EXHIBIT 10.31
THE CHILDREN'S PLACE RETAIL STORES, INC.
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BETWEEN THE CHILDREN'S PLACE RETAIL STORES, INC.,
THE FINANCIAL INSTITUTIONS NAMED HEREIN AND
▇▇▇▇▇ FARGO RETAIL FINANCE LLC, DATED APRIL 25, 2003
EXHIBIT 10.31
================================================================================
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
THE CHILDREN'S PLACE RETAIL STORES, INC.,
AS BORROWER,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
AS LENDERS,
AND
▇▇▇▇▇ FARGO RETAIL FINANCE LLC,
AS AGENT
================================================================================
TABLE OF CONTENTS
PAGE(s)
1. DEFINITIONS AND CONSTRUCTION.................................................................1
1.1 Definitions...........................................................................1
1.2 Accounting Terms.....................................................................16
1.3 Code.................................................................................16
1.4 Construction.........................................................................16
1.5 Schedules and Exhibits...............................................................16
2. LOAN AND TERMS OF PAYMENT...................................................................16
2.1 Revolving Advances...................................................................16
2.2 Letters of Credit....................................................................24
2.3 Intentionally Omitted................................................................27
2.4 Intentionally Omitted................................................................27
2.5 Payments.............................................................................27
2.6 Overadvances.........................................................................28
2.7 Interest and Letter of Credit Fees: Rates, Payments, and Calculations...............28
2.8 Collection of Accounts...............................................................30
2.9 Crediting Payments; Application of Collections.......................................30
2.10 Designated Account...................................................................30
2.11 Maintenance of Loan Account; Statements of Obligations...............................31
2.12 Fees.................................................................................31
2.13 Eurodollar Rate Loans................................................................31
2.14 Illegality...........................................................................33
2.15 Requirements of Law..................................................................33
2.16 Indemnity............................................................................35
3. CONDITIONS; TERM OF AGREEMENT...............................................................35
3.1 Conditions Precedent to the Initial Advance and the Initial Letter of Credit.........35
3.2 Conditions Precedent to all Advances and all Letters of Credit.......................36
3.3 Intentionally Omitted................................................................36
3.4 Term; Automatic Renewal..............................................................36
3.5 Effect of Termination................................................................37
3.6 Early Termination by Borrower........................................................37
4. CREATION OF SECURITY INTEREST...............................................................38
4.1 Grant of Security Interest...........................................................38
4.2 Negotiable Collateral................................................................38
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral...............38
4.4 Delivery of Additional Documentation Required........................................38
4.5 Power of Attorney....................................................................38
4.6 Right to Inspect.....................................................................39
i
5. REPRESENTATIONS AND WARRANTIES..............................................................39
5.1 No Encumbrances......................................................................39
5.2 Eligible Accounts....................................................................39
5.3 Eligible Inventory...................................................................40
5.4 Equipment............................................................................40
5.5 Location of Inventory and Equipment..................................................40
5.6 Inventory Records....................................................................40
5.7 Location of Chief Executive Office; FEIN.............................................40
5.8 Due Organization and Qualification; Subsidiaries.....................................40
5.9 Due Authorization; No Conflict.......................................................40
5.10 Litigation...........................................................................41
5.11 No Material Adverse Change...........................................................41
5.12 Solvency. Borrower is Solvent.......................................................41
5.13 Employee Benefits....................................................................41
5.14 Environmental Condition..............................................................41
6. AFFIRMATIVE COVENANTS.......................................................................42
6.1 Accounting System and Schedules......................................................42
6.2 Financial Statements, Reports, Certificates..........................................42
6.3 Tax Returns..........................................................................43
6.4 Designation of Inventory.............................................................43
6.5 Store Openings and Closings and Rents Reports........................................44
6.6 Title to Equipment...................................................................44
6.7 Maintenance of Equipment.............................................................44
6.8 Taxes................................................................................44
6.9 Insurance............................................................................44
6.10 No Setoffs or Counterclaims..........................................................45
6.11 Location of Inventory and Equipment..................................................45
6.12 Compliance with Laws.................................................................45
6.13 Employee Benefits....................................................................45
6.14 Leases...............................................................................46
7. NEGATIVE COVENANTS..........................................................................46
7.1 Indebtedness.........................................................................46
7.2 Liens................................................................................47
7.3 Restrictions on Fundamental Changes..................................................47
7.4 Disposal of Assets...................................................................47
7.5 Change Name..........................................................................47
7.6 Guarantee............................................................................47
7.7 Nature of Business...................................................................47
7.8 Prepayments and Amendments...........................................................47
7.9 Change of Control....................................................................48
7.10 Consignments.........................................................................48
7.11 Distributions........................................................................48
7.12 Accounting Methods...................................................................48
7.13 Advances, Investments and Loans......................................................48
ii
7.14 Transactions with Affiliates.........................................................49
7.15 Suspension...........................................................................49
7.16 Use of Proceeds......................................................................49
7.17 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees.........................................................................49
7.18 No Prohibited Transactions Under ERISA...............................................49
7.19 Financial Covenant...................................................................50
7.20 Capital Expenditures.................................................................50
8. EVENTS OF DEFAULT...........................................................................50
9. THE LENDER GROUP'S RIGHTS AND REMEDIES......................................................52
9.1 Rights and Remedies..................................................................52
9.2 Remedies Cumulative..................................................................54
10. TAXES AND EXPENSES..........................................................................54
11. WAIVERS; INDEMNIFICATION....................................................................55
11.1 Demand; Protest; etc.................................................................55
11.2 The Lender Group's Liability for Collateral..........................................55
11.3 Indemnification......................................................................55
12. NOTICES.....................................................................................55
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..................................................56
14. DESTRUCTION OF BORROWER'S DOCUMENTS.........................................................57
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..................................................57
15.1 Assignments and Participations.......................................................57
15.2 Successors...........................................................................60
16. AMENDMENTS; WAIVERS.........................................................................60
16.1 Amendments and Waivers...............................................................60
16.2 No Waivers; Cumulative Remedies......................................................61
17. AGENT; THE LENDER GROUP.....................................................................61
17.1 Appointment and Authorization of Agent...............................................61
17.2 Delegation of Duties.................................................................62
17.3 Liability of Agent-Related Persons...................................................62
17.4 Reliance by Agent....................................................................63
17.5 Notice of Default or Event of Default................................................63
17.6 Credit Decision......................................................................64
17.7 Costs and Expenses; Indemnification..................................................64
17.8 Agent in Individual Capacity.........................................................65
17.9 Successor Agent......................................................................65
17.10 Withholding Tax......................................................................65
17.11 Collateral Matters...................................................................67
iii
17.12 Restrictions on Actions by Lenders; Sharing of Payments..............................68
17.13 Agency for Perfection................................................................68
17.14 Payments by Agent to the Lenders.....................................................68
17.15 Concerning the Collateral and Related Loan Documents.................................69
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information...............................................69
17.17 Several Obligations; No Liability....................................................70
18. GENERAL PROVISIONS..........................................................................70
18.1 Effectiveness........................................................................70
18.2 Section Headings.....................................................................70
18.3 Interpretation.......................................................................71
18.4 Severability of Provisions...........................................................71
18.5 Counterparts; Telefacsimile Execution................................................71
18.6 Revival and Reinstatement of Obligations.............................................71
18.7 Integration..........................................................................71
iv
SCHEDULES AND EXHIBITS
Schedule C-1 Commitments on Closing Date
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 5.8 Subsidiaries
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Condition
Schedule 6.11 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Business Plan for Fiscal Year Ending on or about
January 31, 2004
Exhibit C-1 Form of Compliance Certificate
Exhibit D-1 Form of Collateral Certificate
v
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT (THIS
"AGREEMENT"), is entered into as of April 25, 2003, among THE CHILDREN'S PLACE
RETAIL STORES, INC., a Delaware corporation ("Borrower"), with its chief
executive office located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, on
the one hand, and the financial institutions listed on the signature pages
hereof (such financial institutions, together with their respective successors
and assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), and ▇▇▇▇▇ FARGO RETAIL FINANCE LLC, a Delaware
limited liability company, as Agent, on the other hand.
RECITALS
A. Borrower and Foothill Capital Corporation are parties to that certain
Second Amended and Restated
Loan and Security Agreement dated as of July 31,
1997 (as amended, the "Existing Loan Agreement").
▇. ▇▇▇▇▇ Fargo Retail is the assignee of Foothill Capital Corporation as
a Lender and the Agent under this Agreement.
C. Borrower, Agent and Lenders desire to amend and restate in its
entirety the Existing Loan Agreement.
The parties agree that the Existing Loan Agreement is amended and restated
as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"ACCOUNTS" means all currently existing and hereafter arising
accounts, contract rights, Revolving Accounts, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods or the
rendition of services by Borrower, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"ADJUSTED EURODOLLAR RATE" means, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next whole multiple of 1/16 of 1% per annum) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to (i) 100% minus (ii) the Reserve Percentage. The Adjusted Eurodollar
Rate shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
1
"ADDITIONAL FINANCING" means any increase in the Maximum Amount
from $100,000,000 to an amount not to exceed $120,000,000.
"ADVANCES" has the meaning set forth in SECTION 2.1(a).
"AFFILIATE" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" as applied to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"AGENT" means ▇▇▇▇▇ Fargo Retail, solely in its capacity as
agent for the Lenders, and shall include any successor agent.
"AGENT ADVANCE" has the meaning set forth in SECTION 2.1(h).
"AGENT LOAN" has the meaning set forth in SECTION 2.1(g).
"AGENT-RELATED PERSONS" means Agent, together with its
Affiliates, and the officers, directors, employees, counsel, agents, and
attorneys-in-fact of Agent and such Affiliates.
"AGENT'S ACCOUNT" has the meaning set forth in SECTION 2.8.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the second anniversary of the Closing Date, 0.25% times the sum of the Maximum
Amount, and (b) at all times on or after the second anniversary of the date of
this Agreement there shall not be any prepayment premium.
"ASSIGNEE" has the meaning set forth in SECTION 15.1.
"ASSIGNMENT AND ACCEPTANCE" has the meaning set forth in
SECTION 15.1(a) and shall be in the form of EXHIBIT A-1.
"AUTHORIZED PERSON" means any officer or other authorized
employee of Borrower.
"AVAILABILITY" means, as of the date of determination, the
result (so long as such result is a positive number) of (a) the lesser of the
Borrowing Base or the Maximum Amount, LESS (b) the Revolving Facility Usage.
"AVERAGE UNUSED PORTION OF MAXIMUM AMOUNT" means, as of any
date of determination, (a) an amount equal to the Maximum Amount, LESS (b) the
average Daily Balance of Obligations that were outstanding during the
immediately preceding month.
2
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 ET SEQ.), as amended, and any successor statute.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER'S BOOKS" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"BORROWING" means a borrowing hereunder consisting of Advances
made on the same day by the Lenders, or by Agent in the case of an Agent Loan or
an Agent Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1(a).
"BUSINESS DAY" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in Los Angeles,
California, are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the Eurodollar Rate or Eurodollar Rate
Loans, any day that is a Business Day pursuant to clause (a) above and that is
also a day on which trading in Dollars is carried on by and between banks in the
London interbank market.
"BUSINESS PLAN" means Borrower's and its Subsidiaries' business
plans attached hereto as Exhibit B-1, together with any amendment, modification,
or revision to such business plan approved by Agent.
"CHANGE OF CONTROL" shall be deemed to have occurred at such
time as Borrower's existing shareholders cease to be the "beneficial owners" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 40% of the total voting power of all classes of stock
then outstanding of Borrower normally entitled to vote in the election of
directors.
"CHILDREN'S PLACE CANADA" means The Children's Place (Canada),
LP, an Ontario limited partnership.
"CLOSING DATE" means the date of the first to occur of the
making of the initial Advance or the issuance of the initial Letter of Credit.
"CODE" means the
California Uniform Commercial Code.
"COLLATERAL" means each of the following:
3
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of the Lender Group, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Investment Property, Negotiable
Collateral, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or Inventory,
in each case, in form and substance satisfactory to Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMITMENT" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on SCHEDULE C-1 or on the signature page of the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of SECTION 15.1, as such Commitment may be adjusted from
time to time in accordance with the provisions of SECTION 15.1 and "Commitments"
means, collectively, the aggregate amount of the commitments of all of the
Lenders.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C-1 and delivered by the chief accounting officer of
Borrower to Agent.
"DAILY BALANCE" means, with respect to each day during the term
of this Agreement, the amount of an Obligation owed at the end of such day.
4
"DEEMS ITSELF INSECURE" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the Code.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" has the meaning set forth in SECTION
2.1(f)(ii).
"DEFAULTING LENDERS RATE" means the Reference Rate for the
first three days from and after the date the relevant payment is due and
thereafter at the interest rate then applicable to Advances.
"DESIGNATED ACCOUNT" means account number 20-3024941126-6 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Agent.
"DESIGNATED ACCOUNT BANK" means First Union National Bank,
whose office is located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
and whose ABA number is ▇▇▇▇▇▇▇▇▇.
"DISBURSEMENT LETTER" means an instructional letter executed
and delivered by Borrower to Agent regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Agent.
"DOLLARS OR $" means United States dollars.
"ELIGIBLE ACCOUNTS" means those Accounts created by Borrower in
the ordinary course of business, that arise out of Borrower's sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrower to the
Lender Group in the Loan Documents, and that are and at all times continue to be
reasonably acceptable to Agent in all respects; PROVIDED, HOWEVER, that
standards of eligibility may be fixed and revised from time to time by Agent in
Agent's reasonable credit judgment. Eligible Accounts shall not include the
following:
(a) Accounts that the Account Debtor has failed to pay within
90 days of invoice date;
(b) Accounts owed by an Account Debtor or its Affiliates
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
5
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States
or any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (y) the Account is supported by an irrevocable
letter of credit satisfactory to Agent (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Agent and is directly
drawable by Agent, or (z) the Account is covered by credit insurance in form and
amount, and by an insurer, satisfactory to Agent;
(f) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Agent, with the Assignment of
Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Account;
(h) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(i) Accounts the collection of which Agent, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition.
"ELIGIBLE INVENTORY" means Inventory consisting of first
quality finished goods held for sale in the ordinary course of Borrower's
business (other than inventory of Children's Place Canada), that is reasonably
acceptable to Agent in all respects, that is located at Borrower's premises
identified on Schedule E-1 or that is in transit to Borrower if: (a) title to
such Inventory has been transferred to Borrower, (b) the Inventory is insured to
Agent's reasonable satisfaction and (c) documentation regarding such Inventory
is reasonably acceptable to Agent, and such Inventory strictly complies with all
of Borrower's representations and warranties to the Lender Group. If Eligible
Inventory is in transit to Borrower and has been acquired pursuant to a Letter
of Credit, the Letter of Credit must have been drawn upon. Eligible Inventory
shall not include slow moving Inventory (as determined in Agent's reasonable
business judgment based upon industry practices), or obsolete items, restrictive
or custom items, raw materials, work-in-process, components that are not part of
finished goods, spare parts, packaging and shipping materials, supplies used or
consumed in Borrower's business, Inventory subject to a security interest or
6
lien in favor of any third Person, ▇▇▇▇ and hold goods, Inventory that is not
subject to Agent's perfected security interests, defective goods (except for
minor defects that do not affect saleability), "seconds," and Inventory acquired
on consignment.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $5,000,000,000, or the asset based lending Affiliate of such
bank, (b) a commercial bank organized under the laws of any other country which
is a member of the Organization for Economic Cooperation and Development or a
political subdivision of any such country, and having total assets in excess of
$5,000,000,000, or the asset based lending Affiliate of such bank; provided that
such bank is acting through a branch or agency located in the United States, (c)
a finance company, insurance or other financial institution, or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having total assets in excess of
$500,000,000, (d) any Affiliate (other than individuals) of an existing Lender,
and (e) any other Person approved by Agent and Borrower.
"EQUIPMENT" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any assets acquired by Borrower with the proceeds of a Capital
Expenditure Loan, (b) any interest of Borrower in any of the foregoing, and (c)
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which, within the meaning of Section 414 of the IRC, is: (i) under
common control with Borrower; (ii) treated, together with Borrower, as a single
employer; (iii) treated as a member of an affiliated service group of which
Borrower is also treated as a member; or (iv) is otherwise aggregated with the
Borrower for purposes of the employee benefits requirements listed in IRC
Section 414(m)(4).
"ERISA EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
7
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"EURODOLLAR RATE" means, with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum (rounded upwards, if
necessary, to the next whole multiple of 1/16 of 1% per annum) at which United
States dollar deposits are offered to ▇▇▇▇▇ Fargo (or its Affiliates) by major
banks in the London interbank market (or other Eurodollar Rate market selected
by Agent) on or about 11:00 a.m. (
California time) two Business Days prior to
the commencement of such Interest Period in amounts comparable to the amount of
the Eurodollar Rate Loans requested by and available to Borrower in accordance
with this Agreement.
"EURODOLLAR RATE LOANS" means any Advance (or any portion
thereof) made or outstanding hereunder during any period when interest on such
Advance (or portion thereof) is payable based on the Adjusted Eurodollar Rate.
"EURODOLLAR RATE MARGIN" means 1.50% initially and shall be
subject to review on June 1, 2003, and at the end of each Fiscal Month
thereafter to the following levels corresponding to the following amount of
Availability:
AMOUNT OF AVAILABILITY EURODOLLAR RATE MARGIN
Greater than $40,000,000 1.50%
Equal to or less than $40,000,000 and 1.75%
greater than $30,000,000
Equal to or less than $30,000,00 and 2.25%
greater than $20,000,000
Equal to or less than $20,000,000 and 2.75%
greater than $10,000,000
Less than $10,000,000 3.00% (subject, however, to
waiver by the Required Lenders)
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"FEIN" means Federal Employer Identification Number.
"FISCAL MONTH" means months computed on the retail basis of
four weeks, five weeks and four weeks per fiscal quarter.
"FISCAL YEAR" means a retail year ending on the Saturday
closest to January 31.
"FUNDING DATE" means the date on which a Borrowing occurs.
8
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, infringement claims, computer programs, information
contained on computer disks or tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds, and tax refund claims), other
than goods, Accounts, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"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.
"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"INDEBTEDNESS" means: (a) all obligations of Borrower for
borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
capital leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION
11.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria,
9
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"INTEREST PERIOD" means, for any Eurodollar Rate Loan, the
period commencing on the Business Day such Eurodollar Rate Loan is disbursed or
continued, or on the Business Day on which a Reference Rate Loan is converted to
such Eurodollar Rate Loan, and ending on the date that is one, three or six
months thereafter, as selected by Borrower and notified to Agent as provided in
SECTIONS 2.13(a) AND (b).
"INVENTORY" means all present and future inventory (other than
inventory of Children's Place Canada) in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a contract of
service and all of Borrower's present and future raw materials, work in process,
finished goods, and packing and shipping materials, wherever located.
"INVENTORY RESERVES" means reserves (determined from time to
time by Agent in its discretion) for (a) the estimated costs relating to unpaid
freight charges, warehousing or storage charges, taxes, duties, and other
similar unpaid costs associated with the acquisition of Eligible In-Transit
Inventory by Borrower, plus (b) the estimated reclamation claims of unpaid
sellers of Inventory sold to Borrower.
"INVESTMENT PROPERTY" means all of Borrower's presently
existing and hereafter acquired or arising investment property (as that term is
defined in Section 9115 of the Code).
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in SECTION 2.2(a).
"L/C GUARANTY" has the meaning set forth in SECTION 2.2(a).
"LENDER" AND "LENDERS" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of SECTION 15.1.
"LENDER GROUP" means, individually and collectively, each of
the individual Lenders and Agent.
"LENDER GROUP EXPENSES" means all: reasonable costs or expenses
(including taxes, and insurance premiums) required to be paid by Borrower under
any of the Loan Documents that are paid or incurred by the Lender Group;
reasonable fees or charges paid or incurred by the Lender Group in connection
with the Lender Group's transactions with Borrower, including, fees or charges
for photocopying, notarization, couriers and messengers,
10
telecommunication, public record searches (including tax lien, litigation, and
UCC searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic Collateral appraisals); environmental
audits; costs and expenses incurred by Agent in the disbursement of funds to
Borrower (by wire transfer or otherwise); charges paid or incurred by Agent
resulting from the dishonor of checks; costs and expenses paid or incurred by
Agent to correct any default or enforce any provision of the Loan Documents, or
in gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; reasonable costs
and expenses paid or incurred by the Lender Group in examining Borrower's Books;
costs and expenses of third party claims or any other suit paid or incurred by
the Lender Group in enforcing or defending the Loan Documents or in connection
with the transactions contemplated by the Loan Documents or the Lender Group's
relationship with Borrower or any guarantor; and the Lender Group's reasonable
attorneys fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing, defending, or
concerning the Loan Documents (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), irrespective of
whether suit is brought. Notwithstanding anything to the contrary set forth
herein, the foregoing shall be subject to the limitations set forth in SECTION
2.12(e).
"LETTER OF CREDIT" means an L/C or an L/C Guaranty, as the
context requires.
"LETTER OF CREDIT AMOUNT" means 0.75% per annum.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.11.
"LOAN DOCUMENTS" means this Agreement, the Disbursement Letter,
the Letters of Credit, the Lockbox Agreements, the Stock Pledge, any note or
notes executed by Borrower and payable to the Lender Group, and any other
agreement entered into, now or in the future, in connection with this Agreement.
"LOCKBOX ACCOUNT" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
11
"LOCKBOX AGREEMENTS" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Agent, each of which is among Borrower, Agent, and
one of the Lockbox Banks.
"LOCKBOX BANKS" means First Union National Bank, or any
replacement bank chosen by Borrower and acceptable to Agent.
"LOCKBOXES" has the meaning set forth in SECTION 2.8.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect on the
value of the Collateral or the amount that the Lender Group would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material impairment
of the priority of the Lender Group's Liens with respect to the Collateral.
"MAXIMUM AMOUNT" means $75,000,000, initially and $100,000,000
once one or more Lenders have additional Commitments in the aggregate of
$25,000,000 PLUS the amount of the Additional Financing if it is provided by the
Lenders.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined
in SECTION 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of subsidiaries of
Borrower, but limited to 66% of the outstanding shares of each class of stock of
any foreign Subsidiary), investment property, security entitlements, documents,
personal property leases (wherein Borrower is the lessor), chattel paper, and
Borrower's Books relating to any of the foregoing.
"NRLV" means at any time of determination thereof, the ratio,
expressed as a percentage, of the net retail liquidation value of Borrower's
Inventory divided by the retail value of such Inventory, all as set forth in the
most recent appraisal delivered to, and approved by Agent.
"OBLIGATIONS" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, liabilities (including all amounts charged to
Borrower's Loan Account pursuant hereto), obligations, fees, charges, costs, or
Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties owing by Borrower to the Lender Group of any
kind and description (whether
12
pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between the Lender Group and Borrower, and irrespective of whether for
the payment of money), whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from Borrower to others that the Lender Group may
have obtained by assignment or otherwise, and further including all interest not
paid when due and all Lender Group Expenses that Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"ORIGINATING LENDER" has the meaning set forth in SECTION
15.1(e).
"OVERADVANCE" has the meaning set forth in SECTION 2.6.
"PARTICIPANT" has the meaning set forth in SECTION 15.1(c).
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"PERMITTED LIENS" means (a) Liens held by the Lender Group, (b)
Liens for unpaid taxes that either (i) are not yet due and payable or (ii) are
the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1, (d) the
interests of lessors under operating leases and purchase money security
interests and Liens of lessors under capital leases to the extent that the
acquisition or lease of the underlying asset is permitted under SECTION 7.21 and
so long as the Lien only attaches to the asset purchased or acquired and only
secures the purchase price of the asset, (e) Liens arising by operation of law
in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers,
or suppliers, incurred in the ordinary course of business of Borrower and not in
connection with the borrowing of money, and which Liens either (i) are for sums
not yet due and payable, or (ii) are the subject of Permitted Protests, (f)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of Borrower and not in
connection with the borrowing of money, (h) Liens arising by reason of security
for surety or appeal bonds in the ordinary course of business of Borrower, (i)
Liens of or resulting from any judgment or award that would not cause a Material
Adverse Change and as to which the time for the appeal or petition for rehearing
of which has not yet expired, or in respect of which Borrower is in good faith
prosecuting an appeal or proceeding for a review, and in respect of which a stay
of execution pending such appeal or proceeding for review has been secured, and
(j) with respect to any Real Property, easements, rights of way, zoning and
similar covenants and restrictions, and similar encumbrances that customarily
exist on properties of Persons engaged in similar activities and similarly
situated and that in any event do not materially interfere with or impair the
use or operation of the Collateral by Borrower or the value of the Lender
Group's Lien thereon or therein, or materially interfere with the ordinary
conduct of the business of Borrower.
"PERMITTED PROTEST" means the right of Borrower to protest any
Lien (other than any such Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Borrower in an amount that is
13
reasonably satisfactory to Agent, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of the Lender Group in
and to the Collateral.
"PERSON" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"PLAN" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"PRO-RATA SHARE" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the aggregate amount of the
Commitments.
"REAL PROPERTY" means any estates or interests in real property
now owned or hereafter acquired by Borrower.
"REFERENCE RATE" the rate of interest announced within ▇▇▇▇▇
Fargo at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of ▇▇▇▇▇ Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as ▇▇▇▇▇ Fargo may designate.
"REFERENCE RATE LOANS" means any advance (or portion thereof)
made or outstanding hereunder during any period when interest on such Advance is
payable based on the Reference Rate.
"RENEWAL DATE" has the meaning set forth in SECTION 3.4.
"REPORTABLE EVENT" means any of the events described in SECTION
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"REQUIRED LENDERS" means, at any time, Agent together with such
other Lenders whose Pro Rata Shares together with Agent aggregate 50.1% or more
of the Commitments; PROVIDED, HOWEVER, that in all circumstances in which there
are two or more Lenders, Required Lenders shall include at least one Lender that
is not the Agent or an Affiliate of Agent.
"REQUIREMENT OF LAW" means, as to any Person: (a) (i) all
statutes and regulations and (ii) court orders and injunctions, arbitrators'
decisions, and/or similar rulings, in each instance by any Governmental
Authority or arbitrator applicable to or binding upon such Person or any of such
Person's property or to which such Person or any of such Person's property
14
is subject; and (b) that Person's organizational documents, by-laws and/or other
instruments which deal with corporate or similar governance, as applicable.
"RESERVE PERCENTAGE" for any Interest Period means, as of the
date of determination thereof, the maximum percentage (rounded upward, if
necessary to the nearest 1/100th of 1%), as determined by Agent (or its
Affiliates) in accordance with its (or their) usual procedures (which
determination shall be conclusive in the absence of manifest error), that is in
effect on such date as prescribed by the Board of Governors of the Federal
Reserve System for determining the reserve requirements (including supplemental,
marginal, and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "eurocurrency liabilities") having a term
equal to such Interest Period by Agent or its Affiliates.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan"
within the meaning of SECTION 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"REVOLVING ACCOUNTS" means any Account arising from an
agreement to extend credit on an ongoing basis through the use of a device such
as a credit card or the like, whether or not subject to regulation under Federal
Reserve Board Regulation Z, or any state statute or regulation on
truth-in-lending.
"REVOLVING FACILITY USAGE" means, as of any date of
determination, the aggregate amount of Advances and undrawn or unreimbursed
Letters of Credit outstanding.
"SETTLEMENT" has the meaning set forth in SECTION 2.1(h)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION
2.1(h)(i).
"SOLVENT" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"STOCK PLEDGE" means that certain Security Agreement-Stock
Pledge, dated as of January 31, 1999, between Borrower and Agent.
15
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 15.8.
"▇▇▇▇▇ FARGO" means ▇▇▇▇▇ Fargo Bank, National Association.
"▇▇▇▇▇ FARGO RETAIL" means ▇▇▇▇▇ Fargo Retail Finance LLC, a
Delaware limited liability company.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by the requisite members of the Lender Group. Section, subsection,
clause, schedule, and exhibit references are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) AMOUNTS. Subject to the terms and conditions of this
Agreement, each Lender agrees to make advances ("Advances") to Borrower in an
amount at any one time outstanding not to exceed such Lender's Pro Rata Share of
an amount equal to the lesser of (i) the Maximum Amount LESS the aggregate
amount of all undrawn or unreimbursed Letters of Credit, or (ii) the Borrowing
Base LESS the aggregate amount of all undrawn or unreimbursed Letters of
16
Credit. For purposes of this Agreement, "Borrowing Base", as of any date of
determination, shall mean the result of:
(w) 90% of Eligible Accounts, PLUS
(x) 30% of the retail value of Borrower's Eligible
Inventory, NOT TO EXCEED 90% of the NRLV of Borrower's gross Inventory for
months other than June through November of each year and 95% of the NRLV of
Borrower's gross Inventory for the months of June through November of each
year; PLUS
(y) an amount equal to 70% of the Borrower's cost of
Inventory to be acquired pursuant to outstanding commercial Letters of
Credit (except that inventory acquired by Letters of Credit for Children's
Place Canada shall not be included in this Section). Such Letters of Credit
must not allow partial draws unless such draws are for finished goods
Inventory concurrently transferred to Borrower, and draws thereunder must
require documentation reflecting the transfer of title to Borrower (in form
and substance satisfactory to Agent) of first quality finished goods
Inventory conforming to Borrower's contract with the seller; LESS
(z) the aggregate amount of reserves, if any,
established by Agent under SECTIONS 2.1(b), 6.14 AND 10.
(b) RESERVES. Anything to the contrary in this SECTION 2.1
notwithstanding, Agent may (i) reduce the advance rates based upon Eligible
Accounts and Eligible Inventory without declaring an Event of Default if it
determines in its reasonable business judgment that there has occurred a
Material Adverse Change; and (ii) establish reserves against the Borrowing Base
in such amounts as Agent in its reasonable judgment (from the perspective of an
asset-based lender) shall deem necessary or appropriate, including reserves on
account of (y) sums that Borrower is required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any section
of this Agreement or any other Loan Document and (z) without duplication of the
foregoing, amounts owing by Borrower to any Person to the extent secured by a
Lien on, or trust over, any of the Collateral, which Lien or trust, in the
reasonable determination of Agent (from the perspective of an asset-based
lender), would be likely to have a priority superior to the Liens of Agent (such
as landlord liens, ad valorem taxes, or sales taxes where given priority under
applicable law) in and to such item of the Collateral.
(c) REVOLVING NATURE. Amounts borrowed pursuant to this
SECTION 2.1 may be repaid and, subject to the terms and conditions of this
Agreement, reborrowed at any time during the term of this Agreement.
(d) PROCEDURE FOR BORROWING. Each Borrowing shall be made
upon Borrower's irrevocable request therefor delivered to Agent (which notice
must be received by Agent no later than 10:00 a.m. (
California time) on the
Funding Date if such advance is for $8,000,000 or less or no later than 10:00
a.m. (
California time) on the Business Day immediately preceding the requested
Funding Date if such advance is for more than $8,000,000) specifying (i)
17
the amount of the Borrowing; and (ii) the requested Funding Date, which shall be
a Business Day.
(e) AGENT'S ELECTION. Promptly after receipt of a request for
a Borrowing pursuant to SECTION 2.1(d) in excess of $8,000,000, the Agent shall
elect, in its discretion, (i) to have the terms of SECTION 2.1(f) apply to such
requested Borrowing, or (ii) to make an Agent Loan pursuant to the terms of
SECTION 2.1(g) in the amount of the requested Borrowing. Any requested Borrowing
of $8,000,000 or less shall be made as an Agent Loan pursuant to the terms of
SECTION 2.1(g).
(f) MAKING OF ADVANCES.
(i) In the event that the Agent shall elect to have
the terms of this SECTION 2.1(f) apply to a requested Borrowing in excess of
$8,000,000 as described in SECTION 2.1(e), then promptly after receipt of a
request for a Borrowing pursuant to SECTION 2.1(d), the Agent shall notify the
Lenders, not later than 1:00 p.m. (
California time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telephone and
promptly followed by telecopy, or other similar form of transmission, of the
requested Borrowing. Each Lender shall make the amount of such Lender's Pro Rata
Share of the requested Borrowing available to the Agent in same day funds, to
such account of the Agent as the Agent may designate, not later than 11:00 a.m.
(
California time) on the Funding Date applicable thereto. After the Agent's
receipt of the proceeds of such Advances, upon satisfaction of the applicable
conditions precedent set forth in SECTIONS 3.1 and 3.2, the Agent shall make the
proceeds of such Advances available to Borrower on the applicable Funding Date
by transferring same day funds equal to the proceeds of such Advances received
by the Agent to the Designated Deposit Account; PROVIDED, HOWEVER, that, subject
to the provisions of SECTION 2.1(l), the Agent shall not request any Lender to
make, and no Lender shall have the obligation to make, any Advance if the Agent
shall have received written notice from any Lender, or otherwise has actual
knowledge, that (A) one or more of the applicable conditions precedent set forth
in SECTIONS 3.1 or 3.2 will not be satisfied on the requested Funding Date for
the applicable Borrowing, or (B) the requested Borrowing would exceed the
Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to Agent for the
account of Borrower the amount of that Lender's Pro Rata Share of the Borrowing,
Agent may assume that each Lender has made or will make such amount available to
Agent in immediately available funds on the Funding Date and Agent may (but
shall not be so required), in reliance upon such assumption, make available to
Borrower on such date a corresponding amount. If and to the extent any Lender
shall not have made its full amount available to Agent in immediately available
funds and Agent in such circumstances has made available to Borrower such
amount, that Lender shall on the Business Day following such Funding Date make
such amount available to Agent, together with interest at the Defaulting Lenders
Rate for each day during such period. A notice from Agent submitted to any
Lender with respect to amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is paid to Agent such payment to Agent
shall constitute such Lender's Advance
18
on the date of Borrowing for all purposes of this Agreement. If such amount is
not paid to Agent on the Business Day following the Funding Date, Agent will
notify Borrower of such failure to fund and, upon demand by Agent, Borrower
shall pay such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate per
annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Lender to make any Advance on any
Funding Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other Lender
on any Funding Date. Any Lender that fails to make any Advance that it is
required to make hereunder on any Funding Date and that has not cured such
failure by making such Advance within one Business Day after written demand upon
it by Agent to do so, shall constitute a "Defaulting Lender" for purposes of
this Agreement until such Advance is made.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by Agent. Agent may hold and, in its discretion, re-lend to
Borrower the amount of all such payments received or retained by it for the
account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Defaulting Lender's Commitment shall be deemed to be zero. This section
shall remain effective with respect to such Defaulting Lender until (A) the
Obligations under this Agreement shall have been declared or shall have become
immediately due and payable or (B) the requisite non-Defaulting Lenders, Agent,
and Borrower shall have waived such Defaulting Lender's default in writing. The
operation of this section shall not be construed to increase or otherwise affect
the Commitment of any non-Defaulting Lender, or relieve or excuse the
performance by Borrower of their duties and obligations hereunder.
(g) MAKING OF AGENT LOANS.
(i) In the event the Agent shall elect to have the
terms of this SECTION 2.1(g) apply to a requested Borrowing in excess of
$8,000,000 as described in SECTION 2.1(e) or in the event of any requested
Borrowing of $8,000,000 or less, Agent shall make an Advance in the amount of
such Borrowing (any such Advance made solely by Agent pursuant to this SECTION
2.1(g) being referred to as an "Agent Loan" and such Advances being referred to
collectively as "Agent Loans") available to Borrower on the Funding Date
applicable thereto by transferring same day funds to Borrower's Designated
Deposit Account. Each Agent Loan is an Advance hereunder and shall be subject to
all the terms and conditions applicable to other Advances, except that all
payments thereon shall be payable to Agent solely for its own account (and for
the account of the holder of any participation interest with respect to such
Advance). Subject to the provisions of SECTION 2.1(l), the Agent shall not make
any Agent Loan if the Agent shall have received written notice from any Lender,
or otherwise has actual knowledge, that (i) one or more of the applicable
conditions precedent set forth in SECTIONS 3.1 or 3.2 will not be satisfied on
the requested Funding Date for the applicable Borrowing, or (ii) the requested
Borrowing would exceed the Availability on such Funding Date. Agent shall not
19
otherwise be required to determine whether the applicable conditions precedent
set forth in SECTIONS 3.1 or 3.2 have been satisfied on the Funding Date
applicable thereto prior to making, in its sole discretion, any Agent Loan.
(ii) The Agent Loans shall be secured by the Collateral
and shall constitute Advances and Obligations hereunder, and shall bear interest
at the rate applicable from time to time to Obligations pursuant to SECTION 2.7.
(h) AGENT ADVANCES.
(i) Agent hereby is authorized by Borrower and the
Lenders, from time to time in Agent's sole discretion, (1) after the occurrence
of a Default or an Event of Default (but without constituting a waiver of such
Default or Event of Default), or (2) at any time that any of the other
applicable conditions precedent set forth in SECTION 3.1 or 3.2 have not been
satisfied, to make Advances to Borrower on behalf of the Lenders which Agent, in
its reasonable business judgment, deems necessary or desirable (A) to preserve
or protect the Collateral, or any portion thereof, (B) to enhance the likelihood
of, or maximize the amount of, repayment of the Obligations, or (C) to pay any
other amount chargeable to Borrower pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses described in
Section 10 (any of the Advances described in this SECTION 2.1(h) being
hereinafter referred to as "Agent Advances"); PROVIDED, that Agent shall not
make any Agent Advances to Borrower without the consent of the Required Lenders
if the amount thereof would exceed $8,000,000 in the aggregate at any one time.
(ii) Agent Advances shall be repayable on demand and
secured by the Collateral, shall constitute Advances and Obligations hereunder,
and shall bear interest at the rate applicable from time to time to the
Obligations pursuant to SECTION 2.7.
(i) SETTLEMENT. It is agreed that each Lender's funded
portion of the Advances is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, the Agent and the Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Agent Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) The Agent shall request settlement ("Settlement")
with the Lenders on a weekly basis, or on a more frequent basis if so determined
by the Agent, (1) for itself, with respect to each Agent Loan and Agent Advance,
and (2) with respect to Collections received, as to each by notifying the
Lenders by telephone and promptly followed by telecopy, or other similar form of
transmission, of such requested Settlement, no later than 1:00 p.m. (
California
time) on the Business Date immediately preceding the date of such requested
Settlement (the "Settlement Date"). Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances, Agent Loans,
and Agent Advances for the period since the prior Settlement Date, the amount of
repayments received in such period, and the amounts allocated to each Lender of
the principal, interest, fees, and other charges for such
20
period. Subject to the terms and conditions contained herein: (y) if a Lender's
balance of the Advances, Agent Loans, and Agent Advances exceeds such Lender's
Pro Rata Share of the Advances, Agent Loans, and Agent Advances as of a
Settlement Date, then Agent shall by no later than 1:00 p.m. (
California time)
on the Settlement Date transfer in same day funds to the account of such Lender
as Lender may designate, an amount such that each such Lender shall, upon
receipt of such amount, have as of the Settlement Date, its Pro Rata Share of
the Advances, Agent Loans, and Agent Advances; and (z) if a Lender's balance of
the Advances, Agent Loans, and Agent Advances is less than such Lender's Pro
Rata Share of the Advances, Agent Loans, and Agent Advances as of a Settlement
Date, such Lender shall no later than 1:00 p.m. (
California time) on the
Settlement Date transfer in same day funds to such account of the Agent as the
Agent may designate, an amount such that each such Lender shall, upon transfer
of such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances, Agent Loans, and Agent Advances. Such amounts made available to the
Agent under clause (z) of the immediately preceding sentence shall be applied
against the amounts of the applicable Agent Loan or Agent Advance and, together
with the portion of such Agent Loan or Agent Advance representing each Lender's
Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such
amount is not made available to the Agent by any Lender on the Settlement Date
applicable thereto to the extent required by the terms hereof, the Agent shall
be entitled to recover for its account such amount on demand from such Lender
together with interest thereon at the Defaulting Lenders Rate.
(ii) In determining whether a Lender's balance of the
Advances, Agent Loans, and Agent Advances is less than, equal to, or greater
than such Lender's Pro Rata Share of the Advances, Agent Loans, and Agent
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received by
Agent with respect to principal, interest, fees payable by Borrower and
allocable to the Lenders hereunder, and proceeds of Collateral. To the extent
that a net amount is owed to any such Lender after such application, such net
amount shall be distributed by Agent to that Lender as part of such Settlement;
PROVIDED, HOWEVER, that the closing fee payable by Borrower under Section
2.12(b) shall be distributed to the Lenders within three Business Days following
the Closing Date without regard to the netting of amounts owing to or owed by
any Lender as part of a Settlement.
(iii) Between Settlement Dates, the Agent, to the extent
no Agent Advances or Agent Loans are outstanding, may pay over to Lenders any
payments received by the Agent, which in accordance with the terms of the
Agreement would be applied to the reduction of the Advances, for application to
Lenders' Pro Rata Share of the Advances. If, as of any Settlement Date,
Collections received since the then immediately preceding Settlement Date have
been applied to Lenders' Pro Rata Share of the Advances other than to Agent
Loans or Agent Advances, as provided for in the previous sentence, Lenders shall
pay to the Agent for the accounts of the Lenders, and Agent shall pay to the
Lenders, to be applied to the outstanding Advances of such Lenders, an amount
such that each Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During the period between
Settlement Dates, the Agent with respect to Agent Loans and Agent Advances, and
each Lender with respect to the Advances other than Agent Loans and Agent
Advances, shall be entitled to
21
interest at the applicable rate or rates payable under this Agreement on the
daily amount of funds employed by the Agent or the Lenders, as applicable.
(j) NOTATION. The Agent shall record on its books the
principal amount of the Advances owing to each Lender, including the Agent Loans
and Agent Advances owing to the Agent, and the interests therein of each Lender,
from time to time. In addition, each Lender is authorized, at such Lender's
option, to note the date and amount of each payment or prepayment of principal
of such Lender's Advances in its books and records, including computer records,
such books and records constituting rebuttably presumptive evidence, absent
manifest error, of the accuracy of the information contained therein.
(k) LENDERS' FAILURE TO PERFORM. All Advances (other than
Agent Loans and Agent Advances) shall be made by the Lenders simultaneously and
in accordance with their Pro Rata Shares. It is understood that (i) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure by any other Lender
to perform its obligation to make any Advances hereunder, and (ii) no failure by
any Lender to perform its obligation to make any Advances hereunder shall excuse
any other Lender from its obligation to make any Advances hereunder.
(l) OVERADVANCES. Agent may make voluntary Overadvances
without the written consent of the Required Lenders for amounts charged to the
applicable Loan Account for interest, fees or Lender Group Expenses pursuant to
SECTION 2.1(h)(i)(2)(C). If the conditions for borrowing under SECTION 3.2(d)
cannot be fulfilled, the Agent may, but is not obligated to, knowingly and
intentionally continue to make Advances (including Agent Loans) to Borrower such
failure of condition notwithstanding, so long as, at any time, (i) either (A)
the outstanding Revolving Facility Usage would not exceed the Borrowing Base for
more than 60 consecutive days or more than once in any 180 day period, and the
maximum outstanding overadvance amount shall not exceed $2,000,000 or (B) (y)
the outstanding Revolving Facility Usage would not exceed the Borrowing Base by
more than the amount proposed by Agent and agreed to by the Required Lenders,
and (z) such Advances are made pursuant to a plan (proposed by Agent and agreed
to by the Required Lenders) for the elimination of the outstanding Revolving
Facility Usage in excess of the Borrowing Base, and (ii) the outstanding
Revolving Facility Usage (except for and excluding amounts charged to the
applicable Loan Account for interest, fees, or Lender Group Expenses) does not
exceed the Maximum Amount. The foregoing provisions are for the sole and
exclusive benefit of the Agent and the Lenders and are not intended to benefit
Borrower in any way. The Advances and Agent Loans, as applicable, that are made
pursuant to this SECTION 2.1(l) shall be subject to the same terms and
conditions as any other Agent Advance or Agent Loan, as applicable, except that
the rate of interest applicable thereto shall be the rates set forth in SECTION
2.7(c)(i) without regard to the presence or absence of a Default or Event of
Default; PROVIDED, that the Required Lenders may, at any time, revoke Agent's
authorization contained in this SECTION 2.1(l) to make Overadvances (except for
and excluding amounts charged to the applicable Loan Account for interest, fees,
or Lender Group Expenses), any such revocation to be in writing and to become
effective upon Agent's receipt thereof; PROVIDED FURTHER, HOWEVER, that the
making of such Overadvances shall not constitute a waiver of such Event of
Default arising therefrom.
22
In the event Agent obtains actual knowledge that
Revolving Facility Usage exceeds the amount permitted by the preceding
paragraph, regardless of the amount of or reason for such excess, Agent shall
notify Lenders as soon as practicable (and prior to making any (or any further)
intentional Overadvances (except for and excluding amounts charged to the
applicable Loan Account for interest, fees, or Lender Group Expenses) unless
Agent determines that prior notice would result in imminent harm to the
Collateral or its value), and Lenders thereupon shall, together with Agent,
jointly determine the terms of arrangements that shall be implemented with
Borrower intended to reduce, within a reasonable time, the outstanding principal
amount of the Advances to Borrower to an amount permitted by the preceding
paragraph. In the event any Lender disagrees over the terms of reduction and/or
repayment of any Overadvance, the terms of reduction and/or repayment thereof
shall be implemented according to the determination of the Required Lenders.
Each Lender shall be obligated to settle with Agent as
provided in SECTION 2.1(i) for the amount of such Lender's Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this SECTION 2.1(l), and any Overadvances
resulting from the charging to the applicable Loan Account of interest, fees, or
Lender Group Expenses.
(m) EFFECT OF BANKRUPTCY. If a case is commenced by or
against any Borrower under the Bankruptcy Code, or other statute providing for
debtor relief, then, without the approval of Required Lenders the Lender Group
shall not make additional loans or provide additional financial accommodations
under the Loan Documents to such Borrower as debtor or debtor-in-possession, or
to any trustee for such Borrower, nor consent to the use of cash collateral
(provided that the applicable Loan Account shall continue to be charged, to the
fullest extent permitted by law, for accruing interest, fees, and Lender Group
Expenses).
(n) ADDITIONAL FINANCING. At Borrower's request, subject to
each of the following conditions, Agent and Lenders may provide the Additional
Financing:
(i) no Event of Default or prospective Event of
Default shall exist;
(ii) any increases in the Maximum Amount (and any
concurrent increases in the maximum amount of the Letter of Credit facility)
will be in a minimum amount of $5,000,000 and $5,000,000 increases thereto
(provided that the Maximum Amount will not in any event exceed $120,000,000 and
the maximum Letter of Credit facility will not exceed $100,000,000), and at the
effective date thereof, Borrower shall pay to Agent for the ratable benefit of
Lenders, an amendment fee in the amount of 0.125% of the amount of any increase
in the Maximum Amount;
(iii) Agent and Lenders shall have received and approved
Borrower's updated Business Plan;
23
(iv) Borrower shall have Borrowing Base Availability
(without being limited by the Maximum Amount) as of the end of each of the three
months prior to such increase of at least $10,000,000;
(v) Borrower shall have given Agent and Lenders not
less than 90 days advance written notice of its desire for the Additional
Financing during which time Agent shall use its best efforts to obtain
additional binding commitments of new Lenders or from existing Lenders; and
(vi) Agent shall have received binding commitments of
new Lenders (or from existing Lenders) for the increase in the Maximum Amount.
2.2 LETTERS OF CREDIT.
(a) AGREEMENT TO CAUSE ISSUANCE; AMOUNTS; OUTSIDE EXPIRATION
DATE. Subject to the terms and conditions of this Agreement, Agent agrees to
issue letters of credit for the account of Borrower (each, an "L/C") or to issue
guarantees of payment (each such guaranty, an "L/C Guaranty") with respect to
letters of credit issued by an issuing bank for the account of Borrower;
PROVIDED, HOWEVER, Borrower shall have the right to cause Letters of Credit for
the purchase of inventory by Children's Place Canada. For purposes of
clarification, the inventory referred to herein is not part of Inventory as that
term is defined in this Agreement. Agent shall have no obligation to issue a
Letter of Credit if any of the following would result:
(i) 100% of the aggregate amount of all undrawn and
unreimbursed Letters of Credit, would exceed the Borrowing Base less the amount
of outstanding Advances (including any Agent Advances and Agent Loans); or
(ii) the aggregate amount of all undrawn or
unreimbursed Letters of Credit would exceed the lower of: (x) the Maximum Amount
less the amount of outstanding Advances (including any Agent Advances and Agent
Loans); or (y) $80,000,000 or up to $100,000,000 in accordance with SECTION
2.1(n) relating to Additional Financing.
Borrower expressly understands and agrees that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrower and the Lender Group acknowledge and
agree that certain of the letters of credit that are to be the subject of L/C
Guarantees may be on the Closing Date. Each Letter of Credit shall have an
expiry date no later than the date on which this Agreement is scheduled to
terminate under SECTION 3.4 (without regard to any potential renewal term) and
all such Letters of Credit shall be in form and substance acceptable to Agent in
its sole discretion. If the Lender Group is obligated to advance funds under a
Letter of Credit, Borrower immediately shall reimburse such amount to Agent and,
in the absence of such reimbursement, the amount so advanced immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances under SECTION 2.7.
(b) INDEMNIFICATION. Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless from any loss, cost, expense,
or liability, including payments made by the Lender Group, expenses, and
reasonable attorneys fees incurred by the
24
Lender Group arising out of or in connection with any Letter of Credit. Borrower
agrees to be bound by the issuing bank's regulations and interpretations of any
letters of credit guarantied by the Lender Group and opened to or for Borrower's
account or by Agent's interpretations of any Letter of Credit issued by Agent to
or for Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that the Lender Group shall
not be liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Guarantees may require the Lender Group to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify, save, defend, and hold the Lender Group harmless with respect to any
loss, cost, expense (including reasonable attorneys fees), or liability incurred
by the Lender Group under any L/C Guaranty as a result of the Lender Group's
indemnification of any such issuing bank.
(c) SUPPORTING MATERIALS. Borrower hereby authorizes and
directs any bank that issues a letter of credit guaranteed by an L/C Guaranty to
deliver to Agent all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with such letter of credit and the related application.
Borrower may or may not be the "applicant" or "account party" with respect to
such letter of credit.
(d) COSTS OF LETTERS OF CREDIT. Notwithstanding anything to
the contrary contained in this Agreement, Borrower shall not be responsible for
any and all charges, commissions, fees (other than the Letter of Credit fee set
forth in SECTION 2.7(b)), and costs relating to any L/C or to the letters of
credit guaranteed by an L/C Guaranty.
(e) INDEMNIFICATION. Immediately upon the termination of this
Agreement, Borrower agrees to either (i) provide cash collateral to be held by
Agent in an amount equal to 105% of the maximum amount of the Lender Group's
obligations under outstanding Letters of Credit, or (ii) cause to be delivered
to Agent releases of all of the Lender Group's obligations under outstanding
Letters of Credit. At Agent's discretion, any proceeds of Collateral received by
Agent after the occurrence and during the continuation of an Event of Default
may be held as the cash collateral required by this SECTION 2.2(e).
(f) INCREASED COSTS. If by reason of (i) any change in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application by any governmental authority of any such applicable law, treaty,
rule, or regulation, or (ii) compliance by the issuing bank or the Lender Group
with any direction, request, or requirement (irrespective of whether having the
force of law) of any governmental authority or monetary authority including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
25
(ii) there shall be imposed on the issuing bank or the
Lender Group any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Lender Group, then, and in any such case, Agent may, at any time within a
reasonable period after the additional cost is incurred or the amount received
is reduced, notify Borrower, and Borrower shall pay on demand such amounts as
the issuing bank or Agent may specify to be necessary to compensate the issuing
bank or Agent for such additional cost or reduced receipt, together with
interest on such amount from the date of such demand until payment in full
thereof at the rate set forth in SECTION 2.7(a) or (c)(i), as applicable. The
determination by the issuing bank or Agent, as the case may be, of any amount
due pursuant to this SECTION 2.2(f), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.
(g) PARTICIPATIONS.
(i) PURCHASE OF PARTICIPATIONS. Immediately upon
issuance of any Letter of Credit in accordance with this SECTION 2.2, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and participation
in the credit support or enhancement provided through the Agent to such issuer
in connection with the issuance of such Letter of Credit, equal to such Lender's
Pro Rata Share of the face amount of such Letter of Credit (including, without
limitation, all obligations of Borrower with respect thereto, and any security
therefor or guaranty pertaining thereto).
(ii) DOCUMENTATION. Upon the request of any Lender, the
Agent shall furnish to such Lender copies of any Letter of Credit, reimbursement
agreements executed in connection therewith, application for any Letter of
Credit and credit support or enhancement provided through the Agent in
connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably by requested by such Lender.
(iii) OBLIGATIONS IRREVOCABLE. The obligations of each
Lender to make payments to the Agent with respect to any Letter of Credit or
with respect to any credit support or enhancement provided through the Agent
with respect to a Letter of Credit, and the obligations of Borrower to make
payments to the Agent, for the account of the Lenders, shall be irrevocable, not
subject to any qualification or exception whatsoever, including, without
limitation, any of the following circumstances:
(A) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
26
(B) the existence of any claim, setoff,
defense, or other right which any Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
the Agent, the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between such Borrower or any other Person and the beneficiary named
in any Letter of Credit);
(C) any draft, certificate, or any other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Loan
Documents; or
(E) the occurrence of any Default or Event of
Default.
2.3 INTENTIONALLY OMITTED.
2.4 INTENTIONALLY OMITTED.
2.5 PAYMENTS.
(a) PAYMENTS BY BORROWER.
(i) All payments to be made by Borrower shall be made
without set-off, recoupment, deduction, or counterclaim, except as otherwise
required by law. Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Agent for the account of the Lenders or Agent, as the
case may be, at Agent's address set forth in SECTION 12, and shall be made in
immediately available funds, no later than 11:00 a.m. (California time) on the
date specified herein. Any payment received by Agent later than 11:00 a.m.
(California time), at the option of Agent, shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue until such following Business Day.
(ii) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(iii) Unless Agent receives notice from Borrower prior
to the date on which any payment is due to the Lenders that Borrower will not
make such payment in full as and when required, Agent may assume that Borrower
has made such payment in full to Agent on such date in immediately available
funds and Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrower has not made such
payment in full to Agent, each Lender shall repay to Agent on demand such amount
distributed to such
27
Lender, together with interest thereon at the Reference Rate for each day from
the date such amount is distributed to such Lender until the date repaid.
(b) APPORTIONMENT AND APPLICATION OF PAYMENTS. Except as
otherwise provided with respect to Defaulting Lenders, aggregate principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Advances to which such payments relate held
by each Lender) and payments of the fees (other than fees designated for Agent's
separate account) shall, as applicable, be apportioned ratably among the
Lenders. All payments shall be remitted to Agent and all such payments not
relating to specific Advances, and not constituting payment of specific fees and
all proceeds of Collateral received by Agent, shall be applied, first, to pay
any fees or expense reimbursements then due to Agent from Borrower; second, to
pay any fees or expense reimbursements then due to the Lenders from Borrower;
third, to pay interest due in respect of all Advances, including Agent Loans and
Agent Advances; fourth, to pay or prepay principal of Agent Loans and Agent
Advances; fifth, ratably to pay principal of the Advances (other than Agent
Loans and Agent Advances) and unreimbursed obligations in respect of Letters of
Credit; and sixth, ratably to pay any other Obligations due to Agent or any
Lender by Borrower. Agent shall promptly distribute to each Lender, pursuant to
the applicable wire transfer instructions received from each Lender in writing,
such funds as it may be entitled to receive, subject to a Settlement delay as
provided for in SECTION 2.1(h).
2.6 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to the Lender Group pursuant to SECTIONS 2.1 and
2.2 is greater than either the Dollar or percentage limitations set forth in
SECTIONS 2.1 and 2.2 (an "Overadvance"), Borrower immediately shall pay to
Agent, in cash, the amount of such excess to be used by Agent to reduce the
Obligations pursuant to the terms of SECTION 2.5(b).
2.7 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATE. Except as provided in SECTION 2.7(c),
below, all Obligations shall bear interest on the Daily Balance as follows:
(i) each Eurodollar Rate Loan shall bear interest at a
per annum rate equal to the Adjusted Eurodollar Rate plus the Eurodollar
Rate Margin; and
(ii) all other Obligations (except for undrawn Letters
of Credit) shall bear interest at a per annum rate equal to the Reference
Rate.
(b) LETTER OF CREDIT FEE. Borrower shall pay Agent, for the
benefit of the Lender Group, a fee equal to 0.75% per annum times the aggregate
undrawn amount of all Letters of Credit outstanding as of the end of the day.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit) shall bear interest on the Daily Balance at a per annum rate
equal to 3.00% above the Reference Rate, and (ii) the
28
Letter of Credit fee provided in SECTION 2.6(b) shall be increased to 3.75% per
annum times the aggregate undrawn amount of all outstanding Letters of Credit;
provided, HOWEVER, the foregoing adjustments are subject to waiver by the
Required Lenders.
(d) INTENTIONALLY OMITTED.
(e) PAYMENTS. Interest in respect of Reference Rate Loans and
Letter of Credit fees payable hereunder shall be due and payable, in arrears, on
the first day of each month during the term hereof. Interest in respect of each
Eurodollar Rate Loan shall be due and payable, in arrears, on (i) the last day
of the applicable Interest Period, and (ii) the first day of each month
occurring during the term thereof. Borrower hereby authorizes Agent, at its
option, without prior notice to Borrower, to charge such interest and Letter of
Credit fees, the fees and charges provided for in SECTION 2.12 (as and when
accrued or incurred), and all installments or other payments due under any Loan
Document to Borrower's Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(f) COMPUTATION. In the event the Reference Rate is changed
from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Reference Rate. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.
(g) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; PROVIDED, HOWEVER, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.8 COLLECTION OF ACCOUNTS. Borrower shall at all times maintain
lockboxes (the "Lockboxes") and, immediately after the Closing Date, shall
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of Borrower to remit all Collections in respect
thereof to such Lockboxes. Borrower, Agent, and the Lockbox Banks shall enter
into the Lockbox Agreements, which among other things shall provide for the
opening of a Lockbox Account for the deposit of Collections at a Lockbox Bank.
Borrower agrees that all Collections and other amounts received by Borrower from
any Account Debtor or any other source immediately upon receipt shall be
deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by Borrower without the prior written
consent of Agent. Upon the terms and subject to the conditions set
29
forth in the Lockbox Agreements, all amounts received in each Lockbox Account
shall be wired each Business Day into an account (the "Agent's Account")
maintained by Agent at a depositary selected by Agent.
2.9 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of
any Collections by Agent (whether from transfers to Agent by the Lockbox Banks
pursuant to the Lockbox Agreements or otherwise) immediately shall be applied
provisionally to reduce the Obligations outstanding under SECTION 2.1, but shall
not be considered a payment on account unless such Collection item is a wire
transfer of immediately available federal funds and is made to the Agent's
Account or unless and until such Collection item is honored when presented for
payment. Should any Collection item not be honored when presented for payment,
then Borrower shall be deemed not to have made such payment, and interest shall
be recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any Collection item shall be deemed received by Agent only if
it is received into the Agent's Account on a Business Day on or before 11:00
a.m. California time. If any Collection item is received into the Agent's
Account on a non-Business Day or after 11:00 a.m. California time on a Business
Day, it shall be deemed to have been received by Agent as of the opening of
business on the immediately following Business Day. Prior to the occurrence of
an Event of Default or Agent reasonably deeming itself insecure, and so long as
Availability is $25,000,000 or more, at Borrower's option, monies shall be
transferred from the Lock Box to Agent or to Borrower's operating account on a
daily basis, and if transferred to Borrower's operating account such monies will
not be applied to the Obligations.
2.10 DESIGNATED ACCOUNT. Agent and the Lender Group are authorized
to make the Advances and the Letters of Credit under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to SECTION 2.7(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by the Lender Group hereunder. Unless
otherwise agreed by Agent and Borrower, any Advance requested by Borrower and
made by the Lender Group hereunder shall be made to the Designated Account.
2.11 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances made by the Lender
Group to Borrower or for Borrower's account, including, accrued interest, Lender
Group Expenses, and any other payment Obligations of Borrower. In accordance
with SECTION 2.9, the Loan Account will be credited with all payments received
by Agent from Borrower or for Borrower's account, including all amounts received
in the Agent's Account from any Lockbox Bank. Agent shall render statements
regarding the Loan Account to Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting the Lender
Group Expenses owing, and such statements shall be conclusively presumed to be
correct and accurate and constitute an account stated between Borrower and the
Lender Group unless, within 30 days after receipt thereof by Borrower, Borrower
shall deliver to Agent written objection thereto describing the error or errors
contained in any such statements.
30
2.12 FEES. Borrower shall pay to Agent for the ratable benefit of
the Lender Group (except where otherwise indicated) the following fees:
(a) CLOSING FEE. A closing fee in the amount of $150,000,
payable on the Closing Date.
(b) ANNIVERSARY FEE. An anniversary fee equal to 0.125% of
the Maximum Amount, which fee shall be due and payable in full on each of the
first anniversary and second anniversary of the Closing Date; PROVIDED, HOWEVER,
the Agreement has not previously been terminated.
(c) UNUSED LINE FEE. On the first day of each month
commencing June 1, 2003, whenever the average Daily Balance of Obligations is
less than the Maximum Amount then in effect, an unused line fee in an amount
equal to 0.375% per annum times the Average Unused Portion of the Maximum
Amount.
(d) SERVICING FEE. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee solely for the Agent in an amount equal to $2,000.
(e) APPRAISALS; FINANCIAL EXAMINATION AND APPRAISAL FEES. The
Agent or its designee, at the sole expense of Borrower, shall conduct periodic
appraisals of Borrower's Inventory. So long as no Event of Default has occurred
and is continuing, Borrower shall not be liable to pay more than $30,000 per
year (exclusive of out of pocket expenses) for financial analyses and
examinations and periodic appraisals of Inventory in the aggregate.
2.13 EURODOLLAR RATE LOANS. Any other provisions herein to the
contrary notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a) BORROWING; CONVERSION; CONTINUATION. Borrower may from
time to time, on or after the Closing Date (and subject to the satisfaction of
the requirements of SECTIONS 3.1 AND 3.2), request in a written or telephonic
communication with Agent: (i) Advances to constitute Eurodollar Rate Loans; (ii)
that Reference Rate Loans be converted into Eurodollar Rate Loans; or (iii) that
existing Eurodollar Rate Loans continue for an additional Interest Period. Any
such request shall specify the aggregate amount of the requested Eurodollar Rate
Loans, the proposed funding date therefor (which shall be a Business Day, and
with respect to continued Eurodollar Rate Loans shall be the last day of the
Interest Period of the existing Eurodollar Rate Loans being continued), and the
proposed Interest Period (in each case subject to the limitations set forth
below). Eurodollar Rate Loans may only be made, continued, or extended if, as of
the proposed funding date therefor, each of the following conditions is
satisfied:
(v) no Event of Default exists;
(w) no more than five Interest Periods may be in
effect at any one time;
31
(x) the amount of each Eurodollar Rate Loan borrowed,
converted, or continued must be in an amount not less than $5,000,000 and
integral multiples of $1,000,000 in excess thereof;
(y) Agent shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to it and can be readily
determined as of the date of the request for such Eurodollar Rate Loan by
Borrower; and
(z) Agent shall have received such request at least
two Business Days prior to the proposed funding date therefor.
Any request by Borrower to borrow Eurodollar Rate Loans,
to convert Reference Rate Loans to Eurodollar Rate Loans, or to continue any
existing Eurodollar Rate Loans shall be irrevocable, except to the extent that
any Lender shall determine under SECTIONS 2.13(a), 2.14 OR 2.15 that such
Eurodollar Rate Loans cannot be made or continued.
(b) DETERMINATION OF INTEREST PERIOD. By giving notice as set
forth in SECTION 2.12(a), Borrower shall select an Interest Period for such
Eurodollar Rate Loan. The determination of the Interest Period shall be subject
to the following provisions:
(i) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on which
the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a
day which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day; provided, however, that if the
next succeeding Business Day occurs in the following calendar month, then
such Interest Period shall expire on the immediately preceding Business
Day;
(iii) if any Interest Period begins on the last Business
Day of a month, or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period, then the
Interest Period shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iv) Borrower may not select an Interest Period which
expires later than the Maturity Date.
(c) AUTOMATIC CONVERSION: OPTIONAL CONVERSION BY AGENT. Any
Eurodollar Rate Loan shall automatically convert to a Reference Rate Loan upon
the last day of the applicable Interest Period, unless Agent has received a
request to continue such Eurodollar Rate Loan at least two Business Days prior
to the end of such Interest Period in accordance with the terms of SECTION
2.13(a). Any Eurodollar Rate Loan shall, at Agent's option, upon notice to
Borrower, immediately convert to a Reference Rate Loan in the event that (i) an
Event of Default shall have occurred and be continuing or (ii) this Agreement
shall terminate, and Borrower shall
32
pay to Agent, for the benefit of the Lenders, any amounts required by SECTION
2.16 as a result thereof.
2.14 ILLEGALITY. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date shall make it unlawful for any Lender to make or
maintain Eurodollar Rate Loans as contemplated by this Agreement, (a) the
obligation of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such, and convert Reference Rate Loans to Eurodollar
Rate Loans shall forthwith be suspended and (b) such Lender's then outstanding
Eurodollar Rate Loans, if any, shall be converted automatically to Reference
Rate Loans on the respective last days of the then current Interest Periods with
respect thereto or within such earlier period as required by law; PROVIDED,
HOWEVER, that before making any such demand, each Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or regulatory manner) to
designate a different lending office if the making of such a designation would
allow such Lender or its lending office to continue to perform its obligations
to make Eurodollar Rate Loans. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, Borrower shall pay to such Lender such amounts, if any, as
may be required pursuant to SECTION 2.15. If circumstances subsequently change
so that such Lender shall determine that it is no longer so affected, such
Lender will promptly notify Agent and Borrower, and upon receipt of such notice,
the obligations of such Lender to make or continue Eurodollar Rate Loans or to
convert Reference Rate Loans into Eurodollar Rate Loans shall be reinstated.
2.15 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof by a Governmental Authority
made subsequent to the Closing Date or compliance by any Lender with any request
or directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the Closing Date
(i) shall subject such Lender to any tax, levy,
charge, fee, reduction, or withholding of any kind whatsoever with respect
to Eurodollar Rate Loans, or change the basis of taxation of payments to
such Lender in respect thereof (except for the establishment of a tax based
on the net income of the Lender or changes in the rate of tax on the net
income of such Lender);
(ii) shall in respect of Eurodollar Rate Loans impose,
modify or hold applicable any reserve, special deposit, compulsory loan, or
similar requirement against assets held by, deposits or other liabilities
in or for the account of, Advances or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender; or
33
(iii) shall impose on such Lender any other condition
with respect to Eurodollar Rate Loans;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing, or maintaining Eurodollar Rate Loans or to increase the cost to such
Lender in respect of Eurodollar Rate Loans, by an amount which such Lender deems
to be material, or to reduce any amount receivable hereunder in respect of
Eurodollar Rate Loans, or to forego any other sum payable thereunder or make any
payment on account thereof in respect of Eurodollar Rate Loans, then, in any
such case, Borrower shall promptly pay to Agent (for the benefit of such
Lender), upon such Lender's demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable;
PROVIDED, HOWEVER, that before making any such demand, each Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic, or regulatory manner) to
designate a different Eurodollar lending office if the making of such
designation would allow such Lender or its Eurodollar lending office to continue
to perform its obligations to make Eurodollar Rate Loans or to continue to fund
or maintain Eurodollar Rate Loans and avoid the need for, or materially reduce
the amount of, such increased cost. If a Lender becomes entitled to claim any
additional amounts pursuant to this SECTION 2.15, such Lender shall promptly
notify Agent and Borrower of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
SECTION 2.15 submitted in reasonable detail by such Lender to Agent and Borrower
shall be conclusive in the absence of manifest error. Within five Business Days
after a Lender notifies Agent and Borrower of any increased cost pursuant to the
foregoing provisions of this Section 2.15, Borrower may convert all Eurodollar
Rate Loans then outstanding into Reference Rate Loans in accordance with SECTION
2.13 and, additionally, reimburse such Lender for any cost in accordance with
SECTION 2.16. This covenant shall survive the termination of this Agreement and
the payment of the Advances and all other amounts payable hereunder for nine
months following such termination and repayment.
(b) If a Lender shall have determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date or compliance by such Lender or any Person
controlling such Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the Closing Date does or shall have the effect of increasing the
amount of capital required to be maintained or reducing the rate of return on
such Lender's or such Person's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such Person could have
achieved but for such change or compliance (taking into consideration such
Lender's or such Person's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to Agent and Borrower of a prompt written request
therefor, Borrower shall pay to Agent (for the benefit of such Lender) such
additional amount or amounts as will compensate such Lender or such Person for
such reduction. This covenant shall survive the termination of this Agreement
and the payment of the Advances and all other amounts payable hereunder for nine
months following such termination and repayment.
34
2.16 INDEMNITY. Borrower agrees to indemnify Agent and each Lender
and to hold Agent and each Lender harmless from any loss or expense which Agent
and each Lender may sustain or incur as a consequence of (a) default by Borrower
in payment when due of the principal amount of or interest on any Eurodollar
Rate Loan, (b) default by Borrower in making a Borrowing of, conversion into, or
continuation of Eurodollar Rate Loans after Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (c)
default by Borrower in making any prepayment of a Eurodollar Rate Loan after
Borrower has given a notice thereof in accordance with the provisions of this
Agreement, or (d) the making of a prepayment of Eurodollar Rate Loans on a day
which is not the last day of an Interest Period with respect thereto (whether
due to the termination of this Agreement, upon an Event of Default, or
otherwise), including, in each case, any such loss or expense (but excluding
loss of margin or anticipated profits) arising from the reemployment of funds
obtained by it or from fees payable to terminate the deposits from which such
funds were obtained; PROVIDED, HOWEVER, that Agent or any Lender, if requesting
indemnification, shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error. Calculation of all amounts payable to Agent or any
such Lender under this SECTION 2.16 shall be made as though such Lender had
actually funded the relevant Eurodollar Rate Loan through the purchase of a
deposit bearing interest at the Eurodollar Rate in an amount equal to the amount
of such Eurodollar Rate Loan and having a maturity comparable to the relevant
Interest Period; PROVIDED, HOWEVER, that each Lender may fund each of the
Eurodollar Rate Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
2.16. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder for a period of
nine months thereafter.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE INITIAL
LETTER OF CREDIT. The obligation of the Lender Group to make the initial Advance
and to issue the initial Letter of Credit is subject to the fulfillment, to the
satisfaction of Agent and its counsel, of each of the following conditions on or
before the Closing Date:
(a) the Closing Date shall occur on or before April 28, 2003;
(b) Agent shall have received and filed amendments to its
financing statements;
(c) Agent shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(1) the Disbursement Letter; and
(2) an amendment to the Stock Pledge;
(d) Agent shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution,
35
delivery, and performance of this Agreement and the other Loan Documents to
which Borrower is a party and authorizing specific officers of Borrower to
execute the same;
(e) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(f) Agent shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(g) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.10, the
form and substance of which shall be satisfactory to Agent and its counsel;
(h) Agent shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Agent in its sole discretion;
(i) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent
and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL LETTERS OF CREDIT.
The following shall be conditions precedent to all Advances and all Letters of
Credit hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) except for good faith disputes between Borrower and
landlords, no Default or Event of Default shall have occurred and be continuing
on the date of such extension of credit, nor shall either result from the making
thereof;
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, the Lender Group or any of their Affiliates; and
(d) the amount of any requested Advance or Letter of Credit
shall not exceed Availability at such time.
3.3 INTENTIONALLY OMITTED.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and the Lender Group and
shall continue in
36
full force and effect for a term ending on April 25, 2006 (the "Renewal Date")
and automatically shall be renewed for successive one year periods thereafter,
unless sooner terminated pursuant to the terms hereof. Either Borrower or Agent
(on behalf of the Lender Group) may terminate this Agreement effective on the
Renewal Date or on any year anniversary of the Renewal Date by giving the other
party at least 90 days prior written notice. The foregoing notwithstanding,
Agent (on behalf of the Lender Group) shall have the right to terminate the
Lender Group's obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and the Lender Group's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and the Lender Group's obligation to provide
additional credit hereunder is terminated.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any
time upon 90 days prior written notice to Agent, to terminate this Agreement by
paying to Agent, for the benefit of the Lender Group, in cash, the Obligations
(including either (a) providing cash collateral to be held by Agent for the
benefit of those Lenders with a Revolver Commitment in an amount equal to 105%
of the then outstanding Letter of Credit Usage, or (b) causing the outstanding
original Letters of Credit to be returned to the Issuing Lender, in full,
together with the Applicable Prepayment Premium (to be allocated based upon
letter agreements between Agent and individual Lenders). If Borrower has sent a
notice of termination pursuant to the provisions of this Section, then the
Commitments shall terminate and Borrower shall be obligated to repay the
Obligations (including either (i) providing cash collateral to be held by Agent
for the benefit of those Lenders with a Revolver Commitment in an amount equal
to 105% of the then outstanding Letter of Credit Usage, or (ii) causing the
original Letters of Credit to be returned to the Issuing Lender, in full,
together with the Applicable Prepayment Premium, on the date set forth as the
date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) foreclosure and sale
of Collateral, (b) sale of the Collateral in any Insolvency Proceeding, or (c)
restructure, reorganization, or compromise of the Obligations by the
confirmation of a plan of reorganization or any other plan of compromise,
restructure, or arrangement in any Insolvency Proceeding, then, in view of the
impracticability and extreme difficulty of ascertaining the actual amount of
damages to the Lender Group or profits lost by the Lender Group as a result of
such early termination, and by mutual agreement of the parties as to a
reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrower shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.
37
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Agent for
the benefit of the Lender Group a continuing security interest in all currently
existing and hereafter acquired or arising Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents. The
security interests of Agent for the benefit of the Lender Group in the
Collateral shall attach to all Collateral without further act on the part of the
Lender Group or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, and other than: (a) sales of Inventory
to buyers in the ordinary course of business, (b) sales of Equipment in any 12
month period having an aggregate net book value of $500,000 with the proceeds
being applied to the Obligations, and (c) sale or disposal of Collateral (other
than Inventory) in connection with the closing of Borrower's stores, Borrower
has no authority, express or implied, to dispose of any item or portion of the
Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Agent, shall endorse and deliver
physical possession of such Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time, Agent or Agent's designee may (a) notify customers or
Account Debtors of Borrower that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Agent for the benefit of the Lender
Group or that Agent for the benefit of the Lender Group has a security interest
therein, and (b) collect the Accounts, General Intangibles, and Negotiable
Collateral directly and charge the collection costs and expenses to the Loan
Account. Borrower agrees that it will hold in trust for the Lender Group, as the
Lender Group's trustee, any Collections that it receives and immediately will
deliver said Collections to Agent in their original form as received by
Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Agent, Borrower shall execute and deliver to Agent all financing
statements, continuation financing statements, fixture filings, security
agreements, pledges, assignments, control agreements, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that Agent
reasonably may request, in form satisfactory to Agent, to perfect and continue
perfected the Liens of the Lender Group in the Collateral, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as Borrower's true and lawful attorney, with power
to (a) if Borrower refuses to, or fails timely to execute and deliver any of the
documents described in SECTION 4.4, sign the name of Borrower on any of the
documents described in SECTION 4.4, (b) at any time that an Event of Default has
occurred and is continuing or the Lender Group deems itself insecure, sign
Borrower's name on any invoice or ▇▇▇▇ of lading relating to any Account, drafts
against Account Debtors, schedules
38
and assignments of Accounts, verifications of Accounts, and notices to Account
Debtors, (c) send requests for verification of Accounts, (d) endorse Borrower's
name on any Collection item that may come into the Lender Group's possession,
(e) at any time that an Event of Default has occurred and is continuing or the
Lender Group deems itself insecure, notify the post office authorities to change
the address for delivery of Borrower's mail to an address designated by Agent,
to receive and open all mail addressed to Borrower, and to retain all mail
relating to the Collateral and forward all other mail to Borrower, (f) at any
time that an Event of Default has occurred and is continuing or the Lender Group
deems itself insecure, make, settle, and adjust all claims under Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Agent deems itself insecure, settle and adjust
disputes and claims respecting the Accounts directly with Account Debtors, for
amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as Borrower's attorney, and
each and every one of Agent's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and the Lender Group's obligation to extend credit hereunder is
terminated.
4.6 RIGHT TO INSPECT. Agent (through any of its officers,
employees, or agents), shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement,
Borrower makes the following representations and warranties which shall be true,
correct, and complete in all respects as of the date hereof, and shall be true,
correct, and complete in all respects as of the Closing Date, and at and as of
the date of the making of each Advance and Letter of Credit made thereafter, as
though made on and as of the date of such Advance and Letter of Credit (except
to the extent that such representations and warranties relate solely to an
earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are, at the time of
the creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, bona fide existing obligations
created by the sale and delivery of Inventory or the rendition of services to
Account Debtors in the ordinary course of Borrower's business, unconditionally
owed to Borrower without defenses, disputes, offsets, counterclaims, or rights
of return or cancellation other than normal returns or disputes in the normal
course of business. The property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for immediate
shipment to and unconditional acceptance by the Account Debtor. At the time of
the creation of an Eligible Account and as of each date on which Borrower
includes an Eligible Account in a Borrowing Base calculation or certification,
39
Borrower has not received notice of actual or imminent bankruptcy, insolvency,
or material impairment of the financial condition of any applicable Account
Debtor regarding such Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is now and at all
times hereafter shall be of good and merchantable quality, free from defects,
except for minor defects arising in the ordinary course of business.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Agent's prior written consent) and are located only at the locations identified
on SCHEDULE 6.11 or otherwise permitted by SECTION 6.11.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality and quantity of its Inventory
and Borrower's cost therefor in accordance with the retail method of accounting.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to cause a
Material Adverse Change.
(b) Set forth on SCHEDULE 5.8, is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower. All of the outstanding capital stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on SCHEDULE 5.8, no capital stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT. Borrower is duly organized and
existing and in good standing under the laws of the state of its incorporation
and qualified and
40
licensed to do business in, and in good standing in, any state where the failure
to be so licensed or qualified could reasonably be expected to have a material
adverse effect on the business, operations, condition (financial or otherwise),
finances, or prospects of Borrower or on the value of the Collateral to Agent.
5.10 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; and (b) current matters
that, if decided adversely to Borrower, would not materially impair the prospect
of repayment of the Obligations or materially impair the value or priority of
the Lender Group's security interests in the Collateral.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Borrower or any guarantor of the Obligations that have been delivered by
Borrower to the Lender Group have been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present Borrower's (or
such guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.
5.12 SOLVENCY. BORROWER IS SOLVENT. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan Documents
with the intent to hinder, delay, or defraud either present or future creditors
of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on SCHEDULE 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on SCHEDULE 5.14,
none of Borrower's properties or assets has ever been used by Borrower or, to
the best of Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials. None of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, or a candidate for closure
pursuant to any environmental
41
protection statute. No lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by Borrower. Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by Borrower resulting in
the releasing or disposing of Hazardous Materials into the environment.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall do all of the following:
6.1 ACCOUNTING SYSTEM AND SCHEDULES.
(a) Borrower shall maintain a standard and modern system of
accounting in accordance with GAAP with ledger and account cards or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as from time to time may be requested by Agent. Borrower also shall
keep proper books of account showing all sales, claims, and allowances on its
Inventory.
(b) Schedules of Accounts. With such regularity as Agent
shall require, Borrower shall provide Agent with schedules describing all
Accounts. Agent's failure to request such schedules or Borrower's failure to
execute and deliver such schedules shall not affect or limit the Lender Group's
security interests or other rights in and to the Accounts.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower agrees to
deliver to Agent: (a) as soon as available, but in any event within 30 days
after the end of each month (or 45 days after the end of fiscal quarter) during
each of Borrower's fiscal years, a company prepared balance sheet, income
statement, and cash flow statement covering Borrower's operations during such
period; and (b) as soon as available, but in any event within 90 days after the
end of each of Borrower's Fiscal Years, financial statements of Borrower for
each such Fiscal Year, audited by independent certified public accountants
reasonably acceptable to Agent and certified, without any going concern or other
material qualifications, by such accountants to have been prepared in accordance
with GAAP, together with a certificate of such accountants addressed to Agent
stating that such accountants do not have knowledge of the existence of any
failure of Borrower to comply with SECTION 7.20. Such audited financial
statements shall include a balance sheet, profit and loss statement, and cash
flow statement, and, if prepared, such accountants' letter to management. If
Borrower is a parent company of one or more Subsidiaries, or Affiliates, or is a
Subsidiary or Affiliate of another company, then, in addition to the financial
statements referred to above, Borrower agrees to deliver financial statements
prepared on a consolidating basis so as to present Borrower and each such
related entity separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to Lenders
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Borrower with the Securities and
Exchange Commission,
42
if any, as soon as the same are filed, or any other information that is provided
by Borrower to its public shareholders, and any other report reasonably
requested by Agent relating to the Collateral and financial condition of
Borrower.
Each month, together with the financial statements provided
pursuant to SECTION 6.2(a), Borrower shall deliver to Agent a certificate signed
by its chief financial officer to the effect that: (i) all reports, statements,
or computer prepared information of any kind or nature delivered or caused to be
delivered to Agent hereunder have been prepared in accordance with GAAP and
fairly present the financial condition of Borrower; (ii) Borrower is in timely
compliance with all of its covenants and agreements hereunder; (iii) the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date); and (iv) on the date of delivery of such certificate to Agent there does
not exist any condition or event that constitutes an Event of Default (or, in
each case, to the extent of any non-compliance, describing such non-compliance
as to which he or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto).
Borrower shall deliver to Agent its Business Plan for the
fiscal year commencing on or about February 1, 2004 on or before March 31, 2004,
and for the fiscal year commencing on or about February 1, 2005 on or before
March 31, 2005.
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Agent and to release to Agent whatever financial information concerning Borrower
that Agent may request. Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Agent, at Borrower's
expense, copies of Borrower's financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
Agent any information they may have regarding the Collateral or the financial
condition of Borrower.
6.3 TAX RETURNS. Deliver to Agent copies of each of Borrower's
future federal income tax returns, and any amendments thereto, concurrently with
the filing thereof with the Internal Revenue Service.
6.4 DESIGNATION OF INVENTORY. Borrower shall now and from time to
time hereafter, but not less frequently than weekly (or monthly so long as
Borrower has maintained at least $25,000,000 of Availability without being
limited by the Maximum Amount) (to be delivered each Monday based upon the close
of business on the preceding Saturday), execute and deliver to Agent a
designation of Inventory specifying the retail selling price of Borrower's
Inventory, and not less frequently than monthly, execute and deliver to Agent a
designation of Inventory specifying Borrower's Cost, and further specifying such
other information as Agent may reasonably request. Such designation shall
separately report Inventory that is subject to a letter of credit issued by any
Person other than Agent. Borrower will not include Inventory in transit in its
Inventory reports until such Inventory has been paid for by draws under
applicable letters of credit or has been acquired by Borrower without letter of
credit financing.
43
6.5 STORE OPENINGS AND CLOSINGS AND RENTS REPORTS. Borrower shall
give Agent reasonable prior notice of new store openings and closing of its
stores. Borrower shall make timely payment of all rents on real property leases
where Borrower is the lessee within applicable grace periods, and shall provide
Agent with a monthly report specifying the status of such payments. In the event
that Borrower becomes delinquent in its rent payments, then Agent can establish
reserves against the Borrowing Base for the amount of any landlord liens arising
from such delinquency.
6.6 TITLE TO EQUIPMENT. Upon Agent's request, Borrower shall within
30 days of such request deliver to Agent, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment with a market value of $100,000 or more other than
Equipment leased or to be leased.
6.7 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures on the Closing Date, Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and such Equipment shall at all times remain personal
property.
6.8 TAXES. Cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. Borrower
shall make due and timely payment or deposit of all such federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Agent, on demand, appropriate certificates attesting to
the payment thereof or deposit with respect thereto. Borrower will make timely
payment or deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Agent with proof satisfactory to Agent indicating that Borrower has made
such payments or deposits.
6.9 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Borrower's ownership and use of the Collateral, as well as insurance
against larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Agent. All such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Agent, showing
44
Agent as sole loss payee thereof, and shall contain a waiver of warranties, and
shall specify that the insurer must give at least 10 days prior written notice
to Agent before canceling its policy for any reason. Borrower shall deliver to
Agent certified copies of such policies of insurance and evidence of the payment
of all premiums therefor. All proceeds payable under any such policy shall be
payable to Agent to be applied on account of the Obligations.
6.10 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under
the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.11 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.11; PROVIDED, HOWEVER,
that Borrower may amend SCHEDULE 6.11 so long as such amendment occurs by
written notice to Agent not less than 30 days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, Alaska, Hawaii or Puerto Rico,
and so long as, at the time of such written notification, Borrower provides any
financing statements necessary to perfect and continue perfected the Lien of
Agent for the benefit of the Lender Group in such assets, and Borrower will use
its best efforts to obtain a Collateral Access Agreement if requested by Agent.
6.12 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to cause a Material Adverse Change.
6.13 EMPLOYEE BENEFITS.
(a) Deliver to Agent: (i) promptly, and in any event within
10 Business Days after Borrower or any of its Subsidiaries knows or has reason
to know that an ERISA Event has occurred that reasonably could be expected to
result in a Material Adverse Change, a written statement of the chief financial
officer of Borrower describing such ERISA Event and any action that is being
taking with respect thereto by Borrower, any such Subsidiary or ERISA Affiliate,
and any action taken or threatened by the IRS, Department of Labor, or PBGC.
Borrower or such Subsidiary, as applicable, shall be deemed to know all facts
known by the administrator of any Benefit Plan of which it is the plan sponsor,
(ii) promptly, and in any event within three Business Days after the filing
thereof with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within three Business Days
after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, of the PBGC's intention to terminate a Benefit
Plan or to have a trustee appointed to administer a Benefit Plan, copies of each
such notice.
45
(b) Cause to be delivered to Agent, upon Agent's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.14 LEASES. Pay when due all rents and other amounts payable under
any leases to which Borrower is a party or by which Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest.
To the extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Agent shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that is the subject of L/C
Guarantees;
(b) Indebtedness set forth in SCHEDULE 7.1;
(c) Indebtedness secured by Permitted Liens;
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and
46
(iv) to the extent that Indebtedness that is refinanced was subordinated in
right of payment to the Obligations, then the subordination terms and conditions
of the refinancing Indebtedness must be at least as favorable to the Lender
Group as those applicable to the refinanced Indebtedness;
(e) leases, whether operating leases or capital leases of
existing or after acquired Equipment; and
(f) Indebtedness subordinated to the Obligations on terms and
conditions satisfactory to Agent.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
SECTION 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Without Lender's prior
written consent, enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of its property or assets.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or otherwise
dispose of any material portion of Borrower's properties or assets other than
sales of (a) Inventory to buyers in the ordinary course of Borrower's business
as currently conducted and (b) Equipment having a fair market value, in the
aggregate, of up to $500,000 in any Fiscal Year.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure
(within the meaning of SECTION 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase,
or change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTIONS 7.1(b), (c), or (d).
47
7.9 CHANGE OF CONTROL. Except for transfers of shares by Borrower's
existing shareholders to members of their immediate family, cause, permit, or
suffer, directly or indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on
▇▇▇▇ and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding; PROVIDED, HOWEVER, Borrower may buy back
certain of its capital stock so long as (i) no Event of Default or Default
exists and (ii) there has been at least $10,000,000 of borrowing Availability
under Section 2.1 (without being limited by the Maximum Amount) as of the end of
each of the three months preceding such payment or purchase, and on such date,
after taking into account the payment or purchase of such stock.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Agent information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Agent pursuant to or in accordance with this Agreement, and agrees that Agent
may contact directly any such accounting firm or service bureau in order to
obtain such information.
7.13 ADVANCES, INVESTMENTS AND LOANS. Make any investment except:
(a) investments in cash and cash equivalents and equity
investments in Subsidiaries in an amount not to exceed $1,000,000 in the
aggregate in any Fiscal Year;
(b) so long as no Event of Default shall have occurred and be
continuing, or would occur as a consequence thereof, Borrower and its
Subsidiaries may (i) make loans and advances to employees for moving and travel
expenses and other similar expenses, in each case incurred in the ordinary
course of business, and (ii) make other loans and advances to directors,
officers, employees and vendors, including without limitation Pada Industrial
(Far East) Co., Ltd. so long as (A) there has been at least $10,000,000 of
borrowing Availability pursuant to SECTION 2.1 (without being limited by the
Maximum Amount) as of the end of each of the three months preceding such loan or
advance and on such date after taking into account the particular loan or
advance and (B) such loans and advances in the aggregate shall not exceed
$6,000,000 outstanding at any one time;
(c) investments in existence on the date hereof and so long
as no Event of Default shall have occurred and be continuing, or would occur as
a consequence thereof, extensions, renewals, modifications, restatements or
replacements thereof so long as the aggregate dollar amount of all such
extensions, renewals, modifications, restatements, or
48
replacements does not exceed the amount of such investments in existence on the
date hereof; and
(d) so long as no Event of Default shall have occurred and be
continuing, or would occur as a consequence thereof, Borrower may make loans and
advances to its Subsidiaries in the aggregate amount of $5,000,000 outstanding
at any one time.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for: (a) transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms, that are fully disclosed to Agent, and
that are no less favorable to Borrower than would be obtained in arm's length
transaction with a non-Affiliate, (b) the employment agreement between Borrower
and ▇▇▇▇ ▇▇▇▇▇, and (c) the advisory agreement between Borrower and SKM
Investors.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 USE OF PROCEEDS. Use (a) the proceeds of the Advances for any
purpose other than (i) on the Closing Date, to pay transactional costs and
expenses incurred in connection with this Agreement, (ii) assuming the
Obligations under the Existing Loan Agreement, and (iii) thereafter, consistent
with the terms and conditions hereof, for its lawful and permitted corporate
purposes.
7.17 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Agent and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Lien of Agent (for the benefit of the Lender Group) and also
provides to Agent a Collateral Access Agreement with respect to such new
location. The Inventory and Equipment shall not at any time now or hereafter be
stored with a bailee, warehouseman, or similar party without Agent's prior
written consent.
7.18 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in SECTIONS 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in SECTIONS 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to
pay timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
49
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to
pay any required installment or any other payment required under SECTION 412 of
the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under SECTION 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA; which,
individually or in the aggregate, results in or reasonably would be expected to
result in a claim against or liability of Borrower, any of its Subsidiaries or
any ERISA Affiliate in excess of $100,000.
7.19 FINANCIAL COVENANT. Fail to maintain Availability at all times
of not less than $10,000,000.
7.20 CAPITAL EXPENDITURES. Make capital expenditures (based upon
Borrower's Statement of Cash Flows for Investing Activities, exclusive of
non-capital items) in each of the following Fiscal Years in excess of the
applicable amount set forth below:
FISCAL YEAR ENDING ON OR ABOUT MAXIMUM CAPITAL EXPENDITURES
January 31, 2004 $ 35,000,000
Agent and Borrower shall reasonably agree upon the maximum capital expenditures
for the Fiscal Years ending on or about January 31, 2005 and January 31, 2006
based upon Borrower's Business Plan for each such Fiscal Year.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts),
50
fees and charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts constituting Obligations);
8.2 If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and the Lender Group; PROVIDED, HOWEVER, that Borrower's
failure or neglect to comply with SECTIONS 6.1(b), 6.2, 6.3, 6.4, 6.5, 6.6, 6.8,
6.11 and 6.13 shall not constitute an Event of Default hereunder unless such
failure or neglect continues for five days or more;
8.3 If there is a material impairment of the prospect of repayment
of any portion of the Obligations owing to the Lender Group or a material
impairment of the value or priority of the Lender Group's security interests in
the Collateral;
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
the Lender Group shall be relieved of its obligation to extend credit hereunder;
(d) an interim trustee is appointed to take possession of all or a substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower; or (e) an order for relief shall have been
issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If (a) an action or proceeding is brought against Borrower
which is reasonably likely to be decided adversely to Borrower, and such adverse
decision would materially impair the prospect of repayment of the Obligations or
materially impair the value or priority of the Lender Group's security interests
in the Collateral, or (b) if a judgment or other claim in excess of $500,000
becomes a lien or encumbrance upon any material portion of Borrower's properties
or assets and shall remain outstanding 30 days or longer;
51
8.10 If there is a default in an agreement involving Indebtedness of
$500,000, or more, or any material agreement to which Borrower is a party with
one or more third Persons resulting in a right by such third Persons,
irrespective of whether exercised, to accelerate the maturity of Borrower's
obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third Person thereunder, or any such guarantor
or other third Person becomes the subject of an Insolvency Proceeding.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Agent may, pursuant to SECTIONS 17.4 and
17.5, without notice of its election and without demand, do any one or more of
the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting the Lender Group's rights and security interests in the
Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit Borrower's Loan Account with only the net
amounts received by Agent in payment of such disputed Accounts after deducting
all Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for the Lender Group, segregate all returned Inventory from all other property
of Borrower or in
52
Borrower's possession and conspicuously label said returned Inventory as the
property of the Lender Group;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Collateral if Agent so requires, and to make the Collateral
available to Agent as Agent may designate. Borrower authorizes Agent to enter
the premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or Lien that in Agent's determination appears to
conflict with the Liens of Agent (for the benefit of the Lender Group) in the
Collateral and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned or leased premises, Borrower hereby grants
Agent a license to enter into possession of such premises and to occupy the
same, without charge, for up to 120 days in order to exercise any of the Lender
Group's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by the Lender Group (including any amounts received in the Lockbox Accounts), or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Agent is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender Group's benefit;
(j) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Agent
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(k) Agent shall give notice of the disposition of the
Collateral as follows:
(A) Agent shall give Borrower and each holder of a
security interest in the Collateral who has filed with Agent a written request
for notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other
53
than a public sale is to be made of the Collateral, then the time on or after
which the private sale or other disposition is to be made;
(B) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in SECTION 12, at least five
days before the date fixed for the sale, or at least five days before the date
on or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Collateral that
is perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrower
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to Agent;
(C) If the sale is to be a public sale, Agent also
shall give notice of the time and place by publishing a notice one time at least
five days before the date of the sale in a newspaper of general circulation in
the county in which the sale is to be held;
(l) Agent may credit bid and purchase at any public sale; and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The Lender Group's rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Agent may do any
or all of the following: (a) make payment of the same or any part thereof; (b)
set up such reserves in Borrower's Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in SECTION 6.9, and
take any action with respect to such policies as Agent deems prudent. Any such
amounts paid by Agent shall constitute Lender Group Expenses. Any such payments
made by Agent shall not constitute an agreement by the Lender Group to make
similar payments in the future or a waiver by the Lender Group of any Event of
Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
54
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. So long as the
Lender Group complies with its obligations, if any, under Section 9207 of the
Code, the Lender Group shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and
hold each Agent-Related Person, each Lender, each Participant, and each of their
respective officers, directors, employees, counsel, agents, and
attorneys-in-fact (each, an "Indemnified Person") harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by any
of them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and any
other Loan Documents or the transactions contemplated herein, and with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). Borrower shall have no
obligation to any Indemnified Person under this SECTION 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to Agent,
as the case may be, at its address set forth below:
55
IF TO BORROWER: THE CHILDREN'S PLACE RETAIL STORES, INC.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
THE CHILDREN'S PLACE RETAIL STORES, INC.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: STROOCK & STROOCK & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
IF TO AGENT OR THE ▇▇▇▇▇ FARGO RETAIL FINANCE LLC
LENDER GROUP IN CASE One Boston Place
OF AGENT: Suite 1800
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇, Vice President
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: BUCHALTER, NEMER, FIELDS & YOUNGER
▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this SECTION 12, other
than notices by Agent in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Agent in connection with Sections 9504 or 9505 of the Code
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted by telefacsimile or other similar method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
56
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF THE LENDER GROUP, IN ANY OTHER COURT IN
WHICH THE LENDER GROUP SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER AND
EACH MEMBER OF THE LENDER GROUP WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR
TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION 13. BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVES
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND EACH MEMBER
OF THE LENDER GROUP REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Agent may be destroyed or otherwise disposed of by Agent four months after
they are delivered to or received by Agent, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent, assign
and delegate to one or more Eligible Transferees (each an "Assignee") all, or
any ratable part, of the Obligations, the Commitments, and the other rights and
obligations of such Lender hereunder and under the other Loan Documents, in a
minimum amount of $5,000,000; PROVIDED, HOWEVER, that Borrower and Agent may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses, and related information with
respect to the Assignee, shall have been given to Borrower and Agent by such
Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered
to Borrower and Agent a fully executed
57
Assignment and Acceptance ("Assignment and Acceptance") in the form of EXHIBIT
A-1; and (iii) the assignor Lender or Assignee has paid to Agent for Agent's
sole and separate account a processing fee in the amount of $5,000. Anything
contained herein to the contrary notwithstanding, the consent of Agent shall not
be required (and payment of any fees shall not be required) if such assignment
is in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender.
(b) From and after the date that Agent notifies the assignor
Lender that it has received a fully executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Lender under the Loan Documents, and (ii) the
assignor Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall effect
a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties, or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency, or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or any guarantor or the performance or observance by Borrower or any
guarantor of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (4) such Assignee will,
independently and without reliance upon Agent, such assigning Lender, or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (5) such Assignee appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (6) such
Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments of the
Assignor and Assignee arising therefrom. The
58
Commitment allocated to each Assignee shall reduce such Commitment of the
assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Agent, which consent shall not be unreasonably withheld, sell to one or more
Persons (a "Participant") participating interests in the Obligations, the
Commitment, and the other rights and interests of that Lender (the "Originating
Lender") hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that
(i) the Originating Lender's obligations under this Agreement shall remain
unchanged, (ii) the Originating Lender shall remain solely responsible for the
performance of such obligations, (iii) Borrower and Agent shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender's rights and obligations under this Agreement and the other
Loan Documents, (iv) no Originating Lender shall transfer or grant any
participating interest under which the Participant has the sole and exclusive
right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such participant is participating; (B) reduce the interest rate
applicable to the Obligations hereunder in which such Participant is
participating; (C) release all or a material portion of the Collateral (except
to the extent expressly provided herein or in any of the Loan Documents)
supporting the Obligations hereunder in which such Participant is participating;
(D) postpone the payment of, or reduce the amount of, the interest or fees
hereunder in which such Participant is participating; or (E) change the amount
or due dates of scheduled principal repayments or prepayments or premiums in
respect of the Obligations hereunder in which such Participant is participating;
and (v) all amounts payable by Borrower hereunder shall be determined as if such
Originating Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement; PROVIDED, HOWEVER, that no Participant may exercise
any such right of setoff without the notice to and consent of Agent. The rights
of any Participant shall only be derivative through the Originating Lender with
whom such Participant participates and no Participant shall have any direct
rights as to the other Lenders, Agent, Borrower, the Collections, the
Collateral, or otherwise in respect of the Advances or the Letters of Credit. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves. The provisions of this SECTION
15.1(e) are solely for the benefit of the Lender Group, and Borrower shall have
no rights as a third party beneficiary of any of such provisions.
(f) In connection with any such assignment or participation
or proposed assignment or participation, a Lender may disclose to a third party
all documents and information which it now or hereafter may have relating to
Borrower or Borrower's business.
(g) Notwithstanding any other provision in this Agreement,
any Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with
59
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
15.2 SUCCESSORS. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; PROVIDED,
HOWEVER, that Borrower may not assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void. No consent to assignment by the Lenders
shall release Borrower from its Obligations. A Lender may assign this Agreement
and its rights and duties hereunder pursuant to SECTION 15.1 and, except as
expressly required pursuant to SECTION 15.1, no consent or approval by Borrower
is required in connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrower and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all the Lenders and Borrower and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on, any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Advances, which is required for the
Lenders or any of them to take any action hereunder;
(e) increase the advance rate with respect to Advances
(except for the restoration of an advance rate after the prior reduction
thereof), or change SECTION 2.1(b);
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by SECTION
17.11;
(h) change the definition of "Required Lenders";
60
(i) release Borrower from any Obligation for the payment of
money; or
(j) amend any of the provisions of ARTICLE 17.
and, PROVIDED FURTHER, that no amendment, waiver or consent shall, unless in
writing and signed by Agent, affect the rights or duties of Agent under this
Agreement or any other Loan Document; and, PROVIDED FURTHER, that the limitation
contained in clause (e) above shall not be deemed to limit the ability of Agent
to make Advances or Agent Loans, as applicable, in accordance with the
provisions of SECTIONS 2.1(g), (h), or (l). The foregoing notwithstanding, any
amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement, any other
Loan Document, or any present or future supplement hereto or thereto, or in any
other agreement between or among Borrower and Agent and/or any Lender, or delay
by Agent or any Lender in exercising the same, will operate as a waiver thereof.
No waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints ▇▇▇▇▇ Fargo Retail as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this ARTICLE 17.
The provisions of this ARTICLE 17 are solely for the benefit of Agent and the
Lenders, and Borrower shall not have any rights as a third party beneficiary of
any of the provisions contained herein; provided, however, that the provisions
of SECTIONS 17.10, 17.11, and 17.16(d) also shall be for the benefit of
Borrowers. Any provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document notwithstanding, Agent shall not have any duties
or responsibilities, except those expressly set forth herein, nor shall Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against Agent. Except as expressly otherwise provided in this
Agreement, Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any discretionary rights or taking or
refraining from taking any
61
actions which Agent is expressly entitled to take or assert under or pursuant to
this Agreement and the other Loan Documents, including making the determinations
contemplated by SECTION 2.1(b). Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect: (a) maintain,
in accordance with its customary business practices, ledgers and records
reflecting the status of the Advances, the Collateral, the Collections, and
related matters; (b) execute and/or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim for Lenders, notices and other written agreements
with respect to the Loan Documents; (c) make Advances for itself or on behalf of
Lenders as provided in the Loan Documents; (d) exclusively receive, apply, and
distribute the Collections as provided in the Loan Documents; (e) open and
maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Advances, the Collateral, the Collections, or otherwise related
to any of same as provided in the Loan Documents; and (g) incur and pay such
Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
17.2 DELEGATION OF DUTIES. Except as otherwise provided in this
Section, Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees, or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made in
compliance with this Section and without gross negligence or willful misconduct.
The foregoing notwithstanding, Agent shall not make any material delegation of
duties to subagents or non-employee delegees without the prior written consent
of Required Lenders (it being understood that routine delegation of such
administrative matters as filing financing statements, or conducting appraisals
or audits, is not viewed as a material delegation that requires prior Required
Lender approval).
17.3 LIABILITY OF AGENT-RELATED PERSONS. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be taken by any
of them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or, (ii) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by Borrower, or any
Subsidiary or Affiliate of Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement, or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document, or for any failure
of Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained
62
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books, or records of Borrower, or any of Borrower's Subsidiaries
or Affiliates.
17.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrower or counsel to any Lender), independent accountants, and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders or all
Lenders, as applicable, and until such instructions are received, Agent shall
act, or refrain from acting, as it deems advisable so long as it is not grossly
negligent or guilty of willful misconduct. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Lenders or all
Lenders, as applicable, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
17.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of Agent or the
Lenders, except with respect to actual knowledge of the existence of an
Overadvance, and except with respect to Defaults and Events of Default of which
Agent has actual knowledge, unless Agent shall have received written notice from
a Lender or Borrower referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default." Agent
promptly will notify the Lenders of its receipt of any such notice or of any
Event of Default of which Agent has, or is deemed to have, actual knowledge. If
any Lender obtains actual knowledge of any Event of Default, such Lender
promptly shall notify the other Lenders and Agent of such Event of Default. Each
Lender shall be solely responsible for giving any notices to its Participants,
if any. Subject to SECTION 17.4, Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Required Lenders;
PROVIDED, HOWEVER, that:
(a) At all times, Agent may propose and, with the consent of
Required Lenders (which shall not be unreasonably withheld and which shall be
deemed to have been given by a Lender unless such Lender has notified Agent to
the contrary in writing within three days of notification of such proposed
actions by Agent) exercise, any remedies on behalf of the Lender Group; and
(b) At all times, once Required Lenders or all Lenders, as
the case may be, have approved the exercise of a particular remedy or pursuit of
a course of action, Agent may, but shall not be obligated to, make all
administrative decisions in connection therewith or take all other actions
reasonably incidental thereto (for example, if the Required Lenders approve
63
the foreclosure of certain Collateral, Agent shall not be required to seek
consent for the administrative aspects of conducting such sale or handling of
such Collateral).
17.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition, and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals, and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition, and
creditworthiness of Borrower, and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition, or creditworthiness of Borrower, and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
17.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay
Lender Group Expenses to the extent Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, but subject to any requirements of the Loan
Documents that it obtain any applicable consents or engage in any required
consultation, court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrower is obligated to reimburse Agent or Lenders for such expenses
pursuant to the Loan Agreement or otherwise. Agent is authorized and directed to
deduct and retain sufficient amounts from Collections to reimburse Agent for
such out-of-pocket costs and expenses prior to the distribution of any amounts
to Lenders. In the event Agent is not reimbursed for such costs and expenses
from Collections, each Lender hereby agrees that it is and shall be obligated to
pay to or reimburse Agent for the amount of such Lender's Pro Rata Share
thereof. Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrower and without limiting the obligation
of Borrower to do so), according to their Pro Rata Shares, from and against any
and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be
liable for the payment to the Agent-Related Persons of any portion of such
Indemnified Liabilities resulting solely from such
64
Person's gross negligence, bad faith, or willful misconduct. Without limitation
of the foregoing, each Lender shall reimburse Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including attorney fees and
expenses) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that Agent is not reimbursed for such expenses by or on behalf of Borrower. The
undertaking in this SECTION 17.7 shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.
17.8 AGENT IN INDIVIDUAL CAPACITY. ▇▇▇▇▇ Fargo Retail and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests, in and generally engage in any kind of
banking, trust, financial advisory, underwriting, or other business with
Borrower and its Subsidiaries and Affiliates and any other Person party to any
Loan Documents as though ▇▇▇▇▇ Fargo Retail were not Agent hereunder without
notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to
such activities, ▇▇▇▇▇ Fargo Retail and its Affiliates may receive information
regarding Borrower or their Affiliates and any other Person party to any Loan
Documents that is subject to confidentiality obligations in favor of Borrower or
such other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver Agent will
use its reasonable best efforts to obtain), Agent shall be under no obligation
to provide such information to them. With respect to the Agent Loans and Agent
Advances, ▇▇▇▇▇ Fargo Retail shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" include ▇▇▇▇▇ Fargo Retail in its
individual capacity.
17.9 SUCCESSOR AGENT. Agent may resign as Agent following notice of
such resignation ("Notice") to the Lenders and Borrower, and effective upon the
appointment of and acceptance of such appointment by, a successor Agent. If
Agent resigns under this Agreement, the Required Lenders shall appoint any
Lender or Eligible Transferee as successor Agent for the Lenders. If no
successor Agent is appointed within 30 days of such retiring Agent's Notice,
Agent may appoint a successor Agent, after consulting with the Lenders and
Borrower. In any such event, upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights, powers
and duties of the retiring Agent and the term "Agent" shall mean such successor
Agent and the retiring Agent's appointment, powers, and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this SECTION 17 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
17.10 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
65
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment of
any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid under
this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under
the IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of Borrower, such Lender agrees to notify Agent
and Borrower of the percentage amount in which it is no longer the beneficial
owner of Obligations of Borrower to such Lender. To the extent of such
percentage amount, Agent and Borrower will treat such Lender's IRS Form 1001 as
no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, Agent may withhold from any interest payment to such
Lender an amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent or Borrower did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify Agent and Borrower of a change in
circumstances which rendered the exemption from, or reduction of,
66
withholding tax ineffective, or for any other reason) such Lender shall
indemnify Agent and Borrower fully for all amounts paid, directly or indirectly,
by Agent or Borrower as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
or Borrower under this Section, together with all costs and expenses (including
attorneys fees and expenses). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation of
Agent.
17.11 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, to
release any Lien on any Collateral (i) upon the termination of the Commitments
and payment and satisfaction in full by Borrower of all Obligations; and upon
such termination and payment Agent shall deliver to Borrower, at Borrower's sole
cost and expense, all UCC termination statements and any other documents
necessary to terminate the Loan Documents and release the Liens with respect to
the Collateral; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under SECTION 7.4
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry); (iii) constituting property
in which Borrower owned no interest at the time the Lien was granted or at any
time thereafter; or (iv) constituting property leased to Borrower under a lease
that has expired or been terminated in a transaction permitted under this
Agreement. Except as provided above, Agent will not release any Lien on any
Collateral without the prior written authorization of the Lenders. Upon request
by Agent or Borrower at any time, the Lenders will confirm in writing Agent's
authority to release any such Liens on particular types or items of Collateral
pursuant to this SECTION 17.11; PROVIDED, HOWEVER, that (i) Agent shall not be
required to execute any document necessary to evidence such release on terms
that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (ii) such release shall not in any
manner discharge, affect or impair the Obligations or any Liens (other than
those expressly being released), upon (or obligations of Borrower in respect of)
all interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower, is cared
for, protected, or insured or has been encumbered, or that the Liens of the
Agent (for the benefit of the Lender Group) have been properly or sufficiently
or lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure, or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent pursuant to any of
the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, subject to the terms
and conditions contained herein, Agent may act in any manner it may deem
appropriate, in its sole discretion given Agent's own interest in the Collateral
in its capacity as one of the Lenders and that Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing, except as
otherwise provided herein.
67
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations
any amounts owing by such Lender to Borrower or any accounts of Borrower now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by Agent, take or cause to
be taken any action, including the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral the purpose of which is, or could be, to give
such Lender any preference or priority against the other Lenders with respect to
the Collateral.
(b) Subject to SECTION 17.8, if, at any time or times any
Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any
proceeds of Collateral or any payments with respect to the Obligations of
Borrower to such Lender arising under, or relating to, this Agreement or the
other Loan Documents, except for any such proceeds or payments received by such
Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from
Agent in excess of such Lender's Pro Rata Share of all such distributions by
Agent, such Lender shall promptly (1) turn the same over to Agent, in kind, and
with such endorsements as may be required to negotiate the same to Agent, or in
same day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of
this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; PROVIDED, HOWEVER, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
17.13 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints
each other Lender as agent for the purpose of perfecting the Liens of the Lender
Group in assets which, in accordance with Division 9 of the UCC can be perfected
only by possession. Should any Lender obtain possession of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request
therefor shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
17.14 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to the instructions set forth on SCHEDULE
C-1, or pursuant to such other wire transfer instructions as each party may
designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium or interest on revolving advances or otherwise.
68
17.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
ratable benefit (subject to SECTION 4.1) of the Lender Group. Each member of the
Lender Group agrees that any action taken by Agent, Required Lenders, or all
Lenders, as applicable, in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent,
Required Lenders, or all Lenders, as applicable, of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By signing this
Agreement, each Lender;
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that Agent (i) does not
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Agent or other party performing
any audit or examination will inspect only specific information regarding
Borrower and will rely significantly upon Borrower's books and records, as well
as on representations of Borrower's personnel;
(d) agrees to keep all Reports and other material information
obtained by it pursuant to the requirements of this Agreement in accordance with
its reasonable customary procedures for handling confidential information; it
being understood and agreed by Borrower that in any event such Lender may make
disclosures (i) reasonably required by any bona fide potential or actual
Assignee, transferee, or Participant in connection with any contemplated or
actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, (ii) of information
that has become public by disclosures made by Persons other than such Lender,
its Affiliates, assignees, transferees, or participants, or (iii) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; PROVIDED, HOWEVER, that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or
69
other credit accommodations that the indemnifying Lender has made or may make to
Borrower, or the indemnifying Lender's participation in, or the indemnifying
Lender's purchase of, a loan or loans of Borrower; and (ii) to pay and protect,
and indemnify, defend, and hold Agent and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses and other amounts (including, attorney costs) incurred by Agent
and any such other Lender preparing a Report as the direct or indirect result of
any third parties who might obtain all or part of any Report through the
indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof; (y)
to the extent that Agent is entitled, under any provision of the Loan Documents,
to request additional reports or information from Borrower, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender's notice to Agent, whereupon Agent promptly shall request of
Borrower the additional reports or information specified by such Lender, and,
upon receipt thereof, Agent promptly shall provide a copy of same to such
Lender; and (z) any time that Agent renders to Borrower a statement regarding
the Loan Account, Agent shall send a copy of such statement to each Lender.
17.17 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain
of the Loan Documents now or hereafter may have been or will be executed only by
or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
Advances shall constitute the several (and not joint) obligations of the
respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such Advances not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in SECTION 17.7, no member of the Lender Group shall have any
liability for the acts of any other member of the Lender Group. No Lender shall
be responsible to Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make Advances, nor to advance for it or on
its behalf in connection with its Commitment, nor to take any other action on
its behalf hereunder or in connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and the Lender Group.
18.2 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
70
18.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
18.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
18.5 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
18.6 REVIVAL AND REINSTATEMENT OF OBLIGATIONS.
(a) If the incurrence or payment of the Obligations by
Borrower or any guarantor of the Obligations or the transfer by any or all of
such parties to the Lender Group of any property of either or both of such
parties should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrower or
such guarantor automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made.
18.7 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
71
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date set forth in the first paragraph of this Agreement.
THE CHILDREN'S PLACE RETAIL STORES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
▇▇▇▇▇ FARGO RETAIL FINANCE LLC,
a Delaware limited liability company,
as Agent and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: VICE PRESIDENT
S-1
Third Amended and Restated
Loan and Security Agreement
COMMITMENTS ON CLOSING DATE
▇▇▇▇▇ Fargo Retail Finance LLC $ 75,000,000
Total $ 75,000,000*
* $100,000,000 if syndication has been completed by the Closing Date.
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE E-1
Eligible Inventory
See Schedule 6.11
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE P-1
Permitted Liens
1. Security Interest filed April 19, 1999 of ▇▇▇▇▇▇▇ Leasing Corporation in
leased forklift machines securing the lease obligation.
2. Security Interest filed August 27, 1997 of International Leasing
Corporation in five traffic counting machines securing a lease obligation.
3. Security Interest filed July 13, 1999 of Newcourt Communications Finance
Corporation in telecommunications equipment securing a lease obligation.
4. Security Interest filed May 7, 1999 of ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇ Associate Inc. in
computer communications equipment securing a lease obligation.
5. Security Interest filed January 22, 1996 of General Electric Capital Corp.
in pattern making equipment securing a lease obligation.
6. Security Interest filed June __, 2001 of TCF Leasing, Inc. in an electronic
conveyor system securing a lease obligation.
7. Security Interest filed June __, 2001 of Manufacturers Bank in an
electronic conveyor system securing a lease obligation.
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE 5.8
Subsidiaries of The Children's Place Retail Stores, Inc.
- The Children's Place (Hong Kong) Limited, a Hong Kong corporation
Number of Shares of Stock of Subsidiary: 10,000
Number (and Percentage) Owned by Parent: 9,999 (99.99%)
- TCPIP, Inc., a Delaware corporation
Number of Shares of Stock of Subsidiary: 1,000
Number (and Percentage) Owned by Parent: 1,000 (100%)
- ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, inc., a Delaware corporation
Number of Shares of Stock of Subsidiary: 10,000
Number (and Percentage) Owned by Parent: 10,000 (100%)
- The Children's Place (Australia) Pty. Ltd., an Australian corporation
Number of Shares of Stock of Subsidiary: 1
Number (and Percentage) Owned by Parent: 1 (100%)
- TCP Canada, Inc., a Nova Scotia limited liability corporation
Number of Shares of Stock of Subsidiary: 1
Number (and Percentage) Owned by Parent: 1 (100%)
- TCP Resources, LLC, a Delaware limited liability company
Parent is Sole Member owning 100% interest
- The Children's Place (Virginia), Inc., a Virginia corporation
Number of Shares of Stock of Subsidiary: 100
Number (and Percentage) Owned by Parent: 100 (100%)
- The Children's Place Canada Holdings, Inc., a Delaware corporation
Number of Shares of Stock of Subsidiary: 1,500
Number (and Percentage) Owned by Parent: 1,500 (100%)
- TCP Investment Canada I Corp., a Nova Scotia unlimited liability
corporation
Number of Shares of Stock of Subsidiary: 1
Number (and Percentage) Owned by Parent: 1 (100%)*
- TCP Investment Canada II Corp., a Nova Scotia unlimited liability
corporation
Number of Shares of Stock of Subsidiary: 1
Number (and Percentage) Owned by Parent: 1 (100%)**
- The Children's Place (Canada), LP, an Ontario limited partnership
TCP Investment Canada II Corp. owns 1% interest, and is General Partner
Schedule C-1
COMMITMENT ON CLOSING DATE
TCP Investment Canada I Corp. owns 99% interest
* - Shares are owned by The Children's Place Canada Holdings, Inc., which is a
wholly-owned subsidiary of Parent
** - Shares are owned by TCP Investment Canada I Corp., which is a wholly-owned
subsidiary of The Children's Place Canada Holdings, Inc., a wholly-owned
subsidiary of Parent
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE 5.13
ERISA Benefit Plans
The Children's Place 401(k) Plan
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE 5.14
Environmental Condition
In connection with Schedule 5.14, the only exception involves the purchase of
certain children's pearl necklaces from The Children's Place's agent, March
Development of Taiwan, in or about October 1991. The Children's Place sold the
pearl necklaces to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ who distributed the necklaces to Name Brand
Stores. The United States Testing Company, Inc. determined that the necklaces
contained straight chain hydrocarbon (oil) that was within each pearl. A sample
of the liquid filled necklace indicated that it is free from bacterial
contamination and did not have detectable viable bacteria. Accordingly, The
Children's Place took measures to properly dispose of all of the necklaces which
had been sold and/or distributed. The oil in the remaining necklaces has been
drained into a drum. Safety-Kleen, an environmental substance cleanup company,
has disposed of this drum.
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE 6.11
Locations of Inventory and Equipment
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇ ▇▇▇▇-▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
3519 Citic Square, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, P.R. China
See Attached Store List
Schedule C-1
COMMITMENT ON CLOSING DATE
SCHEDULE 7.1
Indebtedness
None
Schedule C-1
COMMITMENT ON CLOSING DATE
EXHIBIT A-1
FORM OF ASSIGNMENT AND ACCEPTANCE
This ASSIGNMENT AND ACCEPTANCE (this "ASSIGNMENT AND ACCEPTANCE")
dated as of ____________, 200__ is made between _________________ (the
"ASSIGNOR") and _________________ (the "ASSIGNEE").
RECITALS
A. The Assignor is party to that certain Third Amended and
Restated
Loan and Security Agreement, dated as of April 25, 2003 (as amended,
amended and restated, modified, supplemented or renewed from time to time, the
"LOAN AGREEMENT"), among The Children's Place Retail Stores, Inc. ("Borrower"),
the several financial institutions from time to time party thereto (including
the Assignor, collectively, the "LENDERS"), and ▇▇▇▇▇ Fargo Retail Finance LLC,
a Delaware corporation, as agent for the Lenders (the "AGENT"). Any terms
defined in the Loan Agreement and not defined in this Assignment and Acceptance
are used herein as defined in the Loan Agreement;
B. As provided under the Loan Agreement, the Assignor has
committed to making Loans (the "COMMITTED LOANS") to the Borrower in an
aggregate amount not to exceed $ (the "COMMITMENT");
C. [The Assignor has made Committed Loans in the aggregate
principal amount of $__________ to the Borrower] [No Committed Loans are
outstanding under the Loan Agreement];
D. [The Assignor has acquired a participation in the Agent's
liability under Letters of Credit in an aggregate outstanding principal amount
of $____________ (the "L/C OBLIGATIONS")] [No Letters of Credit are outstanding
under the Loan Agreement]; and
E. The Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Loan Agreement in respect
of its Commitment, [together with a corresponding portion of each of its
outstanding Committed Loans and L/C Obligations,] in an amount equal to
$_________ (the "ASSIGNED AMOUNT") on the terms and subject to the conditions
set forth herein and the Assignee wishes to accept assignment of such rights and
to assume such obligations from the Assignor on such terms and subject to such
conditions.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. ASSIGNMENT AND ACCEPTANCE.
(a) Subject to the terms and conditions of this Assignment
and Acceptance, (i) the Assignor hereby sells, transfers, delegates, and assigns
to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes
from the Assignor, without recourse
EXHIBIT A-1, PAGE 1
and without representation or warranty (except as provided in this Assignment
and Acceptance) __% (the "ASSIGNEE'S PERCENTAGE SHARE") of (A) the Commitment
[and the Committed Loans and the L/C Obligations] of the Assignor and (B) all
related rights, benefits, obligations, liabilities and indemnities of the
Assignor under and in connection with the Loan Agreement and the other Loan
Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Committed Loans and L/C Obligations assigned.]
(b) With effect on and after the Effective Date (as defined
in Section 5 hereof), the Assignee shall be a party to the Loan Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Lender under the Loan Agreement, including the requirements concerning
confidentiality (if any) and the payment of indemnification to the Agent, with a
Commitment in an amount equal to the Assigned Amount. The Assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Loan Agreement are required to be performed by it as a Lender.
It is the intent of the parties hereto that the Commitment of the Assignor
shall, as of the Effective Date, be reduced by an amount equal to the Assigned
Amount and the Assignor shall relinquish its rights and be released from its
obligations under the Loan Agreement to the extent such obligations have been
assumed by the Assignee; PROVIDED, HOWEVER, the Assignor shall not relinquish
the rights under the Loan Agreement to the extent such rights relate to the time
prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignee's Commitment will be $ .
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignor's Commitment will be $ .
2. PAYMENTS.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $_______,
representing the Assignee's Percentage Share of the principal amount of all
Committed Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount of ___________________ ($_______), as
specified in Section 15.1(a) of the Loan Agreement.
3. REALLOCATION OF PAYMENTS.
Any interest, fees and other payments accrued to the Effective
Date with respect to the Commitment [,] [and] Committed Loans [and L/C
Obligations] shall be for the account of the Assignor. Any interest, fees and
other payments accrued on and after the Effective Date with respect to the
Assigned Amount shall be for the account of the Assignee. Each of the Assignor
and the Assignee agrees that it will hold in trust for the other party any
EXHIBIT A-1, PAGE 2
interest, fees and other amounts which it may receive to which the other party
is entitled pursuant to the preceding sentence and pay to the other party any
such amounts which it may receive promptly upon receipt.
4. INDEPENDENT CREDIT DECISION.
The Assignee (a) acknowledges that it has received a copy of
the Loan Agreement and the Schedules and Exhibits thereto, together with copies
of the most recent financial statements referred to in SECTION 6.3 of the Loan
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Loan Agreement.
5. EFFECTIVE DATE; NOTICES.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance (the "Effective Date") shall be the
later of: (i) ____________, 199_; and (ii) the first day on which the following
conditions precedent have been satisfied:
(i) Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the consent of the Agent required for an effective
assignment of the Assigned Amount by the Assignor to the Assignee under SECTION
15.1(a) of the Loan Agreement shall have been duly obtained and shall be in full
force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts
due to the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section 2(b)
hereof and in SECTION 15.1 of the Loan Agreement in the amount of
_______________________ ($______), shall have been paid to the Agent; and
(v) the Assignor shall have assigned and the Assignee
shall have assumed a percentage equal to the Assignee's Percentage Share of the
rights and obligations of the Assignor under the Loan Agreement.
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Borrower and the Agent for
acknowledgement by the Agent, a Notice of Assignment [substantially] in the form
attached hereto as SCHEDULE 1.
EXHIBIT A-1, PAGE 3
6. AGENT.
[(a)] The Assignee hereby appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Loan Agreement as are delegated to the Agent by the Lenders pursuant to the
terms of the Loan Agreement.
[INCLUDE ONLY IF ASSIGNOR IS AGENT] [(b) The Assignee shall
assume no duties or obligations held by the Assignor in its capacity as Agent
under the Loan Agreement.]
7. WITHHOLDING TAX.
The Assignee (a) represents and warrants to the Lenders, the
Agent and the Borrower that under applicable law and treaties no tax will be
required to be withheld by the Lenders with respect to any payments to be made
to the Assignee hereunder, (b) agrees to furnish (if it is organized under the
laws of any jurisdiction other than the United States or any State thereof) to
the Agent and the Borrower prior to the time that the Agent or the Borrower is
required to make any payment of principal, interest or fees hereunder, duplicate
executed originals of either U.S. Internal Revenue service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein the Assignee claims entitlement to
the benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new Forms 4224 or 1001 upon the expiration of any previously delivered form or
comparable statements in accordance with all applicable U.S. laws and
regulations and amendments thereto, duly executed and completed by the Assignee,
and (c) agrees to comply with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
8. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Loan Agreement, no further action by, or notice to, or filing with, any
person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in
EXHIBIT A-1, PAGE 4
connection with the Loan Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Agreement or any
other instrument or document furnished pursuant thereto. The Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to, the financial condition of the Borrower, or the performance or
observance by the Borrower, of any of its obligations under the Loan Agreement
or any other instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and is an Eligible Transferee and it has full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and
Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or
consents, authorizations or approvals of, any person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance; and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with any person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
9. FURTHER ASSURANCES.
The Assignor and the Assignee each hereby agrees to execute and
deliver such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Borrower or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own
costs and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Assignment and Acceptance.
EXHIBIT A-1, PAGE 5
(d) This Assignment and Acceptance may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO HAVE
BEEN MADE IN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE, EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW
SHALL BE USED TO APPLY THE LAWS OF ANY OTHER STATE OR JURISDICTION. The Assignor
and Assignee each agrees that, in addition to any other courts that may have
jurisdiction under applicable laws or rules, any action or proceeding to enforce
or arising out of this Assignment and Acceptance may be commenced in the
Superior Court of the State of California for Los Angeles County, or in the
United States District Court for the Central District of California, and the
Assignor and Assignee each consents and submits in advance to such jurisdiction
and agrees that venue will be proper in such courts on any such matter. Each
party to this Assignment and Acceptance hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY WAIVES TRIAL BY
JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY RELATED DOCUMENTS AND
AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER
ORAL OR WRITTEN) DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR
DISPUTE HOWSOEVER ARISING, BETWEEN THE ASSIGNOR AND THE ASSIGNEE. THE ASSIGNOR
AND THE ASSIGNEE EACH CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND
FREELY MADE.
EXHIBIT A-1, PAGE 6
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Loan Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
Address:
----------------------------------
----------------------------------
[ASSIGNEE]
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
EXHIBIT A-1, PAGE 7
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
___________, 200___
▇▇▇▇▇ Fargo Retail Finance LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇, Vice President
[Name and Address of Borrower]
Ladies and Gentlemen:
We refer to the Third Amended and Restated
Loan and Security
Agreement, dated as of April 25, 2003 (as amended, amended and restated,
modified, supplemented or renewed from time to time, the "Loan Agreement"),
among The Children's Place Retail Stores, Inc. ("Borrower"), the several
financial institutions from time to time party thereto (collectively, the
"Lenders"), and ▇▇▇▇▇ Fargo Retail Finance LLC, as agent for the Lenders (the
"Agent"). Terms defined in the Loan Agreement are used herein as therein
defined.
1. We hereby give you notice of, and request your consent to, the
assignment by ______ (the "Assignor") to ________________ (the "ASSIGNEE") of
_____% of the right, title and interest of the Assignor in and to the Loan
Agreement (including, without limitation, the right, title and interest of the
Assignor in and to the Commitments of the Assignor[,] [and] all outstanding
loans made by the Assignor [and the Assignor's participation in the Letters of
Credit]) pursuant to the Assignment and Acceptance Agreement attached hereto
(the "ASSIGNMENT AND ACCEPTANCE"). Before giving effect to such assignment, the
Assignor's Commitment is $_________[,] [and] the aggregate amount of its
outstanding loans is $_______[, and its participation in L/C Obligations is
$___________].
2. The Assignee agrees that, upon receiving the consent of the
Agent to such assignment, the Assignee will be bound by the terms of the Loan
Agreement as fully and to the same extent as if the Assignee were the Lender
originally holding such interest in the Loan Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
EXHIBIT A-1, PAGE 8
(B) Payment Instructions:
Account No.:
-----------------------------------------
At:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Reference:
-----------------------------------------
Attention:
-----------------------------------------
4. You are entitled to rely upon the representations, warranties
and covenants of each of the Assignor and Assignee contained in the Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
[NAME OF ASSIGNEE]
By:
-------------------------------------------
Title:
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
EXHIBIT A-1, PAGE 9
ACKNOWLEDGED:
THE CHILDREN'S PLACE RETAIL
STORES, INC., a Delaware corporation,
as Borrower
By:
---------------------------
Title:
------------------------
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
▇▇▇▇▇ FARGO RETAIL FINANCE LLC,
a Delaware limited liability company, as Agent
By:
---------------------------
Title:
------------------------
EXHIBIT A-1, PAGE 10
EXHIBIT C-1
COMPLIANCE CERTIFICATE SAMPLE COPY
Date _______________, 200___
▇▇▇▇▇ FARGO RETAIL FINANCE LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇, Vice President
RE: THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT, DATED AS OF
APRIL 25, 2003 (THE "AGREEMENT") BY AND AMONG ▇▇▇▇▇ FARGO RETAIL
FINANCE LLC, AS AGENT ("AGENT") FOR CERTAIN FINANCIAL INSTITUTIONS ,
THE FINANCIAL INSTITUTIONS AND THE CHILDREN'S PLACE RETAIL STORES,
INC. ("BORROWER").
Dear _______________:
In accordance with Section 6.2 of the Agreement, this letter shall serve as
certification to Agent that to the best of my knowledge: (i) all financial
statements have been prepared in accordance with GAAP and fairly represent the
financial condition of Borrower, (ii) the representations and warranties of
Borrower set forth in the Agreement and other Loan Documents are true and
correct in all material respects on and as of the date of this certification,
(iii) Borrower is in compliance with each of its financial covenants set forth
in Sections 7.19 and 7.20 of the Agreement as of the date of this certification,
and (iv) there does not exist any condition or event that constitutes a Default
or Event of Default. Such certification is made as of the fiscal month ending
______________, 200__.
Sincerely,
Chief Financial Officer
SCHEDULE C-1
AMENDMENT NUMBER ONE TO SECURITY AGREEMENT -
STOCK PLEDGE
This AMENDMENT NUMBER ONE TO SECURITY AGREEMENT - STOCK PLEDGE
("Amendment") is entered into as of April 25, 2003 between The Children's Place
Retail Stores, Inc., a Delaware corporation ("Pledgor") and ▇▇▇▇▇ Fargo Retail
Finance LLC, a Delaware corporation ("▇▇▇▇▇ Fargo Retail"), as Agent, on the
other hand.
RECITALS
▇. ▇▇▇▇▇ Fargo Retail is the successor of Foothill Capital Corporation,
a California corporation with respect to the Security Agreement - Stock Pledge
dated as of January 31, 1999 (the "Pledge Agreement");
B. Pledgor is the record owner of 1,000 shares of the Common Stock of
TCPIP, Inc., a Delaware corporation (formerly known as TCPIP Holding Company,
Inc.).
C. Pledgor and ▇▇▇▇▇ Fargo Retail in its capacity as Agent, hereby
amend and supplement the Pledge Agreement as follows:
1. All references to Foothill in the Pledge Agreement shall mean ▇▇▇▇▇
Fargo Retail as a lender and as the Agent.
2. All references to Company shall now mean TCPIP, Inc., a Delaware
corporation.
3. Recitals A and C of the Pledge Agreement are amended to read as
follows:
"A. Pledgor and ▇▇▇▇▇ Fargo Retail, in its capacity as a Lender and
Agent, are parties to that certain Third Amended and Restated
Loan and
Security Agreement, dated as of April 25, 2003 (as may hereafter be
amended, supplemented or restated from time to time in accordance with
the terms thereof, the "Loan Agreement")."
"C. Pursuant to the terms of the Loan Agreement, Pledgor and ▇▇▇▇▇
Fargo Retail, as Agent for the benefit of the Lenders, have entered into
this Agreement as additional security for the Obligations (as defined in the
Loan Agreement)."
1
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
date first set forth above.
THE CHILDREN'S PLACE RETAIL
STORES, INC., a Delaware corporation
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Title: Vice President and CFO
▇▇▇▇▇ FARGO RETAIL FINANCE LLC,
a Delaware corporation, as Agent and Lender
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Title: Vice President
2