to the Collateral described therein.
4.11. Related Documents. None of the Related Documents has been amended or
-----------------
modified in any respect and no provision therein has been waived and each of the
representations and warranties therein of any Loan Party and, to the best
knowledge of Borrower and Holdings, each other party thereto are true and
correct in all material respects.
4.12. No Burdensome Restrictions; No Defaults.
---------------------------------------
(a) No Loan Party is (i) a party to any lease, contract, indenture
(other than the Senior Note Indenture), loan or credit agreement or other
agreement or instrument the performance
56
of which by such Loan Party could have a Material Adverse Effect or which
(except, prior to the completion of the 1993 Note Redemption and the Discount
Note Redemption, the 1993 Notes Indenture and the Discount Notes Indenture,
respectively), either unconditionally or upon the happening of an event, will
result in the creation of a Lien on the property or assets of such Loan Party or
(ii) subject to any charter or corporate restriction which could have a Material
Adverse Effect.
(b) No Loan Party is in violation of any provision of any Requirement
of Law except where such violations would not, in the aggregate, result in a
Material Adverse Effect.
(c) Except for the Permitted Exceptions, no Loan Party or, to the best
of Borrower's knowledge, any other party is in default under or with respect to
any lease, contract, indenture, loan or credit agreement, or any other agreement
or instrument to which any Loan Party is a party and which is material to the
business, prospects, operations or financial condition of Borrower and its
Subsidiaries considered as one enterprise.
(d) No Default or Event of Default has occurred and is continuing.
4.13. Investment Company Act. Borrower is not an "investment company" or
----------------------
(except with respect to Sefinco, Ltd., ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇
Capital Management, Incorporated and ▇▇▇▇▇▇ Funds and any of their Affiliates
other than Borrower and its Subsidiaries) an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended. The making
of the Loans by the Banks, the application of the proceeds and repayment thereof
by Borrower and Holdings and the consummation of the transactions contemplated
by the Loan Documents will not violate any provision of such Act or any rule,
regulation or order issued by the Commission thereunder. Borrower has not
engaged in any transaction or series of transactions with any of the affiliated
investment companies referred to above or any of their Affiliates other than
Borrower and its Subsidiaries which violates or will violate the Investment
Company Act of 1940, as amended, including, without limitation, the execution,
delivery and performance of this Agreement and the Loan Documents and the
consummation of the transactions contemplated thereby.
4.14. Margin Regulations. Neither Borrower nor Holdings nor any of their
------------------
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock. No proceeds of any Loan will be used to
purchase or carry any Margin Stock.
57
4.15. Use of Proceeds.
---------------
(a) [Intentionally omitted.]
(b) The proceeds of the Revolving Credit Loans shall be used by
Borrower solely for the purpose of (i) financing its working capital
requirements, (ii) paying Obligations, (iii) providing for general corporate
purposes and (iv) financing, in part, the Redemption.
(c) The Letters of Credit shall be requested by Borrower only for
general corporate purposes of Borrower.
4.16. Title and Condition of Assets; Inventory.
----------------------------------------
(a) Borrower and each of its Subsidiaries have title to all of the
assets and property interests material to the conduct of their business and
purported to be owned by them, including those reflected in the balance sheets
referred to in Section 4.6, except for such property as has been disposed of in
the ordinary course of business, or pursuant to the terms of this Agreement, or
with the consent of the Majority Banks, since the respective dates of such
balance sheets. There has been no casualty, condemnation or threat of
condemnation or adverse claim affecting Borrower's or its Subsidiaries' title to
or use of such assets or property interests which is not adequately covered by
insurance. All real property owned by Borrower and its Consolidated Subsidiaries
has an aggregate fair market value of less than $2,000,000.
(b) all of the Inventory owned by Borrower is and will be held for
sale or lease, or to be furnished in connection with the rendition of services,
in the ordinary course of its business, and (except for de minimis amounts of
Inventory in accordance with past practices of Borrower) is and will be fit for
such purposes. Borrower will keep its Inventory in good and marketable
condition, at its own expense, except for de minimis amounts of Inventory in
accordance with past practices of Borrower. It will not, without the prior
written consent of the Agent, acquire or accept any Inventory on consignment or
approval. It will conduct a physical count of the Inventory at least once per
Fiscal Year, and after and during the continuation of an Event of Default, at
such other times as the Agent requests. Borrower will maintain a perpetual
inventory reporting system at all times. It will not, without the Agent's
written consent, sell any Inventory on a ▇▇▇▇-and-hold, guaranteed sale, sale
and return, sale on approval, consignment, or other repurchase or return basis.
4.17. Insurance. All policies of insurance in effect of any kind or nature
---------
owned by or issued to Borrower or any of its Subsidiaries, including 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
58
and effect and are of a nature and provide such coverage as is customarily
carried by companies of the size and character of Borrower and its Subsidiaries.
4.18. Labor Matters. There are no strikes or other labor disputes or
-------------
grievances pending or, to the knowledge of Borrower, threatened against Borrower
or any of its Subsidiaries which could have a Material Adverse Effect. There are
no unfair labor practice charges or grievances pending or in process or, to the
knowledge of Borrower, threatened by or on behalf of any employee or group of
employees of Borrower or its Subsidiaries which could have a Material Adverse
Effect. All payments due from Borrower or its Subsidiaries pursuant to the
provisions of any collective bargaining agreement have been paid or accrued as a
liability on either of their books.
4.19. Certain Debt. Schedule 4.19 hereto specifies all Indebtedness of
------------
Borrower and its Subsidiaries which is (a) for borrowed money, or (b) not
incurred in the ordinary course of the business of such Person in a manner and
to the extent consistent with past practice, or (c) material to the financial
condition, properties, business, operations or prospects of Borrower or any of
its Subsidiaries (or will be material to the financial condition, properties,
business, operations or prospects of Borrower or any of its Subsidiaries).
4.20. Leases. All real property leased by Borrower or any of its
------
Subsidiaries is listed on Schedule 4.20 hereto (individually a "Lease" and
collectively the "Leases"). Borrower has delivered to the Agent a true and
correct copy of the Leases that are marked on Schedule 4.20 hereto to indicate
they were so delivered and have granted the Agent access to all other Leases.
Each Lease is valid and enforceable against the other parties thereto in
accordance with its terms and is in full force and effect, except for such
invalidity or unenforceability as would not, in the aggregate, have a Material
Adverse Effect. Neither Borrower nor any Subsidiary nor, to the best of
Borrower's knowledge, any other party to any Lease is in default of its
obligations thereunder or has delivered or received any notice of default under
any Lease, nor has any event occurred which, with the giving of notice, the
passage of time or both, would constitute a default under any such lease, except
for defaults or events identified on Schedule 4.20 or defaults which would not
in the aggregate have a Material Adverse Effect.
4.21. Solvency. Borrower is Solvent and will be Solvent after giving effect
--------
to the Maryland Merger, the Holdings Merger, the Offering, the Redemption and
the other transactions contemplated by this Agreement and the Related Documents,
including the payment of related fees and expenses.
4.22. Intellectual Property. Borrower and/or its Subsidiaries own, are
---------------------
licensed to use, or otherwise have the right
59
to use all Intellectual Property that is necessary for the operation of
Borrower's business, without infringement of or conflict with the rights of any
other Person. Such Intellectual Property, together with the name of the owner
of, the date and jurisdiction of registration of and the registration number of
such Intellectual Property is accurately and as to rights granted under federal
law completely listed on Schedule 4.22 hereto. No slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by Borrower or any of its
Subsidiaries which is material to its business infringes upon or conflicts with
any rights owned by any other Person; no claim or litigation regarding any of
the foregoing is pending or threatened which has any reasonable likelihood of
having a Material Adverse Effect; no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is pending or,
to the knowledge of Borrower, proposed which, in the aggregate, would be
reasonably likely to have a Material Adverse Effect.
4.23. Environmental Matters. Except as disclosed on Schedule 4.23 hereto:
---------------------
(a) The operations of Borrower and its Subsidiaries comply in all
material respects with all applicable requirements of Law concerning
environmental health and safety matters;
(b) Borrower and its Subsidiaries have obtained all environmental,
health and safety Permits necessary for their operations, and all such Permits
are in good standing and Borrower and its Subsidiaries are in compliance with
all terms and conditions of such Permits;
(c) Neither Borrower nor any of its Subsidiaries nor any of their
respective present or past property or operations is subject to any outstanding
written order from or agreement with any Governmental Authority or other Person
or is subject to any judicial or administrative proceeding respecting (i)
environmental, health or safety Requirements of Law, (ii) Remedial Action or
(iii) Environmental Liabilities and Costs, arising from a Release or threatened
Release, which has any reasonable likelihood of having a Material Adverse
Effect;
(d) Neither Borrower nor any of its Subsidiaries has been notified
that any of its present or past operations is the subject of any investigation
by any Governmental Authority evaluating whether any Remedial Action is needed
at any facility of Borrower or any of its Subsidiaries, which could reasonably
be expected to have a Material Adverse Effect;
(e) Neither Borrower, Holdings, nor any of their Subsidiaries has
engaged in the past or present treatment, storage or disposal (on properties
owned, leased or operated by such Person or elsewhere) of a hazardous waste, as
said terms are defined under
60
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, or any state
equivalent;
(f) Neither Borrower, Holdings, nor any of their Subsidiaries has
filed any notice under any applicable Requirement of Law reporting a Release,
which has any reasonable likelihood of having a Material Adverse Effect;
(g) There is not now on or in the property owned, leased or operated
by Borrower, Holdings, or any of their Subsidiaries:
(i) any underground storage tanks or surface impediments,
(ii) any asbestos-containing material, or
(iii) any polychlorinated biphenyls (PCB's) used in electrical or
other equipment;
which has any reasonable likelihood of having a Material Adverse Effect.
(h) There have been no communications or agreements involving
Borrower, Holdings, or any of their Subsidiaries from or with any Governmental
Authority relating to any Environmental Liabilities and Costs that have, or can
reasonably be expected to have, a Material Adverse Effect;
(i) Neither Borrower, Holdings, nor any of their Subsidiaries has
received any notice or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release which has any reasonable
likelihood of having a Material Adverse Effect;
(j) Neither Borrower, Holdings, nor any of their Subsidiaries has
knowledge of any material contingent liability in connection with any Release or
threatened Release; and
(k) No Environmental Lien has attached to any property of Borrower,
Holdings, or any of their Subsidiaries which has any reasonable likelihood of
having a Material Adverse Effect.
4.24. Certain Obligations. Upon deposit of the trust funds into the trusts
-------------------
for redemption under the Discount Notes Indenture and the 1993 Notes Indenture,
the obligations of Borrower under the Discount Notes, the Discount Notes
Indenture, the 1993 Notes and the 1993 Notes Indenture will cease to be
outstanding Indebtedness of Borrower for financial accounting purposes, and the
deposit of such funds into such trusts will be considered an extinguishment of
such Indebtedness for financial accounting purposes.
61
4.25. Note Covenant Defeasance.
------------------------
(a) All conditions set forth in Section 1203 of the 1993 Notes
Indenture have been satisfied in full and, as a result thereof, the "covenant
defeasance" (as defined in the 1993 Notes Indenture) has occurred; and
(b) all conditions set forth in Section 404 of the Discount Notes
Indenture have been satisfied in full and, as a result thereof, the "covenant
defeasance" (as defined in Section 403 of the Discount Notes Indenture) has
occurred.
ARTICLE V
REPORTING COVENANTS
As long as any Obligations shall remain unpaid or any Bank shall have
any Commitment, Borrower shall, unless the Majority Banks shall otherwise
consent in writing:
5.1. Financial Statements. Furnish, or cause to be furnished, to the Banks:
--------------------
(a) as soon as available, and in any event within
30 days after the end of each fiscal month, the results of any physical count of
Borrower's Inventory conducted during such fiscal month (provided, however, that
-----------------
at least two such counts will be conducted in each Fiscal Year), a consolidated
balance sheet of Borrower and its Consolidated Subsidiaries as of the end of
such fiscal month, together with a comparison of such balance sheet with the
consolidated balance sheet as of the end of the same fiscal month in the
immediately preceding Fiscal Year and with management's projected financial
information as of the end of such fiscal month, and related consolidated
statements of income and cash flow for such fiscal month and the period
commencing at the end of the previous Fiscal Year and ending with the end of
such fiscal month, together with a comparison of such income and cash flow
statements with income and cash flow statements as of the end of the same fiscal
month and period in the previous Fiscal Year and with management's projected
financial information for such fiscal month and period, and together with a
schedule detailing all amounts treated as an expense for depreciation for such
fiscal month, all amounts treated as an expense for the amortization of
transaction costs or intangibles of any kind for such fiscal month and the
Capital Expenditures of Borrower and its Consolidated Subsidiaries for such
fiscal month, in each case certified by the chief financial or accounting
officer of Borrower and in form acceptable to the Majority Banks, and
accompanied by a certificate of a Responsible Officer of Borrower stating that
no Default or Event of Default has occurred and is continuing or if a Default or
an Event of Default has occurred and is continuing, a statement as
62
to the nature thereof and the action which Borrower proposes to take with
respect thereto;
(b) as soon as available, and in any event within 45 days after the
end of each Fiscal Quarter, a consolidated balance sheet of Borrower and its
Consolidated Subsidiaries, each as of the end of such Fiscal Quarter, together
with a comparison of such balance sheet with a consolidated balance sheet as of
the end of the same Fiscal Quarter in the immediately preceding Fiscal Year and
with management's projected financial information as of the end of such Fiscal
Quarter, and the related statements of income and cash flow for such Fiscal
Quarter and for the period commencing at the end of the previous Fiscal Year and
ending with such Fiscal Quarter, together with a comparison of such statements
with statements as of the end of the same Fiscal Quarter and period in the
immediately preceding Fiscal Year and with management's projected financial
information for such Fiscal Quarter and period, and financial information on a
store by store basis showing actual sales, gross margins and operating income
compared to management's projections for such Fiscal Quarter and the comparable
financial information as of the end of the Fiscal Quarter in the immediately
preceding Fiscal Year, certified by the chief financial or accounting officer of
Borrower and in form acceptable to the Majority Banks, together with (i) a
certificate of a Responsible Officer of Borrower and Borrower stating that no
Default or Event of Default has occurred and is continuing or Default or if a
Default or an Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action which Borrower proposes to take with respect
thereto, and (ii) a schedule certified by such officer of Borrower in form
satisfactory to the Agent of computations used by such officer in determining
compliance with the covenants contained in Article VI and VIII and reconciling
computations with such financial statements;
(c) as soon as available, and in any event within 90 days after the
end of each Fiscal Year, a consolidated balance sheet of Borrower and its
Consolidated Subsidiaries, as of the end of such Fiscal Year, certified by Ernst
& Young LLP or other independent public accountants acceptable to the Majority
Banks, together with (A) a certificate of such accounting firm stating that in
the course of the regular audit of the business of Borrower and its Consolidated
Subsidiaries, which audit was conducted by such accounting firm in accordance
with generally accepted auditing standards, such accounting firm obtained no
knowledge that a Default or Event of Default has occurred and is continuing or
if, in the opinion of such accounting firm, a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof, (B) a
comparison of such balance sheet with the consolidated balance sheet for the
previous Fiscal Year and with management's projected financial information for
such Fiscal Year, (C) the related statements of income and cash flow for such
year, together with a comparison of such events with financial statements for
the previous Fiscal Year and with management's projected
63
financial information for such Fiscal Year, (D) a schedule certified by the
chief financial or accounting officer of Borrower in form satisfactory to the
Agent of the computations used by such accountants in determining, as of the end
of such Fiscal Year, compliance with the covenants contained in Articles VI and
VIII and reconciling such computations with such financial statements, (E) a
written discussion and analysis by the management of Borrower of the financial
statements furnished in respect of such Fiscal Year and (F) financial
information on a store by store basis showing actual sales, gross margins and
operating income and detailing capitalized expenses and their start-up costs
with respect to any stores opened during such Fiscal Year;
(d) as soon as available, and in any event at least 90 days prior to
the end of each Fiscal Year, annual financial projections (including a
forecasted income statement, cash flow statement and a consolidated balance
sheet of Borrower and its Consolidated Subsidiaries) for the next Fiscal Year
and annual financial projections, including consolidated balance sheets and
statements of income and cash flow (by fiscal month) for the next Fiscal Year,
in each case in form satisfactory to the Agent;
(e) promptly after the same are received by Borrower, any management
letters provided to such Person by its independent certified public accountants;
(f) within 30 days after the end of each fiscal month, a report of
Borrower's and its Consolidated Subsidiaries' accounts payable aging, in form
satisfactory to Agent;
(g) within 30 days after the end of each fiscal month, a report, in
form satisfactory to Agent, breaking down Inventory by department and category;
(h) within 30 days after the end of each Fiscal Quarter, a report, in
form satisfactory to Agent, (i) of operating profit by store location for such
Fiscal Quarter, and (ii) of Inventory by store location showing the amount of
Inventory as of the close of business at the end of such Fiscal Quarter; and
(i) within four Business Days after the Saturday of each week, a
Borrowing Base Certificate in form satisfactory to Agent, and containing (i) a
roll forward in detail Borrower's ledger of Inventory stock for such week, and
(ii) a list of open buys for such week.
5.2. Reporting Requirements. Furnish to the Banks:
----------------------
(a) as soon as possible, and in any event (A) within 30 days after
Borrower or any member of its Controlled Group knows or should know that any
ERISA Event described in clause (i) of the definition of ERISA Event or any
event described in Section 4063(a) of ERISA with respect to any Plan has
occurred, and (B) within ten
64
days after Borrower or any member of its Controlled Group knows or should know
that any other ERISA Event with respect to any Plan has occurred or a request
for a minimum funding waiver under Section 412 of the Code with respect to any
Plan has been made, a statement of the chief financial officer of Borrower
describing such ERISA Event and the action, if any, which Borrower or such
member of its Controlled Group proposes to take with respect thereto, together
with a copy of the notice of such ERISA Event or other event, if required by the
applicable regulations under ERISA, given to the PBGC;
(b) promptly, and in any event within ten Business Days after receipt
thereof, by Borrower or any member of its Controlled Group from the PBGC, copies
of each notice received by such Person or any such member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) promptly, and in any event within 30 days after requested by the
Banks, copies of the filings, by Borrower or any member of its Controlled Group
with the United States Department of Labor ("DOL"), the IRS or the PBGC, copies
of each annual and other report, including Schedule B thereto with respect to
each Plan;
(d) promptly, and in any event within 30 days after receipt thereof, a
copy of any notice, determination letter, ruling or opinion that Borrower or any
member of its Controlled Group receives from the PBGC, the DOL or the IRS with
respect to any Plan;
(e) promptly, and in any event within 15 Business Days after receipt
thereof, a copy of any correspondence that Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability of
Borrower or any member of its Controlled Group pursuant to Section 4219 or 4202
of ERISA, and a statement from the chief financial officer of Borrower or such
member of its Controlled Group setting forth details as to the events giving
rise to such potential withdrawal liability and the action which Borrower or
such member of its Controlled Group proposes to take with respect thereto;
(f) notification within 30 days of any material increase in the
benefits of any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plan, or the commencement of contributions to any Plan
to which Borrower or any member of their Controlled Group was not previously
contributing within 30 days;
(g) notification within ten Business Days after Borrower or any member
of its Controlled Group knows or should know that Borrower or any such member of
its Controlled Group has or intends to file a notice of intent to terminate any
Plan under a
65
distress termination within the meaning of Section 4041(c) of ERISA and a copy
of such notice;
(h) promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting Borrower or any member of its Controlled Group with respect
to any Plan, except those which, in the aggregate, if adversely determined are
not reasonably expected to have a Material Adverse Effect;
(i) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court governmental department, commission,
board, bureau, agency instrumentality, domestic or foreign, affecting Borrower
or any of its Subsidiaries except those which, if adversely determined, could
not have a Material Adverse Effect;
(j) promptly, and in any event within three Business Days after
Borrower becomes aware of the existence of any Default or Event of Default, (ii)
any breach or nonperformance of, or any default under, any Related Document or
any lease, contract, indenture, loan or credit agreement or any other agreement
or instrument to which Borrower or any of its Subsidiaries is a party and which
is material to the business, prospects, operations or the financial condition of
Borrower and its Subsidiaries considered as one enterprise, or (iii) any
Material Adverse Effect, any Material Adverse Change or any development or other
information which has any reasonable likelihood of having a Material Adverse
Effect, notice specifying the nature of such Default, Event of Default,
development or information, including the anticipated effect thereof;
(k) promptly after the sending or filing thereof, copies of all
reports which Borrower sends to its security holders generally, and copies of
all reports and registration statements which Borrower or any of its
Subsidiaries files with the Commission or any national securities exchange;
(l) upon the request of any Bank, copies of any federal, state and
local tax return or report filed by Borrower, Holdings or any of their
Subsidiaries in respect of taxes measured by income (excluding sales, use and
like taxes);
(m) promptly upon Borrower or any of its Subsidiaries learning
thereof, written notification of any of the following which are material in
amount:
(i) receipt by Borrower or any of its Subsidiaries of written
notice or a claim to the effect that such Person or any of its
Subsidiaries is or may be liable to any Person as a result of the Release
or threatened Release;
66
(ii) receipt by Borrower or any of its Subsidiaries of notice that
any real or personal property of such Person or any of its Subsidiaries
is subject to an Environmental Lien;
(iii) receipt by Borrower or any of its Subsidiaries of written
notice of violation of, or awareness by such Person or any of its
Subsidiaries of a condition which might reasonably result in a written
notice of violation of, any Requirement of Law involving environmental,
health or safety matters;
(iv) receipt by Borrower or any of its Subsidiaries of notice of
the commencement or threat of any judicial or administrative proceeding
alleging a violation of any Requirement of Law involving environmental,
health or safety matters;
(v) any new or proposed change to any existing environmental,
health or safety Requirement of Law; or
(vi) any proposed acquisition of stock, assets, or real estate,
leasing of property or any other action by Borrower or any of its
Subsidiaries that could reasonably be expected to subject such Person or
any of its Subsidiaries to additional material Environmental Liabilities
and Costs; and
(n) such other information respecting the business, properties,
condition or operations, financial or otherwise, of Borrower or any of its
Subsidiaries, as any Bank through the Agent may from time to time reasonably
request.
ARTICLE VI
FINANCIAL COVENANTS
As long as any Obligations shall remain unpaid or Bank
shall have any Commitment, unless the Majority Banks shall otherwise consent in
writing:
6.1. Minimum EBDAIT. The Borrower will not permit EBDAIT of the Borrower
--------------
and its Consolidated Subsidiaries during each period of four consecutive Fiscal
Quarters ending on the last day of each Fiscal Quarter set forth below to be
less than the following amounts:
67
Fiscal Quarter Ending on Amount
------------------------ ------
April 30 and July 31, $26,000,000
1996
October 31, 1996 $26,500,000
February 1, April 30,
July 31 and October 31,
1997 $27,000,000
January 31, April 30,
July 31 and October 31,
1998 $29,000,000
January 30, April 30,
July 31 and October 31,
1999 $30,000,000
January 29, 2000 and
each Fiscal Quarter
thereafter $30,000,000
6.2. Capital Expenditures. Borrower will not permit any Capital
--------------------
Expenditures to be made during the Fiscal Years set forth below in excess of the
amount set forth below for such Fiscal Year.
Fiscal Year ending on Maximum Capital Expenditures
--------------------- ----------------------------
February 1, 1997 $18,000,000
January 31, 1998 $15,000,000
January 30, 1999 $15,000,000,
plus the lesser of (i) 50% of
Cash Flow from Fiscal Year 1998
and (ii) the unused portion of
Capital Expenditures from
Fiscal Year 1997
January 29, 2000 $16,000,000,
and each Fiscal plus the lesser of (i) 50% of
Year thereafter Cash Flow from Fiscal Year 1999
and (ii) the unused portion of
Capital Expenditures from
Fiscal Years 1997 and 1998
; provided, however, that amounts set forth above for any Fiscal Year set forth
-----------------
above and not used in such Fiscal Year may be carried forward into the next
succeeding Fiscal Year but not into any Fiscal Year thereafter.
68
6.3. Minimum Interest Coverage Ratio. Borrower and its Consolidated
-------------------------------
Subsidiaries shall maintain, for each twelve-month period ending on the last day
of each Fiscal Quarter set forth below, an Interest Coverage Ratio of not less
than the following:
Fiscal Quarter Ending on Ratio
------------------------ -----
April 30, 1996 1.6 to 1.0
July 31, 1996 1.7 to 1.0
October 31, 1996 1.8 to 1.0
February 1, April 30,
July 31 and October 31,
1997 2.0 to 1.0
January 31, April 30,
July 31 and October 31,
1998 2.1 to 1.0
January 30, April 30,
July 31 and October 31,
1999 2.2 to 1.0
January 29, 2000 and
each Fiscal Quarter
thereafter 2.25 to 1.0
6.4. Minimum Net Worth. Borrower and its Consolidated Subsidiaries shall
-----------------
have a minimum Net Worth at the end of each Fiscal Quarter set forth below of
not less than the amount set forth below for such date:
69
Fiscal Quarter Ending on Amount
------------------------ ------
April 30, 1996 ($33,000,000)
July 31, 1996 ($1,000,000)
October 31, 1996 and
February 1, 1997 $3,000,000
April 30, 1997 $1,000,000
July 31, 1997 $1,500,000
October 31, 1997 and
January 31, 1998 $6,000,000
April 30, 1998 $5,000,000
July 31, 1998 $5,500,000
October 31, 1998 $7,500,000
January 30, 1999 $9,500,000
April 30, 1999 $8,500,000
July 31, 1999 $9,000,000
October 31, 1999 $11,000,000
January 29, 2000 and
each Fiscal Quarter
thereafter $13,000,000
6.5. [Intentionally Omitted.]
------------------------
6.6. [Intentionally Omitted.]
------------------------
ARTICLE VII
ADDITIONAL AFFIRMATIVE COVENANTS OF BORROWER
As long as any Obligations shall remain unpaid or any Bank shall have
any Commitment, Borrower shall, unless the Majority Banks shall otherwise
consent in writing:
7.1. Compliance with Laws, Etc.
-------------------------
(a) Comply, and cause each of its Subsidiaries to comply, in all
material respects, with all Requirements of Law; and
70
(b) Preserve and cause each of its Subsidiaries to preserve its
ownership and exclusive right to use all of the Intellectual Property owned by
or licensed to it, except where the failure to preserve such rights would be
immaterial with respect to the business of such Person and its Subsidiaries.
7.2. Conduct of Business.
-------------------
(a) Conduct, and cause each of its Subsidiaries to conduct, its
business in a regular manner and reasonably consistent with past practice; and
(b) perform and observe, and cause each of its Subsidiaries to perform and
observe, in all material respects, all the terms, covenants and conditions
required to be performed and observed by it under (i) the Related Documents
(other than the Employment Agreements), and (ii) except where the failure to
perform or observe such terms, covenants and conditions would not have a
Material Adverse Effect, all other Contractual Obligations (including paying all
rent and other charges available under any Lease) and do, and cause its
Subsidiaries to do, all things necessary to preserve and to keep unimpaired its
rights under such other Contractual Obligations.
7.3. Solvency. Continue to be Solvent and ensure that it and its
--------
Subsidiaries, on a consolidated basis, continue to be Solvent.
7.4. Maintenance of Insurance. Maintain, and cause each of its Subsidiaries
------------------------
to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which such Person or Subsidiary operates (including
insurance covering property in which the Banks have a security interest, naming
the Agent for the benefit of the Agent and the Banks as additional insured and
loss payee pursuant to an endorsement substantially in the form of Exhibit P
hereto) and as otherwise reasonably satisfactory to the Majority Banks which
insurance shall name the Agent for the benefit of the Agent and the Banks as
additional insured and loss payee.
7.5. Application of Proceeds. Use the entire amount of the Loans as set
-----------------------
forth in Section 4.15.
7.6. Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
Subsidiaries to pay and discharge, before the same shall become delinquent, all
lawful claims and all taxes, assessments and governmental charges or levies,
except where contested in good faith, by proper proceedings, if adequate
reserves therefor have been established on the books of such Person or such
Subsidiary in accordance with GAAP and non-payment would not, in the aggregate,
have a Material Adverse Effect.
71
7.7. Preservation of Corporate Existence, Etc. Preserve and maintain, and
----------------------------------------
cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charges and statutory) and franchises, except where the
failure to preserve and maintain the corporate existence, rights (charter or
statutory) or franchise of any Subsidiary would not have a Material Adverse
Effect.
7.8. Access and Inspections. From time to time, permit the Agent and each
----------------------
of the Banks and any agents or representatives thereof to examine and make
copies of and abstracts from the records, documents and books of account of, and
visit and inspect the properties of such Person and any of its Subsidiaries
(whether such inspection pertains to reasons of environmental compliance,
hazard, liability or otherwise), and to discuss the affairs, finances, accounts,
properties or operations of such Person and any of its Subsidiaries with any of
their respective officers, directors, employees or agents and permit any Bank or
the Agent to communicate directly with such Person's independent certified
public accountants and authorize those accountants to disclose to such Bank or
the Agent any and all financial statements and other information of any kind,
including copies of any management letter or the substance of any oral
information that such accountants may have with respect to the business,
financial and other affairs of such Person or any of its Subsidiaries; provided,
however, that, except during the continuance of a Default or Event of Default,
any such investigation shall be conducted only during regular business hours and
in a manner that does not interfere unreasonably with the business or operations
of Borrower and its Subsidiaries.
7.9. Keeping of Books. Keep, and cause each of its Subsidiaries to keep,
----------------
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of such Person
and each such Subsidiary in accordance with GAAP.
7.10. Maintenance of Properties, Etc. Maintain and preserve and cause each
------------------------------
of its Subsidiaries to maintain and preserve all of their respective properties
(real and personal) which are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted; and notify
the Agent of any casualty or condemnation or threat of condemnation with respect
to such properties.
7.11. [Intentionally omitted].
-----------------------
7.12. [Intentionally omitted].
-----------------------
7.13. Collection Accounts and Blocked Accounts. Maintain, and cause each of
----------------------------------------
its Subsidiaries to maintain, such blocked collection accounts referred to in
Sections 2.18 and 3.2 as shall be satisfactory in all respects to the Agent.
72
7.14. Key-Man Life Insurance. Maintain key-man life and disability
----------------------
insurance on the lives of such Management Shareholders in such amounts as shall
be satisfactory in all respects to the Agent.
7.15. Maintenance of Licenses and Permits. Maintain and cause each
-----------------------------------
Subsidiary to maintain all rights, permits, licenses, approvals and privileges
necessary for the proper conduct of its and each of such Subsidiary's business
and to continue to engage in the same type of business.
7.16. Employee Plans.
--------------
(a) With respect to other than a Multiemployer Plan, for each Plan
hereafter adopted or maintained by either Borrower or any member of its
Controlled Group, (i) request, or cause such member of its Controlled Group to
request, determination letters from the IRS to the effect that such Plan is
qualified within the meaning of Section 401(a) of the Code; (ii) from and after
the adoption of such Plan, cause, or cause such member of its Controlled Group
to cause, such Plan to be qualified within the meaning of Section 401(a) of the
Code and to be administered in all material respects in accordance with the
requirements of ERISA and Section 401(a) of the Code; (iii) make, or cause such
member of its Controlled Group to make, all required contributions by the due
date under Section 412 of the Code and Section 302 of ERISA; and (iv) not take,
and cause each member of its Controlled Group not to take any action which is
reasonably likely to cause such Plan not to be qualified within the meaning of
Section 401(a) of the Code or not to be administered in all material respects in
accordance with the requirements of ERISA and Section 401(a) of the Code; and
(b) with respect to each Multiemployer Plan, make, and cause each
member of its Controlled Group to make, all contributions required by such
Multiemployer Plan.
7.17. Fiscal Year. Maintain the Fiscal Year as its annual accounting
-----------
period.
7.18. Appraisals. Provide appraisals of, or other information concerning,
----------
such Person's and its Subsidiaries' assets as reasonably requested by the Agent.
7.19. Consents. Use its commercially reasonable efforts to obtain, or cause
--------
its Subsidiaries to obtain, all third party consents in form and substance
satisfactory to the Agent required in connection with the assignment of its
interests in joint ventures, in each case, as soon as practicable and in any
event within 60 days after the Effective Date; provided, however, that Borrower
-----------------
shall not be required to obtain any such consent which is subject to conditions
adverse to Borrower's business, would require Borrower to commence any
litigation, to pay any increase in rent or other sum of money to the lessor or
substantially reduce Borrower's
73
rights or substantially increase Borrower's obligations under the subject Lease
or joint venture agreements.
7.20. [Intentionally omitted.]
------------------------
7.21. [Intentionally omitted.]
------------------------
7.22. Mortgage. In the event that (i) Borrower or any Subsidiary of
--------
Borrower shall acquire any parcel, or group of related parcels, of real property
with a market value of $1,000,000 or more, or (ii) any parcel, or group of
related parcels, of real property owned by the Borrower or any Subsidiary shall
attain a market value of $3,000,000 or more, then Borrower or such Subsidiary,
as the case may be, shall promptly execute and deliver to the Agent a mortgage
(the "Mortgage") with respect to such real property, and such other agreements
and instruments in connection therewith as the Agent shall reasonably request
(including title insurance), all in form and substance reasonably satisfactory
to the Agent, sufficient to grant to the Banks a first mortgage lien thereon.
7.23. Landlord Waivers. Use commercially reasonable efforts to obtain all
----------------
waivers of landlords' Liens on the Collateral in substantially the form of
Exhibit F hereto; provided, however, that Borrower shall not be required to
-----------------
obtain any such waiver which is subject to conditions adverse to Borrower's
business, would require Borrower to commence any litigation, to pay any increase
in rent or other sum of money to the landlord or substantially reduce Borrower's
rights or substantially increase Borrower's obligations under the subject Lease.
7.24. Lease Security. Provide to the Agent within 30 days after the
--------------
Effective Date:
(i) acknowledgment copies of proper Financing Statements filed
under the Uniform Commercial Code of all jurisdictions as may be
necessary or, in the opinion of the Agent, desirable to perfect the Lien
created by the Security Agreement and the ▇▇▇▇▇▇▇▇'▇ Pledge Agreement in
favor of the Agent and the Banks, together with certified copies of
Requests for information or Copies (Form UCC-11), or equivalent reports,
listing all effective financing statements which name Holdings,
▇▇▇▇▇▇▇▇'▇ and any Subsidiary of ▇▇▇▇▇▇▇▇'▇ (under its present name and
any previous name) as debtor and which are filed in such jurisdictions
together with copies of such other financing statements (none of which
shall cover the collateral purported to be covered by the Security
Agreement or the ▇▇▇▇▇▇▇▇'▇ Pledge Agreement); and
(ii) evidence of the completion of all recordings and filings as
may be necessary or, in the opinion of the Agent, desirable to perfect
the Lien created by the Security Agreement and the ▇▇▇▇▇▇▇▇'▇ Pledge
Agreement.
74
7.25. Further Assurances. The Borrower shall execute and deliver, or cause
------------------
to be executed and delivered, to the Agent and/or the Banks such documents and
agreements, and shall take or cause to be taken such actions, as the Agent or
any Bank may, from time to time, reasonably request to carry out the terms and
conditions of this Agreement and the other Loan Documents.
7.26. Dissolution of ▇▇▇▇ Lo. The Borrower shall (i) duly file a
----------------------
certificate of dissolution of ▇▇▇▇ Lo and any other documents required to be
filed therewith with the department of taxation of the State of New York not
later than July 10, 1996, (ii) file a certified copy of such certificate with
the Department of State of the State of New York not later than June 30, 1997,
(iii) provide the Agent with a certified copy of such certificate as approved by
the Department of State of the State of New York not later than July 7, 1997,
and (iv) complete the winding up and liquidation of ▇▇▇▇ Lo not later than July
14, 1997.
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
As long as any Obligations shall remain unpaid or any Bank shall have
any Commitment, Borrower shall not, directly or indirectly, without the written
consent of the Majority Banks:
8.1. Liens, Etc. Create or suffer to exist, or permit any of its
----------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties (including, without limitation, property consisting of
leasehold interests in real property), whether now owned or hereafter acquired,
or assign, or permit any of its Subsidiaries to assign, any right to receive
income except:
(a) Purchase money liens or purchase money security interests upon or
in any property acquired or held by Borrower or any Subsidiary of Borrower in
the ordinary course of business to secure the purchase price of such property or
to secure indebtedness incurred solely for the purpose of financing the
acquisition of such property, or liens existing on such property at the time of
its acquisition (other than any such Lien created in contemplation of such
acquisition); provided, however, that the aggregate principal amount of the
-----------------
Indebtedness secured by the Liens referred to in this clause shall not exceed
$250,000 at any time outstanding;
(b) (i) Liens created pursuant to the Loan Documents; or (ii) Liens on
the funds deposited in trust pursuant to subsection 1203(a) of the 1993 Notes
Indenture and subsection 404(1) of the Discount Notes Indenture created for the
benefit of the holders of the 1993 Notes and the Discount Notes in connection
with the 1993 Note Redemption and the Discount Note Redemption
75
pursuant to subsection 1203(a) of the 1993 Notes Indenture and subsection 404(1)
of the Discount Notes Indenture;
(c) Any Lien securing the renewal, extension or refunding of any
Indebtedness secured by any Lien permitted by this Section 8.1 (other than the
Indebtedness under the 1993 Notes secured by the Lien referred to in clause (ii)
of subsection 8.1(b), which Indebtedness when renewed, extended or refunded in
connection with the Offering and the Redemption shall thereafter be unsecured)
without any increase in the amount secured thereby;
(d) Liens in favor of materialmen, mechanics, warehousemen, carriers,
lessors or other similar Persons incurred by Borrower or any of its Subsidiaries
in the ordinary course of business which secure its obligations to such Person;
provided, however, that Borrower or such Subsidiary (i) is not in default with
-----------------
respect to such payment obligation to such Person or (ii) is in good faith and
by appropriate proceedings diligently contesting such obligation, and in each
case the failure to pay such contested obligations would not in the aggregate
have any reasonable likelihood of having a Material Adverse Effect;
(e) Liens securing taxes, assessments or governmental charges or
levies; provided, however, that neither Borrower nor any of its Subsidiaries is
-----------------
in default in respect of any payment obligation with respect thereto unless (i)
it is in good faith and by appropriate proceedings diligently contesting such
obligation, and (ii) the failure to pay such contested obligations would not in
the aggregate have any reasonable likelihood of having a Material Adverse
Effect;
(f) Liens incurred or pledges and deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance,
old-age pensions and other social security benefits;
(g) Liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations, surety
and appeal bonds and other obligations of like nature, incurred as an incident
to and in the ordinary course of business; provided, however, that neither
-----------------
Borrower nor any of its Subsidiaries is in default in respect of any payment
obligation with respect thereto unless (i) it is in good faith and by
appropriate proceedings diligently contesting such obligation, and (ii) the
failure to pay such contested obligations would not in the aggregate have a
Material Adverse Effect;
(h) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities incident
thereto, leases, subleases, rights of way, encroachments and other survey
defects which do not in the aggregate materially detract from the value of the
property or
76
assets of Borrower or any of its Subsidiaries, as the case may be, or impair the
use of such property for the purposes for which such property is held by
Borrower or any such Subsidiary; and
(i) Liens existing on the date of this Agreement and disclosed on
Schedule 8.1(i) hereto.
(j) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by Section 8.2 incurred to finance the acquisition of fixed or capital
assets, provided that (i) such Liens shall be created substantially
--------
simultaneously with the acquisition of such fixed or capital assets, (ii) such
Liens do not at any time encumber any property other than the property financed
by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by any such Lien
shall at no time exceed 100% of the original purchase price of such property at
the time it was acquired;
(k) attachment or judgment liens (other than any Liens described in
subsection 8.1(l)) individually or in the aggregate not in excess of $500,000
(exclusive of (i) any amounts that are duly bonded to the reasonable
satisfaction of the Agent or (ii) any amount adequately covered by insurance as
to which the insurance company has not disclaimed or disputed in writing its
obligations for coverage);
(l) any Lien arising pursuant to any order of attachment, distraint or
other legal process in connection with court or arbitration proceedings so long
as (i) the execution or other enforcement thereof is effectively stayed, (ii)
the claims secured thereby are being contested in good faith by appropriate
proceedings, (iii) adequate reserves have been established with respect to such
claims in accordance with GAAP, and (iv) no Event of Default would occur as a
result thereof;
8.2. Indebtedness.
------------
(a) Create or suffer to exist, or permit any of its Subsidiaries to
create or suffer to exist, any Indebtedness except (i) the Obligations; (ii) (A)
Indebtedness evidenced by the Senior Notes, as well as any replacements and
refinancings thereof (provided that any such replacement or refinancing is for
no greater amount of Indebtedness and is not due to be repaid until after the
Commitment Termination Date), and (B) prior to the completion of the Discount
Note Redemption and the 1993 Note Redemption, respectively, by the Discount
Notes and the 1993 Notes; (iii) Indebtedness of Borrower to any of its wholly
owned Subsidiaries; (iv) Indebtedness of any wholly owned Subsidiary of Borrower
to any other wholly owned Subsidiary of Borrower; (v) Indebtedness of any
Subsidiary of Borrower to Borrower; (vi) (A) Indebtedness pursuant to the Loan
Agreement dated January 15, 1980, between ▇▇▇▇▇▇▇▇'▇ and The City of New York
with respect to the
77
warehouse, executive office and distribution center facility of Borrower in the
Bronx, New York, (B) Indebtedness evidenced by the New York City Industrial
Development Agency, Industrial Development Revenue and Refunding Bonds (1983
▇▇▇▇▇▇▇▇'▇ Inc. Project), and (C) any refinancings of the Indebtedness described
in items (A) and (B) of this clause (vi), provided that any such refinancing is
--------
(x) on terms and conditions no less favorable to Borrower than those applicable
to the Indebtedness so refinanced and in effect immediately prior to such
refinancing and (y) in an amount not greater than the amount of the Indebtedness
so refinanced and outstanding immediately prior to such refinancing; and (vii)
additional Indebtedness not to exceed an aggregate principal amount at any time
outstanding equal to $10,000,000, which amount includes any Indebtedness secured
by Liens permitted by Section 8.1. No indebtedness (excluding Indebtedness
secured by Liens permitted by Section 8.1) may be incurred in reliance on clause
(vii) of the preceding sentence unless the Interest Coverage Ratio for Borrower
and its Consolidated Subsidiaries for the twelve month period ending at the end
of the most recent Fiscal Quarter is not less than 3.0 to 1.0
(b) Cancel, or permit any of its Subsidiaries to cancel, any claim or
Indebtedness owed to it, except for adequate consideration or in the ordinary
course of business or for the settlement of disputes concerning accounts
receivable in accordance with past practice.
8.3. [Intentionally Omitted.]
------------------------
8.4. Stock Payments, Etc. Declare or make, or permit any of its
-------------------
Subsidiaries to declare or make, any Stock Payment except (i) any Stock Payment
by any Subsidiary of Borrower to Borrower, (ii) repurchases of capital stock of
Borrower by Borrower pursuant to the Employment Agreements with the proceeds of
the key-man life and disability insurance policies referred to in Section 7.14
hereof, and (iii) Stock Payments necessary to effect the Series A Preferred
Stock Redemption as described in the Offering Documents.
8.5. Mergers, Etc. Except for Investments permitted by Section 8.6, merge
------------
or consolidate with or into, or convey, transfer, lease or otherwise dispose
(whether in one transaction or in a series of transactions), all or
substantially all of its assets or the assets of any division (whether now owned
or hereafter acquired) to any Person, or permit any of its Subsidiaries to do
any of the foregoing, or (b) acquire all or substantially all of the stock of
any Person, or acquire all or substantially all of the assets of any Person or
enter into any joint venture or partnership with any Person, or permit any of
its Subsidiaries to do any of the foregoing, except that any Subsidiary of the
Borrower may be merged or consolidated with or into the Borrower (provided that
--------
the Borrower shall be the continuing or surviving corporation) or with or into
anyone or more wholly owned Subsidiaries of the Borrower (provided that the
--------
wholly owned
78
Subsidiary or Subsidiaries shall be the continuing or surviving corporation).
8.6. Investments in Other Persons. Except as permitted by Section 7.5,
----------------------------
make, or permit any of its Subsidiaries to make, any loan or advance to any
Person, or purchase or otherwise acquire, or permit any of its Subsidiaries to
purchase or otherwise acquire, any capital stock, equity interest, obligations
or other securities issued by, or make, or permit any of its Subsidiaries to
make, any capital contribution to, or otherwise invest in, any Person (any of
the foregoing being an "Investment"), except for the following:
(a) Investments by Borrower or any of its Subsidiaries in any wholly
owned Subsidiary of Borrower;
(b) Investments by any Subsidiary of Borrower in Borrower;
(c) Investments by Borrower and its Subsidiaries in accounts, contract
rights and chattel paper (as defined in he Uniform Commercial Code), and notes
receivable made in the ordinary course of business in accordance with past
practice;
(d) Loans or advances to employees of Borrower or any of its
Subsidiaries, which loans and advances are in the ordinary course of business
and are in amounts and for purposes consistent with past practice;
(e) Investments of Borrower or any of its Subsidiaries in (i)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed or insured by the United States Government or any
agency hereof, (ii) certificates of deposit, eurodollar time deposits, overnight
bank deposits, bankers' acceptances and repurchase agreements of a Qualified
Issuer having maturities of one year or less from the date of acquisition, (iii)
commercial paper of an issuer rated at least A-1 by Standard & Poor's
Corporation or P-1 by ▇▇▇▇▇'▇ Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of investments, and (iv) money market funds
acceptable to the Agent in the exercise of its reasonable judgment;
(f) Investments in joint ventures formed to open new stores in an
amount not to exceed $200,000 in any Fiscal Year or $750,000 in the aggregate.
8.7. Contingent Obligations. Incur, or permit any of its Subsidiaries to
----------------------
incur, directly or indirectly, any Contingent Obligation, except for:
(a) the Subsidiary Guaranty; and
79
(b) endorsements for collections or deposits in the ordinary course of
business.
8.8. Sale of Assets; Maintenance of Ownership of Stock; Sale Leasebacks;
-------------------------------------------------------------------
Transfers of Real Property; Transfers of Assets.
-----------------------------------------------
(a) Sell or otherwise dispose of any assets or any interest therein
(other than with respect to leases of real property) or permit any of its
Subsidiaries to sell or dispose of any of its assets or any interest therein, or
permit or suffer any other Person to acquire any interest in any of its assets,
except in the ordinary course of business; provided, however, that the sale or
-----------------
disposition of assets for adequate consideration and in connection with the
closing of individual stores which are not, in the aggregate, material to
Borrower's business, shall be deemed to be a sale or disposition of assets in
the ordinary course of business;
(b) [Intentionally omitted];
(c) Become liable, or permit any of its Subsidiaries to become liable,
as lessee or guarantor or other surety with respect to any lease of any property
(whether real or personal or mixed) whether now owned or hereafter acquired (i)
which either Borrower or any of its Subsidiaries has sold or transferred or is
to sell or transfer to any other Person or (ii) which either Borrower or any of
its Subsidiaries intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by that entity to any
other Person in connection with such lease; or
(d) Transfer or permit any of its Subsidiaries to transfer any assets
to any Subsidiary, other than a transfer permitted by Section 8.2 or 8.6; except
that any Subsidiary may sell, lease, assign, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to the
Borrower.
8.9. Change in Nature of Business. Make any material change or permit any
----------------------------
of its Subsidiaries to make any material change in the nature or conduct of its
business as carried on at the Effective Date (except for actions taken in
respect of ▇▇▇▇ Lo pursuant to Section 7.26), or enter into or permit any of its
Subsidiaries to enter into any business other than apparel retailing.
8.10. Capital Structure. Make, or permit any of its Subsidiaries to make,
-----------------
any change in its capital structure (including in the terms of its outstanding
Stock) or amend its certificate of incorporation or by-laws.
8.11. No Modifications to Related Documents. Amend, supplement or otherwise
-------------------------------------
modify any provision of (a) any Related
80
Document or take or fail to take any action thereunder which would directly or
indirectly have a Material Adverse Effect, or (b) the Discount Notes, the
Discount Notes Indenture, the 1993 Notes, the 1993 Notes Indenture, the Senior
Notes or the Senior Note Indenture, unless the terms of such amendment,
supplement or modification are no less favorable to Borrower, or, in the case of
clause (b), the consent of the Agent has been obtained.
8.12. Transactions with Affiliates. Enter into or be a party to, or permit
----------------------------
any of its Subsidiaries to enter into or be a party to, any transaction with any
Affiliate of Borrower or any such Subsidiary, except (i) as otherwise expressly
permitted by Section 8.2, 8.4, 8.6, 8.7 or 8.8, (ii) for such transactions,
otherwise permitted hereunder, on terms and conditions no less favorable to
Borrower or such Subsidiary than would be obtained in an arm's- length
transaction with a non-Affiliate, (iii) between Subsidiaries of Borrower
consistent with past practice to the extent otherwise permitted herein, (iv)
among Borrower and its Subsidiaries to the extent otherwise permitted herein,
(v) with respect to transactions in the nature of employment agreements or
compensation arrangements, upon fair and reasonable terms and consistent with
past practice, and (vi) financial advisory fees paid to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, Inc., Encantrales, Inc. and their affiliates as described in the
Offering Documents.
8.13. Adverse Transactions.
--------------------
(a) Enter into or be a party to, or permit any of its Subsidiaries to
enter into or be a party to, any transaction the performance of which in the
future would be inconsistent with or could require Borrower or any such
Subsidiary to breach any of the covenants or agreements contained herein or in
any other Loan Document or Related Document or give rise to any Event of
Default.
(b) Take or omit to take, or permit any of its Subsidiaries to take or
omit to take, any action, which act or omission would constitute a default
pursuant to or noncompliance with any of the terms of this Agreement, any of the
other Loan Documents, any Related Document, or of any other material contract,
instrument, or lease to which it is a party or by which it or any of its
property is bound.
(c) Amend, modify, alter, rescind, terminate, assign or waive, or
permit any of its Subsidiaries to amend, modify, alter, rescind, terminate or
waive, any of its rights or permit any breach or event of default to exist under
any Employment Agreement, or the Shareholders' Agreement or, other than in the
ordinary course of business, any material franchise agreement or material lease
agreement to which it is a party as of the Effective Date.
8.14. Accounting Changes. Make, or permit any of its Subsidiaries to make,
------------------
any significant change in accounting
81
treatment and reporting practices except as permitted or required by GAAP.
8.15. Speculative Transactions. Engage in any transaction involving
------------------------
commodity or currency options or futures contracts except for the sole purpose
of hedging.
8.16. Compliance with ERISA. Permit any member of its Controlled Group
---------------------
directly or indirectly to (i) terminate any Plan so as to result in any material
(in the reasonable opinion of the Majority Banks) liability to Borrower or any
member of its Controlled Group, (ii) permit to exist any ERISA Event, or any
other event or condition which presents the risk of a material (in the
reasonable opinion of the Majority Banks) liability of Borrower, Holdings or any
member of their Controlled Group, (iii) make a complete or partial withdrawal
(within the meaning of Section 4201 of ERISA) from any Multiemployer Plan so as
to result in any material (in the reasonable opinion of the Majority Banks)
liability to Borrower or any member of its Controlled Group, (iv) enter into any
new Plan or modify any existing Plan so to increase its obligations thereunder
except in the ordinary course of business which could result in any material (in
the reasonable opinion of the Majority Banks) liability to Borrower or any
member of its Controlled Group, or (v) permit the present value of all benefit
liabilities, as defined in Title IV of ERISA, under each Plan, other than a
Multiemployer Plan (using the actuarial assumptions utilized by the plan) to
exceed the fair market value of Plan assets allocable to such benefits all
determined as of the most recent valuation date for each such Plan to the extent
that would constitute a Material Adverse Change (in the reasonable opinion of
the Majority Banks), or do any of the foregoing themselves.
8.17. Limitation on the Formation of Subsidiaries After the Effective Date.
--------------------------------------------------------------------
Incorporate or otherwise organize any new Subsidiary which was not in existence
on the Effective Date or permit any of its Subsidiaries to do so unless, in the
case of Borrower, (i) any such newly formed Subsidiary shall have executed and
delivered to the Agent, for the benefit of the Agent and the Banks, a guaranty,
in substantially the form of the Subsidiary Guaranty, and a security agreement,
in substantially the form of the Security Agreement, (ii) the stock of such
Subsidiary is pledged pursuant to the ▇▇▇▇▇▇▇▇'▇ Pledge Agreement and (iii) the
incorporation or organization of such Subsidiary could not have a Material
Adverse Effect.
8.18. Internal Revenue Code Section 338. Make any election under Section
---------------------------------
338 of the Code other than a protective carryover election pursuant to the
Treasury Regulations issued under such Section without the prior consent of the
Majority Banks which shall not be unreasonably withheld.
8.19. [Intentionally omitted.]
------------------------
82
8.20. [Intentionally omitted.]
------------------------
8.21. Prepayments. (a) Prepay, redeem or purchase, or permit any of its
-----------
Subsidiaries to prepay, redeem or purchase, in any manner any Indebtedness,
except (i) the Obligations; and (ii) the Discount Notes and the 1993 Notes in
connection with the Discount Note Redemption and the 1993 Note Redemption,
respectively; or (b) make any payment in violation of the terms of the Senior
Notes or the Senior Note Indenture or terminate all or any of its obligations
under the Senior Note Indenture, by depositing or causing to be deposited with
the trustee thereunder, pursuant to such indenture or otherwise, any cash or
securities in trust or otherwise; provided, however, that nothing in this
-----------------
Section 8.21 shall prohibit (X) the prepayment, redemption or repurchase of the
Senior Notes solely out of proceeds from any offering of (i) equity securities
of Borrower so long as, before or simultaneously with such prepayment,
redemption or repurchase, the Revolving Credit Loans and all unpaid interest and
Obligations (including the Early Termination Fee) shall have been repaid in full
in cash and all outstanding Letters of Credit shall have been cash
collateralized to the satisfaction of BABC, or (ii) debt securities of Borrower
otherwise permitted to be incurred pursuant to Section 8.2 and scheduled to
mature no earlier than the Senior Notes to be prepaid, redeemed or purchased, or
(Y) the purchase or redemption of up to an aggregate maximum of $10 million face
amount of Senior Notes if (I) after giving effect to such purchase or
redemption, Borrower shall have Availability hereunder of at least $10 million
and (II) during the period of three months immediately prior to the date of such
purchase or redemption, Borrower had average daily Availability hereunder of at
least $20 million; provided, further, that no prepayment, purchase or redemption
-----------------
shall be permitted hereunder if any event has occurred and is continuing, or
would result from such prepayment, purchase or redemption, which constitutes a
Default or an Event of Default.
8.22. Investment Company Act. Borrower will not engage in any transaction
----------------------
or series of transactions with any of the affiliated investment companies
referred to in Section 4.13 or any of their Affiliates other than Borrower and
its Subsidiaries which violates or will violate the Investment Company Act of
1940, as amended.
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing:
(a) Borrower shall fail to make any payment of principal on any Loan
when the same becomes due and payable; or
83
(b) Borrower shall fail to make any payment of interest on any Loan,
or fee or any other amount or Obligation due hereunder or under any other
Loan Document within five days after the same becomes due and payable; or
(c) Any representation or warranty (except for the representations and
warranties provided in Section 4.3 with respect to the Conditional
Assignments of Lease) made by or on behalf of Borrower or any other Loan
Party herein or in any other Loan Document or by any Loan Party (or any
of its officers) in connection with any Loan Document, including any
certificate or financial information delivered pursuant thereto, shall
prove to have been incorrect in any material respect when made; or
(d) (i) Borrower shall fail to perform or observe any term, covenant
or agreement contained in Articles VI or VIII or Section 5.2(j), 7.5,
7.7, 7.8 or 7.17 hereof or (ii) any Loan Party shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement
or any other Loan Document on its part to be performed or observed and,
in the case of a failure under clause (ii), such failure shall remain
unremedied for ten days after written notice thereof shall have been
given to Borrower by the Agent or any Bank; or
(e) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Indebtedness, the aggregate
outstanding principal amount of which is at least $1,000,000, of such
Loan Party or such Subsidiary (as the case may be), when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and
payable, or required to be prepaid or repurchased (other than by a
regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(f) Any Loan Party or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors, or any proceeding shall be instituted by or
against such Loan Party or any of its Subsidiaries seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of
84
an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and
in the case of any such proceeding instituted against any Loan Party or
any of its Subsidiaries such proceeding shall not be stayed or dismissed
within 60 days from the date of institution thereof; or any Loan Party or
any of its Subsidiaries shall take any corporate action to authorize any
of the actions set forth above in this subsection (f); or
(g) Any judgment or order for the payment of money in excess of
$500,000 shall be rendered and be enforceable against any Loan Party or
any of its Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which such judgment or
order shall be unsatisfied or a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(h) With respect to any Plan: (i) Borrower or any other
party-in-interest or disqualified person shall engage in transactions
which in the aggregate would reasonably result in a direct or indirect
liability to either of them or any of their Subsidiaries in excess of
$500,000 under Section 409 or 502 of ERISA or Section 4975 of the Code;
(ii) either Borrower or any member of its Controlled Group shall incur
any accumulated funding deficiency, as defined in Section 412 of the
Code, in the aggregate in excess of $500,000, or request a funding waiver
from the IRS, or apply for an extension of the amortization period under
Section 412(e) of the Code or Section 304 of ERISA, for contributions in
the aggregate in excess of $500,000; (iii) either Borrower or any member
of its Controlled Group shall incur any withdrawal liability in the
aggregate in excess of $500,000 as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA; (iv)
either Borrower or any member of its Controlled Group shall fail to make
a required contribution by the due date under Section 412 of the Code or
Section 302 of ERISA which would result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA; (v) either Borrower, any
member of its Controlled Group or any Plan sponsor shall notify the PBGC
of an intent to terminate, or the PBGC shall institute proceedings to
terminate, a Plan; (vi) a Reportable Event shall occur with respect to a
Plan, other than a Multiemployer Plan, and within 15 days after the
reporting of such Reportable Event to the Majority Banks, the Majority
Banks shall have notified Borrower in writing that (A) the Majority Banks
have reasonably made a determination that, on the basis of such
Reportable Event, there are reasonable grounds for the termination of
such Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee
85
to administer such Plan and (B) as a result thereof an Event of Default
shall occur hereunder; (vii) a trustee shall be appointed by a court of
competent jurisdiction to administer any Plan other than a Multiemployer
Plan to which neither Borrower nor any member of its Controlled Group
could have any liability; (viii) the benefits of any Plan other than a
Multiemployer Plan to which neither Borrower nor any member of its
Controlled Group could have any liability shall be increased if such
increase could have a Material Adverse Effect, or either of Borrower or
any member of its Controlled Group shall begin to maintain, or begin to
contribute to, any Plan, if such maintenance or contribution could have a
Material Adverse Effect, without the prior written consent of the
Majority Banks; or (ix) any ERISA Event other than an event described in
clause (iv), (v) or (vi) above with respect to a Plan shall have
occurred, and 30 days thereafter (A) such ERISA Event, other than such
event described in clause (vi) of the definition of ERISA Event herein
(if correctable), shall not have been corrected and (B) the then present
value of such Plan's benefit liabilities, as defined in Title IV of
ERISA, shall exceed the then current value of assets accumulated in such
Plan by more than $2,500,000; provided, however, that the events listed
-----------------
in subsections (v)-(ix) shall constitute Events of Default only if, as of
the date thereof or any subsequent date, the maximum amount of liability
Borrower, Holdings or any member of their Controlled Group would be
likely, in the reasonable opinion of the Majority Banks, to incur in the
aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any
other provision of law with respect to all such Plans, computed by the
actuary of the Plan taking into account any applicable rules and
regulations of the PBGC at such time, and based on the actuarial
assumptions used by the Plan, resulting from or otherwise associated with
such event exceeds $500,000; or
(i) There shall occur any Material Adverse Change; or
(j) There shall occur any Change In Control; or
(k) Any Loan Document (except, to the extent invalid or unenforceable
under applicable law, the Conditional Assignments of Lease) executed by any Loan
Party which grants any security interest to the Agent for the benefit of the
Agent and the Banks, shall cease to be in full force and effect or to create a
Lien on the Collateral covered thereby or purported to be covered thereby; or
(l) [Intentionally omitted.]
(m) any guaranty of the Obligations shall be terminated, revoked or
declared void or invalid;
86
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Banks, declare the Commitments and the obligation of
each Bank to make Loans and the obligation of BABC to issue the Letters of
Credit to be terminated, whereupon the same shall forthwith terminate, and (ii)
shall at the request, or may with the consent, of the Majority Banks, by notice
to Borrower, declare the Loans, and all interest thereon and all other
obligations and amounts payable under this Agreement, to be forthwith due and
payable, whereupon the Loans, all such interest and all such obligations and
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower, and LAC shall immediately deliver to the Agent cash in an
amount equal to the aggregate amount of all outstanding Letters of Credit to be
held by the Agent as cash collateral; provided, however, that if such event is
-----------------
an Event of Default specified in clause (f) of this Article IX, (A) the
Commitments and the obligation of each Bank to make Loans and the obligation of
BABC to issue Letters of Credit shall automatically be terminated and (B) the
Loans and all other Obligations and amounts owing under or with respect to this
Agreement and the Letters of Credit and the obligation of Borrower to provide
the Agent with cash collateral for all outstanding Letters of Credit shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
Borrower.
ARTICLE X
THE AGENT
10.1. Authorization and Action. Each Bank hereby appoints and authorizes
------------------------
the Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement and the other Loan Documents, the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Banks, and such instructions
shall be binding upon all Banks; provided, however, that the Agent shall not be
-----------------
required to take any action which in its judgment exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law. The Agent
agrees to give to each Bank prompt notice of each notice given to it by Borrower
or any other Loan Party pursuant to the terms of this Agreement or the other
Loan Documents. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
nor shall the Agent have or be deemed
87
to have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent. The Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects as long as such selection was made without
gross negligence or willful misconduct.
10.2. Agent's Reliance, Etc. Neither the Agent nor any of its directors,
---------------------
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement or the other
Loan Documents, except for its or their own gross negligence or wilful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee on its records of any Obligation as the holder thereof
until the Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Agent; (ii) may consult
with legal counsel (including counsel to Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of
Borrower, or to inspect the property (including the books and records) of
Borrower; (v) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (vi) shall incur no liability under or
in respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telegram, cable, facsimile transmission or telex) believed by it to be genuine
and signed or sent by the proper party or parties.
10.3. BABC and Affiliates. With respect to its Commitments and the Loans
-------------------
made by it, BABC shall have the same rights and powers under this Agreement as
any other Bank and may exercise the same as though it were not the Agent; and
the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include
BABC in its individual capacity. BABC and its affiliates may accept deposits
from, lend money to, act as trustee under indentures of, and generally engage in
any kind of business with Borrower any of its Subsidiaries and any Person who
may do business with or own
88
securities of Borrower or any such Subsidiary, all as if BABC were not the Agent
and without any duty to account therefor to the Banks.
10.4. Bank Credit Decision. Each Bank acknowledges that it has,
--------------------
independently and without reliance upon the Agent or any other Bank and based on
the financial statements referred to in Section 4.6 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
10.5. Indemnification. The Banks agree to indemnify the Agent (to the
---------------
extent not reimbursed by Borrower), ratably according to the respective amounts
of their Commitments from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or the other Loan Documents or any action taken or omitted by the
Agent under this Agreement or the other Loan Documents; provided, however, that
-----------------
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or wilful misconduct.
Without limitation of the foregoing, each Bank agrees to reimburse the Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or the other Loan Documents, to the extent that the Agent is not reimbursed for
such expenses by Borrower. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Agent.
10.6. Successor Agent. The Agent may resign at any time by giving written
---------------
notice thereof to the Banks and Borrower and may be removed at any time with or
without cause by the Majority Banks. Upon any such resignation or removal, the
Majority Banks shall have the right to appoint a successor Agent, with the
consent of Borrower (which consent shall not be unreasonably withheld). If no
successor Agent shall have been so appointed by the Majority Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation or the Majority Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, and with the consent of
Borrower (which consent shall not be unreasonably withheld), appoint a successor
Agent, which shall be a commercial bank organized under the laws of
89
the United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such Successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article shall inure to its benefit as to any actions
taken or permitted to be taken by it while it was Agent under this Agreement and
the other Loan Documents.
ARTICLE XI
MISCELLANEOUS
11.1. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Agreement or the other Loan Documents, or consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
-----------------
writing and signed (A) by BABC, waive any of the conditions specified in Section
3.4, or (B) by all the Banks, do any of the following: (a) waive any of the
conditions specified in Section 3.1, 3.2 or 3.3, (b) increase the Commitments of
the Banks or subject the Banks to any additional obligations, (c) reduce the
principal of or interest on the Obligations or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Obligations or any fees or other Obligations payable hereunder,
(e) change the percentage of the Commitments which shall be required for the
Banks or any of them to take any action hereunder, (f) amend this Section 11.1,
(g) increase the advance rate with respect to Revolving Credit Loans, or (h)
release Collateral other than as permitted by the Security Agreement; and
provided, further, however, that no amendment, waiver or consent shall, unless
--------------------------
in writing and signed by the Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Agent under this Agreement
or the other Loan Documents.
11.2. Notices, Etc. All notices and other communications provided for
------------
hereunder shall be by telegram, telex, cable, facsimile communication or letter
or by telephone confirmed immediately in a writing if to Borrower, at its
address at Loehmann's, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇, Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇; if to any Bank, at its Domestic Lending Office specified opposite its
name on Schedule 1 hereto; and if to the Agent, at its address at ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇., ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
90
10022, Telephone No. ▇▇▇-▇▇▇-▇▇▇▇, Fax No. ▇▇▇-▇▇▇-▇▇▇▇, Attention: Division
Manager, with a copy to ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Telephone No. ▇▇▇-▇▇▇-▇▇▇▇, Fax No. ▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇▇, Esq.; or, as to Borrower or the Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to Borrower and the Agent. All such notices and
communications shall, when telegraphed, telexed, cabled, sent by facsimile
transmission or mailed, be effective when delivered to the telegraph company,
confirmed by telex answerback, delivered to the cable company, confirmed by
facsimile answerback or deposited in the mails, respectively, except that
notices and communications to the Agent pursuant to Article II or X shall not be
effective until received by the Agent.
11.3. No Waiver; Remedies. No failure on the part of any Bank or the Agent
-------------------
to exercise, and no delay in exercising, any right hereunder or under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
11.4. Costs and Expenses; Indemnification.
-----------------------------------
(a) Borrower will pay all out-of-pocket costs and expenses of the
Agent (including all reasonable fees, expenses and disbursements of counsel
(including, without limitation, a reasonable estimate of the allocable cost of
in-house counsel and staff)), and all travel, appraisal, audit, search, and
filing fees (including any interest or penalties thereon) incurred or sustained
at any time in connection with this transaction, whether or not there is any
Borrowing hereunder or the transaction closes, including, without limitation:
(i) expenses for any amendment, supplement, waiver, consent, or subsequent
closing in connection with the Loan Documents and the transactions contemplated
thereby; (ii) costs and expenses of lien and title searches and title insurance;
(iii) taxes, fees and other charges for recording the Mortgage, filing financing
statements and continuations, and other actions to perfect, protect, and
continue the Agent's Liens (including costs and expenses paid or incurred by the
Agent in connection with the consummation of this Agreement); (iv) sums paid or
incurred to pay any amount or take any action required of the Borrower under the
Loan Documents that the Borrower fails to pay or take; (v) costs and expenses of
forwarding loan proceeds, collecting checks and other items of payment, and
establishing and maintaining collection accounts; (vi) costs and expenses of
preserving and protecting the Collateral; and (vii) costs and expenses paid or
incurred to obtain payment of the Obligations, enforce the Agent's Liens, sell
or otherwise realize upon the Collateral, and otherwise enforce the provisions
of the Loan Documents, or to defend any claims made or threatened against the
91
Agent or any Bank arising out of the transactions contemplated hereby (including
without limitation, preparations for and consultations concerning any such
matters). Borrower will also pay all costs and expenses of Agent, as well as
Agent's then-standard fees, in connection with any field exams and reports
deemed reasonably necessary by Agent to be conducted after the Effective Date.
Such payments shall be in addition to the amounts otherwise provided for herein.
Following notice to the Borrower setting forth any of the foregoing costs and
expenses, such costs and expenses shall be charged to a loan account of Borrower
maintained with the Agent as Revolving Credit loans as described in Section 2.3.
(b) Borrower agrees to indemnify and hold harmless the Agent and each
Bank, their respective Affiliates and each of their respective directors,
officers and agents (each an "Indemnified Party"), from and against any and all
claims including claims in connection with or arising out of Environmental
Liabilities and Costs, damages, liabilities, costs and expenses (including all
reasonable fees, expenses and disbursements of counsel) as they are incurred by
the Agent or such Bank in connection with or arising out of any investigation,
or for defense of any pending or threatened claim or any action or proceeding
related to the Acquisition, the LAC Merger, the Maryland Merger, the Holdings
Merger, the Offering, the Redemption, this Agreement or any other Loan Document
or the financing contemplated by this Agreement, whether or not an Indemnified
Party is a party and whether or not any such transaction is consummated, except
to the extent such claim, damage, loss, liability or expense is found in a final
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or wilful misconduct. The foregoing
obligations shall survive the payment of the Loans, and any sale or disposition
of any property as a result of which any Environmental Liabilities and Costs
shall arise.
11.5. Right of Set-off. Upon the occurrence and during the continuance of
----------------
any Event of Default, each Bank is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Bank to or for the
credit or the account of Borrower against any and all of the Obligations of
Borrower now or hereafter existing under this Agreement, irrespective of whether
or not such Bank shall have made any demand under this Agreement and although
such Obligations may be unmatured. Each Bank agrees promptly to notify Borrower
after any such set-off and application made by such Bank; provided, however,
-----------------
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Bank under this Section are in
addition to the other rights and remedies (including other rights of set-off)
which such Bank may have.
92
11.6. Assignments and Participations.
------------------------------
(a) Each Bank may, with the prior written consent of Borrower (which
consent shall not unreasonably be withheld) and of the Agent, assign to one or
more other banks or financial institutions (provided that any such bank or
financial institution is not an Affiliate of any direct or indirect competitor
of Borrower) all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans made by it) in a
minimum amount of $10,000,000; provided, however, that the parties to each such
-----------------
assignment shall execute and deliver to the Agent, for its acceptance, an
Assignment and Acceptance, together with a processing fee payable to the Agent
in the amount of $2,500. Upon such execution, delivery and acceptance, from and
after the effective date specified in each Assignment and Acceptance, (x) the
assignee thereunder shall, in addition to any rights and obligations hereunder
held by it immediately prior to such effective date (if any), have the rights
and obligations hereunder that have been assigned to it pursuant to such
Assignment and Acceptance, (y) the Bank assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto) and (z) the assignee shall thereupon become a Bank for all purposes
hereunder, except that if such assignee is not a bank which accepts deposits, no
set-off pursuant to Section 11.5 need be shared with such assignee.
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement of any other instrument or document furnished pursuant
hereto, (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of Borrower or the
performance or observance by any Loan Party of any of their obligations under
this Agreement or any other instrument or document furnished pursuant hereto,
(iii) such assignee Bank confirms that it has received a copy of this Agreement,
together with such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such assignee Bank will, independently and without reliance
upon the Agent, such assigning Bank or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
93
make its own credit decisions in taking or not taking action under this
Agreement, (v) such assignee Bank appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto, and (vi) such assignee Bank agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in Section
11.2 a copy of each Assignment and Acceptance delivered to and accepted by it.
Such copies shall be available for inspection by Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee, the Agent shall, if such Assignment and
Acceptance is consented to by the Agent and Borrower, (i) accept such Assignment
and Acceptance, and (ii) give prompt notice thereof to Borrower. Immediately
upon the receipt by Agent of its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the assignee Bank and the
resulting adjustment of the Revolving Credit Loan Commitments arising therefrom.
The Revolving Credit Loan Commitment allocated to each assignee Bank shall
reduce such Revolving Credit Loan Commitment of the assigning Bank pro tanto.
(e) Each Bank may sell participations to one or more Banks or
financial institutions (provided that any such bank or financial institution is
not an Affiliate of any direct or indirect competitor of Borrower) in or to all
or a portion of its rights and obligations under this Agreement (including all
or a portion of its Commitment and the Loans made by it; provided, however, that
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(i) such Bank's obligations under this Agreement (including its Commitment to
Borrower hereunder) shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Bank shall remain the holder of any such Obligations for all purposes
of this Agreement, (iv) Borrower, the Agent and the other Banks shall continue
to deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement, and (v) no Bank shall transfer or grant
any participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing
94
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement.
(f) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
11.7. Binding Effect. This Agreement shall become effective on the
--------------
Effective Date and thereafter shall be binding upon and inure to the benefit of
Borrower, the Agent and each Bank and their respective successors and assigns,
except that Borrower shall not have the right to assign any of its rights
hereunder or any interest herein without the prior written consent of the Banks
and the assignment by any Bank is governed by Section 11.6.
11.8. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
11.9. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
11.10. WAIVER OF JURY TRIAL. THE AGENT, THE BANKS, AND BORROWER HEREBY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE AGENT, SUCH BANKS, OR BORROWER. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT AND SUCH BANKS ENTERING INTO THIS AGREEMENT.
11.11. Waiver of Permitted Exceptions. Subject to the occurrence of and
------------------------------
effective upon, the Effective Date, BABC, as the sole Bank party to the 1993
Amended Credit Agreement, waives the Permitted Exceptions.
11.12. Severability. The illegality or unenforceability of any provision of
------------
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
▇▇▇▇▇▇▇▇'▇, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
AGENT:
BANKAMERICA BUSINESS CREDIT, INC.,
as Agent
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Title: VP
Commitment: BANKS:
----------
$35,000,000 BANKAMERICA BUSINESS CREDIT, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Title: VP