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CREDIT AGREEMENT,
dated as of October 1, 1997,
among
THE RUG BARN, INC.,
HOME INNOVATIONS, INC.,
DHA HOME, INC.
AND ▇.▇. ▇▇▇▇▇▇ AND COMPANY,
AS BORROWERS,
DECORATIVE HOME ACCENTS, INC.,
DRAYMORE MFG. CORP.
AND HOME INNOVATIONS, INC.,
AS GUARANTORS,
and
THE LENDERS LISTED ON THE SIGNATURE PAGES HERETO,
AS LENDERS
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Table of Contents
Page
ARTICLE I DEFINITIONS; CONSTRUCTION..................................... 1
1.01. Certain Definitions.............................................. 1
1.02. Construction..................................................... 10
1.03. Accounting Principles............................................ 10
ARTICLE II THE TERM LOAN................................................. 10
2.01. Term Loan........................................................ 10
2.02. Term Notes....................................................... 11
2.03. Maturity Date.................................................... 11
2.04. Joint and Several Liability............ ......................... 11
2.05. Post-Petition Closing Fee........................................ 12
2.06. Interest Rate.................................................... 12
2.07. Interest Payment Dates........................................... 12
2.08. Payments ........................................................ 12
2.09. Use of Proceeds.................................................. 13
2.10. Taxes............................................................ 13
ARTICLE III CONDITIONS PRECEDENT TO TERM LOAN............................. 14
3.01. Conditions Precedent to Term Loan................................ 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................ 16
4.01. Corporate Existence, Power and Authority; Subsidiaries........... 16
4.02. Financial Statements; No Material Adverse Change................. 17
4.03. Chief Executive Office; Collateral Locations..................... 17
4.04. Priority of Liens; Title to Properties........................... 17
4.05. Maintenance of Equipment......................................... 18
4.06. Tax Returns...................................................... 18
4.07. Litigation ...................................................... 18
4.08. Compliance with Other Agreements and Applicable Laws............. 18
4.09. Employee Benefits................................................ 19
4.10. Environmental Compliance......................................... 19
4.11. Accuracy and Completeness of Information......................... 20
4.12. Survival of Warranties; Cumulative............................... 20
4.13. Enforceability of Loan Documents................................. 20
4.14. Nature of Business............................................... 20
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4.15. Use of Proceeds........................................................ 20
4.16. Registration and Transfer of Term Notes................................ 21
4.17. Administrative Priority; Lien Priority................................. 21
4.18. Bankruptcy Court Orders................................................ 21
ARTICLE V COLLATERAL........................................................... 22
5.01. Grant of Security Interest............................................. 22
5.02. Security for Secured Obligations....................................... 25
5.03. Proceeds of Collateral................................................. 25
5.04. Administrative Priority................................................ 25
5.05. Grants, Rights and Remedies Cumulative................................. 25
5.06. No Filings Required.................................................... 25
5.07. Survival............................................................... 26
ARTICLE VI AFFIRMATIVE AND NEGATIVE COVENANTS.................................. 26
6.01. Covenants Under Congress Loan Agreement................................ 26
6.02. Liens.................................................................. 26
6.03. Indebtedness........................................................... 26
6.04. Interim Order; Final Order; Administrative Priority; Lien Priority;
Payment of Claims................................................ 27
6.05. Overadvances; Budget; No Amendment; Financial Covenants 27
6.06. Replacement of Schedule VI............................................. 28
ARTICLE VII DEFAULTS........................................................... 28
7.01. Events of Default...................................................... 28
7.02. Consequences of an Event of Default.................................... 31
7.03. Certain Remedies....................................................... 31
ARTICLE VIII GUARANTEE......................................................... 32
8.01. Guarantee.............................................................. 32
8.02. Nature of Guarantee.................................................... 32
8.03. Authorization.......................................................... 32
8.04. Right to Demand Full Performance....................................... 33
8.05. Certain Waivers............................................... 34
8.06. The Guarantors Remain Obligated in Event the Borrowers Are No
Longer Obligated to Discharge Obligations........................ 34
8.07. Severability of Void Obligations under Guarantee....................... 35
8.08. Guarantee Is in Addition to Other Security............................. 35
8.09. Release of Security Interest........................................... 35
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8.10. No Bar to Further Actions.............................................................. 35
8.11. Failure to Exercise Rights Shall Not Operate as a Waiver; No Suspension
of Remedies.................................................................... 35
8.12. Lenders' Duties; Notice to Lenders.................................................... 36
8.13. Successors and Assigns................................................................ 36
8.14. Release of Guarantee.................................................................. 36
8.15. Execution of Guarantee................................................................ 36
8.16. No Subrogation; Certain Agreements.................................................... 36
8.17. Bankruptcy; No Discharge.............................................................. 37
ARTICLE IX MISCELLANEOUS..................................................................... 38
9.01. Holidays.............................................................................. 38
9.02. Amendments and Waivers................................................................ 38
9.03. No Implied Waiver; Cumulative Remedies................................................ 38
9.04. Notices............................................................................... 38
9.05. Expenses; Taxes; Attorneys' Fees; Indemnification..................................... 39
9.06. Several and Not Joint; Limited Liability.............................................. 40
9.07. Application........................................................................... 41
9.08. Severability.......................................................................... 41
9.09. Governing Law......................................................................... 41
9.10. Prior Understandings.................................................................. 41
9.11. Duration; Survival.................................................................... 41
9.12. Counterparts.......................................................................... 42
9.13. Successors and Assigns................................................................ 42
9.14. Waiver of Jury Trial.................................................................. 42
9.15. Right of Setoff....................................................................... 42
9.16. Headings.............................................................................. 43
Exhibits
Exhibit A Congress' Interim Financing Order
Exhibit B Congress' Final Financing Order
Exhibit C Final Order
Exhibit D Interim Order
Exhibit E Amended and Restated Intercreditor Agreement
Exhibit F Letter Agreement
Exhibit G Form of Term Note
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Schedules
Schedule I Real Property Collateral
Schedule II Terms of Repayment
Schedule III Wire Transfer Instructions
Schedule IV Subsidiaries
Schedule V Locations of Collateral
Schedule VI Congress Advance Limitations
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 1, 1997, among THE RUG BARN,
INC., a South Carolina corporation, HOME INNOVATIONS, INC., a Delaware
corporation, DHA HOME, INC., a Delaware corporation, and ▇.▇. ▇▇▇▇▇▇ AND
COMPANY, an Illinois corporation (each a "Borrower" and collectively, the
"Borrowers"), DECORATIVE HOME ACCENTS, INC., a Delaware Corporation, DRAYMORE
MFG. CORP., a North Carolina corporation, and HOME INNOVATIONS, INC., a New
York corporation (each a "Guarantor" and collectively, the "Guarantors") and
the lenders listed on the signature pages hereto (each a "Lender" and
collectively, the "Lenders").
BACKGROUND
Each Borrower and Guarantor has filed separate petitions for relief under
chapter 11 of title 11 of the United States Code with the United States
Bankruptcy Court for the Southern District of New York and continues to operate
its business as a debtor-in-possession.
The Borrowers have requested the Lenders to provide the Borrowers with
term loans having an aggregate principal amount equal to $3.75 million and,
subject to the terms and conditions set forth herein, the Lenders have agreed
to provide such loans.
In consideration of the mutual covenants herein contained and of other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, as used herein the following words and terms shall
have the following meanings, respectively, unless the context hereof otherwise
clearly requires:
"Accelerated Maturity Date" shall mean the date on which the Obligations
(including, without limitation, the entire unpaid principal balance of the
Loans and accrued but unpaid interest thereon) shall become due and payable
pursuant to the terms of any of the Loan Documents, including, without
limitation, by reason of the occurrence of an Event of Default.
"Affiliate" of a Person shall mean any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power,
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directly or indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Agreement" shall mean this Credit Agreement as amended, modified,
supplemented or restated from time to time in accordance with the terms hereof.
"Bankruptcy Code" shall mean ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, 11 U.S.C.
Section Section 101 et seq., or any similar United States federal or state law
for the relief of debtors, as amended from time to time.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for the
Southern District of New York or the United States District Court for the
Southern District of New York.
"Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure,
as amended from time to time.
"Borrower" and "Borrowers" shall have the meanings given such terms in the
introductory paragraph to this Agreement.
"Budget" shall have the meaning given such term in the Congress Financing
Order as such budget is in effect on the date hereof without further amendment
or modification.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in New
York, New York.
"▇▇▇▇▇▇ ▇▇▇▇▇ License" shall mean that certain License Agreement dated as
of April 27, 1997, by and between ▇▇▇▇▇▇ ▇▇▇▇▇, Inc. and DHA Home, Inc., as the
same may be amended or modified from time to time and any auxiliary agreement
entered into in connection therewith.
"Capitalized Lease" shall mean any lease which is required under GAAP to
be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean the aggregate amount which is
required under GAAP to be reported as a liability on the balance sheet of a
Person as lessee under a Capitalized Lease.
"Case" shall mean, collectively, the voluntary chapter 11 cases of the
Debtors under the Bankruptcy Code pending in the Bankruptcy Court.
"Closing Date" shall mean the date on which the conditions set forth in
Section 3.01 hereof shall be satisfied.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case
as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall have the meaning given such term in Section 5.01
hereof.
"Congress" shall mean Congress Financial Corporation, a California
corporation.
"Congress Debt Documents" shall mean the Congress Loan Agreement, the
Congress Financing Order and all other instruments and documents that are in
effect as of the date hereof and are executed in connection with or otherwise
relating to any Congress Debt Document, without further amendment, waiver or
modification.
"Congress Financing Order" shall mean (i) that certain interim order in
the form of Exhibit A hereto from and after the date such order is entered by
the Bankruptcy Court until the date that the final order in the form of Exhibit
B hereto is entered by the Bankruptcy Court and (ii) such final order from and
after the date such order is entered by the Bankruptcy Court.
"Congress Liens" shall mean the Liens granted to Congress pursuant to the
Congress Loan Agreement and/or the Congress Financing Order.
"Congress Loan Agreement" shall mean that certain Loan and Security
Agreement, dated November 12, 1996, as amended as of the date hereof pursuant
to the Congress Ratification Agreement, by and between Congress, the Borrowers
and the Guarantors (but without further amendment, waiver or modification).
"Congress Ratification Agreement" shall mean that certain Ratification and
Amendment Agreement, dated October 1, 1997, by and between the Debtors and
Congress.
"Debtors" shall mean the Borrowers and the Guarantors.
"Decorative Home" shall mean Decorative Home Accents, Inc., a Delaware
corporation.
"Designated Borrowing Officer" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or ▇▇▇ ▇.
▇▇▇▇▇, or such other officer as shall be designated from time to time in
writing by the Borrowers to Lenders.
"Designated Financial Officer" of a Person shall mean the individual
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to be the chief financial officer or
treasurer of such Person (and individuals designated from time to time by the
Board of Directors or governing body
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performing like functions of such Person to act in lieu of the chief financial
officer or the treasurer).
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Effective Date" shall mean the date on which the Restructuring is
consummated pursuant to a plan of reorganization under chapter 11 of the
Bankruptcy Code.
"Environmental Law" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect relating to
the regulation and protection of human health, safety, the environment and
natural resources. Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous Material
Transportation Act, as amended (49 U.S.C. Section 180 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.)
("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. Section 2601
et seq.); the Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et
seq.); and their state and local counterparts or equivalents.
"Environmental Liabilities and Costs" shall mean all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, expert and consulting and costs of
investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition
or a Release of Hazardous Materials from or onto (i) any property presently or
formerly owned by any of the Borrowers or any of the Guarantors or (ii) any
facility which received Hazardous Materials generated by any of the Borrowers
or any of the Guarantors.
"Environmental Lien" shall mean any Lien in favor of any Governmental
Authority or any other Person for Environmental Liabilities and Costs.
"Equipment" shall have the meaning given such term in Section 5.01(a)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as any Borrower, (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with any Borrower, or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of
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the Code) as any Borrower, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default described in
Section 7.01 hereof.
"Final Order" shall mean the order of the Bankruptcy Court, in the form of
Exhibit C hereto, entered after a final hearing under Bankruptcy Rule
4001(c)(2), approving this Agreement and the other Loan Documents and
authorizing the Debtors to incur permanent post-petition secured and
super-priority indebtedness in accordance with this Agreement, and which is in
effect and is not stayed and as to which (a) the time to appeal or petition for
certiorari has expired and as to which no appeal, petition for certiorari or
other proceeding for reargument or rehearing shall then be pending, or (b) in
the event that an appeal, writ of certiorari or reargument or rehearing thereof
has been sought and is pending, such order of the Bankruptcy Court shall have
been affirmed by the highest court to which the order was appealed or
certiorari, reargument or rehearing has been denied, and the time to take any
further appeal, petition for certiorari, or move for reargument or rehearing
shall have expired.
"GAAP" shall mean generally accepted accounting principles as such
principles shall be in effect in the United States at the relevant date.
"Governmental Authority" shall mean any nation or government, any federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Guarantee" shall mean the guarantees granted by the Guarantors to Lenders
pursuant to Article VIII hereof.
"guarantee" of or by any Person shall mean any obligation of such Person
guaranteeing any Indebtedness of any other Person (the "primary obligor"),
directly or indirectly, through an agreement (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Guarantor" and "Guarantors" shall have the meanings given to such terms
in the introductory paragraph to this Agreement.
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"Hazardous Materials" shall mean (i) any element, compound or chemical
that is defined, listed or otherwise classified as a solid waste contaminant,
pollutant, toxic pollutant, hazardous substance, extremely hazardous substance,
toxic substance, hazardous waste, or special waste under any Environmental Law;
(ii) petroleum and its refined fractions, (iii) any dielectric fluids
containing more than 50 parts per polychlorinated biphenyls, (iv) any
flammable, explosive or radioactive materials; and (v) any other materials used
or stored by any Borrower, building, components (including but not limited to
asbestos containing materials) and manufactured products containing Hazardous
Materials.
"Indebtedness" shall mean as to any Person (i) indebtedness for borrowed
money; (ii) indebtedness for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
business and payable in accordance with customary practices); (iii)
indebtedness evidenced by bonds, debentures, notes or other similar instruments
(other than performance, surety and appeal or other similar bonds arising in
the ordinary course of business); (iv) obligations and liabilities secured by a
Lien upon property owned by such Person, whether or not owing by such Person
and even though such Person has not assumed or become liable for the payment
thereof; (v) any guarantee, direct or indirect, by such Person of any
obligations and liabilities; (vi) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights
and remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property; (vii) Capitalized Lease Obligations; (viii) all
liabilities in respect of letters of credit, acceptances and similar
obligations created for the account of such Person; and (ix) net liabilities of
such Person under interest rate cap agreements, interest rate swap agreements,
foreign currency exchange agreements and other hedging agreements or
arrangements calculated on a basis satisfactory to the Lenders and in
accordance with accepted practice.
"Indemnified Parties" shall have the meaning given such term in Section
9.05 hereof.
"Interim Order" shall mean the order of the Bankruptcy Court,
substantially in the form of Exhibit D hereto, entered after a hearing under
Bankruptcy Rule 4001(c)(2), approving this Agreement and the other Loan
Documents and authorizing the Debtors to incur interim post-petition secured
and super-priority indebtedness in accordance with this Agreement.
"Intercreditor Agreement" shall mean the Amended and Restated
Intercreditor Agreement, substantially in the form of Exhibit E hereto, by and
among the Lenders and Congress and acknowledged by the Borrowers and the
Guarantors, dated the Closing Date hereof, as amended, modified and
supplemented and in effect from time to time, regarding the relative priority
of the Liens granted to the Lenders under this Agreement and the Congress
Liens.
"Interest Rate" shall have the meaning given such term in Section 2.06
hereof.
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"Inventory" shall mean all goods and merchandise of the Borrowers and the
Guarantors including, but not limited to, all raw materials, work in process,
finished goods, materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or sale of such goods and
merchandise, whether now owned or hereafter acquired and all such property, the
sale or disposition of which would give rise to accounts receivable or cash.
"Lender" and "Lenders" shall have the meanings given such terms in the
introductory paragraph to this Agreement.
"Letter Agreement" shall mean the letter agreement, dated as of May 15,
1997, among Decorative Home, TCW Special Credits Fund V - The Principal Fund,
the entities listed on Schedule I thereto, and Magten, as agent on behalf of
certain of its accounts, a copy of which Letter Agreement is attached hereto as
Exhibit F.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, claim,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loans made by the Lenders to the
Borrowers under this Agreement.
"Loan Documents" shall mean this Agreement, the Term Notes, the
Intercreditor Agreement, the Order and all other instruments, agreements and
documents from time to time delivered in connection herewith or therewith.
"Magten" shall mean Magten Asset Management Corp., as agent on behalf of
certain of its accounts.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
any Borrower's or Guarantor's assets, property, prospects, or condition,
financial or otherwise, (ii) the Collateral or Lenders' security interest
therein, (iii) any Borrower's or Guarantor's ability to pay or perform the
Obligations, or (iv) any of the Lenders' rights and remedies under any Loan
Document or applicable law or the Lenders' ability to enforce any such rights
and remedies.
"Maturity Date" shall mean the earlier to occur of (a) the Accelerated
Maturity Date, (b) the Stated Maturity Date, and (c) the first anniversary of
the Petition Date.
"Note Register" shall have the meaning given such term in Section 4.17
hereof.
"Note Registrar" shall have the meaning given such term in Section 4.17
hereof.
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"Obligations" shall mean any and all Loans and all other indebtedness,
obligations, indemnities and liabilities of every kind, nature and description
owing by any one or more Borrowers to Lenders and/or their respective
Affiliates including, without limitation, the Post-Petition Closing Fee and all
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to a Borrower
under the Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the commencement of such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired by
Lenders.
"Order" shall mean (i) the Interim Order until the date that the final
order in respect of the Interim Order becomes the Final Order and (ii) the
Final Order from and after the date the Final Order is in existence.
"Other Taxes" shall have the meaning given to such term in Section 2.10(a)
hereof.
"Percentage Interest" shall mean, with respect to each Lender, the
percentage interest of each Term Loan made by such Lender as set forth next to
such Lender's name on the signature pages hereto.
"Permitted Liens" shall mean, collectively, the (i) Congress Liens, (ii)
Liens granted pursuant to the Loan Documents, (iii) Liens permitted under the
Congress Loan Agreement but only to the extent such Liens exist as of the date
hereof and (iv) Liens granted pursuant to the Prior Credit Agreement or any
other "Loan Document" as such term is defined in the Prior Credit Agreement.
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint-stock company, government (including
political subdivisions), Governmental Authority or agency, or any other entity.
"Petition Date" shall mean the date of the commencement of the Case.
"Post-Petition Closing Fee" shall have the meaning given such term in
Section 2.05 hereof.
"Potential Default" shall mean any event or condition which, with notice
or passage of time, or any combination of the foregoing, would constitute an
Event of Default.
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"Prior Credit Agreement" shall mean that certain Credit Agreement, dated
as of May 23, 1997, as amended from time to time, by and among the Borrowers,
the Guarantors and the Lenders.
"Real Property Collateral" shall mean the parcels of real property and the
related improvements thereto identified on Schedule I hereto.
"Receivables" shall have the meaning given such term in Section 5.01(c)
hereof.
"Related Contracts" shall have the meaning given such term in Section
5.01(c) hereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Hazardous Material into the indoor or outdoor environment or onto or from any
property presently or formerly owned or operated by any of the Borrowers or any
of the Guarantors, or at any disposed facility that received Hazardous
Materials generated by any of the Borrowers or any of the Guarantors including
the movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
"Remedial Action" shall mean all actions necessary to monitor, assess,
evaluate, investigate, clean up, remove or treat any Release or threatened
Release of Hazardous Materials or to prevent, mitigate or minimize any Release
or threatened Release so that the Release or threatened Release does not
migrate or endanger or threaten to endanger public health or welfare or the
environment.
"Restructuring" shall have the meaning given such term in the Letter
Agreement.
"Secured Obligations" has the meaning given to such term in Section 5.02
hereof.
"Stated Maturity Date" shall mean the Effective Date.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited or general partnership, limited liability company, limited liability
partnership, trust, association or other business entity of which an aggregate
of 30% or more of the outstanding stock or other interests entitled to vote in
the election of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more Subsidiaries
of such Person.
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"Taxes" shall have the meaning given such term in Section 2.10(a) hereof.
"Term Loan" shall have the meaning given such term in Section 2.01 hereof.
"Term Notes" shall have the meaning given such term in Section 2.02
hereof.
"Trademarks" shall have the meaning given such term in Section 5.01(d)
hereof.
"Trademark Licenses" shall have the meaning given such term in Section
5.01(d) hereof.
1.02. Construction.. Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Lenders include good faith estimates by the Lenders (in
the case of quantitative determinations) and good faith beliefs by the Lenders
(in the case of qualitative determinations). The words "hereof," "herein,"
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. The section and
other headings contained in this Agreement and the Table of Contents preceding
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any
respect. Section, subsection and exhibit references are to this Agreement
unless otherwise specified.
1.03. Accounting Principles Except as otherwise provided in this
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Agreement
(other than the Budget) shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all accounting
or financial terms shall have the meanings ascribed to such terms by GAAP.
Notwithstanding the definition of GAAP contained in this Agreement, no change
in GAAP that would affect the method or calculation of any of the financial
covenants, restrictions or standards or definitions of terms used herein shall
be given effect in such calculations until such financial covenants,
restrictions or standards or definitions are amended in a manner satisfactory
to the Borrowers and the Lenders so as to reflect such change in GAAP.
ARTICLE II
THE TERM LOAN
2.01. Term Loan. Subject to the terms and conditions hereof, Lenders
agree to make Loans to Borrowers in an aggregate principal amount equal to
Three Million Seven
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Hundred and Fifty Thousand Dollars ($3,750,000) on the Closing Date
(collectively, the "Term Loan").
2.02. Term Notes. The Borrowers agree that in order to evidence the Term
Loan, the Borrowers will execute and deliver to each Lender on the Closing Date
a promissory note, dated the Closing Date, substantially in the form of Exhibit
G (collectively, the "Term Notes"), payable to the order of such Lender in the
principal amount of its respective Percentage Interest in the Term Loan.
2.03. Maturity Date. On the Maturity Date, all Obligations (including,
without limitation all outstanding amounts under the Term Notes and the
Post-Petition Closing Fee and all accrued and unpaid interest on the
Obligations) shall become immediately due and payable without notice or demand.
2.04. Joint and Several Liability. (a) Each of the Borrowers shall be
jointly and severally liable with the other Borrowers for the Obligations, and
each of the Obligations shall be secured by all of the Collateral. Each of the
Borrowers acknowledges that it is a co-borrower hereunder and is jointly and
severally liable under this Agreement and the other Loan Documents. All
financial accommodations extended to any of the Borrowers or requested by any
of the Borrowers shall be deemed to be financial accommodations extended for
each of the Borrowers, and each of the Borrowers hereby authorizes each other
of the Borrowers to effectuate borrowings on its behalf. Notwithstanding
anything to the contrary contained in this Agreement or any of the other Loan
Documents, the Lenders shall be entitled to rely upon any request, notice or
other communication received by them from any of the Borrowers on behalf of all
Borrowers, and shall be entitled to treat their giving of any notice hereunder
to any of the Borrowers as notice to each and all Borrowers.
(b) Each of the Borrowers agrees that the joint and several liability of
the Borrowers provided for in this Section 2.04 shall not be impaired or
affected by any modification, supplement, extension or amendment or any
contract or agreement to which the other Borrowers may hereafter agree (other
than an agreement signed by the Lenders specifically releasing such liability),
nor by any delay, extension of time, renewal, compromise or other indulgence
granted by any Lender with respect to any of the Obligations, nor by any other
agreements or arrangements whatsoever with the other Borrowers or with any
other person, each of the Borrowers hereby waiving all notice of such delay,
extension, release, substitution, renewal, compromise or other indulgence, and
hereby consenting to be bound thereby as fully and effectually as if it had
expressly agreed thereto in advance. The liability of each of the Borrowers is
direct and unconditional as to all of the Obligations, and may be enforced
without requiring any Lender first to resort to any other right, remedy or
security. Each of the Borrowers hereby expressly waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the
Obligations, the Term Notes, the Post-Petition Closing Fee, this Agreement or
any other Loan Document and any requirement that the Lenders protect, secure,
perfect or insure any Lien or any
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property subject thereto or exhaust any right or take any action against any
of the Borrowers or any other person or any Collateral.
(c) Each of the Borrowers hereby irrevocably waives and releases each
other of the Borrowers from all "claims" (as defined in Section 101(5) of the
Bankruptcy Code) to which such Borrowers are or would be entitled by virtue of
the provisions of the subsection 2.04(b) hereof or the performance of such
Borrower's obligations thereunder including, without limitation, any right of
subrogation (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise), reimbursement, contribution, exoneration or similar right, or
indemnity, or any right of recourse to security for any of the Obligations.
2.05. Post-Petition Closing Fee. On the Closing Date, a closing fee of
$937,500 (the "Post-Petition Closing Fee") shall be for all purposes fully
earned and non-refundable by Lenders (it being agreed that, as of the Closing
Date, the Post-Petition Closing Fee shall be deemed to be a portion of the
Obligations by the Borrowers to Lenders hereunder); provided, however, that
Lenders shall be deemed to have waived Borrowers' obligation to pay the
Post-Petition Closing Fee if either (i) the Restructuring is not consummated
consistent with the terms and conditions described in the Letter Agreement
solely by reason of Magten's breach of its commitments described in the Letter
Agreement or (ii) the Restructuring is consummated and on the Effective Date
all outstanding Obligations are repaid in full from the proceeds of a secured
term loan on the terms and conditions set forth in Schedule II hereto and on
such other terms and conditions acceptable to the Term Lenders in their sole
discretion.
2.06 Interest Rate. The Obligations shall bear interest at a rate (the
"Interest Rate") per annum equal to the greater of (i) the highest per annum
interest rate for "Loans" (as such term is used in the Congress Loan Agreement)
in effect from time to time under the Congress Loan Agreement plus 3% and (ii)
12%.
2.07 Interest Payment Dates. The Borrowers shall pay interest on the
unpaid principal amount of each Loan and the Post-Petition Closing Fee from the
Closing Date until such principal amount shall be paid in full, which interest
shall be payable monthly in arrears on the first Business Day of each month,
commencing October 1, 1997.
2.08. Payments. (a) Time, Place and Manner. All payments to be made in
respect of the Obligations or other amounts due hereunder, under the Term Notes
or any other Loan Document shall be payable at or before 12:00 Noon, New York
City time, on the day when due without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived. Such payments shall be
made in Dollars by wire transfer in funds immediately available to each Lender
in its Percentage Interest of such payments according to the wire instructions
set forth on Schedule III hereto (or at any other address at which such Lender
shall notify the Borrowers in writing), without setoff, counterclaim or other
deduction or defense of any nature or kind whatsoever. Interest on all
Obligations and all fees that accrue on a per annum basis shall be computed on
the basis of the actual number of days
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elapsed in the period during which interest or such fee accrues and a year of
360 days. In computing interest on any Loan, the date of the making of such
Loan shall be included and the date of payment shall be excluded.
(b) Interest Upon Events of Default. To the extent permitted by law,
after there shall have occurred and so long as there is continuing an Event of
Default pursuant to Section 7.01, all principal, interest, fees, indemnities or
any other Obligations of the Borrowers hereunder, or under any Term Note or any
other Loan Document (and including, without limitation, interest accrued under
this subsection 2.08(b)) shall compound on a daily basis as provided in this
subsection 2.08(b) and shall bear interest for each day until paid (before and
after judgment), payable on demand, at a rate per annum of 2% above the
Interest Rate for such day.
2.09. Use of Proceeds. The Borrowers hereby covenant, represent and
warrant that the proceeds of the Term Loan made to them will be used for the
purposes set forth in the Budget through the Effective Date.
2.10. Taxes. (a) All payments made by any Borrower or Guarantor
hereunder, under the Term Notes or under any other Loan Document will be made
without setoff, counterclaim or other deduction or defense of any nature or
kind whatsoever. All such payments shall be made free and clear of, and
without deduction for, any present or future income, franchise, sales, use,
excise, stamp or other taxes, levies, imposts, deductions, charges, fees,
withholdings, restrictions or conditions of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any jurisdiction (whether
pursuant to United States Federal, state, local or foreign law) or by any
political subdivision or taxing authority thereof or therein, and all interest,
penalties or similar liabilities, excluding taxes on the overall net income of
any Lender (such nonexcluded taxes are hereinafter collectively referred to as
the "Taxes"). If any Borrower or Guarantor shall be required by law to deduct
or to withhold any Taxes from or in respect of any amount payable hereunder,
(i) the amount so payable shall be increased to the extent necessary so that
after making all required deductions and withholdings (including Taxes on
amounts payable to the Lenders pursuant to this sentence) the Lenders receive
an amount equal to the sum they would have received had no such deductions or
withholdings been made, (ii) such Borrower or Guarantor shall make such
deductions or withholdings, and (iii) such Borrower or Guarantor shall pay the
full amount deducted or withheld to the relevant taxation authority in
accordance with applicable law. Whenever any Taxes are payable by any
Borrower, as promptly as possible thereafter, such Borrower or Guarantor shall
send the Lenders an official receipt showing payment. In addition, the
Borrowers and Guarantors agree to pay any present or future taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, recordation or filing of, or otherwise with
respect to, this Agreement, the Term Notes or any other Loan Document
(hereinafter referred to as "Other Taxes").
(b) The Borrowers will indemnify each Lender for the amount of Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
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any jurisdiction on amounts payable under this Section 2.10) paid by such
Lender and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be paid immediately following the date on
which such Lender makes written demand.
(c) If any Borrower or Guarantor fails to perform its obligations under
this Section 2.10, the Borrowers shall indemnify the Lenders for any
incremental taxes, interest or penalties that may become payable as a result of
any such failure.
ARTICLE III
CONDITIONS PRECEDENT TO TERM LOAN
3.01. Conditions Precedent to Term Loan. This Agreement shall become
effective as of the Business Day when each of the following conditions
precedent shall have been satisfied and the obligation of Lenders to make the
Term Loan hereunder shall be subject to the satisfaction of the following
conditions precedent:
(a) Payment of Expenses, Etc. The Borrowers shall have paid all amounts
then owing to the Lenders by the Borrowers or Guarantors hereunder, or under
any other Loan Document, including, without limitation, those amounts due and
payable on the Closing Date pursuant to Section 9.05 hereof. The Borrowers
shall have paid to counsel to the Lenders all fees and other client charges due
to such counsel on the Closing Date.
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Article IV of this Agreement and in
each other Loan Document and certificate or other writing delivered to the
Lenders pursuant hereto or thereto or prior to the Closing Date shall be
correct on and as of the Closing Date as though made on and as of such date;
and no Potential Default or Event of Default shall have occurred and be
continuing on the Closing Date or would result from (i) this Agreement becoming
effective in accordance with its terms or (ii) the Loans being made on the
Closing Date.
(c) Legality. The making of the Loans shall not contravene any law,
rule or regulation applicable to the Lenders.
(d) Delivery of Documents. Lenders shall have received on or before
the Closing Date the following, each in form and substance satisfactory to the
Lenders and their counsel and, unless indicated otherwise, dated the Closing
Date:
(i) Each Lender shall have received its respective Term Note payable
to the order of such Lender and duly executed by each Borrower;
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(ii) the Intercreditor Agreement duly executed by Congress and duly
acknowledged by the Borrowers and the Guarantors;
(iii) a copy of the resolutions adopted by the Board of Directors
of each of the Borrowers and the Guarantors, certified as of the Closing Date by
authorized officers thereof, authorizing (A) in the case of the Borrowers, the
borrowings hereunder and the transactions contemplated by the Loan Documents to
which each Borrower is or will be a party, and (B) the execution, delivery and
performance by such Person of each Loan Document and the execution and delivery
of the other documents to be delivered by such Person in connection therewith;
(iv) a certificate of an authorized officer of each Borrower and the
Guarantors, certifying the names and true signatures of the officers of such
Person authorized to sign each Loan Document to which such Person is or will be
a party and the other documents to be executed and delivered by such Person in
connection therewith, together with evidence of the incumbency of such
authorized officers;
(v) a certificate of the Designated Financial Officer of each of the
Borrowers, certifying as to the matters set forth in Section 3.01(b);
(vi) a certificate of an authorized officer of the Borrowers
certifying the names and true signatures of those officers of the Borrowers
that are authorized to provide all notices under this Agreement and the Loan
Documents; and
(vii) such other agreements, instruments, approvals, opinions and
other documents as the Lenders may reasonably request.
(e) Lien Priority. The Liens in favor of the Lenders pursuant to the
Loan Documents shall be valid and perfected, first priority Liens on the
Collateral, subject only to the Permitted Liens.
(f) Legal Restraints/Litigation. Except as set forth in any public
filings made by any Borrower or Guarantor with the Securities and Exchange
Commission, there shall be no (1) litigation, investigation or proceeding
(judicial or administrative) pending or threatened against the Borrowers or the
Guarantors or their respective assets or properties (other than the Case), by
any Person relating in any way to the transactions contemplated by this
Agreement and the other Loan Documents or the consummation of the
Restructuring, (2) injunction, writ or restraining order restraining or
prohibiting the transactions contemplated by this Agreement and the other Loan
Documents or the consummation of the Restructuring, or (3) suit, action,
investigation or proceeding (judicial or administrative) pending or threatened
against the Borrowers or the Guarantors, or their assets, which, in the opinion
of the Lenders, if adversely determined could have a Material Adverse Effect.
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(g) Indebtedness. The Borrowers and the Guarantors shall have no
Indebtedness or other liabilities other than (1) Indebtedness to Congress under
the Congress Loan Agreement, (2) Indebtedness permitted under the Congress Loan
Agreement but only to the extent such Indebtedness exists as of the date
hereof, and (3) Indebtedness permitted under the Loan Documents.
(h) Material Adverse Effect. Since April 25, 1997, no situation, event
or circumstance shall have occurred (other than the commencement of the Case)
which could have a Material Adverse Effect which has not been fully and
accurately disclosed to Lenders in writing.
(i) Information. Debtors shall furnish Lender with all financial
information, projections, budgets, business plans, cash flows and such other
information as Lenders shall have requested.
(j) No Trustee or Examiner, etc. No trustee, examiner, receiver or the
like shall have been appointed or designated in the case with respect to any
debtor, as debtor or debtor-in-possession, or its business, property or assets,
and no motion or proceeding shall be pending seeking such relief.
(k) Intercreditor Agreement. The Intercreditor Agreement shall be in
full force and effect with respect to the security interests and liens securing
the Obligations and the indebtedness under the Loan Documents.
(l) Entry of Interim Order. The Interim Order shall have been entered
by the Bankruptcy Court and such Interim Order shall be in full force and
effect and shall not have been vacated, reversed, modified, amended or stayed
in any respect and, in the event that such order is the subject of any pending
appeal, the performance of any obligation hereunder of any party hereto shall
not be the subject of a stay pending appeal.
(m) Compliance with Bankruptcy Laws. The Debtors shall have complied
in full with the notice and other requirements of the Bankruptcy Code and any
applicable Bankruptcy Rule or requirement of the Bankruptcy Court with respect
to the Interim Order and/or the Final Order in a manner acceptable to Lenders
and their counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Lenders the
following (which shall survive the execution and delivery of this Agreement):
4.01. Corporate Existence, Power and Authority; Subsidiaries. Each
Borrower and Guarantor is a corporation duly organized and in good standing
under the laws
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of its state of incorporation and is duly qualified as a foreign corporation
and in good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify has not had and could not reasonably be expected to have a Material
Adverse Effect. After giving effect to the Order, the execution, delivery and
performance of this Agreement, the other Loan Documents and the transactions
contemplated hereunder and thereunder are all within each Borrower's and
Guarantor's corporate powers, have been duly authorized and are not in
contravention of law or the terms of such Borrower's or Guarantor's certificate
of incorporation, by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its property are bound. After
giving effect to the Order, this Agreement and the other Loan Documents
constitute legal, valid and binding obligations of each Borrower and Guarantor
enforceable in accordance with their respective terms. No Borrower or
Guarantor has any Subsidiaries except as set forth on Schedule IV hereto.
4.02. Financial Statements; No Material Adverse Change. All financial
statements relating to the Borrowers and Guarantors which have been delivered
by any Borrower or Guarantor to Lenders on or prior to any date that this
representation and warranty is made or deemed to be made have been prepared in
accordance with GAAP and fairly present the financial condition and the results
of operation of such of the Borrowers and Guarantors as are included therein as
at the dates and for the periods set forth therein. There has been no
situation, event or circumstance that has occurred since the Petition Date
which could have a Material Adverse Effect.
4.03. Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and Guarantor and each Borrower's and Guarantor's
records concerning Receivables are located only at the address set forth on the
signature pages to this Agreement and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
Schedule V hereto, subject to the right of a Borrower or Guarantor to establish
new locations in accordance with Section 6.01 below. Schedule V correctly
identifies any of such locations which are not owned by a Borrower or Guarantor
and sets forth the owners and/or operators thereof and to the best of the
applicable Borrower's and Guarantor's knowledge, the holders of any mortgages
on such locations.
4.04. Priority of Liens; Title to Properties. The security interests and
liens granted to Lenders under this Agreement and the other Loan Documents
constitute valid and perfected first priority liens and security interests in
and upon the Collateral, subject only to the Permitted Liens. Each Borrower
and Guarantor has good and marketable title to all of its properties and
assets, subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Lenders and the
Permitted Liens.
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4.05. Maintenance of Equipment. The Equipment is, and will be kept by the
Borrowers and Guarantors, in good operating condition and repair (ordinary wear
and tear excepted).
4.06. Tax Returns. Each Borrower and Guarantor has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it (without requests for extension except as previously
disclosed in writing to Lenders). All information in such tax returns, reports
and declarations is complete and accurate in all material respects. Each
Borrower and Guarantor has paid or caused to be paid all taxes due and payable
or claimed due and payable in any assessment received by it, except (a) certain
taxes with respect to periods prior to the Petition Date and (b) taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower or Guarantor and with respect
to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and
payable and whether or not disputed.
4.07. Litigation. Except as set forth in any public filings made by any
Borrower or Guarantor with the Securities and Exchange Commission, there is no
present investigation by any governmental agency pending, or to the best of any
Borrower's and Guarantor's knowledge threatened, against or affecting any
Borrower or Guarantor, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of any Borrower's or
Guarantor's knowledge threatened, against any Borrower or Guarantor or its
assets or goodwill, or against or affecting any transactions contemplated by
this Agreement or the other Loan Documents, which has resulted, or if adversely
determined against a Borrower or Guarantor could reasonably be expected to
result, in any Material Adverse Effect.
4.08. Compliance with Other Agreements and Applicable Laws. No Borrower
or Guarantor is in default under, or in violation of any of the terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound (except for defaults or
violations which have resulted from (a) the commencement or continuation of the
Case, provided that any payments required to be made by any Debtor as a result
thereof are currently stayed under applicable provisions of the Bankruptcy Code
or (b) any rejection by a Debtor of any such agreement, contract, instrument,
lease, or commitment pursuant to or in accordance with the Bankruptcy Code and
as approved or confirmed by the Bankruptcy Court in the Case) and each Borrower
and Guarantor is in compliance with all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders of any foreign, Federal,
State or local governmental authority. No "Event of Default" (as defined in
the Congress Loan Agreement) has occurred under the Congress Loan Agreement
which has not been either waived by Congress prior to the Closing Date or cured
prior to the Closing Date.
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4.09. Employee Benefits. (a) No Borrower or Guarantor or any of their
ERISA Affiliates maintains or is required to contribute to, and no Borrower or
Guarantor or any of their ERISA Affiliates previously maintained or was
previously required to contribute to, any employee pension benefit plan subject
to Title IV of ERISA.
(b) No Borrower or Guarantor or any of their ERISA Affiliates has engaged
in any transaction in connection with which a Borrower or Guarantor or any of
their ERISA Affiliates could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code in an aggregate amount in excess of $500,000.
(c) Full payment has been made of all amounts which any Borrower or
Guarantor or any of their ERISA Affiliates is required to have contributed
under the terms of each employee pension benefit plan as contributions to such
plan as of the last day of the most recent fiscal year of such plan ended prior
to the date hereof and where nonpayment could result in a liability to any
Borrower or Guarantor or any of their ERISA Affiliates in an aggregate amount
in excess of $500,000, and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any employee pension benefit plan that is subject to
Title IV of ERISA.
(d) None of the Borrowers or Guarantors or their ERISA Affiliates is or
has ever been obligated to contribute to any "multiemployer plan" (as such term
is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.
4.10. Environmental Compliance. (a) No Borrower or Guarantor has
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, where such violation has had or could reasonably be
expected to have a Material Adverse Effect. The operations of each Borrower
and Guarantor comply in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of any Borrower's or Guarantor's
knowledge threatened, with respect to any non-compliance with or violation of
the requirements of any Environmental Law by any Borrower or Guarantor or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects any Borrower or Guarantor or its
business, operations or assets or any properties at which any Borrower or
Guarantor has transported, stored or disposed of any Hazardous Materials.
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(c) No Borrower or Guarantor has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Each Borrower and Guarantor has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of such Borrower or Guarantor under any
Environmental Law and all of such licenses, permits, certificates, approvals or
similar authorizations are valid and in full force and effect.
4.11. Accuracy and Completeness of Information. All information furnished
by or on behalf of any Borrower or Guarantor in writing to Lenders in
connection with this Agreement or any of the other Loan Documents or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Schedules attached hereto, is true and correct in all
material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred which has
had or could reasonably be expected to have a Material Adverse Effect, which
has not been fully and accurately disclosed to Lenders in writing.
4.12. Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Loan Documents shall
survive the execution and delivery of this Agreement and shall be deemed to
have been made again to Lenders on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lenders regardless of any investigation made or information
possessed by Lenders. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations or warranties
which any Borrower or Guarantor shall now or hereafter give, or cause to be
given, to Lenders.
4.13. Enforceability of Loan Documents. This Agreement is, and each other
Loan Document to which each Borrower and each Guarantor is or will be a party,
when delivered hereunder, will be, a legal, valid and binding obligation of the
Borrowers and the Guarantors, enforceable against the Borrowers and the
Guarantors in accordance with its terms.
4.14. Nature of Business. The Borrowers and the Guarantors are primarily
engaged in the business of designing, manufacturing and marketing an extensive
line of decorative home accessories.
4.15. Use of Proceeds. The proceeds of the Term Loan shall be used for
general working capital through the Effective Date in the ordinary course of
business of the Borrowers and the Guarantors.
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4.16. Registration and Transfer of Term Notes. (a) The Borrowers shall
cause to be kept at the principal executive office of The Rug Barn, Inc. a
register (the register maintained in such office being herein referred to as
the "Note Register") in which the Borrowers shall provide for the registration
of the Term Notes and of transfers of Term Notes. The name and address of each
registered holder of a Term Note, each transfer thereof made pursuant to
paragraph (b) of this Section 4.16, and the name and address of each transferee
of the Term Notes shall be registered in the Note Register. The Note Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. The Borrowers hereby appoint The Rug
Barn, Inc. as security registrar (the "Note Registrar") for the purpose of
registering Term Notes and transfers of Term Notes as herein provided.
(b) Upon surrender for registration of transfer of any Term Note at the
principal executive office of The Rug Barn, Inc., the Borrowers and the
Guarantors shall execute and deliver, in the name of the designated transferee
or transferees, one or more new Term Notes of denominations of a like aggregate
principal amount. All Term Notes issued upon any registration of transfer of
Term Notes shall be the valid obligations of the Borrowers and the Guarantors,
evidencing the same debt (including, without limitation, the Guarantee), and
entitled to the same benefits under this Agreement and the other Loan
Documents, as the Term Notes surrendered upon such registration of transfer.
Every Term Note presented or surrendered for registration of transfer shall (if
so required by the Borrowers) be duly endorsed, or be accompanied by a written
instrument of transfer, in form reasonably satisfactory to the Borrowers duly
executed by the registered holder thereof or his attorney duly authorized in
writing. No service charge shall be made for any registration of transfer of
Term Notes.
4.17. Administrative Priority; Lien Priority.
(a) After the entry of the Interim Order, the Secured Obligations will
constitute allowed administrative expenses in the Case having priority over all
administrative expenses and unsecured claims against the Borrowers and the
Guarantors now existing or hereafter arising, of any kind or nature whatsoever
(including, without limitation, all administrative expenses of the kind
specified in Sections 503(b) and 507(b) of the Bankruptcy Code), subject to the
terms and conditions of the Order.
(b) The Liens on the Collateral granted hereby shall be valid and
perfected first priority Liens to the extent provided in the Order.
4.18. Bankruptcy Court Orders. The Order is in full force and effect, and
has not been reversed, stayed, modified or amended absent the joinder and
consent of the Lenders.
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ARTICLE V
COLLATERAL
5.01. Grant of Security Interest. As collateral security for all of the
Secured Obligations, each Borrower and each Guarantor hereby pledges and
assigns to the Lenders, their successors and assigns, and hereby grants to the
Lenders an undivided continuing senior, first priority security interest in and
to all of such Borrower's or Guarantor's right, title and interest in and to
the following, whether acquired prior to, on or after the Petition Date (the
"Collateral"):
(a) all equipment of any kind and in all of its forms, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired (including, but not limited to, all machinery, apparatus, furniture,
fixtures, excluding fixtures bearing or identified by the ▇▇▇▇▇▇ ▇▇▇▇▇
Intellectual Property (unless removed or as approved by ▇▇▇▇▇▇ ▇▇▇▇▇, Inc.),
conveyors, tools, attachments, materials, storage and handling equipment, motor
vehicles, boats, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof), together with all substitutes, replacements, accessions and
additions thereto, and all tools, parts, accessories and attachments used in
connection therewith (hereinafter collectively referred to as the "Equipment");
(b) all Inventory of any kind and in all of its forms, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired;
(c) (i) all accounts, contract rights, chattel paper, instruments, deposit
accounts, general intangibles and other obligations of any kind (including, but
not limited to, any obligations of a Borrower or Guarantor to another Borrower
or Guarantor) whether now or hereafter existing, whether now owned or hereafter
acquired, and whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and (ii) all rights now or
hereafter existing in and to all credit insurance, guaranties, letters of
credit, security agreements, leases and other contracts now or hereafter
existing and securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, deposit accounts, general intangibles or
obligations (any and all such accounts, contract rights, chattel paper,
instruments, deposit accounts, general intangibles and obligations being
hereinafter referred to collectively as the "Receivables", and any and all such
credit insurance, guaranties, letters of credit, leases, security agreements
and other contracts, specifically excluding the ▇▇▇▇▇▇ ▇▇▇▇▇ License, being
hereinafter referred to collectively as the "Related Contracts");
(d) (i) all trademarks, service marks, trade names, business names, trade
styles, designs, logos, other source or business identifiers, copyrights and
all general intangibles of like nature, now or hereafter owned, adopted,
acquired or used by any Borrower or Guarantor, all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and
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Trademark Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision thereof), and
all reissues, extensions or renewals thereof, together with all goodwill of the
business symbolized by such marks and all customer lists, formulae and other
records of any Borrower or Guarantor relating to the distribution of products
and services in connection with which any of such marks are used, and all
income, royalties, damages and payments now or hereafter due and/or payable
under and with respect thereto, including, without limitation, payments under
all licenses entered into in connection therewith and damages and payments for
past and future infringements or dilutions thereof and the right to ▇▇▇ for
past, present and future infringements and dilutions thereof (hereinafter
referred to collectively as the "Trademarks"); provided, however, that
Trademarks excludes any and all interests and/or rights to use the trademark
"▇▇▇▇▇▇ ▇▇▇▇▇" (or "CK/▇▇▇▇▇▇ ▇▇▇▇▇" or other derivative thereof) deriving from
the ▇▇▇▇▇▇ ▇▇▇▇▇ License or otherwise including any and all copyrights,
copyrightable material or other intellectual property or proprietorial data or
information which may exist or arise in connection therewith or relating
thereto (collectively, the "▇▇▇▇▇▇ ▇▇▇▇▇ Intellectual Property"), and (ii) all
licenses (other than the ▇▇▇▇▇▇ ▇▇▇▇▇ License and any sublicenses thereunder),
contracts or other agreements, whether written or oral, naming any Borrower or
Guarantor as licensor or licensee and providing for the grant of any right to
use any Trademark, together with any goodwill connected with and symbolized by
any such trademark licenses or agreements and the right to prepare for sale and
sell any and all Inventory now or hereafter owned by any Borrower or Guarantor
and now or hereafter covered by such licenses (hereinafter referred to
collectively as the "Trademark Licenses");
(e) (i) all moneys, securities and other property, and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Lenders
from or for any Borrower or Guarantor, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of the Borrowers' and
Guarantors' claims against any Lender at any time existing; (ii) all rights
relating to the sale or other transfer of property to, or the construction,
renovation or other improvement of property by or for, any Borrower or
Guarantor; (iii) all rights, interests, choses in action, causes of actions,
claims and all other intangible property of every kind and nature, in each
instance whether now owned or hereafter acquired by any Borrower or Guarantor,
including, without limitation, all corporate and other business records, all
loans, royalties, and all other forms of obligations receivable whatsoever
(other than Receivables); (iv) all customer and supplier contracts, sale
orders, rights under license and franchise agreements, and other contracts and
contract rights (other than the ▇▇▇▇▇▇ ▇▇▇▇▇ License); (v) all interests
(including, without limitation, profit participations) in partnerships, joint
ventures, corporations, limited liability companies or other Persons, and all
other equity or debt securities issued by any Persons, including all moneys due
from time to time in respect thereof; (vi) all federal, state and local tax
refunds and federal, state and local tax refund claims; (vii) all right, title
and interest under leases, subleases, licenses and concessions and other
agreements relating to personal property, including all moneys due from time to
time in respect thereof; (viii) all payments due or made to any Borrower or
Guarantor in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any property by any
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Person, Governmental Authority or regulatory body; (ix) all deposit accounts
(general or special) with any bank or other financial institution and all funds
on deposit therein, and all certificates and instruments, if any, from time to
time representing or evidencing any of such accounts; (x) all credits with and
other claims against third parties (including carriers and shippers) (other
than Receivables); (xi) all rights to indemnification; (xii) all reversionary
interests in pension and profit sharing plans and reversionary, beneficial and
residual interests in trusts; (xiii) all letters of credit, guaranties, liens,
security interests and other security held by or granted to any Borrower or
Guarantor; (xiv) all instruments, files, records, ledger sheets and documents
covering or relating to any of the Collateral; (xv) all other intangible
property, whether or not similar to the foregoing, in each instance, however
and wherever arising (other than the ▇▇▇▇▇▇ ▇▇▇▇▇ Intellectual Property); (xvi)
all notes, certificates of deposit, deposit accounts, checks and other
instruments from time to time hereafter delivered to or otherwise possessed by
any Lender for or on behalf of any Borrower or Guarantor, in substitution for
or in addition to any or all of the foregoing; and (xvii) all interest,
dividends, cash, instruments and other property and assets from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing;
(f) the books and records of the Borrowers and the Guarantors relating to
any of the Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral;
(g) all of the shares of capital stock of each of the Borrowers and each
of the Guarantors (other than Decorative Home);
(h) the Real Property Collateral and any estates or interests in real
property now owned and hereafter acquired by any Borrower or Guarantor
(including, without limitation, leasehold estates or interests);
(i) any such other property not included under paragraphs (a) through (h)
above that would otherwise be deemed to constitute "Collateral" as defined in
the Congress Loan Agreement, as such agreement may be amended, modified or
replaced from time to time, or in any other Congress Debt Document (including,
without limitation, the Congress Financing Order);
(j) any and all other assets or property of any kind and in all of its
forms, wherever located and whether now or hereafter existing and whether now
owned or hereafter acquired, not included under paragraphs (a) through (i)
above; and
(k) all proceeds (in whatever form, whether cash, securities or any other
type of property) of any and all of the foregoing Collateral (including,
without limitation, (A) damages and payments for past or future infringements
of the Trademarks and (B) the right to ▇▇▇ for past, present and future
infringements of the Trademarks) and, to the extent not
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otherwise included, all payments under insurance (whether or not the Lenders
are the loss payees thereof), any indemnity, warranty or guaranty payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral;
in each case howsoever any Borrower's or any Guarantor's interest therein may
arise or appear (whether by ownership, security interest, claim or otherwise).
Notwithstanding the foregoing, the senior, first priority security
interest granted to the Lenders in the Collateral shall be subject to Permitted
Liens.
5.02. Security for Secured Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for the
payment of all of the Obligations and all obligations of each Borrower and
Guarantor now or hereafter arising under or with respect to this Agreement, the
Guarantee, the Term Notes or any other Loan Document, whether for principal,
premium, interest, fees, expenses or otherwise, including, without limitation,
the obligations to pay the Term Loan and the Post-Petition Closing Fee and to
perform each and every obligation set forth in this Agreement (including,
without limitation, the Guarantee), the Term Notes and the other Loan Documents
(all such obligations being hereinafter collectively referred to as the
"Secured Obligations").
5.03. Proceeds of Collateral. The proceeds of any sale or other
disposition of Collateral by any Lender permitted under this Agreement or any
other Loan Document shall be distributed by such Lender to each Lender based
upon each Lender's Percentage Interest.
5.04. Administrative Priority. The Borrowers and the Guarantors hereby
agree that the Secured Obligations shall constitute allowed administrative
expenses in the Case having priority over all administrative expenses and
unsecured claims against the Borrowers and the Guarantors now existing or
hereafter arising, of any kind or nature whatsoever (including, without
limitation, all administrative expenses of the kind specified in sections
503(b) and 507(b) of the Bankruptcy Code), subject to the terms and conditions
of the Order.
5.05. Grants, Rights and Remedies Cumulative. The Liens and security
interests granted pursuant to Section 5.01 hereof and administrative priority
granted pursuant to Section 5.04 hereof may be independently granted by the
Loan Documents and by other Loan Documents hereafter entered into. This
Agreement, the Interim Order, the Final Order and such other Loan Documents
supplement each other, and the grants, priorities, rights and remedies of the
Lenders hereunder and thereunder are cumulative.
5.06. No Filings Required. The Liens and security interests referred to
in Section 5.01 hereof and in the other Loan Documents shall be deemed valid
and perfected upon entry of the Interim Order and entry of the Interim Order
shall have occurred on or before the Closing Date. The Lenders shall not be
required to file any financing statements, notices of lien or similar
instruments in any jurisdiction or filing office or to take any other
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action in order to validate or perfect the Liens and security interests granted
by or pursuant to this Agreement, the Interim Order, the Final Order or any
other Loan Document.
5.07. Survival. The Liens, lien priority, administrative priorities and
other rights and remedies granted to the Lenders pursuant to this Agreement,
the Order and the other Loan Documents (specifically including, but not limited
to, the existence, perfection and priority of the Liens and security interests
provided herein and therein, and the administrative priority provided herein
and therein) shall not be modified, altered or impaired in any manner by any
other financing or extension of credit or incurrence of debt by any Borrower or
Guarantor (pursuant to section 364 of the Bankruptcy Code or otherwise), or by
any dismissal or conversion of the Case, or by any other act or omission
whatever, except in accordance with the Order.
ARTICLE VI
AFFIRMATIVE AND NEGATIVE COVENANTS
6.01. Covenants Under Congress Loan Agreement. Section 9 of the Congress
Loan Agreement and any definitions of any capitalized terms set forth in such
section which are set forth in the Congress Loan Agreement (as in effect on the
date of this Agreement) shall be incorporated by reference in this Agreement
(without regard to any amendment, supplement, modification or waiver relating
thereto or the termination or expiration thereof) to the same extent as if set
forth at length herein, except that all references to the term "Lender" shall
mean the Lenders, and the Borrowers and Guarantors jointly and severally agree
to cause the Borrowers and Guarantors to perform and observe their covenants,
agreements and obligations under said Section 9, so long as the Obligations
(whether or not due) remain unpaid in full in cash, including without
limitation all principal of and accrued and unpaid interest on the Loans.
6.02. Liens. No Borrower or Guarantor shall create, incur, assume or
suffer to exist any Lien on any of its assets or properties including, without
limitation, the Collateral, except the Permitted Liens.
6.03. Indebtedness. No Borrower or Guarantor shall incur, create, assume,
become or be liable in any manner with respect to, or permit to exist, any
obligation or Indebtedness, except (a) Indebtedness to Congress under the
Congress Loan Agreement or any other Congress Debt Document, (b) Indebtedness
permitted under the Congress Loan Agreement but only to the extent such
Indebtedness exists as of the date hereof, and (c) Indebtedness permitted under
the Loan Documents.
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6.04. Interim Order; Final Order; Administrative Priority; Lien Priority;
Payment of Claims.
(a) Without the prior written consent of the Lenders, no Borrower or
Guarantor shall at any time seek, consent to or suffer to exist any
modification, stay, vacation or amendment of the Interim Order, the Final Order
or the Congress Financing Order.
(b) No Borrower or Guarantor shall at any time suffer to exist a priority
for any administrative expense or unsecured claim (including, without
limitation, any reclamation claim) against any Borrower or Guarantor now
existing or hereafter arising of any kind or nature whatsoever (including,
without limitation, any administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code) equal or superior to the
priority of the Lenders in respect of the Obligations, except as set forth in
the Order.
(c) No Borrower or Guarantor shall at any time suffer to exist any Lien on
the Collateral having a priority equal or superior to the Liens in respect of
the Collateral granted to the Lenders hereby, except for Permitted Liens.
6.05. Overadvances; Budget; No Amendment; Financial Covenants. (a)
Without the prior written consent of the Lenders, (i) no Borrower or Guarantor
shall request, incur, create, assume, become or be liable in any manner with
respect to, or permit to exist any advance under the Congress Loan Agreement or
other Congress Debt Documents (whether by means of a revolving credit loan,
issuance of a letter of credit or other form of Indebtedness) that (A) is not
expressly contemplated by, consistent with, and permitted under, the Budget, or
(B) would, after giving effect thereto, cause all such advances under the
Congress Loan Agreement or other Congress Debt Documents to exceed the
aggregate amount of advances permitted under the borrowing base formula in
effect under the Congress Loan Agreement as of the Closing Date (the "Existing
Formula") and (ii) no Borrower or Guarantor shall request, permit or consent to
any waiver, modification or amendment to the Budget, the Existing Formula or
any other provision of the Congress Loan Agreement or the other Congress Debt
Documents.
(b) Without limiting the generality of Section 6.05(a), without the prior
written consent of the Lenders, the aggregate outstanding amount of any and all
advances under the Congress Loan Agreement and the other Congress Debt
Documents (whether by means of a revolving credit loan, issuance of a letter of
credit or other form of Indebtedness), as of each day set forth on Schedule VI
to this Agreement, shall not exceed the amount set forth opposite such day as
set forth on Schedule VI. Not later than 5 days following each date set forth
on Schedule VI hereto, Borrowers and Guarantors shall deliver to the Lenders a
certificate of the Designated Financial Officer setting forth the balance of
all outstanding advances under the Congress Loan Agreement and the other
Congress Debt Documents as of such date.
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6.06. Replacement of Schedule VI. Not later than 30 days prior to the end
of the period covered by Schedule VI hereto, Borrowers and Guarantors shall
deliver to the Lenders a proposed replacement Schedule VI for the 60-day period
following the last date set forth on the then current Schedule VI to this
Agreement, which shall be in form and substance acceptable to the Lenders.
Upon the written approval by the Lenders of any such proposed replacement
Schedule VI, such replacement Schedule VI shall, for all purposes hereof, be
deemed to be a part of this Agreement.
ARTICLE VII
DEFAULTS
7.01. Events of Default. An Event of Default shall mean the occurrence or
existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of law):
(a) The Borrowers shall fail to pay when due any of the Obligations;
or
(b) Any representation or warranty made by the Borrowers or
Guarantors under this Agreement or any other Loan Document or any
statement made by the Borrowers or Guarantors in any financial statement,
certificate, report or document furnished to any Lender pursuant to or in
connection with this Agreement or any other Loan Document, shall prove to
have been false or misleading in any material respect as of the time when
made (including by omission of material information necessary to make
such representation, warranty or statement, in light of the circumstances
under which it was made, not misleading), or any of the Borrowers or
Guarantors shall fail to observe or perform any of the covenants or
provisions contained in this Agreement or any of the other Loan
Documents; or
(c) Any "Event of Default" shall have occurred under the Congress
Loan Agreement; or
(d) Any Congress Debt Document shall be amended, waived, modified or
supplemented subsequent to the date hereof without the prior written
consent of the Lenders; or
(e) The ▇▇▇▇▇▇ ▇▇▇▇▇ License shall cease to be in effect or shall be
terminated; or
(f) Except for the Case, any Borrower or any Guarantor (i) shall
institute any proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any
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law relating to bankruptcy, insolvency, reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for any
Borrower or any Guarantor or for any substantial part of its property,
(ii) shall be generally not paying its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally, (iii)
shall make a general assignment for the benefit of creditors, or (iv)
shall take any action to authorize or effect any of the actions set forth
above in this subsection (f); or
(g) Except for the Case, any proceeding shall be instituted against
any Borrower or any Guarantor seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for any Borrower
or any Guarantor or for any substantial part of its property, and either
such proceeding shall remain undismissed or unstayed for a period of 45
days or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property) shall occur; or
(h) Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Borrower or any Guarantor, or a
proceeding shall be commenced by any of the Borrowers, or by any
Governmental Authority or other regulatory body having jurisdiction over
any Borrower or any Guarantor, seeking to establish the invalidity or
unenforceability thereof, or any Borrower or any Guarantor shall deny in
writing that such Borrower or any Guarantor has any liability or
obligation purported to be created under any Loan Document; or
(i) The security interests purported to be created by this
Agreement, the Order and/or any other Loan Document shall cease to be, or
shall be asserted by any Borrower or any of the Guarantors not to be, a
valid, perfected, first priority security interest in the Collateral
covered thereby, subordinate to no other Lien except for Permitted Liens;
or
(j) The Guarantee shall cease to be, or shall be asserted by any
Borrower or any Guarantor not to be, in full force and effect and
enforceable in accordance with its terms, or any of the Borrowers or the
Guarantors shall contest or deny in writing the validity or
enforceability of any of the Obligations;
(k) Any Borrower or Guarantor shall, without the prior written
consent of the Lenders, (i) request, incur, create, assume, become or be
liable in any manner with respect to, or permit to exist any advance
under the Congress Loan Agreement or other Congress Debt Documents
(whether by means of a revolving credit loan, issuance of a letter of
credit or other form of Indebtedness) that would,
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after giving effect thereto, cause all such advances under the Congress
Loan Agreement or other Congress Debt Documents to exceed the aggregate
amount of advances permitted under the Existing Formula or (ii) request,
permit or consent to any waiver, modification or amendment to the
Existing Formula or any other provision of the Congress Loan Agreement or
the other Congress Debt Documents;
(l) Any Debtor shall fail to comply or shall default in the
performance of any term of the Order;
(m) The Bankruptcy Court shall enter an order appointing a trustee,
an examiner with enlarged powers, or any other fiduciary for any Debtor
or any property of any Debtor's estate;
(n) The Bankruptcy Court or any other court with jurisdiction in the
matter shall enter an order modifying, reversing, revoking, staying,
rescinding, vacating, or amending the Order or any of the other Loan
Documents, without Lenders' express prior written consent (and no such
consent shall be implied from any other action, inaction, or acquiescence
of Lenders) or any Debtor shall make a motion or application to do so
(except following Lenders' prior written request);
(o) Any person shall file a plan of reorganization in the Case which
does not provide for the full and final repayment of all Obligations upon
the effectiveness of such plan, unless Lenders have joined in or
consented to such plan in writing;
(p) Any motion or application is filed in the Case which seeks
approval for or allowance of any claim, lien, security interest ranking
equal or senior in priority to the claims, liens and security interests
of Lenders under the Order or the other Loan Documents (and in the case
of such motion or application filed by any Person other than Debtors,
such motion or application is not dismissed by order of the Bankruptcy
Court within 10 days after it is filed), or any such equal or prior
claim, lien, or security interest shall be established in any manner,
except, in either case, as expressly permitted under the Order, the other
Loan Documents, the Congress Financing Order, the other Congress Debt
Documents and the Intercreditor Agreement;
(q) Except for expiration or termination in accordance with the
Order or the terms of the other Loan Documents, any of the Loan Documents
or any lien or security interest of Lenders created thereunder shall
cease for any reason to be in full force and effect or to have the
priority provided in the Order, or any motion or application shall be
filed or adversary proceeding commenced in the Case to challenge the
validity, enforceability, perfection, or priority of any of the Loan
Documents or any of such liens and security interests (and in the case of
any such motion, application, or proceeding filed or commenced by any
Person other than
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Debtors, such motion, application, or proceeding is not dismissed by
order of the Bankruptcy Court within 10 days after it is filed or
commenced);
(r) The automatic stay under section 362 of the Bankruptcy Code as
to any Debtor or its estate shall be modified or vacated for any secured
claim or claims to the extent that as a result thereof enforcement of
such claim against property of any Debtor would be permitted;
(s) The Bankruptcy Court enters an order dismissing the Case or
converting the Case to a case under Chapter 7 of the Bankruptcy Code;
(t) The Interim Order shall cease to be in full force and effect and
the Final Order shall not have been entered by the Bankruptcy Court prior
to such cessation; or
(u) The Bankruptcy Court shall not have entered the Final Order on
or before October 27, 1997, or the Final Order shall cease to be in full
force and effect from and after the date of entry thereof by the
Bankruptcy Court.
7.02. Consequences of an Event of Default. If an Event of Default shall
occur and be continuing or shall exist, the Lenders may by notice to the
Borrowers,
(a) declare all Obligations, including, without limitation the
Loans, all interest thereon and all other amounts, to be immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers, and an action therefor
shall immediately accrue; or
(b) give notice to the Borrowers of the occurrence and continuance of
an Event of Default;
provided, however, that upon the occurrence of any Event of Default described
in subsections (f) or (g) of Section 7.01, all Obligations, including, without
limitation, the Loans, all interest thereon and all other amounts, shall
immediately become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrowers.
7.03. Certain Remedies. If an Event of Default occurs, the Lenders may
exercise all rights and remedies which they may have hereunder or under any
other Loan Document or at law or in equity or otherwise. All such remedies
shall be cumulative and not exclusive.
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ARTICLE VIII
GUARANTEE
8.01. Guarantee. Each of the Guarantors, for consideration received,
jointly and severally unconditionally and irrevocably guarantees to the Lenders
the due and punctual payment of the Obligations, whether or not allowed or
allowable as a claim in any proceeding commenced under any Bankruptcy Law, and
whether or not recovery of any such obligation or liability may be barred by a
statute of limitations or such obligation or liability may otherwise be
unenforceable. All Obligations shall be conclusively presumed to have been
created in reliance on the Guarantee. The Guarantee is a continuing guaranty
of the Obligations and may not be revoked and shall not otherwise terminate
unless and until any and all Obligations have been indefeasibly paid and
performed in full, in cash. Nothing contained in this Article VIII shall be
deemed to limit in any way the terms of the Order.
8.02. Nature of Guarantee. The liability of each Guarantor under the
Guarantee is independent of and not in consideration of or contingent upon the
liability of the Borrowers or any other Guarantor and a separate action or
actions may be brought and prosecuted against any Guarantor, whether or not any
action is brought or prosecuted against the Borrowers or any other Guarantor or
whether any Borrower or any other Guarantor is joined in any such action or
actions. The Guarantee given by each Guarantor shall be construed as a
continuing, absolute and unconditional guaranty of payment (and not merely of
collection) without regard to:
(a) the legality, validity or enforceability of the Term Notes, this
Agreement or any other Loan Document, any of the Obligations, any Lien on
Collateral, the security interest granted under this Agreement or any Loan
Document or the Guarantee given by any other Guarantor;
(b) any defense (other than payment), set-off or counterclaim that may at
any time be available to the Borrowers or any other Guarantor against, and any
right of setoff at any time held by, the Lenders; or
(c) any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor or any Borrower), whether or not similar to any of
the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrowers or any other Guarantor, in
bankruptcy or in any other instance.
Any payment by any Borrower or any Guarantor or other circumstance that
operates to toll any statute of limitations applicable to such Persons shall
also operate to toll the statute of limitations applicable to each Guarantor.
8.03. Authorization. Each Guarantor authorizes the Lenders, without
notice to or further assent by such Guarantor, and without affecting any
Guarantor's liability hereunder (regardless of whether any subrogation or
similar right that such Guarantor may
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have or any other right or remedy of such Guarantor is extinguished or
impaired), from time to time to do any or all of the following:
(a) permit the Borrowers to increase or create Obligations, or terminate,
release, compromise, subordinate, extend, accelerate or otherwise change the
amount or time, manner or place of payment of, or rescind any demand for
payment or acceleration of, the Obligations or any part thereof, consent or
enter into supplemental loan agreements or otherwise amend the terms and
conditions of the Loan Documents or any provision thereof;
(b) take and hold Collateral from the Borrowers or any other Person,
perfect or refrain from perfecting a Lien on such Collateral, and exchange,
enforce, subordinate, release (whether intentionally or unintentionally), or
take or fail to take any other action in respect of, any such Collateral or
Lien or any part thereof;
(c) exercise in such manner and order as they elect in their sole
discretion, fail to exercise, waive, suspend, terminate or suffer expiration
of, any of the remedies or rights of the Lenders against the Borrowers or any
Guarantor in respect of any Obligation or any Collateral;
(d) release, add or settle with any Guarantor or any Borrower in respect
of the Guarantee or the Obligations;
(e) accept partial payments on the Obligations and apply any and all
payments or recoveries from any Guarantor or any Borrower or Collateral to such
of the Obligations as Lenders may elect in their sole discretion, whether or
not such Obligations are secured or guaranteed;
(f) refund at any time, at Lenders' sole discretion, any payments or
recoveries received by Lenders in respect of any Obligations or Collateral; and
(g) otherwise deal with any Borrower, any Guarantor and any Collateral as
Lenders may elect in their sole discretion.
8.04. Right to Demand Full Performance. In the event of any demand for
payment or performance by Lenders from any Guarantor hereunder, Lenders shall
have the right to demand their full claims and to receive all dividends or
other payments in respect thereof until the Obligations have been paid in full,
and the Guarantors shall continue to be jointly and severally liable hereunder
for any balance which may be owing to Lenders by the Borrowers under this
Agreement, the Term Notes or any other Loan Document. The retention by the
Lenders of any security, prior to the realization by the Lenders of their
rights to such security upon foreclosure thereon, shall not, as between the
Lenders and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Obligations due to the Lenders by the
Borrowers or any part thereof. Without limiting Section 9.05 or any other
provision of this Agreement, each Guarantor, promptly after demand, will
reimburse the Lenders for all costs and expenses of collecting
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such amount under, or enforcing this Guarantee, including, without limitation,
the reasonable fees and expenses of counsel.
8.05. Certain Waivers. Each Guarantor waives:
(a) the right to require the Lenders to proceed against the Borrowers or
any other Guarantor, to proceed against or exhaust any Collateral or to pursue
any other remedy in Lenders' power whatsoever and the right to have the
property of any Borrower or any other Guarantor first applied to the discharge
of the Obligations;
(b) all rights and benefits under applicable law purporting to reduce a
guarantor's obligations in proportion to the obligation of the principal or
providing that the obligation of a surety or guarantor must neither be larger
nor in other respects more burdensome than that of the principal;
(c) the benefit of any statute of limitations affecting the Obligations or
any Guarantor's liability hereunder;
(d) any requirement of marshaling or any other principle of election of
remedies;
(e) any right to assert against the Lenders any defense (legal or
equitable), set-off, counterclaim and other right that any Guarantor may now or
any time hereafter have against any Borrower or any other Guarantor;
(f) presentment, demand for payment or performance (including diligence in
making demands hereunder), notice of dishonor or nonperformance, protest,
acceptance and notice of acceptance of this Guarantee, and, except to the
extent expressly required by the Loan Documents, all other notices of any kind,
including (i) notice of any action taken or omitted by the Lenders in reliance
hereon, (ii) notice of any default by the Borrowers or any other Guarantor,
(iii) notice that any portion of the Obligations is due, (iv) notice of any
action against the Borrowers or any other Guarantor, or any enforcement of
other action with respect to any Collateral, or the assertion of any right of
the Lenders hereunder; and
(g) all defenses that at any time may be available to any Guarantor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect.
8.06. The Guarantors Remain Obligated in Event the Borrowers Are No Longer
Obligated to Discharge Obligations. It is the express intention of the Lenders
and the Guarantors that if for any reason any Borrower has no legal existence,
is or becomes under no legal obligation to discharge the Obligations owing to
the Lenders by the Borrowers or if any of the Obligations owing by the
Borrowers to the Lenders becomes irrecoverable from any Borrower by operation
of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Guarantors contained in this Article VIII
shall nevertheless be binding upon the Guarantors, as principal debtor, until
such time as all such
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Obligations have been paid in full in cash to the Lenders and all Obligations
owing to the Lenders by the Borrowers have been discharged, and the Guarantors
shall be responsible for the payment thereof to the Lenders upon demand.
8.07. Severability of Void Obligations under Guarantee. The obligations
of any Guarantor hereunder shall be limited to the maximum amount that would
not render its obligations hereunder subject to avoidance under Section 548 of
the Bankruptcy Code or any applicable provisions of comparable state law.
8.08. Guarantee Is in Addition to Other Security. This Guarantee shall be
in addition to and not in substitution for any other guarantees or other
security which the Lenders may now or hereafter hold in respect of the
Obligations owing to the Lenders by the Borrowers and (except as may be
required by law) the Lenders shall be under no obligation to marshal in favor
of each of the Guarantors any other guarantees or other security or any moneys
or other assets which the Lenders may be entitled to receive or upon which any
Lender may have a claim.
8.09. Release of Security Interest. Without limiting the generality of
the foregoing, each Guarantor hereby consents and agrees, to the fullest extent
permitted by applicable law, that the rights of the Lenders hereunder, and the
liability of the Guarantors hereunder, shall not be affected by any and all
releases for any purpose of any Collateral from the security interest created
by any Loan Document and that this Guarantee shall continue to be effective or
be reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by any Lender upon the
insolvency, bankruptcy or reorganization of any Borrower or otherwise, all as
though such payment had not been made.
8.10. No Bar to Further Actions. Except as provided by law, no action or
proceeding brought or instituted under this Article VIII and the Guarantee and
no recovery or judgment in pursuance thereof shall be a bar or defense to any
further action or proceeding which may be brought under this Article VIII and
the Guarantee by reason of any further default or defaults under this Article
VIII and the Guarantee or in the payment of any of the Obligations owing by the
Borrowers.
8.11. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of the
Lenders, any right, power, privilege or remedy under this Article VIII and the
Guarantee shall operate as a waiver thereof, nor shall any single or partial
exercise of any rights, power, privilege or remedy preclude any other or
further exercise thereof, or the exercise of any other rights, powers,
privileges or remedies. The rights and remedies herein provided for are
cumulative and not exclusive of any rights or remedies provided in law or
equity.
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(b) Nothing contained in this Article VIII shall limit the right of the
Lenders to take any action to accelerate the maturity of the Obligations
pursuant to Article VII and as set forth in this Agreement or the other Loan
Documents or to pursue any rights or remedies hereunder or thereunder or under
applicable law.
8.12. Lenders' Duties; Notice to Lenders.
(a) Any provision in this Article VIII or elsewhere in this Agreement
or any other Loan Document allowing the Lenders to request any information or
to take any action authorized by, or on behalf of any Guarantor, shall be
permissive and shall not be obligatory on the Lenders.
(b) The Lenders shall not be required to inquire into the existence,
powers or capacities of any Borrower, any Guarantor or the officers, directors
or agents acting or purporting to act on their respective behalf.
8.13. Successors and Assigns. All terms, agreements and conditions of
this Article VIII shall extend to and be binding upon each Guarantor and its
successors and permitted assigns and shall inure to the benefit of and may be
enforced by the Lenders and their respective successors and assigns.
8.14. Release of Guarantee. Concurrently with the payment in full in cash
of all of the Obligations, the Guarantors shall be released from and relieved
of their obligations under this Article VIII. If any of the Obligations are
revived and reinstated after the termination of this Guarantee, then all of the
obligations of the Guarantors under this Guarantee shall be revived and
reinstated as if this Guarantee had not been terminated until such time as the
Obligations are paid in full, in cash, and each Guarantor shall enter into an
amendment to this Guarantee, reasonably satisfactory to the Lenders, evidencing
such revival and reinstatement.
8.15. Execution of Guarantee. To evidence the Guarantee, each Guarantor
hereby agrees to execute a notation relating to the Guarantee to be endorsed on
each Term Note. Each Guarantor agrees that this Agreement shall be executed on
behalf of each Guarantor by its Chairman of the Board, its President, its Chief
Executive Officer, Chief Operating Officer or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries.
8.16. No Subrogation; Certain Agreements.
(a) EACH GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION, INDEMNITY OR
REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS TO ENFORCE ANY POWER,
RIGHT OR REMEDY THAT THE LENDERS MAY NOW OR HEREAFTER HAVE IN RESPECT OF THE
OBLIGATIONS AGAINST THE BORROWERS OR ANY OTHER GUARANTOR, ANY AND ALL BENEFITS
OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL,
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WHETHER REAL OR PERSONAL PROPERTY, NOW OR HEREAFTER HELD BY THE LENDERS, AND
ANY AND ALL OTHER RIGHTS AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) ANY
GUARANTOR MAY HAVE AGAINST ANY BORROWER OR ANY OTHER GUARANTOR, UNDER
APPLICABLE LAW OR OTHERWISE, AT LAW OR IN EQUITY, BY REASON OF ANY PAYMENT
UNDER THE GUARANTEE, UNLESS AND UNTIL THE OBLIGATIONS SHALL HAVE BEEN PAID IN
FULL IN CASH.
(b) Each Guarantor assumes the responsibility for being and keeping itself
informed of the financial condition of each other Guarantor and of all other
circumstances bearing upon the risk of nonpayment of the Obligations or the
Guarantee of any other Guarantor that diligent inquiry would reveal, and agrees
that the Lenders shall have no duty to advise any Guarantor of information
regarding such condition or any such circumstances.
8.17. Bankruptcy; No Discharge. (a) Without limiting Section 8.02 or any
other provision of this Article VIII, the Guarantee shall not be discharged or
otherwise affected by any bankruptcy, reorganization or similar proceeding
commenced by or against any Borrower or any other Guarantor, including (i) any
discharge of, or bar or stay against collecting, all or any part of the
Obligations in or as a result of any such proceeding, whether or not assented
to by the Lenders, (ii) any disallowance of all or any portion of any claim for
repayment of the Obligations, (iii) any use of cash or other collateral in any
such proceeding, (iv) any agreement or stipulation as to adequate protection in
any such proceeding, (v) any failure by any Lender to file or enforce a claim
against any Borrower or any other Guarantor or its estate in any bankruptcy or
reorganization case, (vi) any amendment, modification, stay or cure of any
Lender's rights that may occur in any such proceeding, (vii) any election by
any Lender under Section 1112(b)(2) of the Bankruptcy Code, or (viii) any
borrowing or grant of a Lien under Section 364 of the Bankruptcy Code. Each
Guarantor understands and acknowledges that by virtue of this Guarantee, it has
specifically assumed any and all risks of any such proceeding with respect to
the Borrowers and each other Guarantor.
(b) Notwithstanding anything in this Article VIII to the contrary, any
Event of Default under Section 7.01(f) or (g) of this Agreement shall render
all Obligations automatically due and payable for purposes of the Guarantee,
without demand on the part of the Lenders.
(c) Notwithstanding anything to the contrary herein contained, the
Guarantee (and any Lien on the Collateral securing the Guarantee or the
Obligations) shall continue to be effective or be reinstated, as the case may
be, if at any time any payment, or any part thereof, of any or all of the
Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by any Lender in
connection with any bankruptcy, reorganization or similar proceeding involving
any Borrower, any other Guarantor or otherwise, if the proceeds of any
Collateral are required to be returned by any Lender under any such
circumstances, or if any Lender elects to return
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any such payment or proceeds or any part thereof in its sole discretion, all
as though such payment had not been made or such proceeds not been received.
ARTICLE IX
MISCELLANEOUS
9.01. Holidays. Except as otherwise provided herein, whenever any payment
or action to be made or taken hereunder or under the Notes, or the other Loan
Documents shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day and
such extension of time shall be included in computing interest or fees, if any,
in connection with such payment or action.
9.02. Amendments and Waivers. No amendment or modification of any
provision of this Agreement or of any of the Notes or of any other Loan
Document shall be effective without the prior written agreement of the Lenders
and the Borrowers and Guarantors and no termination or waiver of any provision
of this Agreement (including, without limitation, Section 2.05 hereof) or of
any of the Term Notes or consent to any departure by the Borrowers and
Guarantors therefrom, shall in any event be effective without the written
concurrence of the Lenders, which the Lenders shall have the right to grant or
withhold at their sole discretion. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Borrowers or the Guarantors in any case
shall entitle the Borrowers or Guarantors to any other or further notice or
demand in similar or other circumstances.
9.03. No Implied Waiver; Cumulative Remedies. No course of dealing and no
delay or failure of the Lenders in exercising any right, power or privilege
under this Agreement, the Notes or any other Loan Document shall affect any
other or future exercise thereof or exercise of any other right, power or
privilege; nor shall any single or partial exercise of any such right, power or
privilege or any abandonment or discontinuance of steps to enforce such a
right, power or privilege preclude any further exercise thereof or of any other
right, power or privilege. The rights and remedies of the Lenders under this
Agreement, the Term Notes and the other Loan Documents are cumulative and not
exclusive of any rights or remedies which the Lenders have hereunder or
thereunder or at law or in equity or otherwise. The Lenders may exercise their
rights and remedies against the Borrowers, the Guarantors and the Collateral as
the Lenders may elect, and regardless of the existence or adequacy of any other
right or remedy.
9.04. Notices.
(a) Unless otherwise provided herein, all notices, requests, demands,
directions and other communications (collectively "notices") under the
provisions of this Agreement, the Term Notes or any other Loan Document shall
be in writing and shall
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be mailed (by certified mail, postage prepaid and return receipt requested),
telecopied, or delivered and shall be effective (i) if mailed, three days after
being deposited in the mails, (ii) if telecopied, when sent, confirmation
received and (iii) if delivered, upon delivery. All notices shall be sent to
the applicable party at the address stated on the signature page hereof or in
accordance with the last unrevoked written direction from such party to the
other parties hereto.
(b) Without limiting Section 9.06 or any other provision of this
Agreement, the Lenders may rely, and shall be fully protected in relying, on
any notice purportedly made by or on behalf of the Borrowers or the Guarantors
and the Lenders shall have no duty to verify the identity or authority of any
Person giving such notice. The preceding sentence shall apply to all notices
whether or not made in a manner authorized or required by this Agreement or any
other Loan Document.
9.05. Expenses; Taxes; Attorneys' Fees; Indemnification. The Borrowers
agree to pay or cause to be paid, on demand, and to save the Lenders harmless
against liability for the payment of, all reasonable out-of-pocket expenses,
regardless of whether the transactions contemplated hereby are consummated,
including but not limited to reasonable fees and expenses of counsel for the
Lenders, accounting, due diligence, periodic field audits, investigation,
monitoring of assets, miscellaneous disbursements, examination, travel, lodging
and meals, incurred by the Lenders from time to time arising from or relating
to: (a) the negotiation, preparation, execution, delivery, performance and
administration of this Agreement and the other Loan Documents, (b) any
requested amendments, waivers or consents to this Agreement or the other Loan
Documents whether or not such documents become effective or are given, (c) the
preservation and protection of any of the Lenders' rights under this Agreement
or the other Loan Documents, (d) the defense of any claim or action asserted or
brought against any Lender by any Person that arises from or relates to this
Agreement, any other Loan Document, such Lender's claims against the Borrowers
or the Guarantors, or any and all matters in connection therewith, (e) the
commencement or defense of, or intervention in, any court proceeding arising
from or related to this Agreement or any other Loan Document, (f) the filing of
any petition, complaint, answer, motion or other pleading by any Lender, or the
taking of any action in respect of the Collateral or other security, in
connection with this Agreement or any other Loan Document, (g) the protection,
collection, lease, sale, taking possession of or liquidation of, any Collateral
or other security in connection with this Agreement or any other Loan Document,
(h) any attempt to enforce any lien or security interest in any Collateral or
other security in connection with this Agreement or any other Loan Document,
(i) any attempt to collect from the Borrowers or the Guarantors, (j) the
receipt of any advice with respect to any of the foregoing, (k) all
Environmental Liabilities and Costs arising from or in connection with the
past, present or future operations of any of the Borrowers or any of the
Guarantors involving any damage to real or personal property or natural
resources or harm or injury alleged to have resulted from any Release of
Hazardous Materials on, upon or into such property, (l) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Hazardous Materials present or arising out of the
operations of any facility of the Borrowers,
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the Guarantors or their respective Subsidiaries, or (m) any costs or
liabilities incurred in connection with any Environmental Lien. Without
limitation of the foregoing or any other provision of any Loan Document: (x)
the Borrowers agree to pay all stamp, document, transfer, recording or filing
taxes or fees (including, without limitation, mortgage recording taxes) and
similar impositions now or hereafter determined by the Lenders to be payable in
connection with this Agreement or any other Loan Document, and the Borrowers
agree to indemnify and hold the Lenders harmless from and against any and all
present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such taxes, fees or
impositions, and (y) if the Borrowers or the Guarantors fail to perform any
covenant or agreement contained herein or in any other Loan Document, any
Lender may itself perform or cause performance of such covenant or agreement,
and the expenses of such Lender incurred in connection therewith shall be
reimbursed on demand by the Borrowers. The Borrowers agree to indemnify and
defend the Lenders and their directors, officers, employees, affiliates,
partners, shareholders, counsel and agents and any affiliate of any of the
foregoing (collectively, the "Indemnified Parties") from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages, costs or
expenses of any nature whatsoever (including, without limitation, fees,
expenses and disbursements of counsel and amounts paid in settlement) incurred
by, imposed upon or asserted against any of them arising out of or by reason of
any investigation, litigation or other proceeding brought or threatened
relating to, or otherwise arising out of or relating to, the execution of this
Agreement, the Letter Agreement or any other Loan Document, the transactions
contemplated hereby or thereby or any Loan or proposed Loan hereunder
(including, but without limitation, any use made or proposed to be made by the
Borrowers, the Guarantors or any of their Affiliates of the proceeds of any
thereof, or the delivery or use or transfer of or the payment or failure to pay
under any Loan) but excluding any such losses, liabilities, claims, damages,
costs or expenses to the extent finally judicially determined, by a final and
non-appealable order of a court of competent jurisdiction, to have directly
resulted directly from the gross negligence or willful misconduct of the
Indemnified Party.
9.06. Several and Not Joint; Limited Liability. (a) Notwithstanding
anything herein or in any other Loan Document to the contrary, or any document
or instrument executed and delivered in connection herewith, the parties hereto
agree that the obligations, liabilities and indemnities of each Lender
hereunder shall be several and not joint, and no Lender shall have any
liability hereunder for any breach by any other Lender of any obligation of
such Lender set forth herein or in any other Loan Document.
(b) The Borrowers and Guarantors hereby acknowledge and agree that neither
this Agreement nor any other Loan Document is being executed on behalf of the
partners of any Lender that is a limited partnership as individuals and the
obligations of this Agreement are not binding upon any of the partners,
officers, employees or beneficiaries of such Lender individually but are
binding only upon the assets and property of such Lender, and the Borrowers and
Guarantors agrees that no beneficiary, partner, employee or officer of such
Lender may be held personally liable or responsible for any obligations of such
Lender arising out of this Agreement or any other Loan Document. With respect
to obligations of
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each Lender arising out of this Agreement or any other Loan Document, the
Borrowers and Guarantors shall look for payment or satisfaction of any claim
solely to the assets and property of such Lender.
(c) Magten represents and warrants to the Borrowers and Guarantors that it
has full power and authority to execute and deliver this Agreement and each
other Loan Document as agent or as general partner, as applicable, for the
Lenders on whose behalf Magten is executing this Agreement as set forth on the
signature pages hereto. Except for the foregoing representations and
warranties, the Borrowers and Guarantors hereby acknowledge and agree that
Magten shall not have any personal obligation or liability to the Borrowers and
Guarantors under this Agreement or any other Loan Document but that it is
acting solely for and on behalf of the aforementioned Lenders, and without
limiting the generality of the foregoing, the Borrowers and Guarantors shall
have no recourse against Magten for the performance or satisfaction of any
obligation under this Agreement or any other Loan Document, but shall look for
payment or satisfaction of any claim arising under this Agreement or any other
Loan Document solely to the assets and properties of the Lenders.
9.07. Application. Except to the extent, if any, expressly set forth in
this Agreement or in the Loan Documents, each Lender shall have the right to
apply any payment received or applied by it in connection with the Obligations
to such of the Obligations then due and payable as it may elect.
9.08. Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
9.09. Governing Law. This Agreement and the Term Notes shall be deemed to
be contracts under the laws of the State of New York, without regard to choice
of law principles, and for all purposes shall be governed by and construed and
enforced in accordance with the laws of said State.
9.10. Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein, other than the Interim
Order and the Final Order.
9.11. Duration; Survival. All representations and warranties of the
Borrowers and Guarantors contained herein or made in connection herewith shall
survive the making of the Loans and shall not be waived by the execution and
delivery of this Agreement, the Term Notes or any other Loan Document, any
investigation by or knowledge of the Lenders, the making of any Loan hereunder,
or any other event whatsoever. All covenants and agreements of the Borrowers
and the Guarantors contained herein shall
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continue in full force and effect from and after the date hereof so long as
the Borrowers may borrow hereunder and until the Obligations have been paid in
full in cash. Without limitation, it is understood that all obligations of the
Borrowers and the Guarantors to make payments to or indemnify the Lenders
(including, without limitation, obligations arising under Section 9.05 hereof)
shall survive the payment in full of the Term Notes and all Obligations and of
all other obligations of the Borrowers and the Guarantors thereunder and
hereunder, termination of this Agreement and all other events whatsoever and
whether or not any Loans are made hereunder.
9.12. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
9.13. Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns except that the Borrowers and the Guarantors
may not assign or transfer any of their rights hereunder or thereunder without
the prior written consent of the Lenders.
9.14. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE BORROWERS AND THE GUARANTORS, AND THE LENDERS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE TERM NOTES OR ANY OTHER LOAN
DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE LENDERS OR ANY BORROWER OR GUARANTOR IN CONNECTION HEREWITH OR
THEREWITH. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO
ENTER INTO THIS AGREEMENT.
9.15. Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each Lender may, and is hereby authorized to, at any time
from time to time, without notice to the Borrowers or the Guarantors (any such
notice being expressly waived by the Borrowers and the Guarantors) and to the
fullest extent permitted by law, set off and apply any and all deposits
(general or special, time or demand, provision or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrowers and the Guarantors against any and all Obligations of
the Borrowers or the Guarantors now or hereafter existing under the Loan
Documents, irrespective of whether or not such Lender shall have made any
demand hereunder or thereunder and although such Obligations may be contingent
or unmatured. Each Lender agrees promptly to notify the Borrowers and the
Guarantors after any such setoff and
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application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such setoff and application. The
rights of the Lenders under this Section 9.15 are in addition to the other
rights and remedies (including, without limitation, other rights of setoff
under applicable law or otherwise) which the Lenders may have.
9.16. Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the date first
above written.
BORROWERS:
THE RUG BARN, INC.
By:
--------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
Highway ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HOME INNOVATIONS, INC.
By:
--------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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DHA HOME, INC.
By:
------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇ AND COMPANY
By:
------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Katten, Muchin & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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51
GUARANTORS:
-----------
DECORATIVE HOME ACCENTS, INC.
By:
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
Highway ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DRAYMORE MFG. CORP.
By:
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HOME INNOVATIONS, INC.
By:
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
--------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Katten, Muchin & Zavis
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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52
LENDERS:
MELLON BANK, N.A., solely in its Percentage Interest: 37.25%
capacity as Trustee for GENERAL
MOTORS EMPLOYEES DOMESTIC
GROUP PENSION TRUST (as directed by
Magten Asset Management Corp. and not in
its individual capacity)
By:
-----------------------------------
Name:
Title:
Address for Notices:
--------------------
c/o Magten Asset Management
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. First
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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53
▇▇▇▇▇▇ MASTER RETIREMENT Percentage Interest: 17.00%
TRUST
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
c/o Magten Asset Management Corp.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. First
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇ OF Percentage Interest: 21.40%
LOS ANGELES
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
MAGTEN OFFSHORE FUND LTD. Percentage Interest: 3.50%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
MAGTEN PARTNERS, L.P. Percentage Interest: 3.67%
By: MAGTEN ASSET MANAGEMENT
CORP., its General Partner
By:
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
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55
MAGTEN GROUP TRUST Percentage Interest: 2.37%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
CUSTODIAL TRUST COMPANY
By:
-------------------------------
Name:
Title:
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
NAVY EXCHANGE SERVICE Percentage Interest: 6.93%
COMMAND RETIREMENT TRUST
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
-50-
56
WESTERN UNION PENSION TRUST Percentage Interest: 5.38%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
SATURN FUND LTD. Percentage Interest: 2.50%
By: MAGTEN ASSET MANAGEMENT
CORP., as its attorney-in-fact
By:
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
Address for Notices:
--------------------
Use same address as for ▇▇▇▇▇▇ MASTER
RETIREMENT TRUST.
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