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EXHIBIT 10.1
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PARTY CITY CORPORATION
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$60,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
PARTY CITY CORPORATION
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, as Agent
Dated as of April 24, 1998
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TABLE OF CONTENTS
Section Page
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1. CERTAIN DEFINITIONS.........................................................1
1.1 Certain Definitions......................................................1
1.2 Construction............................................................17
1.2.1 Number; Inclusion.................................................17
1.2.2 Determination.....................................................18
1.2.3 Agent's Discretion and Consent....................................18
1.2.4 Documents Taken as a Whole........................................18
1.2.5 Headings..........................................................18
1.2.6 Implied References to this Agreement..............................18
1.2.7 Persons...........................................................18
1.2.8 Modifications to Documents........................................18
1.2.9 From, To and Through..............................................19
1.2.10 Shall; Will.......................................................19
1.3 Accounting Principles...................................................19
2. REVOLVING CREDIT FACILITY..................................................19
2.1 Revolving Credit Commitments............................................19
2.1.1 Commitment Amount..................................................19
2.1.2 Voluntary Reduction of Commitment..................................20
2.2 Nature of Banks' Obligations with Respect to Revolving redit Loans......20
2.3 Commitment Fees.........................................................20
2.4 Revolving Credit Facility Fee...........................................21
2.5 Revolving Credit Loan Requests..........................................21
2.6 Making Revolving Credit Loans...........................................22
2.7 Revolving Credit Notes..................................................22
2.8 Use of Proceeds.........................................................22
2.9 Landlord Waiver Reserve.................................................23
2.10 Advances for Rent Arrearages...........................................23
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TABLE OF CONTENTS
Section Page
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3. INTEREST RATES.............................................................24
3.1 Interest Rate Options...................................................24
3.1.1 Revolving Credit Interest Rate Options.............................24
3.1.2 Rate Quotations....................................................24
3.2 Interest Periods........................................................24
3.2.1 Ending Date and Business Day.......................................25
3.2.2 Amount of Borrowing Tranche........................................25
3.2.3 Termination Before Expiration Date.................................25
3.2.4 Renewals...........................................................25
3.3 Interest After Default..................................................25
3.3.1 Interest Rate......................................................25
3.3.2 Other Obligations..................................................25
3.3.3 Acknowledgment.....................................................26
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits
Not Available...........................................................26
3.4.1 Unascertainable....................................................26
3.4.2 Illegality; Increased Costs; Deposits Not Available................26
3.4.3 Agent's and Bank's Rights..........................................27
3.5 Selection of Interest Rate Options......................................27
4. PAYMENTS...................................................................28
4.1 Payments................................................................28
4.2 Pro Rata Treatment of Banks.............................................28
4.3 Interest Payment Dates..................................................28
4.4 Voluntary Prepayments...................................................29
4.4.1 Right to Prepay....................................................29
4.4.2 Replacement of a Bank..............................................30
4.4.3 Change of Lending Office...........................................30
4.5 Mandatory Prepayments...................................................31
4.5.1 Sale of Assets.....................................................31
4.5.2 Application Among Interest Rate Options............................31
4.5.3 Reduction of Commitment............................................31
4.6 Additional Compensation in Certain Circumstances........................31
4.6.1 Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc...................31
4.6.2 Indemnity..........................................................32
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TABLE OF CONTENTS
Section Page
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5. REPRESENTATIONS AND WARRANTIES.............................................33
5.1 Representations and Warranties..........................................33
5.1.1 Organization and Qualification....................................33
5.1.2 Capitalization and Ownership......................................33
5.1.3 Subsidiaries......................................................33
5.1.4 Power and Authority...............................................34
5.1.5 Validity and Binding Effect.......................................34
5.1.6 No Conflict.......................................................34
5.1.7 Litigation........................................................35
5.1.8 Store Locations; Inventory; Title to Properties...................35
5.1.9 Financial Statements..............................................36
5.1.10 Use of Proceeds; Margin Stock; Section 20 Subsidiaries............36
5.1.11 Full Disclosure...................................................37
5.1.12 Taxes.............................................................37
5.1.13 Consents and Approvals............................................38
5.1.14 No Event of Default; Compliance with Instruments..................38
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc....................38
5.1.16 Security Interests................................................38
5.1.17 Rights at Leased Locations........................................39
5.1.18 Status of the Pledged Collateral..................................39
5.1.19 Insurance.........................................................40
5.1.20 Compliance with Laws..............................................40
5.1.21 Material Contracts; Burdensome Restrictions.......................40
5.1.22 Investment Companies; Regulated Entities..........................40
5.1.23 Plans and Benefit Arrangements....................................41
5.1.24 Employment Matters................................................42
5.1.25 Environmental Matters.............................................42
5.1.26 Senior Debt Status................................................43
5.1.27 Year 2000.........................................................43
5.2 Updates to Schedules....................................................43
6. CONDITIONS OF LENDING......................................................44
6.1 First Loans.............................................................44
6.1.1 Officer's Certificate.............................................44
6.1.2 Secretary's Certificate...........................................44
6.1.3 Delivery of Loan Documents........................................45
6.1.4 Opinion of Counsel................................................45
6.1.5 Legal Details.....................................................45
6.1.6 Payment of Fees...................................................45
6.1.7 Consents..........................................................45
6.1.8 Officer's Certificate Regarding MACs..............................46
6.1.9 No Violation of Laws..............................................46
6.1.10 No Actions or Proceedings.........................................46
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TABLE OF CONTENTS
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6.1.11 Insurance Policies; Certificates of Insurance;
Endorsements.............................................................46
6.1.12 Filing Receipts...................................................46
6.1.13 Administrative Questionnaire......................................46
6.2 Each Additional Loan....................................................47
7. COVENANTS..................................................................48
7.1 Affirmative Covenants...................................................48
7.1.1 Preservation of Existence, Etc....................................48
7.1.2 Payment of Liabilities, Including Taxes, Etc......................48
7.1.3 Maintenance of Insurance..........................................48
7.1.4 Maintenance of Properties and Leases; New Leases..................50
7.1.5 Maintenance of Patents, Trademarks, Etc...........................50
7.1.6 Visitation Rights.................................................50
7.1.7 Keeping of Records and Books of Account...........................50
7.1.8 Plans and Benefit Arrangements....................................51
7.1.9 Compliance with Laws..............................................51
7.1.10 Use of Proceeds...................................................51
7.1.11 Further Assurances................................................51
7.1.12 Subordination of Intercompany Loans...............................52
7.1.13 Interest Rate Protection..........................................52
7.2 Negative Covenants......................................................52
7.2.1 Indebtedness......................................................52
7.2.2 Liens.............................................................53
7.2.3 Guaranties........................................................53
7.2.4 Loans and Investments.............................................53
7.2.5 Dividends and Related Distributions...............................54
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions...............54
7.2.7 Dispositions of Assets or Subsidiaries............................55
7.2.8 Affiliate Transactions............................................56
7.2.9 Subsidiaries, Partnerships and Joint Ventures.....................56
7.2.10 Continuation of or Change in Business.............................56
7.2.11 Plans and Benefit Arrangements....................................57
7.2.12 Fiscal Year.......................................................57
7.2.13 Issuance of Stock.................................................58
7.2.14 Changes in Organizational Documents...............................58
7.2.15 Capital Expenditures and Leases...................................58
7.2.16 Minimum Fixed Charge Coverage Ratio...............................58
7.2.17 Maximum Leverage Ratio............................................59
7.2.18 Minimum Liquidity Coverage Ratio..................................59
7.2.19 Minimum Tangible Net Worth........................................60
7.2.20 Indebtedness to Net Worth Ratio...................................60
7.2.21 Net Worth.........................................................61
7.2.22 Offsite Inventory.................................................62
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TABLE OF CONTENTS
Section Page
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7.3 Reporting Requirements..................................................62
7.3.1 Monthly Financial Statements.......................................62
7.3.2 Quarterly Financial Statements.....................................63
7.3.3 Annual Financial Statements........................................63
7.3.4 Certificate of the Borrower........................................64
7.3.5 Notice of Default..................................................64
7.3.6 Notice of Litigation...............................................64
7.3.7 Certain Events.....................................................65
7.3.8 Budgets, Forecasts, Other Reports and Information..................65
7.3.9 Notices Regarding Plans and Benefit Arrangements...................66
8. DEFAULT....................................................................67
8.1 Events of Default.......................................................67
8.1.1 Payments Under Loan Documents.....................................68
8.1.2 Breach of Warranty................................................68
8.1.3 Breach of Negative Covenants or Visitation Rights.................68
8.1.4 Breach of Other Covenants.........................................68
8.1.5 Defaults in Other Agreements or Indebtedness......................68
8.1.6 Final Judgments or Orders.........................................69
8.1.7 Loan Document Unenforceable.......................................69
8.1.8 Uninsured Losses; Proceedings Against Assets......................69
8.1.9 Notice of Lien or Assessment......................................69
8.1.10 Material Adverse Change; Insolvency...............................69
8.1.11 Events Relating to Plans and Benefit Arrangements.................70
8.1.12 Cessation of Business.............................................70
8.1.13 Change of Control.................................................70
8.1.14 Involuntary Proceedings...........................................71
8.1.15 Voluntary Proceedings.............................................71
8.2 Consequences of Event of Default........................................71
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings...............................................71
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings...............72
8.2.3 Set-off............................................................72
8.2.4 Suits, Actions, Proceedings........................................72
8.2.5 Application of Proceeds............................................73
8.2.6 Other Rights and Remedies..........................................73
8.3 Notice of Sale..........................................................73
9. THE AGENT..................................................................74
9.1 Appointment............................................................74
9.2 Delegation of Duties...................................................74
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TABLE OF CONTENTS
Section Page
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9.3 Nature of Duties; Independent Credit Investigation.....................74
9.4 Actions in Discretion of Agent; Instructions From the Banks............75
9.5 Reimbursement and Indemnification of Agent by the Borrower.............75
9.6 Exculpatory Provisions; Limitation of Liability........................76
9.7 Reimbursement and Indemnification of Agent by Banks....................77
9.8 Reliance by Agent......................................................77
9.9 Notice of Default......................................................77
9.10 Notices................................................................78
9.11 Banks in Their Individual Capacities...................................78
9.12 Holders of Notes.......................................................78
9.13 Equalization of Banks..................................................78
9.14 Successor Agent........................................................79
9.15 Agent's Fee............................................................79
9.16 Availability of Funds..................................................79
9.17 Calculations...........................................................80
9.18 Beneficiaries..........................................................80
10. MISCELLANEOUS.............................................................80
10.1 Modifications, Amendments or Waivers...................................80
10.1.1 Increase of Commitment; Extension or Expiration Date..............81
10.1.2 Extension of Payment; Reduction of Principal, Interest
or Fees; Modification of Terms of Payment................................81
10.1.3 Release of Collateral or Guarantor................................81
10.1.4 Miscellaneous.....................................................81
10.2 No Implied Waivers; Cumulative Remedies; Writing Required..............81
10.3 Reimbursement and Indemnification of Banks by the Borrower; Taxes......82
10.4 Holidays...............................................................83
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TABLE OF CONTENTS
Section Page
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10.5 Funding by Branch, Subsidiary or Affiliate.............................83
10.5.1 Notional Funding..................................................83
10.5.2 Actual Funding....................................................83
10.6 Notices................................................................84
10.7 Severability...........................................................84
10.8 Governing Law..........................................................84
10.9 Prior Understanding....................................................85
10.10 Duration; Survival....................................................85
10.11 Successors and Assigns................................................85
10.12 Confidentiality.......................................................86
10.12.1 General..........................................................86
10.12.2 Sharing Information With Affiliates of the Banks.................87
10.13 Counterparts..........................................................87
10.14 Agent's or Bank's Consent.............................................87
10.15 Exceptions............................................................87
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL................................88
10.17 Tax Withholding Clause................................................88
10.18 Joinder of Guarantors.................................................89
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(C) - COMPANY-OWNED STORES
SCHEDULE 1.1(F) - FRANCHISE LOCATIONS
SCHEDULE 1.1(O) - OFFSITE STORAGE LOCATIONS
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 5.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES
SCHEDULE 5.1.7 - LITIGATION
SCHEDULE 5.1.8 - OWNED AND LEASED REAL PROPERTY
SCHEDULE 5.1.13 - CONSENTS AND APPROVALS
SCHEDULE 5.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 5.1.16 - FRANCHISE AGREEMENT EXCEPTIONS
SCHEDULE 5.1.17 - PARTNERSHIP AGREEMENTS; LLC AGREEMENTS
SCHEDULE 5.1.19 - INSURANCE POLICIES
SCHEDULE 5.1.21 - MATERIAL CONTRACTS
SCHEDULE 5.1.23 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.25 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(G)(1) - GUARANTOR JOINDER
EXHIBIT 1.1(I)(2) - INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT .1.1(L) - LANDLORD WAIVER FORM
EXHIBIT 1.1(S) - STANDARD LEASE PROVISION
EXHIBIT 2.5 - LOAN REQUEST
EXHIBIT 7.2.6 - ACQUISITION COMPLIANCE CERTIFICATE
EXHIBIT 7.3.4 - QUARTERLY COMPLIANCE CERTIFICATE
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of April 22, 1998 and is made by and
among PARTY CITY CORPORATION, a Delaware corporation (the "Borrower"), each of
the GUARANTORS (as hereinafter defined), the BANKS (as hereinafter defined) and
PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Banks under
this Agreement (hereinafter referred to in such capacity as the "Agent").
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to provide a revolving
credit facility to the Borrower in an aggregate principal amount not to exceed
$60,000,000; and
WHEREAS, the revolving credit shall be used for acquisitions, store
expansion, working capital and general corporate purposes and to refinance
existing indebtedness; and
WHEREAS, the Banks are willing to provide such credit upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this Agreement,
the following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
Affiliate as to any Person shall mean any other Person (i)
which directly or indirectly controls, is controlled by, or is under common
control with such Person, (ii) which beneficially owns or holds 5% or more of
any class of the voting or other equity interests of such Person, or (iii) 5% or
more of any class of voting interests or other equity interests of which is
beneficially owned or held, directly or indirectly, by such Person. Control, as
used in this definition, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the directors or trustees
of a corporation or trust, as the case may be. "Affiliate" shall not include or
pertain to any mutual fund complex owning shares for investment purposes.
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Agent shall mean PNC Bank, National Association, and its
successors and assigns.
Agent's Fee shall have the meaning assigned to that term in
Section 9.15.
Agent's Letter shall have the meaning assigned to that term in
Section 9.15.
Agreement shall mean this Credit Agreement, as the same may be
supplemented or amended from time to time, including all schedules and exhibits.
Applicable Margin shall mean with reference to Loans to which
the Base Rate Option or the Euro-Rate Option applies, an amount in excess of the
Base Rate or the Euro-Rate, as the case may be, calculated in respect of the
most-recently reported Fixed Charge Coverage Ratio commencing with the fiscal
quarter ending March 31, 1998 according to the table set forth below. Applicable
Margin shall change on the day financial statements are due to be delivered
pursuant to Sections 7.3.2 [Quarterly Financial Statements] and 7.3.3 [Annual
Financial Statements] and if information necessary to make such determination is
not timely delivered pursuant to such sections, Applicable Margin shall be at
"Level V" in the following table until such information is delivered.
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APPLICABLE MARGIN
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Applicable Margin Applicable Margin
Fixed Charge for Base Rate Loans for Euro-Rate Loans
Level Coverage Ratio (%) (%)
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I greater than 1.90-to-1.0 0 .75
less than or equal to
1.90-to-1.0 but greater
II than 1.70-to-1.0 0 1.00
less than or equal to
1.70-to-1.0 but greater
III than 1.50-to-1.0 0 1.25
less than or equal to
1.50-to-1.0 but greater
IV than 1.35-to-1.0 0 1.50
less than or equal to
1.35-to-1.0 and greater
V than 1.20-to-1.0 0 1.75
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For periods prior to the date in respect of which the Applicable Margin is first
calculated according to the table set forth above, the Applicable Margin shall
be 1.25% for Euro-Rate Loans
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and 0% for Base Rate Loans. The rate on Base Rate Loans shall change on the day
the Applicable Margin changes; the rate on Euro-Rate Loans shall change in
respect of Interest Periods beginning on or after the date the Applicable Margin
changes.
Assignment and Assumption Agreement shall mean an Assignment
and Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and
the Agent, as Agent and on behalf of the remaining Banks, substantially in the
form of Exhibit 1.1(A).
Authorized Officer shall mean those individuals, designated by
written notice to the Agent from the Borrower, authorized to execute notices,
reports and other documents on behalf of the Loan Parties required hereunder.
The Borrower may amend such list of individuals from time to time by giving
written notice of such amendment to the Agent.
Banks shall mean the financial institutions named on Schedule
1.1(B) and their respective successors and assigns as permitted hereunder, each
of which is referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate per
annum announced from time to time by the Agent at its Principal Office as its
then prime rate, which rate may not be the lowest rate then being charged
commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus
one-half percent (.5%) per annum.
Base Rate Option or Revolving Credit Base Rate Option shall
mean the option of the Borrower to have Revolving Credit Loans bear interest at
the rate and under the terms and conditions set forth in Section 3.1.1(i).
Benefit Arrangement shall mean at any time an "employee
benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a
Plan nor a Multiemployer Plan and which is maintained, sponsored or otherwise
contributed to by any member of the ERISA Group.
Borrower shall mean Party City Corporation, a corporation
organized and existing under the laws of the State of Delaware.
Borrowing Date shall mean, with respect to any Loan, the date
for the making thereof or the renewal or conversion thereof at or to the same or
a different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans
outstanding as follows: (i) any Loans to which a Euro-Rate Option applies which
become subject to the same Interest Rate Option under the same Loan Request by
the Borrower and which have the same Interest Period shall constitute one
Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall
constitute one Borrowing Tranche.
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Business Day shall mean any day other than a Saturday or
Sunday or a legal holiday on which commercial banks are authorized or required
to be closed for business in New Jersey and if the applicable Business Day
relates to any Loan to which the Euro-Rate Option applies, such day must also be
a day on which dealings are carried on in the London interbank market.
Closing Date shall mean the date hereof. The closing shall
take place at 11:00 a.m., local time, on the Closing Date at the offices of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Princeton, New Jersey or at such other time and place as the
parties agree.
Collateral shall mean the Pledged Collateral, the UCC
Collateral and the Intellectual Property Collateral.
Collateral Assignment shall mean the Collateral Assignment of
Contract Rights relating to the Franchise Agreements and miscellaneous contracts
in form and substance satisfactory to the Agent and executed and delivered by
the Borrower on the Closing Date.
Commitment or Revolving Credit Commitment shall mean, as to
any Bank at any time, the amount initially set forth opposite its name on
Schedule 1.1(B) in the column labeled "Amount of Commitment for Revolving Credit
Loans," and thereafter on Schedule I to the most recent Assignment and
Assumption Agreement, and Commitments or Revolving Credit Commitments shall mean
the aggregate Revolving Credit Commitments of all of the Banks. On the Closing
Date, the Commitments equal $60,000,000 in the aggregate.
Commitment Fee shall have the meaning assigned to that term in
Section 2.3.
Company-owned Stores shall mean the stores operated by the
Borrower directly pursuant to leasehold rights to a particular location and
which are not Franchise Locations. All Company-owned Stores are described on
Schedule 1.1(C), including their addresses (including county), size, and whether
a copy of the lease is in the Agent's possession, whether UCC-1 financing
statements have been executed and delivered in respect of the Borrower's
property thereat, and whether the lease contains the Standard Lease Provision
set forth on Exhibit 1.1(S).
Consideration shall mean with respect to any Permitted
Acquisition, the aggregate of (i) the cash paid by any of the Loan Parties,
directly or indirectly, to the seller in connection therewith, (ii) the
Indebtedness incurred or assumed by any of the Loan Parties, whether in favor of
the seller or otherwise and whether fixed or contingent, (iii) any Guaranty
given or incurred by any Loan Party in connection therewith, and (iv) any other
consideration given or obligation incurred by any of the Loan Parties in
connection therewith; but, for purposes of Section 7.2.6 shall exclude stock
consideration paid by the Borrower in a "stock-for-stock" exchange.
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Consolidated Tangible Net Worth shall mean as of any date of
determination total stockholders' equity less intangible assets of the Borrower
and its Subsidiaries as of such date, determined and consolidated in accordance
with GAAP.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean
lawful money of the United States of America.
EBITDA shall mean (i) the sum of net income, depreciation,
amortization, interest expense, income tax expense minus (ii) non-cash credits
to net income, in each case of the Borrower and its Subsidiaries determined and
consolidated in accordance with GAAP and measured as of the end of each fiscal
quarter (or other specified date of determination) for the twelve (12) prior
months.
EBITR shall mean (i) the sum of net income, interest expense,
income tax expense and rent expense minus (ii) non-cash credits to net income,
in each case of the Borrower and its Subsidiaries determined and consolidated in
accordance with GAAP and measured as of the end of each fiscal quarter (or other
specified date of determination) for the twelve (12) prior months.
Environmental Complaint shall mean any written complaint
setting forth a cause of action for personal or property damage or natural
resource damage or equitable relief, order, notice of violation, citation,
subpoena, issued pursuant to any Environmental Laws by an Official Body, of any
type relating to, arising out of, or issued pursuant to, any of the
Environmental Laws or any Environmental Conditions, as the case may be.
Environmental Conditions shall mean any conditions of the
environment, including the workplace, the ocean, natural resources (including
flora or fauna), soil, surface water, groundwater, any actual or potential
drinking water supply sources, substrata or the ambient air, relating to or
arising out of, or caused by, the use, handling, storage, treatment, recycling,
generation, transportation, release, spilling, leaking, pumping, emptying,
discharging, injecting, escaping, leaching, disposal, dumping, threatened
release or other management or mismanagement of Regulated Substances resulting
from the use of, or operations on, any Property.
Environmental Laws shall mean all federal, state, local and
foreign Laws and regulations, including permits, licenses, authorizations,
bonds, orders, judgments, and consent decrees issued, or entered into, pursuant
thereto, relating to pollution or protection of human health or the environment
or employee safety in the workplace.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
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ERISA Group shall mean, at any time, the Borrower and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with the Borrower, are treated as a single employer under Section 414
of the Internal Revenue Code.
Euro-Rate shall mean, with respect to the Loans comprising any
Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period,
the interest rate per annum determined by the Agent by dividing (the resulting
quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum)
(i) the rate of interest determined by the Agent in accordance with its usual
procedures (which determination shall be conclusive absent manifest error) to be
the average of the London interbank offered rates for U.S. Dollars quoted by the
British Bankers' Association as set forth on Dow ▇▇▇▇▇ Markets Service (formerly
known as Telerate) display page 3750 (or appropriate successor or, if the
British Bankers' Association or its successor ceases to provide such quotes, a
comparable replacement determined by the Agent) two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such Borrowing
Tranche and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage.
The Euro-Rate may also be expressed by the following formula:
Average of London interbank offered rates on Dow ▇▇▇▇▇ Markets
Service display page 3750 as quoted by
Euro-Rate = British Bankers' Association or appropriate successor
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Agent shall give prompt notice to the Borrower of the
Euro-Rate as determined or adjusted in accordance herewith, which determination
shall be conclusive absent manifest error.
Euro-Rate Option or Revolving Credit Euro-Rate Option shall
mean the option of the Borrower to have Revolving Credit Loans bear interest at
the rate and under the terms and conditions set forth in Section 3.1.1(ii).
Euro-Rate Reserve Percentage shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Agent which is in effect during any relevant period, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the reserve requirements (including supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in such System.
Event of Default shall mean any of the events described in
Section 8.1 and referred to therein as an "Event of Default."
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Expiration Date shall mean, with respect to the Revolving
Credit Commitments, April 24, 2001.
Facility Fees shall mean the fees referred to in Section 2.4.
Federal Funds Effective Rate for any day shall mean the rate
per annum (based on a year of 360 days and actual days elapsed and rounded
upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that
term in Section 5.1.9(ii).
Fixed Charge Coverage Ratio shall mean the ratio of (x) EBITR
to (y) Fixed Charges.
Fixed Charges shall mean the sum of interest expense and rent
expense (expressed as the greater of accrued or actually paid) in each case of
the Borrower and its Subsidiaries determined and consolidated in accordance with
GAAP and measured as of the end of each fiscal quarter for the four (4) prior
fiscal quarters.
Franchise Agreements shall mean the agreements between Party
City and the Franchisees pursuant to which Franchisees operate Party City stores
at the Franchise Locations.
Franchises and Franchisees shall mean, respectively, (i) the
franchises of Party City stores and the business operations of those stores and
(ii) the Persons who operate such stores pursuant to an effective Franchise
Agreement with Party City as franchisor.
Franchise Locations shall mean the locations at which
Franchisees operate on a given date Party City stores pursuant to an effective
Franchise Agreement; all current Franchise Locations (including address and
size) are described on Schedule 1.1(F).
Franchise Royalties shall mean all payments due to be made to
the Borrower from Franchisees, including without limitation, those pursuant to
Franchise Agreements and other payments, charges, contributions and assessments
but excluding funds paid or held in trust or escrow as or into the Borrower's
"ad fund."
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GAAP shall mean generally accepted accounting principles as
are in effect from time to time, subject to the provisions of Section 1.3, and
applied on a consistent basis both as to classification of items and amounts.
Guarantor shall mean each of the parties to this Agreement
which is designated as a "Guarantor" on the signature page hereof and each other
Person which joins this Agreement as a Guarantor after the date hereof pursuant
to Section 10.18; in all events, Party City Michigan shall be a Guarantor
hereunder.
Guarantor Joinder shall mean a joinder by a Person as a
Guarantor under this Agreement, the Guaranty Agreement and the other Loan
Documents in the form of Exhibit 1.1(G)(1).
Guaranty of any Person shall mean any obligation of such
Person guaranteeing or in effect guaranteeing any liability or obligation of any
other Person in any manner, whether directly or indirectly, including any
agreement to indemnify or hold harmless any other Person, any performance bond
or other suretyship arrangement and any other form of assurance against loss,
except endorsement of negotiable or other instruments for deposit or collection
in the ordinary course of business.
Guaranty Agreement shall mean the Guaranty and Suretyship
Agreement in form and substance satisfactory to the Agent and executed and
delivered by the appropriate Loan Party on the Closing Date.
Historical Statements shall have the meaning assigned to that
term in Section 5.1.9(i).
Indebtedness shall mean, as to any Person at any time, any and
all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of Indebtedness for
borrowed money.
Ineligible Security shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
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Insolvency Proceeding shall mean, with respect to any Person,
(a) a case, action or proceeding with respect to such Person (i) before any
court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party or otherwise
relating to the liquidation, dissolution, winding-up or relief of such Person,
or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors
undertaken under any Law.
Intellectual Property Collateral shall mean all of the
property described in the Patent, Trademark and Copyright Assignment.
Intercompany Subordination Agreement shall mean a
Subordination Agreement among the Loan Parties in the form attached hereto as
Exhibit 1.1(I)(2).
Interest Period shall have the meaning assigned to such term
in Section 3.2.
Interest Rate Option shall mean any Euro-Rate Option or Base
Rate Option.
Interim Statements shall have the meaning assigned to that
term in Section 5.1.9(i).
Internal Revenue Code shall mean the Internal Revenue Code of
1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
Labor Contracts shall mean all employment agreements,
employment contracts, collective bargaining agreements and other agreements
among any Loan Party or Subsidiary of a Loan Party and its employees.
Landlord Waiver Reserve shall have the meaning assigned to
that term in Section 2.9.
Landlord Waivers shall mean as to the Company- owned Stores
landlord waiver and consents substantially in the form of Exhibit 1.1 (L)
executed and delivered by the lessor of those stores.
Law shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
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Leverage Ratio shall mean the ratio of (x) the sum of the
Borrower's consolidated Indebtedness for borrowed money, capital leases,
Guaranties and reimbursement obligations (whether contingent or otherwise) in
respect of letters of credit to (y) EBITDA.
Lien shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LLC Interests shall have the meaning given to such term in
Section 5.1.3.
Loan Documents shall mean this Agreement, the Agent's Letter,
the Collateral Assignment, the Guaranty Agreement, the Intercompany
Subordination Agreement, the Notes, the Patent, Trademark and Copyright
Assignment, the Pledge Agreement, the Security Agreement, the Security Agreement
- PCM, the Patent, Trademark and Copyright Assignment - PCM, the Tomax
Collateral Assignment, and the Restrictive Covenants and any other instruments,
certificates or documents delivered or contemplated to be delivered hereunder or
thereunder or in connection herewith or therewith, as the same may be
supplemented or amended from time to time in accordance herewith or therewith,
and Loan Document shall mean any of the Loan Documents.
Loan Parties shall mean the Borrower and the Guarantors.
Loan Request shall have the meaning given to such term in
Section 2.5.
Loans or Revolving Credit Loans shall mean collectively and
Revolving Credit Loan or Loan shall mean separately all Revolving Credit Loans
or any Revolving Credit Loan made by the Banks or one of the Banks to the
Borrower pursuant to Section 2.1.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Loan Parties taken as a whole, (c)
impairs materially or could reasonably be expected to impair materially the
ability of the Loan Parties taken as a whole to duly and punctually pay or
perform its Indebtedness, or (d) impairs materially or could reasonably be
expected to impair materially the ability of the Agent or any of the Banks, to
the extent permitted, to enforce their legal remedies pursuant to this Agreement
or any other Loan Document.
Month, with respect to an Interest Period under the Euro-Rate
Option, shall mean the interval between the days in consecutive calendar months
numerically
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corresponding to the first day of such Interest Period. If any Euro-Rate
Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is to
end, the final month of such Interest Period shall be deemed to end on the last
Business Day of such final month.
Multiemployer Plan shall mean any employee benefit plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and
to which the Borrower or any member of the ERISA Group is then making or
accruing an obligation to make contributions or, within the preceding five Plan
years, has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
Notes or Revolving Credit Notes shall mean collectively and
Note or Revolving Credit Note shall mean separately all the Revolving Credit
Notes of the Borrower evidencing the Revolving Credit Loans together with all
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
Notices shall have the meaning assigned to that term in
Section 10.6.
Obligation shall mean any obligation or liability of any of
the Loan Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Agent's Letter or any other Loan Document and including without
limitation "automated clearing house" payment obligations and obligations under
interest rate swap, floor, collar or other hedging arrangements permitted hereby
and owing to any of the Banks or the Agent.
Offsite Storage Locations shall mean the locations listed on
Schedule 1.1(O) at which all of the tangible property (including Inventory) of
all Loan Parties is kept, other than inventory stored at Store Locations.
Schedule 1.1(O) includes the addresses (including county) of such locations, the
owner or lessor thereof, the terms of the lease, and the Company-owned Store(s)
whose inventory are stored at such location. Schedule 1.1(O) also includes a
listing of certain trailers and containers located at Company-owned Store
locations which contain inventory, but these trailers and containers shall not
be deemed to be Offsite Storage locations for purposes of this Agreement.
Official Body shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
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Partnership Interests shall have the meaning given to such
term in Section 5.1.3.
Party City shall mean Party City Corporation, the Borrower
hereunder, including such Person as the single franchisor under all of the
Franchise Agreements.
Party City Michigan shall mean Party City Michigan, Inc., a
Delaware corporation, which is a wholly-owned subsidiary of the Borrower and the
owner of certain of the Collateral.
Patent, Trademark and Copyright Assignment shall mean the
Patent, Trademark and Copyright Collateral Assignment in form and substance
satisfactory to the Agent and executed and delivered by Borrower on the Closing
Date.
Patent, Trademark and Copyright Assignment - PCM shall mean
the Patent, Trademark and Copyright Collateral Assignment in form and substance
satisfactory to the Agent and executed and delivered by Party City Michigan on
the Closing Date.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Acquisitions shall have the meaning assigned to such
term in Section 7.2.6.
Permitted Investments shall mean:
(i) direct obligations of the United States of America
or any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in twelve (12) months or
less from the date of acquisition;
(ii) commercial paper or other debt instruments maturing
in 180 days or less rated not lower than A-1, by Standard & Poor's or P-1 by
▇▇▇▇▇'▇ Investors Service, Inc. on the date of acquisition;
(iii) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose obligations are rated
A-1, A or the equivalent or better by Standard & Poor's on the date of
acquisition or otherwise to the extent insured by the FDIC; and
(iv) money market accounts maintained as escrow accounts
in connection with acquisitions or otherwise in the normal course of business
and invested in any of the categories listed in (i), (ii) or (iii) above.
Permitted Liens shall mean:
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(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, or carrier Liens,
securing obligations incurred in the ordinary course of business that are not
yet due and payable and which do not apply to inventory;
(iv) Good-faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vi) Liens, security interests and mortgages in favor of
the Agent for the benefit of the Banks;
(vii) Liens on property leased by any Loan Party or
Subsidiary of a Loan Party under capital leases permitted in Section 7.2.15, or
under operating leases, securing obligations of such Loan Party or Subsidiary to
the lessor under such leases;
(viii) Any Lien existing on the date of this Agreement
and described on Schedule 1.1(P), provided that the principal amount secured
thereby is not hereafter increased, and no additional assets become subject to
such Lien;
(ix) Purchase Money Security Interests, provided that
the aggregate amount of loans and deferred payments secured by such Purchase
Money Security Interests shall not exceed $5,000,000 in 1998 and $2,000,000 in
each year thereafter (excluding in all events for the purpose of this
computation any loans or deferred payments secured by Liens described on
Schedule 1.1(P) or Liens otherwise permitted by this definition); and
(x) The following, (A) if the validity or amount thereof
is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and in either case
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they do not affect the Collateral or, in the aggregate, do not materially impair
the ability of any Loan Party to perform its Obligations hereunder or under the
other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the
applicable Loan Party maintains such reserves or other appropriate
provisions as shall be required by GAAP and pays all such taxes,
assessments or charges forthwith upon the commencement of
proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title
to, real or personal property other than the Collateral, including
any attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits;
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens, including; or
(4) Liens resulting from final judgments or orders described
in Section 8.1.6.; and
(xi) Liens for the benefit of landlords to the extent
not prohibited from time to time under the Loan Documents.
Person shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
Pledge Agreement shall mean the Pledge Agreement relating to
all of the stock or other ownership interests of each of the Subsidiaries of any
Loan Party in form and substance satisfactory to the Agent and executed and
delivered by the appropriate Loan Party on the Closing Date.
Pledged Collateral shall mean the property of the Loan Parties
in which security interests are to be granted under the Pledge Agreement or the
Collateral Assignment.
PNC Bank shall mean PNC Bank, National Association, its
successors and assigns.
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Potential Default shall mean any event or condition which with
notice, passage of time or a determination by the Agent or the Required Banks,
or any combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office of the
Agent in Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable
perfected first-priority security interest under the Uniform Commercial Code in
the UCC Collateral and the Pledged Collateral which is subject only to Permitted
Liens.
Prohibited Transaction shall mean any prohibited transaction
as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
for which neither an individual nor a class exemption has been issued by the
United States Department of Labor.
Property shall mean all real property, both owned and leased,
of any Loan Party or Subsidiary of a Loan Party.
Purchase Money Security Interest shall mean Liens upon
tangible personal property securing loans to any Loan Party or Subsidiary of a
Loan Party or deferred payments by such Loan Party or Subsidiary for the
purchase of such tangible personal property.
Purchasing Bank shall mean a Bank which becomes a party to
this Agreement by executing an Assignment and Assumption Agreement.
Ratable Share shall mean the proportion that a Bank's
Commitment bears to the Commitments of all of the Banks.
Regulated Substances shall mean any substance, including any
solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material,
wastes, chemicals, petroleum products, by-products, coproducts, impurities,
dust, scrap, heavy metals, defined as a "hazardous substance," "pollutant,"
"pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous
substance," "toxic chemical," "toxic waste," "hazardous waste," "industrial
waste," "residual waste," "solid waste," "municipal waste," "mixed waste,"
"infectious waste," "chemotherapeutic waste," "medical waste," or "regulated
substance" or any related materials, substances or wastes as now or hereafter
defined pursuant to any Environmental Laws, ordinances, rules, regulations or
other directives of any Official Body, the generation, manufacture, extraction,
processing, distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse, spilling, leaking, dumping, injection, pumping,
leaching, emptying, discharge, escape, release or other management or
mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as promulgated
by the Board of Governors of the Federal Reserve System, as amended from time to
time.
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Reportable Event shall mean a reportable event described in
Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
Required Banks shall mean
(i) if there are no Loans outstanding, Banks whose
Commitments aggregate at least 66.67% of the Commitments of all of the Banks, or
(ii) if there are Loans outstanding, a Bank or group of
Banks to the extent the sum of the Loans of such Banks then outstanding
aggregates at least 66.67% of the total principal amount of all of the Loans
then outstanding.
Restrictive Covenant shall mean the Restrictive Covenant
agreements dated the Closing Date between each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and the Agent on behalf of the Banks.
Revolving Facility Usage shall mean at any time the sum of the
Revolving Credit Loans outstanding.
Section 20 Subsidiary shall mean the Subsidiary of the bank
holding company controlling any Bank, which Subsidiary has been granted
authority by the Federal Reserve Board to underwrite and deal in certain
Ineligible Securities.
Security Agreement shall mean the Security Agreement in form
and substance satisfactory to the Agent and executed and delivered by the
Borrower on the Closing Date.
Security Agreement - PCM shall mean the Security Agreement in
form and substance satisfactory to the Agent and executed and delivered by Party
City Michigan on the Closing Date.
Shares shall have the meaning assigned to that term in Section
5.1.2.
Standard & Poor's shall mean Standard & Poor's Ratings
Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
Standard Lease Provision shall mean the landlord waiver
provision substantially as set forth in Exhibit 1.1 (S).
Subsidiary of any Person at any time shall mean (i) any
corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, (ii) any partnership of which such Person is
a general partner or of which 50% or
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more of the partnership interests is at the time directly or indirectly owned by
such Person or one or more of such Person's Subsidiaries, (iii) any limited
liability company of which such Person is a member or of which 50% or more of
the limited liability company interests is at the time directly or indirectly
owned by such Person or one or more of such Person's Subsidiaries or (iv) any
corporation, trust, partnership, limited liability company or other entity which
is controlled or capable of being controlled by such Person or one or more of
such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to that term
in Section 5.1.3.
Tomax Collateral Assignment shall mean the Collateral
Assignment of Contract Rights relating to any Loan Party's agreements with and
licenses from Tomax Technologies, Inc., in form and substances satisfactory to
the Agent and executed and delivered by the Borrower on the Closing Date,
together with the related consent executed by Tomax Technologies, Inc. and
delivered on the Closing Date.
Transferor Bank shall mean the selling Bank pursuant to an
Assignment and Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties in
which security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to
that term in Section 5.1.16.
Year 2000 Problem shall have the meaning assigned to that term
in Section 5.1.27.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 Number; Inclusion.
references to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 Determination.
references to "determination" of or by the Agent or the Banks
shall be deemed to include good-faith estimates by the Agent or the Banks (in
the case of quantitative
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determinations) and good-faith beliefs by the Agent or the Banks (in the case of
qualitative determinations) and either such determination shall be conclusive
absent manifest error;
1.2.3 Agent's Discretion and Consent.
whenever the Agent or the Banks are granted the right herein
to act in its or their sole discretion or to grant or withhold consent such
right shall be exercised in good faith;
1.2.4 Documents Taken as a Whole.
the words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.5 Headings.
the section and other headings contained in this Agreement or
such other Loan Document and the Table of Contents (if any), preceding this
Agreement or such other Loan Document are for reference purposes only and shall
not control or affect the construction of this Agreement or such other Loan
Document or the interpretation thereof in any respect;
1.2.6 Implied References to this Agreement.
article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified;
1.2.7 Persons.
reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
1.2.8 Modifications to Documents.
reference to any agreement (including this Agreement and any
other Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
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1.2.9 From, To and Through.
relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.10 Shall; Will.
references to "shall" and "will" are intended to have the same
meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 [Negative Covenants] (and all defined terms used in the
definition of any accounting term used in Section 7.2) shall have the meaning
given to such terms (and defined terms) under GAAP as in effect on the date
hereof applied on a basis consistent with those used in preparing the Historical
Statements referred to in Section 5.1.9(i) [Historical Statements]. In the event
of any change after the date hereof in GAAP, and if such change would result in
the inability to determine compliance with the financial covenants set forth in
Section 7.2 based upon the Borrower's regularly prepared financial statements by
reason of the preceding sentence, then the parties hereto agree to endeavor, in
good faith, to agree upon an amendment to this Agreement that would adjust such
financial covenants in a manner that would not affect the substance thereof, but
would allow compliance therewith to be determined in accordance with the
Borrower's financial statements at that time. So long as the Borrower has any
Subsidiaries, all reports shall be presented on a consolidated and consolidating
basis.
2. REVOLVING CREDIT FACILITY
2.1 Revolving Credit Commitments.
2.1.1 Commitment Amount.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, each Bank severally agrees
to make Revolving Credit Loans to the Borrower at any time or from time to time
on or after the date hereof to the Expiration Date provided that after giving
effect to such Loan the aggregate amount of Loans from such Bank shall not
exceed such Bank's Revolving Credit Commitment. Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1.
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2.1.2 Voluntary Reduction of Commitment.
The Borrower shall have the right at any time and from time to
time upon five (5) Business Days' prior written notice to the Agent to reduce
permanently and ratably, in a minimum amount of $500,000 and whole multiples of
$100,000 of principal, or terminate completely all of the Commitments, without
penalty or premium except as hereinafter set forth, provided that any such
reduction or termination shall be accompanied by prepayment of the Notes,
together with outstanding Commitment Fees, and the full amount of interest
accrued on the principal sum to be prepaid (and all amounts referred to in
Section 4.6.2 hereof), to the extent that the aggregate amount thereof then
outstanding exceeds the Commitments as so reduced or terminated. All notices to
reduce the Commitments shall be irrevocable.
2.2 Nature of Banks' Obligations with Respect to Revolving Credit
Loans.
Each Bank shall be obligated to participate in each request for
Revolving Credit Loans pursuant to Section 2.5 [Revolving Credit Loan Requests]
in accordance with its Ratable Share. The aggregate of each Bank's Revolving
Credit Loans outstanding hereunder to the Borrower at any time shall never
exceed its Revolving Credit Commitment. The obligations of each Bank hereunder
are several. The failure of any Bank to perform its obligations hereunder shall
not affect the Obligations of the Borrower to any other party nor shall any
other party be liable for the failure of such Bank to perform its obligations
hereunder. The Banks shall have no obligation to make Revolving Credit Loans
hereunder on or after the Expiration Date.
2.3 Commitment Fees.
Accruing from the date hereof until the Expiration Date, the
Borrower agrees to pay to the Agent for the account of each Bank, as
consideration for such Bank's Revolving Credit Commitment hereunder, a
nonrefundable commitment fee (the "Commitment Fee") equal to (x) the percentage
per annum determined in reference to the Borrower's Fixed Charge Coverage Ratio
commencing with the fiscal quarter ending March 31, 1998 according to the table
set forth below (computed on the basis of a year of 360 days and actual days
elapsed) multiplied by (y) the average daily difference between the amount of
(i) such Bank's Revolving Credit Commitment as the same may be constituted from
time to time and the (ii) the sum of such Bank's Revolving Credit Loans
outstanding. Commitment Fees shall change on the day financial statements are
due to be delivered pursuant to Sections 7.3.2 [Quarterly Financial Statements]
and 7.3.3 [Annual Financial Statements] and if information necessary to make
such determination is not timely delivered pursuant to such sections, the
"Commitment Fee Percentage" in the following table shall be at "Level V" until
such information is delivered.
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--------------------------------
COMMITMENT FEE PERCENTAGE
--------------------------------
-----------------------------------------------------------
Fixed Charge Commitment Fee
Level Coverage Ratio Percentage (%)
---------------------------------------------------
I greater than 1.90-to-1.0 .175
less than or equal to
1.90-to-1.0 but greater than
II 1.70-to-1.0 .20
less than or equal to
1.70-to-1.0 but greater than
III 1.50-to-1.0 .25
less than or equal to
1.50-to-1.0 but greater than
IV 1.35-to-1.0 .30
less than or equal to
1.35-to-1.0 and greater than
V 1.20-to-1.0 .35
-----------------------------------------------------------
All Commitment Fees shall be payable in arrears on the first Business Day of
each July, October, January and April after the date hereof and on the
Expiration Date or upon acceleration of the Notes. For periods prior to the date
in respect of which the Commitment Fee percentage is first calculated according
to the table set forth above, the percentage used to calculate the Commitment
Fee shall be .25%.
2.4 Revolving Credit Facility Fee.
The Borrower agrees to pay to the Agent for the account of each
Bank, as consideration for such Bank's Revolving Credit Commitment, a
nonrefundable facility fee described in the Agent's Letter and payable on the
Closing Date.
2.5 Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrower may from time to
time prior to the Expiration Date request the Banks to make Revolving Credit
Loans, or renew or convert the Interest Rate Option applicable to existing
Revolving Credit Loans pursuant to Section 3.2 [Interest Periods], by delivering
to the Agent, not later than 10:00 a.m., Eastern time, (i) three (3) Business
Days prior to the proposed Borrowing Date with respect to the making of
Revolving Credit Loans to which the Euro-Rate Option applies or the conversion
to or the renewal of the Euro-Rate Option for any Loans; and (ii) the day of the
proposed Borrowing Date with respect to the making of a Revolving Credit Loan to
which the Base Rate Option applies or the last day of the preceding Interest
Period with respect to the conversion to the Base Rate Option for any Loan, of a
duly completed request therefor substantially in the form of Exhibit 2.5 or a
request by
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telephone immediately confirmed in writing by letter or facsimile in such form
(each, a "Loan Request"), it being understood that the Agent may rely on the
authority of any individual making such a telephonic request prior to receipt of
such written confirmation. Each Loan Request shall be irrevocable and shall
specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the
proposed Loans comprising each Borrowing Tranche, which shall be in integral
multiples of $1,000,000 and not less than $1,000,000 for each Borrowing Tranche
to which the Euro-Rate Option applies and not less than the lesser of $500,000
or the maximum amount available for Borrowing Tranches to which the Base Rate
Option applies; (iii) whether the Euro-Rate Option or Base Rate Option shall
apply to the proposed Loans comprising the applicable Borrowing Tranche; and
(iv) in the case of a Borrowing Tranche to which the Euro-Rate Option applies,
an appropriate Interest Period for the Loans comprising such Borrowing Tranche.
2.6 Making Revolving Credit Loans.
The Agent shall, promptly after receipt by it of a Loan Request
pursuant to Section 2.5 [Revolving Credit Loan Requests], and in any event
before 2:00 p.m., Eastern time, on the date of receipt, notify the Banks of its
receipt of such Loan Request specifying: (i) the proposed Borrowing Date and the
time and method of disbursement of the Revolving Credit Loans requested thereby;
(ii) the amount and type of each such Revolving Credit Loan and the applicable
Interest Period (if any); and (iii) the apportionment among the Banks of such
Revolving Credit Loans as determined by the Agent in accordance with Section 2.2
[Nature of Banks' Obligations]. Each Bank shall remit the principal amount of
each Revolving Credit Loan to the Agent such that the Agent is able to, and the
Agent shall, to the extent the Banks have made funds available to it for such
purpose and subject to Section 6.2 [Each Additional Loan], fund such Revolving
Credit Loans to the Borrower in U.S. Dollars and immediately available funds at
the Principal Office prior to 2:00 p.m., Eastern time, on the applicable
Borrowing Date, provided that if any Bank fails to remit such funds to the Agent
in a timely manner, the Agent may elect in its sole discretion to fund with its
own funds the Revolving Credit Loans of such Bank on such Borrowing Date, and
such Bank shall be subject to the repayment obligation in Section 9.16
[Availability of Funds].
2.7 Revolving Credit Notes.
The Obligation of the Borrower to repay the aggregate unpaid
principal amount of the Revolving Credit Loans made to it by each Bank, together
with interest thereon, shall be evidenced by a Revolving Credit Note dated the
Closing Date payable to the order of such Bank in a face amount equal to the
Revolving Credit Commitment of such Bank.
2.8 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used in
accordance with Section 7.1.10 [Use of Proceeds].
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2.9 Landlord Waiver Reserve.
Notwithstanding anything in this Section 2 to the contrary, a
portion of the Commitments (the "Landlord Waiver Reserve") described below shall
from time to time be unavailable for Loans. Such portion shall be equal to:
(w) $2,000,000 minus:
(x) the product of (i) $50,000 and (ii) the number of
Company-owned Stores as to which a Landlord Waiver has been
delivered after the Closing Date or a Standard Lease Provision
made effective after the Closing Date with respect to an
existing lease which theretofore has not included a landlord
waiver plus;
(y) the product of (i) $50,000 and (ii) the number of
leases for Company-owned Stores entered into (whether by
execution, assumption or otherwise) after the Closing Date as
to which a Landlord Waiver has not been delivered or a
Standard Lease Provision has not been made effective (unless
the Borrower demonstrates to the Agent's satisfaction that
such states have no statutory lien applicable to such stores)
minus;
(z) the product of (i) $50,000 and (ii) the number of
Company-owned Stores as of the Closing Date which are located
in states determined after the Closing Date to have no
statutory landlord liens applicable to such stores.
The amount of the Landlord Waiver Reserve shall constitute "Revolving Facility
Usage" for purposes of the ratio set forth in Section 7.2.18 [Minimum Liquidity
Coverage Ratio] but not for purposes of Section 2.3 [Commitment Fees]. The
Landlord Waiver Reserve shall be recalculated as of the end of the fiscal
quarter next ending after the Closing Date and thereafter at the end of each
fiscal quarter.
2.10 Advances for Rent Arrearages.
Without limiting any right elsewhere described of the Agent or the
Banks to make advances in respect of a Loan Party's obligations, the Agent may,
and at the discretion of Required Banks shall, advance funds after an Event of
Default in an aggregate amount not to exceed the amount of the Landlord Waiver
Reserve to pay unpaid rent at Company-owned Store locations at which the
Landlord has or may assert a statutory lien against collateral on account of
unpaid rent at such location. Nothing herein shall require the Agent to make
such payment (this provision being for the sole benefit of the Agent and the
Banks). All such advances shall be "Obligations" and shall be repaid upon
demand.
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3. INTEREST RATES
3.1 Interest Rate Options.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Loans as selected by it from the Base Rate Option or
Euro-Rate Option set forth below applicable to the Loans, it being understood
that, subject to the provisions of this Agreement, the Borrower may select
different Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche, provided that there shall
not be at any one time outstanding more than five (5) Borrowing Tranches in the
aggregate among all of the Loans accruing interest at a Euro-Rate Option and the
Base Rate Option. Notwithstanding anything else hereinto the contrary, if at any
time the designated rate applicable to any Loan made by any Bank exceeds such
Bank's highest lawful rate, the rate of interest on such Bank's Loan shall be
limited to such Bank's highest lawful rate.
3.1.1 Revolving Credit Interest Rate Options.
The Borrower shall have the right to select from the following
Interest Rate Options applicable to the Revolving Credit Loans:
(i) Revolving Credit Base Rate Option: A fluctuating
rate per annum (computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed) equal to the Base Rate plus the Applicable
Margin, such interest rate to change automatically from time to time effective
as of the effective date of each change in the Base Rate; or
(ii) Revolving Credit Euro-Rate Option: A rate per annum
(computed on the basis of a year of 360 days and actual days elapsed) equal to
the Euro-Rate plus the Applicable Margin.
3.1.2 Rate Quotations.
The Borrower may call the Agent on or before the date on which
a Loan Request is to be delivered to receive an indication of the rates then in
effect, but it is acknowledged that such projection shall not be binding on the
Agent or the Banks nor affect the rate of interest which thereafter is actually
in effect when the election is made.
3.2 Interest Periods.
At any time when the Borrower shall select, convert to or renew a
Euro-Rate Option, the Borrower shall notify the Agent thereof at least three (3)
Business Days prior to the effective date of such Euro-Rate Option by delivering
a Loan Request. The notice shall specify an interest period (the "Interest
Period") during which such Interest Rate Option shall apply; such
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Interest Period may be one, two, three or six Months. Notwithstanding the
preceding sentence, the following provisions shall apply to any selection of,
renewal of, or conversion to a Euro-Rate Option:
3.2.1 Ending Date and Business Day.
any Interest Period which would otherwise end on a date which
is not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
3.2.2 Amount of Borrowing Tranche.
each Borrowing Tranche of Euro-Rate Loans shall be in integral
multiples of $1,000,000 and not less than $1,000,000;
3.2.3 Termination Before Expiration Date.
the Borrower shall not select, convert to or renew an Interest
Period for any portion of the Loans that would end after the Expiration Date;
and
3.2.4 Renewals.
in the case of the renewal of a Euro-Rate Option at the end of
an Interest Period, the first day of the new Interest Period shall be the last
day of the preceding Interest Period, without duplication in payment of interest
for such day.
3.3 Interest After Default.
To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
3.3.1 Interest Rate.
the rate of interest for each Loan otherwise applicable
pursuant to Section 3.1 [Interest Rate Options], shall be increased to a rate
equal to the applicable Base Rate plus the Applicable Margin plus an additional
2.0% per annum; and
3.3.2 Other Obligations.
each other Obligation hereunder if not paid when due shall
bear interest at a rate per annum equal to the sum of the rate of interest
applicable under the Revolving Credit Base Rate Option plus the Applicable
Margin plus an additional 2.0% per annum from the time such Obligation becomes
due and payable and until it is paid in full.
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3.3.3 Acknowledgment.
The Borrower acknowledges that the increase in rates referred
to in this Section 3.3 reflects, among other things, the fact that such Loans or
other amounts have become a substantially greater risk given their default
status and that the Banks are entitled to additional compensation for such risk;
and all such interest shall be payable by Borrower upon demand by Agent.
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits
Not Available.
3.4.1 Unascertainable.
If on any date on which a Euro-Rate would otherwise be
determined, the Agent shall have determined that:
(i) adequate and reasonable means do not exist for
ascertaining such Euro-Rate, or
(ii) a contingency has occurred which materially and
adversely affects the London interbank eurodollar market relating to the
Euro-Rate, the Agent shall have the rights specified in Section 3.4.3.
3.4.2 Illegality; Increased Costs; Deposits Not Available.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Loan to
which a Euro-Rate Option applies has been made impracticable or unlawful by
compliance by such Bank in good faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law), or
(ii) such Euro-Rate Option will not adequately and
fairly reflect the cost to such Bank of the establishment or maintenance of any
such Loan, or
(iii) after making all reasonable efforts, deposits of
the relevant amount in Dollars for the relevant Interest Period for a Loan to
which a Euro-Rate Option applies, respectively, are not available to such Bank
with respect to such Loan, in the London interbank market,
then the Agent shall have the rights specified in Section 3.4.3.
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3.4.3 Agent's and Bank's Rights.
In the case of any event specified in Section 3.4.1 above, the
Agent shall promptly so notify the Banks and the Borrower thereof, and in the
case of an event specified in Section 3.4.2 above, such Bank shall promptly so
notify the Agent and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send copies of such
notice and certificate to the other Banks and the Borrower. Upon such date as
shall be specified in such notice (which shall not be earlier than the date such
notice is given), the obligation of (A) the Banks, in the case of such notice
given by the Agent, or (B) such Bank, in the case of such notice given by such
Bank, to allow the Borrower to select, convert to or renew a Euro-Rate Option
shall be suspended until the Agent shall have later notified the Borrower, or
such Bank shall have later notified the Agent, of the Agent's or such Bank's, as
the case may be, determination that the circumstances giving rise to such
previous determination no longer exist. If at any time the Agent makes a
determination under Section 3.4.1 and the Borrower has previously notified the
Agent of its selection of, conversion to or renewal of a Euro-Rate Option and
such Interest Rate Option has not yet gone into effect, such notification shall
be deemed to provide for selection of, conversion to or renewal of the Base Rate
Option otherwise available with respect to such Loans. If any Bank notifies the
Agent of a determination under Section 3.4.2, the Borrower shall, subject to the
Borrower's indemnification Obligations under Section 4.6.2 [Indemnity], as to
any Loan of the Bank to which a Euro-Rate Option applies, on the date specified
in such notice either convert such Loan to the Base Rate Option otherwise
available with respect to such Loan or prepay such Loan in accordance with
Section 4.4 [Voluntary Prepayments] provided that, at the Borrower's option, and
to the extent permitted by law, such conversions or prepayment may be postponed
until the end of the applicable Interest Period. Absent due notice from the
Borrower of conversion or prepayment, such Loan shall automatically be converted
to the Base Rate Option otherwise available with respect to such Loan upon such
specified date.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select a new Interest Period to apply to
any Borrowing Tranche of Loans under the Euro-Rate Option at the expiration of
an existing Interest Period applicable to such Borrowing Tranche in accordance
with the provisions of Section 3.2 [Interest Periods], the Borrower shall be
deemed to have converted such Borrowing Tranche to the Revolving Credit Base
Rate Option commencing upon the last day of the existing Interest Period.
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4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of principal,
interest, Commitment Fees, Facility Fees, Agent's Fee or other fees or amounts
due from the Borrower hereunder shall be payable prior to 11:00 a.m., Eastern
time, on the date when due without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower, and without
set-off, counterclaim or other deduction of any nature, and an action therefor
shall immediately accrue. Such payments shall be made to the Agent at the
Principal Office for the ratable accounts of the Banks with respect to the Loans
in U.S. Dollars and in immediately available funds, and the Agent shall promptly
distribute such amounts to the Banks in immediately available funds, provided
that in the event payments are received by 11:00 a.m., Eastern time, by the
Agent with respect to the Loans and such payments are not distributed to the
Banks on the same day received by the Agent, the Agent shall pay the Banks the
Federal Funds Effective Rate with respect to the amount of such payments for
each day held by the Agent and not distributed to the Banks. The Agent's and
each Bank's statement of account, ledger or other relevant record shall, in the
absence of manifest error, be conclusive as the statement of the amount of
principal of and interest on the Loans and other amounts owing under this
Agreement.
4.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank according to its
Ratable Share, and each selection of, conversion to or renewal of any Interest
Rate Option and each payment or prepayment by the Borrower with respect to
principal, interest, Commitment Fees, Facility Fees, or other fees (except for
the Agent's Fee) or amounts due from the Borrower hereunder to the Banks with
respect to the Loans, shall (except as provided in Section 3.4.3 [Agent's and
Bank's Rights] in the case of an event specified in Section 3.4 [Euro-Rate
Unascertainable; Etc.], 4.4.2 [Voluntary Prepayments] or 4.4 [Additional
Compensation in Certain Circumstances]) be made in proportion to the applicable
Loans outstanding from each Bank and, if no such Loans are then outstanding, in
proportion to the Ratable Share of each Bank.
4.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall be due
and payable in arrears on the first Business Day of each July, October, January
and April after the date hereof and on the Expiration Date or upon acceleration
of the Notes. Interest on Loans to which the Euro-Rate Option applies shall be
due and payable on the last day of each Interest Period for those Loans and, if
such Interest Period is longer than three (3) Months, also on the 90th day of
such Interest Period. Interest on mandatory prepayments of principal under
Section 4.5 [Mandatory Prepayments] shall be due on the date such mandatory
prepayment is due. Interest
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on the principal amount of each Loan or other monetary Obligation shall be due
and payable on demand after such principal amount or other monetary Obligation
becomes due and payable (whether on the stated maturity date, upon acceleration
or otherwise).
4.4 Voluntary Prepayments.
4.4.1 Right to Prepay.
The Borrower shall have the right at its option from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in Section 4.4.2 below or in Section 4.5.3 [Additional Compensation in
Certain Circumstances]):
(i) at any time with respect to any Loan to which the
Base Rate Option applies,
(ii) on the last day of the applicable Interest Period
with respect to Loans to which a Euro-Rate Option applies,
(iii) on the date specified in a notice by any Bank
pursuant to Section 3.4 [Euro-Rate Unascertainable, Etc.] with respect to any
Loan to which a Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the Loans,
it shall provide a prepayment notice to the Agent by 1:00 p.m. on the date of
prepayment of Loans to which the Base Rate Option applies and at least one (1)
Business Day prior to the date of prepayment of Loans to which the Euro-Rate
Option applies setting forth the following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(y) a statement indicating the application of the prepayment
between the Revolving Credit Loans; and
(z) the total principal amount of such prepayment, which shall
not be less than $1,000,000.
All prepayment notices shall be irrevocable. The principal
amount of the Loans for which a prepayment notice is given, together with
interest on such principal amount except with respect to Loans to which the Base
Rate Option applies, shall be due and payable on the date specified in such
prepayment notice as the date on which the proposed prepayment is to be made.
Except as provided in Section 3.4.3 if the Borrower prepays a Loan but fails to
specify the applicable Borrowing Tranche which the Borrower is prepaying, the
prepayment shall be applied (i) first to Loans to which the Base Rate Option
applies, then (ii) to Loans to which the
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Euro-Rate Option applies. Any prepayment hereunder shall be subject to the
Borrower's Obligation to indemnify the Banks under Section 4.6.2.
4.4.2 Replacement of a Bank.
In the event any Bank (i) gives notice under Section 3.4
[Euro-Rate Unascertainable, Etc.] or Section 4.6.1 [Increased Costs, Etc.], (ii)
does not fund Revolving Credit Loans because the making of such Loans would
contravene any Law applicable to such Bank, (iii) does not approve any action as
to which consent of the Required Banks is requested by the Borrower and obtained
hereunder, or (iv) becomes subject to the control of an Official Body (other
than normal and customary supervision), then the Borrower shall have the right
at its option, with the consent of the Agent, which shall not be unreasonably
withheld, to prepay the Loans of such Bank in whole, together with all interest
accrued thereon, and terminate such Bank's Commitment within ninety (90) days
after (w) receipt of such Bank's notice under Section 3.4 [Euro-Rate
Unascertainable, Etc.] or 4.6.1 [Increased Costs, Etc.], (x) the date such Bank
has failed to fund Revolving Credit Loans because the making of such Loans would
contravene Law applicable to such Bank, (y) the date of obtaining the consent
which such Bank has not approved, or (z) the date such Bank became subject to
the control of an Official Body, as applicable; provided that the Borrower shall
also pay to such Bank at the time of such prepayment any amounts required under
Section 4.5.3 [Additional Compensation in Certain Circumstances] and any accrued
interest due on such amount and any related fees; provided, however, that the
Commitment of such Bank shall be provided by one or more of the remaining Banks
or a replacement bank acceptable to the Agent; provided, further, the remaining
Banks shall have no obligation hereunder to increase their Commitments.
Notwithstanding the foregoing, the Agent may only be replaced subject to the
requirements of Section 9.14 [Successor Agent].
4.4.3 Change of Lending Office.
Each Bank agrees that upon the occurrence of any event giving
rise to increased costs or other special payments under Section 3.4.2
[Illegality, Etc.] or 4.6.1 [Increased Costs, Etc.] with respect to such Bank,
it will if requested by the Borrower, use reasonable efforts (subject to overall
policy considerations of such Bank) to designate another lending office for any
Loans affected by such event, provided that such designation is made on such
terms that such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of such Section. Nothing in this Section
4.4.3 shall affect or postpone any of the Obligations of the Borrower or any
other Loan Party or the rights of the Agent or any Bank provided in this
Agreement.
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4.5 Mandatory Prepayments.
4.5.1 Sale of Assets.
Within five (5) Business Days of any sale of assets authorized
by Section 7.2.7(v) [Disposition of Assets or Subsidiaries], the Commitments
shall automatically be reduced by an amount equal to the net after-tax proceeds
of such sale (as estimated in good faith by the Borrower), and the Borrower
shall make payments of principal to the extent required under Section 4.5.3
together with accrued interest on such principal amount except that with respect
to sales of assets made at any time after the Closing Date and generating net
proceeds not exceeding $2,000,000 in the aggregate, the Borrower may re-invest
net proceeds in business assets used in the normal course of the Borrower's
business provided that such assets are or become within thirty (30) days after
the underlying asset sale Collateral as to which the Agent has a Prior Security
Interest.
4.5.2 Application Among Interest Rate Options.
All prepayments required pursuant to this Section 4.5 shall
first be applied among the Interest Rate Options to the principal amount of the
Loans subject to the Base Rate Option, then to Loans subject to a Euro-Rate
Option. In accordance with Section 4.6.2 [Indemnity], the Borrower shall
indemnify the Banks for any loss or expense, including loss of margin, incurred
with respect to any such prepayments applied against Loans subject to a
Euro-Rate Option on any day other than the last day of the applicable Interest
Period.
4.5.3 Reduction of Commitment.
Whenever the principal amount of the Revolving Facility Usage
exceeds the Commitment (whether because of a reduction thereof pursuant to
Sections 2.1, 4.5.1 or otherwise), the Borrower shall make within one (1)
Business Day a payment of principal sufficient to reduce such excess to zero
($0), together with interest accrued thereon.
4.6 Additional Compensation in Certain Circumstances.
4.6.1 Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any change in any
Law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of Law) of any central
bank or other Official Body:
(i) subjects any Bank to any tax or changes the basis of
taxation with respect to this Agreement, the Notes, the Loans or payments by the
Borrower of principal, interest, Commitment Fees, or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall net
income of such Bank),
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(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments to extend
credit extended by, or assets (funded or contingent) of, deposits with or for
the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or contingent) of, or
letters of credit, other credits or commitments to extend credit extended by,
any Bank, or (B) otherwise applicable to the obligations of any Bank under this
Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital adequacy or
similar requirement, to have the effect of reducing the rate of return on any
Bank's capital, taking into consideration such Bank's customary policies with
respect to capital adequacy) by an amount which such Bank in its sole discretion
deems to be material, such Bank shall from time to time notify the Borrower and
the Agent of the amount determined in good faith (using any averaging and
attribution methods employed in good faith) by such Bank to be necessary to
compensate such Bank for such increase in cost, reduction of income, additional
expense or reduced rate of return. Such notice shall set forth in reasonable
detail the basis for such determination. Such amount shall be due and payable by
the Borrower to such Bank ten (10) Business Days after such notice is given.
4.6.2 Indemnity.
In addition to the compensation required by Section 4.6.1
[Increased Costs, Etc.], the Borrower shall indemnify each Bank against all
liabilities, losses or expenses (including loss of margin, any loss or expense
incurred in liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by a Bank to fund or maintain
Loans subject to a Euro-Rate Option) which such Bank sustains or incurs as a
consequence of any
(i) payment, prepayment, conversion or renewal of any
Loan to which a Euro-Rate Option applies on a day other than the last day of the
corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by the Borrower to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part any Loan Requests
under Section 2.5 [Revolving Credit Loan Requests] or Section 3.2 [Interest
Periods] or notice relating to prepayments under Section 4.4 [Voluntary
Prepayments], or
(iii) default by the Borrower in the performance or
observance of any covenant or condition contained in this Agreement or any other
Loan
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Document, including any failure of the Borrower to pay when due (by acceleration
or otherwise) any principal, interest, Commitment Fee or any other amount due
hereunder.
If any Bank sustains or incurs any such loss or expense, it shall
from time to time notify the Borrower of the amount determined in good faith by
such Bank (which determination may include such assumptions, allocations of
costs and expenses and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify such Bank for such loss or expense.
Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower to such Bank
ten (10) Business Days after such notice is given.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Loan Parties, jointly and severally, represent and warrant to
the Agent and each of the Banks as follows:
5.1.1 Organization and Qualification.
Each Loan Party and each Subsidiary of each Loan Party is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Loan Party and each Subsidiary of each Loan Party has the
lawful power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct. Each Loan Party and each Subsidiary
of each Loan Party is duly licensed or qualified and in good standing in each
jurisdiction listed on Schedule 5.1.1 and in all other jurisdictions where the
property owned or leased by it or the nature of the business transacted by it or
both makes such licensing or qualification necessary.
5.1.2 Capitalization and Ownership.
The authorized and issued capital stock of the Borrower
(referred to herein as the "Shares") are described and are owned as indicated
generally by the public, with owners of 5% or more of such Shares being shown on
Schedule 5.1.2. All of the Shares have been validly issued and are fully paid
and nonassessable. There are no options, warrants or other rights outstanding to
purchase any such shares except as indicated on Schedule 5.1.2.
5.1.3 Subsidiaries.
Schedule 5.1.3 states the name of each of the Borrower's
Subsidiaries, its jurisdiction of incorporation, its authorized capital stock,
the issued and outstanding shares (referred to herein as the "Subsidiary
Shares") and the owners thereof if it is a corporation, its outstanding
partnership interests (the "Partnership Interests") if it is a partnership and
its outstanding limited liability company interests, interests assigned to
managers thereof and the
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voting rights associated therewith (the "LLC Interests") if it is a limited
liability company. The Borrower and each Subsidiary of the Borrower has good and
marketable title to all of the Subsidiary Shares, Partnership Interests and LLC
Interests it purports to own, free and clear in each case of any Lien. All
Subsidiary Shares, Partnership Interests and LLC Interests have been validly
issued, and all Subsidiary Shares are fully paid and nonassessable. All capital
contributions and other consideration required to be made or paid in connection
with the issuance of the Partnership Interests and LLC Interests have been made
or paid, as the case may be. There are no options, warrants or other rights
outstanding to purchase any such Subsidiary Shares, Partnership Interests or LLC
Interests except as indicated on Schedule 5.1.3.
5.1.4 Power and Authority.
Each Loan Party has full power to enter into, execute, deliver
and carry out this Agreement and the other Loan Documents to which it is a
party, to incur the Indebtedness contemplated by the Loan Documents and to
perform its Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings on its part.
5.1.5 Validity and Binding Effect.
This Agreement has been duly and validly executed and
delivered by each Loan Party, and each other Loan Document which any Loan Party
is required to execute and deliver on or after the date hereof will have been
duly executed and delivered by such Loan Party on the required date of delivery
of such Loan Document. This Agreement and each other Loan Document constitutes,
or will constitute, legal, valid and binding obligations of each Loan Party
which is or will be a party thereto on and after its date of delivery thereof,
enforceable against such Loan Party in accordance with its terms, except to the
extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
5.1.6 No Conflict.
Neither the execution and delivery of this Agreement or the
other Loan Documents by any Loan Party nor the consummation of the transactions
herein or therein contemplated or compliance with the terms and provisions
hereof or thereof by any of them will conflict with, constitute a default under
or result in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of any Loan Party or (ii) any Law or any material
agreement or instrument or order, writ, judgment, injunction or decree to which
any Loan Party or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries is bound or to which it is subject, or result in the creation
or enforcement of any Lien, charge or encumbrance whatsoever upon any property
(now or
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hereafter acquired) of any Loan Party or any of its Subsidiaries (other than
Liens granted under the Loan Documents).
5.1.7 Litigation.
There are no actions, suits, proceedings or investigations
pending or, to the knowledge of any Loan Party, threatened against such Loan
Party or any Subsidiary of such Loan Party at law or equity before any Official
Body which individually or in the aggregate may result in any Material Adverse
Change. None of the Loan Parties or any Subsidiaries of any Loan Party is in
violation of any order, writ, injunction or any decree of any Official Body
which may result in any Material Adverse Change. Schedule 5.1.7 lists certain
litigation matters, none of which individually or in the aggregate will result
in any Material Adverse Change.
5.1.8 Store Locations; Inventory; Title to Properties.
5.1.8.1 Store Locations. Each of the Franchise Locations
is described on Schedule 1.1(F). Each of the Company-owned Stores (and their
locations) is described on Schedule 1.1.(C). The Offsite Storage Locations are
described on Schedule 1.1(O). There are no Party City stores which are not
described on either Schedule 1.1 (C) or Schedule 1.1(F) and no Loan Party
conducts any retail businesses other than at such locations or the locations
listed on Schedule A to the Security Agreement or the Security Agreement - PCM.
The Borrower has delivered to the Agent and its counsel copies of all leases (as
amended to date) for all Company-owned Stores.
5.1.8.2 Inventory. All of the Borrower's inventory is
kept at all time at either (x) the Company-owned Stores or (y) the Offsite
Storage Locations described on Schedule 1.1(O). There is in force a waiver of
warehouseman's lien or landlord's lien in favor of the Agent on behalf of the
Banks in respect of Offsite Storage locations to the extent that Inventory which
is stored at all such locations is valued in excess of $2,000,000 in the
aggregate. No Subsidiary of the Borrower owns or has rights to any inventory. No
inventory at any Company-owned Store is subject to any consignment or
conditional sale and is owned free and clear by the Borrower and none of the
Borrower's inventory is located at any Franchise Locations. No Loan Party
purchases or holds inventory on behalf of any Franchisee.
5.1.8.3 Real Property. The real property leased by each
Loan Party and each Subsidiary of each Loan Party is described on Schedule
5.1.8. No Loan Party owns any real property. Each Loan Party and each Subsidiary
of each Loan Party has a valid leasehold interest in all properties, assets and
other rights which it purports to lease or which are reflected as leased on its
books and records, free and clear of all Liens and encumbrances except Permitted
Liens, and subject to the terms and conditions of the applicable leases. All
leases of property are in full force and effect without the necessity for any
consent which has not previously been obtained upon consummation of the
transactions contemplated hereby.
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5.1.9 Financial Statements.
(i) Historical Statements. The Borrower has delivered to
the Agent copies of its audited consolidated year-end financial statements for
and as of the end of the fiscal year ended December 31, 1997 (the "Historical
Statements"). The Historical Statements were compiled from the books and records
maintained by the Borrower's management, are correct and complete and fairly
represent the consolidated financial condition of the Borrower and its
Subsidiaries as of their dates and the results of operations for the fiscal
periods then ended and have been prepared in accordance with GAAP consistently
applied, subject (in the case of the Interim Statements) to normal year-end
audit adjustments.
(ii) Financial Projections. The Borrower has delivered
to the Agent financial projections of the Borrower and its Subsidiaries for the
fiscal year 1998, presented on a quarterly basis and derived from various
assumptions of the Borrower's management (the "Financial Projections"). The
Financial Projections represent a reasonable range of possible results in light
of the history of the business, present and foreseeable conditions and the
intentions of the Borrower's management. The Financial Projections accurately
reflect the liabilities of the Borrower and its Subsidiaries upon consummation
of the transactions contemplated hereby as of the Closing Date.
(iii) Accuracy of Financial Statements. Neither the
Borrower nor any Subsidiary of the Borrower has any liabilities, contingent or
otherwise, or forward or long-term commitments that are not disclosed in the
Historical Statements or in the notes thereto, and except as disclosed therein
there are no unrealized or anticipated losses from any commitments of the
Borrower or any Subsidiary of the Borrower which may cause a Material Adverse
Change. Since December 31, 1997, no Material Adverse Change has occurred.
5.1.10 Use of Proceeds; Margin Stock; Section 20 Subsidiaries.
5.1.10.1 General.
The Loan Parties intend to use the proceeds of the
Loans in accordance with Sections 2.8 and 7.1.10.
5.1.10.2 Margin Stock.
None of the Loan Parties or any Subsidiaries of any
Loan Party engages or intends to engage principally, or as one of its important
activities, in the business of extending credit for the purpose, immediately,
incidentally or ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U). No part of the proceeds of any Loan has been or will
be used, immediately, incidentally or ultimately, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for such
purpose, or for any purpose which
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entails a violation of or which is inconsistent with the provisions of the
regulations of the Board of Governors of the Federal Reserve System. None of the
Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin
stock in such amounts that more than 25% of the reasonable value of the assets
of any Loan Party or Subsidiary of any Loan Party are or will be represented by
margin stock.
5.1.10.3 Section 20 Subsidiaries.
The Loan Parties do not intend to use and shall not
use any portion of the proceeds of the Loans, directly or indirectly (i)
knowingly to purchase any Ineligible Securities from a Section 20 Subsidiary
during any period in which such Section 20 Subsidiary makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
a Section 20 Subsidiary, or (iii) to make payments of principal or interest on
Ineligible Securities underwritten or privately placed by a Section 20
Subsidiary and issued by or for the benefit of any Loan Party or any Affiliate
of any Loan Party.
5.1.11 Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the Agent or
any Bank by any Loan Party in connection herewith or therewith, contains any
material untrue statement of a fact or omits to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to any Loan Party which adversely affects the business, property, assets,
financial condition, results of operations or prospects of any Loan Party or
Subsidiary of any Loan Party which has not been set forth in this Agreement or
in the certificates, statements, agreements or other documents furnished in
writing to the Agent and the Banks prior to or at the date hereof in connection
with the transactions contemplated hereby.
5.1.12 Taxes.
All federal, state, local and other tax returns required to
have been filed with respect to each Loan Party and each Subsidiary of each Loan
Party have been filed, or proper extensions have been filed, and payment or
adequate provision has been made for the payment of all taxes, fees, assessments
and other governmental charges which have or may become due pursuant to said
returns or to assessments received, except to the extent that such taxes, fees,
assessments and other charges are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made. There are no agreements or waivers extending the statutory period of
limitations applicable to any federal income tax return of any Loan Party or
Subsidiary of any Loan Party for any period.
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5.1.13 Consents and Approvals.
Except for the filing of financing statements in the state and
county filing offices, no consent, approval, exemption, order or authorization
of, or a registration or filing with, any Official Body or any other Person
(including all Franchises) is required by any Law or any agreement in connection
with the execution, delivery and carrying out of this Agreement and the other
Loan Documents by any Loan Party, except as listed on Schedule 5.1.13, all of
which shall have been obtained or made on or prior to the Closing Date.
5.1.14 No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition
exists or will exist after giving effect to the borrowings or other extensions
of credit to be made on the Closing Date under or pursuant to the Loan Documents
which constitutes an Event of Default or Potential Default. None of the Loan
Parties or any Subsidiaries of any Loan Party is in violation of (i) any term of
its certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents or (ii) any agreement or instrument
to which it is a party or by which it or any of its properties may be subject or
bound where such violation would constitute a Material Adverse Change.
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises, permits and rights necessary to own and
operate its properties and to carry on its business as presently conducted and
planned to be conducted by such Loan Party or Subsidiary, without known, alleged
or actual conflict with the legally protected rights of others. All patents,
trademarks, service marks, trade names, registered copyrights, licenses,
registrations, franchises and permits (other than local business permits or
certificates of occupancy) of each Loan Party and each Subsidiary of each Loan
Party are listed and described on Schedule 5.1.15.
5.1.16 Security Interests.
5.1.16.1 Generally. The Liens and security
interests granted to the Agent for the benefit of the Banks pursuant to the
Collateral Assignment, the Patent, Trademark and Copyright Assignment, the
Pledge Agreement and the Security Agreement in the Collateral (other than the
Property) constitute and will continue to constitute first-lien perfected
security interests under the Uniform Commercial Code as in effect in each
applicable jurisdiction (the "Uniform Commercial Code") or other applicable Law
entitled to all the rights, benefits and priorities provided by the Uniform
Commercial Code or such Law. Upon the filing of financing statements relating to
said security interests in each office and in each jurisdiction where required
in order to perfect the security interests described above, taking possession of
any stock certificates or other certificates evidencing the Pledged Collateral
and
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recordation of the Patent, Trademark and Copyright Assignment in the United
States Patent and Trademark Office and United States Copyright Office, as
applicable, all such action as is necessary or advisable to establish such
rights of the Agent will have been taken, and there will be upon execution and
delivery of the Collateral Assignment, the Patent, Trademark and Copyright
Assignment, the Pledge Agreement and the Security Agreement, such filings and
such taking of possession, no necessity for any further action in order to
preserve, protect and continue such rights, except the filing of continuation
statements with respect to such financing statements within six months prior to
each five-year anniversary of the filing of such financing statements. All
filing fees and other expenses in connection with each such action have been or
will be paid by the Borrower.
5.1.16.2 Franchises and Franchise Agreements.
Except as described on Schedule 5.1.16, each of the Franchise Agreements is in
force and, to each Loan Party's knowledge, no party thereto is in material
breach thereof or has taken action to terminate any such agreement. To each Loan
Party's knowledge, each Franchisee is obligated to pay the Franchise Royalties
and other fees described in such agreement without set-off or counterclaims and
no such fee has been prepaid except as required by such agreements. The
Collateral Assignment is valid and enforceable in accordance with its terms
against the Loan Parties and the other parties to the Franchise Agreements. The
Borrower has delivered to the Agent copies of all franchise registration and
disclosures, including its Uniform Franchise Offering Circulars, or "UFOC"
filings, as amended.
5.1.17 Rights at Leased Locations.
In respect of Company-owned Stores, the Agent shall have the
right (subject to applicable law as to enforcement of remedies) pursuant to
Landlord Waivers to enter into the subject premises and recover Collateral. In
respect of Franchise Locations, the Borrower has and shall have the right
(subject to and to the extent provided in the applicable franchise agreement and
subject to applicable law as to the enforcement of remedies) as franchisor to
enter into the subject premises, operate the Franchise Store (or its successor)
and assume or assign such rights and shall have assigned such rights of the
Borrower to the Agent.
5.1.18 Status of the Pledged Collateral.
All the shares of capital stock, Partnership Interests or LLC
Interests included in the Pledged Collateral to be pledged pursuant to the
Pledge Agreement or the Collateral Assignment are or will be upon issuance
validly issued and nonassessable and owned beneficially and of record by the
pledgor free and clear of any Lien or restriction on transfer, except as
otherwise provided by the Pledge Agreement or the Collateral Assignment and
except as the right of the Banks to dispose of the Subsidiary Shares,
Partnership Interests or LLC Interests may be limited by the Securities Act of
1933, as amended, and the regulations promulgated by the Securities and Exchange
Commission thereunder and by applicable state securities laws. There are no
shareholder, partnership, limited liability company or other agreements or
understandings with respect to the shares of capital stock, Partnership
Interests or
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LLC Interests included in the Pledged Collateral except for the partnership
agreements and limited liability company agreements described on Schedule
5.1.17. The Loan Parties have delivered true and correct copies of such
partnership agreements and limited liability company agreements to the Agent.
5.1.19 Insurance.
Schedule 5.1.19 lists all insurance policies and other bonds
to which any Loan Party or Subsidiary of any Loan Party is a party, all of which
are valid and in full force and effect. No notice has been given or claim made
and no grounds exist to cancel or avoid any of such policies or bonds or to
reduce the coverage provided thereby. Such policies and bonds provide adequate
coverage from reputable and financially sound insurers in amounts sufficient to
insure the assets and risks of each Loan Party and each Subsidiary of each Loan
Party in accordance with prudent business practice in the industry of the Loan
Parties and their Subsidiaries.
5.1.20 Compliance with Laws.
The Loan Parties and their Subsidiaries are in compliance in
all respects with all applicable Laws (other than Environmental Laws which are
specifically addressed in Section 5.1.25 [Environmental Matters]) in all
jurisdictions in which any Loan Party or Subsidiary of any Loan Party is
presently or will be doing business except where the failure to do so would not
constitute a Material Adverse Change.
5.1.21 Material Contracts; Burdensome Restrictions.
Schedule 5.1.21 lists all material contracts relating to the
business operations of each Loan Party and each Subsidiary of any Loan Party,
including all employee benefit plans and Labor Contracts. All such material
contracts are valid, binding and enforceable upon such Loan Party or Subsidiary
and each of the other parties thereto in accordance with their respective terms;
there is no default thereunder, to the Loan Parties' knowledge, with respect to
parties other than such Loan Party or Subsidiary. None of the Loan Parties or
their Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which could
result in a Material Adverse Change, or is obligated under any Guaranty except
for the Guaranty Agreement.
5.1.22 Investment Companies; Regulated Entities.
None of the Loan Parties or any Subsidiaries of any Loan Party
is an "investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control." None of the Loan
Parties or any Subsidiaries of any Loan Party is subject to any
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other Federal or state statute or regulation limiting its ability to incur
Indebtedness for borrowed money.
5.1.23 Plans and Benefit Arrangements.
Except as set forth on Schedule 5.1.23, to the knowledge of
the Loan Parties:
(i) The Borrower and each other member of the ERISA
Group are in compliance in all respects with any applicable provisions of ERISA
with respect to all Benefit Arrangements, Plans and Multiemployer Plans. There
has been no Prohibited Transaction with respect to any Benefit Arrangement or
any Plan or, to the best knowledge of the Borrower, with respect to any
Multiemployer Plan or Multiple Employer Plan, which could result in any
liability of the Borrower or any other member of the ERISA Group. The Borrower
and all other members of the ERISA Group have made when due any and all payments
required to be made under any agreement relating to a Multiemployer Plan or a
Multiple Employer Plan or any Law pertaining thereto. With respect to each Plan
and Multiemployer Plan, the Borrower and each other member of the ERISA Group
(i) have fulfilled in all respects their obligations under the minimum funding
standards of ERISA, (ii) have not incurred any liability to the PBGC, and (iii)
have not had asserted against them any penalty for failure to fulfill the
minimum funding requirements of ERISA.
(ii) Each Multiemployer Plan and Multiple Employer Plan
is able to pay benefits thereunder when due.
(iii) Neither the Borrower nor any other member of the
ERISA Group has instituted or intends to institute proceedings to terminate any
Plan.
(iv) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(v) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(vi) Neither the Borrower nor any other member of the
ERISA Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the best knowledge of the Borrower, no
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Multiemployer Plan or Multiple Employer Plan is reasonably expected to be
reorganized or terminated, within the meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, the Borrower and all other members of the ERISA Group have paid when
due all premiums required to be paid for all periods through the Closing Date.
To the extent that any Benefit Arrangement is funded other than with insurance,
the Borrower and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the Closing Date.
(viii) All Plans, Benefit Arrangements and Multiemployer
Plans have been administered substantially in accordance with their terms and
applicable Law.
5.1.24 Employment Matters.
Each of the Loan Parties and each of their Subsidiaries is in
compliance with the Labor Contracts and all applicable federal, state and local
labor and employment Laws including those related to equal employment
opportunity and affirmative action, labor relations, minimum wage, overtime,
child labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation, where
the failure to comply would constitute a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
the Labor Contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any of the Loan Parties or
any of their Subsidiaries which in any case would constitute a Material Adverse
Change. The Borrower has delivered to the Agent true and correct copies of each
of the Labor Contracts.
5.1.25 Environmental Matters.
Except as disclosed on Schedule 5.1.25:
(i) None of the Loan Parties or any Subsidiaries of any
Loan Party has received any Environmental Complaint from any Official Body or
private Person alleging that such Loan Party or Subsidiary is a potentially
responsible party under the Comprehensive Environmental Response, Cleanup and
Liability Act, 42 U.S.C. ss. 9601, et seq., and none of the Loan Parties has any
reason to believe that such an Environmental Complaint is likely to be received.
There are no pending or, to any Loan Party's knowledge, threatened Environmental
Complaints relating to any Loan Party or Subsidiary of any Loan Party.
(ii) Each Loan Party and each Subsidiary of any Loan
Party has all material permits, licenses, authorizations, plans and approvals
necessary under the Environmental Laws for the conduct of the business of such
Loan Party or Subsidiary as presently conducted. Each Loan Party and each
Subsidiary of any Loan Party has submitted all material notices, reports and
other filings required by the Environmental Laws to be submitted to
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an Official Body which pertain to past and current operations by the Loan
Parties on any of the Property.
(iii) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances by the Loan Parties at, on, or under any of
the Property and all off-site transportation, storage, processing, treatment,
recycling, reclamation, disposal or other use or management of Regulated
Substances by the Loan Parties have been done in accordance with the
Environmental Laws where failure to do so would cause a Material Adverse Change.
5.1.26 Senior Debt Status.
The Obligations of each Loan Party under this Agreement, the
Notes, the Guaranty Agreement and each of the other Loan Documents to which it
is a party do rank and will rank senior in lien status with respect to the
Collateral and pari passu with all other Indebtedness of such Loan Party except
(i) Indebtedness of such Loan Party to the extent secured by Permitted Liens,
(ii) if required by such Person, Indebtedness owing to a Person providing
interest rate hedging as (and to the extent) required under Section 7.1.13 and
(iii) Indebtedness to PNC Bank described in Section 7.2.1(v). There is no Lien
upon or with respect to any of the properties or income of any Loan Party or
Subsidiary of any Loan Party which secures indebtedness or other obligations of
any Person except for Permitted Liens.
5.1.27 Year 2000.
The Borrower and each Loan Party have reviewed the areas
within their business and operations which could be adversely affected by, and
will have developed by December 31, 1998 a program to address on a timely basis,
the risk that certain computer applications used by the Borrower or any Loan
Party (or any of their respective material suppliers, customers or vendors) may
be unable to recognize and perform date-sensitive functions involving dates
prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000
Problem will not result in any Material Adverse Change.
5.2 Updates to Schedules.
Should any of the information or disclosures provided on any
of the Schedules attached hereto become outdated or incorrect in any material
respect, the Borrower shall promptly provide the Agent in writing with such
revisions or updates to such Schedule as may be necessary or appropriate to
update or correct same; provided, however, that no breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule be deemed to have been cured by any such correction or update, unless
and until the Required Banks, in their sole and absolute discretion, shall have
accepted in writing such revisions or updates to such Schedule.
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6. CONDITIONS OF LENDING.
The obligation of each Bank to make Loans hereunder is subject to the
performance by each of the Loan Parties of its Obligations to be performed
hereunder at or prior to the making of any such Loans and to the satisfaction of
the following further conditions:
6.1 First Loans.
On the Closing Date:
6.1.1 Officer's Certificate.
The representations and warranties of each of the Loan Parties
contained in Section 5 and in each of the other Loan Documents shall be true and
accurate on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and each of the Loan Parties shall
have performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and there shall be delivered to the Agent for the
benefit of each Bank a certificate of each of the Loan Parties, dated the
Closing Date and signed by the Chief Executive Officer, President or Chief
Financial Officer of each of the Loan Parties, to each such effect.
6.1.2 Secretary's Certificate.
There shall be delivered to the Agent for the benefit of each
Bank a certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of each of the Loan Parties, certifying as appropriate as
to:
(i) all action taken by each Loan Party in connection
with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized to
sign this Agreement and the other Loan Documents and the true signatures of such
officer or officers and specifying the Authorized Officers permitted to act on
behalf of each Loan Party for purposes of this Agreement and the true signatures
of such officers, on which the Agent and each Bank may conclusively rely; and
(iii) copies of its organizational documents, including
its certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, and limited liability company
agreement as in effect on the Closing Date certified by the appropriate state
official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing of each Loan Party in each state where organized or qualified
to do business.
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6.1.3 Delivery of Loan Documents.
The Collateral Assignment, Guaranty Agreement, Notes, Patent,
Trademark and Copyright Assignment, Pledge Agreement, Intercompany Subordination
Agreement, Security Agreement, the Security Agreement - PCM, the Patent,
Trademark and Copyright Assignment - PCM, the Tomax Collateral Assignment, and
the Restrictive Covenants and other Loan Documents shall have been duly executed
and delivered to the Agent for the benefit of the Banks, together with all
appropriate financing statements and appropriate stock powers and certificates
evidencing the Subsidiary Shares, the Partnership Interests and the LLC
Interests.
6.1.4 Opinion of Counsel.
There shall be delivered to the Agent for the benefit of each
Bank a written opinion of St. ▇▇▇▇ & ▇▇▇▇▇, L.L.C. , counsel for the Loan
Parties (who may rely on the opinions of such other counsel as may be acceptable
to the Agent), dated the Closing Date and in form and substance satisfactory to
the Agent and its counsel as to the matters set forth in Section 5 and such
other matters as the Agent may request.
6.1.5 Legal Details.
All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance reasonably satisfactory to the Agent and counsel for
the Agent, and the Agent shall have received all such other counterpart
originals or certified or other copies of such documents and proceedings in
connection with such transactions, in form and substance satisfactory to the
Agent and said counsel, as the Agent or said counsel may reasonably request.
6.1.6 Payment of Fees.
The Borrower shall have paid or caused to be paid to the Agent
for itself and for the account of the Banks to the extent not previously paid
the Facility Fees, all other commitment and other fees accrued through the
Closing Date and the costs and expenses for which the Agent and the Banks are
entitled to be reimbursed.
6.1.7 Consents.
All material consents required to effectuate the transactions
contemplated hereby as set forth on Schedule 5.1.13 shall have been obtained.
6.1.8 Officer's Certificate Regarding MACs.
Since December 31, 1997, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the management of any Loan Party or Subsidiary of any Loan Party; and there
shall have been delivered to the
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Agent for the benefit of each Bank a certificate dated the Closing Date and
signed by the Chief Executive Officer, President or Chief Financial Officer of
each Loan Party to each such effect.
6.1.9 No Violation of Laws.
The making of the Loans shall not contravene any Law
applicable to any Loan Party or any of the Banks.
6.1.10 No Actions or Proceedings.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in the
Agent's reasonable discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
6.1.11 Insurance Policies; Certificates of Insurance;
Endorsements.
The Loan Parties shall have delivered evidence acceptable to
the Agent that adequate insurance in compliance with Section 7.1.3 [Maintenance
of Insurance] is in full force and effect and that all premiums then due thereon
have been paid, together with a certified copy of each Loan Party's casualty
insurance policy or policies evidencing coverage satisfactory to the Agent, with
additional insured, lender loss payable special endorsements attached thereto in
form and substance satisfactory to the Agent and its counsel naming the Agent as
additional insured and lender loss payee.
6.1.12 Filing Receipts.
The Agent shall have received, where applicable, termination
statements, filing receipts and acknowledgments and evidence that such Lien
constitutes a Prior Security Interest in favor of the Banks, in a form
acceptable to the Agent.
6.1.13 Administrative Questionnaire.
Each of the Banks and the Borrower shall have completed and
delivered to the Agent the Agent's form of administrative questionnaire.
6.2 Each Additional Loan.
At the time of making any Loans other than Loans made on the Closing
Date and after giving effect to the proposed extensions of credit: the
representations and warranties of the Loan Parties contained in Section 5 and in
the other Loan Documents shall be true on and as of the date of such additional
Loan with the same effect as though such representations and warranties had been
made on and as of such date (except representations and warranties which
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expressly relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein) and the Loan Parties shall have performed and complied with
all covenants and conditions hereof; no Event of Default or Potential Default
shall have occurred and be continuing or shall exist; the making of the Loans
shall not contravene any Law applicable to any Loan Party or Subsidiary of any
Loan Party or any of the Banks; and the Borrower shall have delivered to the
Agent a duly executed and completed Loan Request.
[END OF SECTION 6]
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7. COVENANTS
7.1 Affirmative Covenants.
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans and interest thereon, satisfaction of all of
the Loan Parties' other Obligations under the Loan Documents and termination of
the Commitments, the Loan Parties shall comply at all times with the following
affirmative covenants:
7.1.1 Preservation of Existence, Etc.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, maintain its legal existence as a corporation, limited
partnership or limited liability company and its license or qualification and
good standing in each jurisdiction in which its ownership or lease of property
or the nature of its business makes such license or qualification necessary,
except as otherwise expressly permitted in Section 7.2.6 [Liquidation's,
Mergers, Etc.].
7.1.2 Payment of Liabilities, Including Taxes, Etc.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, duly pay and discharge all liabilities to which it is subject
or which are asserted against it, promptly as and when the same shall become due
and payable, including all taxes, assessments and governmental charges upon it
or any of its properties, assets, income or profits, prior to the date on which
penalties attach thereto, except to the extent that such liabilities, including
taxes, assessments or charges, are subject to lawful extensions pursuant to
applicable law or being contested in good faith and by appropriate and lawful
proceedings diligently conducted and for which such reserve or other appropriate
provisions, if any, as shall be required by GAAP shall have been made, but only
to the extent that failure to discharge any such liabilities would not result in
any additional liability which would adversely affect to a material extent the
financial condition of any Loan Party or Subsidiary of any Loan Party or which
would materially adversely affect the Collateral, provided that the Loan Parties
and their Subsidiaries will pay all such liabilities forthwith upon the
commencement of proceedings to foreclose any Lien which may have attached as
security therefor.
7.1.3 Maintenance of Insurance.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, insure its properties and assets (whether located at the
Company-owned Stores, the Offsite Storage Locations, Franchise Locations, office
locations or otherwise) against loss or damage by fire and such other insurable
hazards as such assets are commonly insured (including fire, extended coverage,
property damage, workers' compensation, public liability and business
interruption insurance) and against other risks in such amounts as similar
properties and assets are insured by
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prudent companies in similar circumstances carrying on similar businesses, and
with reputable and financially sound insurers, including self-insurance to the
extent customary, all as reasonably determined by the Agent. At the request of
the Agent, the Loan Parties shall deliver to the Agent and each of the Banks (x)
on the Closing Date and annually thereafter an original certificate of insurance
signed by the Loan Parties' independent insurance broker describing and
certifying as to the existence of the insurance on the Collateral required to be
maintained by this Agreement and the other Loan Documents, together with a copy
of the endorsement described in the next sentence attached to such certificate
and (y) from time to time a summary schedule indicating all insurance then in
force with respect to each of the Loan Parties. Such policies of insurance shall
contain special endorsements, in form and substance acceptable to the Agent,
which shall (i) specify the Agent as an additional insured, lender loss payee as
its interests may appear, with the understanding that any obligation imposed
upon the insured (including the liability to pay premiums) shall be the sole
obligation of the applicable Loan Parties and not that of the insured, (ii)
provide that the interest of the Banks shall be insured regardless of any breach
or violation by the applicable Loan Parties of any warranties, declarations or
conditions contained in such policies or any action or inaction of the
applicable Loan Parties or others insured under such policies, (iii) provide a
waiver of any right of the insurers to set off or counterclaim or any other
deduction, whether by attachment or otherwise, (iv) provide that any and all
rights of subrogation which the insurers may have or acquire shall be, at all
times and in all respects, junior and subordinate to the prior payment in full
of the Indebtedness hereunder and that no insurer shall exercise or assert any
right of subrogation until such time as the Indebtedness hereunder has been paid
in full and the Commitments have terminated, (v) provide, except in the case of
public liability insurance and workmen's compensation insurance, that all
insurance proceeds for losses of less than $1,000,000 shall be adjusted with and
payable to the applicable Loan Parties and that all insurance proceeds for
losses of $1,000,000 or more shall be adjusted with and payable to the Agent,
(vi) include effective waivers by the insurer of all claims for insurance
premiums against the Agent, (vii) provide that no cancellation of such policies
for any reason (including non-payment of premium) nor any change therein shall
be effective until at least thirty (30) days after receipt by the Agent of
written notice of such cancellation or change, (viii) be primary without right
of contribution of any other insurance carried by or on behalf of any additional
insureds with respect to their respective interests in the Collateral, and (ix)
provide that inasmuch as the policy covers more than one insured, all terms,
conditions, insuring agreements and endorsements (except limits of liability)
shall operate as if there were a separate policy covering each insured. The
applicable Loan Parties shall notify the Agent promptly of any occurrence
causing a material loss or decline in value of the Collateral and the estimated
(or actual, if available) amount of such loss or decline. Any monies received by
the Agent constituting insurance proceeds or condemnation proceeds may, at the
option of the Agent, (i) be applied by the Agent to the payment of the Loans in
such manner as the Agent may reasonably determine, or (ii) be disbursed to the
applicable Loan Parties on such terms as are deemed appropriate by the Agent for
the repair, restoration and/or replacement of property in respect of which such
proceeds were received.
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7.1.4 Maintenance of Properties and Leases; New Leases.
7.1.4.1 Generally. Each Loan Party shall, and shall
cause each of its Subsidiaries to, maintain in good repair, working order and
condition (ordinary wear and tear excepted) in accordance with the general
practice of other businesses of similar character and size, all of those
properties useful or necessary to its business, and from time to time, such Loan
Party will make or cause to be made all appropriate repairs, renewals or
replacements thereof.
7.1.4.2 Standard Lease Provisions. Without limiting the
foregoing, in connection with the lease for every Company-owned Store entered
into (whether by execution, assumption or otherwise) after the Closing Date, the
Borrower shall either cause a Landlord Waiver to be executed or cause the
inclusion of the Standard Lease Provision in such lease contemporaneously with
execution of such lease. The Agent may in its sole discretion consent to waive
this requirement for up to five (5) Company-owned Stores per calendar year.
7.1.5 Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, maintain in full force and effect all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and other
authorizations necessary for the ownership and operation of its properties and
business.
7.1.6 Visitation Rights.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, permit any of the officers or authorized employees or
representatives of the Agent or any of the Banks to visit and inspect any of its
properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as any of the Banks may reasonably
request, provided that each Bank shall provide the Borrower and the Agent with
reasonable notice prior to any visit or inspection. In the event any Bank
desires to conduct an audit of any Loan Party, such Bank shall make a reasonable
effort to conduct such audit contemporaneously with any audit to be performed by
the Agent. Without limiting the foregoing, the Agent may require one or more
appraisals of the Loan Parties' assets, one of which appraisals shall be at the
expense of the Loan Parties.
7.1.7 Keeping of Records and Books of Account.
The Borrower shall, and shall cause each Subsidiary of the
Borrower to, maintain and keep proper books of record and account which enable
the Borrower and its Subsidiaries to issue financial statements in accordance
with GAAP and as otherwise required by applicable Laws of any Official Body
having jurisdiction over the Borrower or any Subsidiary of
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the Borrower, and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial affairs.
7.1.8 Plans and Benefit Arrangements.
The Borrower shall, and shall cause each other member of the
ERISA Group to, comply with ERISA, the Internal Revenue Code and other
applicable Laws applicable to Plans and Benefit Arrangements. Without limiting
the generality of the foregoing, the Borrower shall cause all of its Plans and
all Plans maintained by any member of the ERISA Group to be funded in accordance
with the minimum funding requirements of ERISA and shall make, and cause each
member of the ERISA Group to make, in a timely manner, all contributions due to
Plans, Benefit Arrangements and Multiemployer Plans, unless failure to do so
would not cause a Material Adverse Change.
7.1.9 Compliance with Laws.
Each Loan Party shall, and shall cause each of its
Subsidiaries to, comply with all applicable Laws, including all Environmental
Laws, in all respects, provided that such non-compliance shall not be deemed to
be a violation of this Section 7.1.9 unless failure to do so would cause a
Material Adverse Change.
7.1.10 Use of Proceeds.
The Loan Parties will use the proceeds of the Loans only for
(i) general corporate purposes, for working capital and permitted capital
expenditures, (ii) to finance Permitted Acquisitions, (iii) to finance the
opening of new Company-owned Stores and (iv) to repay and terminate Indebtedness
outstanding under the Borrower's existing bank facility with PNC Bank. The Loan
Parties shall not use the proceeds of the Loans for any purposes which
contravene any applicable Law or any provision hereof.
7.1.11 Further Assurances.
Each Loan Party shall, from time to time, at its expense,
faithfully preserve and protect the Agent's Lien on and Prior Security Interest
in the Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Agent in its
reasonable discretion may deem necessary or advisable from time to time in order
to preserve, perfect and protect the Liens granted under the Loan Documents and
to exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
7.1.12 Subordination of Intercompany Loans.
Each Loan Party shall cause any intercompany Indebtedness,
loans or advances owed by any Loan Party to any other Loan Party to be
subordinated pursuant to the terms of the Intercompany Subordination Agreement.
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7.1.13 Interest Rate Protection.
The Borrower shall cause not less than 25% of the Revolving
Facility Usage (calculated as of the end of each fiscal quarter) to be subject
to interest rate swap, floor, collar or other hedging arrangements acceptable to
the Agent.
7.2 Negative Covenants.
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans and interest thereon, satisfaction of all of
the Loan Parties' other Obligations hereunder and termination of the
Commitments, the Loan Parties shall comply with the following negative
covenants:
7.2.1 Indebtedness.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule
7.2.1 (including any extensions or renewals thereof, provided there is no
increase in the amount thereof or other significant change in the terms thereof
unless otherwise specified on Schedule 7.2.1;
(iii) Capitalized leases as and to the extent permitted
under Section 7.2.15 [Capital Expenditures and Leases] and operating leases;
(iv) Indebtedness secured by Purchase Money Security
Interests not exceeding $5,000,000 in 1998 and $2,000,000 in each year
thereafter;
(v) Indebtedness owing to PNC Bank in respect of
"automated clearing house" payment exposure and interest rate hedging
arrangements;
(vi) Other Indebtedness for interest rate hedging
arrangements required by Section 7.1.13;
(vii) Indebtedness of a Loan Party to another Loan Party
which is subordinated in accordance with the provisions of Section 7.1.12
[Subordination of Intercompany Loans]; and
(viii) Indebtedness comprised of the Borrower's
obligations as lessee at up to four (4) Franchise Locations as of the Closing
Date and two (2) additional Franchise Locations in respect of new Franchises
owned by existing Franchisees in their protected areas; provided that the
Borrower has delivered to the Banks written notice, and a description of the
material terms of, such additional leases prior to its effective date.
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7.2.2 Liens.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time create, incur, assume or suffer to exist any
Lien on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree or become liable to do so, except Permitted Liens.
7.2.3 Guaranties.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time, directly or indirectly, become or be liable
in respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for
Guaranties of Indebtedness of the Loan Parties permitted hereunder or guaranties
which would otherwise be permitted under Section 7.2.1 [Indebtedness].
7.2.4 Loans and Investments.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, at any time make or suffer to remain outstanding any
loan or advance to, or purchase, acquire or own any stock, bonds, notes or
securities of, or any partnership interest (whether general or limited) or
limited liability company interest in, or any other investment or interest in,
or make any capital contribution to, any other Person, or agree, become or
remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms
in the ordinary course of business;
(ii) advances to employees to meet expenses incurred by
such employees in the ordinary course of business;
(iii) Permitted Investments and Permitted Acquisitions;
and
(iv) loans, advances and investments in or to other Loan
Parties.
7.2.5 Dividends and Related Distributions.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, make or pay, or agree to become or remain liable to make
or pay, any dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of its shares of
capital stock, partnership interests or limited liability company interests on
account of the purchase, redemption, retirement or acquisition of its shares of
capital
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stock (or warrants, options or rights therefor), partnership interests or
limited liability company interests, except dividends or other distributions
payable to another Loan Party.
7.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a
party to any merger or consolidation, or acquire by purchase, lease or otherwise
all or substantially all of the assets or capital stock of any other Person,
provided that
(1) any Loan Party other than the Borrower may consolidate or
merge into another Loan Party which is wholly-owned by the Borrower; or
(2) the Borrower may acquire by purchase substantially all of
the stock of a Franchise or the Franchise assets of a Franchisee in accordance
with the Borrower's established pricing formulas and purchase structure (which
have been provided to the Agent and the Banks prior to the Closing Date) (each
such purchase being a "Permitted Acquisition"), provided that:
(i) the Borrower shall grant or cause to exist perfected
Liens in favor of the Agent in the assets of or acquired from the seller in such
Permitted Acquisition on or before the date of such Permitted Acquisition;
(ii) the business acquired shall be a Franchise and such
purchase shall comply with Section 7.2.10 [Continuation of or Change in
Business];
(iii) no Potential Default or Event of Default shall
exist immediately prior to and after giving effect to such Permitted
Acquisition;
(iv) the Borrower shall demonstrate adherence to its
established pricing formulas and purchase structure and that it shall be in
compliance with the covenants contained in Sections 7.2.15, 7.2.16, 7.2.17,
7.2.18, 7.2.19, 7.2.20 and 7.2.21 after giving effect to such Permitted
Acquisition (including in such computation Indebtedness or other liabilities
assumed or incurred in connection with such Permitted Acquisition but excluding
income earned or expenses incurred by the Person, business or assets to be
acquired) by delivering at least five (5) Business Days prior to such Permitted
Acquisition a certificate in the form of Exhibit 8.2.6 evidencing such
compliance;
(v) the Consideration paid by the Loan Parties for all
Permitted Acquisitions made during the current fiscal year of the Loan Parties
shall not exceed $12,500,000 per year and the aggregate of the Consideration
paid by the Loan Parties for such Permitted Acquisition and all other Permitted
Acquisitions made between the Closing Date and the date of such Permitted
Acquisition shall not exceed $30,000,000;
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(vi) the Loan Parties shall deliver to the Agent (A) at
least five (5) Business Days before such Permitted Acquisition (x) copies of any
agreements substantially as entered into or proposed to be entered into by such
Loan Parties in connection with such Permitted Acquisition and (y) executed
complete UCC-1 financing statements suitable for filing and sufficient to
perfect the security interest of the Agent on behalf of the Banks in all
property acquired in such Permitted Acquisition and (B) promptly after the
closing thereof, evidence satisfactory to the Agent that all Liens have been
cancelled and satisfied of record; and
(vii) the Loan Parties shall also deliver to the Agent
from time to time on demand such other information about such Person or its
assets or such Permitted Acquisition as the Agent may reasonably require.
7.2.7 Dispositions of Assets or Subsidiaries.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise
transfer or dispose of, voluntarily or involuntarily, any of its properties or
assets, tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of such Loan Party), except:
(i) transactions involving the sale of inventory in the
ordinary course of business;
(ii) subject to Section 4.5, any sale, transfer or lease
of assets (except inventory) in the ordinary course of business which are no
longer necessary or required in the conduct of such Loan Party's or such
Subsidiary's business;
(iii) any sale, transfer or lease of assets by any
wholly owned Subsidiary of such Loan Party to another Loan Party;
(iv) any sale, transfer or lease of assets in the
ordinary course of business which are replaced by substitute assets acquired or
leased within the parameters of Section 7.2.15 [Capital Expenditures and
Leases], provided such substitute assets are subject to the Banks' Prior
Security Interest;
(v) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (i) through (iv) above, which is
approved by the Required Banks so long as the after-tax proceeds (as reasonably
estimated by the Borrower) are applied in accordance with the provisions of
Section 4.5.1 [Sale of Assets] above; or
(vi) any grant of a Franchise to a Franchisee.
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7.2.8 Affiliate Transactions.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, enter into or carry out any transaction (including
purchasing property or services from or selling property or services to any
Affiliate of any Loan Party or other Person) unless such transaction is not
otherwise prohibited by this Agreement, is entered into in the ordinary course
of business upon fair and reasonable arm's-length terms and conditions which are
fully disclosed to the Agent and is in accordance with all applicable Law.
7.2.9 Subsidiaries, Partnerships and Joint Ventures.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, own or create directly or indirectly any Subsidiaries
other than (i) any Subsidiary which has joined this Agreement as Guarantor on
the Closing Date; and (ii) any Subsidiary formed after the Closing Date which
joins this Agreement as a Guarantor pursuant to Section 10.18 [Joinder of
Guarantors], provided that the Required Banks shall have consented to such
formation and joinder and that such Subsidiary and the Loan Parties, as
applicable, shall grant a Prior Security Interest to the Agent for the benefit
of the Banks in the assets held by, and stock of or other ownership interests
in, such Subsidiary. Each of the Loan Parties shall not become or agree to (1)
become a general or limited partner in any general or limited partnership,
except that the Loan Parties may be general or limited partners in other Loan
Parties, (2) become a member or manager of, or hold a limited liability company
interest in, a limited liability company, except that the Loan Parties may be
members or managers of, or hold limited liability company interests in, other
Loan Parties, or (3) become a joint venturer or hold a joint venture interest in
any joint venture.
7.2.10 Continuation of or Change in Business.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, engage in any business other than (w) in the case of
Party City Michigan, the ownership of a single Party City retail store and of
certain intangible property relating to the business otherwise described in this
Section 7.2.10, (x) as to the Borrower, the ownership and operations of
Company-owned Stores bearing the Party City name, (y) as to the Borrower, the
franchising of Party City stores at the Franchise Locations, and (z) the sale of
party supply merchandise through catalogues, internet sales and other avenues
(provided that the Agent has in respect to any warehouse or distribution centers
such perfected liens and waivers as it deems necessary); such Loan Party or
Subsidiary shall not permit any material change in such business.
7.2.11 Plans and Benefit Arrangements.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to do any of the following if such would likely cause a
Material Adverse Change:
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(i) fail to satisfy the minimum funding requirements of
ERISA and the Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with
any other circumstances or set of circumstances resulting in liability under
ERISA, would constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to Plan, to exceed, as of any actuarial valuation date,
the fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that the Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a material liability of the Borrower or any member of the ERISA
Group;
(vii) terminate, or institute proceedings to terminate,
any Plan, where such termination is likely to result in a material liability to
the Borrower or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code.
7.2.12 Fiscal Year.
The Borrower shall not, and shall not permit any Subsidiary of
the Borrower to, change its fiscal year from the twelve-month period ending
December 31.
7.2.13 Issuance of Stock.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, issue any additional shares of its capital stock or any
options, warrants or other rights in respect thereof except for issuances (x) to
the Borrower, (y) to employees of the
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Borrower as part of incentive plans described in writing to the Banks from time
to time and (z) for cash, provided that (i) incident to an Event of Default,
one-half (1/2) of the proceeds of which are applied to reduce the Commitments
and be applied to the Obligations (as if a sale of assets) in accordance with
Section 4.5 hereof and (ii) absent an Event of Default, the proceeds of which
are applied to reduce the Revolving Credit Usage by half (1/2).
7.2.14 Changes in Organizational Documents.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, amend in any respect its certificate of incorporation
(including any provisions or resolutions relating to capital stock), by-laws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational documents
without providing at least thirty (30) calendar days' prior written notice to
the Agent and the Banks and, in the event such change would be adverse to the
Banks as determined by the Agent in its sole discretion, obtaining the prior
written consent of the Required Banks.
7.2.15 Capital Expenditures and Leases.
Each of the Loan Parties shall not, and shall not permit any
of its Subsidiaries to, make any payments exceeding $26,000,000 in the aggregate
in any fiscal year on account of the purchase or lease of any assets (but
excluding for purposes of this calculation, the Consideration paid in Permitted
Acquisitions), which if purchased would constitute fixed assets or which if
leased would constitute a capitalized lease, and all such capital expenditures
and leases shall be made under usual and customary terms and in the ordinary
course of business.
7.2.16 Minimum Fixed Charge Coverage Ratio.
The Loan Parties shall not permit the Fixed Charge Coverage
Ratio, calculated as of the end of each fiscal quarter to be less than the
ratios set forth below.
Quarter Ratio
------- -----
1st fiscal quarter of
each fiscal year 1.35-to-1.0
2nd fiscal quarter of
each fiscal year 1.35-to-1.0
3rd fiscal quarter of
each fiscal year 1.20-to-1.0
4th quarter of fiscal
year 1998 1.50-to-1.0
4th quarter of fiscal
years 1999 and thereafter 1.40-to-1.0
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7.2.17 Maximum Leverage Ratio.
The Loan Parties shall not at any time permit its Leverage
Ratio to exceed the ratio set forth below for the periods specified below:
Period Ratio
------ -----
1st fiscal quarter of
each fiscal year 2.50-to-1.0
2nd fiscal quarter of
each fiscal year 2.50-to-1.0
3rd fiscal quarter of
each fiscal year 3.25-to-1.0
If the ratio at the end
of 3rd fiscal quarter
exceeds 2.50-to-1.0, then
the ratio shall be
re-tested and may not
exceed: 1.50-to-1.0*
4th fiscal quarter of
each fiscal year 1.50-to-1.0
*For purposes of the special test which may apply after the 3rd quarter test,
the numerator of "Leverage Ratio" shall be calculated in respect of November 10
of the relevant year and the denominator shall be calculated for the twelve (12)
months ending on October 31 of such year.
7.2.18 Minimum Liquidity Coverage Ratio.
The Loan Parties shall not permit the ratio of (x) their cash,
plus the value (at the lower of cost or market) of the Borrower's inventory plus
the value of the Borrower's accounts net of amounts due among Loan Parties and
Affiliates and after adjustments for delinquent or doubtful accounts to (y)
Revolving Facility Usage, measured as of the end of each month, to be less than
the ratios set forth below for the months described:
Month in any Year Ratio
----------------- -----
January 1.50-to-1.0
February 1.50-to-1.0
March 1.50-to-1.0
April 1.50-to-1.0
May 1.40-to-1.0
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June 1.40-to-1.0
July 1.40-to-1.0
August 1.40-to-1.0
September 1.50-to-1.0
October 1.50-to-1.0
November 1.50-to-1.0
December 1.50-to-1.0
7.2.19 Minimum Tangible Net Worth.
The Borrower shall not in respect of the end of each fiscal
year permit Consolidated Tangible Net Worth to be less than the sum of
$30,000,000 and the sum (measured as of the end of each fiscal year) of (x) 50%
of consolidated net income of the Borrower and its Subsidiaries for each fiscal
quarter in which net income was earned (as opposed to a net loss) and (y) 100%
of the net proceeds of any sale of equity by the Borrower during the period from
December 31, 1997 through the date of determination and (z) that portion of the
Consideration in a Permitted Acquisition made with stock of the Borrower which
increases Borrower's Consolidated Tangible Net Worth (as compared, for example,
with that portion attributable to "goodwill").
7.2.20 Indebtedness to Net Worth Ratio.
The Borrower shall not at any time permit the ratio of (x) all
the Borrower's consolidated liabilities as reflected on its balance sheet in
accordance with GAAP to (y) net worth, determined and consolidated in accordance
with GAAP and measured at the end of each quarter, to exceed the ratio set forth
below for the period specified below:
Quarter Ending Ratio
-------------- -----
March 31, 1998 2.0-to-1.0
June 30, 1998 2.25-to-1.0
September 30, 1998 3.0-to-1.0
If the ratio at the end
of the 3rd fiscal quarter
exceeds 2.50-to-1.0, then
the ratio shall be
re-tested and may not
exceed: 2.0-to-1.0*
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December 31, 1998 2.0-to-1.0
March 31, 1999 2.0-to-1.0
June 30, 1999 2.25-to-1.0
September 30, 1999 3.25-to-1.0
If the ratio at the end
of the 3rd fiscal quarter
exceeds 2.50-to-1.0, then
the ratio shall be
re-tested and may not
exceed: 2.0-to-1.0*
December 31, 1999 2.0-to-1.0
March 31, 2000 2.0-to-1.0
June 30, 2000 2.25-to-1.0
September 30, 2000 3.25-to-1.0
December 31, 2000 2.0-to-1.0
March 31, 2001 and
thereafter 2.0-to-1.0
*For purposes of the special test which may apply after the 3rd quarter test,
the ratio shall be calculated as of November 30 of the relevant year.
7.2.21 Net Worth.
The Borrower shall not permit its net worth, determined and
consolidated in accordance with GAAP and measured at the end of each quarter, to
be less than the amounts set forth for the period specified below:
Quarter Ending Amount ($)
-------------- ----------
March 31, 1998 43,500,000
June 30, 1998 44,300,000
September 30, 1998 42,500,000
December 31, 1998 54,000,000
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March 31, 1999 52,000,000
June 30, 1999 53,000,000
September 30, 1999 51,500,000
December 31, 1999 67,000,000
March 31, 2000 65,500,000
June 30, 2000 66,300,000
September 30, 2000 64,500,000
December 31, 2000 84,000,000
March 31, 2001 82,000,000
7.2.22 Offsite Inventory.
The Borrower shall not permit at any time its inventory to the
extent such inventory's aggregate value (calculated at the lower of cost or
market) exceeds $2,000,000 to be stored at the Offsite Storage Locations or any
other locations other than the Company-owned Stores. All Offsite Storage
Locations shall segregate the Loan Parties' property and afford access thereto
only to the Loan Parties and the Lessor's representatives.
7.3 Reporting Requirements.
The Loan Parties, jointly and severally, covenant and agree that
until payment in full of the Loans, satisfaction of all of the Loan Parties'
other Obligations hereunder and under the other Loan Documents and termination
of the Commitments, the Loan Parties will furnish or cause to be furnished to
the Agent and each of the Banks:
7.3.1 Monthly Financial Statements.
As soon as available and in any event within twenty-five (25)
calendar days after the end of each calendar month, the Borrower's financial
statements, consisting of a consolidated and consolidating balance sheet as of
the end of such month and related consolidated and consolidating statements of
income, stockholders' equity and cash flows for the month then ended and the
fiscal year through that date, all in reasonable detail and certified (subject
to normal year-end adjustments) by the Chief Executive Officer, President or
Chief Financial Officer of the Borrower as having been prepared in accordance
with GAAP, consistently applied, and setting forth in comparative form the
respective financial statements for the corresponding date and period in the
previous fiscal year. Each monthly report shall be
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accompanied by a report regarding the year-to-date profile and loss of each
Company-owned Store, with comparisons to budget and the same period in the prior
year.
7.3.2 Quarterly Financial Statements.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, financial statements of the Borrower, consisting of a consolidated
and consolidating balance sheet as of the end of such fiscal quarter and related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for the fiscal quarter then ended and the fiscal year through that
date, all in reasonable detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower as having been prepared in accordance with GAAP,
consistently applied, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
fiscal year, together with the Borrower's report on Form 10-Q.
7.3.3 Annual Financial Statements.
As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, financial statements of the
Borrower consisting of a consolidated and consolidating balance sheet as of the
end of such fiscal year, and related consolidated and consolidating statements
of income, stockholders' equity and cash flows for the fiscal year then ended,
all in reasonable detail and setting forth in comparative form the financial
statements as of the end of and for the preceding fiscal year, and certified by
independent certified public accountants of nationally recognized standing
satisfactory to the Agent together with the Borrower's report on Form 10-K. The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of any Loan Party under any of the Loan
Documents. The Loan Parties shall deliver with such financial statements and
certification by their accountants a letter of such accountants to the Agent and
the Banks substantially (i) to the effect that, based upon their ordinary and
customary examination of the affairs of the Borrower, performed in connection
with the preparation of such consolidated financial statements, and in
accordance with generally accepted auditing standards, they are not aware of the
existence of any condition or event which constitutes an Event of Default or
Potential Default or, if they are aware of such condition or event, stating the
nature thereof and confirming the Borrower's calculations with respect to the
certificate to be delivered pursuant to Section 7.3.4 [Certificate of the
Borrower] with respect to such financial statements and containing an
accountant's certification acceptable to the Agent and (ii) to the effect that
the Banks are intended to rely upon such accountant's certification of the
annual financial statements and that such accountants authorize the Loan Parties
to deliver such reports and certificate to the Banks on such accountants' behalf
(as expressed in a privity or reliance letter acceptable to the Agent).
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7.3.4 Certificate of the Borrower.
Concurrently with the financial statements of the Borrower
furnished to the Agent and to the Banks pursuant to Sections 7.3.1 [Monthly
Financial Statements], 7.3.2. [Quarterly Financial Statements] and 7.3.3 [Annual
Financial Statements], a certificate of the Borrower signed by the Chief
Executive Officer, President or Chief Financial Officer of the Borrower, in the
form of Exhibit 7.3.4, to the effect that, except as described pursuant to
Section 7.3.5 [Notice of Default], (i) the representations and warranties of the
Borrower contained in Section 5 and in the other Loan Documents are true on and
as of the date of such certificate with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time) and the Loan Parties have performed and complied with all covenants and
conditions hereof, (ii) no Event of Default or Potential Default exists and is
continuing on the date of such certificate and (iii) containing calculations in
sufficient detail to demonstrate compliance as of the date of such financial
statements with all financial covenants contained in Section 7.2 [Negative
Covenants] (provided that the monthly report need only address the financial
covenant set forth in Section 7.2.18 [Liquidity Ratio]).
7.3.5 Notice of Default.
Promptly after any officer of any Loan Party has learned of
the occurrence of an Event of Default or Potential Default, a certificate signed
by the Chief Executive Officer, President or Chief Financial Officer of such
Loan Party setting forth the details of such Event of Default or Potential
Default and the action which such Loan Party proposes to take with respect
thereto.
7.3.6 Notice of Litigation.
Promptly after the commencement thereof, notice of all
actions, suits, proceedings or investigations before or by any Official Body
against any Loan Party or Subsidiary of any Loan Party (i) which relate to the
Loan Parties' or the Agent and the Banks' interests or rights in or to the
Collateral or (ii) involve a claim or series of claims in excess of $1,000,000
or which if adversely determined would constitute a Material Adverse Change or
(iii) involve personal injury cases and employment discrimination cases to the
extent not covered by insurance.
7.3.7 Certain Events.
Written notice to the Agent:
(i) at least thirty (30) calendar days prior thereto,
with respect to any proposed sale or transfer of assets pursuant to Section
7.2.7(iv) or (v),
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(ii) within the time limits set forth in Section 7.2.14
[Changes in Organizational Documents], any amendment to the organizational
documents of any Loan Party;
(iii) at least fifteen (15) calendar days prior thereto,
with respect to any change in any Loan Party's locations from the locations set
forth in Schedule A to the Security Agreement; and
(iv) at least five (5) days prior to the date of
possession, whether to commence operations or otherwise, of each Company-owned
Store (whether as an acquired Franchise Location or a newly opened store) an
update to Schedule 1.1 (C) including the address (including county) and owner of
the property together with a copy of the to-be signed lease agreement and UCC-1
financing statements (covering all property at such location intended by the
Agent to be Collateral) suitable for filing and sufficient to perfect the
security interest of the Agent on behalf of the Banks in all such property; and
with the monthly reports provide any updates to Schedule 1.1(O).
7.3.8 Budgets, Forecasts, Other Reports and Information.
Promptly upon their becoming available to the Borrower:
(i) the annual budget showing budgeted profit and loss
for each store, store openings, capital expenditures and other items reasonably
requested by the Agent and two-year projections of the Borrower (including (x)
income statements, balance sheets and cash flow statements for each month of the
first year included in such projections and for each quarter of the following
year), (y) detailed projections on cash receipts and disbursements and Revolving
Facility Usage as of the first and last Business Days of each month of the first
year included in such projections and (z) other items reasonably requested by
the Agent, to be supplied not later than December 31 of each year and including
any of the foregoing which may be applicable,
(ii) any reports including management letters submitted
to the Borrower by independent accountants in connection with any annual,
interim or special audit,
(iii) any reports (including annual reports), notices or
proxy statements generally distributed by the Borrower to its stockholders on a
date no later than the date supplied to such stockholders,
(iv) regular or periodic reports, including Forms 10-K,
10-Q and 8-K, registration statements and prospectuses, filed by the Borrower
with the Securities and Exchange Commission,
(v) a copy of any order in any proceeding described in
Section 7.3.6 to which the Borrower or any of its Subsidiaries is a party issued
by any Official Body,
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(vi) amendments to or filings under or with respect to
franchisor registration or regulation, including offering circulars and
disclosures; and
(vii) such other reports and information the Agent may
from time to time reasonably request. The Borrower shall also notify the Banks
promptly of the enactment or adoption of any Law which may result in a Material
Adverse Change.
7.3.9 Notices Regarding Plans and Benefit Arrangements.
7.3.9.1 Certain Events.
Promptly upon becoming aware of the occurrence thereof,
notice (including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to the Borrower or
any other member of the ERISA Group (regardless of whether the obligation to
report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject the
Borrower or any other member of the ERISA Group to a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, any Benefit Arrangement or
any trust created thereunder,
(iii) any assertion of material withdrawal liability
with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a
Multiemployer Plan by the Borrower or any other member of the ERISA Group under
Title IV of ERISA (or assertion thereof), where such withdrawal is likely to
result in material withdrawal liability,
(v) any cessation of operations (by the Borrower or any
other member of the ERISA Group) at a facility in the circumstances described in
Section 4062(e) of ERISA,
(vi) withdrawal by the Borrower or any other member of
the ERISA Group from a Multiple Employer Plan,
(vii) a failure by the Borrower or any other member of
the ERISA Group to make a payment to a Plan required to avoid imposition of a
Lien under Section 302(f) of ERISA,
(viii) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA, or
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(ix) any change in the actuarial assumptions or funding
methods used for any Plan, where the effect of such change is to materially
increase or materially reduce the unfunded benefit liability or obligation to
make periodic contributions.
7.3.9.2 Notices of Involuntary Termination and
Annual Reports.
Promptly after receipt thereof, copies of (a) all
notices received by the Borrower or any other member of the ERISA Group of the
PBGC's intent to terminate any Plan administered or maintained by the Borrower
or any member of the ERISA Group, or to have a trustee appointed to administer
any such Plan; and (b) at the request of the Agent or any Bank each annual
report (IRS Form 5500 series) and all accompanying schedules, the most recent
actuarial reports, the most recent financial information concerning the
financial status of each Plan administered or maintained by the Borrower or any
other member of the ERISA Group, and schedules showing the amounts contributed
to each such Plan by or on behalf of the Borrower or any other member of the
ERISA Group in which any of their personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial Information) to
the annual report filed by the Borrower or any other member of the ERISA Group
with the Internal Revenue Service with respect to each such Plan.
7.3.9.3 Notice of Voluntary Termination.
Promptly upon the filing thereof, copies of any Form 5310, or
any successor or equivalent form to Form 5310, filed with the PBGC in connection
with the termination of any Plan..
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any
one or more of the following events or conditions (whatever the reason therefor
and whether voluntary, involuntary or effected by operation of Law):
8.1.1 Payments Under Loan Documents.
The Borrower shall fail to pay (i) any principal of any Loan
(including scheduled installments, mandatory prepayments or the payment due at
maturity) when due, (ii) shall fail to pay any interest on any Loan, or any
other amount owing hereunder or under the other Loan Documents within three (3)
Business Days when due after such interest or other amount becomes due in
accordance with the terms hereof or thereof;
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8.1.2 Breach of Warranty.
Any representation or warranty made at any time by any of the
Loan Parties herein or by any of the Loan Parties in any other Loan Document, or
in any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
8.1.3 Breach of Negative Covenants or Visitation Rights.
Any of the Loan Parties shall default in the observance or
performance of any covenant contained in Section 7.1.6 [Visitation Rights] or
Section 7.2 [Negative Covenants] (other than Sections 7.2.9 or 7.2.22);
8.1.4 Breach of Other Covenants.
Any of the Loan Parties shall default in the observance or
performance of Section 7.2.9, Section 7.2.22 or any other covenant, condition or
provision hereof or of any other Loan Document and such default shall continue
unremedied for a period of ten (10) Business Days after any officer of any Loan
Party becomes aware of the occurrence thereof (such grace period to be
applicable only in the event such default can be remedied by corrective action
of the Loan Parties as determined by the Agent in its sole discretion);
8.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time under
the terms of any other agreement involving borrowed money or the extension of
credit or any other Indebtedness under which any Loan Party or Subsidiary of any
Loan Party may be obligated as a borrower or guarantor in excess of $1,000,000
in the aggregate, and such breach, default or event of default consists of the
failure to pay (beyond any period of grace permitted with respect thereto,
whether waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any indebtedness (whether or not such right shall have been
waived) or the termination of any commitment to lend;
8.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of money in
excess of $1,000,000 in the aggregate shall be entered against any Loan Party by
a court having jurisdiction in the premises, which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of thirty (30) days
from the date of entry;
8.1.7 Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements of the Loan Parties enforceable against the party executing
the same or such party's successors and assigns (as permitted under the Loan
Documents) in accordance with the
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respective terms thereof or shall in any way be terminated (except in accordance
with its terms) or become or be declared ineffective or inoperative or shall in
any way be challenged or contested or cease to give or provide the respective
Liens, security interests, rights, titles, interests, remedies, powers or
privileges intended to be created thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
There shall occur any material uninsured damage to or loss,
theft or destruction of any of the Collateral in excess of $1,000,000 or the
Collateral or any other of the Loan Parties' or any of their Subsidiaries'
assets are attached, seized, levied upon or subjected to a writ or distress
warrant; or such come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors and the same is not cured within thirty
(30) days thereafter;
8.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $1,000,000 which
is not a Permitted Lien is filed of record with respect to all or any part of
any of the Loan Parties' or any of their Subsidiaries' assets by the United
States, or any department, agency or instrumentality thereof, or by any state,
county, municipal or other governmental agency, including the PBGC, or any taxes
or debts owing at any time or times hereafter to any one of these becomes
payable and the same is not paid within thirty (30) days after the same becomes
payable;
8.1.10 Material Adverse Change; Insolvency.
There shall occur any Material Adverse Change or any Loan
Party or any Subsidiary of a Loan Party ceases to be solvent or admits in
writing its inability to pay its debts as they mature;
8.1.11 Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i) any Reportable Event, which
the Agent determines in good faith constitutes grounds for the termination of
any Plan by the PBGC or the appointment of a trustee to administer or liquidate
any Plan, shall have occurred and be continuing; (ii) proceedings shall have
been instituted or other action taken to terminate any Plan, or a termination
notice shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Agent reasonably determines in
good faith that the amount of the Borrower's liability is likely to exceed 10%
of its Consolidated Tangible Net Worth; (v) the Borrower or any member of the
ERISA Group shall fail to make any contributions when due to a Plan or a
Multiemployer Plan; (vi) the Borrower or any other member of the ERISA Group
shall make any amendment to a Plan with respect to which security is required
under Section 307 of ERISA; (vii) the Borrower or any other member of the ERISA
Group shall withdraw completely or partially from a Multiemployer Plan;
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(viii) the Borrower or any other member of the ERISA Group shall withdraw (or
shall be deemed under Section 4062(e) of ERISA to withdraw) from a Multiple
Employer Plan; or (ix) any applicable Law is adopted, changed or interpreted by
any Official Body with respect to or otherwise affecting one or more Plans,
Multiemployer Plans or Benefit Arrangements and, with respect to any of the
events specified in (v), (vi), (vii), (viii) or (ix), the Agent reasonably
determines in good faith that any such occurrence would be reasonably likely to
materially and adversely affect the total enterprise represented by the Borrower
and the other members of the ERISA Group;
8.1.12 Cessation of Business.
Any Loan Party or Subsidiary of a Loan Party ceases to conduct
its business as contemplated, except as expressly permitted under Section 7.2.6
[Liquidations, Mergers, Etc.] or 7.2.7, or any Loan Party or Subsidiary of a
Loan Party is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30) days
after the entry thereof;
8.1.13 Change of Control.
(i) Any person or group of persons within the meaning of
Sections 13(d) or 14(a) of the Securities Exchange Act of 1934, as amended (but
excluding any mutual fund complex owning shares for investment purposes) shall
have acquired beneficial ownership of (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) twenty
percent (20%) or more of the voting capital stock of the Borrower; or (ii)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases to own at least seven percent (7%) of the capital stock of
the Borrower or (iii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases to the President and Chief Executive
Officer of the Borrower or ceases to be actively involved in the control of the
day to day operations of the Borrower.
8.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any Loan Party or Subsidiary of a Loan Party in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or similar official) of any Loan
Party or Subsidiary of a Loan Party for any substantial part of its property, or
for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of thirty (30)
consecutive days or such court shall enter a decree or order granting any of the
relief sought in such proceeding; or
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8.1.15 Voluntary Proceedings.
Any Loan Party or Subsidiary of a Loan Party shall commence a
voluntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action in furtherance of any of the
foregoing.
8.2 Consequences of Event of Default.
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings.
If an Event of Default specified under Sections 8.1.1 through
8.1.13 shall occur and be continuing, the Banks and the Agent shall be under no
further obligation to make Loans and the Agent may, and upon the request of the
Required Banks shall, by written notice to the Borrower, declare the unpaid
principal amount of the Notes then outstanding and all interest accrued thereon,
any unpaid fees and all other Indebtedness of the Borrower to the Banks
hereunder and thereunder to be forthwith due and payable, and the same shall
thereupon become and be immediately due and payable to the Agent for the benefit
of each Bank without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived; and
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under Section 8.1.14
[Involuntary Proceedings] or 8.1.15 [Voluntary Proceedings] shall occur, the
Banks shall be under no further obligations to make Loans hereunder and the
unpaid principal amount of the Loans then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrower to the Banks
hereunder and thereunder shall be immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; and
8.2.3 Set-off.
If an Event of Default shall occur and be continuing, any Bank
to whom any Obligation is owed by any Loan Party hereunder or under any other
Loan Document or any participant of such Bank which has agreed in writing to be
bound by the provisions of Section 9.13 [Equalization of Banks] and any branch,
Subsidiary or Affiliate of such Bank or participant anywhere in the world shall
have the right, in addition to all other rights and remedies available to it,
without notice to such Loan Party, to set-off against and apply to the then
unpaid
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balance of all the Loans and all other Obligations of the Borrower and the other
Loan Parties hereunder or under any other Loan Document any debt owing to, and
any other funds held in any manner for the account of, the Borrower or such
other Loan Party by such Bank or participant or by such branch, Subsidiary or
Affiliate, including all funds in all deposit accounts (whether time or demand,
general or special, provisionally credited or finally credited, or otherwise)
now or hereafter maintained by the Borrower or such other Loan Party for its own
account (but not including funds held in custodian or trust accounts) with such
Bank or participant or such branch, Subsidiary or Affiliate. Such right shall
exist whether or not any Bank or the Agent shall have made any demand under this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of the Borrower or such other Loan Party is or are matured
or unmatured and regardless of the existence or adequacy of any Collateral,
Guaranty or any other security, right or remedy available to any Bank or the
Agent; and
8.2.4 Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and
whether or not the Agent shall have accelerated the maturity of the Loans
pursuant to any of the foregoing provisions of this Section 8.2, the Agent or
any Bank, if owed any amount with respect to the Loans, may proceed to protect
and enforce its rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement or the other Loan Documents, including as permitted
by applicable Law the obtaining of the ex parte appointment of a receiver, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of the Agent
or such Bank; and
8.2.5 Application of Proceeds.
From and after the date on which the Agent has taken any
action pursuant to this Section 8.2 and until all Obligations of the Loan
Parties have been paid in full, any and all proceeds received by the Agent from
any sale or other disposition of the Collateral, or any part thereof, or the
exercise of any other remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the Banks for
out-of-pocket costs, expenses and disbursements, including reasonable attorneys'
and paralegals' fees and legal expenses, incurred by the Agent or the Banks in
connection with realizing on the Collateral or collection of any Obligations of
any of the Loan Parties under any of the Loan Documents, including advances made
by the Banks or any one of them or the Agent for the reasonable maintenance,
preservation, protection or enforcement of, or realization upon, the Collateral,
including advances for taxes, insurance, repairs and the like and reasonable
expenses incurred to sell or otherwise realize on, or prepare for sale or other
realization on, any of the Collateral pursuant to the provisions of the Loan
Documents and applicable law;
(ii) second, to the repayment of all Indebtedness then
due and unpaid of the Loan Parties to the Banks incurred under this Agreement or
any of the other
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Loan Documents, whether of principal, interest, fees, expenses or otherwise, in
such manner as the Agent may determine in its reasonable discretion; and
(iii) the balance, if any, to the appropriate Loan Party
except as prohibited by applicable law.
8.2.6 Other Rights and Remedies.
In addition to all of the rights and remedies contained in
this Agreement or in any of the other Loan Documents, the Agent shall have all
of the rights and remedies of a secured party under the Uniform Commercial Code
or other applicable Law, all of which rights and remedies shall be cumulative
and non-exclusive, to the extent permitted by Law. The Agent may, and upon the
request of the Required Banks shall, exercise all post-default rights granted to
the Agent and the Banks under the Loan Documents or applicable Law.
8.3 Notice of Sale.
Any notice required to be given by the Agent of a sale, lease, or
other disposition of the Collateral or any other intended action by the Agent,
if given ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice thereof to the Borrower.
9. THE AGENT
9.1 Appointment.
Each Bank hereby irrevocably designates, appoints and authorizes PNC
Bank to act as Agent for such Bank under this Agreement and to execute and
deliver or accept on behalf of each of the Banks the other Loan Documents. Each
Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and any other instruments and agreements referred to herein, and
to exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the Agent
on behalf of the Banks to the extent provided in this Agreement.
9.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by or through
agents or employees (provided such delegation does not constitute a
relinquishment of its duties as Agent) and, subject to Sections 9.5
[Reimbursement of Agent by Borrower, Etc.] and 9.6, shall be entitled to engage
and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
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9.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Without limiting the generality of the foregoing,
the use of the term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties. Each
Bank expressly acknowledges (i) that the Agent has not made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of any of the Loan Parties, shall be deemed to constitute
any representation or warranty by the Agent to any Bank; (ii) that it has made
and will continue to make, without reliance upon the Agent, its own independent
investigation of the financial condition and affairs and its own appraisal of
the creditworthiness of each of the Loan Parties in connection with this
Agreement and the making and continuance of the Loans hereunder; and (iii)
except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of any Loan or at any time or times thereafter.
9.4 Actions in Discretion of Agent; Instructions From the Banks.
The Agent agrees, upon the written request of the Required Banks, to
take or refrain from taking any action of the type specified as being within the
Agent's rights, powers or discretion herein, provided that the Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law. In the absence of a request by the Required Banks, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Banks or
all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section 9.6
[Exculpatory Provisions, Etc.]. Subject to the provisions of Section 9.6, no
Bank shall have any right of action whatsoever against the Agent as a result of
the Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Banks, or in the absence of such instructions, in
the absolute discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the Borrower.
The Borrower unconditionally agrees to pay or reimburse the Agent
and hold the Agent harmless against (a) liability for the payment of all
reasonable out-of-pocket costs,
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expenses and disbursements, including fees and expenses of counsel (including
the allocated costs of staff counsel), appraisers and consultants, incurred by
the Agent (i) in connection with the development, negotiation, preparation,
printing, execution, administration, syndication, interpretation and performance
of this Agreement and the other Loan Documents, (ii) relating to any requested
amendments, waivers or consents pursuant to the provisions hereof, (iii) in
connection with the enforcement of this Agreement or any other Loan Document or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (iv) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, and (b) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by the Agent hereunder or thereunder, provided that the Borrower shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements if the
same results from the Agent's or the Banks' gross negligence or willful
misconduct, or if the Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
the Borrower shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrower), or if the same results from a compromise
or settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. In addition, subject to the last sentence of
Section 7.1.6 [Visitation Rights], the Borrower agrees to reimburse and pay all
reasonable out-of-pocket expenses of the Agent's regular employees and agents
engaged periodically to perform audits of the Loan Parties' books, records and
business properties. The Loan Parties shall not be required to indemnify the
Agent or the Banks to the extent otherwise indemnified. The Loan Parties shall
be subrogated to the rights of the Agent and the Banks in respect of amounts
paid by the Loan Parties pursuant to this Section, such grant to be effective
upon the repayment in full of all of the Obligations.
9.6 Exculpatory Provisions; Limitation of Liability.
Neither the Agent nor any of its directors, officers, employees,
agents, attorneys or Affiliates shall (a) be liable to any Bank for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith
including pursuant to any Loan Document, unless caused by its or their own gross
negligence or willful misconduct as determined by a count of competent
jurisdiction by final and non-appealable judgment, (b) be responsible in any
manner to any of the Banks for the effectiveness, enforceability, genuineness,
validity or the due execution of this Agreement or any other Loan Documents or
for any recital, representation, warranty, document, certificate, report or
statement herein or made or furnished under or in connection with this Agreement
or any other Loan Documents, or (c) be under any obligation to any of the Banks
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan
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Parties, or the existence or possible existence of any Event of Default or
Potential Default. No claim may be made by any of the Loan Parties, any Bank,
the Agent or any of their respective Subsidiaries against the Agent, any Bank or
any of their respective directors, officers, employees, agents, attorneys or
Affiliates, or any of them, for any special, indirect or consequential damages
or, to the fullest extent permitted by Law, for any punitive damages in respect
of any claim or cause of action (whether based on contract, tort, statutory
liability, or any other ground) based on, arising out of or related to any Loan
Document or the transactions contemplated hereby or any act, omission or event
occurring in connection therewith, including the negotiation, documentation,
administration or collection of the Loans, and each of the Loan Parties, (for
itself and on behalf of each of its Subsidiaries), the Agent and each Bank
hereby waive, releases and agree never to ▇▇▇ upon any claim for any such
damages, whether such claim now exists or hereafter arises and whether or not it
is now known or suspected to exist in its favor. Each Bank agrees that, except
for notices, reports and other documents expressly required to be furnished to
the Banks by the Agent hereunder or given to the Agent for the account of or
with copies for the Banks, the Agent and each of its directors, officers,
employees, agents, attorneys or Affiliates shall not have any duty or
responsibility to provide any Bank with an credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Loan Parties which may come
into the possession of the Agent or any of its directors, officers, employees,
agents, attorneys or Affiliates.
9.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the extent
not reimbursed by the Borrower and without limiting the Obligation of the
Borrower to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements, including attorneys' fees and disbursements
(including the allocated costs of staff counsel), and costs of appraisers and
environmental consultants, of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (a) if the same results from the Agent's gross negligence or
willful misconduct, or (b) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrower and without limiting the Obligation of the Borrower to do so) in
proportion to its Ratable Share for all amounts due and payable by the Borrower
to the Agent in connection with the Agent's periodic audit of the Loan Parties'
books, records and business properties.
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9.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing, telegram,
telex or teletype message, resolution, notice, consent, certificate, letter,
cablegram, statement, order or other document or conversation by telephone or
otherwise believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
9.9 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Potential Default or Event of Default unless the Agent has
received written notice from a Bank or the Borrower referring to this Agreement,
describing such Potential Default or Event of Default and stating that such
notice is a "notice of default."
9.10 Notices.
The Agent shall promptly send to each Bank a copy of all notices
received from the Borrower or any Bank pursuant to the provisions of this
Agreement or the other Loan Documents promptly upon receipt thereof. The Agent
shall promptly notify the Borrower and the other Banks of each change in the
Base Rate and the effective date thereof.
9.11 Banks in Their Individual Capacities.
With respect to its Revolving Credit Commitment, the Revolving
Credit Loans and any other rights and powers given to it as a Bank hereunder or
under any of the other Loan Documents, the Agent shall have the same rights and
powers hereunder as any other Bank and may exercise the same as though it were
not the Agent, and the term "Banks" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. PNC Bank and its
Affiliates and each of the Banks and their respective Affiliates may, without
liability to account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking or trust business with, the Loan Parties
and their Affiliates, in the case of the Agent, as though it were not acting as
Agent hereunder and in the case of each Bank, as though such Bank were not a
Bank hereunder; such Bank shall give to the Agent notice of such other loan
business. The Banks acknowledge that, pursuant to such activities, the Agent or
its Affiliates may (i) receive information regarding the Loan Parties (including
information that may be subject to confidentiality obligations in favor of the
Loan Parties) and acknowledge that the Agent shall be under no obligation to
provide such information to them, and (ii) accept fees and other consideration
from the Loan Parties for services in connection with this Agreement and
otherwise without having to account for the same to the Banks.
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9.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as the owner
thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any Person who at the time of making such
request or giving such authority or consent is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
9.13 Equalization of Banks.
The Banks and the holders of any participations in any Notes agree
among themselves that, with respect to all amounts received by any Bank or any
such holder for application on any Obligation hereunder or under any Note or
under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Section 3.4.3 [Agent's and Bank's Rights], 4.4.2
[Replacement of a Bank] or 4.5.3 [Additional Compensation in Certain
Circumstances]. The Banks or any such holder receiving any such amount shall
purchase for cash from each of the other Banks an interest in such Bank's Loans
in such amount as shall result in a ratable participation by the Banks and each
such holder in the aggregate unpaid amount under the Notes, provided that if all
or any portion of such excess amount is thereafter recovered from the Bank or
the holder making such purchase, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, together with interest
or other amounts, if any, required by law (including court order) to be paid by
the Bank or the holder making such purchase.
9.14 Successor Agent.
The Agent may resign as Agent by giving not less than thirty (30)
days' prior written notice to the Borrower. If the Agent shall resign under this
Agreement, then either (a) the Required Banks shall appoint from among the Banks
a successor agent for the Banks, subject to the consent of the Borrower, such
consent not to be unreasonably withheld, or (b) if a successor agent shall not
be so appointed and approved within the thirty (30) day period following the
Agent's notice to the Banks of its resignation, then the Agent shall appoint,
with the consent of the Borrower, such consent not to be unreasonably withheld,
a successor agent who shall serve as Agent until such time as the Required Banks
appoint and the Borrower consents to the appointment of a successor agent. Upon
its appointment pursuant to either clause (a) or (b) above, such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent, effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the
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resignation of any Agent hereunder, the provisions of this Section 9 shall inure
to the benefit of such former Agent.
9.15 Agent's Fee.
The Borrower shall pay to the Agent a periodic nonrefundable fee
(the "Agent's Fee") under the terms of a letter (the "Agent's Letter") between
the Borrower and Agent, as amended from time to time.
9.16 Availability of Funds.
The Agent may assume that each Bank has made or will make the
proceeds of a Loan available to the Agent unless the Agent shall have been
notified by such Bank on or before the later of (1) the close of Business on the
Business Day preceding the Borrowing Date with respect to such Loan or two (2)
hours before the time on which the Agent actually funds the proceeds of such
Loan to the Borrower (whether using its own funds pursuant to this Section 9.16
or using proceeds deposited with the Agent by the Banks and whether such funding
occurs before or after the time on which Banks are required to deposit the
proceeds of such Loan with the Agent). The Agent may, in reliance upon such
assumption (but shall not be required to), make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Agent by such Bank, the Agent shall be entitled to recover such amount on
demand from such Bank (or, if such Bank fails to pay such amount forthwith upon
such demand from the Borrower) together with interest thereon, in respect of
each day during the period commencing on the date such amount was made available
to the Borrower and ending on the date the Agent recovers such amount, at a rate
per annum equal to (i) the Federal Funds Effective Rate during the first three
(3) days after such interest shall begin to accrue and (ii) the applicable
interest rate in respect of such Loan after the end of such three-day period.
9.17 Calculations.
In the absence of gross negligence or willful misconduct, the Agent
shall not be liable for any error in computing the amount payable to any Bank
whether in respect of the Loans, fees or any other amounts due to the Banks
under this Agreement. In the event an error in computing any amount payable to
any Bank is made, the Agent, the Borrower and each affected Bank shall,
forthwith upon discovery of such error, make such adjustments as shall be
required to correct such error, and any compensation therefor will be calculated
at the Federal Funds Effective Rate.
9.18 Beneficiaries.
Except as expressly provided herein, the provisions of this Section
9 are solely for the benefit of the Agent and the Banks, and the Loan Parties
shall not have any rights to rely on or enforce any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be
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deemed to have assumed any obligation toward or relationship of agency or trust
with or for any of the Loan Parties.
10. MISCELLANEOUS
10.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Agent, acting on
behalf of all the Banks, and the Borrower, on behalf of the Loan Parties, may
from time to time enter into written agreements amending or changing any
provision of this Agreement or any other Loan Document or the rights of the
Banks or the Loan Parties hereunder or thereunder, or may grant written waivers
or consents to a departure from the due performance of the Obligations of the
Loan Parties hereunder or thereunder (including without limitation those related
to the delivery of landlord waivers). Any such agreement, waiver or consent made
with such written consent shall be effective to bind all the Banks and the Loan
Parties; provided, that, without the written consent of all the Banks, no such
agreement, waiver or consent may be made which will:
10.1.1 Increase of Commitment; Extension or Expiration Date.
Increase the amount of the Revolving Credit Commitment of any
Bank hereunder or extend the Expiration Date;
10.1.2 Extension of Payment; Reduction of Principal, Interest
or Fees; Modification of Terms of Payment.
Whether or not any Loans are outstanding, extend the time for
payment of principal or interest of any Loan (excluding the due date of any
mandatory prepayment of a Loan or any mandatory Commitment reduction in
connection with such a mandatory prepayment hereunder except for mandatory
reductions of the Commitments on the Expiration Date), the Commitment Fee or any
other fee payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Commitment Fee or any other fee payable
to any Bank, or otherwise affect the terms of payment of the principal of or
interest of any Loan, the Commitment Fee or any other fee payable to any Bank;
10.1.3 Release of Collateral or Guarantor.
Except for sales of assets permitted by Section 7.2.7
[Disposition of Assets or Subsidiaries], release any Collateral or substantially
all of the assets of any Loan Party, any Guarantor from its Obligations under
the Guaranty Agreement or any other security for any of the Loan Parties'
Obligations; or
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10.1.4 Miscellaneous
Amend Section 4.2 [Pro Rata Treatment of Banks], 9.6
[Exculpatory Provisions, Etc.] or 9.13 [Equalization of Banks] or this Section
10.1, alter any provision regarding the pro rata treatment of the Banks, change
the definition of Required Banks, or change any requirement providing for the
Banks or the Required Banks to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would modify the
interests, rights or obligations of the Agent in its capacity as Agent shall be
effective without the written consent of the Agent.
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Agent or any
Bank in exercising any right, power, remedy or privilege under this Agreement or
any other Loan Document shall affect any other or future exercise thereof or
operate as a waiver thereof, nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege preclude any further exercise thereof or of any other right,
power, remedy or privilege. The rights and remedies of the Agent and the Banks
under this Agreement and any other Loan Documents are cumulative and not
exclusive of any rights or remedies which they would otherwise have. Any waiver,
permit, consent or approval of any kind or character on the part of any Bank of
any breach or default under this Agreement or any such waiver of any provision
or condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
10.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes.
The Borrower agrees unconditionally upon demand to pay or reimburse
to each Bank (other than the Agent, as to which the Borrower's Obligations are
set forth in Section 9.5 [Reimbursement of Agent By Borrower, Etc.]) and to save
such Bank harmless against (i) liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements (including fees and expenses of
counsel (including allocated costs of staff counsel) for each Bank except with
respect to (a) and (b) below), incurred by such Bank (a) in connection with the
administration and interpretation of this Agreement, and other instruments and
documents to be delivered hereunder, (b) relating to any amendments, waivers or
consents pursuant to the provisions hereof, (c) in connection with the
enforcement of this Agreement or any other Loan Document, or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (d) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings and (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature
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whatsoever which may be imposed on, incurred by or asserted against such Bank,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by such Bank
hereunder or thereunder, provided that the Borrower shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (A) if the same results from
such Bank's or the Agent's gross negligence or willful misconduct as determined
by a court of competent jurisdiction by final and non-appealable judgment, or
(B) if the Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
the Borrower shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrower), or (C) if the same results from a
compromise or settlement agreement entered into without the consent of the
Borrower, which shall not be unreasonably withheld. The Banks will attempt to
minimize the fees and expenses of legal counsel for the Banks which are subject
to reimbursement by the Borrower hereunder by considering the usage of one law
firm to represent the Banks and the Agent except to the extent such usage of one
law firm would result in a conflict or is determined in good faith to adversely
affect the interests of the Banks; provided however, that, incident to an Event
of Default, the Banks specifically reserve the right to retain separate counsel,
the fees and expenses of which shall be reimbursed pursuant to this Section
10.3. The Borrower agrees unconditionally to pay all stamp, document, transfer,
recording or filing taxes or fees and similar impositions now or hereafter
determined by the Agent or any Bank to be payable in connection with this
Agreement or any other Loan Document, and the Borrower agrees unconditionally to
save the Agent and the Banks harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes, fees or impositions.
10.4 Holidays.
Whenever payment of a Loan to be made or taken hereunder shall be
due on a day which is not a Business Day such payment shall be due on the next
Business Day (except as provided in Section 3.2 [Interest Periods] with respect
to Interest Periods under the Euro-Rate Option), shall be stated to be due on a
day which is not a Business Day, such payment or action shall be made or taken
on the next following Business Day (except as provided in Section 3.2 [Interest
Periods] with respect to Interest Periods under the Euro-Rate Option), and such
extension of time shall be included in computing interest and fees, except that
the Loans shall be due on the Business Day preceding the Expiration Date if the
Expiration Date is not a Business Day. Whenever any payment or action to be made
or taken hereunder (other than payment of the Loans) shall be stated to be due
on a day which is not a Business Day, such payment or action shall be made or
taken on the next following Business Day (except as provided in Section 3.2
[Interest Periods] with respect to Interest Periods under the Euro-Rate Option),
and such extension of time shall not be included in computing interest or fees,
if any, in connection with such payment or action.
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10.5 Funding by Branch, Subsidiary or Affiliate.
10.5.1 Notional Funding.
Each Bank shall have the right from time to time, without
notice to the Borrower, to deem any branch, Subsidiary or Affiliate (which for
the purposes of this Section 10.5 shall mean any corporation or association
which is directly or indirectly controlled by or is under direct or indirect
common control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any Loan to
which the Euro-Rate Option applies at any time, provided that immediately
following (on the assumption that a payment were then due from the Borrower to
such other office), and as a result of such change, the Borrower would not be
under any greater financial obligation pursuant to Section 4.5.3 [Additional
Compensation in Certain Circumstances] than it would have been in the absence of
such change. Notional funding offices may be selected by each Bank without
regard to such Bank's actual methods of making, maintaining or funding the Loans
or any sources of funding actually used by or available to such Bank.
10.5.2 Actual Funding.
Each Bank shall have the right from time to time to make or
maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
10.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain
any part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrower hereunder or require the Borrower to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 4.5.3 [Additional Compensation in Certain Circumstances])
which would otherwise not be incurred.
10.6 Notices.
All notices, requests, demands, directions and other communications
(as used in this Section 10.6, collectively referred to as "notices") given to
or made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on Schedule 1.1(B) hereof or in accordance with any
subsequent unrevoked written direction from any party to the others. All notices
shall, except as otherwise expressly herein provided, be effective (a) in the
case of facsimile, when received, (b) in the case of hand-delivered notice, when
hand-delivered, (c) in the case of telephone, when telephoned, provided,
however, that in order to be effective, telephonic notices must be confirmed in
writing no later than the next day by letter or facsimile, (d) if given by mail,
four (4) days after such
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communication is deposited in the mail with first-class postage prepaid, return
receipt requested, and (e) if given by any other means (including by air
courier), when delivered; provided, that notices to the Agent shall not be
effective until received. Any Bank giving any notice to any Loan Party shall
simultaneously send a copy thereof to the Agent, and the Agent shall promptly
notify the other Banks of the receipt by it of any such notice.
10.7 Severability.
The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall be held invalid or unenforceable in whole
or in part in any jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without in
any manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.8 Governing Law.
This Agreement shall be deemed to be a contract under the Laws of
the State of New Jersey and for all purposes shall be governed by and construed
and enforced in accordance with the internal laws of the State of New Jersey
without regard to its conflict of laws principles.
10.9 Prior Understanding.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
10.10 Duration; Survival.
All representations and warranties of the Loan Parties contained
herein or made in connection herewith shall survive the making of Loans and
shall not be waived by the execution and delivery of this Agreement, any
investigation by the Agent or the Banks, the making of Loans or payment in full
of the Loans. All covenants and agreements of the Loan Parties contained in
Sections 7.1 [Affirmative Covenants], 7.2 [Negative Covenants] and 7.3
[Reporting Requirements] herein shall continue in full force and effect from and
after the date hereof so long as the Borrower may borrow hereunder and until
termination of the Commitments and payment in full of the Loans. All covenants
and agreements of the Borrower contained herein relating to the payment of
principal, interest, premiums, additional compensation or expenses and
indemnification, including those set forth in the Notes, Section 4 [Payments]
and Sections 9.5 [Reimbursement of Agent by Borrower, Etc.], 9.7 [Reimbursement
of Agent by Borrower, Etc.] and 10.3 [Reimbursement of Banks by Borrower; Etc.],
shall survive payment in full of the Loans and termination of the Commitments.
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10.11 Successors and Assigns.
(i) This Agreement shall be binding upon and shall inure
to the benefit of the Banks, the Agent, the Loan Parties and their respective
successors and assigns, except that none of the Loan Parties may assign or
transfer any of its rights and Obligations hereunder or any interest herein.
Each Bank may, at its own cost, make assignments of or sell participations in
all or any part of its Commitments and the Loans made by it to one or more banks
or other entities, subject to the consent of the Borrower and the Agent with
respect to any assignee, such consent not to be unreasonably withheld, provided
that (1) no consent of the Borrower shall be required in the case of an
assignment by a Bank to an Affiliate of such Bank or if there exists an Event of
Default, and (2) any assignment by a Bank to a Person other than an Affiliate of
such Bank may not be made in amounts less than the lesser of $5,000,000 or the
amount of the assigning Bank's Commitment. In the case of an assignment, upon
receipt by the Agent of the Assignment and Assumption Agreement, the assignee
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if it had
been a signatory Bank hereunder, the Commitments shall be adjusted accordingly,
and upon surrender of any Note subject to such assignment, the Borrower shall
execute and deliver a new Note to the assignee in an amount equal to the amount
of the Revolving Credit Commitment assumed by it and a new Revolving Credit Note
to the assigning Bank in an amount equal to the Revolving Credit Commitment
retained by it hereunder. Any Bank which assigns any or all of its Commitment or
Loans to a Person other than an Affiliate of such Bank shall pay to the Agent a
service fee in the amount of $3,500 for each assignment. In the case of a
participation, the participant shall only have the rights specified in Section
8.2.3 [Set-off] and the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement executed by such Bank
in favor of the participant relating thereto and not to include any voting
rights except with respect to changes of the type referenced in Sections 10.1.1
[Increase of Commitment, Etc.], 10.1.2 [Extension of Payment, Etc.], or 10.1.3
[Release of Collateral or Guarantor]. In the case of a participation, all of
such Bank's obligations under this Agreement or any other Loan Document shall
remain unchanged, and all amounts payable by any Loan Party hereunder or
thereunder shall be determined as if such Bank had not sold such participation.
(ii) Any assignee or participant which is not
incorporated under the Laws of the United States of America or a state thereof
shall deliver to the Borrower and the Agent the form of certificate described in
Section 10.17 [Tax Withholding Clause] relating to federal income tax
withholding. Each Bank may furnish any publicly available information concerning
any Loan Party or its Subsidiaries and any other information concerning any Loan
Party or its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees or participants),
provided that such assignees and participants agree to be bound by the
provisions of Section 10.12 [Confidentiality].
(iii) Notwithstanding any other provision in this
Agreement, any Bank may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement, its Note and the other Loan
Documents to any Federal Reserve Bank in
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accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
Section 203.14 without notice to or consent of the Borrower or the Agent. No
such pledge or grant of a security interest shall release the transferor Bank of
its obligations hereunder or under any other Loan Document.
10.12 Confidentiality.
10.12.1 General.
The Agent and the Banks each agree to keep confidential all
information obtained from any Loan Party or its Subsidiaries which is nonpublic
and confidential or proprietary in nature (including any information the
Borrower specifically designates as confidential), except as provided below, and
to use such information only in connection with their respective capacities
under this Agreement and for the purposes contemplated hereby. The Agent and the
Banks shall be permitted to disclose such information (i) to outside legal
counsel, accountants and other professional advisors who need to know such
information in connection with the administration and enforcement of this
Agreement, subject to agreement of such Persons to maintain the confidentiality,
(ii) to assignees and participants as contemplated by Section 10.11, (iii) to
the extent requested by any bank regulatory authority or, with notice to the
Borrower, as otherwise required by applicable Law or by any subpoena or similar
legal process, or in connection with any investigation or proceeding arising out
of the transactions contemplated by this Agreement, (iv) if it becomes publicly
available other than as a result of a breach of this Agreement or becomes
available from a source not known to be subject to confidentiality restrictions,
or (v) if the Borrower shall have consented to such disclosure.
10.12.2 Sharing Information With Affiliates of the Banks.
Each Loan Party acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrower or one or more of its Affiliates (in connection with this Agreement
or otherwise) by any Bank or by one or more Subsidiaries or Affiliates of such
Bank and each of the Loan Parties hereby authorizes each Bank to share any
information delivered to such Bank by such Loan Party and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Bank to
enter into this Agreement, to any such Subsidiary or Affiliate of such Bank, it
being understood that any such Subsidiary or affiliate of any Bank receiving
such information shall be bound by the provisions of Section 10.12.1 as if it
were a Bank hereunder. Such Authorization shall survive the repayment of the
Loans and other Obligations and the termination of the Commitments.
10.13 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
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10.14 Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required to be
obtained under this Agreement or any of the other Loan Documents as a condition
to any action, inaction, condition or event, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral, the
payment of money or any other matter.
10.15 Exceptions.
The representations, warranties and covenants contained herein shall
be independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE COURTS OF MIDDLESEX COUNTY, NEW JERSEY AND THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY, AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN PARTY AT
THE ADDRESSES PROVIDED FOR IN SECTION 10.6 AND SERVICE SO MADE SHALL BE DEEMED
TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
10.17 Tax Withholding Clause.
Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Agent two (2) duly
completed copies of the following: (i) Internal Revenue Service Form W-9, 4224
or 1001, or other applicable form prescribed by the Internal Revenue Service,
certifying that such Bank, assignee or participant is entitled to receive
payments under this Agreement and the other Loan Documents without deduction or
withholding of any United States federal income taxes, or is subject to such tax
at a reduced rate under an applicable tax
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treaty, or (ii) Internal Revenue Service Form W-8 or other applicable form or a
certificate of such Bank, assignee or participant indicating that no such
exemption or reduced rate is allowable with respect to such payments. Each Bank,
assignee or participant required to deliver to the Borrower and the Agent a form
or certificate pursuant to the preceding sentence shall deliver such form or
certificate as follows: (A) each Bank which is a party hereto on the Closing
Date shall deliver such form or certificate at least five (5) Business Days
prior to the first date on which any interest or fees are payable by the
Borrower hereunder for the account of such Bank; (B) each assignee or
participant shall deliver such form or certificate at least five (5) Business
Days before the effective date of such assignment or participation (unless the
Agent in its sole discretion shall permit such assignee or participant to
deliver such form or certificate less than five (5) Business Days before such
date in which case it shall be due on the date specified by the Agent). Each
Bank, assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001
further undertakes to deliver to each of the Borrower and the Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, either certifying that such Bank,
assignee or participant is entitled to receive payments under this Agreement and
the other Loan Documents without deduction or withholding of any United States
federal income taxes or is subject to such tax at a reduced rate under an
applicable tax treaty or stating that no such exemption or reduced rate is
allowable. The Agent shall be entitled to withhold United States federal income
taxes at the full withholding rate unless the Bank, assignee or participant
establishes an exemption or that it is subject to a reduced rate as established
pursuant to the above provisions.
10.18 Joinder of Guarantors.
Any Subsidiary of the Borrower which is required to join this
Agreement as a Guarantor pursuant to Section 7.2.9 [Subsidiaries, Partnerships
and Joint Ventures] shall execute and deliver to the Agent (i) a Guarantor
Joinder in substantially the form attached hereto as Exhibit 1.1(G)(1) pursuant
to which it shall join as a Guarantor each of the documents to which the
Guarantors are parties; (ii) documents in the forms described in Section 6.1
[First Loans] modified as appropriate to relate to such Subsidiary; and (iii)
documents necessary to grant and perfect Prior Security Interests to the Agent
for the benefit of the Banks in all Collateral held by such Subsidiary. The Loan
Parties shall deliver such Guarantor Joinder and related documents to the Agent
within five (5) Business Days after the date of the filing of such Subsidiary's
articles of incorporation if the Subsidiary is a corporation, the date of the
filing of its certificate of limited partnership if it is a limited partnership
or the date of its organization if it is an entity other than a limited
partnership or corporation.
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: PARTY CITY CORPORATION
__________________________________ By:___________________________________
Title:________________________________
[Seal]
ATTEST: PARTY CITY MICHIGAN, INC., as
Guarantor
__________________________________ By:___________________________________
Title:________________________________
[Seal]
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By:___________________________________
Title:________________________________
THE CHASE MANHATTAN BANK
By:___________________________________
Title:________________________________
NATIONAL CITY BANK OF PENNSYLVANIA
By:___________________________________
Title:________________________________
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LASALLE NATIONAL BANK
By:___________________________________
Title:________________________________
FLEET BANK N.A.
By:___________________________________
Title:________________________________
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SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Part 1 - Commitments of Banks and Addresses for Notices to Banks
Amount of
Commitment for
Revolving Ratable
Bank Credit Loans Share
---- ------------ -----
Name: PNC Bank, N.A. $15,000,000 25%
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Name: The Chase Manhattan Bank $15,000,000 25%
Address: ▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Name: National City Bank of $10,000,000 16.6667%
Pennsylvania
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
National City Center
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone:(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE 1.1(B)-1
101
Name: Fleet Bank, N.A. $10,000,000 16.6667%
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Name: LaSalle National Bank $10,000,000 16.6667%
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
#▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Total $60,000,000 100%
=========== ========
SCHEDULE 1.1(B)-2
102
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Part 2 - Addresses for Notices to Borrower and Guarantors
AGENT
Name: PNC BANK, NATIONAL ASSOCIATION
Address: Corporate Banking Department
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Professional Corporation
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
BORROWER:
Name: PARTY CITY CORPORATION
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
St. ▇▇▇▇ & ▇▇▇▇▇, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE 1.1(B)-3
103
GUARANTOR:
Name: PARTY CITY MICHIGAN, INC.
c/o PARTY CITY CORPORATION
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
St. ▇▇▇▇ & ▇▇▇▇▇, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE 1.1(B)-4