Exhibit 2.6
EXECUTION
LOAN AND SECURITY AGREEMENT
by and among
CHARMING SHOPPES, INC.
CHARMING SHOPPES OF DELAWARE, INC.
CSI INDUSTRIES, INC.
CATHERINES STORES CORPORATION
LANE ▇▇▇▇▇▇, INC.
and
FB APPAREL, INC.
as Borrowers
and
CHARMING SHOPPES OF DELAWARE, INC.
as Borrowers' Agent
and
CONGRESS FINANCIAL CORPORATION,
as Administrative Agent, Collateral Agent, Joint Lead Arranger and Joint
Bookrunner
▇.▇. ▇▇▇▇▇▇ BUSINESS CREDIT CORP.,
as Co-Agent, Joint Lead Arranger and Joint Bookrunner
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
Dated: August 16, 2001
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................................................ 1
SECTION 2. CREDIT FACILITIES................................................................. 35
2.1 Revolving Loans..................................................................... 35
2.2 Letter of Credit Accommodations..................................................... 36
2.3 Term Loan........................................................................... 40
2.4 Joint and Several Liability......................................................... 41
2.5 Revolving Loan Commitments.......................................................... 42
SECTION 3. INTEREST AND FEES.................................................................. 42
3.1 Interest............................................................................ 42
3.2 Fees................................................................................ 43
3.3 Changes in Laws and Increased Costs of Loans........................................ 45
SECTION 4. CONDITIONS PRECEDENT.............................................................. 46
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations........... 46
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations............... 50
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST.......................................... 51
5.1 Grant of Security Interest.......................................................... 51
SECTION 6. COLLECTION AND ADMINISTRATION..................................................... 57
6.1 Borrowers' Loan Accounts............................................................ 57
6.2 Statements.......................................................................... 57
6.3 Collection of Accounts.............................................................. 57
6.4 Payments............................................................................ 60
6.5 Taxes............................................................................... 62
6.6 Authorization to Make Loans......................................................... 64
6.7 Use of Proceeds..................................................................... 65
6.8 Pro Rata Treatment.................................................................. 65
6.9 Sharing of Payments, Etc............................................................ 65
6.10 Settlement Procedures............................................................... 66
6.11 Obligations Several; Independent Nature of Lenders' Rights.......................... 69
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS..................................... 69
7.1 Collateral Reporting................................................................ 69
7.2 Accounts Covenants.................................................................. 70
7.3 Inventory Covenants................................................................. 70
7.4 Equipment and Real Property Covenants............................................... 72
(i)
7.5 Bills of Lading and Other Documents of Title........................................ 72
7.6 Power of Attorney................................................................... 73
7.7 Right to Cure....................................................................... 74
7.8 Access to Premises.................................................................. 74
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................... 75
8.1 Corporate Existence, Power and Authority; Subsidiaries.............................. 75
8.2 Financial Statements; No Material Adverse Change.................................... 75
8.3 Collateral Locations................................................................ 76
8.4 Priority of Liens; Title to Properties.............................................. 76
8.5 Tax Returns......................................................................... 76
8.6 Litigation.......................................................................... 76
8.7 Compliance with Other Agreements and Applicable Laws................................ 77
8.8 Environmental Compliance............................................................ 77
8.9 Employee Benefits................................................................... 78
8.10 Bank Accounts....................................................................... 78
8.11 Intellectual Property............................................................... 79
8.12 Capitalization...................................................................... 79
8.13 Labor Disputes...................................................................... 80
8.14 Corporate Name; Prior Transactions.................................................. 80
8.15 Inactive Subsidiaries............................................................... 80
8.16 Restrictions on Subsidiaries........................................................ 80
8.17 Material Contracts.................................................................. 81
8.18 Credit Card Agreements.............................................................. 81
8.19 Interrelated Businesses............................................................. 81
8.20 Intentionally Deleted............................................................... 82
8.21 Acquisition of Purchased Stock...................................................... 82
8.22 Accuracy and Completeness of Information............................................ 82
8.23 Survival of Warranties; Cumulative.................................................. 83
8.24 CS Securitization Undertakings...................................................... 83
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS................................................ 83
9.1 Maintenance of Existence............................................................ 83
9.2 New Collateral Locations............................................................ 84
9.3 Compliance with Laws, Regulations, Etc.............................................. 84
9.4 Payment of Taxes and Claims......................................................... 85
9.5 Insurance........................................................................... 86
9.6 Financial Statements and Other Information.......................................... 86
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc............................. 88
9.8 Encumbrances........................................................................ 90
9.9 Indebtedness........................................................................ 93
9.10 Loans, Investments, Guarantees, Etc................................................. 97
9.11 Dividends and Redemptions........................................................... 101
(ii)
9.12 Transactions with Affiliates....................................................... 101
9.13 Intentionally Omitted.............................................................. 102
9.14 Compliance with ERISA.............................................................. 102
9.15 End of Fiscal Years: Fiscal Quarters............................................... 102
9.16 Change in Business................................................................. 102
9.17 Limitation of Restrictions Affecting Subsidiaries.................................. 102
9.18 Financial Covenants................................................................ 103
9.19 Credit Card Agreements............................................................. 104
9.20 Use of Fashion Bug Card and Co-Branded Card........................................ 104
9.21 Sale and Leasebacks................................................................ 105
9.22 Costs and Expenses................................................................. 105
9.23 Further Assurances................................................................. 106
9.24 Preferred Stock.................................................................... 106
9.26 Company Owned Insurance Policies................................................... 106
9.27 Securitization Transactions........................................................ 107
9.28 Release of Indiana Real Property................................................... 107
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................................... 108
10.1 Events of Default.................................................................. 108
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW...................................................... 115
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.............. 115
11.2 Waiver of Notices.................................................................. 116
11.3 Amendments and Waivers............................................................. 117
11.4 Waiver of Counterclaims............................................................ 119
11.5 Indemnification.................................................................... 119
SECTION 12. THE AGENT........................................................................ 120
12.1 Appointment, Powers and Immunities................................................. 120
12.2 Reliance by Agent.................................................................. 120
12.3 Events of Default.................................................................. 121
12.4 Congress in its Individual Capacity................................................ 121
12.5 Indemnification.................................................................... 122
12.6 Non-Reliance on Agent and Other Lenders............................................ 122
12.7 Failure to Act..................................................................... 122
12.8 Additional Loans................................................................... 123
12.9 Concerning the Collateral and the Related Financing Agreements..................... 123
12.10 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders............................................................. 123
12.11 Collateral Matters................................................................ 124
12.12 Agency for Perfection............................................................. 125
(iii)
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS................................................. 126
13.1 Term............................................................................... 126
13.2 Appointment of Borrowers' Agent.................................................... 127
13.3 Interpretative Provisions.......................................................... 128
13.4 Notices............................................................................ 129
13.5 Partial Invalidity................................................................. 130
13.6 Confidentiality.................................................................... 130
13.7 Successors......................................................................... 131
13.8 Assignments; Participations........................................................ 132
13.9 Entire Agreement................................................................... 135
13.10 Counterparts....................................................................... 136
(i)
INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A-1 Form of Assignment and Acceptance (Revolving Loan
Commitment)
Exhibit A-2 Form of Assignment and Acceptance (Term Loan Amount)
Exhibit B Compliance Certificate
Exhibit C Commitments
Exhibit 7.1 Weekly Inventory Report
Omnibus Schedule 1 Part (1) Subsidiaries Part (3) Inactive Subs
Omnibus Schedule 2 Inventory Locations/Real Property Locations
Omnibus Schedule 5 Pledged Stock
Omnibus Schedule 7 Entities Not in Good Standing
Omnibus Schedule 8 Litigation/Investigations
Omnibus Schedule 11 Environmental Compliance
Omnibus Schedule 13 Permitted Liens
Omnibus Schedule 14 Guarantees
Omnibus Schedule 16 Tax Returns
Schedule 1.29 Company Owned Insurance Policies
Schedule 1.62 Existing Letters of Credit
Schedule 1.63 Existing Securitization Documents
Schedule 1.127 Purchase Agreement Inventory Letters of Credit
Schedule 5.4 (e) Investment securities, investment account,
securities accounts, commodity accounts or similar
accounts
Schedule 5.4 (f) Payment rights pursuant to letters of credit,
banker's acceptances or similar instruments
Schedule 5.4 (g) Commercial tort claims
Schedule 6.3 Deposit Accounts and Merchant Payment Arrangements
(ii)
Schedule 8.2 Material Adverse Change
Schedule 8.11 Intellectual Property
Schedule 8.13 Collective Bargaining Agreements
Schedule 8.17 Material Contracts
Schedule 8.18 Credit Card Agreements
Schedule 9.9 Indebtedness
Schedule 9.10 Investments
Schedule 9.28 The Indiana Eight Acres
(iii)
LOAN AND SECURITY AGREEMENT
---------------------------
This Loan and Security Agreement dated August 16, 2001 is entered into by
and among Charming Shoppes, Inc., a Pennsylvania corporation ("Parent"),
Charming Shoppes of Delaware, Inc., a Pennsylvania corporation ("CS Delaware"),
CSI Industries, Inc., a Delaware corporation ("CSI"), FB Apparel, Inc., an
Indiana corporation ("FB Apparel"), Catherines Stores Corporation, a Tennessee
corporation ("Catherines") and Lane ▇▇▇▇▇▇, Inc., a Delaware corporation ("LB");
and, together with Parent, CS Delaware, CSI and FB Apparel and Catherines,
hereinafter referred to individually as a "Borrower" and collectively as
"Borrowers") and CS Delaware in its capacity as agent for itself as a Borrower
and for the other Borrowers ("Borrowers' Agent"), the financial institutions
from time to time parties hereto as lenders, whether by execution of this
Agreement or an Assignment and Acceptance (each individually, a "Lender" and
collectively, "Lenders"), Congress Financial Corporation, a Delaware corporation
in its capacity as administrative agent, collateral agent, Joint Lead Arranger
and Joint Book Runner for Lenders (in such capacity, "Agent") and ▇.▇. ▇▇▇▇▇▇
Business Credit Corp., a Delaware corporation in its capacity as Co-Agent, Joint
Lead Arranger and Joint Bookrunner (in such capacity, "Co-Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrowers, together with the other members of the Apparel Group (as
hereinafter defined), operate a chain of retail apparel stores and certain
related businesses; and
WHEREAS, Borrowers and Obligors (as defined below) have requested that Agent
and Lenders enter into financing arrangements with Borrowers pursuant to which
Lenders may make loans and provide other financial accommodations to Borrowers;
and
WHEREAS, each Lender is willing to agree (severally and not jointly) to make
such loans and provide such financial accommodations to Borrowers on a pro rata
--- ----
basis according to its Commitment (as defined below) on the terms and conditions
set forth herein and Agent is willing to act as agent for Lenders on the terms
and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall have the meaning given to such term in the UCC and
shall also include, without limitation, all present and future rights of each
Borrower to payment of a
monetary obligation whether or not earned by performance, which is not evidenced
by chattel paper or an instrument, (a) for property that has been or is to be
sold, leased, licensed, assigned or otherwise disposed of, (b) for services
rendered or to be rendered, (c) for a secondary obligation incurred or to be
incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with any such card.
1.2 "Additional L/C Accommodations" shall mean the letters of credit,
guarantees and other financial accommodations provided by Lender to the
Additional L/C Debtors pursuant to the Trade Financing Agreement.
1.3 "Additional L/C Collateral" shall mean the "Collateral" as defined on
the date hereof in the Trade Financing Agreement.
1.4 "Additional L/C Debt" shall mean, collectively, the reimbursement
obligations with respect to the Additional L/C Accommodations and other
indebtedness owed by the Additional L/C Debtors to Agent pursuant to the Trade
Financing Agreement.
1.5 "Additional L/C Debtors" shall mean, individually and collectively,
Sentani Trading Limited, Trimoland Limited, Huambo Limited, and CS Insurance
Ltd.
1.6 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of a Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.7 "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of
goodwill), calculating the book value of inventory for this purpose under the
retail method of accounting in accordance with GAAP, after deducting from such
book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (b) the aggregate amount of all liabilities of such Person and its
Subsidiaries in accordance with GAAP (including tax and other proper accruals).
1.8 "Affiliates" shall mean, with respect to a specified Person, a
partnership, corpora tion or any other person which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds ten (10%)
2
percent or more of any class of Voting Stock of such Person or other equity
interests in such Person, (b) any Person of which such Person beneficially owns
or holds ten (10%) percent or more of any class of Voting Stock and (c) any
director or officer of such Person. For the purposes of this definition, the
term "control" (including with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock or by contract or otherwise.
1.9 "Agent" shall mean Congress Financial Corporation, in its capacity as
agent on behalf of Lenders pursuant to the terms hereof and any replacement or
successor agent hereunder.
1.10 "Agreement" shall mean this Loan and Security Agreement, as amended,
modified, extended or restated from time to time.
1.11 "Apparel Group" shall mean, collectively, Borrowers and US
Subsidiaries which are Obligors.
1.12 "Applicable Margin" shall mean, at any time, as to the Interest Rate
for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, the
applicable percentage (on a per annum basis) set forth below if either the
Quarterly Average Excess and Suppressed Availability for the immediately
preceding fiscal quarter is at or within the amounts indicated for such
percentage or the Leverage Ratio as of the last day of the immediately preceding
fiscal quarter (which ratio for this purpose shall be calculated based on the
four (4) immediately preceding fiscal quarters) is at or within the levels
indicated for such percentage:
Applicable
Eurodollar
Applicable Rate
Excess and Prime ----
Suppressed Availability Leverage Ratio Rate Margin Margin
----------------------- -------------- ----------- ------
(a) $100,000,000 or Equal to or less than -0-% 2%
more 1.50 to 1.00
(b) Greater than or equal Greater than 1.50 to .25% 2.25%
to $65,000,000 and 1.00 but equal to or
less than less than 2.00 to 1.00
$100,000,000
(c) Greater than or equal Greater than 2.00 to .50% 2.50%
to $30,000,000 and 1.00 but equal to or
less than less than 2.50 to 1.00
$65,000,000
(d) Less than More than 2.50 to 1.00 .75% 2.75%
$30,000,000
provided, that,
-------- ----
3
(i) subject to clause (iii) below, the Applicable Margin shall be
calculated and established once each fiscal quarter as of the first day of the
calendar month immediately succeeding the month in which the required quarterly
financial statements for each fiscal quarter (commencing with the fiscal quarter
ending on or about October 31, 2001) are delivered to Agent pursuant to the
terms of the Financing Agreements (the "Adjustment Date") and shall be effective
on the Adjustment Date as to all Prime Rate Loans and Eurodollar Rate Loans
requested on or after such Adjustment Date; as to Eurodollar Rate Loans
outstanding on such Adjustment Date, the new Applicable Margin shall be
effective as to such Eurodollar Rate Loans on the first day after the last day
of the interest period in effect on such Adjustment Date; in the event the
Borrowers fail to deliver the required financial statements when due, then for
the period commencing on the next Adjustment Date to occur subsequent to such
failure through the date immediately following the date on which such statements
are delivered, the Applicable Margin shall be the highest Applicable Margin set
forth above.
(ii) the Applicable Margin shall be the lower percentage set forth
above based on the Quarterly Average Excess and Suppressed Availability or the
Leverage Ratio, and
(iii) notwithstanding anything to the contrary set forth above, the
Applicable Margin for the period from the Closing Date until the first day of
the calendar month immediately succeeding the month in which the required
quarterly financial statements for the fiscal quarter ending on or about October
31, 2001 are delivered to Agent pursuant to the terms of the Financing
Agreements (the "First Adjustment Date") shall be set by Agent based on the
Excess and Suppressed Availability based on the updated field examination done
by Agent immediately prior to closing. As to Eurodollar Rate Loans outstanding
on such First Adjustment Date, the new Applicable Margin, shall be effective on
the first day after the last day of the interest period in effect on such First
Adjustment Date.
1.13 "Approved Fund" shall mean with respect to any Lender that is a fund
or similar investment vehicle that makes or invests in commercial loans, any
other fund or similar investment vehicle that invests in commercial loans which
is managed or advised by the same investment advisor as such Lender or by an
affiliate of such investment advisor.
1.14 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A-1 or Exhibit A-2 attached hereto (with
blanks appropriately completed) delivered to Agent in connection with an
assignment of a Lender's interest hereunder in accordance with the provisions of
Section 13.8 hereof.
1.15 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.16 "Borrowing Base" shall mean, at any time the amount equal to:
(a) the lesser of (i) sixty-five (65%) percent of the Value of the
Eligible Inventory of Borrowers and Retail Store Subsidiaries or (ii) eighty-
five (85%) percent of the Net Recovery Cost Percentage multiplied by the Value
of the Eligible Inventory of Borrowers and Retail Store Subsidiaries, plus
----
4
(b) the Indiana Real Property Availability; plus
----
(c) the Pennsylvania Real Property Availability; less
----
(d) any Reserves.
1.17 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York, or the State of North Carolina, and a day on
which the Reference Bank and Agent are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.18 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.19 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock, partnership interests or limited liability company
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).
1.20 "Cash Dominion Event" shall mean the earlier to occur of (a) an act,
condition or event which, with notice or passage of time or both, would
constitute an Event of Default, or an Event of Default shall exist or have
occurred and be continuing, or (B) the date at which the Excess and Suppressed
Availability shall be less than $50,000,000.
1.21 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one year or less issued or directly and
fully guaranteed or insured by the United States of America of any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
-------- ----
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of one year or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $250,000,000; (c)
commercial paper (including variable rate demand notes) with a maturity of one
year or less issued by a corporation (except an Affiliate of Borrower) organized
under the laws of any State of the United States of America or the District of
Columbia and rated at least A-2 by Standard & Poor's Ratings Service, a division
of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at least P-2 by ▇▇▇▇▇'▇ Investors Service,
Inc.; (d) repurchase obligations with a term of not more than thirty (30) days
for underlying securities of the types described in clause (a) above entered
into with any financial institution having combined capital
5
and surplus and undivided profits of not less than $250,000,000; (e) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or issued by any governmental agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within one year or
less from the date of acquisition; provided, that, the terms of such agreements
-------- ----
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets in
securities of the types described in clauses (a) through (e) above.
1.22 "C.D. Credit Plan Agreement" shall mean the Consumer Credit Plan
Agreement dated as of August 12, 1994, as amended and restated as of March 26,
1996 and as of June 1, 1999, between CS Delaware and FSC, as amended, modified,
supplemented or restated from time to time.
1.23 "Change of Control" shall mean (a) the acquisition by any Person
or group (as such term is used in Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, of fifty (50%) percent or more of
the voting power of the total outstanding Voting Stock of Parent; or (b) during
any period of two (2) consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of Parent (together with any new
directors whose nomination for election by the stockholders of Parent, was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of Parent then still
in office.
1.24 "Closing Date" shall mean August 16, 2001.
1.25 "Co-Branded Card" shall mean a revolving Visa or Mastercard issued
by Originator which account is co-branded with "Fashion Bug" stores.
1.26 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.27 "Collateral" shall have the meaning set forth in Section 5 hereof
and shall also include all Obligor Collateral.
1.28 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance reasonably satisfactory to Agent, from any lessor of
premises to any Borrower or Obligor, or any other person to whom any Collateral
is consigned or who has custody, control or possession of any such Collateral or
is otherwise the owner or operator of any premises on which any of such
Collateral is located (excluding any Retail Store location), pursuant to which
such lessor, customs broker, cargo consolidator, freight forwarder, consignee,
processor or other person, inter alia, acknowledges the first priority security
----- ----
interest of Agent in such Collateral,
6
agrees to waive any and all claims such lessor, consignee, processor or other
person may, at any time, have against such Collateral, whether for storage or
otherwise, and agrees to permit Agent access to, and the right to remain on, the
premises of such lessor, consignee, processor or other person so as to exercise
Agent's rights and remedies and otherwise deal with such Collateral, and in the
case of any customs broker, cargo consolidator, freight forwarder, consignee or
other person who at any time has custody, control or possession of any bills of
lading or other documents of title, agrees to hold such Collateral, acknowledges
that it holds and will hold possession of the Collateral for the benefit of the
Agent and agrees to follow all instructions of Agent with respect thereto.
1.29 "Company Owned Insurance Policies" shall mean the life insurance
policies owned by Borrowers which are listed on Schedule 1.29 hereto and which
are subject to the Assignment of Life Insurance Policies, dated of even date
herewith, made by Borrowers in favor of Agent for the benefit of Lenders.
1.30 "Concentration Account" shall mean individually and collectively, the
collection and cash management accounts of (a) CS Delaware at First Union
National Bank and (b) such other collection and cash management accounts
established by Borrowers and Obligors with the prior written consent of Agent.
1.31 "Commitment" shall mean, at any time, as to each Lender, the Term Loan
Commitment and the Revolving Loan Commitment set forth next to such Lender's
name on Exhibit C hereto or on Schedule 1 to the Assignment and Acceptance
Agreement pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of Section 13.8 hereof, as the same may be adjusted from
time to time in accordance with the terms hereof; sometimes being collectively
referred to herein as "Commitments".
1.32 "Congress" shall mean Congress Financial Corporation, a Delaware
corporation, in its individual capacity, and its successors and assigns.
1.33 "Consolidated Net Income" shall mean, with respect to any person for
any period, the aggregate of the net income (loss) of such person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary and/or unusual and non-recurring gains and
non-cash losses with respect to the write-down of fixed assets) after deducting
all charges which should be deducted before arriving at the net income (loss)
for such period and, without duplication, after deducting the Provision for
Taxes for such period, all as determined in accordance with GAAP consistently
applied as in effect on the date hereof as modified to reflect any changes in
such principles respecting purchase accounting; provided, that, (i) the net
-------- ----
income for any Person that is not a wholly-owned Subsidiary or that is accounted
for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid or payable to such Person or a
wholly-owned Subsidiary of such Person; (ii) except to the extent included
pursuant to the foregoing clause, the net income of any Person accrued prior to
the date it becomes a wholly-owned Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or that
Person's assets are acquired by such Person or by its wholly-owned Subsidiaries
shall be
7
excluded; and (iii) the net income (if positive) of any wholly-owned Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such wholly-owned Subsidiary to such Person or to any other
wholly-owned Subsidiary of such Person is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such wholly-owned
Subsidiary shall be excluded. For the purposes of this definition, net income
excludes any gain or loss (exclusive of non-cash losses with respect to the
write down of fixed assets), together with any related Provision for Taxes for
such gain, realized upon the sale or other disposition of any assets that are
not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or of any capital
stock of such Person or a Subsidiary of such Person and any net income realized
or loss incurred as a result of changes in accounting principles or the
application thereof to such Person.
1.34 "Cost" shall mean, as to the Inventory as of any date, the cost of
such Inventory as of such date, determined under the retail method of accounting
in accordance with GAAP. For purposes of determining "cost" of Inventory
hereunder, with respect to any Inventory sold by a Borrower to another Borrower
or a Retail Store Subsidiary, such term shall mean the original cost thereof to
such Borrower or Subsidiary which originally purchased such Inventory and shall
not include any ▇▇▇▇-up or profit on such intercompany sale.
1.35 "Credit Balance Cash Collateral" shall have the meaning set forth in
Section 6.4(c) hereof.
1.36 "Credit Card Acknowledgments" shall mean, individually and
collectively, the agreements in favor of Agent by Credit Card Issuers or
Credit Card Processors who are parties to Credit Card Agreements acknowledging
the first priority security interest of Agent in the monies due and to become
due to any Borrower (including, without limitation, credits and reserves) under
the Credit Card Agreements, and agreeing to transfer all such amounts to the
Blocked Accounts, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.37 "Credit Card Agreements" shall mean the C.D. Credit Plan Agreement
and all other agreements now or hereafter entered into by any Borrower with any
Credit Card Issuer or any Credit Card Processor, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, including, but not limited to, as to Borrowers, the agreements set
forth on Schedule 8.18 hereto.
1.38 "Credit Card Issuer" shall mean any Person (other than Borrowers but
including Financing Subsidiaries) who issues or whose members issue credit
cards, including, without limitation, MasterCard or VISA bank credit or debit
cards or other bank credit or debit cards issued through MasterCard
International, Inc., Visa, U.S.A., Inc. or Visa International and American
Express, Discover, Diners Club, the Fashion Bug Card and other non-bank credit
or debit cards, including, without limitation, credit or debit cards issued by
or through American Express Travel Related Services Company, Inc.
8
1.39 "Credit Card Processor" shall mean any servicing or processing agent
or any factor or financial intermediary who facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures
with respect to any sales transactions of the Retail Stores involving credit
card or debit card purchases by customers using credit cards or debit cards
issued by any Credit Card Issuer. FSC shall be deemed a Credit Card Processor
in respect of the Fashion Bug Card and the Co-Branded Card.
1.40 "Credit Card Receivables" shall mean collectively, (a) all present and
future rights of Parent or any Subsidiary of Parent (including, without
limitation, Borrowers and the Retail Store Subsidiaries but excluding the
Financing Subsidiaries) to payment from any Credit Card Issuer, Credit Card
Processor or other third party arising from sales of goods or rendition of
services to customers who have purchased such goods or services using a credit
or debit card and (b) all present and future rights of any Borrower to payment
from any Credit Card Issuer, Credit Card Processor or other third party in
connection with the sale or transfer of Credit Card Receivables arising pursuant
to the sale of goods or rendition of services to customers who have purchased
such goods or services using a credit card or a debit card, including, but not
limited to, all amounts at any time due or to become due from any Credit Card
Issuer or Credit Card Processor under the Credit Card Agreements or otherwise.
1.41 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of Borrowers hereunder.
1.42 "CS Securitization Undertaking" means (i) any extension of credit by
CS Delaware or Parent to a Financing Subsidiary or Special Purpose Vehicle, (ii)
any capital contribution or other investment by CS Delaware or Parent in a
Financing Subsidiary or Special Purpose Vehicle, or (iii) any agreement by CS
Delaware or Parent to guarantee or otherwise become liable for the obligations
of a Financing Subsidiary or Special Purpose Vehicle (which agreement does not
provide that CS Delaware or Parent shall ▇▇▇▇▇ ▇ ▇▇▇▇ on any of its assets in
support of any guarantee or support of any Financing Subsidiary or Special
Purpose Vehicle).
1.43 "Defaulting Lender" shall have the meaning set forth in Section 6.9
hereof.
1.44 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, each
Borrower and any bank at which a deposit account of a Borrower is at any time
maintained which provides that such bank will comply with instructions
originated by Agent directing disposition of the funds in the deposit account
without further consent by Borrowers and such other terms and conditions as
Agent may require, including as to any such agreement with respect to any
Blocked Account, providing that Agent has sole dominion and control and a first
--------- ----
priority and only security interest in such Blocked Account.
1.45 "EBITDA" shall mean, as to any person, with respect to any period, an
amount equal to: (a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus (b) depreciation, amortization and other non-
----
cash charges (including, but not limited to, imputed interest and deferred
compensation) for such period (to the extent deducted in the
9
computation of Consolidated Net Income of such Person), all in accordance with
GAAP, plus (c) Interest Expense for such period (to the extent deducted in the
----
computation of Consolidated Net Income of such Person), plus (d) charges for
----
Federal, State, local and foreign income taxes for such period (to the extent
deducted in the computation of Consolidated Net Income for such Person). For
purposes of calculating EBITDA for all periods prior to the acquisition of LBH,
Inc., EBITDA shall include the pro-forma historical amounts with respect for
each item for LBH, Inc. and its Subsidiaries.
1.46 "Eligible Inventory" shall mean Inventory of each Borrower and of each
Retail Store Subsidiary consisting of finished goods held for resale in the
ordinary course of the business of such Borrower or such Retail Store Subsidiary
which are acceptable to Agent based on the criteria set forth below. In
general, Eligible Inventory shall not include (a) packaging and shipping
materials; (b) supplies used or consumed in such Borrower's or such Retail Store
Subsidiary's business; (c) Inventory at any distribution center leased by a
Borrower, including the premises at which Seller or any Affiliate of Seller is
landlord or sublandlord unless Agent shall have received a Collateral Access
Agreement from the lessor of such location (and where the Seller or any
Affiliate of Seller is the sublessor then a Collateral Access Agreement only
from such sublessor), executed and delivered by such lessor; provided, that,
-------- ----
without limiting any other rights and remedies of Agent with respect to the
establishment of Reserves or otherwise, Agent may at any time establish Reserves
in respect of amounts at any time due or to become due to the owner, lessor or
third party operator of such location, as the case may be, from any Borrower or
Retail Store Subsidiary; (d) Inventory subject to a Lien in favor of any person
other than Agent except those permitted in this Agreement; (e) ▇▇▇▇ and hold
goods; (f) slow moving and obsolete Inventory; (g) Inventory which is not
subject to the first priority, valid and perfected security interest of Agent;
(h) damaged and/or defective Inventory; (i) Inventory purchased or sold on
consignment; (j) Inventory in transit to Borrowers or any Retail Store
Subsidiary or at premises other than those set forth on Omnibus Schedule 1
hereto (except Inventory in transit (i) to a warehouse location of Borrowers
listed on Omnibus Schedule 2 hereto, which Inventory is located in the United
States, has cleared United States customs and with respect to which all United
States import duties and foreign and domestic freight charges has been paid,
(ii) to the United States for which the foreign vendor thereof has been paid the
entire purchase price therefor and which is the subject of a ▇▇▇▇ of lading in
the possession of a customs broker, as to which Agent shall have received a
Collateral Access Agreement from such customs broker, duly executed and
delivered by such customs broker and (iii) to any Retail Store Subsidiary from a
warehouse location of Borrowers); (k) Inventory held for return to vendors; (l)
Inventory returned by customers and not held for resale; (m) lay-away Inventory;
(n) Inventory consisting of samples and (o) Inventory owned by M and A Joint
Venture LLC. General criteria for Eligible Inventory may be established and
revised from time to time by Agent in good faith based on either: (i) an event,
condition or other circumstance arising after the date hereof, or (ii) an event,
condition or other circumstance existing on the date hereof to the extent Agent
has no written notice thereof from Borrower, prior to the date hereof, in either
case under clause (i) or (ii) which adversely affects or could reasonably be
expected to adversely affect the Inventory in the good faith determination of
Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part
of the Collateral. To the extent Agent may revise the lending formulas used to
determine the Borrowing Base or establish a Reserve so as to address any
circumstances, condition,
10
event or contingency in a manner satisfactory to Agent, Agent shall not revise
the definition of Eligible Inventory for the same purpose. Any revision in the
definition of Eligible Inventory by Agent shall have a reasonable relationship
to the event, condition or other matter which is the basis for such revision as
determined by Agent in good faith.
1.47 "Eligible Transferee" shall mean (a) any Lender; (b) any Affiliate of a
Lender; and (c) any other commercial bank, financial institution or "accredited
investor" (as defined in Regulation D under the Exchange Act) approved by (i)
Agent (which approval shall not be unreasonably witheld) in the case of any
Eligible Transferee with respect to any of the Revolving Loans and (ii approved
by the Required Term Loan Lenders in the case of any Eligible Transferee with
respect to any of the Term Loan; provided, that, none of Borrowers or Obligors
-------- ----
shall qualify as an Eligible Transferee.
1.48 "Enforcement Action" shall mean the exercise by Agent in good faith of
any of its material enforcement rights and remedies as a secured creditor
hereunder or under the other Financing Agreements, applicable law or otherwise
at any time on and after an Event of Default (including, without limitation, the
demand for the immediate payment of all of the Obligations, the solicitation of
bids from third parties to conduct the liquidation of the Collateral, the
engagement or retention of sales brokers, marketing agents, investment bankers,
accountants, appraisers, auctioneers or other third parties for the purposes of
valuing, marketing, promoting and selling the Collateral, the commencement of
any action to foreclose on the security interests or Liens of Agent in all or
any material portion of the Collateral, notification of account debtors to make
payments to Agent, any action to take possession of all or any material portion
of the Collateral or commencement of any legal proceedings or actions against or
with respect to all or any portion of the Collateral).
1.49 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower or
Obligor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose
11
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Materials.
1.50 "Equipment" shall have the meaning given to such term in the UCC and
also shall include, without limitation, all of each Borrower's now owned and
hereafter acquired equipment, wherever located, including machinery, data
processing and computer equipment and computer hardware and software, whether
owned or licensed, and including embedded software, vehicles, tools, furniture,
fixtures (to the extent a security interest may be perfected in a fixture under
the UCC), all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith (other than Inventory), and
substitutions and replacements thereof, wherever located.
1.51 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as amended, together with all rules, regulations and
interpretations thereunder or related thereto.
1.52 "ERISA Affiliate" shall mean any person required to be aggregated with
any Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.53 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such Plan that is a single employer plan where such
termination could result in any liability to the Pension Benefit Guaranty
Corporation; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which any Borrower or any of its Subsidiaries would
be liable; (f) a complete or partial withdrawal by any Borrower or any ERISA
Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or
the commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Plan or Multiemployer Plan; (h) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan; (i) the imposition of any liability under Title IV of ERISA,
other than the Pension Benefit Guaranty Corporation premiums due but not
delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA
Affiliate; and (j) any other event or condition with respect to a Plan or
Multiemployer Plan or any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of any Borrower or Obligor.
12
1.54 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrowers' Agent and approved by Agent)
on or about 9:00 a.m. (New York time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to
Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrowers' Agent.
1.55 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.56 "Excess Availability" shall mean the amount, as determined by Agent,
calculated at any time, equal to: (a) the sum of (i) lesser of: (A) the
Borrowing Base and (B) the Revolving Loan Limit (in each case under clause (A)
and (B) after giving effect to any Reserves), plus (ii cash and Cash Equivalents
of Borrowers and Obligors which are (A) subject to a perfected first priority
security interest in favor of Agent and Lenders and (B) available to Borrowers
without restriction or condition, but in no event shall include funds held at
Borrowers' Retail Store Subsidiaries or in deposit accounts used by the Retail
Store Subsidiaries, plus (ii Credit Balance Cash Collateral, minus (b) the sum
-----
of: (i) the amount of all then outstanding and unpaid Obligations (but not
including for this purpose the outstanding principal amount of the Term Loan),
plus (ii the aggregate amount of all then outstanding and unpaid trade payables
and other obligations of Borrowers and Obligors which are outstanding more than
sixty (60) days past due as of such time, plus (ii without duplication, the
amount of checks issued by Borrowers and Obligors to pay trade payables and
other obligations which are more than sixty (60) days past due as of such time,
but not yet sent.
1.57 "Excess and Suppressed Availability" shall mean the amount, as
determined by Agent, calculated at any time, equal to: (a) the sum of (i) the
Borrowing Base (after giving effect to any Reserves), plus (ii cash and Cash
Equivalents of Borrowers and Obligors which are (A) subject to a perfected first
priority security interest in favor of Agent and Lenders and (B) available to
Borrowers without restriction or condition, but in no event shall include funds
held at Borrowers' Retail Store Subsidiaries or in deposit accounts used by the
Retail Store Subsidiaries, plus (ii Credit Balance Cash Collateral, minus (b)
-----
the sum of: (i) the amount of all then outstanding and unpaid Obligations (but
not including for this purpose the outstanding principal amount of the Term
Loan), plus (ii the aggregate amount of all then outstanding and unpaid trade
payables and other obligations of Borrowers and Obligors which are outstanding
more than sixty (60) days past due as of such time, plus (ii without
duplication, the amount of checks issued by Borrowers to pay trade payables and
other obligations which are more than sixty (60) days past due as of such time,
but not yet sent.
1.58 "Exchange Act" shall mean the Securities Exchange Act of 1934, together
with all rules, regulations and interpretations thereunder or related thereto.
13
1.59 "Excluded Collateral" shall have the meaning set forth in Section 5.2
hereof.
1.60 "Excluded Collections" shall have the meaning set forth in Section
5.2(c)(ii) hereof.
1.61 "Excluded Subsidiaries"shall mean each of the Financing Subsidiaries,
the Inactive Subsidiaries, M and A Joint Venture LLC, and Charming J.V. Inc.,
CSI Charities, Inc., the Foreign Subsidiaries, and, if and only if there is a
Refinancing Mortgage with respect to the Pennsylvania Real Property, Winks Lane,
Inc., and, if and only if there is a Refinancing Mortgage with respect to the
Indiana Real Property or the Indiana Personal Property, FB Distro, Inc.
1.62 "Existing Letters of Credit" shall mean, collectively, the Existing
Letters of Credit issued for the account of Borrowers and Additional L/C Debtors
prior to the date hereof and listed on Schedule 1.62 hereof.
1.63 "Existing Securitization Documents" shall mean the documents described
in Schedule 1.63 hereto, as amended, modified, supplemented or restated from
time to time in accordance with this Agreement.
1.64 "Existing Securitization Transactions" shall mean the transactions
contemplated by the Existing Securitization Documents.
1.65 "Fashion Bug Card" shall mean the private label credit card or private
label credit cards issued by the Financing Subsidiaries (or any subsequent
Credit Card Issuer replacing the Financing Subsidiaries with respect to such
private label credit card or private label credit cards as to which there has
been compliance with Section 9.20 hereof) to customers or prospective customers
of the Retail Store Subsidiaries.
1.66 "Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers, Obligors and Agent, setting forth certain fees
payable by Borrowers to Agent for the benefit of itself and Lenders, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.67 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement.
1.68 "Financing Subsidiaries" shall mean, individually and collectively,
FSC, Originator, Charming Shoppes Receivables Corp. (formerly known as Fashion
SPC, Inc.), Charming Shoppes Seller, Inc., Charming Shoppes Street, Inc., Spirit
of America, Inc. and any other direct or indirect Subsidiary of any of them
engaged in financing, funding or servicing Securitization Program Assets,
including receivables owed to any of them by Persons using the Fashion Bug Card
or the Co-Branded Card, provided, that, the term "Financing Subsidiary" shall
not include
14
any Borrower, Obligor or any Special Purpose Vehicle (including, without
limitation, Charming Shoppes Master Trust).
1.69 "Foreign Subsidiary" shall mean any direct or indirect subsidiary of
Parent organized in a jurisdiction other than the United States of America, a
state thereof, the District of Columbia, or Puerto Rico.
1.70 "FSC" shall mean Fashion Service Corp., a Delaware corporation and its
successors and assigns.
1.71 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.18 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Agent prior to
the date hereof.
1.72 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.73 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.74 "Inactive Subsidiaries" shall mean, individually and collectively, the
Subsidiaries that do not operate a Retail Store and which have no material
assets, as of the date hereof (all of which are more particularly described on
Omnibus Schedule 1) and those Subsidiaries which become Inactive Subsidiaries
after the date hereof as permitted under the terms of this Agreement.
1.75 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the
15
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances or similar documents or instruments
issued for such Person's account; and (g) all indebtedness of such Person in
respect of indebtedness of another Person for borrowed money or indebtedness of
another Person otherwise described in this definition which is secured by any
consensual Lien, on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time, provided, that for the purposes hereof, to the
-------- ----
extent such Indebtedness referred to in this clause (g) is non-recourse to such
Person, the amount of such Indebtedness shall not be deemed to exceed the lesser
of (i) the principal amount of such Indebtedness or (ii the value of asset
securing such Indebtedness and (h) CS Securitization Undertakings arising in
connection with Qualified Securitization Transactions.
1.76 "Indiana Personal Property" shall mean the conveyors, systems and
other equipment and fixtures used in connection with the operation of, or
attached or affixed to, the Indiana Real Property.
1.77 "Indiana Real Property" shall mean the Real Property owned by FB
Distro, Inc., located in Greencastle, Indiana and which as of the Closing Date
is subject to a Mortgage.
1.78 "Indiana Real Property Availability" shall mean the amount equal to
$5,282,500, as reduced effective as of the first day of each month commencing
September by an amount equal to $88,041.67; which Indiana Real Property
Availability shall be reduced to zero upon the occurrence of a refinancing
transaction of such Indiana Real Property described in Section 9.8(l) hereof or
Section 9.21 hereof.
1.79 "Insolvency Proceeding" shall mean, as to any Person, any of the
following: (i) any case or proceeding with respect to such Person under the
U.S. Bankruptcy Code or any other Federal or State bankruptcy, insolvency,
reorganization or other law affecting creditors' rights or any other or similar
proceedings seeking any stay, reorganization, arrangement, composition or
readjustment of the obligations and indebtedness of such Person or (a) any
proceeding seeking the appointment of any trustee, receiver, liquidator,
custodian or other insolvency official with
16
similar powers with respect to such Person or a material portion of its assets
or (b) any proceedings for liquidation, dissolution or other winding up of the
business of such Person or (c) any assignment for the benefit of creditors or
any marshaling of assets of such Person.
1.80 "Insolvency Threshold Amount" shall mean, as of the date of the
commencement of any Voluntary Proceeding or Involuntary Proceeding, as the case
may be, that the fair market value of the assets of the Person(s) subject to the
Voluntary Proceeding or Involuntary Proceeding, as the case may be, is equal to
or greater than (a) $1,000,000, in each individual instance, or (b) $3,000,000,
in the aggregate, for all such instances. In calculating the Insolvency
Threshold Amount, only the assets or properties of the Person(s) subject to the
Voluntary Proceeding or Involuntary Proceeding, as the case may be, shall be
included in the calculation unless Agent or Required Term Loan Lenders
determines, in its or their good faith discretion, that there is a reasonable
likelihood that the Voluntary Proceeding or Involuntary Proceeding, as the case
may be, may be successfully extended to include Obligors, or their assets or
properties, in which case the assets or properties of such others included in
such proceeding also shall be included for the purposes of making the
calculation.
1.81 "Intellectual Property" shall mean Borrower's now owned and hereafter
arising or acquired: patents, patent rights, patent applications, copyrights,
works which are the subject matter of copyrights, copyright registrations,
trademarks, trade names, trade styles, trademark and service ▇▇▇▇ applications,
and licenses and rights to use any of the foregoing; all extensions, renewals,
reissues, divisions, continuations, and continuations-in-part of any of the
foregoing; all rights to ▇▇▇ for past, present and future infringement of any of
the foregoing; inventions, trade secrets, formulae, processes, compounds,
drawings, designs, blueprints, surveys, reports, manuals, and operating
standards; goodwill; customer and other lists in whatever form maintained; and
domain names and domain name registrations, trade secret rights, copyright
rights, rights in works of authorship, and contract rights relating to computer
software programs, in whatever form created or maintained.
1.82 "Interest Expense" shall mean, for any period, as to any Person and
its Subsidiaries, all of the following as determined in accordance with GAAP,
total interest expense, whether paid or accrued (including the interest
component of Capital Leases for such period), including, without limitation, all
bank fees, commissions, discounts and other fees and charges owed with respect
to letters of credit, banker's acceptances or similar instruments.
1.83 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrowers' Agent
may elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrowers'
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Agent may not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.84 "Interest Rate" shall mean
(a) as to Revolving Loans:
17
(i) Subject to clause (ii) of this definition below:
(A) as to Prime Rate Loans, a rate equal to the Applicable
Margin on a per annum basis in excess of the Prime Rate,
(B) as to Eurodollar Rate Loans, a rate equal to the
Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate
(in each case, based on the Eurodollar Rate applicable for the Interest Period
selected by Borrowers' Agent as in effect three (3) Business Days after the date
of receipt by Agent of the request of Borrowers' Agent for such Eurodollar Rate
Loans in accordance with the terms hereof, whether such rate is higher or lower
than any rate previously quoted to Borrower's Agent); and
(ii) notwithstanding anything to the contrary contained in clause
(a)(i) of this definition, the Applicable Margin otherwise used to calculate the
Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall be the
highest percentage set forth in the definition of the term Applicable Margin for
each category of Loans (without regard to the amount of Quarterly Average Excess
and Suppressed Availability or the Leverage Ratio) plus two (2%) percent per
annum, at Agent's option, after notice to Borrowers' Agent, (A) for the period
(1) from and after the effective date of termination or non-renewal hereof until
Agent and Revolving Loan Lenders have received full and final payment of all
outstanding and unpaid Obligations arising pursuant to the Revolving Loans which
are not contingent and cash collateral in the amounts and on the terms required
under Section 13.1 hereof for contingent Obligations (notwithstanding entry of a
judgment against Borrower) and (2) from and after the date of the occurrence of
an Event of Default for so long as such Event of Default is continuing, and (B)
on Revolving Loans to Borrowers at any time outstanding in excess of the
Borrowing Base (whether or not such excess(es) arise or are made with or without
Agent's or any Lender's knowledge or consent and whether made before or after an
Event of Default but only to the extent of such excess); and
(b) as to the Term Loan:
(i) subject to clause(b)(ii) below a rate equal to four (4%)
percent per annum in excess of the Prime Rate, subject to increase or decrease
in the Prime Rate, effective as of the first day of the month after any such
change occurs; provided, that, notwithstanding any increases or decreases in the
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Prime Rate the Interest Rate applicable to the Term Loan shall never be less
than eleven and one-half (11 1/2%) percent per annum or, prior to an Event of
Default, greater than thirteen (13%) percent per annum, and
(ii) notwithstanding anything to the contrary contained in clause
(b)(i) of this definition, the Interest Rate applicable to the Term Loan shall
mean three (3%) percent above the highest rate otherwise applicable under
Section 1.84(b)(i) above, without notice, either (A) for the period on and after
the date of termination or non-renewal hereof until such time as all Obligations
arising pursuant to the Term Loan are paid and satisfied in full in immediately
available funds, or (B) for the period from and after the date of the occurrence
of any Event of Default, and for so long as such Event of Default is continuing.
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1.85 "Inventory" shall have the meaning given to such term in the UCC and
also include, without limitation, all of each Borrower's and each Retail Store
Subsidiary's now owned and hereafter existing or acquired goods, wherever
located, which (a) are held by any of Borrowers or Retail Store Subsidiaries for
sale or lease or to be furnished under a contract of service; (b) are furnished
by any of Borrowers or Retail Store Subsidiaries under a contract of service; or
(c) consist of raw materials, work in process, finished goods or materials used
or consumed in the business of any of Borrowers or Retail Store Subsidiaries.
1.86 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or Obligor and any securities intermediary, commodity intermediary or
other person who has custody, control or possession of any investment property
of such Borrower or Obligor acknowledging that such securities intermediary,
commodity intermediary or other person has custody, control or possession of
such investment property on behalf of Agent, that it will comply with
entitlement orders originated by Agent with respect to such investment property,
or other instructions of Agent, or (as the case may be) apply any value
distributed on account of any commodity contract as directed by Agent, in each
case, without the further consent of such Borrower or Obligor and including such
other terms and conditions as Agent may require, provided, that, no such
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agreement shall be required with respect to any securities intermediary,
commodity intermediary or other person who has custody, control or possession of
any investment property of specifically and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of any Borrower's or Obligor's salaried employees or property held in trust for
the benefit of an employee or any unaffiliated third party.
1.87 "Involuntary Proceeding" shall have the meaning set forth in Section
10.1(g) hereof.
1.88 "Lenders" shall mean the financial institutions and other Persons who
are signatories hereto as Lenders and other Persons made a party to this
Agreement as a Lender in accordance with Section 13.8 hereof, and their
respective successors and assigns; sometimes being referred to herein
individually as a "Lender".
1.89 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties, including, without limitation, the
Additional L/C Accommodations, (a) which are from time to time issued or opened
by Agent or any Revolving Loan Lender for the account of any of Borrowers or any
Obligor or any Additional L/C Debtor or (b) with respect to which Agent and
Revolving Loan Lenders have agreed to indemnify the issuer or guaranteed to the
issuer the performance by any of Borrowers or any Obligor or any Additional L/C
Debtor of its obligations to such issuer (including, without limitation, the
Existing Letters of Credit).
1.90 "Leverage Ratio" shall mean, at the end of any fiscal quarter, the
ratio computed for the period consisting of four (4) consecutive fiscal quarters
ended on such date of:
(a) the outstanding principal amount of Revolving Loans and the Term
Loan outstanding as of the last day of such period; to
19
(b) EBITDA of Parent and its Subsidiaries for such period.
1.91 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.92 "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance (including, but
not limited to, easements, rights of way and the like), lien (statutory or
other), security agreement or transfer intended as security, including without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease or any financing lease having
substantially the same economic effect as any of the foregoing.
1.93 "Loans" shall mean, collectively, the Revolving Loans and the Term
Loan.
1.94 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance, operations or prospects of
Borrowers and Obligors, taken as a whole, or (b) the legality, validity or
enforceability of (i) this Agreement or (ii any of the other Financing
Agreements (except to the extent such illegality, invalidity or unenforceability
of such Financing Agreement (other than this Agreement) would have an effect on
the transactions contemplated herein that is immaterial or de minimis in the
good faith determination of Agent); (c) the legality, validity, enforceability,
perfection or priority of the Liens of Agent upon the Collateral (except to the
extent such illegality, invalidity or unenforceability would have an effect on
the Liens of the Agent upon the Collateral that is immaterial or de minimis in
the good faith determination of Agent); (d) the Collateral or its value; (e) the
ability of Borrowers to repay the Obligations or of Borrowers to perform their
respective obligations under this Agreement or any of the other Financing
Agreements, in either case, taken as a whole; or (f) the ability of Agent or any
Lender to enforce the Obligations or realize upon the Collateral or otherwise
with respect to the rights and remedies of Agent and Lenders under this
Agreement or any of the other Financing Agreements (taken as a whole).
1.95 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements and purchase orders for merchandise),
written or oral, of any Borrower or Obligor involving monetary liability of or
to any Person in an amount in excess of $9,500,000 in any fiscal year and (b)
any other contract or other agreement (other than the Financing Agreements),
whether written or oral, to which any Borrower or Obligor is a party as to which
the breach, nonperformance, cancellation or failure to renew by any party
thereto would have a Material Adverse Effect.
1.96 "Maximum Credit" shall mean $375,000,000.
1.97 "Minimum Cash Surrender Value" shall have the meaning set forth in
Section 9.26 hereof.
1.98 "Mortgages" shall mean, individually and collectively, each of the
following: (a) the Mortgage and Security Agreement, dated of even date
herewith, by FB Distro, Inc. in favor of Agent with respect to the Real Property
and related assets of FB Distro, Inc. located in
20
Greencastle, Indiana, (b) the Deed of Trust and Security Agreement, dated of
even date herewith, by Columbia #2589 Development Co., Inc. in favor of Agent
with respect to the Real Property and related assets of Columbia #2589
Development Co., Inc. located in Maury County, Tennessee, (c) the Open End
Mortgage and Security Agreement, dated of even date herewith, by Winks Lane,
Inc. in favor of Agent with respect to the Real Property and related assets of
Winks Lane, Inc. located in Bensalem, Pennsylvania, (d) the Deed of Trust,
Security Agreement and Assignment of Rents and Leases, dated of even date
herewith, by Festus #2733 Development Co., Inc. in favor of Agent with respect
to the Real Property and related assets of Festus #2733 Development Co., Inc.
located in Festus, Missouri, (e) the Deed of Trust, Security Agreement and
Assignment of Rents and Leases, dated of even date herewith, by Sikeston #2736
Development Company., Inc. in favor of Agent with respect to the Real Property
and related assets of Sikeston #2736 Development Company., Inc. located in
Sikeston, Missouri, (f) the Deed of Trust, Security Agreement and Assignment of
Rents and Leases, dated of even date herewith, by Rolla #2685 Development Co.,
Inc. in favor of Agent with respect to the Real Property and related assets of
Rolla #2685 Development Co., Inc. located in Rolla, Missouri, (g) the Mortgage,
Security Agreement and Fixture Filing, dated of even date herewith, by Macomb
#2619 Development Co., Inc. in favor of Agent with respect to the Real Property
and related assets of Macomb #2619 Development Co., Inc. located in Macomb,
Illinois and (h) the Open End Mortgage and Security Agreement, dated of even
date herewith, by Winks Lane, Inc. in favor of Agent with respect to the Real
Property and related assets of Winks Lane, Inc. located in Philadelphia,
Pennsylvania.
1.99 "Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current plan
year or the immediately preceding six (6) plan years contributed to by any
Borrower or any ERISA Affiliate.
1.100 "NBC Agreements" shall mean, collectively, the Loan Agreement dated
February 17, 1998, as amended January 29, 1999 and as further amended May 29,
1999 by and among Catherines, Catherines, Inc. and National Bank of Commerce
and all agreements, documents and instruments at any time executed and/or
delivered by Borrowers, any of Obligors or any other person with, to or in favor
of National Bank of Commerce in connection therewith or related thereto, as all
of the foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.101 "Net Recovery Cost Percentage" shall mean the fraction, expressed as
a percentage, the numerator of which is the amount equal to the recovery on the
aggregate amount of the Inventory at such time on a "going out of business sale"
basis as set forth in the most recent acceptable appraisal of Inventory received
by Agent in accordance with Section 7.3, net of operating expenses, liquidation
expenses and commissions, and the denominator of which is the original Cost of
the aggregate amount of the Inventory subject to appraisal.
1.102 "Obligations" shall mean (a) any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and Indebtedness of every
kind, nature and description owing by Borrowers, Retail Store Subsidiaries,
other Obligors or Additional L/C Debtors to Agent or any Lender and/or of their
Affiliates, including principal, interest, charges, fees, costs and
21
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, arising under this Agreement and the other Financing Agreements,
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 any or all of Borrowers, any Retail
Store Subsidiary or other Obligor or Additional L/C Debtor under the United
States Bankruptcy Code or any similar statute (including, without limitation,
the payment of interest and other amounts which would accrue and become due but
for the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and (b) for purposes only of
Section 5.1 hereof, any and all obligations, liabilities and indebtedness of any
kind, nature and description owing by a Borrower to any Lender or any Affiliate
of Agent (including First Union National Bank) arising under or in connection
with a swap agreement between such Borrower and such Person, provided, that, (i)
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in no event shall the amount of such obligations, liabilities and indebtedness
secured by the Collateral pursuant hereto or any of the other Financing
Agreements in the aggregate outstanding at any time exceed the amount of the
Reserve established with respect thereto as in effect at such time, and (ii)
Agent shall have entered into an agreement, in form and substance satisfactory
to Agent, with such Person that is a counterparty to such swap agreement, as
acknowledged and agreed to by Borrowers, providing for the delivery to Agent by
such counterparty of information with respect to the amount of such
indebtedness, obligations and liabilities and providing for the other rights of
such Person pursuant hereto.
1.103 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, including, without
limitation, each of the Retail Store Subsidiaries, C.S.A.C., Inc., C.S.F., Inc.,
C.S.I.C., Inc., FB Clothing, Inc., Charm-Fin Stores, Inc., Fashion Bug of
California, Inc., but not including any of Borrowers, the Additional L/C Debtors
or the Excluded Subsidiaries.
1.104 "Obligor Collateral" shall mean, as to each Obligor, all of its
property pledged to Agent pursuant to any of the Financing Agreements.
1.105 "Originator" shall mean Spirit of America National Bank and its
successors and assigns.
1.106 "Originator Accounts" shall mean revolving credit card accounts
maintained by the Originator, including accounts that have been written off as
uncollectible.
1.107 "Other Taxes" shall mean any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any of the
other Financing Agreements.
1.108 "Over-Advance" shall have the meaning set forth in Section 12.8
hereof.
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1.109 "Participant" shall mean any financial institution that acquires and
holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
13.8 of this Agreement governing participations.
1.110 "Participant Register" has the meaning specified therefor in Section
13.8(g)(ii).
1.111 "Payment Account" shall have the meaning set forth in Section
6.3(a)(i) hereof.
1.112 "Pennsylvania Real Property" shall mean the Real Property owned by
Winks Lane, Inc. located in Bensalem, Pennsylvania and which, as of the Closing
Date, is subject to a Mortgage.
1.113 "Pennsylvania Real Property Availability" shall mean the amount equal
to $4,000,000, as reduced effective as of the first day of each month commencing
September by an amount equal to $66,666.67; which Pennsylvania Real Property
Availability shall be reduced to zero upon the occurrence of a refinancing
transaction of the Pennsylvania Real Property described in Section 9.8(l) hereof
or Section 9.21 hereof.
1.114 "Permits" shall have the meaning set forth in Section 8.7 (b).
1.115 "Permitted Liens" shall mean those Liens permitted to be incurred by
Borrowers and Obligors in accordance with Section 9.8 hereof.
1.116 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.117 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) subject to Title IV of ERISA which any Borrower sponsors, maintains, or
to which it makes, is making, or is obligated to make contributions, other than
a Multiemployer Plan.
1.118 "Preferred Stock" means with respect to any Person, any class or
series of Capital Stock of such Person that is entitled, upon distribution of
assets of such Person, whether by dividend or liquidation, to a preference over
another class or series of Capital Stock of such Person.
1.119 "Prohibited Preferred Stock" means any Preferred Stock that by its
terms is mandatorily redeemable or subject to any other payment obligation
(including any obligation to pay dividends, other than dividends of shares of
Preferred Stock of the same class and series payable in kind or dividends of
shares of common stock) on or before a date that is more than 2 years after the
Renewal Date, or, on or before the date that is more than 2 years after the
Renewal Date, is redeemable at the option of the holder thereof for cash or
assets or securities (other than
23
distributions in kind of shares of Preferred Stock of the same class and series
or of shares of common stock).
1.120 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.121 "Prime Rate Loans" shall mean, any Revolving Loans or portion thereof
on which interest is payable based on the Prime Rate in accordance with the
terms hereof.
1.122 "Proceeds" shall mean all proceeds as defined in the Uniform
Commercial Code of New York or other applicable law, and all other profits,
rentals, or receipts, in whatever form, arising from the collection, sale,
lease, or other disposition of, or realization upon, the Collateral, or a
specified portion thereof, including, without limitation, any insurance proceeds
with respect thereto.
1.123 "Pro Rata Share" shall mean (a) with respect to references to all
Lenders, as to any Lender, (i) prior to the making of the Term Loan, the
fraction (expressed as a percentage) the numerator of which is such Lender's
Commitment and the denominator of which is the aggregate amount of all of the
Commitments of Lenders, as adjusted from time to time in accordance with the
provisions of Section 13.8 hereof and (ii on or after the making of the Term
Loan, the fraction (expressed as a percentage) the numerator of which is such
Lender's Revolving Loan Commitment plus such Lender's outstanding Term Loans and
the denominator of which is the aggregate amount of all of the Revolving Loan
Commitments and all of the outstanding Term Loans; provided, that, if the
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Commitments have been terminated, the numerator shall be the unpaid amount of
such Lender's Loans and its interest in the Letter of Credit Accommodations and
the denominator shall be the aggregate amount of all unpaid Loans and Letter of
Credit Accommodations, (b) with respect to references to Revolving Loan Lenders,
as to any Revolving Loan Lender, the fraction (expressed as a percentage) the
numerator of which is such Revolving Loan Lender's Revolving Loan Commitment and
the denominator of which is the aggregate amount of all of the Revolving Loan
Commitments of Revolving Loan Lenders, as adjusted from time to time in
accordance with the provisions of Section 13.8 hereof; provided, that, if the
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Commitments have been terminated, the numerator shall be the unpaid amount of
such Revolving Loan Lender's Revolving Loans and its interest in the Letter of
Credit Accommodations and the denominator shall be the aggregate amount of all
unpaid Loans and Letter of Credit Accommodations, and (c) with respect to
references only to Term Loan Lenders, as to any Term Loan Lender, (i) prior to
the making of the Term Loan, the fraction (expressed as a percentage) the
numerator of which is such Term Loan Lender's Term Loan Commitment and the
denominator of which is the aggregate amount of all of the Term Loan
Commitments and (ii) on or after the making of the Term Loan, the fraction
(expressed as a percentage) the numerator of which is such Term Loan Lender's
Term Loans and the denominator of which is the aggregate amount of all of the
Term Loans.
1.124 "Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, Provincial, county or
local, and whether foreign
24
or domestic, that are paid or payable by any Person in respect of any period in
accordance with GAAP.
1.125 "Purchase Agreements" shall mean, individually and collectively, the
Stock Purchase Agreement, dated as of July 9, 2001, among Charming Shoppes,
Inc., Venice Acquisition Corporation, Seller and The Limited, together with
assumption agreements and such other instruments of transfer as are referred to
therein and all side letters with respect thereto, and all agreements, documents
and instruments executed and/or delivered in connection therewith, as all of the
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced; provided, that, the term "Purchase
-------- ----
Agreements" as used herein shall not include any of the "Financing Agreements"
as such term is defined herein.
1.126 "Purchase Agreement Reserve" shall mean a Reserve established by
Agent on the date hereof in an amount equal to the sum of (a) thirty-five (35%)
percent of the aggregate amount of the outstanding Purchase Agreement Inventory
Letters of Credit plus (b) thirty-five (35%) percent of the amount of freight,
taxes, duty and other amounts which Agent estimates must be paid in connection
with the Inventory purchased pursuant to such Purchase Agreement Inventory
Letters of Credit; the amount of such reserve shall be $8,329,000. The Purchase
Agreement Reserve shall be reduced each time Agent receives evidence that a
Purchase Agreement Inventory Letter of Credit has been drawn upon and honored by
the issuer, by an amount equal to the sum of (i) thirty-five (35%) percent of
the amount of such draw plus (ii thirty-five (35%) percent of the amount of the
estimated freight, duty and other amounts related thereto.
1.127 "Purchase Agreement Inventory Letters of Credit" shall mean the
letters of credit pursuant to which LB will purchase Inventory, in respect of
which Parent is required to reimburse The Limited, which letters of credit are
listed on 1.127 hereto.
1.128 "Purchased Stock" shall mean all of the issued and outstanding
Capital Stock of LBH, Inc. acquired by Borrowers from Seller pursuant to the
Purchase Agreements.
1.129 "Qualified Securitization Transaction" means (x) the Existing
Securitization Transactions, and (y) any transaction or series of transactions
that may be entered into by any Financing Subsidiary pursuant to which any
Financing Subsidiary may sell, convey or otherwise transfer to another Financing
Subsidiary and any other Person, or may grant a security interest in, any
Securitization Program Assets (whether now existing or arising in the future);
provided that:
--------
(a) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of a Financing Subsidiary or Special Purpose Vehicle
(i) is guaranteed by any Obligor or Borrower (excluding guarantees of
obligations by CS Delaware or Parent pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates any Borrower or Obligor (other
than CS Delaware or Parent pursuant to Standard Securitization Undertakings) or
(iii) subjects any property or asset of any Borrower or Obligor, directly or
indirectly, contingently or otherwise, to the satisfaction of obligations
incurred in such transactions, other than CS Delaware or Parent pursuant to
Standard Securitization Undertakings or Standard Merchant Charges.
25
(b) the Borrowers and Obligors do not have any obligation to maintain
or preserve the financial condition of a Financing Subsidiary or Special Purpose
Vehicle or cause such entity to achieve certain levels of operating results,
(c) Securitized Receivables are not subject to any Liens in favor of
any Persons other than holders of Securitization Program Obligations arising
under such Qualified Securitization Transaction,
(d) after giving effect thereto, the aggregate outstanding principal
amount required to be paid to holders of Securitization Program Obligations
(including the Financing Subsidiaries) by CS Delaware or Parent whether
characterized as Standard Securitization Undertakings or otherwise (but
excluding Standard Merchant Charges) shall not exceed the amounts and other
limitations set forth in Section 9.10(k), and
(e) after giving effect thereto, the aggregate amount required to be
invested in the Qualified Securitization Transactions by the Financing
Subsidiaries, as credit enhancement for third-party investment therein, shall
not exceed the aggregate amount so required to be invested by the Financing
Subsidiaries under the Existing Securitization Transactions as in effect on the
date hereof (assuming for this purpose that all commitments under the Existing
Securitization Transactions are fully funded).
1.130 "Quarterly Average Excess and Suppressed Availability" shall mean, at
any time, the daily average of the amount of the Excess and Suppressed
Availability for the immediately preceding fiscal quarter as calculated by Agent
in good faith.
1.131 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrowers and Obligors, including leasehold interests (except for
leasehold interests of any Retail Store Subsidiary in any Retail Store
location), together with all buildings, structures, and other improvements
located thereon and all licenses, easements and appurtenances relating thereto,
wherever located.
1.132 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of each Borrower: (a) all Accounts; (b) all Credit
Card Receivables; (c) all amounts at any time payable to any Borrower in respect
of the sale or other disposition by any Borrower of any Account, other
Receivable or other obligation for the payment of money; (d) all interest, fees,
late charges, penalties, collection fees and other amounts due or to become due
or otherwise payable in connection with any Account or any Credit Card
Receivables; (e) payment intangibles of any Borrower and other contract rights,
chattel paper, instruments, notes and other forms of obligations owing to any
Borrower, whether from the sale and lease of goods or other property, licensing
of any property (including General Intangibles), rendition of services or from
loans or advances by such Borrower to or for the benefit of any third person
(including loans or advances to any Affiliates or Subsidiaries of such Borrower)
or otherwise associated with any Accounts, Inventory, other Receivables or
General Intangibles (including, without limitation, bills of lading, warehouse
receipts and other documents of title or shipping documents); (f) all
26
monies, securities and other investment property, credit balances, deposits,
deposit accounts and other property and the proceeds thereof, now or hereafter
held or received or held by, or in transit to, Lender or any of its Affiliates
or participants or held or received by any other bank, other financial
institution or other person, whether for safekeeping, pledge, custody,
transmission, collection or otherwise; (g) deposits (general or special) and
balances at any bank or other financial institution or other person; (h) all
right, title and interest in, to and in respect of the foregoing, including,
without limitation, all goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing, any of
same, including, without limitation, all returned, reclaimed or repossessed
Inventory; (i) all right, title and interest, and all enforcement and other
rights, remedies, and security and liens, in, to and in respect of any of the
foregoing, including, without limitation, rights of stoppage in transit,
replevin, repossession, sequestration and reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, guaranties, or other
contracts of suretyship with respect thereto, or deposits or other security for
the obligation of any account debtor; and (j) credit and other insurance with
respect to any Receivables or Inventory.
1.133 "Records" shall mean all of any Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of such Borrower
with respect to the foregoing maintained with or by any other person).
1.134 "Reference Bank" shall mean First Union National Bank, or such other
bank as Agent may from time to time designate.
1.135 "Refinancing Indebtedness" shall have the meaning set forth in
Section 9.9 hereof.
1.136 "Refinancing Mortgages" shall have the meaning set forth in Section
9.8 hereof.
1.137 "Register" shall have the meaning set forth in Section 13.8 hereof.
1.138 "Registered Term Loan" has the meaning specified therefor in Section
2.3(c).
1.139 "Registered Term Note" has the meaning specified therefor in Section
2.3(c).
1.140 "Renewal Date" shall have the meaning set forth in Section 13.1
hereof.
1.141 "Required Lenders" shall mean, at any time, those Lenders whose Pro
Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more.
1.142 "Required Revolving Loan Lenders" shall mean, at any time, those
Revolving Loan Lenders whose Pro Rata Shares with respect to the Revolving Loan
Commitment aggregate sixty-six and two-thirds (66 2/3%) percent or more.
27
1.143 "Required Term Loan Lenders" shall mean, at any time, those Term Loan
Lenders whose Pro Rata Shares with respect to Term Loans aggregate sixty-six and
two-thirds (66 2/3%) percent or more.
1.144 "Reserves" shall mean as of any date of determination, such amounts
as Agent may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to any Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Agent in good faith, adversely affect, or have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets or
business of Borrowers and Obligors, taken as a whole or (ii) the security
interests and other rights of Agent in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Agent's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or Obligor to Agent is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect outstanding
Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in
respect of any state of facts which Agent determines in good faith constitutes
an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default. Without limiting any other rights or remedies of Agent
under this Agreement or any of the other Financing Agreements with respect to
the establishment of Reserves or otherwise, Agent may establish and revise
Reserves to reflect any of the following: (i) inventory shrinkage; (ii) reserves
in respect of markdowns; (ii) cost variances; (iv) the aggregate amount of
deposits, if any, received by any Borrower or Retail Store Subsidiary from its
retail customers in respect of unfilled orders for merchandise; (v) amounts due
or to become due in respect of sales, use and/or withholding taxes; (vi any
rental payments, service charges or other amounts due or to become due to
owners, lessors or third party operators of real or personal property to the
extent Inventory or Records are located in or on property or such Records are
needed to monitor or otherwise deal with the Collateral; (vi amounts owing by
Borrowers to Credit Card Issuers or Credit Card Processors in connection with
the Credit Card Agreements; (vi increase in the number of days of the turnover
of Inventory or a deterioration in its nature, quality or mix (but only to the
extent not addressed by the lending formulas in a manner satisfactory to Agent);
and (ix) variances between the perpetual inventory records of Borrowers and the
results of the test counts of Inventory conducted by Agent with respect thereto
in excess of the percentage acceptable to Agent, (x) to reflect the amount of
duty, freight, and taxes arising in connection with imported goods, (xi the
Purchase Agreement Reserve, (xii) in respect of the obligations, liabilities or
indebtedness of Borrowers of any kind, nature or description owing by a Borrower
to any Affiliate of Agent (including First Union National Bank) or any Lender
arising under or in connection with any swap agreement of any Borrower with such
person, (xiii) amounts paid to Borrowers in respect of Company Owned Life
Insurance Policies which cause the aggregate cash surrender value of Company
Owned Life Insurance Policies to be less than the Minimum Cash Surrender Value,
(xiv) to reflect amounts paid to Agent in accordance with Section 9.7(b)(ii)(A)
and (xv) to reflect the amount of any Lien in accordance with Section 9.8(b)
hereof. To the extent Agent may revise the lending formulas used to determine
the Borrowing Base or establish new criteria or revise existing criteria for
Eligible Inventory so as to address any circumstances, condition, event
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or contingency in a manner satisfactory to Agent, Agent shall not establish a
Reserve for the same purpose. The amount of any Reserve established by Agent
shall have a reasonable relationship to the event, condition or other matter
which is the basis for such Reserve as determined by Agent in good faith.
1.145 "Retail Sales Price" shall mean the current ticketed sales price in
the Retail Stores, net of markdowns from the original retail sales price with
respect thereto, for the types, categories and styles of inventory included in
the Eligible Inventory of Borrowers and the Retail Store Subsidiaries.
1.146 "Retail Stores" shall mean the retail stores which are now or
hereafter operated by US Subsidiaries of Parent and which sell Inventory.
1.147 "Retail Store Subsidiary" shall mean a US Subsidiary of Parent which
now or hereafter owns a Retail Store or which is now or hereafter organized to
operate a Retail Store in the future but shall not include any US Subsidiaries
which are Inactive Subsidiaries.
1.148 "Revolving Loan Commitment" shall mean, at any time, as to each
Lender, the principal amount designated as its Revolving Loan Commitment set
forth on Exhibit C or on Schedule 1 to the Assignment and Acceptance Agreement
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 13.8 hereof, as the same may be adjusted from time to time
in accordance with the terms hereof; sometimes being collectively referred to
herein as "Revolving Loan Commitments".
1.149 "Revolving Loan Lenders" shall mean, collectively, the Lenders with a
Revolving Credit Commitment; sometimes being referred to herein individually as
a "Revolving Loan Lender".
1.150 "Revolving Loan Limit" shall mean $300,000,000.
1.151 "Revolving Loans" shall mean the loans now or hereafter made by or on
behalf of any Lender or by Agent for the ratable account of any Lender on a
revolving basis pursuant to the Credit Facility (involving advances, repayments
and readvances) as set forth in Sections 2.1 and 2.2 hereof.
1.152 "Secured Funded Debt Ratio" shall mean, on any date of determination,
the ratio of (a) the Total Secured Debt of Parent and its Subsidiaries on such
date, to (b) the EBITDA of Parent and its Subsidiaries for the twelve (12) month
period ended as of the most recently completed fiscal month for which Borrowers
have delivered financial statements as required by Section 9.6(a)(i) hereof, all
as determined on a consolidated basis in accordance with GAAP.
1.153 "Securitization Documents" means (a) the Existing Securitization
Documents, (b) a receivables purchase agreement, pooling and servicing
agreement, credit agreement, agreements to acquire undivided interests or other
agreement to transfer, or create a security interest in, Securitization Program
Assets, in each case as amended, modified, supplemented or restated and
29
in effect from time to time entered into by a Financing Subsidiary or Special
Purpose Vehicle, (c) each other instrument, agreement and other document entered
into by a Financing Subsidiary or Special Purpose Vehicle relating to the
transactions contemplated by the items referred to in clause (a) or (b) above,
and (d) each Standard Securitization Undertaking made by CS Delaware or Parent
or Standard Merchant Charges relating to the transactions contemplated by the
items referred to in clause (a) or (b) above, in each case as amended, modified,
supplemented or restated and in effect from time to time.
1.154 "Securitization Program Assets" means (a) all Securitized
Receivables, (b) all Securitization Related Assets, and (c) all collections
(including recoveries) and other proceeds of the assets described in the
foregoing clauses.
1.155 "Securitization Program Obligations" means (a) notes, trust
certificates, undivided interests, partnership interests or other interests
representing the right to be paid a specified principal or hedge payment amount
from the Securitization Program Assets, and (b) related obligations of a
Financing Subsidiary or a Special Purpose Vehicle (including, without
limitation, rights in respect of interest or yield, breach of warranty claims
and expense reimbursement and indemnity provisions) and (c) obligations of CS
Delaware or Parent in connection with Standard Securitization Undertakings but
not Standard Merchant Charges.
1.156 "Securitized Receivables" means all rights (including rights to
payment) of the Originator or any other Financing Subsidiary in respect of
Originator Accounts, whether constituting finance charges, amounts billed in
respect of purchases of merchandise or services, credit insurance premiums,
rights to interchange, returned check or other charges, fees or other amounts.
1.157 "Securitization Related Assets" means (a) any rights, remedies,
powers and privileges with respect to the Securitized Receivables (including
rights in respect of Liens securing such Securitized Receivables and other
credit support in respect of such Securitized Receivables), (b) any proceeds of
such Securitized Receivables and any lockboxes or accounts in which such
proceeds are deposited, (c) spread accounts of the Financing Subsidiaries or
Special Purpose Vehicles and other similar accounts (and any amounts on deposit
therein) established in connection with a Qualified Securitization Transaction,
(d) any warranty, indemnity, dilution and other intercompany claim arising out
of the Securitization Documents and (e) other assets of the Financing
Subsidiaries or Special Purpose Vehicles which are customarily transferred or in
respect of which Liens are customarily granted in connection with asset
securitization transactions involving accounts receivable.
1.158 "Seller" shall mean LFAS, Inc., a Delaware corporation and its
successors and assigns.
1.159 "Single Asset Insolvency Event" shall mean an Involuntary Proceeding
or a Voluntary Proceeding involving a Single Asset Retail Store Subsidiary that
(a) does not exceed the Insolvency Threshold Amount and (b) in respect of which
Agent has received, within three (3) Business Days of the commencement of any
such Voluntary Proceeding or Involuntary
30
Proceeding, a notice from Borrowers' Agent of the occurrence of such event and
requesting that such event not be deemed an Event of Default under the Financing
Agreements.
1.160 "Single Asset Retail Store Subsidiary" shall mean (a) a single
Retail Store Subsidiary which operates no more than one Retail Store or (b) a
single Inactive Subsidiary.
1.161 "Special Agent Advances" shall have the meaning set forth in Section
12.11 hereof.
1.162 "Special Purpose Vehicle" shall mean a trust, partnership or other
special purpose Person established by a Financing Subsidiary to implement a
Qualified Securitization Transaction.
1.163 "Standard Merchant Charges" shall mean all obligations of any
Borrower or Obligor to Originator or any Financing Subsidiary pursuant to Credit
Card Agreements for (a) the amount of sales which (i) were calculated in respect
of merchandise refused or returned by a customer of such Borrower or Obligor
thereunder, (ii) were reduced by any rebate, refund, charge-back or adjustment,
(iii) were created as a result of a fraudulent or counterfeit charge and (b)
fees payable to Originator or any Financing Subsidiary, where Originator or any
Financing Subsidiary is the Credit Card Processor or Credit Card Issuer,
provided, that, such fees do not exceed three (3%) percent of any purchase made
-------- ----
by any holder of a Fashion Bug Card or Co-Branded Card.
1.164 "Standard Securitization Undertakings" means (a) representations,
warranties, covenants and indemnities entered into by any Financing Subsidiary
which are reasonably customary in a credit card origination, securitization or
funding transactions, (b) representations, warranties, covenants and indemnities
entered into by the Borrowers and Obligors which are customary to be given by
merchant or retailer to a Person that provides credit to the customers of such
merchant or retailer, including liability for Credits (as defined in the C.D.
Credit Plan Agreement), (c) representations, warranties, covenants and
indemnities given by CS Delaware or Parent relating to the accuracy or
completeness of representations, warranties and other information provided to
holders of Securitization Program Obligations, and (d) CS Securitization
Undertakings, provided, that, the term "Standard Securitization Undertakings"
-------- ----
shall not include (i) Standard Merchant Charges, or (ii) covenants by Obligors
or Borrowers to (A) grant Liens on any of their assets or (B) to require them to
support the obligations of Financing Subsidiaries in connection with any such
transactions other than pursuant to CS Securitization Undertakings as permitted
in this Agreement.
1.165 "Subordinated Note Indenture" shall mean the Indenture, dated as of
the date of issuance of the Subordinated Notes, between Parent and Trustee with
respect to the Subordinated Notes, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
31
1.166 "Subordinated Note Agreements" shall mean, individually and
collectively, the Subordinated Notes, the Subordinated Note Indenture and all
other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Parent or any other Borrower or any other person in
connection with the issuance of the Subordinated Notes, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.167 "Subordinated Notes" shall mean the unsecured 7.5% Convertible
Subordinated Notes due 2006 issued by Parent pursuant to the Subordinated Note
Indenture in the aggregate principal amount of up to $138,000,000, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.168 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
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 by such Person and/or
one or more subsidiaries of such Person.
1.169 "Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of any Lender, such taxes (including income
taxes, franchise taxes or capital taxes) as are imposed on or measured by such
Lender's net or gross income or capital by any jurisdiction (or any political
subdivision thereof).
1.170 "Term Loan" shall mean the term loan made by the Term Loan Lenders
as provided for in Section 2.3 hereof.
1.171 "Term Loan Amount" shall mean, as of any date of determination and
as to each Term Lender, the outstanding principal amount of the Term Loan held
by such Term Lender.
1.172 "Term Loan Commitment" shall mean, at any time, as to each Lender,
the principal amount designated as its Term Loan Commitment on Exhibit C hereto
or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of
Section 13.8 hereof, as the same may be adjusted from time to time in accordance
with the terms hereof; sometimes being collectively referred to herein as "Term
Loan Commitments".
1.173 "Term Loan Lenders" shall mean, individually and collectively, the
Lenders with a Term Loan Commitment or outstanding Term Loans.
1.174 "Term Loan Register" has the meaning specified therefor in Section
13.8(g).
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1.175 "The Limited" shall mean The Limited, Inc., a Delaware corporation
and its successors and assigns.
1.176 "Threshold Amount" shall mean, as of the date of determination, the
lesser of (a) the amount of a Lien, judgment, or claim under an agreement, as
applicable, or (b) the amount of the assets or properties that are the subject
of a Lien or are available to satisfy a judgment, or the breach of an agreement,
as applicable, do not exceed (i) $2,000,000, in each individual instance, or
(ii) $4,500,000, in the aggregate, for all such instances, whether involving the
same or other Persons. In calculating the Threshold Amount, only the assets or
properties of the Person(s) against whom the Lien has been filed or levied, are
judgment debtors, or are liable under the agreement, as applicable, shall be
included in the calculation, unless (A) the lienholder, judgment debtor or
claimant is attempting to establish liability against, other Borrowers, Obligors
or Subsidiaries of Parent, in addition to the Person against whom the lien has
been filed or levied, are judgement debtors or are liable under the applicable
agreement, as applicable and (B) Agent or Required Term Loan Lenders
determines, in its or their good faith discretion, that there is a reasonable
likelihood that the Lien, judgment, or liability may be successfully established
against other Borrowers or Obligors, or their assets or properties, in which
case the assets or properties of such others also shall be included for purposes
of making the calculation.
1.177 "Total Secured Debt" shall mean, on any date of determination, all
outstanding Indebtedness of Parent and its Subsidiaries for borrowed money,
issued and outstanding letters of credit, and Capital Leases, in each case,
which Indebtedness is secured by a Lien on any assets of Parent or any of its
Subsidiaries.
1.178 "Trade Financing Agreements" shall mean, individually and
collectively the following (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced), (a) the Trade
Financing Agreement [Security Agreement], dated of even date herewith, by and
among the Additional L/C Debtors (other than CS Insurance Limited) and Agent;
(b) the Letter of Credit Reimbursement Agreement, dated of even date herewith,
by and between CS Insurance Ltd. and Agent; and (c) all other agreements,
documents and instruments executed in connection with the foregoing.
1.179 "Trustee" shall mean First Union National Bank and its successors
and assigns, and any replacement trustee permitted pursuant to the terms and
conditions of the Subordinated Note Indenture.
1.180 "US Subsidiary" means a Subsidiary which is a corporation organized
under the laws of the United States of America or of any state of the United
States of America, the District of Columbia or Puerto Rico, except that such
term shall not include the Excluded Subsidiaries.
1.181 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York, and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time (except that terms used
herein which are defined in the Uniform Commercial Code as in effect in the
State of New York on the date hereof shall continue to have
33
the same meaning notwithstanding any replacement or amendment of such statute).
References to sections of the UCC shall be construed to also refer to any
successor sections.
1.182 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost or (b) market value, provided, that,
for purposes of the calculation of the Borrowing Base, (i) the Value of the
Inventory shall not include: (A) the portion of the Value of Inventory equal to
the profit earned by any Affiliate on the sale thereof to Borrower or (B) write-
ups or write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be determined in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.
1.183 "Voluntary Proceeding" shall have the meaning set forth in Section
10.1(h) hereof.
1.184 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.185 "Weighted Average to Maturity" shall mean when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the product obtained
by multiplying (i) the amount of each then outstanding installment, sinking
fund, serial maturity or other required payments of principal, including payment
at final maturity, in respect thereof, by (ii) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the making of
such payment.
SECTION 2. CREDIT FACILITIES
-----------------
2.1 Revolving Loans.
---------------
(a) Subject to and upon the terms and conditions contained herein,
each Revolving Loan Lender severally (and not jointly) agrees to fund its Pro
Rata Share of Revolving Loans to Borrowers from time to time in amounts
requested by Borrowers up to the amount outstanding at any time equal to the
lesser of: (i) the Borrowing Base at such time or (ii) the Revolving Loan Limit.
(b) Agent may, in its good faith discretion, from time to time, upon
not less than five (5) days prior notice to Borrowers' Agent, reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Agent
determines that: (i) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (ii) there is a decrease in the
Net Recovery Cost Percentage after the date hereof or (iii) the nature, quality
or mix of the Inventory has deteriorated and as to mix, such that the ratio of
any category of
34
Inventory to all Inventory has changed from the ratio in the appraisal of the
Inventory received by Agent prior to the date hereof. The amount of any decrease
in the lending formulas shall have a reasonable relationship to the event,
condition or circumstance which is the basis for such decrease as determined by
Agent in good faith. In determining whether to reduce the lending formula(s),
Agent may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Inventory or in establishing Reserves.
(c) Except in Agent's discretion, with the consent of all Revolving
Loan Lenders, the aggregate amount of the Revolving Loans and the Letter of
Credit Accommodations outstanding at any time shall not exceed the Revolving
Loan Limit. In the event that the outstanding amount of any component of the
Revolving Loans, or the aggregate amount of the outstanding Revolving Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(e) or the Revolving Loan Limit, as applicable, such event shall not limit,
waive or otherwise affect any rights of Agent or Lenders in that circumstance or
on any future occasions and Borrowers shall, upon demand by Agent, in its
discretion, or upon the direction of the Required Revolving Loan Lenders, which
may be made at any time or from time to time, repay to Agent the entire amount
of any such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
-------------------------------
(a) Subject to and upon the terms and conditions contained herein, at
the request of Borrowers' Agent, Agent agrees, for the ratable risk of each
Revolving Loan Lender according to its Pro Rata Share, to provide or arrange for
Letter of Credit Accommodations for the account of Borrowers or any Additional
L/C Debtor containing terms and conditions acceptable to Agent and the issuer
thereof. Any payments made by or on behalf of Agent or any Revolving Loan
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrowers pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Agent for the benefit of the Revolving Loan Lenders, a letter of
credit fee (i) at a rate equal to one and one-half (1 1/2%) percent per annum on
the daily outstanding balance of the Letter of Credit Accommodations in respect
of those Letter of Credit Accommodations used for the purpose of purchasing
Eligible Inventory and (ii) at a rate equal to two (2%) percent per annum on the
daily outstanding balance of the Letter of Credit Accommodations in respect of
those Letter of Credit Accommodations used for purposes other than those set
forth in Section 2.2 (b)(i) hereof (the rates set forth in clauses (i) and (ii)
hereof are referred to as the "Applicable L/C Fee Rates"), in each case for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, except that Borrowers shall pay to Agent
such applicable letter of credit fee, at Agent's option, without notice, at a
rate equal to two (2%) percent per annum in excess of the then Applicable L/C
Fee Rates on such daily outstanding balance for: (i) the period from and after
the date of termination or non-renewal hereof until Agent and Lenders have
received full and final payment of all Obligations (notwithstanding entry of a
judgment against
35
any Borrower) and (ii) the period from and after the date of the occurrence of
an Event of Default for so long as such Event of Default is continuing as
determined by Agent. Such letter of credit fees shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination or non-
renewal of this Agreement.
(c) Borrowers' Agent shall give Agent two (2) Business Days' prior
written notice (or such fewer days notice as is appropriate in accordance with
the automated systems of the relevant issuer of such Letter of Credit
Accommodations) of any Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation; Borrowers' Agent
shall attach to such notice the proposed form of the Letter of Credit
Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Agent: (i) such Borrower or any Additional
L/C Debtor shall have delivered to the proposed issuer of such Letter of Credit
Accommodation at such times and in such manner as such proposed issuer may
require, an application in form and substance satisfactory to such proposed
issuer and Agent for the issuance of the Letter of Credit Accommodation and such
other documents as may be required pursuant to the terms thereof, and the form
and terms of the proposed Letter of Credit Accommodation shall be satisfactory
to Agent and such proposed issuer, (ii) as of the date of issuance, no order of
any court, arbitrator or other Governmental Authority shall purport by its terms
to enjoin or restrain money center banks generally from issuing letters of
credit of the type and in the amount of the proposed Letter of Credit
Accommodation, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such Letter of
Credit Accommodation refrain from, the issuance of letters of credit generally
or the issuance of such Letters of Credit Accommodation; and (iii) the Excess
Availability, prior to giving effect to any Reserves with respect to such Letter
of Credit Accommodations, on the date of the proposed issuance of any Letter of
Credit Accommodations, shall be equal to or greater than: (A) if the proposed
Letter of Credit Accommodation is for the purpose of purchasing Eligible
Inventory, the amount equal to the percentage equal to one hundred (100%)
percent minus the then applicable percentage with respect to Eligible Inventory
set forth in the definition of the term Borrowing Base multiplied by the sum of
(1) the stated face amount of the proposed Letter of Credit and (2) freight,
taxes, duty and other amounts which Agent estimates must be paid in connection
with such Inventory upon arrival and for delivery to one of Borrower's locations
for Eligible Inventory within the United
36
States of America and (B) if the proposed Letter of Credit Accommodation is for
any other purpose, an amount equal to one hundred (100%) percent of the face
amount thereof and all other commitments and obligations made or incurred by
Agent with respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, a Reserve shall be established in the applicable amount set forth
in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Agent's discretion, with the consent of all Revolving
Loan Lenders, the amount of all outstanding Letter of Credit Accommodations and
all other commitments and obligations made or incurred by Agent or any Revolving
Loan Lender in connection therewith shall not at any time exceed $150,000,000.
At any time an Event of Default exists or has occurred and is continuing, upon
Agent's request, Borrowers will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Agent, for the ratable benefit of
Lenders, for the Letter of Credit Accommodations.
(f) Borrowers shall indemnify and hold Agent and Lenders harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Agent or any Lender may suffer or incur in connection with any
Letter of Credit Accommodations and any documents, drafts or acceptances
relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by any issuer or correspondent with respect to
any Letter of Credit Accommodation, except for such losses, claims, damages,
liabilities, costs or expenses that are a direct result of the gross negligence
or wilful misconduct of Agent as determined pursuant to a final non-appealable
order of a court of competent jurisdiction. Borrowers assume all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed Borrower's agent. Borrowers assume all risks for, and agrees to
pay, all foreign, Federal, State and local taxes, duties and levies relating to
any goods subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder. Borrowers hereby release and hold Agent and
Lenders harmless from and against any acts, waivers, errors, delays or
omissions, whether caused by Borrowers, by any issuer or correspondent or
otherwise with respect to or relating to any Letter of Credit Accommodation,
except for the gross negligence or wilful misconduct of Agent as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
The provisions of this Section 2.2(f) shall survive the payment of Obligations
and the termination or non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrowers shall, upon the occurrence and during the
continuance of an Event of Default, at Agent's request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver them to Agent and/or subject to Agent's order, and
if they shall come into Borrower's possession, to deliver them, upon Agent's
request, to Agent in their original form. Borrowers shall also, upon the
occurrence and during the continuance of an Event of Default, at Agent's
request, designate Agent as the consignee on all bills of lading and other
negotiable and non-negotiable documents.
37
(h) Borrowers hereby irrevocably authorize and direct any issuer of a
Letter of Credit Accommodation to name such Borrower as the account party
therein and to deliver to Agent all instruments, documents and other writings
and property received by issuer pursuant to the Letter of Credit Accommodations
and to accept and rely upon Agent's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit Accommodations or
the applications therefor. Nothing contained herein shall be deemed or construed
to grant Borrowers any right or authority to pledge the credit of Agent or any
Lender in any manner. Agent and Lenders shall have no liability of any kind with
respect to any Letter of Credit Accommodation provided by an issuer other than
Agent or any Lender unless Agent has duly executed and delivered to such issuer
the application or a guarantee or indemnification in writing with respect to
such Letter of Credit Accommodation. Borrowers shall be bound by any reasonable
interpretation made in good faith by Agent, or any other issuer or correspondent
under or in connection with any Letter of Credit Accommodation or any documents,
drafts or acceptances thereunder, notwithstanding that such interpretation may
be inconsistent with any instructions of Borrowers, any Additional L/C Debtor or
Borrowers' Agent. Agent shall have the sole and exclusive right and authority
to, and Borrowers, any Additional L/C Debtor or Borrowers' Agent shall not: (i)
at any time an Event of Default exists or has occurred and is continuing, (A)
approve or resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders, and (ii at all times, (A) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents, and (B) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included in
the Collateral except (unless an Event of Default or a condition or event which,
with notice or the passage of time or both, would constitute an Event of Default
has occurred), Borrowers and Additional L/C Debtors may waive discrepancies in
the presentation of documents required for payment under any Letter of Credit
Accommodations other than for the required presentation or delivery of a ▇▇▇▇ of
lading or cargo receipt or other transport document with respect to Eligible
Inventory thereunder. Agent may take such actions either in its own name or in
the name of any Borrower, any Additional L/C Debtor or Borrowers' Agent.
(i) Any rights, remedies, duties or obligations granted or undertaken
by Borrowers to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrowers and Additional L/C Debtors to Agent
for the ratable benefit of Revolving Loan Lenders. Any duties or obligations
undertaken by Agent to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Agent in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrowers to Agent for the ratable benefit of
Revolving Loan Lenders and to apply in all respects to Borrowers.
38
(j) Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Revolving Loan Lender shall be deemed to have
irrevocably and unconditionally purchased and received, without recourse or
warranty, an undivided interest and participation to the extent of such
Revolving Loan Lender's Pro Rata Share of the liability with respect to such
Letter of Credit Accommodation (including, without limitation, all Obligations
with respect thereto).
(k) Borrowers are irrevocably and unconditionally obligated, without
presentment, demand or protest, to pay to Agent any amounts paid by an issuer of
a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Revolving Loans in accordance
with Section 2.2(a) or otherwise). In the event that Borrowers fail to pay Agent
on the date of any payment under a Letter of Credit Accommodation in an amount
equal to the amount of such payment, Agent (to the extent it has actual notice
thereof) shall promptly notify each Lender of the unreimbursed amount of such
payment and each Lender agrees, upon one (1) Business Day's notice, to fund to
Agent the purchase of its participation in such Letter of Credit Accommodation
in an amount equal to its Pro Rata Share of the unpaid amount. The obligation of
each Lender to deliver to Agent an amount equal to its respective participation
pursuant to the foregoing sentence is absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuance of any
Event of Default, the failure to satisfy any other condition set forth in
Section 4 or any other event or circumstance. If such amount is not made
available to Agent by such Lender, Agent shall be entitled to recover such
funds, on demand from such Lender together with interest thereon for each day
from the date such payment was due until the date such amount is paid to Agent
at the Federal Funds Rate for each day during such period (as published by the
Federal Reserve Bank of New York or at Agent's option based on the arithmetic
mean determined by Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof
applicable to Prime Rate Loans.
2.3 Term Loan.
---------
(a) Term Loan Lenders agree, ratably in accordance with their
respective Term Loan Commitments, and subject to the satisfaction of the
applicable conditions precedent set forth in Section 4 hereof, to make the Term
Loan to Borrowers on the Closing Date in an aggregate principal amount of
$75,000,000, which Term Loan shall be repaid on the earlier to occur of (i) the
third anniversary of the date of this Agreement, (ii) the termination or non-
renewal of the Credit Facility or (iii) an acceleration of the Obligations. The
Term Loan shall be secured by all of the Collateral and shall constitute
Obligations.
(b) The Term Loan may be prepaid in whole or in part, subject to the
satisfaction of each of the following conditions as determined by Agent: (i) the
amount of any such partial prepayment shall not be less than $5,000,000, (ii)
the average of the Excess Availability, based
39
on the immediately preceding thirty consecutive (30) days prior to any such
prepayment, and on the date of any such prepayment and after giving effect to
such prepayment, shall be not less than $50,000,000, and (iii) no Event of
Default, or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred and be
continuing.
(c) Borrower's Agent agrees to record each Term Loan Amount on the
Term Loan Register referred to in Section 13.8(g)(i). Each Term Loan Amount
recorded on the Term Loan Register (the "Registered Term Loan") may not be
evidenced by promissory notes other than a Registered Term Note (as defined
below). Upon the registration of the Term Loan or the Term Loan Amount, any
promissory note (other than a Registered Term Note) evidencing the same shall be
null and void and shall be returned to the Borrowers. Borrowers agree, at the
request of any Lender, to execute and deliver to such Lender a promissory note
in registered form to evidence such Registered Term Loan (i.e., containing
registered note language) and registered as provided in Section 13.8(g) hereof
(a "Registered Term Note"), payable to the order of such Lender and otherwise
duly completed. Once recorded on the Term Loan Register, the Obligations
evidenced by such Note may not be removed from the Term Loan Register so long as
it remains outstanding, and a Registered Term Note may not be exchanged for a
promissory note that is not a Registered Term Note.
2.4 Joint and Several Liability. Borrowers shall be liable for all
---------------------------
amounts due to Agent under this Agreement, regardless of which Borrower actually
receives the Loans or other extensions of credit hereunder or the amount of such
Loans received or the manner in which Agent accounts for such Loans, Letter of
Credit Accommodations or other extensions of credit on its books and records.
The Obligations with respect to Loans and Letter of Credit Accommodations or
other extensions of credit made to a Borrower, and the Obligations arising as a
result of the joint and several liability of a Borrower hereunder, with respect
to Loans and Letter of Credit Accommodations or other extensions of credit made
to the other Borrowers hereunder, shall be separate and distinct obligations,
but all such other Obligations shall be primary obligations of all Borrowers.
The Obligations arising as a result of the joint and several liability of a
Borrower hereunder with respect to Loans, Letter of Credit Accommodations or
other extensions of credit made to the other Borrowers hereunder shall, to the
fullest extent permitted by law, be unconditional irrespective of (a) the
validity or enforceability, avoidance or subordination of the Obligations of the
other Borrowers or of any promissory note or other document evidencing all or
any part of the Obligations of the other Borrowers, (b) the absence of any
attempt to collect the Obligations from the other Borrowers, any Obligor or any
other security therefor, or the absence of any other action to enforce the same,
(c) the waiver, consent, extension, forbearance or granting of any indulgence by
Agent with respect to any provisions of any instrument evidencing the
Obligations of the other Borrowers, or any part thereof, or any other agreement
now or hereafter executed by the other Borrowers and delivered to Agent, (d) the
failure by Agent to take any steps to perfect and maintain its security interest
in, or to preserve its rights and maintain its security or collateral for the
Obligations of the other Borrowers, (e) the election of Agent in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the Bankruptcy Code, (f) the disallowance of all or any portion of the
claim(s) of Agent for the repayment of the Obligations of the other Borrowers
under Section 502
40
of the Bankruptcy Code, or (g) any other circumstances which might constitute a
legal or equitable discharge or defense of an Obligor or of the other Borrowers,
other than the wilful misconduct or gross negligence of Agent or Lenders as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. With respect to the Obligations arising as a result of the joint
and several liability of a Borrower hereunder with respect to Loans, Letter of
Credit Accommodations or other extensions of credit made to the other Borrowers
hereunder, each Borrower waives, until the Obligations shall have been paid in
full in immediately available funds and this Agreement shall have been
terminated, any right to enforce any right of subrogation or any remedy which
Agent now has or may hereafter have against Borrowers, any endorser or any
guarantor of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to Agent. Upon any
Event of Default and for so long as the same is continuing, Agent may proceed
directly and at once, without notice, against any Borrower to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against the other Borrowers or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that Agent and Lenders shall be under no obligation to marshal any assets in
favor of Borrower(s) or against or in payment of any or all of the Obligations.
2.5 Revolving Loan Commitments. The aggregate amount of each Revolving
--------------------------
Loan Lender's Pro Rata Share of the Revolving Loans and Letter of Credit
Accommodations shall not exceed the amount of such Lender's Revolving Loan
Commitment, as the same may from time to time be amended with the written
acknowledgment of Agent.
SECTION 3. INTEREST AND FEES
-----------------
3.1 Interest.
--------
(a) Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrowers' Agent may from time to time request Eurodollar Rate
Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans
or that any existing Eurodollar Rate Loans continue for an additional Interest
Period. Such request from Borrowers' Agent shall specify the amount of the
Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to
Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued
(subject to the limits set forth below) and the Interest Period to be applicable
to such Eurodollar Rate Loans. Subject to the terms and conditions contained
herein, three (3) Business Days after receipt by Agent of such a request from
Borrowers' Agent, such Prime Rate Loans shall be converted to Eurodollar Rate
Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default, or act, condition or event which with
-------- ----
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred and be continuing, (ii) no party hereto shall have sent
any notice of termination or non-renewal of this
41
Agreement, (iii) Borrowers and Borrowers' Agent shall have complied with such
customary procedures as are reasonably established by Agent and specified by
Agent to Borrowers' Agent from time to time for requests by Borrowers' Agent for
Eurodollar Rate Loans, (iv) no more than seven (7) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (vi Agent and each Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Agent through the Reference Bank or such Lender and can be readily determined as
of the date of the request for such Eurodollar Rate Loan by Borrowers' Agent.
Any request by Borrowers' Agent for Eurodollar Rate Loans or to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans shall be irrevocable. Notwithstanding anything to the contrary contained
herein, Agent, Lenders and Reference Bank shall not be required to purchase
United States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Agent, Lenders and Reference Bank had
purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Agent has
received and approved a request to continue such Eurodollar Rate Loan at least
three (3) Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by Agent
to Borrowers' Agent, be subsequently converted to Prime Rate Loans in the event
that this Agreement shall terminate or not be renewed. Borrowers shall pay to
Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its
option, charge any loan account of any Borrower) any amounts required to
compensate Agent, any Lender, the Reference Bank or any Participant for any loss
(including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing excluding any termination on the last day
of the applicable Interest Period. In the event any Person seeks compensation
hereunder prior to Borrowers being obligated to pay such amount or Agent charges
any loan account of any Borrower, a certificate of Agent or any Lender setting
forth the basis for the determination of such amount necessary to compensate
Agent or such Lender as aforesaid shall be delivered to Borrowers, which
certificate shall be conclusive, absent manifest error.
(d) Interest shall be payable by Borrowers to Agent, for the benefit of
the applicable Lenders, monthly in arrears not later than the first day of each
calendar month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The interest rate on non-contingent
Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
first day of the month after any change in such Prime Rate is announced based on
the Prime Rate in effect on the last day of the month in which any such change
occurs. In no event shall charges constituting interest payable by Borrowers to
Agent and Lenders exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
42
3.2 Fees.
----
(a) Borrowers agree to pay to Agent the other fees and amounts set
forth in the Fee Letter in the amounts and at the times specified therein.
(b) Borrowers shall pay to Agent, for the ratable account of the
Revolving Loan Lenders, monthly an unused line fee at a rate equal to the
percentage (on a per annum basis) set forth below calculated upon the amount by
which the Revolving Loan Limit as then in effect exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears. Commencing with the fiscal quarter ending on or about October 31,
2001), the percentage used for determining the unused line fee shall be as set
forth below if either the Quarterly Average Excess and Suppressed Availability
for the immediately preceding fiscal quarter is at or within the amounts
indicated for such percentage or the Leverage Ratio as of the last day of the
immediately preceding fiscal quarter (which ratio for this purpose shall be
calculated based on the four (4) immediately preceding fiscal quarters) is at or
within the levels indicated for such percentage:
Excess and Suppressed Unused Line
Availability Leverage Ratio Fee Percentage
------------ -------------- ---------------
(i) $100,000,000 or more Equal to or less than .375%
1.50 to 1.00
(ii) Greater than or equal to Greater than 1.50 to .375%
$65,000,000 and less than 1.00 but equal to or less
$100,000,000 than 2.00 to 1.00
(iii) Greater than or equal to Greater than 2.00 to 1.00 .50%
$30,000,000 and less than but equal to or less
$65,000,000 than 2.50 to 1.00
(iv) Less than $30,000,000 More than 2.50 to 1.00 .50%
provided, that,
-------- ----
(A) subject to clause (C) below, the Applicable Unused Line Fee
Percentage shall be calculated and established once each fiscal quarter as of
the first day of the calendar month immediately succeeding the month in which
the required quarterly financial statements for each fiscal quarter (commencing
with the fiscal quarter ending on or about October 31, 2001) are delivered to
Agent pursuant to the terms of the Financing Agreements (the "Adjustment Date");
in the event the Borrowers fail to deliver the required financial statements
when due, then for the period commencing on the next Adjustment Date to occur
subsequent to such failure through the date immediately following the date on
which such statements are
43
delivered, the Applicable Unused Line Fee Percentage shall be the highest
Applicable Unused Line Fee Percentage set forth above.
(B) the Applicable Unused Line Fee Percentage shall be the lower
percentage set forth above based on the Quarterly Average Excess and Suppressed
Availability or the Leverage Ratio, and
(C) notwithstanding anything to the contrary set forth above, the
Applicable Unused Line Fee Percentage for the period from the Closing Date until
the first day of the calendar month immediately succeeding the month in which
the required quarterly financial statements for the fiscal quarter ending on or
about October 31, 2001 are delivered to Agent pursuant to the terms of Section
9.6 hereof shall be set by Agent based on the Excess and Suppressed Availability
based on the updated field examination done by Agent immediately prior to
closing.
(c) Borrowers shall pay to Agent, for its own account, monthly a
servicing fee in an amount equal to $8,000 in respect of Agent's services for
each month (or part thereof) while this Agreement remains in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
fully earned as of and payable in advance on the date hereof and on the first
day of each month hereafter.
3.3 Changes in Laws and Increased Costs of Loans.
--------------------------------------------
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Agent to Borrowers' Agent, convert
to Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Agent, a Lender, Reference Bank or any Participant to make
or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the increase
in the costs to Agent, a Lender or Reference Bank or any Participant of making
or maintaining any Eurodollar Rate Loans by an amount deemed by Agent in good
faith to be material, or (C) reduce the amounts received or receivable by a
Lender or Agent in respect thereof, by an amount deemed by Agent in good faith
to be material or (ii) the cost to Agent, a Lender, Reference Bank or any
Participant of making or maintaining any Eurodollar Rate Loans shall otherwise
increase by an amount deemed by Agent in good faith to be material. Borrowers
shall pay to Agent, for the ratable benefit of Lenders, upon demand by Agent (or
Agent may, at its option, charge any loan account of Borrower) any amounts
required to compensate Agent, any Lender, the Reference Bank or any Participant
for any loss including loss of anticipated profits), cost or expense incurred
by such person as a result of the foregoing, including, without limitation, any
such loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of Agent or any
Lender setting forth the basis for the determination of such amount necessary to
compensate Agent or such Lender as aforesaid shall be delivered to Borrowers and
shall be conclusive, absent manifest error.
44
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Agent or any Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Agent, for the ratable benefit of Lenders, upon demand by
Agent (or Agent may, at its option, charge any loan account of Borrower) any
amounts required to compensate Agent, any Lender, the Reference Bank or any
Participant for any additional loss (including loss of anticipated profits),
cost or expense incurred by such person as a result of such prepayment or
payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such person to make or maintain such Eurodollar Rate Loans or any portion
thereof. A certificate of Agent or any Lender setting forth the basis for the
determination of such amount necessary to compensate Agent or such Lender as
aforesaid shall be delivered to Borrowers and shall be conclusive, absent
manifest error.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions Precedent to Initial Loans and Letter of Credit
----------------------------------------------------------
Accommodations. Each of the following is a condition precedent to Agent and
--------------
Lenders making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Agent shall have received, in form and substance reasonably
satisfactory to Agent, all releases, terminations and such other documents as
Agent may reasonably request to evidence and effectuate the termination by the
existing lenders to Borrowers and Obligors of their respective financing
arrangements with Borrowers and Obligors and the termination and release by it
or them, as the case may be, of any interest in and to any assets and properties
of each Borrower and each Obligor, duly authorized, executed and delivered by it
or each of them, including, but not limited to, (i) UCC termination statements
for all UCC financing statements previously filed by it or any of them or their
predecessors, as secured party and each Borrower or any Obligor, as debtor and
(ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to
secure debt by any Borrower or any Obligor in favor of such existing lenders or
any agent for them, in form acceptable for recording with the appropriate
Governmental Authority excluding Permitted Liens which shall not be terminated;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Agent, and Lenders shall have received all information and
copies of all documents, including records of requisite corporate, and other
action and proceedings which Agent may have reasonably requested in connection
therewith, such documents where requested by Agent or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation, formation or other
organization document of any of Borrowers certified by the Secretary of State
(or equivalent Governmental Authority) which shall set forth the same complete
corporate name of any of Borrowers as is set forth herein and such document as
shall set forth the organizational identification number of any of Borrowers, if
one is issued in its jurisdiction of incorporation;
45
(c) no material adverse change shall have occurred in the assets,
businesses or prospects of Borrowers and Obligors, taken as a whole, since the
date of the commencement of Agent's latest field examination and no change or
event shall have occurred which would impair the ability of Borrowers and
Obligors, taken as a whole, to perform their obligations hereunder or under any
of the other Financing Agreements to which any of them is party or of Agent to
enforce the Obligations or realize upon the Collateral. Without limiting the
generality of the foregoing (i) no investigation, litigation or other
proceedings shall be pending or threatened against any Borrower, LBH, Inc. or
any Obligor or any affiliate as of the closing which could have a Material
Adverse Effect in the good faith determination of Agent and Lenders, and (ii)
the Collateral shall not have materially declined in value from the values set
forth in any of the appraisals or field examinations previously done;
(d) Agent shall have completed a field review of the Records and such
other information with respect to the Collateral as Agent may reasonably require
to determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records and/or roll-forwards Inventory
through the date of closing, together with such supporting documentation as may
be reasonably necessary or appropriate, and other documents and information that
will enable Agent to accurately identify and verify the Collateral and including
documentation with respect to inventory in transit, goods in bonded warehouses
or at other third party locations), the results of which each case shall be
satisfactory to Agent in good faith, not more than three (3) Business Days prior
to the date hereof;
(e) Agent shall have received, in form and substance satisfactory to
Agent, all consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem necessary or desirable in good faith in order to
permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement and the
other Financing Agreements, including, without limitation, Collateral Access
Agreements by owners and lessors of leased premises (other than Retail Store
locations) of Borrowers and Obligors and by customs brokers, freight forwarders
and cargo consolidators and warehouses at which Collateral is located;
(f) Agent shall have received Credit Card Acknowledgments with
respect to arrangements of Borrowers with Credit Card Issuers and Credit Card
Processors, in each case, duly executed and delivered by the Credit Card Issuers
and Credit Card Processors;
(g) the Excess Availability as determined by Agent in good faith, as
of the date hereof, shall be not less than $50,000,000 after giving effect to
the initial Loans made or to be made and Letter of Credit Accommodations issued
or to be issued in connection with the initial transactions hereunder;
(h) Agent shall have received, in form and substance reasonably
satisfactory to Agent, a Deposit Account Control Agreement by and among Agent,
Borrowers, and each bank where Borrowers and Obligors have a Blocked Account, in
each case, duly executed and delivered by such bank and Borrower (or shall be
the bank's customer with respect to such deposit account as Agent may specify);
46
(i) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral (including, without limitation, one hundred
(100%) percent of the issued and outstanding Capital Stock of FSC and sixty-five
(65%) percent of the issued and outstanding Capital Stock of Kirkstone Company
Limited, a company organized under the laws of Hong Kong and CS Insurance Ltd, a
company organized under the laws of Bermuda);
(j) Agent shall have received and reviewed UCC search results for
those jurisdictions designated by Agent in which assets of Borrowers, and
Obligors are located, which search results shall be in form and substance
reasonably satisfactory to Agent;
(k) Agent shall have received environmental audits of the Indiana
Real Property and the Pennsylvania Real Property conducted by an independent
environmental engineering firm acceptable to Lender, and in form, scope and
methodology satisfactory to Agent, confirming (i) Borrowers are in compliance
with all material applicable Environmental Laws and (ii) the absence of any
material environmental problems;
(l) Agent shall have received written appraisals of the Indiana Real
Property and the Pennsylvania Real Property, in form, scope and methodology
reasonably acceptable to Agent, by an appraiser acceptable to Agent and initial
Lenders, addressed to Agent and on which Agent and Lenders are expressly
permitted to rely;
(m) Agent shall have received, in form and substance satisfactory to
Agent, a valid and effective title insurance policy (title pro forma or marked-
up commitment) issued by a company and agent acceptable to Agent (i) insuring
the priority, amount and sufficiency of the Mortgages, (ii) insuring against
matters that would be disclosed by surveys and (iii) containing any legally
available endorsements, assurances or affirmative coverage requested by Agent
for protection of its interests;
(n) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as loss payee;
(o) Agent shall have received, in form and substance satisfactory to
Agent, (i) a guarantee of payment by each Borrower of the Obligations owed by
each of the Obligors and the Additional L/C Debtors, and (ii) a guarantee of
payment by all Obligors of all Obligations, secured by a first and only security
interest in favor of Agent granted by all Obligors, except as otherwise agreed
in writing by Agent, in all of their existing and future assets constituting
Collateral;
(p) Agent and Lenders shall be satisfied that (A) as of the Closing
Date Borrowers and Obligors taken as a whole, are not insolvent or will not
become insolvent as a result of the transactions contemplated hereby, (i)
Borrowers and Obligors, taken as a whole, do not have unreasonably small capital
after the consummation of the transactions contemplated hereby to continue to
engage in its business, and (ii) Borrowers and Obligors, taken as a whole, have
not
47
incurred liabilities as a result of the transactions contemplated hereby that
are beyond their ability to pay as such liabilities mature.
(q) Agent shall have received, at the expense of Borrowers, written
appraisals of Borrowers' (and Lane ▇▇▇▇▇▇, Inc.'s) inventory, in form, scope and
methodology reasonably acceptable to Agent and initial Lenders, by an appraiser
acceptable to the Agent, addressed to Agent and on which Agent and Lenders are
expressly permitted to rely;
(r) Intentionally Omitted;
(s) Agent shall have received and approved, the definitive
acquisition agreements for the purchase by Parent, directly or indirectly, of
all of the issued and outstanding shares of capital stock of LBH, Inc., which
shall be in form and substance and on terms and conditions reasonably
satisfactory to Agent and Lenders and Agent shall have received evidence, in
form and substance reasonably satisfactory to Agent and Lenders, that the
transactions contemplated under the terms thereof have been consummated
(including all necessary consents and compliance with applicable laws in
connection with the acquisition) prior to or contemporaneously with the initial
loans by Lenders hereunder, such that the Parent is the direct or indirect
beneficial owner of all of the issued and outstanding shares of Capital Stock of
LBH, Inc., free and clear of all Liens;
(t) Agent shall have received, in form and substance satisfactory to
Agent, a pro-forma balance sheet of Parent and its Subsidiaries reflecting the
initial transactions contemplated hereunder, including, but not limited to, (i)
the consummation of the acquisition of the Purchased Stock by Parent from Seller
and the other transactions contemplated by the Purchase Agreements and (ii) the
Loans and Letter of Credit Accommodations provided by Lenders to Borrowers on
the date hereof and the use of the proceeds of the initial Loans as provided
herein accompanied by a certificate, dated of even date herewith, of the chief
financial officer of Parent stating that such pro-forma balance sheet represents
the reasonable, good faith opinion of such officer as to the subject matter
thereof as of the date of such certificate;
(u) Agent shall have received, (i) the audited consolidated income
statements of LBH, Inc. and its Subsidiaries for fiscal years 1999, 2000 and
2001, and the audited consolidated balance sheets of LBH, Inc. and its
Subsidiaries for fiscal years 2000 and 2001 together with the opinion of
independent certified accountants, which audited income statements and balance
sheets shall be consistent, in substance, with the unaudited financial
statements for the same periods previously delivered to Agent and Lenders, in
the reasonable determination of Agent and Lenders, subject only to adjustments
for non-recurring previously unallocated overhead costs and (ii in form and
substance satisfactory to Agent and Lenders, the consolidated income statements
and balance sheets of LBH, Inc. and its Subsidiaries for the first fiscal
quarter of fiscal year 2001 prepared on a reviewed basis and the accompanying
notes thereto all in reasonable detail, fairly presenting, in all material
respects, the financial position and the results of operations for LBH, Inc. and
its Subsidiaries, as reviewed by PriceWaterhouseCoopers.
48
(v) Agent shall have received the Fee Letter executed and delivered
by all of the parties thereto;
(w) No material adverse change in the business, operations or
prospects of Borrowers and Obligors, taken as a whole, shall have occurred since
the date of the commencement of Agent's field examinations conducted prior to
the date of the Commitment Letter, dated May 31, 2001, by and among Parent,
Agent, Co-Agent and Ableco Finance LLC;
(x) Agent shall have received, in form and substance reasonably
satisfactory to Agent, such opinion letters of counsel to Borrowers and Obligors
with respect to the Purchase Agreements and the Financing Agreements and such
other matters as Agent may reasonably request; and
(y) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Agent,
in form and substance reasonably satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
---------------------------------------------------------------------
Each of the following is an additional condition precedent to the Loans and/or
providing Letter of Credit Accommodations to Borrower, including the initial
Loans and Letter of Credit Accommodations and any future Loans and Letter of
Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto, except (i) to
the extent that such representations and warranties expressly relate solely to
an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date) (ii) with respect to any
changes in the representations and warranties resulting from any actions, sales,
merger, dispositions or other transactions expressly permitted by this Agreement
or consented to by the Required Lenders, the Required Term Loan Lenders, or all
Lenders, as applicable;
(b) no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or, to the knowledge of Borrower, threatened in any
court or before any arbitrator or Governmental Authority, which (i) purports to
enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or
providing the Letter of Credit Accommodations, or (B) the consummation of the
transactions contemplated pursuant to the terms hereof or the other Financing
Agreements or (ii) has or has a reasonable likelihood of having a Material
Adverse Effect, if adversely determined; and
(c) no Event of Default and no act, condition or event which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be
49
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
-----------------------------------------
5.1 Grant of Security Interest. To secure payment and performance of all
--------------------------
Obligations, each Borrower hereby grants to Agent, for itself and the ratable
benefit of Lenders, a continuing security interest in, a lien upon, and a right
of set off against, and hereby assigns to Agent, for itself and the ratable
benefit of Lenders, as security, the following property and interests in
property of such Borrower, whether now owned or hereafter acquired or existing,
and wherever located (together with all other collateral security for the
Obligations at any time granted to or held or acquired by Agent or any Lender,
collectively, the "Collateral"):
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and
Equipment;
(d) all Real Property (that is subject to the Mortgages) and
fixtures;
(e) all chattel paper (including all tangible and electronic chattel
paper);
(f) all instruments (including all promissory notes);
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (ii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors, provided, that, no
-------- ----
such agreement shall be required with respect to any securities intermediary,
commodity intermediary or other person who has custody, control or possession of
any investment property or specifically and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the
50
benefit of any Borrower's salaried employees or property held in trust for the
benefit of an employee or any third Person which is not an Affiliate;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of any of Borrowers now or hereafter held or
received by or in transit to any Borrower or its affiliates or at any other
depository or other institution from or for the account of any Borrower, whether
for safekeeping, pledge, custody, transmission, collection or otherwise;
(l) all commercial tort claims, including, without limitation, those
identified in Schedule 5.4(g) hereto;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.
5.2 Notwithstanding subsection 5.1 of this Section 5, the Collateral shall
not include (collectively, "Excluded Collateral") (a) the (i) the stock of the
Excluded Subsidiaries other than one hundred (100%) percent of the issued and
outstanding Capital Stock of FSC and sixty-five (65%) percent of issued and
outstanding Capital Stock of Kirkstone Company Limited and CS Insurance Ltd.,
and (b) assets of the Excluded Subsidiaries, (c) all (i) Securitization Program
Assets, including, without limitation, amounts owed to the Financing
Subsidiaries as a Credit Card Issuer by Persons using the Fashion Bug Card
and/or the Co-Branded Card and (ii) collections due to such Financing
Subsidiaries from such customers for such amounts ("Excluded Collections"), (d)
real property or rentals from the use or occupancy of real property other than
the Real Property subject to the Mortgages, (e) the membership interests now or
hereafter owned by Charming J.V. Inc. in M and A Joint Venture LLC and (f) motor
vehicles subject to a certificate of title, unless Excess Availability shall be
equal to or less than $15,000,000, and then at the request of Agent, Borrowers
shall and Parent shall cause Obligors to take such action as is necessary to
perfect Agent's security interest therein, (g) the Indiana Real Property, the
Indiana Personal Property and/or the Pennsylvania Real Property to the extent
such property is released in accordance with Section 9.8 or Section 9.21 hereof.
5.3 Notwithstanding anything to the contrary contained in Section 5.1 above,
the types or items of Collateral described in such Section shall not include any
rights or interest in any contract, lease, permit, license, charter or license
agreement covering real or personal property of such Borrower, as such, if under
the terms of such contract, lease, permit, license, charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to Agent is prohibited as a matter of law or under the
terms of such contract, lease, permit, license, charter or license agreement and
such prohibition has not been or is not waived
51
or the consent of the other party to such contract, lease, permit, license,
charter or license agreement has not been or is not otherwise obtained;
provided, that, the foregoing exclusion shall in no way be construed (a) to
-------- ----
apply if any such prohibition is unenforceable under Sections 9-406, 9-407, and
9-408 of the UCC or other applicable law or (b) so as to limit, impair or
otherwise affect Agent's unconditional continuing security interests in and
liens upon any rights or interests of such Borrower in or to monies due or to
become due under any such contract, lease, permit, license, charter or license
agreement (including any Accounts).
5.4 (a) Each Borrower irrevocably and unconditionally authorizes Agent (or
its agent) to file at any time and from time to time such financing statements
with respect to the Collateral naming Agent or its designee as the secured party
and any Borrower or any affiliate of any Borrower as debtor, as Agent may
require, and including any other information with respect to any Borrower or
otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as Agent may determine, together with any amendment and
continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
hereby ratifies and approves all financing statements naming Agent or its
designee as secured party and any Borrower as debtor with respect to the
Collateral (and any amendments with respect to such financing statements) filed
by or on behalf of Agent prior to the date hereof and ratifies and confirms the
authorization of Agent to file such financing statements (and amendments, if
any). Each Borrower hereby authorizes Agent to adopt on behalf of Borrowers any
symbol required for authenticating any electronic filing. In no event shall
Borrowers at any time file, or permit or cause to be filed, any correction
statement or termination statement with respect to any financing statement (or
amendment or continuation with respect thereto) naming Agent or its designee as
secured party and any Borrower as debtor except with respect to termination
statements, as permitted by Section 9-509(d)(2) of the UCC.
(b) None of Borrowers has any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except that which has been
delivered to Agent on or prior to the date hereof. In the event that any
Borrower shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, such Borrower shall promptly notify Agent thereof in
writing. Promptly upon the receipt thereof by or on behalf of any Borrower
(including by any agent or representative), such Borrower shall deliver, or
cause to be delivered to Lenders, all tangible chattel paper and instruments
that such Borrower may at any time acquire, accompanied by such instruments of
transfer or assignment duly executed in blank as Agent may from time to time
specify, in each case except as Agent may otherwise agree. At Agent's option,
each Borrower shall, or Agent may at any time on behalf of any of Borrowers,
cause the original of any such instrument or chattel paper to be conspicuously
marked in a form and manner acceptable to Agent with the following legend
referring to chattel paper or instruments as applicable: "This [chattel
paper][instrument] is subject to the security interest of Congress Financial
Corporation, as Agent and any sale, transfer, assignment or encumbrance of this
[chattel paper][instrument] violates the rights of such secured party."
(c) In the event that any Borrower shall at any time hold or acquire an
interest in any electronic chattel paper or any "transferable record" (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of
52
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction), such Borrower shall promptly notify Agent thereof in writing.
Promptly upon Agent's request, each Borrower shall take, or cause to be taken,
such actions as Agent may reasonably request to give Agent control of such
electronic chattel paper under the UCC and control of such transferable record
under Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as in effect in such jurisdiction.
(d) None of Borrowers has any deposit accounts as of the date hereof,
except as set forth in Schedule 6.3 hereof and the Concentration Accounts. No
Borrower shall, directly or indirectly, after the date hereof open, establish or
maintain any deposit account other than Retail Store bank accounts and zero
balance disbursement accounts unless each of the following conditions is
satisfied: (i) Agent shall have received not less than five (5) Business Days
prior written notice of the intention of such Borrower to open or establish such
account which notice shall specify in reasonable detail and specificity
acceptable to Agent the name of the account, the owner of the account, the name
and address of the bank at which such account is to be opened or established,
the individual at such bank with whom such Borrower is dealing and the purpose
of the account, (ii) the bank where such account is opened or maintained shall
be acceptable to Agent, and (ii) on or before the opening of such deposit
account, such Borrower shall, as Agent may specify, either (A) deliver to Agent
a Deposit Account Control Agreement with respect to such deposit account duly
authorized, executed and delivered by such Borrower and the bank at which such
deposit account is opened and maintained or (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and conditions
acceptable to Agent. The terms of this subsection (d) shall not apply to deposit
accounts specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of any Borrower's
salaried employees, escrows of security deposits with respect to leases of Real
Property or Concentration Accounts until the occurrence of an Event of Default
as set forth in Section 6.3 hereof.
(e) None of Borrowers owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in Schedule 5.4(e) hereof except for investment
property specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of any Borrower's
salaried employees or property held int rust for the benefit of an employee or
any third party which is not an Affiliate.
(i) In the event that any Borrower shall be entitled to or shall at any
time after the date hereof hold or acquire any certificated securities, such
Borrower shall promptly endorse, assign and deliver the same to Agent, for the
benefit of Lenders, accompanied by such instruments of transfer or assignment
duly executed in blank as Agent may from time to time specify. If any
securities, now or hereafter acquired by any Borrower are uncertificated and are
issued to any Borrower or its nominee directly by the issuer thereof, such
Borrower shall immediately notify Agent thereof and shall, as Agent may specify,
either (A) cause the issuer to
53
agree to comply with instructions from Agent as to such securities, without
further consent of any Borrower or such nominee, or (B) arrange for Agent to
become the registered owner of the securities.
(ii) None of Borrowers shall, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (A) Agent shall have received not less than
five (5) business days prior written notice of the intention of any Borrower to
open or establish such account which notice shall specify in reasonable detail
and specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the securities intermediary or commodity
intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Agent, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, each Borrower shall, as Agent
may specify, either (1) execute and deliver, and cause to be executed and
delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by any of Borrowers and such
securities intermediary or commodity intermediary or (2) arrange for Agent to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Agent.
(f) None of Borrowers is the beneficiary or otherwise entitled to any
right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth in Schedule 5.4(f) hereof.
In the event that any Borrower shall be entitled to or shall receive any right
to payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
such Borrower shall promptly notify Agent thereof in writing. Such Borrower
shall immediately, as Agent may specify, either (i) deliver, or cause to be
delivered to Agent, with respect to any such letter of credit, banker's
acceptance or similar instrument, the written agreement of the issuer and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit to Agent by Borrowers and agreeing to make all payments thereon
directly to Agent or as Agent may otherwise direct or (ii) cause Agent to
become, at Borrowers' expense, the transferee beneficiary of the letter of
credit, banker's acceptance or similar instrument (as the case may be).
(g) None of Borrowers has any commercial tort claims as of the date
hereof, in excess of $5,000,000. In the event that any Borrower shall at any
time after the date hereof have any commercial tort claims in excess of
$5,000,000 prior to the occurrence of an Event of Default, and any commercial
tort claim after the occurrence of an Event of Default, such Borrower shall
promptly notify Agent thereof in writing, which notice shall (i) set forth in
reasonable detail the basis for and nature of such commercial tort claim and
(ii) include the express grant by such Borrower to Agent of a security interest
in such commercial tort claim (and
54
the proceeds thereof). In the event that such notice does not include such grant
of a security interest, the sending thereof by such Borrower to Agent shall be
deemed to constitute such grant to Agent. Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the Collateral
and shall be deemed included therein. Without limiting the authorization of
Agent provided in Section 5.4(a) hereof or otherwise arising by the execution by
Borrowers of this Agreement or any of the other Financing Agreements, Agent is
hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and each
Borrower as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower shall
promptly upon Agent's request, execute and deliver, or cause to be executed and
delivered, to Agent such other agreements, documents and instruments as Agent
may require in connection with such commercial tort claim.
(h) None of Borrowers has any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth on Omnibus Schedule 2 hereof and except for goods
located in the United States in transit to a location of any Borrower permitted
herein in the ordinary course of business of Borrowers in the possession of the
carrier transporting such goods. In the event that any goods, documents of the
title or other Collateral are at any time after the date hereof in the custody,
control or possession of any other person not referred to in the Omnibus
Schedules provided to Agent pursuant to the Loan Agreement or such carriers,
Borrowers shall promptly notify Agent thereof in writing. Promptly upon Agent's
request, each Borrower shall deliver to Agent a Collateral Access Agreement duly
executed and delivered by such person and such Borrower.
(i) Borrowers shall take any other actions reasonably requested by
Agent from time to time to cause the attachment, perfection and first priority
of, and the ability of Agent to enforce, the security interest of Agent in any
and all of the Collateral, including, without limitation, (i) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the UCC or other applicable law, to the extent, if any,
that Borrower's signature thereon is required therefor, (ii) causing Agent's
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of Agent to enforce, the security interest of Agent in such Collateral,
(ii) complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of each Lender in such Collateral, (iv) obtaining
the consents and approvals of any Governmental Authority or third party,
including, without limitation, any consent of any licensor, lessor or other
person obligated on Collateral, and taking all actions required by any earlier
versions of the UCC or by other law, as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan
------------------------
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other
55
Obligations and the Collateral and the property of Retail Store Subsidiaries
securing Obligations, (b) all payments made by or on behalf of Borrowers and (c)
all other appropriate debits and credits as provided in this Agreement,
including, without limitation, fees, charges, costs, expenses and interest. All
entries in the loan account(s) shall be made in accordance with Agent's
customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Borrowers' Agent each month a
----------
statement setting forth the balance in the Borrowers' loan account(s) maintained
by Agent for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Agent but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers, Parent and
Borrowers' Agent and conclusively binding upon Borrowers, Parent and Borrowers'
Agent as an account stated except to the extent that Agent receives a written
notice from Borrowers' Agent of any specific exceptions of Borrowers thereto
within thirty (30) days after the date such statement has been mailed by Agent.
Until such time as Agent shall have rendered to Borrowers' Agent a written
statement as provided above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Agent and Lenders by
Borrower.
6.3 Collection of Accounts.
----------------------
(a) Each Borrower shall establish and maintain, at its expense,
deposit account arrangements and merchant payment arrangements with the banks
set forth on Schedule 6.3 hereto and after prior written notice to Agent,
subject to Section 8.10, such other banks as such Borrower may hereafter select
as are acceptable to Agent. The banks set forth on Schedule 6.3 constitute all
of the banks with whom Borrowers have deposit account arrangements and merchant
payment arrangements as of the date hereof and identifies each of the deposit
accounts at such banks to a Retail Store location of a Borrower or Retail Store
Subsidiary or otherwise describes the nature of the use of such deposit account
by such Borrower.
(i) Each Borrower shall establish and maintain, at its expense,
deposit accounts with such banks as are acceptable to Agent (the "Blocked
Accounts") into which each Borrower shall promptly deposit, and Parent shall
cause each of the other Obligors to deposit in such Blocked Accounts and direct,
their respective account debtors, Credit Card Issuers (other than Originator)
and Credit Card Processors to directly remit to such Blocked Accounts payments
on its Accounts, Credit Card Receivables and all other payments constituting
proceeds of Inventory, other Collateral or other property which is security for
the Obligations in the identical form in which such payments are made, whether
by cash, check or other manner. The banks at which the Blocked Accounts are
established shall enter into a Deposit Account Control Agreement providing that
all items received or deposited in the Blocked Accounts are the property of
Agent, that the depository bank has no Lien upon, or right of setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein, that the depository bank holds and will hold
the funds therein for the benefit of Agent and Lenders and will comply with
instructions originated by Agent without any Borrower's consent and that the
depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Agent, as
56
Agent may from time to time designate for such purpose ("Payment Account").
Subject to the terms and conditions contained herein, Agent shall instruct the
depository banks at which the Blocked Accounts are maintained to transfer the
funds on deposit in the Blocked Accounts to such operating bank account of each
Borrower as such Borrower (or Borrowers' Agent on behalf of such Borrower) may
specify in writing to Agent until such time as Agent shall notify the depository
bank otherwise. Agent will only instruct the depository banks at which the
Blocked Accounts are maintained to transfer all funds received or deposited into
the Blocked Accounts to the Payment Account at any time upon and after the
occurrence of a Cash Dominion Event. Each Borrower agrees that all payments made
to such Blocked Accounts or other funds received and collected by Agent, shall
be treated as payments to Agent in respect of the Obligations and therefore
shall constitute the property of Agent to the extent of the then outstanding
Obligations.
(ii) Notwithstanding anything to the contrary set forth in Section
6.3(a)(i), Borrowers may direct each of the Retail Store Subsidiaries to first
deposit all collections from customers of their retail stores, all proceeds from
sales of Inventory in every form, including, without limitation, cash, checks,
credit card sales drafts, credit card sales or charge slips or receipts and
other forms of daily store receipts, into a depository account maintained by
them with a local bank, used solely for such purpose and identified to each
Retail Store as set forth on Schedule 6.3 (together with any other deposit
accounts at any time established or used by any Retail Store Subsidiary for
receiving such store receipts from any Retail Store, collectively, the "Store
Bank Accounts" and each individually, a "Store Bank Account") provided that (i)
all such funds deposited into the Store Bank Accounts shall be sent by wire
transfer or by transfer using the automated clearinghouse network no less
frequently than twice a week or more frequently upon Agent's request, except
nominal amounts which are required to be maintained (A) in such Store Bank
Accounts under the terms of such Retail Store Subsidiary's arrangements with the
bank at which such Store Bank Accounts are maintained as in effect on the date
hereof or (B) for such Retail Store Subsidiary's operations, including, without
limitation, amounts to cover returned or dishonored checks or returned goods,
and which nominal amounts shall not exceed $5,000 as to any individual Retail
Store at any time to one of the Concentration Accounts and (ii) on each Business
Day CS Delaware shall remit or cause the applicable depository bank to remit all
collected funds in such Concentration Accounts to the Blocked Accounts, except
for Excluded Collections. None of Borrowers nor any of the Obligors shall open
or use any concentration or cash management accounts at any bank or other
financial institution, other than the Concentration Accounts and Store Bank
Accounts, without the prior written consent of Agent. No later than five (5)
days after the occurrence of an Event of Default, each Borrower or Obligor which
maintains a Concentration Account shall, upon Agent's request, obtain a Deposit
Control Agreement, in form and substance to Agent, from each depository bank
with respect to such Concentration Account.
(b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final collection) to
the Obligations on the Business Day of receipt by Agent of immediately available
funds in the Payment Account provided such payments and notice thereof are
received in accordance with Agent's usual and customary practices as in effect
from time to time and within sufficient time to credit such Borrower's loan
account on such day, and if not, then on the next Business Day. For purposes of
57
calculating interest on the Obligations, such payments or other funds received
and collected by Agent on account of the Obligations will be applied
(conditional upon final collection) to the Obligations one (1) Business Day
following the date of receipt of immediately available funds by Agent in the
Payment Account. In addition, with respect to all proceeds of Accounts, Credit
Card Receivables and Inventory deposited in the Blocked Accounts or otherwise
received by Borrowers, which are not remitted to the Payment Account (which
shall only be in accordance with Section 6.3(a)(ii) hereof), Borrowers shall pay
to Agent, for its own account, a collection fee on the first day of each month
equal to the amount of the Interest Rate on Prime Rate Loans with respect to
such proceeds (a) from the earlier of the date of receipt of such proceeds by
Borrowers or the date of deposit of such proceeds in the Blocked Accounts and
(b) until the next Business Day.
(c) Each Borrower and Obligor and all of their directors, employees,
agents, Subsidiaries (other than Financing Subsidiaries) and other Affiliates
shall, acting as trustee for Agent, receive, as the property of Agent, any
monies, checks, notes, drafts or any other payment relating to and/or proceeds
of Receivables or other Collateral which come into their possession or under
their control and immediately upon receipt thereof, shall deposit or cause the
same to be deposited in the accounts of Borrowers in accordance with the
provisions of this Section 6.3, or remit the same or cause the same to be
remitted, in kind, to Agent; provided, that, if at any time the Excess
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Availability shall be less than $10,000,000, Borrowers shall and Parent shall
cause each Obligor to promptly upon Agent's request cause the portion thereof
representing sales and/or use taxes payable in connection with such sales or
otherwise to be deposited into a separate bank account or accounts established
for such purpose. In no event shall the same be commingled with a Borrower's or
Obligor's own funds. Each Borrower agrees to reimburse Agent on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of the payments by Agent to or indemnification of
such bank or person in connection with such Blocked Account or any amounts
received therein or transferred therefrom. The obligation of Borrowers to
reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the
termination or non-renewal of this Agreement.
6.4 Payments.
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(a) All Obligations shall be payable to the Payment Account as provided
in Section 6.3 or such other place as Agent may designate from time to time.
Prior to either (i) an Event of Default and the acceleration by Agent of the
payment of all or a material portion of the Obligations or (ii) the commencement
of an Insolvency Proceeding by or against any Borrower (and in the case of any
Insolvency Proceeding against any Borrower, until any applicable cure period has
passed in order for the same to constitute an Event of Default), Proceeds of
Collateral shall be applied in the following order:
(A) first, to the payment in full of all costs, expenses and
other charges (but not fees) of Agent payable by Borrowers under the Financing
Agreements and all indemnities payable by Borrowers under the Financing
Agreements then due to Agent;
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(B) second, to the payment in full of all costs, expenses and
other charges (but not fees) of Lenders payable by Borrowers under the Financing
Agreements and all indemnities payable by Borrowers under the Financing
Agreements then due to any Lender;
(C) third, to the payment in full of all fees (other than the
early termination fee set forth in Section 13.1(c) hereof) payable by Borrowers
to the Agent for the account of Agent or for the ratable account of Lenders
hereunder and under the other Financing Agreements then due;
(D) fourth, to the payment in full of all interest due in respect
of the Loans (including interest payable in respect of Revolving Loans, the Term
Loan or otherwise);
(E) fifth, to the payment in full of the principal of the
Revolving Loans;
(F) sixth, to the payment in full of the principal of the Term
Loan; and
(G) seventh, to the payment in full of any other Obligations
(including the early termination fee set forth in Section 13.1(c) hereof).
(b) Notwithstanding anything to the contrary contained in Section
6.4(a) hereof, on and after either (i) an Event of Default and the acceleration
by Agent of the payment of all or a material portion of the Obligations or (ii)
the commencement of an Insolvency Proceeding by or against any Borrower (and in
the case of any Insolvency Proceeding against any Borrower, after any applicable
cure period has passed in order for the same to constitute an Event of Default),
Proceeds of the Collateral shall be applied in the following order:
(A) first, to the payment in full of the expenses for the
collection and enforcement of the Obligations and for the protection,
preservation or sale, disposition or other realization upon the Collateral,
including all expenses, liabilities and advances incurred or made by or on
behalf of Agent, as an Agent, in connection therewith (including attorneys' fees
and legal expenses and other Agent's expenses);
(B) second, to the payment in full of the Obligations (and
including cash collateral for Letter of Credit Accommodations in an amount equal
to one hundred five (105%) percent of the aggregate undrawn amount thereof)
other than (i) the Obligations arising pursuant to the Term Loan (including
principal, interest and fees and expenses attributable thereto), (ii) the early
termination fee payable under Section 13.1(c) of the Loan Agreement and (iii)
Obligations that are described in clause (b) of the definition of Obligations
which are in excess of the Reserve provided therefor in Section 1.144(xii)
hereof;
(C) third, to the payment in full of the Obligations arising
pursuant to the Term Loan (including principal, interest and fees and expenses
attributable thereto);
(D) fourth, to the payment in full of the interests of Revolving
Loan Lenders in (i) the early termination fee payable in accordance with Section
13.1(c) hereof and (ii)
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Obligations that are described in clause (b) of the definition of Obligations
which are in excess of the Reserve provided therefor in Section 1.144(xii)
hereof; and
(E) fifth, to the payment in full of any other Obligations.
(c) Notwithstanding anything to the contrary contained in this
Agreement, unless so directed by Borrowers, or unless an Event of Default shall
exist or have occurred and be continuing, Agent shall not apply any payments
which it receives to any Eurodollar Rate Loans, except (i) on the expiration
date of the Interest Period applicable to any such Eurodollar Rate Loans or (ii)
in the event that there are no outstanding Prime Rate Loans, provided, that, in
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the event that there are no outstanding Prime Rate Loans and no Event of Default
exists or has occurred, upon Borrowers' Agent's request, any payments received
after Agent's receipt of such request will not be applied to the Eurodollar Rate
Loans and such amounts that are not applied to the Obligations shall be held as
cash collateral for the Obligations (the "Credit Balance Cash Collateral").
Such Credit Balance Cash Collateral shall constitute part of the Collateral.
Such Credit Balance Cash Collateral shall be held by Agent in an account
designated by Agent for such purposes in its books and records and may be
commingled with Agent's own funds. Borrowers shall receive a credit on a monthly
basis to its loan account maintained by Agent on the funds so held by Agent at a
rate equal to three and one-half (3 1/2%) percent per annum less than the Prime
Rate (adjusted effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs) as calculated by Agent. So long as no
act, condition or event, which with notice, lapse of time or both, would
constitute an Event of Default or Event of Default shall exist or have occurred
and be continuing and no Cash Dominion Event exists, amounts received by Agent
from Borrowers pursuant to the foregoing which are not applied to the
Obligations pursuant to the provisions of this Section 6.4 shall, upon the
request of Borrowers' Agent received by Agent on or before 11:00 a.m. New York
City time on any Business Day, be remitted to Borrowers.
(d) At Agent's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers.
Borrowers shall make all payments to Agent and Lenders on the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Agent or any Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Agent or such Lender. Borrowers shall be liable to pay
to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the
amount of any payments or proceeds surrendered or returned. This Section 6.4(d)
shall remain effective notwithstanding any contrary action which may be taken by
Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
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6.5 Taxes.
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(a) Any and all payments by or on behalf of any Borrower or any
Obligor hereunder and under any other Financing Agreement shall be made, in
accordance with Section 6.4, free and clear of and without deduction for any and
all Taxes, excluding (i) income taxes imposed on the net income of any Lender
(or any transferee or assignee of such Lender, including any Participant, any
such transferee or assignee being referred to as a "Transferee") and (ii
franchise or similar taxes imposed on or determined by reference to the net
income of any Lender (or Transferee), in each case by the United States of
America or by the jurisdiction under the laws of which such Lender (or
Transferee) (A) is organized or any political subdivision thereof or (B) has its
applicable lending office located. In addition, Borrowers agree to pay to the
relevant Governmental Authority in accordance with applicable law any Other
Taxes.
(b) If any Borrower or Obligor shall be required by law to deduct or
withhold in respect of any Taxes or Other Taxes from or in respect of any sum
payable hereunder to Agent or any Lender, then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender (or Agent on behalf of such Lender) receives an amount equal to the sum
it would have received had no such deductions or withholdings been made;
(ii) such Borrower or Obligor shall make such deductions and
withholdings;
(iii) such Borrower or Obligor shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) to the extent not paid to Agent and Lenders pursuant to
clause (i) above, such Borrower or Obligor shall also pay to Agent or any
Lender, at the time interest is paid, all additional amounts which Agent or any
Lender specifies as necessary to preserve the after-tax yield such Lender would
have received if such Taxes or Other Taxes had not been imposed.
(c) Within thirty (30) days after the date of any payment by any
Borrower or Obligor of Taxes or Other Taxes, such Borrower or Obligor shall
furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment reasonably satisfactory to Agent.
(d) Borrowers will indemnify Agent and each Lender (or Transferee) for
the full amount of Taxes and Other Taxes paid by Agent or such Lender (or
Transferee, as the case may be). If Agent or such Lender (or Transferee)
receives a refund in respect of any Taxes or Other Taxes for which Lender (or
Transferee) has received payment from any Borrower or Obligor hereunder, so long
as no Event of Default, or act, condition or event which with notice or passage
of time or both would constitute an Event of Default, shall exist or have
occurred and be
61
continuing, Agent or such Lender (as the case may be) shall credit to the loan
account of Borrowers the amount of such refund plus any interest received (but
only to the extent of indemnity payments made, or additional amounts paid, by
Borrowers or Obligors under this Section 6.5 with respect to the Taxes or Other
Taxes giving rise to such refund). If a Lender (or any Transferee) claims a tax
credit in respect of any Taxes for which it has been indemnified by Borrowers or
Obligors pursuant to this Section 6.5, such Lender will apply the amount of the
actual dollar benefit received by such Lender as a result thereof, as reasonably
calculated by Lender and net of all expenses related thereto, to the Loans. If
Taxes or Other Taxes were not correctly or legally asserted, Agent or such
Lender shall, upon Borrowers' Agent's request and at Borrowers' expense, provide
such documents to Borrowers' Agent, in form and substance satisfactory to Agent,
as Parent may reasonably request, to enable Borrowers to contest such Taxes or
Other Taxes pursuant to appropriate proceedings then available to such Borrower
(so long as providing such documents shall not, in the good faith determination
of Agent, have a reasonable likelihood of resulting in any liability of Agent or
any Lender).
(e) In the event any Transferee is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") such Non-U.S. Lender shall deliver to Borrowers'
Agent two (2) copies of either United States Internal Revenue Service Form 1001
or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S.
Federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", a Form W-8, or any subsequent versions
thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8,
a certificate representing that such Non-U.S. Lender is not a bank for purposes
of Section 881(c) of the Code, is not a ten (10%) percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of any Borrower or Obligor and
is not a controlled foreign corporation related to any Borrower or Obligor
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from U.S.
Federal withholding tax on payments by Borrowers or Obligors under this
Agreement and the other Financing Agreements. Such forms shall be delivered by
any Transferee that is a Non-U.S. Lender on or before the date it becomes a
party to this Agreement (or, in the case of a Transferee that is a Participant,
on or before the date such Participant becomes a Transferee hereunder) and on or
before the date, if any, such Non-U.S. Lender changes its applicable lending
office by designating a different lending office (a "New Lending Office"). In
addition, a Non-U.S. Lender shall upon written notice from Borrower's Agent
promptly deliver such new forms as are required by the Code or the regulations
issued thereunder to claim exemption from, or reduction in the rate of, U.S.
Federal withholding tax upon the obsolescence or invalidity of any form
previously delivered by such Non-U.S. Lender. Notwithstanding any other
provision of this Section 6.5(e), a Non-U.S. Lender shall not be required to
deliver any form pursuant to this Section 6.5(e) that such Non-U.S. Lender is
not legally able to deliver.
(f) Borrowers and Obligors shall not be required to indemnify any Non-
U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in respect
of United States Federal withholding tax pursuant to subsections (a), (b) or (d)
above to the extent that the (i) the obligation to withhold amounts with respect
to United States Federal withholding tax was applicable on the date such Non-
U.S. Lender became a party to this Agreement (or, in the case of
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a Transferee that is a Participant, on the date such Participant became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; provided, that, this subsection (f) shall not apply (A) to any Transferee
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or New Lending Office that becomes a Transferee or New Lending Office as a
result of an assignment, participation, transfer or designation made at the
request of Borrowers or Obligors and (B) to the extent the indemnity payment or
additional amounts any Transferee, acting through a New Lending Office, would be
entitled to receive (without regard to this subsection (f)) do not exceed the
indemnity payment or additional amounts that the person making the assignment,
participation or transfer to such Transferee making the designation of such New
Lending Office, would have been entitled to receive in the absence of such
assignment, participation, transfer or designation or (ii the obligation to pay
such additional amounts would not have arisen but for a failure by such Non-U.S.
Lender to comply with the provisions of subsection (e) above.
6.6 Authorization to Make Loans. Agent and Lenders are authorized to
---------------------------
make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of any Borrower or Borrowers' Agent or other authorized person or, at
the discretion of Agent, if such Loans are necessary to satisfy any Obligations
then due and payable. All requests for Loans or Letter of Credit Accommodations
hereunder shall specify the date on which the requested advance is to be made or
Letter of Credit Accommodations established (which day shall be a Business Day)
and the amount of the requested Loan. Requests received after 11:00 a.m. New
York City time on any day shall be deemed to have been made as of the opening of
business on the immediately following Business Day. All Loans and Letter of
Credit Accommodations under this Agreement shall be conclusively presumed to
have been made to, and at the request of and for the benefit of, Borrowers when
deposited to the credit of such Borrower or otherwise disbursed or established
in accordance with the instructions of such Borrower or Borrowers' Agent or in
accordance with the terms and conditions of this Agreement.
6.7 Use of Proceeds. Borrowers shall use the initial proceeds of the
---------------
Loans provided by Agent to Borrowers hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrowers to Agent on or about the date hereof, (b) payment of a portion of the
purchase price for the Purchased Stock, and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of the
Purchase Agreements, this Agreement and the other Financing Agreements. All
other Loans made or Letter of Credit Accommodations provided to or for the
benefit of Borrowers pursuant to the provisions hereof shall be used by
Borrowers only for general operating, working capital and other proper corporate
purposes of Borrowers not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be
considered a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended.
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6.8 Pro Rata Treatment. Except to the extent otherwise provided in this
------------------
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata
Shares and shall be distributed accordingly.
6.9 Sharing of Payments, Etc.
------------------------
(a) Borrowers agree that, in addition to (and without limitation of)
any right of setoff, banker's lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option (but subject, as
among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset
balances held by it for the account of Borrowers at any of its offices, in
dollars or in any other currency, against any principal of or interest on any
Loans owed to such Lender or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
Borrower), in which case it shall promptly notify Borrowers' Agent and Agent
thereof; provided, that, such Lender's failure to give such notice shall not
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affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from any Borrower or
Obligor payment of any principal of or interest on any Loan owing to it or
payment of any other amount under this Agreement or any of the other Financing
Agreements through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by Borrowers to such Lender
than the percentage thereof received by any other Lender, it shall promptly pay
to Agent, for the benefit of Lenders, the amount of such excess and
simultaneously purchase from such other Lenders a participation in the Loans or
such other amounts, respectively, owing to such other Lenders (or such interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all Lenders
shall share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) in
accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) Borrowers agree that any Lender so purchasing such a participation
(or direct interest) may exercise, in a manner consistent with this Section, all
rights of setoff, banker's lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender were a direct holder of Loans or
other amounts (as the case may be) owing to such Lender in the amount of such
participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of Borrower. If, under any applicable
64
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section applies, such Lender shall, to the
extent practicable, assign such rights to Agent for the benefit of Lenders and,
in any event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share in
the benefits of any recovery on such secured claim.
6.1 Settlement Procedures.
---------------------
(a) In order to administer the Credit Facility in an efficient manner
and to minimize the transfer of funds between Agent and Lenders, Agent may, at
its option, subject to the terms of this Section, make available, on behalf of
Revolving Loan Lenders, the full amount of the Revolving Loans requested or
charged to any Borrower's loan account(s) or otherwise to be advanced by Lenders
pursuant to the terms hereof, without requirement of prior notice to Revolving
Loan Lenders of the proposed Revolving Loans.
(b) With respect to all Revolving Loans made by Agent on behalf of
Revolving Loan Lenders as provided in this Section, the amount of each Lender's
Pro Rata Share of the outstanding Revolving Loans shall be computed weekly, and
shall be adjusted upward or downward on the basis of the amount of the
outstanding Revolving Loans as of 5:00 p.m. New York time on the Business Day
immediately preceding the date of each settlement computation; provided, that,
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Agent retains the absolute right at any time or from time to time to make the
above described adjustments at intervals more frequent than weekly, but in no
event more than twice in any week. Agent shall deliver to each of the Revolving
Loan Lenders after the end of each week, or at such lesser period or periods as
Agent shall determine, a summary statement of the amount of outstanding
Revolving Loans for such period (such week or lesser period or periods being
hereinafter referred to as a "Settlement Period"). If the summary statement is
sent by Agent and received by a Lender prior to 12:00 p.m. New York time, then
such Revolving Loan Lender shall make the settlement transfer described in this
Section by no later than 3:00 p.m. New York time on the same Business Day and if
received by Lender after 12:00 p.m. New York time, then such Lender shall make
settlement transfer by no later than 3:00 p.m. New York time on the next
Business Day following the date of receipt. If, as of the end of any Settlement
Period, the amount of a Lender's Pro Rata Share of the outstanding Revolving
Loans is more than such Lender's Pro Rata Share of the outstanding Revolving
Loans as of the end of the previous Settlement Period, then such Revolving Loan
Lender shall forthwith (but in no event later than the time set forth in the
preceding sentence) transfer to Agent by wire transfer in immediately available
funds the amount of the increase. Alternatively, if the amount of a Revolving
Loan Lender's Pro Rata Share of the outstanding Revolving Loans in any
Settlement Period is less than the amount of such Revolving Loan Lender's Pro
Rata Share of the outstanding Revolving Loans for the previous Settlement
Period, Agent shall forthwith transfer to such Lender by wire transfer in
immediately available funds the amount of the decrease. The obligation of each
of the Revolving Loan Lenders to transfer such funds and effect such settlement
shall be irrevocable and unconditional and without recourse to or warranty by
Agent. Agent and each Revolving Loan Lender agrees to ▇▇▇▇ its books and records
at the end of each Settlement Period to show at all times the dollar amount of
its Pro Rata Share of the outstanding Revolving Loans and Letter of Credit
Accommodations. Each Revolving Loan Lender shall only be entitled to receive
65
interest on its Pro Rata Share of the Revolving Loans to the extent such
Revolving Loans have been funded by such Revolving Loan Lender. Because the
Agent on behalf of Revolving Loan Lenders may be advancing and/or may be repaid
Revolving Loans prior to the time when Revolving Loan Lenders will actually
advance and/or be repaid such Revolving Loans, interest with respect to
Revolving Loans shall be allocated by Agent in accordance with the amount of
Revolving Loans actually advanced by and repaid to each Revolving Loan Lender
and the Agent and shall accrue from and including the date such Revolving Loans
are so advanced to but excluding the date such Revolving Loans are either repaid
by Borrowers or actually settled with the applicable Revolving Loan Lender as
described in this Section.
(c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Revolving Loans by Borrowers, Agent may apply such amounts repaid directly
to any amounts made available by any Agent pursuant to this Section. In lieu of
weekly or more frequent settlements, Agent may, at its option, at any time
require each Revolving Loan Lender to provide Agent with immediately available
funds representing its Pro Rata Share of each Revolving Loan, prior to Agent's
disbursement of such Revolving Loan to any Borrower. In such event, all
Revolving Loans under this Agreement shall be made by the Lenders simultaneously
and proportionately to their Pro Rata Shares. No Revolving Loan Lender shall be
responsible for any default by any other Revolving Loan Lender in the other
Revolving Loan Lender's obligation to make a Revolving Loan requested hereunder
nor shall the Commitment of any Revolving Loan Lender be increased or decreased
as a result of the default by any other Revolving Loan Lender in the other
Revolving Loan Lender's obligation to make a Revolving Loan hereunder.
(d) If Agent is not funding a particular Revolving Loan to a Borrower
pursuant to this Section 6.10 on any day, Agent may assume that each Revolving
Loan Lender will make available to Agent such Lender's Pro Rata Share of the
Revolving Loan requested or otherwise made on such day and Agent may, in its
discretion, but shall not obligated to, cause a corresponding amount to be made
available to Borrowers on such day. If Agent makes such corresponding amount
available to a Borrower and such corresponding amount is not in fact made
available to Agent by such Revolving Loan Lender, Agent shall be entitled to
recover such corresponding amount on demand from such Revolving Loan Lender
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to Agent at the Federal Funds Rate for each
day during such period (as published by the Federal Reserve Bank of New York or
at Agent's option based on the arithmetic mean determined by Agent of the rates
for the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York time) on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent's demand, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the
period in which such Revolving Loan Lender has not paid such corresponding
amount to Agent, notwithstanding anything to the contrary contained in this
Agreement or any of the other Financing Agreements, the amount so advanced by
Agent to a Borrower shall, for all purposes hereof, be a Revolving Loan made by
Agent for its own account. Upon any such failure by a Revolving Loan Lender to
pay Agent, Agent shall promptly thereafter notify Borrowers' Agent of such
failure and such Borrower shall immediately pay such
66
corresponding amount to Agent for its own account within five (5) Business Days
of Borrowers' Agent's receipt of such notice. A Revolving Loan Lender who fails
to pay Agent its Pro Rata Share of any Revolving Loans made available by the
Agent on such Revolving Loan Lender's behalf, or any Lender who fails to pay any
other amount owing by it to Agent, is a "Defaulting Lender". Agent shall not be
obligated to transfer to a Defaulting Lender any payments received by Agent for
the Defaulting Lender's benefit, nor shall a Defaulting Lender be entitled to
the sharing of any payments hereunder (including, principal, interest or fees).
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, relend to Borrowers the amount of
all such payments received or retained by it for the account of such Defaulting
Lender. For purposes of voting or consenting to matters with respect to this
Agreement and the other Financing Agreements and determining Pro Rata Shares,
such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Revolving Loan Commitment shall be deemed to be zero (0). This Section shall
remain effective with respect to a Defaulting Lender until such default is
cured. The operation of this Section shall not be construed to increase or
otherwise affect the Commitment of any Revolving Loan Lender, or relieve or
excuse the performance by any Borrower or any Obligor of their duties and
obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Revolving Loan Lender or to relieve any Revolving Loan Lender from
its obligation to fulfill its Revolving Loan Commitment hereunder or to
prejudice any rights that Borrowers may have against any Revolving Loan Lender
as a result of any default by any Revolving Loan Lender hereunder in fulfilling
its Revolving Loan Commitment.
6.11 Obligations Several; Independent Nature of Lenders' Rights. The
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obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
---------------------------------------------
7.1 Collateral Reporting.
--------------------
(a) Borrowers or Borrowers' Agent shall provide Agent with the
following documents in a form reasonably satisfactory to Agent:
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(i) daily, reports, in form and substance satisfactory to Agent, on
Cash Equivalents, to the extent such Cash Equivalents are to be included in the
calculation of Excess Availability and Excess and Suppressed Availability.
(ii) on Tuesday of each week for the immediately preceding week
ending on the close of business on Saturday of that week or more frequently as
Agent may request, (A) perpetual inventory reports in substantially the form set
forth as Exhibit 7.1, with such modifications as Agent shall request from time
to time, (B) reports of sales of Inventory, returns, and aggregate Inventory
purchases (including all costs related thereto, such as freight, duty and
taxes), and (C) markdown reports by categories of Inventory, setting forth the
original Cost, original retail sales price prior to any markdowns and the Retail
Sales Price and (D) a report with respect to loans by Borrowers and Obligors to
FSC permitted under Section 9.10(k) hereof, which report shall detail the
outstanding amount of such loans as of the close of business for each calendar
day of the preceding week.
(iii) as soon as possible at the end of each month (but in any event
within ten (10) days after the end thereof) or more frequently, as Agent may
request, (A) inventory aging reports by category (including identifying
Inventory at locations owned and operated by third parties or on consignment),
(B) a report of (i) all store openings and closings which occurred in the month
just ended and (ii) projected store openings and closings for the current month,
(C) agings of accounts payable (and including information indicating the amounts
owing to owners and lessors of leased premises, warehouses, consolidators and
other third parties from time to time in possession of any Collateral), and (D)
a certificate from the chief financial officer of Borrowers' Agent (1)
representing that Borrowers have made payment of sales and use taxes during such
month or, at Lender's request, other evidence of such payment and (2) reporting
each dispute in an amount equal to or in excess of $100,000 with any lessor or
other third party operator of locations where Collateral is located (the report
should indicate the amount of the dispute and whether reserves (and the amount
thereof) are set aside therefor);
(iv) upon Agent's reasonable request, (A) copies of deposit slips
and bank statements, (B) copies of purchase orders, invoices and delivery
documents for Inventory acquired by Borrowers, and (C) the monthly statements
received by any Borrower from any Credit Card Issuers or Credit Card Processors,
together with such additional information with respect thereto as shall be
sufficient to enable Lender to monitor the transactions pursuant to the Credit
Card Agreements; and
(v) such other reports as to the Collateral as Agent shall request
from time to time.
(b) If any of Borrower's records or reports of the Collateral are prepared
or maintained by an accounting service, contractor, shipper or other agent,
Borrowers hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Agent and to
follow Agent's instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
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7.2 Accounts Covenants.
------------------
(a) Borrowers shall notify Agent promptly of: (i) any notice of a
material default by any Borrower under any of the Credit Card Agreements or of
any default which has a reasonable likelihood of resulting in the Credit Card
Issuer or Credit Card Processor ceasing to make payments or suspending payments
to any Borrower, (ii) any notice from any Credit Card Issuer or Credit Card
Processor that such person is ceasing or suspending, or will cease or suspend,
any present or future payments due or to become due to any Borrower from such
person, or that such person is terminating or will terminate any of the Credit
Card Agreements, and (iii) the failure of any Borrower to comply with any
material terms of the Credit Card Agreements or any terms thereof which has a
reasonable likelihood of resulting in the Credit Card Issuer or Credit Card
Processor ceasing or suspending payments to any Borrower.
(b) Agent shall have the right at any time or times, in Agent's name
or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) each
-------------------
Borrower shall and Parent shall cause each Obligor and Additional L/C Debtor to
at all times maintain inventory records reasonably satisfactory to Agent,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrowers cost therefor and daily withdrawals
therefrom and additions thereto; (b) Borrowers shall conduct a physical count of
the Inventory at least once each year (at which representatives of Agent may be
present) and at such time or times as is consistent with current practices as of
the date hereof, but at any time or times as Agent may request on or after an
Event of Default in accordance with clause (e) below, and promptly following
such physical inventory shall supply Agent with a report in the form and with
such specificity as may be reasonably satisfactory to Agent concerning such
physical count; (c) Borrowers shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Agent,
except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location and except for Inventory shipped from the
manufacturer thereof to Borrowers which is in transit to the locations set forth
or permitted herein; (d) upon Agent's request, Borrowers shall, at their
expense, no more than three (3) times in any twelve (12) month period, but at
any additional time or times as Agent may request at Lenders' expense, or at any
time or times as Agent may request at Borrower's expense on or after an Event of
Default, deliver or cause to be delivered to Agent written reports or appraisals
as to the Inventory in form, scope and methodology acceptable to Agent and by an
appraiser acceptable to Agent, addressed to Agent and upon which Agent and
Lenders are is expressly permitted to rely; and (e) after the occurrence and
during the continuance of an Event of Default, Borrowers shall, at their
expense, conduct through RGIS Inventory Specialists, Inc. or another inventory
counting service acceptable to Agent, a physical count of the Inventory in form,
scope and methodology acceptable to Agent, the results of which shall be
reported directly by such inventory counting service to Agent and Borrowers
shall promptly deliver confirmation in a form satisfactory to Agent that
appropriate adjustments have been made to the inventory records of Borrowers to
reconcile the inventory count to Borrower's inventory records; Borrowers shall
69
produce, use, store and maintain the Inventory, with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); Borrowers assume all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; each Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrowers to repurchase such Inventory except for the right of
return given to retail customers of Borrowers in the ordinary course of the
business of Borrowers in accordance with the then current return policy of
Borrower; Borrowers shall keep the Inventory in good and marketable condition;
and Borrowers shall not acquire or accept any Inventory on consignment or
approval, except for the sale of jewelry in Retail Store Subsidiaries of
Catherines to the extent such Inventory is reported to Agent in accordance with
the terms hereof.
(e) Agent may, at any time or times that an Event of Default exists or
has occurred and is continuing, (i) notify any or all account debtors, Credit
Card Issuers, Credit Card Processors or any other obligor in respect of any
Receivables that the Receivables have been assigned to Agent and that Agent has
a security interest therein and Agent may direct any or all accounts debtors,
Credit Card Issuers, Credit Card Processors or other obligors in respect of any
Receivables to make payment of Receivables directly to Agent , (ii extend the
time of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all
Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any way
liable for payment thereof without affecting any of the Obligations, (ii demand,
collect or enforce payment of any Receivables or such other obligations, but
without any duty to do so, and Agent and Lenders shall not be liable for Agent's
failure to collect or enforce the payment thereof nor for the negligence of its
agents or attorneys with respect thereto and (iv take whatever other action
Agent may in good ▇▇▇▇▇ ▇▇▇▇ necessary or desirable for the protection of its
interests. At any time that an Event of Default exists or has occurred and is
continuing, at Agent's request, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Agent and are payable directly and only to Agent and each Borrower
shall deliver to Agent such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Agent may require.
7.4 Equipment and Real Property Covenants. With respect to Real Property
-------------------------------------
subject to the Mortgages, upon Agent's request, Borrowers shall, at their
expense, no more than once in any twelve (12) month period, but at any time or
times as Agent may request on or after an Event of Default, deliver or cause to
be delivered to Agent written reports or appraisals as to the Real Property
subject to the Mortgages, in form, scope and methodology acceptable to Agent and
by an appraiser acceptable to Agent, addressed to Agent and upon which Agent and
Lenders are permitted to rely. With respect to the Equipment and Real Property:
(a) Borrowers shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (b) Borrowers and
Obligors shall use the Equipment and Real Property with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
material conformity with all applicable laws; (c) Borrowers and Obligors shall
not remove any
70
Equipment from the locations set forth or permitted herein, except to the extent
necessary to have any Equipment replaced, repaired or maintained in the ordinary
course of the business of Borrowers or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles or other portable Equipment used by or for the
benefit of Borrowers and Obligors in the ordinary course of business and except
for sales, dispositions or other transactions permitted under this Agreement;
and (d) each Borrower assumes all responsibility and liability arising from the
use of the Equipment and Real Property.
7.5 Bills of Lading and Other Documents of Title. With respect to
--------------------------------------------
Inventory in transit to premises of a customs broker in the United States or
premises of Borrowers in the United States of America, after the occurrence and
during the continuance of an Event of Default, (a) Borrowers shall cause all
bills of lading and other documents of title relating to goods being purchased
by it which are outside the United States and in transit to such premises to
name Borrowers as consignee, unless and until Agent may direct otherwise; (b) at
such time and from time to time as Agent may direct, Borrowers shall cause Agent
or such other financial institution or other person as Agent may specify to be
named as consignee; (c) without limiting any other rights of Agent or any Lender
hereunder, Agent shall have the right to endorse and negotiate on behalf of ,
and as attorney-in-fact for, Borrowers any ▇▇▇▇ of lading or other document of
title with respect to such goods naming Borrowers as consignee to Agent; (d)
there shall be three (3) originals of each of such ▇▇▇▇ of lading or other
document of title which unless and upon Agent's direction, shall be delivered as
follows: (i) one (1) original to such customs broker as Borrowers may specify
(so long as Agent has received a Collateral Access Agreement duly executed and
delivered by such customs broker), and (ii two (2) originals to Agent or to such
other person as Agent may designate for such purpose; (e) Borrowers shall
obtain a copy (but not the originals) of such ▇▇▇▇ of lading or other documents
of title from the customs broker and (f) Borrowers shall cause all bills of
lading or other documents of title relating to goods purchased by Borrowers
which are outside the United States and in transit to the premises of Borrowers
or the premises of a customs broker in the United States to be issued in a form
so as to constitute negotiable documents as such term is defined in the Uniform
Commercial Code.
7.6 Power of Attorney. Each Borrower hereby irrevocably designates and
-----------------
appoints Agent (and all persons designated by Agent) as such Borrower's true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower's or Agent's
name, to: (a) at any time an Event of Default exists or has occurred and is
continuing (i) demand payment on Receivables or other Collateral, (ii enforce
payment of Receivables by legal proceedings or otherwise, (ii exercise all of
such Borrower's rights and remedies to collect any Receivable or other
Collateral, (iv sell or assign any Receivable upon such terms, for such amount
and at such time or times as the Agent deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi discharge and release any
Receivable, (vi prepare, file and sign such Borrower's name on any proof of
claim in bankruptcy or other similar document against an account debtor or other
obligor in respect of any Receivables or other Collateral, (vi notify the post
office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Agent, and open and dispose of all mail
addressed to such Borrower and handle and store all mail relating to the
Collateral; (ix) clear
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Inventory the purchase of which was financed with Letter of Credit
Accommodations through U.S. Customs or foreign export control authorities in
such Borrower's name, Agent's name or the name of Agent's designee, and to sign
and deliver to customs officials powers of attorney in Borrower's name for such
purpose, and to complete in such Borrower's or Agent's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, and (x) do all acts and things which are necessary, in
Agent's determination, to fulfill such Borrower's obligations under this
Agreement and the other Financing Agreements and (b) at any time to (i) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Agent or any Lender, (ii have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (ii endorse Borrower's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any
Lender and deposit the same in Agent's account for application to the
Obligations, (iv endorse Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Receivable
or any goods pertaining thereto or any other Collateral, including any warehouse
or other receipts, or bills of lading and other negotiable or non-negotiable
documents, and (v) sign such Borrower's name on any verification of Receivables
and notices thereof to account debtors or any secondary obligors or other
obligors in respect thereof. Each Borrower hereby releases Agent and Lenders and
their respective officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Agent's own gross
negligence or wilful misconduct as determined pursuant to a final non-appealable
order of a court of competent jurisdiction .
7.7 Right to Cure. Agent may, at its option, after notice to Borrowers'
-------------
Agent (and so long as Borrowers have not taken such action within five (5) days
after such notice, unless Agent determines in good faith that under the
circumstances it must act sooner), (a) cure any default by any Borrower or
Obligor under any material agreement with a third party which affects the
Collateral, its value or the ability of Agent to collect, sell or otherwise
dispose of the Collateral or the rights and remedies of Agent or any Lender
therein or the ability of such Borrower or Obligor to perform its obligations
under the other Financing Agreements, (b) pay any or bond on appeal any judgment
entered against any Borrower or Obligor, (c) discharge taxes, Liens, at any time
levied on or existing with respect to the Collateral and (d) pay any amount,
incur any expense or perform any act which, in Agent's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto. Agent may add any amounts so
expended to the Obligations and charge Borrowers' account therefor, such amounts
to be repayable by Borrowers on demand. Agent and Lenders shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrowers or Obligors.
Any payment made or other action taken by Agent or any Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.8 Access to Premises. From time to time as requested by Agent, at the
------------------
cost and expense of Borrowers, (a) Agent or its designee shall have complete
access to all of Borrowers
72
premises and Parent shall cause each Obligor to permit Agent to have complete
access to all of such Obligor's premises during normal business hours and after
notice to Borrowers' Agent, or at any time and without notice to Borrowers,
Obligors or Borrowers' Agent if an Event of Default exists or has occurred and
is continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrowers' books and records, including the Records, and
(b) Borrowers and Obligors shall promptly furnish or cause to be furnished to
Agent such copies of such books and records or extracts therefrom as Agent may
reasonably request, and (c) Agent or any Lender or Agent's designee may use
during normal business hours such of any Borrower's or Obligor's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing (provided, that, Borrowers shall and Parent shall cause Obligors to
-------- -----
make such personnel, equipment, supplies and premises available to Lender or its
designee in such manner so as to minimize any interference with the operations
of Borrowers and Obligors) and if an Event of Default exists or has occurred and
is continuing for the collection of Accounts and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrowers hereby, jointly and severally, represent and warrant to Agent and
Lenders the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations by Agent and
Lenders to Borrowers.
8.1 Corporate Existence, Power and Authority; Subsidiaries. Except as
------------------------------------------------------
set forth on Omnibus Schedule 7, each Borrower, Obligor and each other
Subsidiary of Parent (other than Inactive Subsidiaries), is a corporation,
limited liability company or partnership duly organized and in good standing
under the laws of its state or jurisdiction of formation and is duly qualified
as a foreign entity 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 and where the failure to so qualify or
be in good standing has or has a reasonably likelihood of having a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements, and the Purchase Agreements and the transactions
contemplated hereunder and thereunder are all within each Borrower's and
Obligor's powers, have been duly authorized and are not in contravention of law
or the terms of each Borrower's or any other Obligor's certificate of
incorporation, formation, operating or partnership agreement, by-laws, or other
organizational documentation. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
thereby (a) are not in contravention of the terms of any indenture, or mortgage,
agreement or other undertaking to which any Borrower, Obligor or other
Subsidiary of Parent is a party or by which any Borrower, Obligor, or other
Subsidiary of Parent or its respective properties are bound where the
Indebtedness, obligations or other liability of such Borrower, Obligor or other
Subsidiary of Parent or the value of the respective properties bound thereby
equals or exceeds $1,000,000 or (b) result in, require or give rise to the
creation or imposition of any Lien upon any property of Borrowers, Obligors or
other Subsidiaries of Parent under any agreement or otherwise (other than in
favor of Agent pursuant to the terms of the Financing Agreements). This
Agreement and the
73
other Financing Agreements constitute legal, valid and binding obligations of
Borrowers enforceable in accordance with their respective terms. Borrowers do
not have any Subsidiaries except as set forth on Omnibus Schedule 1.
8.2 Financial Statements; No Material Adverse Change. All financial
------------------------------------------------
statements relating to Borrowers or any other Subsidiary of Parent which have
been or may hereafter be delivered by Borrowers to Agent and Lenders have been
prepared in accordance with GAAP and fairly present in all material respects the
financial condition and the results of operation of Borrowers and such Obligors
as at the dates and for the periods set forth therein. Except as disclosed in
Schedule 8.2 hereto, there has been no act, condition or event which has had or
is reasonably likely to have a Material Adverse Effect since the date of the
most recent audited financial statements of Borrowers or any Obligor furnished
by Borrowers to Agent prior to the date of this Agreement.
8.3 Collateral Locations. Each Borrower and each Borrower's and
--------------------
Obligor's Records concerning Accounts are located only at the addresses set
forth for such Borrower or Obligor on Omnibus Schedule 2 hereto, subject to the
right of any Borrower or other Obligor to establish new locations in accordance
with Section 9.2 below. Omnibus Schedule 2 hereto correctly identifies as of
the date hereof any of such locations which are not owned by Borrowers or
Obligors and sets forth the owners and/or operators thereof.
8.4 Priority of Liens; Title to Properties. The Liens granted to Agent
--------------------------------------
under this Agreement and the other Financing Agreements constitute valid and,
except as otherwise specifically consented to in writing by Agent, perfected
first priority Liens in and upon the Collateral and other property which is
security for the Obligations subject only to the Permitted Liens. Each Borrower
and Obligor has good and marketable title to all of its respective properties
and assets subject to no Liens or charges of any kind, except those granted to
Agent and such others as are specifically listed on Omnibus Schedule 13 hereto
or permitted under Section 9.8 hereto.
8.5 Tax Returns. Each of Borrowers and the other Subsidiaries of Parent
-----------
has filed, or caused to be filed, in a timely manner prior to the expiration of
all properly filed extensions all tax returns, reports and declarations which
are required to be filed by it, except as set forth in Omnibus Schedule 16
hereto or unless in respect of a Retail Store Subsidiary any such failure to
timely file any such tax returns, reports or declarations would not have a
Material Adverse Effect. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each of
Borrowers and the other Subsidiaries of Parent has paid or caused to be paid all
taxes due and payable or claimed due and payable in any assessment received by
it, as to which non-payment thereof would result in a Material Adverse Effect,
except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to, as applicable,
Borrowers or the other Subsidiaries of Parent 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.
Each Borrower and Retail Store Subsidiary has collected and deposited in a
separate bank account or remitted to the appropriate tax authority when due all
sales and/or use taxes applicable to its business required to be
74
collected under the laws of the United States and each possession or territory
thereof, and each State or political subdivision thereof or any other
jurisdiction, including any State in which such Borrower or Retail Store
Subsidiary owns any Inventory or owns or leases any other property.
8.6 Litigation. Except as set forth on Omnibus Schedule 8 hereto, there
----------
is no present investigation by any Governmental Authority pending, or to the
best of any Borrower's knowledge threatened, against or affecting any Borrower,
Obligor or any Subsidiary of any Borrower or Obligor, its assets or business and
there is no action, suit, proceeding or claim by any Person pending, or to the
best of each Borrower's knowledge threatened, against any Borrower, Obligor, or
any Subsidiary of any Borrower or Obligor or its assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, which if adversely
determined against any Borrower, Obligor, or any Subsidiary of any Obligor has
had or has a reasonable likelihood of having a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
----------------------------------------------------
(a) None of Borrowers, Obligors or other Subsidiaries of Parent is in
default in any respect under, or in violation in any respect of the terms of,
any material agreement, contract, instrument, lease or other commitment to which
it is a party or by which it or any of its assets are bound where such default
has had or has a reasonable likelihood of having a Material Adverse Effect.
Each Borrower and the other Subsidiaries is in compliance with the requirements
of all applicable laws, rules, regulations and orders of any Governmental
Authority relating to its business, including, without limitation, those set
forth in or promulgated pursuant to the Occupational Safety and Health Act of
1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the
Code, as amended, and the rules and regulations thereunder, and all
Environmental Laws where the failure to comply has had or has a reasonable
likelihood of having a Material Adverse Effect.
(b) Each Borrower and other Subsidiary of Parent has obtained all
permits, licenses, approvals, consents, certificates, orders or authorizations
of any Governmental Authority (the "Permits") required for the lawful conduct of
its business where the failure to obtain such Permit has had or is reasonably
likely to have a Material Adverse Effect. There are no actions, claims or
proceedings pending or to the best of Borrower's knowledge, threatened that seek
the revocation, cancellation, suspension or modification of any of the Permits
which revocation, cancellation, suspension or modification has had or is
reasonably likely to have Material Adverse Effect.
8.8 Environmental Compliance.
------------------------
(a) Except as set forth on Omnibus Schedule 11 hereto, Borrowers,
Obligors and other Subsidiaries of Parent have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or any
license, certificate, approval or similar authorization or other Permit
thereunder where such violation would have a Material Adverse Effect and the
operations of Borrowers and Obligors
75
comply in all respects with all Environmental Laws and all licenses,
certificates, approvals and other Permits where the failure to so comply would
have a Material Adverse Effect.
(b) Except as set forth on Omnibus Schedule 11 hereto, 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 each Borrower's and Obligor's knowledge threatened, with respect
to any non-compliance with or violation of the requirements of any Environmental
Law by such Borrower, Obligor or other Subsidiary of Parent 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 or has a reasonable likelihood of
affecting such Borrower or Obligor or its business, operations or assets or any
properties at which such Borrower or Obligor has transported, stored or disposed
of any Hazardous Materials which, in any case, has had or has a reasonable
likelihood of having a Material Adverse Effect.
(c) Borrowers, Obligors and other Subsidiaries of Parent have no
material liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials which has had or has a
reasonable likelihood of having a Material Adverse Effect.
(d) Borrowers, Obligors and their Subsidiaries have all licenses,
certificates, approvals or similar authorizations and other Permits required to
be obtained or filed in connection with the operations of Borrowers, Obligors
and their Subsidiaries under any Environmental Law where the failure to obtain
such licenses, certificates or similar authorizations and other Permits has had
or has a reasonably likelihood of having a Material Adverse Effect and all of
such licenses, certificates, approvals or similar authorizations and other
Permits are valid and in full force and effect.
8.9 Employee Benefits.
-----------------
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to the
best of each Borrower's knowledge, nothing has occurred which would cause the
loss of such qualification. No Borrower nor any of its ERISA Affiliates have
ever maintained or been required to contribute to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code.
(b) There are no pending, or to the best of any Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which would
result in a liability to Borrowers in excess of $5,000,000.
76
(c) No ERISA Event has occurred or is reasonably expected to occur
which would result in a liability in excess of the Threshold Amount.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
-------------
other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 6.3 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 5.4
hereof.
8.11 Intellectual Property. Each Borrower and Obligor owns or licenses or
---------------------
otherwise has the right to use all Intellectual Property necessary for the
operation of its business as presently conducted or proposed to be conducted
where the failure to have the right to use such Intellectual Property has had or
is reasonably likely to have a Material Adverse Effect. As of the date hereof,
each Borrower and Obligor does not have any Intellectual Property registered, or
subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Schedule 8.11 hereto and has not granted any licenses with respect
thereto other than as set forth in Schedule 8.11 hereto. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights where the failure to have
such rights has had or is reasonably likely to have a Material Adverse Effect.
To the best of each Borrower's knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods
bearing or using any Intellectual Property presently contemplated to be sold by
or employed by each Borrower and Obligor infringes any patent, trademark,
servicemark, tradename, copyright, license or other Intellectual Property owned
by any other Person presently and no claim or litigation is pending or
threatened against or affecting each Borrower and Obligor contesting its right
to sell or use any such Intellectual Property which if adversely determined
would have or would be reasonably likely to have a Material Adverse Effect.
Schedule 8.11 sets forth all of the agreements or other arrangements of
Borrowers and Obligors pursuant to which such Person(s) has a license or other
right to use any trademarks, logos, designs, representations or other
Intellectual Property owned by another person as in effect on the date hereof
and the dates of the expiration of such agreements or other arrangements of such
Borrower or Obligor as in effect on the date hereof (collectively, together with
such agreements or other arrangements as may be entered into by such Borrower or
Obligor after the date hereof, collectively, the "License Agreements" and
individually, a "License Agreement"). No trademark, servicemark or other
Intellectual Property at any time used by such Borrower or Obligor which is
owned by another person, or owned by such Borrower or Obligor subject to any
Lien in favor of any person other than Agent, is affixed to any Eligible
Inventory, except to the extent permitted under the term of the license
agreements listed on Schedule 8.11 hereto.
8.12 Capitalization.
--------------
(a) The issued and outstanding shares of Capital Stock of each
Borrower (other than Parent, LB and FB Apparel) are directly and beneficially
owned and held by Parent, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
Liens of any kind, except as disclosed in writing to Agent. FB Clothing,
77
Inc., which is a US Subsidiary, is the beneficial owner and holder of all of the
issued and outstanding shares of capital stock of FB Apparel, LBH, Inc. is the
beneficial owner and holder of the issued and outstanding shares of Capital
Stock of LB. Venice Acquisition Corporation is the beneficial owner and holder
of the issued and outstanding shares of Capital Stock of LBH, Inc. Each of the
Additional L/C Debtors is a direct or indirect Subsidiary of Parent.
(b) Borrowers and Obligors, taken as a whole, are solvent and will
continue to be solvent after the creation of the Obligations, the security
interests of Agent and the other transactions contemplated hereunder, are able
to pay their debts as they mature and have (and has reason to believe they will
continue to have) sufficient capital (and not unreasonably small capital) to
carry on their business as and all businesses in which they are about to engage.
The assets and properties of Borrowers and Obligors at a fair valuation and at
their present salable value are, and will be, greater than the Indebtedness of
Borrowers and Obligors, and including subordinated and contingent liabilities
computed at the amount which, to the best of Borrower's knowledge, represents an
amount which can reasonably be expected to become an actual or mature liability.
8.13 Labor Disputes.
--------------
(a) Set forth on Schedule 8.13 hereto is a list (including dates of
termination) of all collective bargaining or similar agreements between or
applicable to Borrowers and Obligors and any union, labor organization or other
bargaining agent in respect of the employees of Borrowers and Obligors on the
date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or any Obligor or, to the best of each Borrower's
knowledge, threatened against it or any Obligor, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against any Borrower or Obligor or, to best of each
Borrower's knowledge, threatened against it, and (ii no significant strike,
labor dispute, slowdown or stoppage is pending against any Borrower or Obligor
or, to the best of each Borrower's knowledge, threatened against Borrower or any
Obligor, which, in either case, has had or has a reasonable likelihood of
resulting in a Material Adverse Effect.
8.14 Corporate Name; Prior Transactions. No Borrower or Obligor (other
----------------------------------
than a Retail Store Subsidiary) has, during the past five years, been known by
or used by any other corporate or fictitious name or been a party to any merger
or consolidation, or acquired all or substantially all of the assets of any
Person, or acquired any of its property or assets out of the ordinary course of
business, except for the acquisition of Catherines and its Subsidiaries, Modern
Woman Holdings, Inc. and its Subsidiaries, and LBH, Inc. and its Subsidiaries.
8.15 Inactive Subsidiaries. Each of the Inactive Subsidiaries (a) has no
---------------------
material business operations and assets or (b) has been dissolved or liquidated.
78
8.16 Restrictions on Subsidiaries. Except for restrictions contained in
----------------------------
this Agreement or any other agreement with respect to Indebtedness of Borrowers
and Obligors permitted hereunder and the other Financing Agreements, the
Purchase Agreements and the Securitization Documents, there are no contractual
or consensual restrictions on any Borrower, Obligor or any of its Subsidiaries
(other than the Foreign Subsidiaries) which prohibit or otherwise restrict (a)
the transfer of cash or other assets (i) between such Borrower or Obligor and
any of their respective Subsidiaries except for restrictions on the transfers of
funds from Financing Subsidiaries other than FSC to Borrowers and Obligors or
(ii between any Subsidiaries of such Borrower or Obligor or (b) the ability of
any Borrower or Obligor or any of their respective Subsidiaries to incur
Indebtedness or grant security interests to Agent or any Lender in the
Collateral.
8.17 Material Contracts. Schedule 8.17 hereto sets forth all Material
------------------
Contracts to which any Borrower or Obligor is a party or is bound as of the date
hereof. Borrower has delivered true, correct and complete copies of such
Material Contracts to Agent on or before the date hereof. No Borrower or
Obligor is in breach of or in default under any Material Contract and has not
received any notice of the intention of any other party thereto to terminate any
Material Contract where such default or termination would have or is reasonably
likely to have a Material Adverse Effect.
8.18 Credit Card Agreements. Set forth in Schedule 8.18 hereto is a
----------------------
correct and complete list, as of the date hereof, of (a) all of the Credit Card
Agreements and all other agreements, documents and instruments existing as of
the date hereof between or among any Borrower, any of its Affiliates, the Credit
Card Issuers, the Credit Card Processors and any of their Affiliates, (b) the
percentage of each sale payable to the Credit Card Issuer or Credit Card
Processor under the terms of the Credit Card Agreements, (c) all other fees and
charges payable by any Borrower under or in connection with the Credit Card
Agreements and (d) the term of such Credit Card Agreements. The Credit Card
Agreements constitute all of such agreements necessary for each Borrower to
operate its business as presently conducted with respect to credit cards and
debit cards and no Receivables of any Borrower arise from purchases by customers
of Inventory with credit cards or debit cards, other than those which are issued
by Credit Card Issuers with whom such Borrower has entered into one of the
Credit Card Agreements set forth on Schedule 8.18 hereto or with whom such
Borrower has entered into a Credit Card Agreement in accordance with Section
8.18 hereof. Each of the Credit Card Agreements constitutes the legal, valid
and binding obligations of the Borrower that is party thereto and to the best of
each Borrower's and Obligor's knowledge, the other parties thereto, enforceable
in accordance with their respective terms and is in full force and effect. No
default or event of default, or act, condition or event which after notice or
passage of time or both, would constitute a default or an event of default under
any of the Credit Card Agreements exists or has occurred and is continuing which
would have the reasonable likelihood of having a Material Adverse Effect. Each
Borrower and the other parties thereto have complied with all of the terms and
conditions of the Credit Card Agreements to the extent necessary for such
Borrower to be entitled to receive all payments thereunder.
79
8.19 Interrelated Businesses. Borrowers, Obligors and the other
-----------------------
Subsidiaries make up a related organization of various entities which share an
identity of interests such that any benefit received by any of them benefits the
others. Each Borrower and the other Subsidiaries (a) render services to or for
the benefit of the other Borrowers and other Subsidiaries, (b) make loans and
advances and provide other financial accommodations to or for the benefit of the
other Borrowers and the other Subsidiaries of Parent (including, inter alia, the
----- ----
payment and/or guaranties by Borrowers, Obligors and the other Subsidiaries of
Indebtedness of the other Borrowers and the other Subsidiaries), and (c) provide
administrative, marketing, payroll and management services to or for the benefit
of the other Borrowers and the other Subsidiaries of Parent. Borrowers and the
other Subsidiaries of Parent have centralized accounting and legal services. The
Additional L/C Accommodations are opened solely for the purpose of (i) with
respect to the Additional L/C Debtors other than CS Insurance Ltd., acquiring
Inventory by Borrowers for ultimate resale in the Retail Stores and (ii with
respect to CS Insurance Limited, providing insurance services for the Apparel
Group. Nothing contained in this Section 8.19 should be construed or imply that
Borrowers and their Subsidiaries are not separate legal entities.
8.20 Intentionally Deleted.
---------------------
8.21 Acquisition of Purchased Stock.
------------------------------
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed (to the extent
required to be performed prior to the date hereof) in accordance with their
terms by the respective parties thereto in all material respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Agent and
consented to in writing by Agent) of all conditions precedent set forth therein
and giving effect to the terms of the Purchased Agreements and the assignments
to be executed and delivered by Seller (or any of its affiliates or
subsidiaries) thereunder, Parent, through its subsidiary Venice Acquisition
Corporation, has acquired and has good and marketable title to the Purchased
Stock, free and clear of all claims, and Liens of any kind, except for Permitted
Liens.
(b) All actions and proceedings, required by the Purchase Agreements,
applicable law or regulation (including, but not limited to, compliance with the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust Improvements Act of 1976, as amended) have been
taken and the transactions required thereunder have been duly and validly taken
and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or other
action or proceeding has been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Purchase Agreements.
(d) Borrowers have delivered, or caused to be delivered, to Agent,
true, correct and complete copies of the Purchase Agreements.
80
8.22 Accuracy and Completeness of Information. All information furnished
----------------------------------------
by or on behalf of each Borrower and Obligor in writing to Agent or any Lender
in connection with this Agreement or any of the other Financing Agreements or
any transaction contemplated hereby or thereby, including all information on the
Omnibus Schedules is true and correct in all material respects on the date as of
which such information is dated or certified and does not knowingly omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Affect, which has not been fully and accurately
disclosed to Agent in writing.
8.23 Survival of Warranties; Cumulative. All representations and
----------------------------------
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent regardless of any investigation made or
information possessed by Agent or any Lender. The representations and
warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which Borrowers shall now or hereafter give, or
cause to be given, to Agent or any Lender.
8.24 CS Securitization Undertakings. As of the Closing Date, the
------------------------------
aggregate amount of outstanding loans and advances made by Borrowers and
Obligors to FSC pursuant to CS Securitization Undertakings is zero (-0-).
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 Maintenance of Existence. Each Borrower shall and Parent shall cause
------------------------
each Obligor, and each other Financing Subsidiary and Foreign Subsidiary to at
all times preserve, renew and keep in full force and effect (a) its rights and
franchises as a corporation, limited liability company or partnership where the
failure to do so would have a reasonable likelihood of having a Material Adverse
Effect and (b) its existence subject to Section 9.7(c) hereof. Each Borrower,
Obligor and other Subsidiary of Parent (other than Inactive Subsidiaries) shall
at all times maintain in full force and effect all Permits, licenses,
trademarks, tradenames, approvals, authorizations, leases and contracts
necessary to carry on the business as presently or proposed to be conducted
where the failure to so maintain the same would have a reasonable likelihood of
having a Material Adverse Effect. Each Borrower shall, and Parent shall cause
each, Obligor and Additional L/C Debtor to give Agent thirty (30) days prior
written notice of any proposed change in its corporate name, which notice shall
accordingly set forth the new name and each Borrower, Obligor and Additional L/C
Debtor, as the case may be, and Agent shall have received a copy of the
amendment to the formation of such Person, as the case may be, providing for the
name change certified by the Secretary of State of the jurisdiction of formation
of such Person, as the case may be, as soon as it is available. Additionally,
no Borrower shall change its chief executive office or its mailing address or
organizational identification number (or if it does not have one, shall not
acquire one), unless Agent shall have received not less than thirty (30) days'
prior written notice from such Borrower of such proposed change, which notice
shall set forth such information with respect thereto as Agent may require and
Agent shall have received such agreements as Agent may reasonably require in
connection therewith. No Borrower or Obligor
81
shall change its type of organization, jurisdiction of organization or other
legal structure without thirty (30) days prior written notice to Agent of any
such proposed change and subject to Agent's receipt of each of such agreements,
guaranties, documents, and instruments as Agent may deem reasonably necessary or
desirable to protect its interests in the Collateral and other property which is
security for the Obligations.
9.2 New Collateral Locations. Any Borrower or Obligor may only open any
------------------------
new location within the continental United States provided (a) Borrowers' Agent
gives Agent ten (10) days prior written notice of the intended opening of any
such new location and (b) Agent receives such agreements, guaranties, documents,
and instruments as Agent may deem reasonably necessary or desirable to protect
its interests in the Collateral and other property which is security for the
Obligations at such location, executed (i) with respect to any new location of
any Borrower, by such Borrower, (ii) with respect to any new location of a
Retail Store operated by a Retail Store Subsidiary, by such Retail Store
Subsidiary, and (iii) with respect to a new location of any Obligor, by such
Obligor.
9.3 Compliance with Laws, Regulations, Etc.
---------------------------------------
(a) Each Borrower shall, and Parent shall cause each Obligor and each
other Subsidiary of Parent to, at all times, comply in all material respects
with all laws, rules, regulations, licenses, approvals, orders and other Permits
applicable to it and duly observe all requirements of any foreign, Federal,
State or local Governmental Authority, including ERISA, the Code, the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, and all statutes, rules, regulations, orders, permits
and stipulations relating to environmental pollution and employee health and
safety, including all of the Environmental Laws where the failure to do so,
individually or in the aggregate, has or has a reasonable likelihood of having a
Material Adverse Effect.
(b) Each Borrower shall and Parent shall cause each Obligor and each
other Subsidiary of Parent to establish and maintain, at its expense, a system
to assure and monitor its continued compliance in all material respects with all
applicable Environmental Laws in all of its operations, which system shall
include annual reviews of such compliance by employees or agents of such
Borrower who are familiar with the requirements of the Environmental Laws.
Copies of all environmental surveys, audits, assessments, feasibility studies
and results of remedial investigations with respect to any Real Property subject
to the Mortgages or any non-compliance with respect to other Real Property which
has a reasonable likelihood of having a Material Adverse Effect shall be
promptly furnished, or caused to be furnished, by such Borrower to Agent. Each
Borrower, Obligor and other Subsidiary of Parent shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Agent on such response.
(c) Each Borrower shall and Parent shall cause each Obligor and each
other Subsidiary of Parent to give both oral and written notice to Agent
immediately upon such Person's receipt of any notice of, or such Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any
82
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by such Person or (B) the release,
spill or discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects such Person or its
business, operations or assets or any properties at which such Borrower, Obligor
and other Subsidiary of Parent transported, stored or disposed of any Hazardous
Materials where such matter has had or has a reasonable likelihood of having a
Material Adverse Effect.
(d) Without limiting the generality of the foregoing, whenever Agent
reasonably determines that there is material non-compliance, or any condition
which requires any action by or on behalf of any Borrower, Obligor or Foreign
Subsidiary in order to avoid any material non-compliance, with any Environmental
Law which material non-compliance or condition has had or is reasonably likely
to have a Material Adverse Effect, such Borrower shall, at Agent's request and
Borrowers' expense: (i) cause an independent environmental engineer acceptable
to Agent to conduct such tests of the site where such Person's non-compliance or
alleged reasonably non-compliance with such Environmental Laws has occurred as
to such non-compliance and prepare and deliver to Agent a report as to such
material non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such material non-compliance, or Person's
response thereto or the estimated costs thereof, shall change in any material
respect.
(e) Borrowers shall indemnify and hold harmless Agent and Lenders and
their respective, directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including attorneys' fees and
legal expenses) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material,
including the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of such Borrower and the preparation
and implementation of any closure, remedial or other required plans, other than
such loss, claim, liability, damage, cost or expense as a result of the gross
negligence or wilful misconduct of Agent or any Lender as determined pursuant to
a final, non-appealable order of a court of competent jurisdiction. All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
(f) For purposes of Section 9.3(b), (c) and (d) hereof, the term
"other Subsidiary of Parent" shall not include any of the Financing
Subsidiaries.
9.4 Payment of Taxes and Claims. Each Borrower shall, and Parent shall
---------------------------
cause each Obligor and other of its other Subsidiaries to, duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently
83
pursued and available to any Borrower or such Subsidiary, as the case may be,
and with respect to which adequate reserves have been set aside on its books and
except in the case of taxes owed by Retail Store Subsidiaries where the failure
to pay such taxes would not result in a liability which would exceed the
Threshold Amount. Each Borrower shall be liable for any tax or penalties imposed
on Agent or any Lender as a result of the financing arrangements provided for
herein and each Borrower agrees to indemnify and hold Agent and Lenders harmless
with respect to the foregoing, and to repay to Agent, for the benefit of
Lenders, on demand the amount thereof, and until paid by Borrowers such amount
shall be added and deemed part of the Loans, provided, that, nothing contained
-------- ----
herein shall be construed to require Borrowers to pay any income or franchise
taxes attributable to the income of Lenders from any amounts charged or paid
hereunder to Lenders. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Each Borrower shall, and Parent shall cause each Obligor
---------
and each other Subsidiary of Parent (other than the Financing Subsidiaries), to,
at all times, maintain with financially sound and reputable insurers insurance
with respect to the Collateral against loss or damage and all other insurance of
the kinds and in the amounts customarily insured against or carried by
corporations of established reputation engaged in the same or similar businesses
and similarly situated. Said policies of insurance shall be reasonably
satisfactory to Agent as to form, amount and insurer. Borrowers shall furnish
certificates, policies or endorsements to Agent as Agent shall reasonably
require as proof of such insurance, and, if Borrowers fail to do so, Agent is
authorized, but not required, to obtain such insurance at the expense of
Borrowers. All policies shall provide for at least thirty (30) days prior
written notice to Agent of any cancellation or reduction of coverage and that
Agent may act as attorney for Borrowers in obtaining, and at any time an Event
of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrowers shall cause Agent to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain non-
contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Agent. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Agent as its interests may appear and further specify that Agent and Lenders
shall be paid regardless of any act or omission by any Borrower or any of its
Affiliates. At its option, Agent may apply any insurance proceeds received by
Agent at any time to the cost of repairs or replacement of Collateral and/or to
payment of the Obligations, whether or not then due, in any order and in such
manner as Agent may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
------------------------------------------
(a) Each Borrower shall, and Parent shall cause each Obligor and each
of its other Subsidiaries to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral, other property which is security for the Obligations and the
business of such Person (if any) in accordance with GAAP and Borrowers' Agent
shall furnish or cause to be furnished to Agent: (i) within thirty-five (35)
days after the end of each fiscal month (except that no financial statements
will be furnished for the
84
month of February, so long as the financial statements due in respect of the
month of March are prepared for the first two fiscal months of the fiscal year),
monthly unaudited consolidated financial statements for Parent, and its
consolidated Subsidiaries including, without limitation, consolidated financial
statements for all of the Retail Store Subsidiaries as a whole, (including in
each case balance sheets, statements of income and loss, statements of cash flow
and statements of shareholders' equity), all in reasonable detail, fairly
presenting the consolidated financial position and the results of the
consolidated operations of Parent and its consolidated Subsidiaries, as of the
end of and through such fiscal month and accompanied by a compliance certificate
substantially in the form of Exhibit B hereto, along with a schedule in form
reasonably satisfactory to Agent of the calculations used in determining, as of
the end of such month, whether Parent and Subsidiaries were in compliance with
the covenants set forth in Section 9.18(a) and 9.18(c) of this Agreement for
such month, and as of the end of each such fiscal quarter, whether Parent and
Subsidiaries were in compliance with the covenant set forth in Section 9.18(b)
hereof, and (ii) within ninety (90) days after the end of each fiscal year,
audited consolidated financial statements of Parent (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the consolidated financial position and the
results of the consolidated operations of Parent and its consolidated
Subsidiaries, including the other Borrowers, as of the end of and for such
fiscal year, together with the opinion (which does not contain a "going concern"
or other similar exception) of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Parent and
reasonably acceptable to Agent, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Parent and its consolidated Subsidiaries, as of the
end of and for the fiscal year then ended.
(b) Borrowers' Agent shall promptly notify Agent in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to Inventory having a cost of $2,000,000 or more or which would
otherwise adversely affect the Collateral or any other property which is
security for the Obligations in any material respect or which would result in
any material adverse change in the consolidated business, properties, assets,
goodwill or condition, financial or otherwise of the Apparel Group and (ii the
occurrence of any Event of Default or event which, with the passage of time or
giving of notice or both, would constitute an Event of Default.
(c) Borrowers' Agent shall promptly after the sending or filing
thereof furnish or cause to be furnished to Agent copies of all reports which
Parent or any other Borrower sends to its stockholders generally and copies of
all reports and registration statements which Parent or any other Borrower files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(d) Borrowers' Agent shall furnish or cause to be furnished to Agent
such budgets, forecasts, projections and other information respecting the
Collateral and any other property which is security for the Obligations and the
consolidated business of the Apparel Group, as Agent may, from time to time,
reasonably request. Agent is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrowers or any
85
other Obligor to any court or other government agency or to any participant or
assignee or prospective participant or assignee, subject to the confidentiality
provisions of Section 13.6 hereof. Each Borrower hereby irrevocably authorizes
and directs all accountants or auditors to deliver to Agent, at Borrowers'
expense, copies of the financial statements of Parent or any of the other
Borrowers or any other Obligor and any reports or management letters prepared by
such accountants or auditors on behalf of Parent or any of Borrowers and to
disclose to Agent such information as they may have regarding the business of
Parent or any of the other Borrowers or any other Obligor. Any documents,
schedules, invoices or other papers delivered to Agent may be destroyed or
otherwise disposed of by Agent one (1) year after the same are delivered to
Agent, except for any longer period as otherwise designated by Borrowers' Agent
to Agent in writing.
(e) Borrowers shall deliver, or cause to be delivered to Agent, the
proposed Closing Statement of Net Tangible Assets (as such term is defined in
the Purchase Agreements) delivered by The Limited to Parent, and any notices of
disagreements sent by the Parent with respect thereto, to Agent. Within thirty
(30) days after The Limited has delivered the final, undisputed Closing
Statement of Net Tangible Assets to Venice Acquisition Corporation, Borrowers
shall deliver to Agent an opening balance sheet of Parent and its Subsidiaries
after giving effect to the transactions contemplated by this Agreement and the
Purchase Agreements, reviewed by independent certified public accountants,
selected by Borrowers and reasonably acceptable to Agent, which opening balance
sheet shall be certified by the chief financial officer of Parent, to the effect
that such opening balance sheet has been prepared in accordance with GAAP and
presents fairly the financial condition of Parent and its consolidated
Subsidiaries as of such date.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. No Borrower
--------------------------------------------------------
shall and Parent shall cause each Obligor and each other Subsidiary of Parent
not to:
(a) merge into or with or consolidate with any other Person (other
than a Borrower or Obligor, including, without limitation, a Retail Store
Subsidiary except that no Financing Subsidiary or Foreign Subsidiary may merge
into or consolidate with any Borrower or Obligor) or permit any other Person
(other than a Borrower or Obligor) to merge into or with or consolidate with it,
except (i) for the merger or consolidation of any other Person (except a
Financing Subsidiary) into a Borrower or Obligor, with such Borrower or Obligor
being the surviving entity of such merger or consolidation as to which Agent has
given its prior written consent thereto, which consent will not be unreasonably
withheld and (ii) (A) Inactive Subsidiaries may merge into or with or
consolidate with each other, (B) Financing Subsidiaries may merge into or with
or consolidate with any other Financing Subsidiaries except no other Financing
Subsidiary may merge or consolidate with FSC, and (C) Foreign Subsidiaries may
merge into or with or consolidate with each other; or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any of its assets to any other Person, except for
------
(i) (A) sales of Inventory by Borrowers and Obligors in the
ordinary course of business, (B) dispositions of assets by Financing
Subsidiaries contemplated by Qualified
86
Securitization Transactions substantially consistent with current practices in
effect immediately prior to the date hereof, and (C) dispositions of assets by
Foreign Subsidiaries in the ordinary course of business consistent with current
practices in effect immediately prior to the date hereof;
(ii) the disposition of worn-out or obsolete Equipment in the
ordinary course of business or Equipment no longer used or useful in the
business so long as (A) as of the date of such sale or other disposition and
after giving effect thereto, no Event of Default, or act, condition or event
which with notice or passage of time would constitute an Event of Default, shall
exist or have occurred, and (B) to the extent such sales or other dispositions
result in proceeds in excess of $1,000,000 for all such Equipment disposed of in
any fiscal year of Borrowers such proceeds in excess of $1,000,000 shall be paid
to Agent and Agent shall establish a Reserve equal to such amount;
(iii) the sale, lease or other disposition of Equipment (not
subject to Sections 9.7(b)(ii) or (b)(iv) hereof) or Real Property to a Person
who is not a Borrower or Obligor, in the ordinary course of business so long as
(A) as of the date of such sale or other disposition and after giving effect
thereto, no Event of Default, or act, condition or event which with notice or
passage of time would constitute an Event of Default, shall exist or have
occurred, (B) such sales do not involve Equipment or Real Property having an
aggregate fair market value in excess of $1,000,000 for all such Equipment and
Real Property disposed of in any fiscal year of Borrowers, and (C) to the extent
a Cash Dominion Event (other than an Event of Default) exists, any net proceeds
are paid to Agent, to be applied to the outstanding principal amount of
Revolving Loans, which amounts may be reborrowed;
(iv) sales or other dispositions by Borrowers or Retail Store
Subsidiaries of assets in connection with the closing or sale of a Retail Store
location of any Borrower or Retail Store Subsidiary in the ordinary course of
such Borrower's or Retail Store Subsidiary's business which consist of leasehold
interests in the premises of such store, the Equipment, Inventory and fixtures
located at such premises and the books and records relating exclusively and
directly to the operations of such store; provided, that, as to each and all
-------- ----
such sales, (A) on the date of, and after giving effect to, any such sale, in
any calendar year, Borrowers and Retail Store Subsidiaries shall not have closed
or sold Retail Store locations accounting for more than five (5%) percent of all
sales of Borrowers and Retail Store Subsidiaries in the immediately preceding
twelve (12) month period, (B) to the extent not already identified in the most
recent report provided to Agent in accordance with Section 7.1(a)(iii) hereof,
prior to any such sale or disposition, Agent shall have received not less than
ten (10) Business Days prior written notice of such sale, which notice shall set
forth in reasonable detail satisfactory to Agent, the parties to such sale or
other disposition, the assets to be sold or otherwise disposed of, the purchase
price and the manner of payment thereof and such other information with respect
thereto as Agent may request, (C) as of the date of such sale or other
disposition and after giving effect thereto, no Event of Default, or act,
condition or event which with notice or passage of time would constitute an
Event of Default, shall exist or have occurred, and (D) to the extent a Cash
Dominion Event (other than an Event of Default) exists, any and all net proceeds
payable or delivered to such Borrower or Retail Store Subsidiary in respect of
such sale or other disposition shall be paid or delivered, or caused
87
to be paid or delivered, to Agent, for application to the outstanding principal
amount of the Revolving Loans, which may be reborrowed;
(v) dispositions by any Borrower or any Obligor of any property
to any other Borrower or any other Obligor; and
(vi) dispositions of the Cash Equivalents and other investments
permitted under Section 9.10 hereof; or
(c) wind up, liquidate or dissolve, except, that, any Retail Store
------- ----
Subsidiary or any Financing Subsidiary may wind up, liquidate or dissolve,
provided, that, each of the following conditions is satisfied as determined by
-------- ----
Agent: (i) no Borrower or Obligor shall assume any obligations or liabilities as
a result of such winding up, liquidation or dissolution, or otherwise become
liable in respect of any obligations or liabilities of the Subsidiary which is
winding up, liquidating or dissolving, (ii all assets of the Subsidiary which is
winding up, liquidating or dissolving shall be promptly distributed to its
shareholders or partners, as the case may be, and (ii on the date of and after
giving effect to any such winding-up, dissolution or liquidation, no Event of
Default shall exist or have occurred; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. No Borrower shall and Parent shall cause each Obligor
------------
and each other Subsidiary of Parent (other than Financing Subsidiaries) not to,
create, incur, assume or suffer to exist any Lien or other encumbrance of any
nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral or other property which is security for the
Obligations, except:
------
(a) Liens and security interests of Agent;
(b) Liens securing the payment of taxes which are either (i) not yet
due and payable or (ii) the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to any Borrower or
Obligor and with respect to which adequate reserves have been set aside on its
books, provided, that, in the event that a tax Lien is filed of record and has
priority over the Liens of Agent as to the property or assets that are the
subject of the applicable tax Lien, Agent shall establish a Reserve equal to the
amount secured by such Lien unless, the Required Lenders and Required Term Loan
Lenders determine otherwise;
(c) Intentionally deleted;
(d) non-consensual statutory Liens (other than Liens securing the
payment of taxes) arising in the ordinary course of any Borrower's or Obligor's
business to the extent: (i) such Liens secure Indebtedness which is not overdue,
(ii such Liens secure Indebtedness relating to claims or liabilities which are
fully insured and being defended at the sole cost and expense and at the sole
risk of the insurer and are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or such Obligor,
in each case prior to the
88
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books, (ii) non-payment
thereof would not result in a Material Adverse Effect;
(e) purchase money security interests in Equipment (including Capital
Leases), granted after the date hereof, not to exceed $40,000,000 in the
aggregate at any time outstanding so long as such security interests do not
apply to any property of any Borrower or Obligor other than the Equipment so
acquired, and the Indebtedness secured thereby does not exceed the cost of the
Equipment so acquired;
(f) purchase money mortgages, granted after the date hereof, on real
estate not to exceed $5,000,000 in the aggregate at any time outstanding
(exclusive of the Refinancing Mortgages referred to in Section 9.8(l) below) so
long as such mortgages do not apply to any property of any Borrower or Obligor
other than the real estate so acquired, and the Indebtedness secured thereby
does not exceed the cost of the real estate so acquired;
(g) deposits of cash to secure the performance of bids, trade
contracts (other than for borrowed money), freight and customs duties, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business
consistent with the current practices of Borrowers and Obligors as of the date
hereof; provided, that, such deposit of cash is the only security for Borrowers
-------- ----
and Obligors' performance thereunder;
(h) Liens to secure Refinancing Indebtedness to the extent permitted
in Section 9.9 hereof;
(i) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of any Borrower, or Obligor as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(j) pledges and deposits of cash by any Borrower or Obligor after the
date hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security benefits
consistent with the current practices of Borrowers as of the date hereof;
(k) rights of setoff of any Credit Card Issuer or Credit Card
Processor against amounts owing to any Borrower or Obligor or credit balances of
Borrowers with Credit Card Issuers or Credit Card Processors;
(l) (i) mortgages on the Indiana Real Property and/or the
Pennsylvania Real Property granted by the owner of such property in favor of a
third party other than an Affiliate of Borrowers, and a security interest in the
Indiana Personal Property (each a "Refinancing Mortgage") so long as each of the
following conditions is satisfied in the determination of Agent:
89
(A) such Refinancing Mortgage is created and the Indebtedness secured thereby is
incurred no later than one hundred twenty (120) days after the Closing Date, (B)
Agent shall have received not less than twenty (20) days prior written notice of
the intention of the owner of such property to grant such Lien and incur such
Indebtedness, (C) the Indebtedness secured by such property, arises from loans
in cash or other immediately available funds provided to the owners of the
property, the proceeds of which are used, to repay the outstanding principal
amount of Revolving Loans, which amounts may be reborrowed, (D) such Refinancing
Mortgage does not apply to any property of Borrowers or Obligors other than the
Indiana Real Property, Indiana Personal Property and/or Pennsylvania Real
Property, as the case may be, (E) such Refinancing Mortgage shall be in form and
substance reasonably satisfactory to Agent, (F) Agent shall have received a
Collateral Access Agreement (the terms of which shall include the right of the
Agent to cure defaults under the Refinancing Mortgage), duly executed by such
new lender, in form and substance satisfactory to Agent, and (G) as of the date
of the granting of any such Refinancing Mortgage and incurrence of such
Indebtedness and after giving effect thereto, no Event of Default or act,
condition or event which with notice, lapse of time or both would constitute an
Event of Default shall exist or have occurred; to the extent that each of the
foregoing conditions has been satisfied in the determination of Agent, Agent
shall, at the request of Borrowers, at Borrowers' expense, execute and deliver a
release of the applicable Mortgage or Mortgages and such other related release
of Lien as requested by the new lender and, if requested by the new lender, the
owner of such property shall be released from its Obligations under the
Financing Agreements, provided, that, such releases shall each be in
-------- ----
form and substance satisfactory to Agent;
(m) Liens (i) created by a Retail Store Subsidiary in favor of a
Borrower or Obligor to secure advances or financial accommodations made by such
Borrower or Obligor for purposes of opening and operating Retail Stores operated
by such Retail Store Subsidiary or (ii) Liens created by Catherine's Inc. in
favor of Catherines to secure the Indebtedness arising under the Amended and
Restated Subordinated Promissory Note, dated January 31, 2000, in the principal
amount of $48,999,196.90 made by Catherines, Inc. in favor of Catherines (and
assigned by Catherines to Catherines of Nevada, Inc.); which Liens, in each
case, are subordinated in favor of and assigned to Agent pursuant to the
Financing Agreements;
(n) Liens on the cash surrender value of the life insurance policies
referred to in Section 9.9(i) hereof in favor of the issuer of such life
insurance policies in connection with the Indebtedness permitted in accordance
with Section 9.9(i) hereof; and
(o) Liens listed on Omnibus Schedule 13 hereto.
9.9 Indebtedness. No Borrower shall, and Parent shall cause each
------------
Obligor and each other Subsidiary of Parent (other than Financing Subsidiaries)
not to, incur, create, assume, become or be liable in any manner with respect
to, or permit to exist, any Indebtedness except:
------
(a) the Obligations;
90
(b) (i) obligations and Indebtedness owed by any of Borrowers or
Obligors to any of the other Borrowers or Obligors and (ii) indebtedness owed by
Subsidiaries of Parent (other than Borrowers or Obligors) owed to Borrowers and
Obligors, each as permitted in Section 9.10 hereof;
(c) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which any Borrower,
Obligor, or other Subsidiary of Parent is contesting in good faith the amount or
validity thereof by appropriate proceedings diligently pursued and available to
any such Borrower and with respect to which adequate reserves have been set
aside on its books;
(d) purchase money Indebtedness (including Capital Leases) to the
extent permitted under Sections 9.8(e) and (f) hereof;
(e) unsecured guaranties set forth in Section 9.10 hereof;
(f) Indebtedness of Parent of up to the maximum principal amount of
$97,000,000 less the aggregate amount of all repayments or repurchases or
redemptions, optional or mandatory, of principal in respect thereof, evidenced
by the Subordinated Notes, plus interest thereon at the rate provided for in the
Subordinated Notes (as in effect on the date of issuance); provided, that:
-------- ----
(i) Parent shall only make regularly scheduled payments of
principal and interest and premium, if any, or other mandatory payments in
respect of such Indebtedness in accordance with the terms of the Subordinated
Notes or the Subordinated Note Indenture (as in effect on the date of issuance);
(ii) Parent shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of the Subordinated Notes or any of the other
Subordinated Note Agreements (as in effect on the date of issuance) in a manner
that is materially adverse to the Apparel Group, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose in any sinking fund, or otherwise,
except, for mandatory redemptions of the Subordinated Notes (as in effect on the
------
date of issuance) required by the Subordinated Note Indenture (as in effect on
the date of issuance) in the event of a Change of Control (as defined in the
Subordinated Note Indenture as in effect on the date of issuance); and
(iii) Borrowers shall furnish to Lender all material notices or
demands in connection with such Indebtedness as to which non-payment thereof (A)
would result in a material adverse change in the consolidated assets, or
business or prospects of the Apparel Group or (B) would impede the ability of
any Borrower to perform its obligations hereunder or under any of the other
Financing Agreements or Lender to enforce any Obligations or realize upon any
Collateral, which such notices or demands are either received by Parent or any
other Borrower from any of the holders of the Subordinated Notes or the Trustee,
or on their behalf, promptly after receipt thereof, or sent by Parent or any
other Borrower, or on their behalf, to any of the
91
holders of the Subordinated Notes or the Trustee, concurrently with the sending
thereof, as the case may be;
(g) Indebtedness secured by Refinancing Mortgages on (i) the Indiana
Real Property up to a maximum amount of $18,750,000, (ii) the Indiana Personal
Property up to a maximum amount of $10,000,000 and/or (iii) the Pennsylvania
Real Property up to a maximum amount of $13,000,000 permitted under Section 9.8
(j) above; and
(h) the Indebtedness set forth on Schedule 9.9 hereto; provided, that,
-------- ----
(i) such Borrower or Obligor may only make regularly scheduled payments of
principal and interest in respect of such Indebtedness in accordance with the
terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii such Borrower or Obligor shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such Indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof except, that, such Borrower or Obligor may, after
------ ----
prior written notice to Agent, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof, or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose (other than pursuant to payments permitted under clause (i)
above or with Refinancing Indebtedness with respect thereto), and (ii Borrowers'
Agent shall furnish to Agent all material notices or demands in connection with
such Indebtedness either received by any Borrower or Obligor or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or Obligor or on its
behalf, concurrently with the sending thereof, as the case may be.
(i) loans against life insurance policies owned by Borrowers and
identified in Schedule 9.9 hereof;
(j) unsecured Indebtedness of Borrowers and Obligors arising after the
date hereof to any third person (other than Indebtedness otherwise permitted
under this Section 9.9), provided, that, the aggregate principal amount of any
-------- ----
such Indebtedness outstanding at any time shall not exceed $10,000,000 and each
of the following conditions is satisfied as determined by Agent: (i) such
Indebtedness is subject and subordinate in right of payment to the right of
Agent to receive the prior payment and satisfaction in full payment of all of
the Obligations, (ii Agent shall have received not less than ten (10) days prior
written notice of the intention of such Borrower or Obligor to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory to
Agent the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Agent may
reasonably request with respect thereto, (ii Agent shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv on and before the date
of incurring such Indebtedness and after giving effect thereto, no Event of
Default, or act, condition or event which with the passage of time or both would
constitute an Event of Default, shall exist or have occurred, (v) Agent shall
have received, in form and substance satisfactory to
92
Agent, an intercreditor agreement or intercreditor agreements between Agent and
each of the holders of such Indebtedness, as acknowledged and agreed to by such
Borrower or Obligor, providing for the terms of the subordination in right of
payment of the Indebtedness of such Borrower or Obligor to such holders to the
payment of the Obligations and related matters, duly executed and delivered by
each of the holders of such Indebtedness and such Borrower or Obligor, (vi such
Indebtedness shall be incurred by Borrower at commercially reasonable rates and
terms in an arm's length transaction or with an Affiliate, but if with an
Affiliate at rates and on terms no less favorable to such Borrower or Obligor
than such Borrower or Obligor would obtain in a comparable arm's length
transaction with a person who is not an Affiliate, (vi such Indebtedness shall
not at any time include any terms that include any limitation on the right of
any Borrower to request or receive Loans or Letter of Credit Accommodations or
the right of Borrowers to amend, modify, supplement, replace, renew or extend
any of the terms or conditions of this Agreement or any of the other Financing
Agreements or otherwise in any way relate to or adversely affect the
arrangements of Borrower with Agent and Lenders and such Indebtedness shall not
at any time include terms and conditions which in any manner adversely affect
Agent or any rights of Agent as determined in good faith by Agent and confirmed
by Agent to Borrowers' Agent in writing, (vi Borrowers and Obligors shall not,
directly or indirectly, make, or be required to make, any payments in respect of
such Indebtedness, including, but not limited to, any prepayments or other non-
mandatory payments (other than regularly scheduled interest payments), except as
Agent may otherwise agree in writing at the direction of the Required Lenders
and Required Term Loan Lenders, (ix Borrowers and Obligors shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness
or any agreement, document or instrument related thereto, except, that,
------ ----
Borrowers and Obligors may amend, modify, alter or change the terms thereof so
as to extend the maturity thereof, or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness (except pursuant to regularly scheduled payments
permitted herein), or set aside or otherwise deposit or invest any sums for such
purpose, and (x) Borrowers' Agent shall furnish to Agent all material notices or
demands in connection with such Indebtedness either received by Borrowers or
Obligor or on its behalf promptly after the receipt thereof, or sent by Borrower
or on its behalf concurrently with the sending thereof, as the case may be;
(k) Indebtedness of any Borrower or Obligor arising after the date
hereof issued in exchange for, or the proceeds of which are used to extend,
refinance, replace or substitute for, Indebtedness permitted under Section
9.9(d), Section 9.9(f), Section 9.9(g), Section 9.9(h), and Section 9.9 (l)
hereof (the "Refinancing Indebtedness"); provided, that, as to any such
-------- ----
Refinancing Indebtedness, each of the following conditions is satisfied: (i)
Agent shall have received not less than ten (10) Business Days' prior written
notice of the intention to incur such Indebtedness, which notice shall set forth
in reasonable detail satisfactory to Agent, the amount of such Indebtedness, the
schedule of repayments and maturity date with respect thereto and such other
information with respect thereto as Agent may reasonably request, (ii promptly
upon Agent's request, Agent shall have received true, correct and complete
copies of all agreements, documents and instruments evidencing or otherwise
related to such Indebtedness, as duly executed and delivered by the parties
thereto, (iii) the Refinancing Indebtedness shall have a
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Weighted Average Life to Maturity and a final maturity equal to or greater than
the Weighted Average Life to Maturity and the final maturity, respectively, of
the Indebtedness being extended, refinanced, replaced, or substituted for, (iv
the Refinancing Indebtedness shall rank in right of payment no more senior than,
and be at least subordinated (if subordinated) to, the Obligations as the
Indebtedness being extended, refinanced, replaced, or substituted for, (v) the
Refinancing Indebtedness shall not include terms and conditions with respect to
any Borrower or Obligor which are more burdensome or restrictive in any material
respect than those included in the Indebtedness so extended, refinanced,
replaced or substituted for, (vi such Indebtedness incurred by any Borrower or
Obligor shall be at rates and with fees or other charges no higher or greater
than the Indebtedness so extended, refinanced, replaced or substituted for, (vi
as of the date of incurring such Indebtedness and after giving effect thereto,
no Event of Default shall exist or have occurred and be continuing, (vi the
principal amount of such Refinancing Indebtedness shall not exceed the principal
amount of the Indebtedness so extended, refinanced, replaced or substituted for
(plus the amount of reasonable refinancing fees and expenses incurred in
connection therewith), (ix) the Refinancing Indebtedness shall be secured by
substantially the same assets that secure the Indebtedness so extended,
refinanced, replaced or substituted for, provided, that, such security interests
-------- ----
with respect to the Refinancing Indebtedness shall have a priority no more
senior than, and be at least as subordinated (on terms and conditions acceptable
to Agent) as the security interest with respect to the Indebtedness so extended,
refinanced, replaced or substituted for, (x) such Borrower or Obligor may only
make regularly scheduled payments of principal, interest and fees, if any, in
respect of such Indebtedness (except as otherwise permitted below), (xi such
Borrower or Obligor shall not, directly or indirectly, (A) amend, modify, alter
or change in any material respect the terms of the agreements with respect to
such Indebtedness, except that such Borrower or Obligor may, after prior written
------ ----
notice to Agent, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof (and pay reasonable extension fees in connection
therewith), or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, or to make any covenants contained therein less restrictive or
burdensome as to such Borrower or Obligor or (B) redeem, retire, defease,
purchase or otherwise acquired such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, except as expressly required
pursuant to the terms thereof or pursuant to regularly scheduled payments
permitted herein or with the proceeds of any other Refinancing Indebtedness
permitted hereunder, and (xi) Borrowers and Obligors shall furnish to Agent all
material notices or demands in connection with such Indebtedness received by any
Borrower or Obligor or on its behalf promptly after the receipt thereof or sent
by any Borrower or Obligor, concurrently with the sending thereof, as the case
may be;
(l) CS Securitization Undertakings permitted in accordance with
Sections 9.10(k) and (n) hereof;
(m) Indebtedness of Borrowers and Obligors in respect of surety bonds
(whether bid, performance or otherwise) and other obligations of a like nature
incurred in the ordinary course of business consistent with the current
practices of Borrowers and Obligors as of the date hereof; and
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(n) Indebtedness of Borrowers under swap agreements, cap agreements,
collar agreements, exchange agreements, futures or forward hedging contracts or
similar contractual arrangements intended to protect a Person against
fluctuations in interest rates or currency exchange rates of any Borrower;
provided, that, such arrangements are with banks or other financial institutions
-------- ----
that have combined capital and surplus and undivided profits of not less than
$250,000,000 and are not for speculative purposes and such Indebtedness shall be
unsecured (except that Indebtedness arising under or in connection with swap
agreements with any Affiliate of Agent or any Lender may be secured to the
extent provided herein).
9.10 Loans, Investments, Guarantees, Etc. No Borrower shall, nor shall
------------------------------------
Parent permit any Obligor or any other Subsidiary of Parent (other than any
Financing Subsidiary), directly or indirectly, to, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the Indebtedness, performance, obligations or dividends of any Person, or form
or acquire any Subsidiaries, or agree to do any of the foregoing, except:
------
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
-------- ----
Prime Rate Revolving Loans are then outstanding, except that, notwithstanding
------ ----
that any Prime Rate Revolving Loans are outstanding, any Borrower may from time
to time in the ordinary course of business consistent with the current practices
of such Borrower as of the date hereof make deposits of cash or other
immediately available funds in operating demand deposit accounts used for
disbursements to the extent required to provide funds for amounts drawn or
anticipated to be drawn shortly on such accounts and such funds may be held in
Cash Equivalents consisting of overnight investments until so drawn (so long as
such funds and Cash Equivalents are not held more than five (5) Business Days
from the date of the initial deposit thereof and do not exceed $10,000,000 at
any time exclusive of the amount of any Credit Balance Cash Collateral) and (ii
the terms and conditions of Section 5.4 hereof shall have been satisfied with
respect to the deposit account or investment account in which such cash or Cash
Equivalents here held;
(c) loans of money by any Borrower to any Person (other than another
Borrower or Obligor) after the date hereof or investments by Borrowers by
capital contribution in any Person (other than another Borrower or Obligor)
after the date hereof other than the investments otherwise permitted in this
Section 9.10); provided, that, as to any such loans or investments, each of the
-------- ----
following conditions is satisfied as determined by Agent: (i) the Person
receiving such loan or investment is engaged in a business related, ancillary or
complimentary to the business of any Borrower permitted in this Agreement, (ii)
as of the date of any such loan or investment and after giving effect thereto,
no Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default shall exist or have occurred,
(ii) as of the date of any such loan or investment and after giving effect
thereto, the Excess Availability shall be not less than $50,000,000, (iv) the
aggregate amount of all such
95
loans or investments in any calendar year shall not exceed $4,000,000, (v) the
aggregate amount of all such loans or investments during the term of this
Agreement shall not exceed $10,000,000, (vi) Agent shall have received (A) not
less than ten (10) Business Days' prior written notice thereof setting forth in
reasonable detail the nature and terms thereof, (B) true, correct and complete
copies of all agreements, documents and instruments relating thereto and (C)
such other information with respect thereto as Agent may reasonably request and
(vi in the case of an investment by capital contribution, at Agent's option, the
original of any Capital Stock or other instrument evidencing such capital
contribution shall be promptly delivered to Agent, together with such stock
power, assignment or endorsement as Agent may request, and promptly upon Agent's
request, such Borrower or Obligor shall execute and deliver to Agent in form and
substance satisfactory to Agent, a pledge and security agreement granting to
Agent a first pledge of and lien on all of the issued and outstanding shares of
such Capital Stock, (vi in the case of loans of money or property, the original
of any promissory note or other instrument evidencing the Indebtedness arising
pursuant to such loans shall be delivered, or caused to be delivered, to Agent,
at Agent's option, together with an appropriate endorsement and with full
recourse to the payee thereof;
(d) loans of money by Borrowers or investments by Borrowers by capital
contribution, directly or indirectly in M and A Joint Venture LLC after the date
hereof; provided, that, as to any such loans or investments, each of the
-------- ----
following conditions is satisfied as determined by Agent: (i) as of the date of
any such loan or investment and after giving effect thereto, no Event of
Default, or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred, (ii as of the
date of any such loan or investment and after giving effect thereto, the Excess
Availability shall be not less than $20,000,000, (ii the aggregate amount of all
such loans or investments during the term of this Agreement shall not exceed
$4,000,000, and (iv Agent shall have received (A) not less than ten (10)
Business Days' prior written notice thereof setting forth in reasonable detail
the nature and terms thereof, (B) true, correct and complete copies of all
agreements, documents and instruments relating thereto and (C) such other
information with respect thereto as Agent may reasonably request;
(e) the existing equity investments of Borrowers and Obligors as of
the date hereof in its Subsidiaries, provided, that, except as set forth in
-------- ----
Section 9.10(d) hereof, no Borrower or Obligor shall have any further
obligations or liabilities to make any capital contributions or other additional
investments or other payments to or in or for the benefit of any of such
Subsidiaries except as set forth on Schedule 9.10 hereto;
(f) unsecured guarantees by Borrowers and Obligors of the obligations
of any Subsidiary of any Borrower to any third party with respect to leases of
real property or personal property in the ordinary course of business and other
such unsecured guarantees existing as of the date hereof;
(g) unsecured guarantees by Parent arising after the date hereof of
the obligations of any Subsidiary of Parent to any third party in the ordinary
course of business;
96
(h) guarantees by any Borrower or Subsidiaries of Borrowers of the
Obligations in favor of Agent and Lenders;
(i) stock or obligations issued to any Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to such Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
-------- ----
evidencing such obligations shall be promptly delivered to Agent, upon Agent's
request, together with such stock power, assignment or endorsement by such
Borrower as Agent may request;
(j) loans or investments by a Borrower or an Obligor to or in any other
Obligor or Borrower, provided, that, (i) as of the date of any such loan or
investment and after giving effect thereto, no Event of Default, shall exist or
have occurred, and (ii) all Financing Agreements previously executed and
delivered by such Obligor are in full force and effect;
(k) loans by any Borrower or Obligor to FSC in respect of Qualified
Securitization Transactions, provided, that, as to any such loans, each of the
-------- ----
following conditions is satisfied as determined by Agent: (i) as of the date of
any such loan and after giving effect thereto, no Event of Default, or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred, (ii) as of the date of any
such loan and after giving effect thereto, the Excess Availability shall be not
less than $35,000,000, (ii) (A) during the period commencing February 1st
through October 31st in any calendar year the aggregate amount of all such
loans outstanding at any time shall not exceed $8,000,000, (B) during the period
commencing November 1st of each calendar year through the end of January
31st of the immediately succeeding calendar year, the maximum aggregate
outstanding amount of all such loans shall not exceed $14,000,000; provided,
--------
that, the maximum aggregate outstanding amount of all loans permitted under
----
clause (B) for the period commencing December 20th through December 29th of
each calendar year may be $20,000,000, (C) provided, that, the maximum aggregate
permitted outstanding amount of all such loans under clauses (A) and (B) during
the period commencing April 1, 2002 through November 30, 2002 may increase by
$5,000,000, and provided, further, that, in the event that the amount of
outstanding loans to FSC at any time, exceed the applicable maximum amounts
provided for in this clause (iii) or clause (iv) below, Borrowers shall have
three (3) Business Days to cure any such excess, and (D) notwithstanding
anything to the contrary set forth in this Section 9.10(k), if as of the date of
any such loan and after giving effect thereto, Excess Availability shall be not
less than $125,000,000, the maximum aggregate permitted outstanding amount of
all such loans under clauses (A) and (B) shall increase by $5,000,000, (iv
notwithstanding the maximum permitted outstanding loan amounts set forth in
clause (iii) above, the maximum aggregate outstanding amount of all such loans
cannot exceed $3,000,000 during one calendar day of each calendar week during
the term of this Agreement (for purposes of determining compliance with this
clause (iv), the term "loans" shall only include loans made by any Borrower or
Obligor to FSC to enable FSC to make payments to CS Delaware under the C.D.
Credit Plan Agreement) and (v) such loans are not being made to fund any amounts
owing to Originator or any other Financing Subsidiary in respect of the Co-
Branded Card; provided, that, in the event that the only condition prohibiting
97
any Borrower or Obligor from making loans to FSC is a failure to satisfy the
conditions set forth in clause (ii) above, then any of the Foreign Subsidiaries
may make such loans provided, that, each of the other conditions of this Section
9.10(k) are satisfied;
(l) loans by a Subsidiary of Parent (other than a Borrower or Obligor)
to a Borrower or Obligor, provided, that, (i) the Indebtedness arising pursuant
to such loan shall be subject to, and subordinate in right of payment to, the
right of Agent to receive the prior final payment and satisfaction in full of
all of the Obligations on terms and conditions acceptable to Agent, and (ii)
such Borrower or Obligor shall not, directly or indirectly make, or be required
to make, any payments in respect of such Indebtedness;
(m) not form or acquire any Subsidiaries after the date hereof, except,
for, the organization or acquisition of new U.S. Subsidiaries which (i)
promptly upon any such formation or acquisition (but no later than thirty (30)
days after the organization or acquisition thereof), Parent and Borrowers shall
cause any such Subsidiary (other than a Financing Subsidiary) to execute and
deliver to Agent, in form and substance satisfactory to Agent, (A) an absolute
and unconditional guarantee of payment of any and all present and future
Obligations of Borrowers to Agent, (B) a security agreement granting to Agent a
first and prior security interest and lien (except as otherwise consented to in
writing by Agent) upon all of the assets of such Subsidiary, (C) related UCC
Financing Statements, and (D) such other agreements, documents and instruments
as Agent may require, including, but not limited to, supplements and amendments
hereto and other loan agreements or instruments evidencing indebtedness of such
new Subsidiary to Agent, (ii promptly upon Agent's request: (A) such Borrower
shall execute and deliver to Agent in form and substance satisfactory to Agent,
a pledge and security agreement granting to Agent a first pledge of and lien on
all of the issued and outstanding shares of Capital Stock of such Subsidiary,
and (B) such Borrower shall deliver the original stock certificates evidencing
such shares of Capital Stock (or such other evidence as may be issued in the
case of a limited liability company) together with stock powers with respect
thereto duly executed in blank (or the equivalent thereof in the case of a
limited liability company), and (ii as of the date of such organization or
formation and after giving effect thereto, no Event of Default, or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred;
(n) an unsecured guarantee by Parent or CS Delaware of the obligations
of FSC to Originator in respect of any Qualified Securitization Transactions, to
the extent required by any Governmental Authority having regulatory authority
over Originator or any other unsecured Standard Securitization Undertaking,
provided, that, (i) any payments made by Parent or CS Delaware in respect of
-------- ----
thereof shall be deemed an outstanding loan under Section 9.10(k) hereof and
(ii) no such guarantee shall be made, in respect of Qualified Securitization
Transactions related to the Co-Branded Card; and
(o) unsecured guarantee obligations of Parent in favor of The Limited
or any of its Affiliates pursuant to the Purchase Agreements; and
(p) guarantees listed on Omnibus Schedule 14.
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9.11 Dividends and Redemptions. Except for dividends paid by a Borrower
-------------------------
(other than Parent), Obligor, or any other Subsidiary of Parent directly or
indirectly to Parent or to any other Borrower or Obligor of which it is a
Subsidiary, no Borrower, Obligor or any other Subsidiary of Parent shall,
directly or indirectly, declare or pay any dividends in cash or other of its
assets on account of any shares of any class of capital stock of such Borrower,
Obligor or any other Subsidiary of Parent now or hereafter outstanding, or set
aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
capital stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration other than common stock or apply or set apart any
sum, or make any other distribution (by reduction of capital or otherwise) in
respect of any such shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates. Except for Qualified Securitization
----------------------------
Transactions and transactions between or among any Borrower or Obligor and any
other Borrower or Obligor, none of Borrowers or any Obligors shall enter into
any transaction for the purchase, sale or exchange of property to or by any
Affiliate except (a) in the ordinary course consistent with current business
practices in effect immediately prior to the date hereof and pursuant to the
reasonable requirements of such Borrower's or Obligor's business, and provided,
that, each Borrower and Obligor is in compliance with and utilizes the arms-
length standard for course of dealing transactions applicable to Affiliates as
contemplated in Section 482 of the Code, as amended, and the regulations
promulgated thereunder, such that no material amount of Taxes are due and owing
and unpaid as a result of any such transaction or series of transactions or (b)
upon fair and reasonable terms no less favorable to such Borrower or Obligor
than such Borrower or Obligor would obtain in a comparable arm's length
transaction with an unaffiliated person, except with respect to sales of
Inventory to or purchases of Inventory by a Borrower or Obligor, as to which the
sales or purchase price is not less than the cost thereof to the seller thereof.
9.13 Intentionally Omitted.
9.14 Compliance with ERISA. Borrowers shall not with respect to any
---------------------
"employee pension benefit plans" maintained by any Borrower or any of its ERISA
Affiliates:
(a) to the extent any of the following would create a Lien on any of
the Collateral or other assets securing the Obligation, (i) terminate any of
such employee pension benefit plans so as to incur any liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer
to exist any prohibited transaction involving any of such employee pension
benefit plans or any trust created thereunder which would subject Borrowers or
such ERISA Affiliate to a tax or penalty or other liability on prohibited
transactions imposed under Section 4975 of the Code or ERISA, (iii) fail to pay
to any such employee pension benefit plan any contribution which it is obligated
to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
plan, (iv) allow or suffer to exist any accumulated funding deficiency, whether
or not waived, with respect to any such employee pension benefit plan, (v) allow
or suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee pension benefit plan that is a single
employer plan, which termination could result in
99
any liability to the Pension Benefit Guaranty Corporation or (vi) incur any
withdrawal liability with respect to any Multiemployer Plan; and
(b) As used in this Section 9.14, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.15 End of Fiscal Years: Fiscal Quarters. Parent shall, for financial
------------------------------------
reporting purposes, and shall cause each of its Subsidiaries' (excluding Foreign
Subsidiaries) (a) fiscal years to end on the Saturday closest to the 31/st/ day
of January of each year, and (b) fiscal quarters to end on the last day of the
thirteenth (13/th/) week following the end of the immediately preceding fiscal
quarter, provided, that, the end of the fourth fiscal quarter shall be on the
-------- ----
last day of the fourteenth (14/th/) week following the end of the third fiscal
quarter whenever necessary to have the fourth fiscal quarter end on the Saturday
closest to January 31 of each year. Each Foreign Subsidiary's fiscal year shall
end on December 31 of each calendar year.
9.16 Change in Business. Each Borrower shall not, and Parent shall cause
------------------
each Obligor and other Subsidiary of Parent not to, engage in any business other
than the business of such Person on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which such Person is
engaged on the date hereof.
9.17 Limitation of Restrictions Affecting Subsidiaries. Except for
-------------------------------------------------
restrictions contained in the Purchase Agreements, the NBC Agreements, Borrowers
shall not, and Parent shall cause each Obligor and each other Subsidiary of
Parent (other than the Financing Subsidiaries) not to, directly, or indirectly,
create or otherwise cause or suffer to exist any encumbrance or restriction
which prohibits or limits the ability of any Subsidiary of any Borrower to (a)
pay dividends or make other distributions or pay any Indebtedness owed to any
Borrower or any Subsidiary of Borrower; (b) make loans or advances to any
Borrower or any Subsidiary of any Borrower, (c) transfer any of its properties
or assets to any Borrower or any Subsidiary of any Borrower; or (d) create,
incur, assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii this Agreement, (ii customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of any Borrower or any of its Subsidiaries, (iv customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of any Borrower or its Subsidiary, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of any Borrower
prior to the date on which such Subsidiary was acquired by any Borrower and
outstanding on such acquisition date, and (vi the extension or continuation of
contractual obligations in existence on the date hereof; provided, that, any
-------- ----
such encumbrances or restrictions contained in such extension or continuation
are no less favorable to Agent and Lenders than those encumbrances and
restrictions under or pursuant to the contractual obligations so extended or
continued.
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9.18 Financial Covenants.
-------------------
(a) (i) At any time that Excess and Suppressed Availability is equal
to or less than $50,000,000, Parent and its Subsidiaries on a consolidated basis
shall, at all times (including as of the end of the month immediately prior
thereto) have, and shall maintain, Adjusted Tangible Net Worth of not less than
$228,000,000 (the "TNW Minimum Amount", as adjusted pursuant to clause (ii)
below).
(ii) The TNW Minimum Amount shall either be increased or
decreased, as the case may be, by the amount, if any, by which the Tangible Net
Worth of Parent and its Subsidiaries, on a consolidated basis, shown on the
opening balance sheet of Parent and its Subsidiaries delivered to Agent pursuant
to Section 9.6(e) hereof either exceeds or is less than $288,462,000, as the
case may be.
(b) Until the Term Loan has been paid in full in immediately
available funds, Parent and its Subsidiaries, on a consolidated basis, shall, as
of the end of the following periods, maintain EBITDA in an amount at least equal
to the amount indicated next to such period:
Period Minimum EBITDA
------ --------------
(i) 12 months ending July 31, 2001 $140,000,000
(ii) 12 months ending October 31, 2001 $140,000,000
(iii) 12 months ending January 31, 2002 $140,000,000
(iv) for the 12 months ending April 30, 2002 $140,000,000
and the 12 months ending at the end of
each fiscal quarter thereafter
(c) Until the Term Loan has been paid in full in immediately
available funds, Parent and its Subsidiaries, on a consolidated basis, shall, at
all times, maintain a Secured Funded Debt Ratio of not greater than 3.0 to 1.
9.19 Credit Card Agreements. Borrowers shall and Parent shall cause each
----------------------
Obligor to (a) observe and perform all material terms, covenants, conditions and
provisions of the Credit Card Agreements to be observed and performed by it at
the times set forth therein; (b) not do, permit, suffer or refrain from doing
anything, as a result of which there could be a default under or breach of any
of the terms of any of the Credit Card Agreements and (c) at all times maintain
in full force and effect the Credit Card Agreements and not terminate, cancel,
surrender, modify, amend, waive or release any of the Credit Card Agreements, or
consent to or permit to occur any of the foregoing; except, that (i) a Borrower
or Obligor may terminate or cancel any of the Credit Card Agreements in the
ordinary course of the business of such Borrower or Obligor; provided, that,
-------- ----
Borrowers shall give Agent not less than fifteen (15) days prior written notice
of the intention to so terminate or cancel any of the Credit Card Agreements;
(d) not enter into any new Credit Card Agreements with any new Credit Card
Issuer unless (i) Agent shall have received not
101
less than fifteen (15) days prior written notice of the intention of such
Borrower to enter into such agreement (together with such other information with
respect thereto as Agent may request) and (ii) Borrowers deliver, or cause to be
delivered to Agent, a Credit Card Acknowledgment in favor of Agent; (e) give
Agent immediate written notice of any Credit Card Agreement entered into by such
Borrower or Obligor after the date hereof, together with a true, correct and
complete copy thereof and such other information with respect thereto as Agent
may request; and (f) furnish to Agent, promptly upon the request of Agent, such
information and evidence as Agent may require from time to time concerning the
observance, performance and compliance by any Borrower or Obligor or the other
party or parties thereto with the terms, covenants or provisions of the Credit
Card Agreements.
9.20 Use of Fashion Bug Card and Co-Branded Card.
-------------------------------------------
(a) Parent shall cause, at the request of Agent in its discretion or
at the direction of the Required Revolving Loan Lenders or Required Term Loan
Lenders, each of the Retail Store Subsidiaries to cease making any sales of
merchandise to customers of the Retail Store Subsidiaries that purchase such
merchandise with the Fashion Bug Card or the Co-Branded Card upon the occurrence
of an Event of Default described in Sections 10.1(a)(i), 10.1(g), 10.1(h),
10.1(a)(ii) or 10.1(q) (but in the case of an Event of Default arising under
Section 10.1(a)(ii) only to the extent such Event of Default arises from the
result of the failure to comply with any of Sections 10.1(a)(i), 9.7, 9.8, 9.9,
9.10, 9.12, 9.17 or 9.18 hereof) that is continuing. The Financing Subsidiaries
shall not be replaced by any other Credit Card Issuer with respect to the
Fashion Bug Card or the Co-Branded Card, as applicable except for any
arrangement with such replacement Credit Card Issuer which is not materially
adverse from the existing financing arrangements with the Financing Subsidiaries
with respect to the Fashion Bug Card or the Co-Branded Card, as applicable.
(b) Upon the occurrence and during the continuance of an Event of
Default, Parent shall cause each of the Retail Store Subsidiaries to cease
taking payments in respect of accounts receivable owing to any of the Financing
Subsidiaries in respect of the Fashion Bug Card and the Co-Branded Card.
9.21 Sale and Leasebacks. Each Borrower shall not, and Parent shall not
-------------------
permit any Obligor or any other Subsidiary to, enter into any arrangement,
directly or indirectly, with any Person whereby such Borrower, or Obligor, as
the case may be, shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred (except to the
extent of Capital Leases permitted under Section 9.9(b) hereof), except, that,
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Borrowers may enter into such arrangements with respect to any or all of the
Indiana Real Property, Indiana Personal Property or the Pennsylvania Real
Property provided, that, each of the following conditions is satisfied, as
determined by Agent: (a) such transaction must occur no later than one hundred
(120) days after the Closing Date, (b) Agent shall have received not less than
twenty (20) days prior written notice of the intention of Borrowers to enter
into such transaction, (c) the proceeds of any such transaction shall be used to
repay the outstanding principal amount of Revolving Loans which
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amounts may be reborrowed,(d) such transaction does not apply to any property of
Borrowers other than the Indiana Real Property and/or the Pennsylvania Real
Property, as the case may be, (d) such sale-leaseback documents shall be in form
and substance reasonably satisfactory to Agent, (e) Agent shall have received a
Collateral Access Agreement, duly executed by the lessor, in form and substance
reasonably satisfactory to Agent, and (f) as of the date of the consummation of
any such transaction and after giving effect thereto, no Event of Default or
act, condition or event which with notice, lapse of time or both would
constitute an Event of Default shall exist or have occurred; to the extent that
each of the foregoing conditions has been satisfied in the determination of
Agent, Agent shall, at the request of Borrowers, at Borrowers' expense, execute
and deliver a release of the applicable Mortgage or Mortgages and such other
release of Lien as requested by the lessor, provided, that, such releases shall
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each be in form and substance satisfactory to Agent.
9.22 Costs and Expenses. Borrowers shall pay to Agent and Lenders on
------------------
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes and intangibles taxes, if applicable); (b) costs and expenses
and fees for insurance premiums, appraisal fees and search fees, costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Agent's customary charges and fees with respect thereto; (c) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the Liens of Agent, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Agent or any Lender arising out of the transactions
contemplated hereby and thereby (including preparations for and consultations
concerning any such matters); (f) all out-of-pocket expenses and costs
heretofore (with respect to the Agent and Ableco Finance LLC) and from time to
time hereafter incurred by Agent and Lenders during the course of periodic field
examinations of the Collateral and any Borrower's or Obligor's operations, plus
a per diem charge at the rate of $750 per person per day for Agent's examiners
in the field and office; and (g) the fees and disbursements of counsel
(including legal assistants) to Agent and counsel to any Lender in connection
with any of the foregoing. Notwithstanding anything to the contrary contained
herein, the costs, expenses, fees and disbursements payable with respect to the
preparation, negotiation and execution of the Financing Agreements shall be
subject to the limitations contained in the commitment letter dated May 31,
2001.
9.23 Further Assurances. At the request of Agent at any time and from
------------------
time to time, Borrowers shall, and Parent shall cause each of the Obligors and
Additional L/C Debtors to, at Borrowers expense, duly execute and deliver, or
cause to be duly executed and delivered, such
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further agreements, documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect, maintain and
enforce the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Agent may at any time and from time to time request
a certificate from an officer of Borrowers' Agent representing that all
conditions precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied. In the event of such request by
Agent, Agent and Lenders may, at Agent's option, cease to make any further Loans
or provide any further Letter of Credit Accommodations until Agent has received
such certificate and, in addition, Agent has determined that such conditions are
satisfied.
9.24 Preferred Stock. No Borrower shall and Parent shall cause each
---------------
Obligor not to issue any Prohibited Preferred Stock.
9.25 Change of Control. Parent shall at all times own directly or
-----------------
indirectly one hundred (100%) percent of the total outstanding Voting Stock of
each of Borrowers (other than Parent), Obligors, Additional L/C Debtors, the
Foreign Subsidiaries and FSC. Parent shall not permit (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of any Borrower or Obligor to any Person or group (as such term is used
in Section 13(d)(3) of the Exchange Act) other than as permitted in this
Agreement, (b) the adoption of a plan by the stockholders of any Borrower or
Obligor relating to the dissolution or liquidation of such Borrower or Obligor
other than as permitted in Section 9.7 hereof; or (c) FSC to own directly or
indirectly less than one hundred (100%) percent of the total outstanding Voting
Stock of each of the other Financing Subsidiaries.
9.26 Company Owned Insurance Policies. Borrowers shall and Parent shall
--------------------------------
cause each Obligor (a) not to purchase any additional company owned life
insurance policies with respect to any of its employees unless such policies are
assigned to Agent except for life insurance policies purchased by any Borrower
or Obligor, as the case may be, on the life of employees, in respect of which
the beneficiary is not any Borrower, Obligor or other Subsidiary of Parent other
than for premium reimbursement for split-dollar life insurance policies, (b) to
pay the premiums in respect of all Company Owned Insurance Policies when due,
and (c) not to exercise their right to obtain any loans against the cash
surrender value of any Company Owned Insurance Policy unless each of the
following conditions is satisfied in the determination of Agent: (i) after
giving effect to the request for any such loan, the aggregate remaining cash
surrender value of Borrowers in all such Company Owned Insurance Policies shall
not be less than $8,500,000 (the "Minimum Cash Surrender Value"), and (ii) no
Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default shall exist or have occurred
and be continuing. To the extent that any payments are made to any Borrower as a
beneficiary of any Company Owned Insurance Policy, and provided, that, (A) the
equity interest of Borrowers in all such Company Owned Insurance Policies equals
or exceeds the Minimum Cash Surrender Value, and (B) no Event of Default, or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred and be continuing
such payment shall be delivered to Agent and applied to the outstanding
principal amount of the Revolving Loans which may be reborrowed; in the event
that any payments are
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made to any Borrower as a beneficiary of any Company Owned Insurance Policy the
effect of which would be to cause the aggregate cash surrender value of the
Company Owned Insurance Policies to be less than the Minimum Cash Surrender
Value then, such payment shall be delivered to Agent and a Reserve established
in an amount equal to the amount of such payment.
9.27 Securitization Transactions. Parent shall not permit any
---------------------------
modifications, supplements or restatements of the Existing Securitization
Transactions or enter into any subsequent Securitization Transaction which would
not satisfy the requirements of a Qualified Securitization Transaction.
9.28 Release of Indiana Real Property. The Mortgage covering Indiana Real
--------------------------------
Property, covers, among other Real Property, eight (8) acres of Indiana Real
Property (as more particularly described on Schedule 9.28 annexed hereto,
collectively, the "Indiana Eight Acres"). The Indiana Eight Acres are subject to
a Purchase and Sale Agreement, dated May 22, 2001, entered into by and between
FB Distro, Inc., as seller and ▇▇▇▇ ▇▇▇▇ Chevrolet-Buick, Inc. as buyer. At or
prior to closing of such Purchase and Sale Agreement, Agent shall, at FB Distro
Inc.'s request, release the Indiana Eight Acres from the Mortgage covering the
Indiana Real Property, provided, that, Agent receives (a) such evidence as it
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requires that remaining Indiana Real Property subject to the Mortgage is in full
compliance with all applicable subdivision ordinances, and (b) such
endorsement(s) to Agent's existing title insurance policy modifying the
description of the Indiana Real Property subject to the Mortgage, as Agent shall
reasonably require.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 Events of Default. The occurrence or existence of any one or more of
-----------------
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) any Borrower, Obligor or Additional L/C Debtor fails (i) to pay
when due any of the Obligations within two (2) Business Days of the due date
thereof or (ii to observe or perform any of the other terms, covenants,
conditions or provisions contained in this Agreement or the other Financing
Agreements other than as described in Section 10.1(a)(i) above and such failure
shall continue for ten (10) consecutive days; provided, that, such ten (10) day
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period shall not apply in the case of: (A) any failure to observe any such term,
covenant or condition or provision which is not capable of being cured at all or
within such ten (10) day period or which has been the subject of a prior failure
within a six (6) month period or (B) an intentional breach by any Borrower of
any such term, covenant, condition or provision, or (C)the failure to observe or
perform any covenants or provisions with respect to Collateral under this
Agreement or any of the other Financing Agreements or (D) any failure to comply
with Section 9.10(k);
(b) any representation, warranty or statement of fact made by any
Borrower, Obligor or Additional L/C Debtor to Agent in this Agreement, the other
Financing Agreements or any other written agreement, schedule, confirmatory
assignment or otherwise shall when made or deemed made be false or misleading in
any material respect;
105
(c) any Obligor or Additional L/C Debtor revokes, terminates or
fails to perform any of the terms, covenants, conditions or provisions of any
guarantee, endorsement or other agreement of such party in favor of Agent;
(d) any judgment for the payment of money is rendered against any
Borrower, Obligor or other Subsidiary of Parent in excess of the Threshold
Amount and shall remain undischarged or unvacated for a period in excess of
thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution affecting assets in excess of the Threshold Amount is
rendered against any Borrower, any Obligor or any other Subsidiary of Parent.
(e) any Borrower, Obligor, or other Subsidiary of Parent dissolves
or suspends or discontinues doing business other than as permitted in Section
9.7 hereof;
(f) any Borrower, Obligor or other Subsidiary of Parent (i) becomes
insolvent (however defined or evidenced) (other than Inactive Subsidiaries), or
(ii makes an assignment for the benefit of creditors or, makes or sends notice
of a bulk transfer or calls a meeting of its principal creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower, Obligor, or other Subsidiary of Parent
or all or any part of its properties and such petition or application is not
dismissed within thirty (30) days after the date of its filing or any Borrower,
Obligor, or any other Subsidiary of Parent shall file any answer admitting or
not contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner (each, an "Involuntary Proceeding"); provided, that,
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if any Involuntary Proceeding is a Single Asset Insolvency Event, then such
Single Asset Insolvency Event shall not be deemed an Event of Default as against
any Person other than the Persons which are the subject of such Involuntary
Proceeding, unless Agent, at the direction of the Required Revolving Loan
Lenders and Required Term Loan Lenders has not waived (which waiver shall not be
unreasonably withheld) the putative Event of Default within thirty (30) days of
the commencement of such Single Asset Insolvency Event in which case such
putative Event of Default shall become an Event of Default on such thirtieth
(30th) day;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower, Obligor or other Subsidiary of Parent or
for all or any part of its property (each, a "Voluntary Proceeding"); provided,
--------
that, if any Voluntary Proceeding is a Single Asset Insolvency Event, then such
----
Single Asset Insolvency Event shall not be deemed an Event of Default as against
any Person other than the Persons which are the subject of such Voluntary
Proceeding, unless Agent, at the direction of the Required Revolving Loan
Lenders and Required Term Loan Lenders has not waived (which
106
waiver shall not be unreasonably withheld) the putative Event of Default within
thirty (30) days of the commencement of such Single Asset Insolvency Event, the
putative Event of Default within thirty (30) days of the commencement of such
Single Asset Insolvency Event in which case such putative Event of Default shall
become an Event of Default on such thirtieth (30/th/) day;
(i) any default by any Borrower, Obligor or any other Subsidiary of
Parent under any agreement, document or instrument relating to any Indebtedness
for borrowed money owing to any person other than Agent (including, but not
limited to, any of the Subordinated Note Agreements, the Existing Securitization
Documents or other documents relating to any Qualified Securitization
Transaction), or any Capital Lease, obligations, contingent Indebtedness in
connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Agent and Lenders, in any case in
an amount in excess of the Threshold Amount which default continues for more
than the applicable cure period, if any, with respect thereto, or any default by
any Borrower, Obligor or other Subsidiary of Parent under any Material Contract
which default continues for more than the applicable cure period, if any, with
respect thereto in amount in excess of the Threshold Amount or any Credit Card
Issuer or Credit Card Processor withholds payment of amounts otherwise payable
to any Borrower to fund a reserve account or otherwise hold as collateral, or
shall require any Borrower to pay funds into a reserve account or for such
Credit Card Issuer or Credit Card Processor to otherwise hold as collateral, or
any Borrower, Obligor or other Subsidiary of Parent shall, or shall be required
to, provide a letter of credit, guarantee, indemnity or similar instrument to or
in favor of such Credit Card Issuer or Credit Card Processor such that in the
aggregate all of such funds in the reserve account, other amounts held as
collateral and the amount of such letters of credit, guarantees, indemnities or
similar instruments shall exceed $3,000,000;
(j) any Credit Card Issuer or Credit Card Processor shall send notice
to any Borrower that it is ceasing to make or suspending payments to a Borrower
of amounts due or to become due to such Borrower or shall cease or suspend such
payments, or shall send notice to any Borrower that it is terminating its
arrangements with such Borrower or such arrangements shall terminate as a result
of any event of default under such arrangements, which continues for more than
the applicable cure period, if any, with respect thereto, unless such Borrower
shall have entered into arrangements with another Credit Card Issuer or Credit
Card Processor, as the case may be, within thirty (30) days after the date of
any such notice;
(k) any bank at which any deposit account of any of Borrowers or
Obligors is maintained shall fail to comply with any of the terms of any Deposit
Account Control Agreement to which such bank is a party or any securities
intermediary, commodity intermediary or other financial institution at any time
in custody, control or possession of any investment property of any of Borrowers
shall fail to comply with any of the terms of any Investment Property Control
Agreement to which such person is a party and such account is not closed and re-
established at another financial institution with a Deposit Account Control
Agreement in favor of Agent within twenty (20) days of the occurrence of such
default;
107
(l) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent or Lenders) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
(m) an ERISA Event shall occur which results in or could reasonably be
expected to result in a Material Adverse Effect.
(n) any Change of Control;
(o) the indictment of any Borrower, Obligor, or any other Subsidiary
of Parent by any Governmental Authority, or as Agent may reasonably and in good
faith determine, the threatened indictment by any Governmental Authority of any
Borrower, Obligor or any other Subsidiary of Parent of which any Borrower,
Obligor, other Subsidiary of Parent or Agent receives notice, in either case, as
to which there is a reasonable possibility of an adverse determination, in the
good faith determination of Agent, under any criminal statute, or commencement
or threatened commencement of criminal or civil proceedings against of any
Borrower, Obligor or any other Subsidiary of Parent, pursuant to which statute
or proceedings the penalties or remedies sought or available include forfeiture
of any other property of any Borrower, Obligor, or other Subsidiary of Parent in
excess of the Threshold Amount;
(p) there shall be an act, condition or event which has or may have a
Material Adverse Effect after the date hereof;
(q) FSC shall fail to (i) make settlements on each Business Day
(except for delays arising from force majeure, in which case such failure to
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make settlements on each Business Day shall not continue for more than one (1)
Business Day) with respect to amounts owed to CS Delaware under the C.D. Credit
Plan Agreement (ii) remit to CS Delaware all funds its receives in respect of
amounts owed to CS Delaware pursuant to the C.D. Credit Plan Agreement pursuant
to the Qualified Securitization Transactions no later than the same Business Day
it receives such funds; or
(r) there shall be an Event of Default under any of the other
Financing Agreements.
10.2 Remedies.
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(a) At any time an Event of Default exists or has occurred and is
continuing, Agent shall have all rights and remedies provided in this Agreement,
the other Financing Agreements,
108
the Uniform Commercial Code and other applicable law, all of which rights and
remedies may be exercised without notice to or consent by each Borrower or any
Obligor, except as such notice or consent is expressly provided for hereunder or
required by applicable law. All rights, remedies and powers granted to Agent or
Lenders hereunder, under any of the other Financing Agreements, the Uniform
Commercial Code or other applicable law, are cumulative, not exclusive and
enforceable, in Agent's discretion, alternatively, successively, or concurrently
on any one or more occasions, and shall include, without limitation, the right
to apply to a court of equity for an injunction to restrain a breach or
threatened breach by each Borrower of this Agreement or any of the other
Financing Agreements. Subject to Section 12 hereof, Agent may, and at the
direction of the Required Lenders shall, at any time or times, proceed directly
against Borrower or any Obligor to collect the Obligations without prior
recourse to the Collateral or any other property which is security for the
Obligations.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent, may, in its discretion and upon
the direction of the Required Lenders shall and without limitation (except with
respect to clause (i) hereof which Agent may do in its discretion and at the
direction of Required Revolving Loan Lenders), (i)(A) reduce the lending
formulas or amounts of Revolving Loans and Letter of Credit Accommodations
available to Borrowers and Additional L/C Debtors or (B) terminate the
Commitments, (ii accelerate the payment of all Obligations and demand immediate
payment thereof to Agent, for itself and the benefit of Lenders (provided, that,
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upon the occurrence of any Event of Default described in Sections 10.1(g) or
10.1(h) hereof involving any Person that is not a Single Asset Retail Store
Subsidiary, all Obligations shall automatically become immediately due and
payable; provided, further, that, in the event that a Single Asset Insolvency
-------- ------- ----
Event has occurred, the Obligations of such Single Asset Retail Store Subsidiary
shall automatically become immediately due and payable; and in the event that a
Single Asset Insolvency Event has occurred and is not waived within the thirty
(30) day period contemplated by the provisos to Sections 10.1(g) and 10.1(h), as
applicable, then, at the option of Agent and upon the direction of the Required
Lenders, all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iv) require
each Borrower, at Borrower's expense, to assemble and make available to Agent
any part or all of the Collateral at any place and time designated by Agent, (v)
collect, foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (vi) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale, foreclosure
or other disposition thereof or for any other purpose, and (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including, without limitation, entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with the Agent having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of each Borrower,
which right or equity of redemption is hereby expressly waived and released by
each Borrower. If any of the Collateral is sold or leased by Agent upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment
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therefor is finally collected by Agent. If notice of disposition of Collateral
is required by law, five (5) days prior notice by Agent to Borrowers' Agent
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and each Borrower waives any other
notice. In the event Agent institutes an action to recover any Collateral or
seeks recovery of any Collateral by way of prejudgment remedy, each Borrower
waives the posting of any bond which might otherwise be required.
(c) Notwithstanding anything to the contrary contained herein, except
as the Required Term Loan Lenders shall otherwise agree, Agent shall demand
payment of the Obligations and commence and pursue such other Enforcement
Actions as Agent in good ▇▇▇▇▇ ▇▇▇▇▇ appropriate within ninety (90) days (except
with respect to Events of Default described in Sections 10.1(g) and 10.1(h),
Agent shall take such Enforcement Actions as it deems appropriate under the
circumstances promptly upon receipt of notice) after the date of the receipt by
Agent of written notice executed and delivered by the Required Term Loan Lenders
of an Event of Default described in Sections 10.1(a)(i), 10.1(g), 10.1(h),
10.1(q) or 10.1(a)(ii) (to the extent arising as a result of the failure to
comply with Sections 10.1(a)(i), 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.17, 9.18(b),
9.18(c) or 9.20 hereof), and requesting that Agent commence Enforcement Actions,
provided, that, (i) such Event of Default has not been waived or cured, (ii in
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the good faith determination of Agent, taking an Enforcement Action is permitted
under the terms of this Agreement and applicable law, (ii taking an Enforcement
Action shall not result in any liability of Agent or Lenders to any Borrower,
Obligor or any other person, (iv Agent shall be entitled to all of the benefits
of Sections 12.2, 12.3 and 12.5 hereof, and (v) Agent shall not be required to
take an Enforcement Action so long as within the period provided above, Agent
shall, at its option, either (A) appoint Ableco Finance LLC, as an agent of
Agent for purposes of exercising the rights of Agent to take an Enforcement
Action, subject to the terms hereof or (B) resign as Agent and Ableco Finance
LLC shall automatically be deemed to be the successor Agent hereunder for
purposes hereof, except with respect to the provisions of Section 2 hereof and
in connection with all matters relating to the determination of the Borrowing
Base and each of its components (including Eligible Inventory, Indiana Real
Property Availability, Pennsylvania Real Property Availability, Reserves and
receiving reports in respect of Collateral and conducting field examinations
with respect to the Collateral and similar matters).
(d) Upon the occurrence of an Event of Default for the purpose of
enabling Agent to exercise the rights and remedies hereunder, each Borrower
hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to any
Borrower) to use, assign, license or sublicense any of the trademarks, service-
marks, trade names, business names, trade styles, designs, logos and other
source of business identifiers and other Intellectual Property and general
intangibles now owned or hereafter acquired by any Borrower, wherever the same
maybe located, including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof, provided, that, such license shall
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terminate on the date that Agent and Lenders have received final payment and
satisfaction in full of all of the Obligations in immediately available funds
and this Agreement has been terminated.
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(e) Agent may apply the cash proceeds of Collateral actually received
by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, subject to Section 6.4 hereof, whether or not then due.
Borrowers shall remain jointly and severally liable to Agent and Lenders for the
payment of any deficiency with interest at the highest rate provided for in the
Loan Agreement and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(f) Agent may, at any time or times that an Event of Default exists or
has occurred and is continuing, enforce any Borrower's rights against any
account debtor, secondary obligor or other obligor in respect of any of the
Accounts or other Receivables. Without limiting the generality of the foregoing,
Agent may at such time or times (i) notify any or all account debtors, secondary
obligors or other obligors in respect thereof that the Receivables have been
assigned to Agent and that Agent has a security interest therein for the benefit
of Lenders and Agent may direct any or all accounts debtors, secondary obligors
and other obligors to make payment of Receivables directly to Agent, (ii) extend
the time of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all
Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any secondary obligors or other
obligors in respect thereof without affecting any of the Obligations, (ii)
demand, collect or enforce payment of any Receivables or such other obligations,
but without any duty to do so, and neither Agent nor any Lender shall be liable
for its failure to collect or enforce the payment thereof nor for the negligence
of its agents or attorneys with respect thereto and (iv) take whatever other
action Agent may deem necessary or desirable for the protection of its interests
and the interests of Agent and Lenders. At any time that an Event of Default
exists or has occurred and is continuing, at Agent's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to Agent and are payable directly and only
to Agent and each Borrower shall deliver to Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Agent may require. In the event any account debtor
returns Inventory when an Event of Default exists or has occurred and is
continuing, each Borrower shall, upon Agent's request, hold the returned
Inventory in trust for Agent, segregate all returned Inventory from all of its
other property, dispose of the returned Inventory solely according to Agent's
instructions, and not issue any credits, discounts or allowances with respect
thereto without Agent's prior written consent.
(g) To the extent that applicable law imposes duties on Agent or any
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower acknowledges and agrees that it
is not commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by Agent or any Agent to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Authority or other third party for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise
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collection remedies against account debtors, secondary obligors or other persons
obligated on Collateral or to remove Liens against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as any Borrower, for expressions of interest in acquiring all or
any portion of the Collateral, (vi) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the collateral is of
a specialized nature, (vi) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or
credit enhancements to insure Agent and Lenders against risks of loss,
collection or disposition of Collateral or to provide to Agent a guaranteed
return from the collection or disposition of Collateral, or (xi) to the extent
deemed appropriate by Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral.
(h) Each Borrower acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by Agent or any
Lender would not be commercially unreasonable in Agent's exercise of remedies
against the Collateral and that other actions or omissions by Agent or any
Lender shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section. Without limitation of the foregoing, nothing
contained in this Section shall be construed to grant any rights to any Borrower
or to impose any duties on Agent or any Lender that would not have been granted
or imposed by this Agreement or by applicable law in the absence of this
Section.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
--------------------------------------------------------------
Waiver.
------
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law that would apply any
other law).
(b) Each of the parties hereto irrevocably consents and submits to
the non-exclusive jurisdiction of the Supreme Court of the State of New York in
New York County and the United States District Court for the Southern District
of New York, whichever Agent may elect, and waive any objection based on ven ue
or forum non conveniens with respect to any action instituted therein arising
----- --- ----------
under this Agreement or any of the other Financing Agreements
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or in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Agent and Lenders shall
have the right to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or its property).
(c) Each Borrower and Borrowers' Agent hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Agent's option, by service upon any Borrower in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, such Borrower shall appear in answer to such process, failing which
such Borrower shall be deemed in default and judgment may be entered by Agent
against any Borrower for the amount of the claim and other relief requested.
(d) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF THE PARTIES HERETO
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EACH OF THE
PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to any Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by such
Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Agent and such
Lender, that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Agent and Lenders
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement. Except as prohibited by law, each Borrower waives
any right which it may have to claim or recover in any litigation with Agent and
Lenders any special, exemplary, punitive or consequential damages or any damages
other than, or in
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addition to, actual damages. Each Borrower: (i) certifies that neither Agent nor
any Lender nor any representative, agent or attorney acting for or on behalf of
Agent or any Lender has represented, expressly or otherwise, that Agent and
Lenders would not, in the event of litigation seek to enforce any of the waivers
provided for herein, and (ii) acknowledges that in entering into this Agreement
and the other Financing Agreements, Agent and Lenders are relying upon, among
other things, the waivers and certifications set forth in this Section 11.1.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Agent or any Lender may elect to give shall
entitle any Borrower to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers.
----------------------
(a) Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed by Agent and
the Required Lenders or at Agent's option, by Agent with the authorization of
the Required Lenders, and as to amendments to any of the Financing Agreements
(other than with respect to any provision of Section 12 hereof), by Borrowers'
Agent; except, that,
------ ----
(i) any change, waiver, discharge or termination with respect to
the following shall require the consent of Agent and all Lenders:
(A) the release of any Collateral (except as expressly required
by the Financing Agreements and except as permitted under Section 12.11(b)
hereof), or the subordination of any Liens of Agent for the benefit of Lenders,
(B) the reduction of any percentage specified in the definition
of Required Lenders,
(C) the consent to the assignment or transfer by any Borrower
of any of its rights and obligations under this Agreement, or
(D) the amendment, modification or waiver of this Section 11.3,
(E) the amendment or modification of Section 6.4 hereof, and
(F) the increase in the advance rates (in excess of the stated
advance rates in effect on the date hereof) constituting part of the Borrowing
Base,
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(ii) any change, waiver, discharge or termination with respect to the
following shall require the consent of Agent and each Revolving Loan Lender
directly affected thereby:
(A) a reduction in the amount of, or postponement of the due
date of, principal repayments in respect of the Revolving Loans by or on behalf
of such Revolving Loan Lender or interest payments in respect of the Revolving
Loans by or on behalf of such Revolving Loan Lender or any fees payable for the
account of such Revolving Loan Lender;
(B) an increase in the Commitment of such Revolving Loan Lender
over the amount thereof then in effect,
(iii) any change, waiver, discharge or termination with respect to the
following shall require the consent of Agent and the Required Revolving Loan
Lenders:
(A) the reduction of any percentage specified in the definition of
Required Lenders,
(B) the amendment or modification of Section 9.18(a) hereof, and
(C) an increase in the Revolving Loan Limit,
(iv) any change, waiver, discharge or termination with respect to the
following shall require the consent of Agent and the Required Term Loan Lenders:
(A) the terms of Section 9.18(b) or (c) hereof (or any
definition with respect to financial terms used in such financial covenant in a
manner which has the effect of reducing the amounts which Parent and its
Subsidiaries are required to maintain pursuant to such financial covenants);
(B) the reduction of any percentage specified in the definition
of Required Term Loan Lenders,
(C) the definitions of "Borrowing Base" (but only to the extent
such proposed change in the definition would increase the advance rates above
those in effect on the date hereof), "Change of Control", "Consolidated Net
Income", "EBITDA", "Eligible Inventory", "Eligible Transferee", "Enforcement
Action", "Excess Availability", "Excluded Collateral", "Interest Rate (clause
(b) only)", "Material Adverse Effect", "Maximum Credit", "Net Recovery Cost
Percentage", "Prime Rate", "Pro Rata Share", "Required Term Loan Lenders" or
"Revolving Loan Limit"( but only to the extent such proposed change in the
definition would have the effect of increasing the amount of Revolving Loans
available to the Borrowers); and
(D) any of the following Sections in any material respect: 2.3,
3.2(d), 3.2(e), 6.4, 9.7, 9.8, 9.9, 9.10, 9.11, 9.18(b), 9.20, 10.1(q), 10.2,
11.3, 12.11, 12.12, or 13.1 hereof, and
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(v) any change, waiver, discharge or termination with respect to the
following shall require the consent of Agent and each Term Loan Lender directly
affected thereby:
(A) a reduction in the amount of, or postponement of the due date
of, principal repayments in respect of the Term Loan by or on behalf of such
Term Loan Lender or interest payments in respect of the Term Loan by or on
behalf of such Term Loan Lender or any fees payable for the account of such Term
Loan Lender;
(B) an increase in the Maximum Credit or the Revolving Loan Limit
or the outstanding principal amount of the Term Loan by or on behalf of such
Term Loan Lender; and
(C) forgiveness, compromise or cancellation of any of the Term
Loan by or on behalf of such Term Loan Lender.
(b) Agent and Lenders shall not, by any act, delay, omission or otherwise
be deemed to have expressly or impliedly waived any of its or their rights,
powers and/or remedies unless such waiver shall be in writing and signed as
provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in Section
11.3(a) above, in the event that Borrowers request that this Agreement or any
other Financing Agreements be amended or otherwise modified in a manner which
would require the unanimous consent of all of the Lenders and such amendment or
other modification is agreed to by the Required Lenders, then, with the consent
of Borrowers, Agent and the Required Lenders, Borrowers, Agent and the Required
Lenders may amend this Agreement without the consent of the Lenders that did not
agree to such amendment or other modification (collectively, the "Minority
Lenders") to provide for (i) the termination of the Commitment of each of the
Minority Lenders, (ii) the addition to this Agreement of one or more other
Lenders, or an increase in the Commitment of one or more of the Required
Lenders, so that the Commitments, after giving effect to such amendment, shall
be in the same aggregate amount as the Commitments immediately before giving
effect to such amendment, (ii) if any Loans are outstanding at the time of such
amendment, the making of such additional Loans by such new Lenders or Required
Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (iv) the payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and such other modifications
to this Agreement as Borrowers and the Required Lenders may determine to be
appropriate.
(d) The consent of Agent shall be required for any amendment, waiver or
consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section.
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11.4 Waiver of Counterclaims. Each Borrower waives all rights to
-----------------------
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold Agent and
---------------
each Lender, and its directors, agents, employees and counsel, harmless from and
against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel except for such losses, claims, damages, liabilities, costs or expenses
resulting from the gross negligence or wilful misconduct of a Lender as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrowers shall pay the maximum portion which it is
permitted to pay under applicable law to Agent and Lenders in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12. THE AGENT
---------
12.1 Appointment, Powers and Immunities. Each Lender irrevocably
----------------------------------
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Lender; (b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any Borrower or any Obligor or any other Person to
perform any of its obligations hereunder or thereunder; and (c) shall not be
responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Financing Agreement or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents
117
or attorneys-in-fact selected by it in good faith. Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and until
the assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent. The provisions of this Section 12 are solely for the
benefit of Agent and Lenders. Borrowers and Obligors shall not have any rights
as a third party beneficiary of any of the provisions contained in this Section
12. Notwithstanding anything to the contrary contained in Section 11.3 hereof,
no amendments to this Section 12 shall require the written agreement of any
Borrower or Obligor. The identification of ▇.▇. ▇▇▇▇▇▇ Business Credit Corp. as
a co-agent, joint lead arranger and joint bookrunner hereunder shall not create
any rights in favor of it in such capacity nor subject it to any duties or
obligations in such capacity.
12.2 Reliance by Agent. Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to any
Borrower or counsel to any Lender), independent accountants and other experts
selected by Agent. Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any of the other Financing Agreements
unless it shall first receive such advice or concurrence of the Lenders as it
deems appropriate and until such instructions are received, Agent shall act or
refrain from acting, as it deems advisable so long as it is not grossly
negligent or guilty of wilful misconduct. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. As to any matters not expressly provided
for by this Agreement or any other Financing Agreement, Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder or
thereunder in accordance with instructions given by the Required Lenders,
Required Term Loan Lenders or all of Lenders as is required in such
circumstance, and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
12.3 Events of Default.
-----------------
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, or Borrowers' Agent specifying such
Event of Default or any unfulfilled condition precedent, and stating that such
notice is a "Notice of Default or Failure of Condition". In the event that Agent
receives such a Notice of Default or Failure of Condition, Agent shall give
prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take
such action with respect to any such Event of Default or failure of condition
precedent as shall be directed by the Required Lenders; provided, that, unless
-------- ----
and until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to or by reason of such Event of Default or failure of condition precedent, as
it shall deem advisable in the best interest of Lenders. Without limiting the
foregoing, and notwithstanding the existence or occurrence and continuance of an
Event of Default or any failure to satisfy any of the conditions
118
precedent set forth in Section 4 of this Agreement to the contrary, Agent may,
but shall have no obligation to, continue to make Loans and issue or cause to be
issued Letter of Credit Accommodations for the ratable account and risk of
Lenders from time to time if Agent believes making such Loans or issuing or
causing to be issued such Letter of Credit Accommodations is in the best
interests of Lenders, unless and until Required Revolving Loan Lenders shall
specifically direct otherwise.
(b) Except with the prior written consent of Agent, no Lender may
assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
any Obligor or any of the Collateral or other property of any Borrower or any
Obligor.
12.4 Congress in its Individual Capacity. With respect to its Commitment
-----------------------------------
and the Loans made and Letter of Credit Accommodations issued or caused to be
issued by it (and any successor acting as Agent), so long as Congress shall be a
Lender hereunder, it shall have the same rights and powers hereunder as any
other Lender (except as set forth in Section 13.8 hereof) and may exercise the
same as though it were not acting as Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include Congress in its
individual capacity as Lender hereunder. Congress (and any successor acting as
Agent) and its Affiliates may (without having to account therefor to any Lender)
lend money to, make investments in and generally engage in any kind of business
with Borrowers (and any of its Subsidiaries or Affiliates) as if it were not
acting as Agent, and Congress and its Affiliates may accept fees and other
consideration from Borrowers and any of their Subsidiaries and Affiliates for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
---------------
reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
-------- ----
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the Agent as determined by a final non-
appealable judgment of a court of competent jurisdiction.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
---------------------------------------
has, independently and without reliance on Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Borrowers and Obligors and has made its own decision to enter
into this Agreement and that it will, independently and without reliance upon
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements. Agent shall not be required to keep itself informed
as to the performance
119
or observance by Borrowers or Obligors of any term or provision of this
Agreement or any of the other Financing Agreements or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Borrower or any Obligor. Agent will use reasonable efforts to
provide Lenders with any information received by Agent from any Borrower or any
Obligor which is required to be provided to Lenders hereunder and with a copy of
any Notice of Default or Failure of Condition received by Agent from Borrowers'
Agent or any Lender; provided, that, Agent shall not be liable to any Lender for
-------- ----
any failure to do so, except to the extent that such failure is attributable to
Agent's own gross negligence or willful misconduct as determined by a final non-
appealable judgment of a court of competent jurisdiction. Except for notices,
reports and other documents expressly required to be furnished to Lenders by
Agent hereunder, Agent shall not have any duty or responsibility to provide any
Lender with any other credit or other information concerning the affairs,
financial condition or business of any Borrower or any Obligor that may come
into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
--------------
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Revolving Loans or
----------------
provide any Letter of Credit Accommodations to Borrowers on behalf of Lenders
intentionally and with actual knowledge that such Revolving Loans or Letter of
Credit Accommodations would cause the aggregate amount of the total outstanding
Loans and Letter of Credit Accommodations to Borrowers to exceed the Borrowing
Base, without the prior consent of all Lenders, except, that, Agent may make
------ ----
such additional Loans or provide such additional Letter of Credit Accommodations
on behalf of Lenders, intentionally and with actual knowledge that such
Revolving Loans or Letter of Credit Accommodations will cause the total
outstanding Loans and Letter of Credit Accommodations to Borrowers to exceed the
Borrowing Base (an "Over-Advance"), as Agent may deem necessary or advisable in
its discretion, provided, that: (a) the total principal amount of the
-------- ----
additional Revolving Loans or additional Letter of Credit Accommodations to
Borrowers which Agent may make or provide after obtaining such actual knowledge
that the aggregate principal amount of the Revolving Loans equal or exceed the
Borrowing Base shall not (i) exceed, when taken together with Special Agent
Advances, the lesser of (A) $20,000,000 or (B) six and one-half (6 1/2%)
percent of the Value of Eligible Inventory at any time outstanding in the
aggregate, and (ii) cause the total principal amount of the Revolving Loans and
Letter of Credit Accommodations to exceed the Revolving Loan Limit and (b) no
such additional Revolving Loan or Letter of Credit Accommodation shall be
outstanding more than ninety (90) days from the date such additional Revolving
Loan or Letter of Credit Accommodation was made or issued (as the case may be),
except as the Required Revolving Loan Lenders may otherwise agree . Each
Revolving Lender shall be obligated to pay Agent the amount of its Pro Rata
Share of any such additional Revolving Loans or Letter of Credit Accommodations
provided that Agent is acting in accordance with the terms of this Section 12.8.
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12.9 Concerning the Collateral and the Related Financing Agreements. Each
--------------------------------------------------------------
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
12.10 Field Audit, Examination Reports and other Information; Disclaimer by
---------------------------------------------------------------------
Lenders. By signing this Agreement, each Lender:
-------
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and a weekly report with respect to the Borrowing Base prepared by Agent
(each field audit or examination report and weekly report with respect to the
Borrowing Base being referred to herein as a "Report" and collectively,
"Reports");
(b) expressly agrees and acknowledges that Agent (A) does not make
any representation or warranty as to the accuracy of any Report, or (B) shall
not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Obligors and will rely significantly upon each Borrower's and
Obligor's books and records, as well as on representations of any Borrower's and
Obligor's personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.6 hereof, and not to
distribute or use any Report in any other manner.
12.11 Collateral Matters.
------------------
(a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances ("Special Agent
Advances") which Agent, in its sole discretion, deems necessary or desirable
either (i) to preserve or protect the Collateral or any portion thereof
(provided, that, in no event shall the amount of Special Agent Advances for such
-------- ----
purpose, together with the aggregate amount of outstanding Over-Advances, exceed
the lesser of (A) $20,000,000 or (B) six and one-half (6 1/2%) of the value of
Eligible Inventory in the aggregate outstanding at any time) or (ii to pay any
other amount chargeable to any Borrower pursuant to the terms of this Agreement
consisting of costs, fees and expenses and payments to any issuer of Letter of
Credit Accommodations. Special Agent Advances shall be repayable on demand and
be secured by the Collateral. Special Agent Advances shall not constitute Loans
but shall otherwise constitute Obligations hereunder. Agent shall notify each
Lender and Borrower's Agent in
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writing of each such Special Agent Advance, which notice shall include a
description of the purpose of such Special Agent Advance. Without limitation of
its obligations pursuant to Section 6.9, each Revolving Loan Lender agrees that
it shall make available to Agent, upon Agent's demand, in immediately available
funds, the amount equal to such Revolving Lender's Pro Rata Share of each such
Special Agent Advance. If such funds are not made available to Agent by such
Lender, Agent shall be entitled to recover such funds, on demand from such
Lender together with interest thereon for each day from the date such payment
was due until the date such amount is paid to Agent at the Federal Funds Rate
for each day during such period (as published by the Federal Reserve Bank of New
York or at Agent's option based on the arithmetic mean determined by Agent of
the rates for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of the three leading brokers
of Federal funds transactions in New York City selected by Agent) and if such
amounts are not paid within three (3) days of Agent's demand, at the highest
Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and in
its discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii constituting property being
sold or disposed of if Borrowers' Agent certifies to Agent and Lenders that the
sale or disposition is made in compliance with Section 9.7 hereof (and Agent may
rely conclusively on any such certificate, without further inquiry), or (ii
constituting property in which any Borrower did not own an interest at the time
the security interest, mortgage or lien was granted or at any time thereafter,
or (iv prior to the occurrence of an Event of Default having a value of less
than $5,000,000 in the aggregate, or (v) releases otherwise provided for in
accordance with the Financing Agreements, including without limitation, releases
of Mortgages pursuant to satisfaction of the conditions set forth in Section
9.8(l) or 9.20 hereof or (vi if approved, authorized or ratified in writing by
all of Lenders. Except as provided above, Agent will not release any security
interest in, mortgage or lien upon, any of the Collateral without the prior
written authorization of all of Lenders. Upon request by Agent at any time,
Lenders will promptly confirm in writing Agent's authority to release particular
types or items of Collateral pursuant to the Financing Agreements.
(c) Without any manner limiting Agent's authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
--------
that, (i) Agent shall not be required to execute any such document on terms
----
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of Borrowers in respect
of) the Collateral retained by Borrowers.
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(d) Agent shall have no obligation whatsoever to any Lender or any
other Person to investigate, confirm or assure that the Collateral exists or is
owned by any Borrower or Obligor or is cared for, protected or insured or has
been encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letter of Credit Accommodations
hereunder, or whether any particular reserves are appropriate, or that the liens
and security interests granted to Agent pursuant hereto or any of the Financing
Agreements or otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its discretion, given Agent's
own interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender.
12.12 Agency for Perfection. Each Lender hereby appoints Agent and each
---------------------
other Lender as agent for the purpose of perfecting the security interests in
and liens upon the Collateral of Agent in assets which, in accordance with
Article 9 of the UCC can be perfected only by possession and Agent and each
Lender hereby acknowledges that it holds possession of any such Collateral for
the benefit of Agent as secured party. Should any Lender obtain possession of
any such Collateral, such Lender shall notify Agent thereof, and, promptly upon
Agent's request therefor shall deliver such Collateral to Agent or in accordance
with Agent's instructions.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
13.1 Term.
----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"); provided, that, to the extent that the Term
Loan has been paid in full prior to the third anniversary of the date hereof,
Borrowers may at their option extend the Renewal Date with respect to the
revolving credit portion of the Credit Facility to the date four (4) years from
the date hereof by (i) giving Agent notice at least sixty (60) days prior to the
third (3/rd/) anniversary of this Agreement and (ii payment of renewal fee of
$750,000 to Agent for the account of the Revolving Loan Lenders. Agent or
Borrowers may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the first anniversary of the Renewal Date
(to the extent Borrowers have exercised their renewal option) by giving to the
other party at least sixty (60) days prior written notice and in addition,
Borrowers may, at any time, upon ten (10) Business Days' prior written notice to
Agent, terminate this Agreement; provided, that, in each case, this Agreement
-------- ----
and all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall
furnish cash collateral to Agent in such amounts as Agent determines are
reasonably necessary to secure Agent from loss, cost, damage or expense,
123
including reasonable attorneys' fees and legal expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
payment. Such payments in respect of the Obligations and cash collateral shall
be remitted by wire transfer in Federal funds to such bank account of Agent, as
Agent may, in its discretion, designate in writing to Borrowers' Agent for such
purpose. Interest shall be due until and including the next Business Day, if
the amounts so paid by Borrowers to the bank account designated by Agent are
received in such bank account later than 12:00 noon, New York City time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Agent's continuing security interest in the Collateral and the rights and
remedies of Agent hereunder, under the other Financing Agreements and applicable
law, shall remain in effect until all such Obligations have been fully and
finally discharged and paid. Accordingly, each Borrower waives any rights it may
have under Section 9-404 of the UCC (or any replacement section) to demand the
filing of termination statements with respect to the Collateral and Agent shall
not be required to send such termination statements to Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid in full in
immediately available funds.
(c) If for any reason this Agreement is terminated prior to the date
three (3) years from the date hereof, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Agent's and Revolving Loan Lenders' lost
profits as a result thereof, Borrowers agree to pay to Agent for the benefit of
Revolving Loan Lenders, upon the effective date of such termination, an early
termination fee in the amount of one-half (1/2%) percent of the Revolving Loan
Limit. Such early termination fee shall be presumed to be the amount of damages
sustained by Revolving Loan Lenders as a result of such early termination and
Borrowers agree that it is reasonable under the circumstances currently
existing. In addition, Revolving Loan Lenders shall be entitled to such early
termination fee upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders does not exercise
their right to terminate this Agreement, but elects, at their option, to provide
financing to Borrowers or permit the use of cash collateral under the United
States Bankruptcy Code. The early termination fee provided for in this Section
13.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to contrary contained in Section 13.1(c)
above, in the event of the termination of this Agreement by Borrowers prior to
the end of the initial three (3) year term or renewal term of this Agreement and
the full and final repayment of all of the Obligations and the receipt by Agent
and Lenders of cash collateral all as provided in Section 13.1(c) with the
proceeds of initial loans and advances to Borrowers pursuant to a revolving
credit facility provided by First Union National Bank or its Affiliates (or for
which First Union National Bank is acting as agent) to Borrowers to replace the
financing arrangements provided
124
for herein, and as to which Agent shall not be acting on behalf of First Union
National Bank in any capacity, Borrowers shall not be required to pay the early
termination fee provided for above.
13.2 Appointment of Borrowers' Agent.
-------------------------------
(a) Each Borrower hereby irrevocably appoints CS Delaware as
Borrowers' Agent hereunder and CS Delaware hereby irrevocably agrees to act in
such capacity as agent for each and all of Borrowers hereunder. Each Borrower
further irrevocably authorizes Borrowers' Agent to take such action on such
Borrowers' behalf and to exercise such rights and powers hereunder as are
delegated to Borrowers' Agent by the terms hereof, together with such rights and
powers as are reasonably incidental thereto.
(b) Borrowers' Agent is hereby expressly and irrevocably authorized
by each Borrower, without hereby limiting any other implied or expressed
authority, without notice to any Borrower (i) to give and receive on behalf of
such Borrower all notices and other materials delivered or to be delivered by
Agent or Lenders to such Borrower or by such Borrower to Agent and/or Lenders
pursuant to the Financing Agreements, (ii to request Revolving Loans and Letter
of Credit Accommodations on behalf of such Borrower and (ii to pay, on behalf of
such Borrower, all Obligations at any time owed to Lender pursuant to the terms
of the Financing Agreements.
13.3 Interpretative Provisions.
-------------------------
(a) All terms used herein which are defined in Article 1, Article 8
or Article 9 of the Uniform Commercial Code shall have the meanings given
therein unless otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to Borrower, Borrowers' Agent, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) All references to the term "good faith" used herein when
applicable to Agent shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in
125
fact in the conduct or transaction concerned. Borrowers shall have the burden of
proving any lack of good faith on the part of Agent alleged by any Borrower or
Obligor at any time.
(g) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as determined in good faith by Agent.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrowers most recently
received by Agent prior to the date hereof.
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) Unless otherwise expressly provided herein, (i) references herein
to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) All Schedules annexed hereto are deemed to include information as
of the date hereof.
(n) This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent's or any Lender's involvement in their preparation.
13.4 Notices. All notices, requests and demands hereunder shall be in
-------
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by
126
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing. All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):
If to Borrowers: Charming Shoppes of Delaware, Inc.,
Borrowers' Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
and
Charming Shoppes of Delaware, Inc.,
Borrowers' Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Drinker, ▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
One ▇▇▇▇▇ Square
18th and Cherry
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: 215-988-2757
If to Agent: Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
13.5 Partial Invalidity. If any provision of this Agreement is held to be
------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
127
13.6 Confidentiality.
---------------
(a) Agent and each Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by any Borrower pursuant to this Agreement, provided,
--------
that, nothing contained herein shall limit the disclosure of any such
----
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order, (ii to bank examiners and other regulators, auditors and/or
accountants, (ii in connection with any litigation to which Agent or such Lender
is a party, (iv to any Lender or Participant (or prospective Lender or
Participant) so long as such assignee or Participant (or prospective assignee or
Participant) shall have been instructed to treat such information as
confidential in accordance with this Section 13.6 and shall have acknowledged
such instructions and agreed to comply therewith, or (v) to counsel for Agent or
any Participant or Lender (or prospective Participant or Lender).
(b) In the event that Agent or any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Agent or such Lender, as the case may be, agrees (i) to the extent
permitted by applicable law or if permitted by applicable law, statute, rule or
regulation to the extent Agent determines in good faith that it will not create
any risk of liability to Agent or such Lender, that Agent or such Lender will
promptly notify Borrowers' Agent of such request so that Borrowers may seek a
protective order or other appropriate relief or remedy and (ii if disclosure of
such information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent's or such Lender's reasonable expenses,
cooperate with Borrowers in their reasonable efforts to obtain an order or other
reliable assurance that confidential treatment will be accorded to such portion
of the disclosed information which Borrowers so designates, to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender determines in good faith that it will not create any risk
of liability to Agent or such Lender.
(c) In no event shall this Section 13.6 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by any Borrower or any
third party without breach of this Section 13.6 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, or in violation of any other confidentiality agreement in favor of
Borrowers to the extent Agent or the Lender involved has actual knowledge of
such agreement and the violation thereof at the time it receives such
information, (ii to apply to or restrict disclosure of information that was or
becomes available to Agent on a non-confidential basis from a person other than
any Borrower other than in violation of a confidentiality agreement in favor of
any Borrower by such person to the extent Agent or the Lender involved has
actual knowledge of such agreement and the violation thereof at the time it
receives such information, (ii require Agent or any Lender to return any
materials furnished by Borrowers to Agent or (iv prevent Agent from responding
to routine informational requests in accordance with the Code of Ethics for the
----------------------
Exchange of Credit Information promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or
------------------------------
other applicable industry standards relating to the exchange of credit
information. The obligations of Agent and Lenders under this
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Section 13.6 shall supersede and replace the obligations of Agent and Lenders
under any confidentiality letter signed prior to the date hereof.
13.7 Successors. This Agreement, the other Financing Agreements and any
----------
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Borrowers and their
respective successors and assigns, except that Borrowers may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders. Any such purported assignment without such express prior
written consent shall be void. No Lender may assign its rights and obligations
under this Agreement without the prior written consent of Agent, except as
provided in Section 13.8 below. The terms and provisions of this Agreement and
the other Financing Agreements are for the purpose of defining the relative
rights and obligations of Borrowers, Agent and Lenders with respect to the
transactions contemplated hereby and there shall be no third party beneficiaries
of any of the terms and provisions of this Agreement or any of the other
Financing Agreements.
13.8 Assignments; Participations.
---------------------------
(a) Each Lender (except as the rights of Agent, as Revolving Loan
Lender may be limited as set forth in Section 13.8(b) below) may (i) assign all
or a portion of its rights and obligations under this Agreement (including,
without limitation, a portion of its Commitment, the Loans owing to it and its
rights and obligations as a Lender with respect to Letters of Credit
Accommodations) and the other Financing Agreements to its parent company and/or
any Affiliate of such Lender which is at least fifty (50%) percent owned by such
Lender or its parent company, an Approved Fund, or to one or more Lenders or (ii
assign all, or if less than all a portion equal to at least $5,000,000 in the
aggregate for the assigning Lender, of such rights and obligations under this
Agreement to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Acceptance; provided, that, (A) the consent of Agent shall be required in
-------- ----
connection with any assignment of the Revolving Loan Commitment to an Eligible
Transferee pursuant to clause (ii) above, and (B) such transfer or assignment
will not be effective until recorded by the Agent on the Register which Agent
agrees shall be done promptly. As used in this Section, the term "employee
benefit plan" shall have the meaning assigned to it in Title I of ERISA and
shall also include a "plan" as defined in Section 4975(e)(1) of the Code.
(b) Agent shall not reduce its Revolving Loan Commitment to less than
$40,000,000, except, that, Agent shall have the right to assign its rights and
------ ----
delegate its obligations as a Revolving Loan Lender under the Financing
Agreements below such minimum amount (i) to any of present and future
subsidiaries or affiliates of Agent or (ii) to the extent of the interests of
Participants as provided herein, or (iii) upon the merger, consolidation, sale,
transfer or other disposition of all or any substantial portion of its business,
loan portfolio or other assets or (iv) at any time after an Event of Default
shall exist or have occurred and be continuing or (v) with the consent of
Borrowers' Agent which consent shall not be unreasonably withheld, delayed or
conditioned.
129
(c) Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and Borrower, any Obligor,
Agent and Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Borrowers and any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(d) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(e) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower, any Obligor or any of their Subsidiaries or the performance or
observance by any Borrower or any Obligor of any of the Obligations; (ii such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv such assignee will, independently and
without reliance upon the assigning Lender or Agent and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (vi such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Financing Agreements are required to be performed by it as a Lender. Agent
and Lenders may furnish any information concerning any Borrower or any Obligor
in the possession of Agent or any Lender from time to time to assignees and
Participants.
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(f) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Financing Agreements (including, without limitation, all
or a portion of its Commitments and the Loans owing to it and its participation
in the Letter of Credit Accommodations, without the consent of Agent or the
other Lenders); provided, that, (i) such Lender's obligations under this
-------- ----
Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrower, Obligor, Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Financing Agreements, and (ii the
Participant shall not have any rights under this Agreement or any of the other
Financing Agreements (the Participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the Participant relating thereto) and all amounts payable by
any Borrower or any Obligor hereunder shall be determined as if such Lender had
not sold such participation.
(g) (i) Borrower shall maintain, or cause to be maintained, a
register (the "Term Loan Register") on which it enters the name of each Lender
as the registered owner of the Term Loans held by such Lender. A Registered Term
Loan (and the Registered Term Note, if any, evidencing the same) may be assigned
or sold in whole or in part only by registration of such assignment or sale on
the Term Loan Register (and each Registered Term Note shall expressly so
provide). Any assignment or sale of all or part of such Registered Term Loan
(and the Registered Term Note, if any, evidencing the same) may be effected only
by registration of such assignment or sale on the Term Register, together with
the surrender of the Registered Term Note, if any, evidencing the same duly
endorsed by (or accompanied by a written instrument of assignment or sale duly
executed by) the holder of such Registered Term Note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new Registered Term
Notes in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Term Loan (and the Registered Term Note, if any evidencing the
same), Borrower shall treat the Person in whose name such Loan (and the
Registered Term Note, if any, evidencing the same) is registered as the owner
thereof for the purpose of receiving all payments thereon and for all other
purposes, notwithstanding notice to the contrary.
(ii) In the event that any Lender sells participations in the
Registered Term Loan, such Lender shall maintain a register on which it enters
the name of all participants in the Registered Term Loans held by it (the
"Participant Register"). A Registered Term Loan (and the Registered Term Note,
if any, evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each
Registered Term Note shall expressly so provide). Any participation of such
Registered Term Loan (and the Registered Term Note, if any, evidencing the same)
may be effected only by the registration of such participation on the
Participant Register.
(h) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including without
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limitation (i) any pledge or assignment to secure obligations to a Federal
Reserve Bank and (ii) in the case of any Lender that is an Approved Fund, any
pledge or assignment to any holders of obligations owed, or securities issues,
by such Lender including any trustee for, or any other representative of, such
holders; and this Section shall not apply to any such pledge or assignment of a
security interest; provided, that, no such pledge or assignment of a security
--------- ----
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledge or assignee for such Lender as a party hereto.
(i) Borrowers shall assist Agent or any Lender permitted to sell
assignments or participations under this Section 13.8 in whatever manner
reasonably necessary in order to enable or effect any such assignment or
participation, including (but not limited to) the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential Lenders or Participants. Each Borrower shall
certify the correctness, completeness and accuracy of all descriptions of
Borrowers and Obligors and its affairs provided, prepared or reviewed by
Borrowers' Agent that are contained in any selling materials and all other
information provided by it and included in such materials.
13.9 Entire Agreement. This Agreement, the other Financing Agreements,
----------------
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
13.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts when taken together shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, Agent, Co-Agent, Lenders and Borrowers have caused
these presents to be duly executed as of the day and year first above written.
BORROWERS
---------
CHARMING SHOPPES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Executive Vice President
------------------------------
Chief Executive Office:
----------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
CHARMING SHOPPES OF DELAWARE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Vice President
------------------------------
Chief Executive Office:
----------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
CSI INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Vice President, Treasurer and
------------------------------
Assistant Secretary
------------------------------
Chief Executive Office:
----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
FB APPAREL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Vice President, Treasurer and
------------------------------
Assistant Secretary
------------------------------
Chief Executive Office:
----------------------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
LANE ▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Title: Vice President, Treasurer and
------------------------------
Assistant Secretary
------------------------------
Chief Executive Office:
----------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
CATHERINES STORES CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Title: Vice President and Treasurer
------------------------------
Chief Executive Office:
----------------------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BORROWERS' AGENT
----------------
CHARMING SHOPPES OF DELAWARE, INC.,
as Borrowers' Agent
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Vice President
------------------------------
Chief Executive Office:
----------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AGENT
-----
CONGRESS FINANCIAL CORPORATION,
as Agent, Joint Lead Arranger and Joint Bookrunner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Title: Executive Vice President
---------------------------
CO-AGENT
--------
▇.▇. ▇▇▇▇▇▇ BUSINESS CREDIT CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: Vice President
---------------------------
LENDERS
-------
CONGRESS FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Title: Executive Vice President
---------------------------
THE CHASE MANHATTAN BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: Vice President
---------------------------
ABLECO FINANCE LLC
By: /s/ ▇▇▇ ▇▇▇▇
------------------------------
Title: Senior Vice President and
---------------------------
Chief Credit Officer
---------------------------
136