EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
by and among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders,
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Agent
and
M T S, INCORPORATED and
THREE A'S HOLDINGS, L.L.C.
as Borrowers
Dated: October 9, 2002
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement"), dated
October 9, 2002, is entered into by and among the financial institutions from
time to time parties hereto, whether by execution of an Assignment and
Acceptance Agreement (as defined below) or this Agreement (each a "Lender" and
collectively "Lenders"), The CIT Group/Business Credit, Inc., a New York
corporation, as administrative and collateral agent for Lenders (in such
capacity, "Agent"), and M T S, Incorporated, a California corporation ("Borrower
Agent") and Three A's Holdings, L.L.C., a Delaware limited liability company
("TAH" and together with Borrower Agent, "Borrowers" and each sometimes
individually referred to as a "Borrower").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Agent and Lenders enter
into financing arrangements with Borrower pursuant to which Lenders may make
loans and provide other financial accommodations to Borrowers; and
WHEREAS, TAH is a wholly-owned Subsidiary of Borrower Agent,
and together are inter-related entities which, collectively constitute an
integrated distributor and retailer of recorded music and related products; and
WHEREAS, the directors of each Borrower view the entities as
sufficiently dependent upon each other and so inter-related that any advance
made hereunder to any Borrower would benefit all of the Borrowers as a result of
their consolidated operations and identity of interests; and
WHEREAS, each Borrower has requested that Agent and Lenders
treat them as co-borrowers hereunder, jointly and severally responsible for the
obligations of each other hereunder; and
WHEREAS, each Lender is willing to agree (severally and not
jointly) to make such loans and provide such financial accommodations to
Borrower on a pro rata basis according to its Loan Commitment (as defined below)
on the terms and conditions set forth herein and Agent is willing to act as
administrative and collateral agent for Lenders on the terms and conditions set
forth herein and in the other Financing Agreements (as defined below);
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have
the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of any Borrower
to payment of a monetary obligation, whether or not earned by performance, which
is not evidenced by chattel paper or an instrument, (a) for property that has
been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, (b) for services rendered or to be rendered,
(c) for a secondary obligation incurred or to be incurred, or (d) arising out of
the use of a credit, charge or debit card along with all information contained
on or for use with such card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one percent (1%))
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five percent (5%) or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five percent (5%) or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
percent (5%) or more of the equity interests and (c) any director or executive
officer of such Person. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise; provided, however, that in no event shall
Agent or any Lender be deemed to be an Affiliate of any Borrower.
1.4 "Anniversary Date" shall mean, initially, April 1, 2005 and,
subsequently, April 1 in every year thereafter.
1.5 "Appraisal Methodology" shall mean such methodology for calculating
the Net Orderly Liquidation Value for a particular type of Inventory acceptable
to Agent based on the "low selling period" level indicated in the most recent
appraisal provided under the terms of this Agreement.
1.6 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto delivered to Agent in
connection with an assignment of a Lender's interest hereunder in accordance
with the provisions of Section 14.6 hereof.
1.7 "Availability Cure Date" shall mean the first Business Day
following any Availability Trigger Date on which Excess Availability has been
$20,000,000 or greater for ninety (90) consecutive days following such
Availability Trigger Date.
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1.8 "Availability Cure Period" shall mean any period beginning on an
Availability Trigger Date and ending on an Availability Cure Date.
1.9 "Availability Reserves" shall mean the sum of: (a) Fifteen Million
Dollars ($15,000,000) (representing the minimum amount of Excess Availability
required pursuant to Section 9.16(b) hereof), (b) fifty percent (50%) of the
aggregate amount of all unredeemed gift certificates and merchandise credits
issued by any Borrower, (c) (i) at least three (3) months gross rental payments
or similar charges for each Borrower's leased premises or other Collateral
locations for which such Borrower has not delivered to Agent a Collateral Access
Agreement, plus (ii) three (3) months estimated payments (or such other period
as Agent may determine based on applicable state law relating to landlord
rights) plus any other fees or charges owing by each Borrower (as determined by
Agent in its reasonable credit judgment) to any warehousemen or third party
processor from whom Agent has not received a Collateral Access Agreement;
provided that, the amounts referred to in this clause (a) are subject to
adjustment, in Agent's reasonable credit judgment, for (A) delivery to Agent of
any such Collateral Access Agreements, (B) the opening or closing of a
Collateral location, (C) any change in the amount of rental, storage or
processor payments or similar charges and/or (D) any other matters which Agent
may, in its reasonable credit judgment, deem relevant; (d) the amount of any
past due rental payments or similar charges owing by any Borrower with respect
to any leased premises or other Collateral Locations, (e) the amount of any past
due sales taxes owing by any Borrower which are not being contested by the
appropriate legal proceedings and for which adequate reserves in accordance with
GAAP have not been created by such Borrower, (f) any reserve which Agent may
require, in its reasonable credit judgment, from time to time pursuant to this
Agreement, including without limitation, for Letter of Credit Accommodations
pursuant to Section 2.4(d) hereof; (g) such other reserves as Agent deems
necessary in its reasonable credit judgment as a result of (i) negative
forecasts and/or trends in any Borrower's business, industry, prospects,
profits, operations or financial condition, or (ii) other issues, circumstances
or facts that could otherwise negatively affect any Borrower, the Collateral or
any Borrower's business, prospects, profits, operations, industries, financial
conditions or assets; (h) the amount of the Term Loan; and (i) until a
Successful Syndication shall have occurred, at Agent's sole discretion, reserves
in an amount up to the aggregate amounts received by any Borrower or Obligor in
connection with any transaction described in Sections 9.7(b)(x) or 9.9(q)
hereof.
1.10 "Availability Trigger Date" shall mean any date on which Excess
Availability is less than $20,000,000.
1.11 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.12 "Borrowing Base" shall mean the sum of:
(a) the lesser of (i) 85% of the Net Orderly Liquidation Value
(based on the applicable Appraisal Methodology) of Eligible Inventory owned by
Borrower Agent other than Return to Vendor Inventory or (ii) 70% of the Cost of
Eligible Inventory owned by Borrower Agent other than Return to Vendor
Inventory; plus
(b) the least of (i) 85% of the Net Orderly Liquidation Value
(based on the applicable Appraisal Methodology) of Eligible Inventory owned by
TAH other than Return to
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Vendor Inventory, (ii) 55% of the Cost of Eligible Inventory owned by TAH other
than Return to Vendor Inventory, or (iii) $12,000,000; plus
(c) the least of (i) 85% of the Net Orderly Liquidation Value
(based on the applicable Appraisal Methodology) of Eligible Inventory consisting
of Return to Vendor Inventory, (ii) 20% of the Cost of Eligible Inventory
consisting of Return to Vendor Inventory, or (iii) $5,000,000; plus
(d) 85% of Eligible Merchant Payment Receivables; less
(e) any applicable Availability Reserves.
1.13 "Borrowing Base Certificate" shall mean a certificate,
substantially in the form of Exhibit B hereto, or such other form as Agent may
require, executed by the President, Chief Executive Officer, Vice President,
Chief Financial Officer, Controller or Treasurer of each Borrower (or of
Borrower Agent on their behalf) and delivered to Agent from time to time
pursuant to the terms of this Agreement.
1.14 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close
under the laws of the State of California or the State of New York, and a day on
which the Reference Bank, Agent and each Lender are open for the transaction of
business, except that if a determination of a Business Day shall relate to any
Eurodollar Rate Loans, the term Business Day shall also exclude any day on which
banks are closed for dealings in dollar deposits in the London interbank market
or other applicable Eurodollar Rate market.
1.15 "Capital Expenditures" shall mean, for given period, the aggregate
expenditures of all Borrowers during such period on account of property, plant,
equipment or similar fixed assets that, in conformity with GAAP, are required to
be reflected in the balance sheet of any Borrower. Notwithstanding the
foregoing, or any other provision hereof, "Capital Expenditures" shall not
include (i) the aggregate expenditures of Borrowers for video and DVD Rental
Inventory acquisitions, or (ii) the lease, rental or other such payments by
Borrowers in respect of operating leases for store locations, regardless of
their treatment for GAAP purposes.
1.16 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
Notwithstanding the foregoing, or any other provision hereof, "Capital Leases"
shall not include any store leases for real property, regardless of their
treatment for GAAP purposes.
1.17 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock, partnership interests or limited liability
company interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
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1.18 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America of any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than Two Hundred
Fifty Million Dollars ($250,000,000); (c) commercial paper (including variable
rate demand notes) with a maturity of ninety (90) days or less issued by a
corporation (except an Affiliate of any Borrower) organized under the laws of
any State of the United States of America or the District of Columbia and rated
at least A-1 by Standard & Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc. or at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than Two Hundred Fifty Million Dollars ($250,000,000); (e)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit to the United States of America, in each case maturing within
ninety (90) days or less from the date of acquisition; provided, that, the terms
of such agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which invest substantially
all of their assets in securities of the types described in clauses (a) through
(e) above.
1.19 "CBI" shall mean Columbus & Bay, Inc., a California corporation.
1.20 "Chief Restructuring Officer" shall have the meaning set forth in
Section 4.1(ff) hereof.
1.21 "Closing Date" shall mean the date of the first to occur of the
making of the initial Loans or the issuance of the initial Letter of Credit
Accommodation.
1.22 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.23 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.24 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Agent, from any lessor of premises to any
Borrower, or any other person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other person, inter alia, acknowledges the
first priority security interest of Agent, for itself and the ratable benefit of
Lenders, in such Collateral, agrees to waive any and all claims such lessor,
consignee or other person may, at any time, have
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against such Collateral, whether for processing, storage or otherwise, and
agrees to permit Agent access to, and the right to remain on, the premises of
such lessor, consignee or other person so as to exercise Agent's rights and
remedies and otherwise deal with such Collateral and, in the case of any
consignee or other person who at any time has custody, control or possession of
any Collateral, acknowledges that it holds and will hold possession of the
Collateral for the benefit of Agent and agrees to follow all instructions of
Agent with respect thereto.
1.25 "Consolidated Balance Sheet" shall mean a consolidated or
combined, as applicable, balance sheet for Parent, each Borrower and the
consolidated Subsidiaries of each of them, all prepared in accordance with GAAP.
1.26 "Consolidating Balance Sheet" shall mean a Consolidated Balance
Sheet plus individual balance sheets for Parent, each Borrower and the
consolidated Subsidiaries of each of them, all prepared in accordance with GAAP.
1.27 "Cost" shall mean, with respect to any Borrower's Inventory, such
Borrower's cost (net of freight, duty, transportation, tax or other charges)
therefor, determined on a first-in-first-out basis.
1.28 "Credit Card Issuer" shall mean any third party, non-Affiliate of
any Borrower who issues or whose members issue credit cards used by customers of
any Borrower to purchase goods, including, without limitation, MasterCard or
VISA bank credit or debit cards or other bank credit or debit cards, and
American Express, Discover, Diners Club, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and other non-bank
credit or debit cards.
1.29 "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.30 "Defaulting Lender" shall have the meaning set forth in Section
6.10(d) hereof.
1.31 "Default Rate of Interest" shall mean a rate of interest per annum
on any Obligations hereunder, equal to the sum of (a) two percent (2.0%) plus
(b) the applicable contract rate of interest set forth in Section 3.1(a) or
3.1(c) hereof.
1.32 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower and any bank at which any deposit account of such Borrower is at any
time maintained which provides that such bank will comply with instructions
originated by Agent directing disposition of the funds in the deposit account
without further consent by such Borrower and such other terms and conditions as
Agent may require, including as to any such agreement with respect to any
Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Agent, for itself and the ratable benefit of
Lenders, that the bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein, or that it has subordinated such lien or right to setoff to
the Lien in favor of Agent on behalf of the Lenders, and that the bank will
wire, or otherwise transfer, in immediately available funds, on a daily basis to
the Payment Account all funds received or deposited into the Blocked Accounts.
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1.33 "Dividends" shall mean with respect to any Person (a) any dividend
or other payment or distribution, direct or indirect, on account of any shares
of any class of Capital Stock of such Person, now or hereafter outstanding
(including, without limitation, any payment in connection with any dissolution,
merger, consolidation or disposition involving such Person), or to the holders,
in their capacity as such, of any shares of any class of Capital Stock of such
Person, now or hereafter outstanding (other than dividends or distributions
payable in the same class of Capital Stock of such Person), (b) any redemption,
retirement, sinking fund, or similar payment, purchase, or other acquisition for
value, direct or indirect, of any shares of any class of Capital Stock of such
Person, now or hereafter outstanding, and (c) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of such Person, now or hereafter
outstanding.
1.34 "Early Termination Date" shall mean the date, prior to an
Anniversary Date, on which the Borrowers terminate this Agreement in accordance
with the terms hereof.
1.35 "EBITDA" shall mean, for a given period, all earnings of all
Borrowers and their respective consolidated Subsidiaries before all (a) interest
and tax obligations, (b) depreciation and (c) amortization for said period, all
determined in accordance with GAAP on a consistent basis with the latest audited
financial statements of Borrowers and their respective consolidated
Subsidiaries, but excluding the effect of non-cash, non-recurring gains or
losses, including restructuring charges as determined in accordance with GAAP,
for such period in accordance with GAAP.
1.36 "Eligible Inventory" shall mean the gross amount of all Inventory
and Eligible InTransit Inventory (other than periodicals) that is subject to a
valid, exclusive, first priority and fully perfected security interest in favor
of Agent, for itself and the ratable benefit of the Lenders, and which conforms
to the warranties contained herein and which, at all times continues to be
acceptable to Agent in the exercise of its reasonable credit judgment, less,
without duplication, any: (a) work-in-process; (b) supplies; (c) Inventory
(other than Eligible In-Transit Inventory) not present in the United States of
America; (d) Inventory returned or rejected by any Borrower's customers (other
than Inventory that is undamaged and resaleable in the normal course of such
Borrower's business) and Inventory (other than Return to Vendor Inventory) to be
returned to such Borrower's suppliers; (e) Inventory (other than Eligible
In-Transit Inventory) in transit to third parties (other than any Borrower's
agents or warehouses), or in the possession of a warehouseman, bailee, third
party processor, or other third party, unless such warehouseman, bailee or third
party has executed a Collateral Access Agreement and Agent, for itself and the
ratable benefit of the Lenders, shall have a first priority perfected security
interest in such Inventory; (f) Rental Inventory or any Inventory previously
characterized as Rental Inventory; and (g) less any reserves required by Agent
in its reasonable credit judgment, including without limitation for special
order goods, discontinued, slow-moving, damaged or obsolete Inventory, market
value declines, ▇▇▇▇ and hold (deferred shipment), consignment sales, shrinkage
and any applicable customs, freight, duties and taxes. Notwithstanding the
foregoing, the criteria for Eligible Inventory set forth above may be revised or
adjusted by Agent in its reasonable credit judgment based on an event, condition
or other circumstance which, in Agent's reasonable credit judgment, adversely
affects or could reasonably be expected to adversely affect the value of the
Inventory. Any Inventory which is not Eligible Inventory shall nevertheless be
part of the Collateral.
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1.37 "Eligible In-Transit Inventory" shall mean the gross amount of all
Eligible Inventory (a) which is purchased under a documentary Letter of Credit
Accommodation issued hereunder, (b) which is in transit to, from or in the
possession of third parties from whom Agent has received a Collateral Access
Agreement, (c) with respect to which exists proof of a Borrower's ownership
thereof acceptable to Agent in conformity with commercial finance industry
standards, (d) which is subject to the valid, first priority and fully perfected
security interest of Agent and Lenders, (e) which is in transit for a period of
thirty (30) days or less, and (f) which conforms to the warranties contained
herein and which at all times continues to be acceptable to Agent. Eligible
Inventory of a Borrower that is in transit to another Borrower shall not be
required to comply with the requirements for Eligible In-Transit Inventory in
order to be included in the Borrowing Base.
1.38 "Eligible Merchant Payment Receivables" shall mean the gross
amount of all Merchant Payment Receivables that are subject to a valid,
exclusive, first priority and fully perfected security interest in favor of
Agent, for itself and the ratable benefit of the Lenders, which conform to the
warranties contained herein and which, at all times continue to be acceptable to
Agent less, without duplication, the sum of all Merchant Payment Receivables:
(a) for which Agent has not received a Merchant Payment Direction Letter and (b)
which are unpaid more than five (5) days after the date submitted to the
appropriate Merchant Payment Processor for payment.
1.39 "Eligible Transferee" shall mean (a) any Lender; (b) any Affiliate
of a Lender; and (c) any other commercial bank, financial institution or
"accredited investor" (as defined in Regulation D under the Securities Exchange
Act) approved by Agent and, unless an Event of Default has occurred and is
continuing at the time any assignment is effected hereunder, Borrower Agent,
such approval not to be unreasonably withheld, conditioned or delayed by
Borrower Agent, and such approval to be deemed given by Borrower Agent if no
objection from Borrower Agent is received by the assigning Lender and Agent
within five (5) Business Days after notice of such proposed assignment has been
provided by the assigning Lender or Agent to Borrower Agent; provided, that, no
Borrower, Obligor or any of their respective Affiliates shall qualify as an
Eligible Transferee.
1.40 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
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(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.41 "Equipment" shall mean all of each Borrower's now owned and
hereafter acquired equipment, wherever located, including machinery, data
processing and computer equipment and computer hardware and software, whether
owned or licensed, and including embedded software, vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located. "Equipment" shall not include Borrowers' videos and
DVD's held for rental to customers.
1.42 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.43 "ERISA Affiliate" shall mean any Person required to be aggregated
with any Borrower or any Borrower's Subsidiary under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
1.44 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which any Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which such Borrower or any of its Subsidiaries could otherwise be
liable; (f) a complete or partial withdrawal by any Borrower or any ERISA
Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or
the commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Plan; (h) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (i) the imposition of any
liability under Title IV of ERISA, other than the Pension Benefit Guaranty
Corporation premiums due but not delinquent under Section 4007 of ERISA, upon
any Borrower or any ERISA Affiliate; and (j) any other event or condition with
respect to a Plan including any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of any Borrower in excess of $500,000 in any one case or
$1,000,000 in the aggregate.
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1.45 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one percent (1%)) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower Agent and approved by Lender)
on or about 11:00 a.m. (Los Angeles time) three (3) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by Borrowers (or
Borrower Agent on their behalf) and available to Borrowers in accordance with
this Agreement, with a maturity of comparable duration to the Interest Period
selected by Borrowers (or Borrower Agent on their behalf).
1.46 "Eurodollar Rate Loans" shall mean any Revolving Loans, Term Loan
or portion thereof on which interest is payable based on the Adjusted Eurodollar
Rate in accordance with the terms hereof.
1.47 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.48 "Excess" shall have the meaning set forth in Section 3.1(e)
hereof.
1.49 "Excess Availability" shall mean the amount, as determined by
Agent, calculated at any time, equal to: (a) the sum of (i) the Borrowing Base
(as calculated without giving effect to the reserve provided for as item (a) of
the definition of Availability Reserves) plus (ii) the amount of Real Estate
Loans then available to be borrowed under the terms of this Agreement, minus (b)
the sum of: (i) the amount of all then outstanding and unpaid Obligations, plus
(ii) the aggregate amount of all then outstanding and unpaid trade payables and
other obligations of each Borrower which are more than sixty (60) days past due
as of such time, plus (iii) the amount of checks issued by each Borrower to pay
trade payables and other obligations which are more than sixty (60) days past
due as of such time, but not yet sent (but without duplication of clause
(b)(ii)) and, plus (iv) any book overdraft of any Borrower.
1.50 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.51 "Family Parties" shall mean all of the following: (a) ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ (the "Designated Family Member"), (b) any current or former spouse of
the Designated Family Member, (c) any lineal descendant (including by adoption)
of the Designated Family Member, (d) any brother or sister of the Designated
Family Member (each person described in clauses (a), (b), (c) or (d), a "Solomon
Family Member"), (e) any of the following acting in his or her capacity as such:
(i) executor, administrator or personal representative of the estate of a
Solomon Family Member, (ii) conservator or trustee appointed by a court of
competent jurisdiction for any Solomon Family Member who is alleged or adjudged
to be disabled or incompetent, (f) any trust (including a voting trust)
established principally for the benefit of a Solomon Family Member, (g) any
limited partnership, limited liability partnership or limited liability company
in which a Solomon Family Member holds all of the partnership or membership
interests, as applicable, (h) any corporation with respect to which a Solomon
Family Member holds sufficient shares to elect all of the directors, and (i)
directors of Borrower Agent.
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1.52 "Fee Letter" shall mean the letter agreement, dated on or about
the date hereof, by and among Borrowers and Agent, setting forth certain fees
payable by Borrowers to Agent for its own benefit, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.53 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guaranties, security agreements, mortgages, deeds of trust and
other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by any Borrower or any Obligor in connection with this
Agreement.
1.54 "Fixed Charge Coverage Amount" shall mean, for any specified
fiscal period with respect to Borrowers and their consolidated Subsidiaries, the
difference between (a) EBITDA and (b) the sum of (i) Capital Expenditures, (ii)
income taxes paid and (iii) Fixed Charges.
1.55 "Fixed Charges" shall mean, with respect to any Person for any
specified fiscal period, (a) an aggregate amount equal to (i) all Interest
Expense, and (ii) all Dividends paid or accrued during such period plus (b)
scheduled payments of principal with respect to Indebtedness (other than with
respect to Indebtedness to the Lenders hereunder or payments permitted hereunder
with respect to the JPMC Indebtedness) during such period.
1.56 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.16 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the most recent audited financial statements delivered to
Agent prior to the date hereof.
1.57 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.58 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.59 "Hedging Transaction" shall mean any interest rate swap
transaction, basis swap transaction, forward rate transaction, commodity swap
transaction, equity transaction, equity
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index transaction, foreign exchange transaction, cap transaction, floor
transaction (including any option with respect to any of these transactions and
any combination of any of the foregoing) entered into by a Borrower, provided
that such transaction (a) is entered into for risk management purposes (i.e. not
for speculative purposes) in the ordinary course of business, (b) is not for a
term longer than sixty (60) days, (c) relates to readily exchangeable currency
and (d) is not for a contract amount such that the aggregate amount of all such
contracts in effect at any one time exceeds $5,000,000.
1.60 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services); (c) all obligations as lessee under leases which have been, or should
be, in accordance with GAAP recorded as Capital Leases; (d) any contractual
obligation, contingent or otherwise, of such Person to pay or be liable for the
payment of any indebtedness described in this definition of another Person,
including, without limitation, any such indebtedness, directly or indirectly
guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such
indebtedness, obligation or liability or any security therefor, or to provide
funds for the payment or discharge thereof, or to maintain solvency, assets,
level of income, or other financial condition; (e) all obligations with respect
to redeemable stock and redemption or repurchase obligations under any Capital
Stock or other equity securities issued by such Person; (f) all reimbursement
obligations and other liabilities of such Person with respect to surety bonds
(whether bid, performance or otherwise), letters of credit, banker's
acceptances, drafts or similar documents or instruments issued for such Person's
account; (g) all indebtedness of such Person in respect of indebtedness of
another Person for borrowed money or indebtedness of another Person otherwise
described in this definition which is secured by any consensual lien, security
interest, collateral assignment, conditional sale, mortgage, deed of trust, or
other encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; provided that, if the Person's liability for such
third party indebtedness is limited to the pledge of such Person's assets, the
amount of such Person's indebtedness for purposes of this clause (g) with
respect to such third party indebtedness shall be deemed to be the lesser of (A)
the amount of the third party indebtedness secured or (B) the value of such
Person's assets pledged to secure such third party indebtedness; (h) all
obligations, liabilities and indebtedness of such Person (marked to market)
arising under swap agreements, cap agreements and collar agreements, Hedging
Transactions, and other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency or commodity values;
and (i) all obligations owed by such Person under License Agreements with
respect to non-refundable, advance or minimum guaranty royalty payments.
1.61 "Indenture" shall mean that certain Indenture, dated April 23,
1998, between Borrower Agent, as issuer, and State Street Bank and Trust Company
of California, N.A. (or its successor in interest), as trustee.
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1.62 "Intellectual Property" shall mean all of each Borrower's now
owned and hereafter arising or acquired: patents, patent rights, patent
applications, copyrights, works which are the subject matter of copyrights,
copyright registrations, trademarks, trade names, trade styles, trademark and
service ▇▇▇▇ applications, and licenses and rights to use any of the foregoing;
all extensions, renewals, reissues, divisions, continuations, and continuations-
in-part of any of the foregoing; all rights to ▇▇▇ for past, present and future
infringement of any of the foregoing; inventions, trade secrets, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports, manuals,
and operating standards; goodwill (including any goodwill associated with any
trademark or the license of any trademark); customer and other lists in whatever
form maintained; and trade secret rights, copyright rights, rights in works of
authorship, domain names and domain name registrations; software and contract
rights relating to software, in whatever form created or maintained.
1.63 "Interest Expense" shall mean, with respect to any Person, the
total interest obligations (paid or accrued) of such Person, determined in
accordance with GAAP on a consistent basis with the last audited financial
statements of such Person.
1.64 "Interest Period" shall mean:
(a) with respect to any initial request by Borrowers (or
Borrower Agent on their behalf) for a Eurodollar Rate Loan, a one month, two
month, three month or six month period commencing on the borrowing or conversion
date with respect to a Eurodollar Rate Loan and ending one, two, three or six
months thereafter, as applicable; and
(b) with respect to any continuation of, or conversion to, a
Eurodollar Rate Loan, at the option of Borrowers (or Borrower Agent on their
behalf), any one month, two month or three month period commencing on the last
day of the immediately preceding Interest Period applicable to such Eurodollar
Rate Loan and ending one, two, three or six months thereafter, as applicable;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a
day which is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension would extend
such payment into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month, at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(iii) for purposes of determining the availability of
Interest Periods, such Interest Periods shall be deemed available if (A) the
Reference Bank quotes an applicable rate or Agent approves a rate quoted by some
other Eurodollar Rate market selected by Borrowers (or Borrower Agent on their
behalf), as provided in the definition of Eurodollar Rate, (B) the Eurodollar
Rate determined by the Reference Bank or approved by Agent will adequately and
fairly reflect the cost of maintaining or funding its loans bearing interest at
the Eurodollar
13
Rate, for such Interest Period, and (C) such Interest Period will end on or
before the earlier of Anniversary Date or the last day of the then current term
of this Agreement. If a requested Interest Period shall be unavailable in
accordance with the foregoing sentence, the Borrowers shall continue to pay
interest on the Obligations at the Prime Rate based interest rate set forth in
Section 3.1(a)(i) hereof.
1.65 "Inventory" shall mean all of each Borrower's now owned and
hereafter existing or acquired goods, wherever located, which (a) are leased by
such Borrower as lessor; (b) are held by such Borrower for sale or lease or to
be furnished under a contract of service; (c) are furnished by such Borrower
under a contract of service; or (d) consist of raw materials, work in process,
finished goods or materials used or consumed in its business.
1.66 "Investment Property Control Agreement " shall mean an agreement
in writing, in form and substance satisfactory to Agent, by and among Agent, a
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of such
Borrower acknowledging that such securities intermediary, commodity intermediary
or other person has custody, control or possession of such investment property
on behalf of Agent, that it will comply with entitlement orders originated by
Agent with respect to such investment property, or other instructions of Agent,
or (as the case may be) apply any value distributed on account of any commodity
contract as directed by Agent, in each case, without the further consent of such
Borrower and including such other terms and conditions as Agent may require.
1.67 "Issuing Bank" shall mean the bank issuing any Letter of Credit
Accommodation.
1.68 "ITR" shall mean Ireland TR, Incorporated, a California
corporation.
1.69 "Japanese Subsidiary" means Tower Records Kabushiki Kaisha.
1.70 "JH" shall mean Jeremy's Holdings, LLC, a Delaware limited
liability company.
1.71 "JPMC" shall mean JPMorgan Chase Bank.
1.72 "JPMC Agreements" shall mean the JPMC Loan Agreement and all
documents, instruments and agreements related thereto.
1.73 "JPMC Indebtedness" shall mean the Indebtedness, or any portion
thereof, owed by Borrowers to JPMC under or in respect of the JPMC Agreements.
1.74 "JPMC Intercreditor Agreement" means that certain Intercreditor
Agreement, of even date herewith, entered into by and between Agent and JPMC, in
form and substance satisfactory to Agent.
1.75 "JPMC Lenders" means the financial institutions from time to time
party to the JPMC Loan Agreement.
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1.76 "JPMC Loan Agreement" shall mean the Amended and Restated Term
Loan Agreement, dated as of the date hereof, among Borrower Agent, JPMC and the
Lenders named therein.
1.77 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Agent or any Lender for the account of
any Borrower or any Obligor or (b) with respect to which Agent on behalf of
Lenders has agreed to indemnify the Issuing Bank or guaranteed to the Issuing
Bank the performance by any Borrower of its obligations to such Issuing Bank;
sometimes being referred to herein individually as a "Letter of Credit
Accommodation."
1.78 "License Agreements" shall have the meaning set forth in Section
8.10 hereof.
1.79 "Life Insurance Policies" shall mean, collectively: (a) the
insurance policy issued by Massachusetts Mutual Life Insurance Company (formerly
Connecticut Mutual Life Insurance Co.) as policy number 1980991, on the life of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in an amount no less than $20,000; (b) the insurance policy
issued by Massachusetts Mutual Life Insurance Company (formerly Connecticut
Mutual Life Insurance Co.) as policy number 2117729, on the life of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in an amount no less than $30,000; (c) the insurance policy issued by
MTL Insurance Company (Mutual Trust) as policy number 948576A, on the life of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in an amount no less than $1,000,000; (d) the insurance
policy issued by MTL Insurance Company (Mutual Trust) as policy number 955164A,
on the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in an amount no less than $1,000,000; (e) the
insurance policy issued by MTL Insurance Company (Mutual Trust) as policy number
956650A, on the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in an amount no less than $500,000;
and (f) the insurance policy issued by MTL Insurance Company (Mutual Trust) as
policy number 975237A, on the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in an amount no less
than $1,000,000.
1.80 "Loan Commitment " shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signature pages
hereto designated as the Loan Commitment or on Schedule 1 to the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of Section 14.6 hereof, as the same may be adjusted from
time to time in accordance with the terms hereof; sometimes being collectively
referred to herein as "Loan Commitments."
1.81 "Loans" shall mean, collectively, the Real Estate Loans, the Term
Loan and the Revolving Loans.
1.82 "Material Adverse Effect" shall mean any facts, events or
circumstances which in Agent's reasonable determination materially and adversely
affect (a) the financial condition, operations, assets, business, properties or
prospects, debt service capacity, tax position or environmental liability of any
Borrower, (b) the ability of any Borrower to perform its respective obligations
under the Financing Agreements, (c) the licenses, authorizations or approvals
applicable to any Borrower, (d) the ability of any party under a Material
Contract to perform its respective obligations thereunder, (e) the validity or
enforceability of the rights, remedies, options or benefits available to Agent
or the Lenders under the Financing Agreements, (f) the assets, properties or
environmental liability of any of CBI, JH, RTR, Sunset or Pipernick or (g)
15
the legal ability of any Obligor to perform its obligations under the Financing
Agreements to which it may be a party.
1.83 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower
involving monetary liability of or to any Person in an amount in excess of One
Million Dollars ($1,000,000) in any fiscal year and (b) any other contract or
other agreement (other than the Financing Agreements), whether written or oral,
to which any Borrower is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto would have a Material
Adverse Effect.
1.84 "Maximum Credit" shall mean the amount of Seventy-Five Million
Dollars ($75,000,000).
1.85 "Maximum Interest Rate" shall mean the maximum non-usurious rate
of interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken, reserved, charged or received in respect of
the Obligations.
1.86 "Merchant Payment Agreements" shall mean all agreements now or
hereafter entered into by any Borrower with any Credit Card Issuer or Merchant
Payment Processor as the same may now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.87 "Merchant Payment Direction Letter" shall mean an agreement, in
form and substance satisfactory to Agent, duly executed by a Merchant Payment
Processor in favor of Agent, whereby, among other things, such Merchant Payment
Processor is irrevocably directed and agrees to remit all proceeds of or other
amounts payable with respect to Merchant Payment Receivables to the Blocked
Account or as Agent may otherwise direct.
1.88 "Merchant Payment Processor" shall mean any servicing or
processing agent or any factor or financial intermediary who facilitates,
services, processes or manages the authorization, billing, transfer, payment
and/or other procedure from a Credit Card Issuer, bank, consumer payment
facilitator or other Person with respect to any sales transactions of a Borrower
involving credit, charge or debit card purchases, check purchases or cashing, or
other method of consumer payment.
1.89 "Merchant Payment Receivables" shall mean all domestic Accounts
consisting of the present and future rights of any Borrower to payment by any
Merchant Payment Processor or Credit Card Issuer and all information contained
on or for use with a credit, charge or debit card issued by a Credit Card
Issuer.
1.90 "Minority Lenders" shall have the meaning set forth in Section
11.3(c) hereof.
1.91 "Mortgages" has the meaning given in Section 4.1(p) hereof.
1.92 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower
or any ERISA Affiliate.
16
1.93 "Net Orderly Liquidation Value" shall mean the orderly liquidation
value, as determined pursuant to Section 7.3(d) hereof, after deduction of
associated costs, fees and liquidation expenses.
1.94 "Net Proceeds" shall mean the cash proceeds received by Borrower
Agent or any of its Subsidiaries in respect of any sale described in Section
9.7(b)(x) or any financing described in Section 9.9(q) hereof, including any
cash received in respect of any non-cash proceeds, but only as and when
received, net of the sum of all fees and out-of-pocket expenses paid by Borrower
Agent or any of its Subsidiaries to Persons other than Affiliates in connection
therewith.
1.95 "New Lending Office" shall have the meaning set forth in Section
6.5(e) hereof.
1.96 "Non-U.S. Lender" shall have the meaning set forth in Section
6.5(e) hereof.
1.97 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any Borrower to Agent or any Lender and/or
any of their respective affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to such Borrower under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Agent or any Lender.
1.98 "Obligor" shall mean Parent, Sunset, CBI, JH, RTR, TD, TTSR, TRS,
ITR, Pipernick, TRA, TRII, TRM, TRG or any other guarantor, endorser, acceptor,
surety or other person liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations, other than a
Borrower.
1.99 "Other Taxes" shall mean any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Financing Agreements.
1.100 "Overadvances" shall mean, at any time of determination, the
amount by which (a) the sum of all then outstanding Revolving Loans, all then
issued and outstanding Letter of Credit Accommodations, all then outstanding
Real Estate Loans, the then outstanding Term Loan and other advances made
hereunder exceed (b) the lesser of (i) the sum of the (A) the Borrowing Base
(without inclusion of the amount of the Term Loan in the calculation of
Availability Reserves for such purposes) plus (B) the maximum amount initially
available to be borrowed under the terms of Section 2.3 hereof minus the amount
of all principal repayments with respect to the Real Estate Loans or (ii) the
Maximum Credit.
17
1.101 "Parent" shall mean Tower Records, Incorporated, a Delaware
corporation.
1.102 "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
14.6 of this Agreement governing participations.
1.103 "Payment Account" shall mean account number 144054227 of Agent at
the Reference Bank or such other account of Agent as Agent may from time to time
designate to Borrowers as the Payment Account for purposes of this Agreement.
1.104 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.105 "Pipernick" shall mean Pipernick Corp., a Delaware corporation.
1.106 "Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which any Borrower sponsors, maintains, or to which it makes, is
making, or is obligated to make contributions, or in the case of a Multiemployer
Plan has made contributions at any time during the immediately preceding six (6)
plan years.
1.107 "Prime Rate" shall mean the rate from time to time publicly
announced by the Reference Bank as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.108 "Prime Rate Loans" shall mean any Revolving Loans Term Loan or
portion thereof on which interest is payable based on the Prime Rate in
accordance with the terms thereof.
1.109 "Pro Rata Share" shall mean the fraction (expressed as a
percentage) the numerator of which is such Lender's Loan Commitment and the
denominator of which is the aggregate amount of all of the Loan Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 14.6 hereof; provided, that, if the Loan Commitments have been
terminated, the numerator shall be the unpaid amount of such Lender's Loans and
its interest in the Letter of Credit Accommodations and the denominator shall be
the aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.110 "PTCE 95-60" shall have the meaning set forth in Section 14.6(a)
hereof.
1.111 "Real Estate Loan Availability Date" shall have the meaning set
forth in Section 2.3(a) hereof.
1.112 "Real Estate Loans" shall mean the loans now or hereafter made by
or on behalf of any Lender or by Agent for the ratable account of any Lender, to
or for the benefit of any Borrower as provided in Section 2.3 hereof.
18
1.113 "Real Estate Notes" shall mean the notes, each substantially in
the form of Exhibit E hereto, delivered by the Borrowers to each Lender, to
evidence the Real Estate Loans made pursuant to the terms hereof and repayable
in accordance with the provisions hereof.
1.114 "Real Estate Subline" shall mean the lesser of (a) Seven Million
Five Hundred Thousand Dollars ($7,500,000) or (b) twenty-five percent (25%) of
the fair market value (as determined by an appraiser selected by Borrowers and
acceptable to Agent but subject to adjustment by Agent, in its reasonable credit
judgment, for any conditions or events subsequently occurring or made known to
Agent with respect thereto) of the Real Property Collateral; provided, however,
such amount shall be reduced as provided for in Section 2.3(b) hereof.
1.115 "Real Property" shall mean all now owned and hereafter acquired
real property of any Borrower or Obligor, and all leasehold interests under
which any Borrower or Obligor is a tenant or subtenant, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, and including
the real property and related assets more particularly described in the
Mortgages, leasehold mortgages or any other mortgage, deed of trust or other
such instrument delivered by any Borrower or Obligor to Agent in connection with
this Agreement.
1.116 "Real Property Collateral" means all Real Property subject to a
Mortgage in favor of Agent other than the real property located at ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ in the City of West Sacramento, County of Yolo, State of California.
1.117 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of each Borrower: (a) all Accounts; (b)
all interest, fees, late charges, penalties, collection fees and other amounts
due or to become due or otherwise payable in connection with any Account; and
(c) all payment intangibles of such Borrower and other contract rights, chattel
paper, instruments, notes, and other forms of obligations owing to such
Borrower, whether from the sale and lease of goods or other property, licensing
of any property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by such Borrower or to or for
the benefit of any third person (including loans or advances to any Affiliates
or Subsidiaries of such Borrower) or otherwise associated with any Accounts,
Inventory or general intangibles of such Borrower (including, without
limitation, choses in action, causes of action, tax refunds, tax refund claims,
any funds which may become payable to such Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to such Borrower from any Plan or other employee benefit plan, rights
and claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which such Borrower is a beneficiary).
1.118 "Records" shall mean all of each Borrower's present and future
books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the
19
foregoing are stored (including any rights of such Borrower with respect to the
foregoing maintained with or by any other person).
1.119 "Reference Bank" shall mean ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., its successor
or such other bank as Lender may from time to time designate.
1.120 "Register" shall have the meaning set forth in Section 14.6(b)
hereof.
1.121 "Rental Inventory" shall mean Inventory of any Borrower held for
rental or at any time rented to retail customers.
1.122 "Report" and "Reports" shall have the meaning set forth in
Section 12.10(a) hereof.
1.123 "Required Lenders" shall mean, at any time, those Lenders whose
Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of
the aggregate of the Loan Commitments of all Lenders, or if the Loan Commitments
shall have been terminated, Lenders to whom at least sixty-six and two-thirds
(66 2/3%) percent of the then outstanding Obligations are owing.
1.124 "Return to Vendor Inventory" shall mean Inventory (a) which is
designated as Inventory to be returned to a supplier under a return
authorization request, (b) which is subject to an agreement between a Borrower
and its supplier whereby such supplier agrees to accept returns of such
Inventory and refund to such Borrower the purchase price therefor and (c) for
which such Borrower has not received notice from such supplier that returns of
such Inventory are no longer being accepted.
1.125 "Revolving Loan Limit" shall mean, as of any date of
determination, (a) the Maximum Credit, minus (b) the then outstanding aggregate
amount of all Real Estate Loans, minus (c) the then outstanding amount of the
Term Loan.
1.126 "Revolving Loans" shall mean the loans now or hereafter made by
or on behalf of any Lender or by Agent for the ratable account of any Lender, to
or for the benefit of any Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.127 "Revolving Notes" shall mean the notes, each substantially in the
form of Exhibit C hereto, delivered by the Borrowers to each Lender, to evidence
the Revolving Loans made pursuant to the terms hereof and repayable in
accordance with the provisions hereof.
1.128 "RTR" shall mean R.T. Records, Incorporated, a California
corporation.
1.129 "Senior Subordinated Notes" shall mean those certain notes issued
by Borrower Agent, in the aggregate original principal amount of $110,000,000
and bearing interest at a rate of 9 3/8% per annum, with an original maturity
date of May 1, 2005.
1.130 "Settlement Period" shall have the meaning set forth in Section
6.10(b) hereof.
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1.131 "SKU" means stock keeping unit evidencing a particular type and
title of Inventory.
1.132 "Solvent" shall mean, at any time with respect to any Person,
that at such time such Person is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof.
1.133 "Special Agent Advances" shall have the meaning set forth in
Section 12.11(a) hereof.
1.134 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.135 "Subordinated Public Debt" shall mean the Indebtedness, or any
portion thereof, of Borrower Agent arising under or otherwise related to the
Senior Subordinated Notes.
1.136 "Surrendered Insurance Policies" shall mean, collectively, (a)
the insurance policy issued by Metropolitan Life Insurance Company as policy
number 950 850 229A, on the lives of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
(b) the insurance policy issued by New York Life Insurance Company as policy
number 45 555 862, on the lives of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (c)
the insurance policy issued by ManuLife Financial as policy number 5,354,553-9,
on the lives of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (d) the insurance
policy issued by ▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company as policy number 80
120 660, on the lives of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and (e) the
insurance policy issued by Aenta as policy number G 1 586 645, on the lives of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
1.137 "Successful Syndication" means such time as The CIT
Group/Business Credit, Inc.'s Loan Commitment is $35,000,000 or less.
1.138 "Sunset" shall mean 8775 Sunset, Inc., a California corporation.
1.139 "Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of any Lender, such taxes (including income
taxes, franchise taxes or capital taxes) as are imposed on or measured by such
Lender's net income or capital by any jurisdiction (or any political subdivision
thereof).
1.140 "TD" shall mean Tower Direct LLC, a Delaware limited liability
company.
1.141 "Term Loan" shall have the meaning set forth in Section 2.2.
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1.142 "Term Note" shall mean the note substantially in the form of
Exhibit D hereto, delivered by the Borrowers to Agent, for the benefit of the
Lenders, to evidence the Term Loan made pursuant to the terms hereof and
repayable in accordance with the provisions hereof.
1.143 "Transferee" shall mean any transferee or assignee of a Lender,
including any Participant.
1.144 "TRA" shall mean TR Argentina, Incorporated, a California
corporation.
1.145 "TRG" shall mean Tower Graphics, Incorporated, a California
corporation.
1.146 "TRII" shall mean TR Israel, Incorporated, a California
corporation.
1.147 "TRM" shall mean TR Mexico, Incorporated, a California
corporation.
1.148 "TRS" shall mean T.R. Services, Incorporated, a California
corporation.
1.149 "TTSR" shall mean ▇▇▇▇ ▇▇▇▇▇▇ Records, Incorporated, a Delaware
corporation.
1.150 "Trust Note" shall mean the Secured Promissory Note, dated as of
the date hereof, issued by MTS to the order of The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ 1994 Children's Trust.
1.151 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of California, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of California on the date hereof shall continue to
have the same meaning notwithstanding any replacement or amendment of such
statute except as Lender may otherwise determine.
1.152 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained
herein, each Lender severally (and not jointly) agrees to fund its Pro Rata
Share of Revolving Loans to Borrowers (or Borrower Agent for their benefit) from
time to time in amounts requested by Borrowers (or Borrower Agent on their
behalf) up to the amount equal to the lesser of: (i) the Borrowing Base or (ii)
the Revolving Loan Limit. The Revolving Loans made hereunder shall be evidenced
by the Revolving Note.
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(b) In the event that any funded advance constitutes an
Overadvance, unless made pursuant to the prior written consent of Agent and in
accordance with the terms of Section 12.8 hereof, such Overadvance shall be
immediately due and payable to the Agent, on behalf of the Lenders.
2.2 Term Loan.
(a) Subject to and upon the terms and conditions contained
herein, on the Closing Date each Lender severally (and not jointly) agrees to
fund to Agent its Pro Rata Share of $18,000,000 which funds shall be used to:
(i) pursuant to that certain Purchase and Sale Agreement, of even date herewith,
among Agent, the Lenders, JPMC and the JPMC Lenders, purchase, on terms and
conditions satisfactory to Agent, from JPMC the indebtedness evidenced by that
certain $15,000,000 Note, dated as of October 9, 2002, made by Borrower Agent in
favor of JPMC, which indebtedness (the "Original Term Loan") when so purchased
shall constitute Obligations hereunder, and (ii) make a term loan to Borrowers
(or Borrower Agent for their benefit) in the principal amount of $3,000,000 (the
"Gap Loan" and, together with the Original Term Loan, the "Term Loan").
(b) The Term Loan shall be evidenced by the Term Note. The
Term Loan and all interest accrued with respect thereto, to the extent not paid,
shall be due and payable in full on the effective date of any termination of
this Agreement, whether terminated by Agent and the Lenders or by Borrowers. The
Term Loan may not be prepaid, in whole or in part; provided, however, upon the
sale (in accordance with any applicable terms of this Agreement or any Financing
Agreement) of the Real Property commonly known as ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
(the "Broadway Property"), the proceeds of such sale shall be used, subject to
the provisions of Section 9.7(b)(x) hereof, to repay the Term Loan until paid in
full, and if such proceeds are not sufficient to repay the Term Loan in full,
the remaining principal balance of the Term Loan shall immediately be converted
into Revolving Loans.
2.3 Real Estate Loans.
(a) During the period of time beginning on the date that a
Successful Syndication occurs (the "Real Estate Loan Availability Date"), and
ending on the first anniversary of the Real Estate Loan Availability Date,
subject to and upon the terms and conditions set forth herein, each Lender
severally (and not jointly) agrees to fund its Pro Rata Share of Real Estate
Loans to Borrowers (or Borrower Agent for their benefit) from time to time in
amounts requested by Borrowers (or Borrower Agent on their behalf) up to, in the
aggregate for all such loans at any time requested, the Real Estate Subline. The
Real Estate Loans made hereunder shall be evidenced by the Real Estate Notes.
(b) Borrowers may prepay at any time, at their option and
without payment of any premium or penalty, in whole or in part, the Real Estate
Loans, provided that: (i) on each such prepayment, Borrowers shall pay all
accrued interest on the principal so prepaid to the date of such prepayment and
(ii) to the extent prepaid, Real Estate Loans may not be re-borrowed under this
Section 2.3 and the Real Estate Subline shall be permanently reduced by the
amount of any such prepayment(s).
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(c) The Real Estate Loans and all interest accrued with
respect thereto, to the extent not prepaid, shall be due and payable in full on
the earlier to occur of (i) the date that is eighteen months after the Real
Estate Loan Availability Date (on which date the Real Estate Subline shall be
permanently reduced to zero) or (ii) the effective date of any termination of
this Agreement, whether terminated by Agent and the Lenders or by Borrowers.
2.4 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrowers (or Borrower Agent on their behalf), Agent
agrees, for the ratable risk of each Lender according to its Pro Rata Share, to
provide or arrange for Letter of Credit Accommodations for the account of
Borrowers containing terms and conditions acceptable to Agent and the Issuing
Bank thereof. Any payments made by Agent or any Lender to any Issuing Bank
thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to Borrowers pursuant
to this Section 2.
(b) In consideration of the Letter of Credit Accommodations,
Borrowers shall pay to Agent, for the benefit of the Lenders, letter of credit
fees: (a) with respect to documentary Letter of Credit Accommodations, payable
upon the issuance thereof, in an amount equal to (i) three percent (3.00%) of
the face amount of such Letter of Credit Accommodation if at any time during the
preceding fiscal quarter Excess Availability was $25,000,000 or lower, (ii) two
and three-quarters percent (2.75%) of the face amount of such Letter of Credit
Accommodation if at all times during the preceding fiscal quarter Excess
Availability was between $25,000,000 and $35,000,000, or (iii) two and one-half
percent (2.50%) of the face amount of such Letter of Credit Accommodation if at
all times during the preceding fiscal quarter Excess Availability was
$35,000,000 or greater; and (b) with respect to standby Letter of Credit
Accommodations, payable monthly in arrears, in an amount equal to (i) three and
one-half percent (3.50%) per annum on the face amount of such Letter of Credit
Accommodations less any and all amounts previously drawn under such Letter of
Credit Accommodations if at any time during the preceding fiscal quarter Excess
Availability was $25,000,000 or lower, (ii) three and one-quarter percent
(3.25%) per annum on the face amount of such Letter of Credit Accommodations
less any and all amounts previously drawn under such Letter of Credit
Accommodations if at all times during the preceding fiscal quarter Excess
Availability was between $25,000,000 and $35,000,000, or (iii) three percent
(3.00%) per annum on the face amount of such Letter of Credit Accommodations
less any and all amounts previously drawn under such Letter of Credit
Accommodations if at all times during the preceding fiscal quarter Excess
Availability was $35,000,000 or greater. Notwithstanding the foregoing, during
the period beginning on the Closing Date and ending on the last day of the month
in which Borrowers deliver to Agent the financial statements and other
information required pursuant to Section 9.6(b)(ii) hereof for their fiscal year
ending July 31, 2003, Borrowers shall pay to Agent, for the benefit of the
Lenders, letter of credit fees: (x) with respect to documentary Letter of Credit
Accommodations, payable upon the issuance thereof, in an amount equal to two and
three-quarters percent (2.75%) of the face amount of such Letter of Credit
Accommodation and (y) with respect to standby Letter of Credit Accommodations,
payable monthly, in an amount equal to three and one-quarter percent (3.25%) per
annum on the face amount of such Letter of Credit Accommodations less any and
all amounts previously drawn under such Letter of Credit Accommodations. Any and
all charges, fees, commissions, costs and expenses charged to the Agent or
Lenders by any Issuing Bank in
24
connection with, or arising out of, Letter of Credit Accommodations or out of
transactions relating thereto will be charged to Borrowers' loan account(s) in
full when charged to, or paid by, the Agent or any Lender, or as may be due upon
any termination of this Agreement, and when made by any such Issuing Bank shall
be conclusive on the Agent and Lenders.
(c) Borrowers (or Borrower Agent on their behalf) shall
request the issuance of a Letter of Credit Accommodation, which request shall be
irrevocable, by written notice to Agent specifying the original face amount of
the Letter of Credit Accommodation requested, the effective date (which date
shall be a Business Day) of issuance of such requested Letter of Credit
Accommodation, whether such Letter of Credit Accommodations may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit
Accommodation is to expire (which date shall be a Business Day), the purpose for
which such Letter of Credit Accommodation is to be issued, and the beneficiary
of the requested Letter of Credit Accommodation. Borrowers (or, if applicable,
Borrower Agent) shall attach to such request the proposed form of the Letter of
Credit Accommodation.
(d) Within the Revolving Loan Limit and the Borrowing Base,
the Agent, on behalf of the Lenders, shall assist the Borrowers in obtaining
Letter of Credit Accommodations in an aggregate amount not to exceed Twenty
Million Dollars ($20,000,000). It is understood that the term, form and purpose
of each Letter of Credit Accommodation and all documentation in connection
therewith, and any amendments, modifications or extensions thereof, must be
mutually acceptable to the Agent, the Issuing Bank and the Borrower Agent. Any
and all outstanding Letter of Credit Accommodations shall be reserved dollar for
dollar from the Borrowing Base as an Availability Reserve.
(e) The Agent shall have the right, without notice to any
Borrower, to charge the Borrowers' loan account(s) with the amount of any and
all indebtedness, liability or obligation of any kind incurred by the Agent
and/or the Lenders with respect to the Letter of Credit Accommodations at the
earlier of (i) payment by the Agent or Lenders under the Letter of Credit
Accommodations; or (ii) the occurrence of an Event of Default which has not been
waived in accordance with the terms of this Agreement. Any amount charged to the
Borrowers' loan account(s) shall be deemed a Revolving Loan hereunder and shall
incur interest at the Prime Rate based interest rate for Revolving Loans set
forth in Section 3.1 hereof.
(f) Neither Agent nor any Lender shall be responsible for: (i)
the existence, character, quality, quantity, condition, packing, value or
delivery of the goods purporting to be represented by any documents; (ii) any
difference or variation in the character, quality, quantity, condition, packing,
value or delivery of the goods from that expressed in the documents; (iii) the
validity, sufficiency or genuineness of any documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (iv) the time, place,
manner or order in which shipment is made; (v) partial or incomplete shipment,
or failure or omission to ship any or all of the goods referred to in any Letter
of Credit Accommodation or related documents; (vi) any deviation from
instructions; (vii) delay, default, or fraud by the shipper and/or anyone else
in connection with the goods or the shipping thereof; or (viii) any breach of
contract between the shipper or vendors and any Borrower.
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(g) Each Borrower agrees that any action taken by the Agent
and/or the Lenders, if taken in good faith, or any action taken by any Issuing
Bank, under or in connection with the Letter of Credit Accommodations, the
drafts or acceptances, or the Collateral, shall be binding on such Borrower and
shall not result in any liability whatsoever of Agent or any Lender to such
Borrower. In furtherance thereof, the Agent shall have the full right and
authority to: (i) clear and resolve any questions of non-compliance of
documents; (ii) give any instructions as to acceptance or rejection of any
documents or goods; (iii) execute any and all steamship or airways guaranties
(and applications therefore), indemnities or delivery orders; (iv) grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents; and (v) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letter of Credit Accommodations,
drafts or acceptances; all in the Agent's sole name. The Issuing Bank shall be
entitled to comply with and honor any and all such documents or instruments
executed by or received solely from the Agent, all without any notice to or any
consent from any Borrower. Notwithstanding any prior course of conduct or
dealing with respect to the foregoing including amendments and non-compliance
with documents and/or any Borrower's instructions with respect thereto, the
Agent may exercise its rights hereunder in its sole and reasonable judgment. In
addition, without the Agent's express consent and endorsement in writing, each
Borrower agrees: (I) not to execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letter of Credit Accommodations, drafts or acceptances; and
(II) after the occurrence of an Event of Default which is not cured within any
applicable grace period, if any, or waived in accordance with the terms of this
Agreement, not to (A) clear and resolve any questions of non-compliance of
documents, or (B) give any instructions as to acceptances or rejection of any
documents or goods.
(h) Each Borrower agrees that: (i) any necessary import,
export or other licenses or certificates for the import or handling of the
Collateral will have been promptly procured; (ii) all foreign and domestic
governmental laws and regulations in regard to the shipment and importation of
the Collateral, or the financing thereof will have been promptly and fully
complied with; and (iii) any certificates in that regard that the Agent may at
any time request will be promptly furnished. In connection herewith, each
Borrower warrants and represents that all shipments made under any such Letter
of Credit Accommodations are in accordance with the laws and regulations of the
countries in which the shipments originate and terminate, and are not prohibited
by any such laws and regulations. Borrowers assume all risk, liability and
responsibility for, and agree to pay and discharge, all present and future
local, state, federal or foreign taxes, duties, or levies. Any embargo,
restriction, laws, customs or regulations of any country, state, city, or other
political subdivision, where the Collateral is or may be located, or wherein
payments are to be made, or wherein drafts may be drawn, negotiated, accepted,
or paid, shall be solely Borrowers' risk, liability and responsibility.
(i) Upon any payments made to the Issuing Bank under any
Letter of Credit Accommodation, the Agent, for the ratable benefit of the
Lenders, shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by any Borrower to the Issuing Bank in any
application for such Letter of Credit Accommodation, any standing agreement
26
relating to Letter of Credit Accommodations or otherwise, all of which shall be
deemed to have been granted to the Agent, for the ratable benefit of the
Lenders, and apply in all respects to the Agent and Lenders and shall be in
addition to any rights, remedies, duties or obligations contained herein.
(j) Each Borrower shall indemnify and hold Agent and Lenders
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses which Agent or any Lender may suffer or incur in connection
with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any Issuing Bank or
correspondent with respect to any Letter of Credit Accommodation. Each Borrower
assumes all risks with respect to the acts or omissions of the drawer under or
beneficiary of any Letter of Credit Accommodation and for such purposes the
drawer or beneficiary shall be deemed such Borrower's agent. Each Borrower
assumes all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Each Borrower
hereby releases and holds Agent and each Lender harmless from and against any
acts, waivers, errors, delays or omissions, whether caused by such Borrower, by
any Issuing Bank or correspondent or otherwise with respect to or relating to
any Letter of Credit Accommodation, except for the gross negligence or willful
misconduct of Agent or such Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.4(j) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(k) In connection with Inventory purchased pursuant to Letter
of Credit Accommodations, Borrowers shall, at Agent's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Agent, for
itself and the ratable benefit of Lenders, holds a security interest to deliver
them to Agent and/or subject to Agent's order, and if they shall come into any
Borrower's possession, to deliver them, upon Agent's request, to Agent in their
original form. Borrowers shall also, at Agent's request, designate Agent as the
consignee on all bills of lading and other negotiable and non-negotiable
documents.
(l) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower to any Issuing Bank or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any Issuing Bank or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by such
Borrower to Agent for the ratable benefit of Lenders. Any duties or obligations
undertaken by Lender to any Issuing Bank or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement by Lender in favor of
any Issuing Bank or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrowers to Lender
and to apply in all respects to Borrowers.
2.5 Commitments. The aggregate amount of each Lender's Pro Rata Share
of the Loans and Letter of Credit Accommodations shall not exceed the amount of
such Lender's Commitment, as the same may from time to time be amended with the
written acknowledgment of Agent.
27
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Interest on the Loans shall be due and payable monthly on and as
of the end of each month as follows:
(i) The average of the net balances owing by the Borrowers to
the Lenders in their loan account(s) at the close of each day during each such
month and the outstanding balance of the Term Loan shall bear interest at a per
annum rate equal to the Prime Rate plus: (A) three-quarters of one and one-half
percent (1.50%) if at any time during the fiscal quarter preceding such month
Excess Availability was $25,000,000 or less, (B) one and one-quarter percent
(1.25%) if at all times during the fiscal quarter preceding such month Excess
Availability was between $25,000,000 and $35,000,000; and (C) one percent
(1.00%) if at all times during the fiscal quarter preceding such month Excess
Availability was $35,000,000 or greater. Notwithstanding the foregoing, during
the period beginning on the Closing Date and ending on the last day of the month
in which Borrowers deliver to Agent the financial statements and other
information required pursuant to Section 9.6(b)(ii) hereof for their fiscal year
ending July 31, 2003, the average of the net balances owing by the Borrowers to
the Lenders in their loan account(s) at the close of each day during each such
month shall bear interest at a per annum rate equal to the Prime Rate plus one
and one-quarter percent (1.25%) per annum.
(ii) The outstanding balance of the Real Estate Loans shall
bear interest at a per annum rate equal to the greater of (A) eleven percent
(11%) or (B) the Prime Rate plus five percent (5%).
The interest rates set forth above shall increase or decrease as and when the
Prime Rate increases or decreases. The interest rates hereunder shall be
calculated based on a 360-day year. The Agent shall be entitled to charge the
Borrowers' loan account(s), at the rate provided for herein, for all Obligations
when due until such Obligations have been paid in full.
(b) During the continuance of an Event of Default and the giving of
any notice by Agent required under the terms of this Agreement, all Obligations
shall bear interest at the Default Rate of Interest.
(c) Borrowers (or Borrower Agent on their behalf) may request
Eurodollar Rate Loans on the following terms and conditions.
(i) Borrowers (or Borrower Agent on their behalf) may elect,
subsequent to the Closing Date and from time to time thereafter: (A) to request
any Revolving Loan made hereunder to be a Eurodollar Rate Loan as of the date of
such loan or (B) to convert Prime Rate Loans (including the Term Loan) to
Eurodollar Rate Loans, and may elect from time to time to convert Eurodollar
Rate Loans to Prime Rate Loans by giving the Agent at least three (3) Business
Days' prior irrevocable notice of such election; provided that, (1) any such
conversion of Eurodollar Rate Loans to Prime Rate Loans shall only be made on
the last day of an Interest Period with respect thereto; (2) should Borrowers
(or Borrower Agent on their behalf) elect to convert Prime Rate Loans to
Eurodollar Rate Loans, Borrowers (or Borrower Agent on their behalf) shall give
the Agent at least three (3) Business Days' prior irrevocable notice of
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such election; (3) if the last day of an Interest Period with respect to a loan
that is to be converted is not a Business Day, then such conversion shall be
made on the next succeeding Business Day, and during the period from such last
day of an Interest Period to such succeeding Business Day, such loan shall bear
interest as if it were a Prime Rate Loan (4) all or any part of any then
outstanding Prime Rate Loans may be converted to Eurodollar Rate Loans as
provided herein, provided that partial conversions shall be in multiples in an
aggregate principal amount of $1,000,000 or more; (5) no more than eight (8)
Eurodollar Rate Loans may be outstanding at any one time; and (6) at the time of
such request or conversion, no Default or Event of Default shall have occurred
and be continuing.
(ii) Any Eurodollar Rate Loan may be continued as such upon
the expiration of an Interest Period, provided Borrowers (or Borrower Agent on
their behalf) so notifies the Agent, at least three (3) Business Days' prior to
the expiration of said Interest Period, and provided further, that no Eurodollar
Rate Loan may be continued as such upon the occurrence of any Default or Event
of Default, but shall be automatically converted to a Prime Rate Loan on the
last day of the Interest Period during which such Default or Event of Default
occurred. Absent such notification, Eurodollar Rate Loans shall convert to Prime
Rate Loans on the last day of the applicable Interest Period. Each notice of
election, conversion or continuation furnished by Borrowers (or Borrower Agent
on their behalf) pursuant hereto shall specify whether such election, conversion
or continuation is for a one, two, three or six month period. Notwithstanding
anything to the contrary contained herein, neither the Agent nor any Lender (nor
any Participant, if applicable) shall be required to purchase United States
Dollar deposits in the London interbank market or from any other applicable
Eurodollar Rate market or source or otherwise "match fund" to fund Eurodollar
Rate Loans, but any and all provisions hereof relating to Eurodollar Rate Loans
shall be deemed to apply as if the Agent and/or Lenders (and any Participant, if
applicable) had purchased such deposits to fund any Eurodollar Rate Loans.
(iii) The Eurodollar Rate Loans shall bear interest for each
Interest Period with respect thereto on the unpaid principal amount thereof at a
per annum rate equal to the Adjusted Eurodollar Rate determined for each
Interest Period in accordance with the terms hereof plus: (A) three and one-
half percent (3.50%) if at any time during the fiscal quarter preceding such
month Excess Availability was $25,000,000 or less; (B) three and one-quarter
percent (3.25%) if at all times during the fiscal quarter preceding such month
Excess Availability was between $25,000,000 and $35,000,000; and (C) three
percent (3.00%) if at all times during the fiscal quarter preceding such month
Excess Availability was $35,000,000 or greater. Notwithstanding the foregoing,
any Eurodollar Rate Loan requested or converted during the period beginning on
the Closing Date and ending on the last day of the month in which Borrowers
deliver to Agent the financial statements and other information required
pursuant to Section 9.6(b)(ii) hereof for their fiscal year ending July 31,
2003, shall bear interest for each Interest Period with respect thereto on the
unpaid principal amount thereof at a rate per annum equal to the Adjusted
Eurodollar Rate determined for each such Interest Period in accordance with the
terms hereof plus three and one-quarter percent (3.25%). Interest in respect of
the Eurodollar Rate Loans shall be calculated on the basis of a 360 day year and
shall be due and payable on and as of the end of each month.
(iv) If all or a portion of the outstanding principal amount
of the Obligations shall not be paid when due (whether at the stated maturity,
by acceleration or
29
otherwise), such outstanding amount, to the extent it is a Eurodollar Rate Loan,
shall be converted to a Prime Rate Loan at the end of the last Interest Period
therefor.
(v) In the event that the Agent, any Lender or any Participant
shall have determined, in the exercise of its reasonable credit judgment (which
determination shall be conclusive and binding upon Borrowers), that by reason of
circumstances affecting the interbank Eurodollar Rate market, adequate and
reasonable means do not exist for ascertaining a Eurodollar Rate applicable for
any Interest Period with respect to: (A) a proposed loan that Borrowers have (or
Borrower Agent on their behalf has) requested be made as a Eurodollar Rate Loan;
(B) a Eurodollar Rate Loan that will result from the requested conversion of a
Prime Rate Loan into a Eurodollar Rate Loan; or (C) the continuation of a
Eurodollar Rate Loan beyond the expiration of the then current Interest Period
with respect thereto; the Agent shall forthwith give written notice of such
determination to Borrower Agent at least one day prior to, as the case may be,
the requested borrowing date for such Eurodollar Rate Loan, the conversion date
of such Prime Rate Loan or the last day of such Interest Period. If such notice
is given: (X) any requested Eurodollar Rate Loan shall be made as a Prime Rate
Loan, (Y) any Prime Rate Loan that was to have been converted to a Eurodollar
Rate Loan shall be continued as a Prime Rate Loan, and (Z) any outstanding
Eurodollar Rate Loan shall be converted, on the last day of then current
Interest Period with respect thereto, to a Prime Rate Loan. Until such notice
has been withdrawn by the Agent, no further Eurodollar Rate Loans shall be made
nor shall any Borrower have the right to convert a Prime Rate Loan to a
Eurodollar Rate Loan.
(vi) If any payment on a Eurodollar Rate Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month in which event such
payment shall be made on the immediately preceding Business Day.
(d) The Agent shall, at the request of Borrower Agent, deliver to
Borrower Agent a statement showing the quotations given by the Reference Bank
and the computations used in determining any interest rate set forth herein.
(e) No agreements, conditions, provisions or stipulations contained
in this Agreement or any of the other Financing Agreements or any Event of
Default, or the exercise by Agent or any Lender of the right to accelerate the
payment or the maturity of all or any portion of the Obligations, or the
exercise by Agent or any Lender of any option whatsoever contained in this
Agreement or any of the other Financing Agreements, or the prepayment by any
Borrower of any of the Obligations, or the occurrence of any event or
contingency whatsoever, shall entitle Agent and Lenders to contract for, charge
or receive, in any event, interest exceeding the Maximum Interest Rate. In no
event shall any Borrower be obligated to pay interest exceeding such Maximum
Interest Rate. All agreements, conditions or stipulations, if any, which may in
any event or contingency whatsoever operate to bind, obligate or compel any
Borrower to pay a rate of interest exceeding the Maximum Interest Rate shall be
without binding force or effect, at law or in equity, to the extent of the
excess of interest over such Maximum Interest Rate. In the event any interest is
contracted for, charged or received in excess of the Maximum Interest Rate
("Excess"), each Borrower acknowledges and stipulates that any such contract,
charge or receipt shall be the result of an accident and bona fide error, and
that any Excess received by Agent or
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any Lender shall be applied, first, to the payment of the then outstanding and
unpaid principal hereunder; second, to the payment of the other Obligations then
outstanding and unpaid; and third, returned to Borrowers, it being the intent of
the parties hereto not to enter at any time into a usurious or otherwise illegal
relationship. Each Borrower recognizes that, with fluctuations in the rate of
interest set forth in this Section 3.1 of this Agreement and the Maximum
Interest Rate, such an unintentional result could inadvertently occur. By the
execution of this Agreement, each Borrower agrees that (i) the credit or return
of any Excess shall constitute the acceptance by such Borrower of such Excess,
and (ii) such Borrower shall not seek or pursue any other remedy, legal or
equitable, against Agent or any Lender, based in whole or in part upon
contracting for, charging or receiving of any interest in excess of the Maximum
Interest Rate. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by Agent or any Lender, all interest at any
time contracted for, charged or received by Agent or any Lender in connection
with this Agreement or any of the other Financing Agreements shall be amortized,
prorated, allocated and spread during the entire term of this Agreement in
accordance with the amounts outstanding from time to time hereunder and the
Maximum Interest Rate from time to time in effect in order to lawfully charge
the maximum amount of interest permitted under applicable law.
3.2 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Agent to Borrowers, convert to Prime
Rate Loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall either (A) make it unlawful
for a Lender, Reference Bank or any Participant with a Lender to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to a Lender, Reference Bank or any Participant with a Lender of making or
maintaining any Eurodollar Rate Loans by an amount deemed by Agent to be
material, or (C) reduce the amounts received or receivable by any Lender in
respect thereof, by an amount deemed by Agent to be material or (ii) the cost to
a Lender, Reference Bank or any Participant with a Lender of making or
maintaining any Eurodollar Rate Loans shall otherwise increase by an amount
deemed by Agent to be material. Borrowers shall pay to Agent for the ratable
benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge
any loan account of any Borrower) any amounts required to compensate Lenders,
the Reference Bank or any Participant with a Lender for any loss (including loss
of anticipated profits), cost or expense incurred by such person as a result of
the foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Agent or any Lender setting forth the basis
for the determination of such amount necessary to compensate such Person as
aforesaid shall be delivered to Borrowers and shall be conclusive, absent
manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Agent or any Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Agent, for the ratable benefit of Lenders, upon demand by
Agent (or Agent may, at its option, charge any loan account of any Borrower) any
amounts
31
required to compensate such Lender, the Reference Bank or any Participant with
such Lender for any additional loss (including loss of anticipated profits),
cost or expense incurred by such person as a result of such prepayment or
payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such person to make or maintain such Eurodollar Rate Loans or any portion
thereof.
3.3 Fees.
(a) Line of Credit Fee. Upon the last Business Day of each month,
commencing on October 31, 2002, Borrowers shall pay to the Agent, for itself and
the ratable benefit of the Lenders, a line of credit fee equal to: (i) the
difference between (A) the Maximum Credit and (B) the sum, for said month, of
(1) the average daily balance of Revolving Loans outstanding for said month, (2)
the average daily balance of Letter of Credit Accommodations outstanding for
said month, (3) the average daily balance of the Real Estate Loans outstanding
for said month, and (4) the then outstanding amount of the Term Loan, such
difference to be multiplied by (ii) one-half of one percent (.50%) per annum
for the number of days in said month.
(b) Early Termination Fee. Borrowers shall pay to Agent, for itself
and the ratable benefit of the Lenders, an early termination fee, due and
payable upon the Early Termination Date, in an amount equal to: (i) two percent
(2.0%) of the Maximum Credit if the Early Termination Date occurs on or before
the date that is twelve (12) months from the Closing Date; (ii) one percent
(1.0%) of the Maximum Credit if the Early Termination Date occurs on a date that
is twelve (12) months or more from the Closing Date but before the date that is
eighteen (18) months after the Closing Date; and (iii) one-quarter of one
percent (.25%) of the Maximum Credit if the Early Termination Date occurs on a
date that is eighteen (18) months or more after the Closing Date and such Early
Termination Date is not an Anniversary Date.
(c) Fee Letter Fees. Borrowers shall pay to Agent the fees set forth
in the Fee Letter, as and when due and payable under the terms thereof.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lenders (or
Agent on behalf of Lenders) making the initial Loans and providing the initial
Letter of Credit Accommodations hereunder:
(a) Board Resolution. Agent shall have received a copy of the
resolutions of the Board of Directors of each Borrower and each Obligor
authorizing the execution, delivery and performance of, as the case may be, (i)
this Agreement, (ii) the guaranties of such Obligors, and (iii) the other
Financing Agreements, in each case certified by the secretary or assistant
secretary of such entity, as of the date hereof, together with a certificate of
the secretary or assistant secretary of such entity as to the incumbency and
specimen signatures of the officers of such entity executing such Financing
Agreements and any certificate or other documents to be delivered by them
pursuant hereto, together with evidence of the incumbency of such secretary or
assistant secretary.
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(b) Corporate Organization. Agent shall have received (i) a copy of
the certificate or articles of incorporation or formation, as the case may be,
of each Borrower and each Obligor, certified by the Secretary of State of the
state of such entity's organization, and (ii) a copy of the by-laws or
operating agreement of each Borrower and each Obligor, certified by the
secretary or assistant secretary of such entity, all as amended through the date
hereof.
(c) Legal Restraints/Litigation. As of the Closing Date, there shall
be no: (i) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against any Borrower, any Obligor or their respective
assets by any Governmental Authority arising out of this Agreement; (ii)
injunction, writ or restraining order restraining or prohibiting the financing
arrangements contemplated under this Agreement; or (iii) suit, action,
investigation or proceeding (judicial or administrative) pending against any
Borrower, any Obligor or their respective assets, which if adversely determine,
could have a Material Adverse Effect.
(d) Examination & Verification. Agent and each Lender shall have
completed, to their respective satisfaction, an examination and verification of
the Accounts, Inventory, financial statements, books and records of each
Borrower, which examination shall indicate that, after giving effect to all
Loans, Letter of Credit Accommodations and other advances and extensions of
credit to be made on the Closing Date, Borrowers shall have Excess Availability
of at least $25,000,000, as evidenced by the Borrowing Base Certificate
delivered by Borrowers to Agent as of the Closing Date.
(e) Inventory Appraisal. Agent shall have received an appraisal,
conducted by an appraiser retained by and acceptable to Agent (but paid for by
Borrowers), of the Inventory of Borrowers, the form, scope and, methodology and
results of which shall be acceptable to Agent in its sole discretion.
(f) Review of Capital Structure. Agent and its counsel shall have
reviewed and been satisfied with the capital structure of Borrowers.
(g) Copies of WOW Store Leases. Agent shall have received copies of
each lease or other such agreement, and any related agreements, with respect to
each WOW store location.
(h) Merchant Payment Direction Letters. Agent shall have received
Merchant Payment Direction Letters with respect to each Merchant Payment
Processor (other than Telecheck, Inc., it being understood and agreed that the
fact that such documentation is not required prior to Closing shall in no way be
construed as a waiver of Agent's right to require the delivery of such
documentation in the future) with whom any Borrower has entered into a Merchant
Payment Agreement.
(i) Depository Accounts.
(i) Agent shall have received evidence, satisfactory to Agent,
that Borrowers have established deposit, payroll and other operating accounts at
a financial institution or institutions satisfactory to Agent.
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(ii) Agent shall have received, in form and substance
satisfactory to Agent, Deposit Account Control Agreements by and among Agent,
each Borrower and each bank where such Borrower has a deposit account, in each
case, duly authorized, executed and delivered by such bank and such Borrower (or
Agent shall be the bank's customer with respect to such deposit account as Agent
may specify) and, with respect to deposit accounts used by each Borrower's
retail store locations for the deposit of receipts from the sale of merchandise
or for the deposit of other proceeds of Collateral and other property which is
security for the Obligations, the bank at which each such deposit account is
maintained shall have been irrevocably authorized and directed to send all funds
on deposit with such bank only to the Blocked Accounts.
(j) UCC Filings. Any financing statements required to be filed in
order to create, in favor of Agent, for itself and the ratable benefit of the
Lenders, a first-priority perfected security interest in the Collateral, subject
only to the liens listed on Schedule 8.4 hereto, shall have been properly filed
in each office in each jurisdiction where required in order to create in favor
of the Agent, for itself and the ratable benefit of the Lenders, a
first-priority perfected security interest in the Collateral. The Agent shall
have received acknowledgment copies of all such filings (or, in lieu thereof,
the Agent shall have received other evidence satisfactory to the Agent that all
such filings have been made) and the Agent shall have received evidence that all
necessary filing fees and all taxes or other expenses related to such filings
have been paid in full.
(k) Lien Searches. Agent shall have received tax, judgment and UCC
searches satisfactory to the Agent for the state of incorporation of each
Borrower and for all locations presently occupied or used by any Borrower.
(l) Casualty Insurance. Borrowers shall have delivered to Agent
evidence satisfactory to Agent that casualty insurance policies listing Agent,
in its capacity as Agent, as additional insured, loss payee or mortgagee, as the
case may be, are in full force and effect, all as set forth in Section 9.5
hereof.
(m) Opinions. Counsel for the Borrowers and Obligors shall have
delivered to Agent, for itself and the benefit of the Lenders, opinions
satisfactory to Agent opining, inter alia, that (subject to (i) the filing,
priority and remedies provisions of the UCC, (ii) the provisions of the U.S.
Bankruptcy Code, insolvency statutes or other like laws, (iii) the equity powers
of a court of law and (iv) such other matters as may be agreed upon with the
Agent) this Agreement and all of the other Financing Agreements entered into by
any Borrower or Obligor are: (A) valid, binding and enforceable according to
their terms, (B) are duly authorized, executed and delivered, (C) do not violate
any terms, provisions, representations or covenants in the charter, by-laws,
operating agreement or other organization documents of any such entity (as the
case may be), the Indenture or, to the best knowledge of such counsel, of any
loan agreement, mortgage, deed of trust, note, security or pledge agreement,
indenture or other contract to which any such entity is a signatory or by which
any such entity or its assets are bound and (D) the Financing Agreements are
effective to create in favor of Agent a legal, valid and enforceable security
interest in the Collateral and all actions have been taken so that Agent has a
fully perfected security interest in all Collateral.
34
(n) Guaranties. Each Obligor shall have executed and delivered to
Agent, for itself and the benefit of the Lenders, a secured guaranty, in form
and substance acceptable to Agent, guaranteeing all present and future
Obligations of the Borrowers and granting to Agent, as security for its
obligations a first priority lien on all personal property of such entities.
(o) Stock Pledge Agreements. Parent and Borrower Agent shall each
have: (i) executed and delivered to Agent a pledge and security agreement
pledging to Agent, for itself and the benefit of the Lenders, as additional
collateral for the Obligations of such entities, not less than 100% of the
issued and outstanding stock of each of its domestic Subsidiaries (other than
Pipernick) and 65% of the issued and outstanding stock of each of its foreign
Subsidiaries, and (ii) delivered to Agent the stock certificates evidencing such
pledged stock together with duly executed stock powers (undated and in-blank)
with respect thereto, all in form and substance satisfactory to Agent.
(p) Mortgages. Agent shall have received a first-priority (except as
Agent may otherwise agree in its sole discretion) mortgage, deed of trust, or
other such instrument, executed by the applicable Borrower or Obligor in favor
of Agent, for the benefit of the Lenders, with respect to each parcel of Real
Property owned by such Person, as the case may be, as of the date hereof, each
in form and substance satisfactory to Agent (collectively, the "Mortgages" and
each a "Mortgage") and Agent shall have received evidence, satisfactory to
Agent, of the recording of such Mortgages in the real property records of the
county where the subject Real Property is located. In addition, Agent shall have
received from JPMC an assignment of that certain Mortgage, Assignment of Leases
and Rents, Security Agreement and Financing Statement, dated April 27, 2001, by
Borrower Agent in favor of JPMC with respect to the Real Property commonly known
as ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (the "Original
Broadway Mortgage") along with an assignment of the indebtedness secured by the
Original Broadway Mortgage, together with such other documentation related
thereto as Agent may require, all in form and substance satisfactory to Agent.
(q) Title Insurance Policies. Agent shall have received, in form and
substance satisfactory to Agent, valid and effective title insurance policies,
issued by a company and agent acceptable to Agent, with respect to each Mortgage
(i) insuring the priority, amount and sufficiency of such Mortgage, (ii)
insuring against matters that would be disclosed by surveys and (iii) containing
any legally available endorsements, assurances or affirmative coverage requested
by Agent for protection of its interests.
(r) Officer's Certificates. Agent shall have received certificates
executed by the chief executive officer or president of each Borrower,
satisfactory in form and substance to Agent, certifying that, as of the Closing
Date, (i) the representations and warranties contained herein are true and
correct in all material respects; (ii) such Borrower is in compliance with all
of the terms and provisions set forth herein; and (iii) no Default or Event of
Default has occurred.
(s) Disbursement Authorization. Borrowers shall have delivered to
Agent all information necessary for Agent and Lenders to issue wire transfer
instructions on behalf of Borrowers for the initial and subsequent loans and/or
advances to be made under this Agreement including, but not limited to,
disbursement authorizations in form acceptable to the Agent.
35
(t) Notes. Agent shall have received the original Revolving Notes
and the original Term Note, each duly executed by Borrowers.
(u) Other Financing Agreements. The other Financing Agreements and
all instruments and documents related hereto or thereto shall have been duly
executed and delivered to Agent, in form and substance satisfactory to Agent.
(v) Financial Statements and Projections. Agent shall have received,
in form and substance satisfactory to Agent: (i) a Consolidated Balance Sheet
and a Consolidating Balance Sheet for the fiscal year-to-date period ended as of
June, 2002 and (ii) monthly consolidated and consolidating projections,
including income statements, balance sheets and statements of cash flow, for the
Borrowers and Obligors for the remainder of the fiscal year ending July 31,
2002, the entire fiscal year ending July 31, 2003 and the entire fiscal year
ending July 31, 2004.
(w) Schedule of Rental Payments. Borrowers or their counsel shall
have provided Agent with schedules of each Borrower's monthly rental payments
for any leased premises or any other premises where any Collateral may be stored
or processed.
(x) Assignment of Life Insurance. Borrowers shall have executed in
favor of Agent, for itself and the ratable benefit of the Lenders, assignments,
in form and substance satisfactory to Agent, with respect to the Life Insurance
Policies (collectively, the "Life Insurance Assignments").
(y) Review of Indenture; Compliance. Agent and its counsel shall
have (i) received, reviewed and been satisfied with the terms of the Indenture,
the Senior Subordinated Notes and all other documents, agreements and
instruments related thereto and (ii) received satisfactory evidence, including a
satisfactory opinion from Borrowers' counsel, that this Agreement, the Financing
Agreements, the JPMC Intercreditor Agreement, the JPMC Agreements, and the
transactions contemplated herein and therein, are permitted under the Indenture,
including, without limitation, that all Indebtedness created by the documents
and transactions described in this subparagraph (z) constitute (A) Permitted
Indebtedness and (B) Senior Indebtedness, in each case as defined in the
Indenture, and that the Liens created in connection with the documents and
transactions described in this subparagraph (z) constitute Permitted Liens, as
defined in the Indenture.
(z) Review of Distribution and Customer Agreements. Agent and its
counsel shall have received, reviewed and been satisfied with the terms of all
distribution and/or licensing agreements of any Borrower and all agreements of
any Borrower with its customers.
(aa) Sale of Japanese Subsidiary. Agent shall have (i) reviewed and
been satisfied with the terms of any and all liabilities, whether actual or
contingent, that result or may result from the sale of the Japanese Subsidiary,
(ii) received evidence, satisfactory to Agent, that Borrowers have received cash
proceeds of the sale of the Japanese Subsidiaries in an aggregate amount equal
to no less than 13,526,000,000 Japanese Yen (the "Japanese Sale Proceeds"), and
(iii) received a funds flow memorandum, certified by an officer of Borrower
Agent, detailing the uses of the Japanese Sale Proceeds.
36
(bb) Background Checks. Agent shall have completed and been
satisfied with the results of background checks on Borrowers' and Obligors'
senior management and/or owners.
(cc) JPMC Financing.
(i) Agent shall have received and reviewed the final JPMC
Agreements, the terms of which shall provide for a loan to Borrower Agent of
$26,000,000 and shall otherwise be acceptable to Agent in its sole discretion.
(ii) Agent shall have received the Intercreditor Agreement and
memoranda of the Intercreditor Agreement with respect to each mortgage or deed
of trust filed by JPMC with respect to any Real Property, each duly executed by
JPMC and, if applicable, acknowledged by the Borrowers and the Obligors.
(iii) Agent shall have received evidence, in form and
substance satisfactory to Agent, that Borrowers and JPMC have consummated the
financing transaction contemplated by the JPMC Agreements.
(dd) Closure of UK Stores. Agent shall have reviewed and been
satisfied with the terms, conditions and timing of the sale and/or closure of
the applicable Borrower's or Obligor's stores located in the United Kingdom or
Ireland as such terms and conditions have been approved by the applicable
Borrower's or Obligor's board of directors.
(ee) Inventory Reporting Capabilities. Agent shall have reviewed and
been satisfied with Borrowers' Inventory reporting capabilities.
(ff) Chief Restructuring Officer. Borrowers shall have employed a
chief restructuring officer who is satisfactory to both Agent and JPMC (the
"Chief Restructuring Officer") and Agent shall have received a copy of the
engagement letter, or other such agreement, executed by Borrower Agent and the
Chief Restructuring Officer, which letter or agreement shall be satisfactory to
Agent.
(gg) Review of Anti-Trust Litigation. Agent shall have received
such information with respect to the anti-trust litigation instituted against
Borrowers as Agent may reasonably request and Agent shall have been satisfied
with the results of its review of such information.
(hh) Original Notes Receivable and Allonges. Agent shall have
received the originals of the following promissory notes together with an
allonge endorsing such note to the order of Agent: (i) that certain Promissory
Note, dated October 12, 1994, executed by TAH to the order of Borrower Agent in
the original principal amount of $3,760,213.47; (ii) that certain Deed of Trust
Note (Fixed Interest Rate), dated August 14, 1993, executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
to the order of Borrower Agent in the original principal amount of $2,729,215.48
and assumed by Sunset; (iii) that certain Deed of Trust Note (Fixed Interest
Rate), dated January 27, 1994, executed by CBI to the order of Borrower Agent in
the original principal amount of $519,064.51; (iv) that certain Promissory Note,
dated January 27, 1995, executed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the order of Borrower
Agent in the original principal amount of $10,000; (v) that certain Promissory
37
Note, dated August 6, 1997, executed by ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the order of
Borrower Agent in the original principal amount of $48,609; (vi) that certain
Note Secured by Deed of Trust (Straight Note), dated October 11, 1991, executed
by ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ to the order of Borrower Agent in
the original principal amount of $183,100; (vii) that certain Straight Note,
dated July 31, 1999, executed by ▇▇▇▇ ▇▇▇▇▇▇▇▇ to the order of Borrower Agent in
the original principal amount of $27,198.58; and (viii) that certain Promissory
Note, dated December 21, 1993, executed by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇ to the order of Borrower Agent in the original principal amount of
$20,000.
(ii) Agent shall have received One Million Five Hundred Thousand
Dollars ($1,500,000) of the proceeds of the Trust Note for application to the
Obligations.
(jj) Closing Date. The Closing Date shall occur on or before the
date that is ten (10) Business Days after the date hereof.
4.2 Conditions Precedent to All Real Estate Loans. Each of the following
is an additional condition precedent to Lenders (or Agent on behalf of Lenders)
making Real Estate Loans to Borrowers, including the initial Real Estate Loans
and any future Real Estate Loans:
(a) Appraisals. Agent shall have received appraisals, conducted by
an appraiser retained by and acceptable to Agent (but paid for by Borrowers), of
all Real Property with respect to which Real Estate Loans are being requested,
the form, scope, methodology and results of which shall be acceptable to Agent
in its sole discretion.
(b) Environmental Audit and Risk Assessment. Agent shall have
received environmental audits and risk assessments, conducted by an
environmental engineering firm retained by Agent and acceptable to Agent (but
paid for by Borrowers), of all Real Property with respect to which Real Estate
Loans are being requested, the form, scope, methodology and results of which
shall be acceptable to Agent in its sole discretion.
(c) Real Estate Notes. Agent shall have received the original Real
Estate Notes executed by Borrowers with respect to the requested Real Estate
Loans.
(d) Other Documentation. Agent shall have received such other legal
documentation, in form and substance satisfactory to Agent, as Agent may require
with respect to the Real Property and Agent's liens thereon.
4.3 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lenders (or Agent on behalf of Lenders) making Loans and/or providing Letter of
Credit Accommodations to Borrowers, including the initial Loans and Letter of
Credit Accommodations and any future Loans and Letter of Credit Accommodations:
(a) Representations and Warranties. Each of the representations and
warranties made by a Borrower in or pursuant to this Agreement shall be true and
correct in all material respects on and as of such date as if made on and as of
such date.
(b) Absence of Default. No Default or Event of Default shall have
occurred.
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(c) Borrowing Base. Except as otherwise provided in this Agreement,
after giving effect to the extension of credit requested to be made by Borrowers
(or Borrower Agent on their behalf) on such date, the aggregate outstanding
balance of the Revolving Loans and outstanding Letter of Credit Accommodations
owing by Borrowers will not exceed the lesser of (i) the Revolving Loan Limit or
(ii) the Borrowing Base.
Each borrowing by Borrowers hereunder shall constitute a representation and
warranty by Borrowers as of the date of such loan or advance that each of the
representations, warranties and covenants contained in this Agreement have been
satisfied and are true and correct, except as Borrowers, Agent and/or the
Required Lenders shall otherwise agree herein or in a separate writing.
4.4 Conditions Subsequent to Loans and Letter of Credit Accommodations.
Each of the following is a condition subsequent to Lenders (or Agent on behalf
of Lenders) continuing to make Loans and/or provide Letter of Credit
Accommodations to Borrowers beyond the dates set forth below and failure to
fulfill such conditions shall constitute an Event of Default:
(a) Release of Liens. Within ten (10) days after the Closing Date,
Agent shall have received evidence of the satisfaction and release, as of
record, of the tax and judgment liens listed on Schedule 4.4(a) hereto.
(b) Cash Transport Agreements. Within ten (10) days after the
Closing Date, Agent shall have received a letter agreement, in form and
substance satisfactory to Agent, from each cash transport service provider
listed on Schedule 8.18 hereto, pursuant to which, among other things, such
service provider agrees to take Agent's direction with respect to any Collateral
from time to time in the possession of such service provider.
(c) Life Insurance. Within ten (10) days after the Closing Date, (i)
evidence, in form and substance satisfactory to Agent, of the acknowledgement
and recording of the Life Insurance Assignments in the records of the issuers of
the Life Insurance Policies and (ii) a letter from each issuer of the Life
Insurance Policies addressed to Agent and confirming (A) that the premiums due
with respect thereto have been paid and that the Life Insurance Policies are in
full force and effect and (B) the policy/death benefit amount and the cash
surrender value of each Life Insurance Policy.
(d) Dissolution of All Non-Obligor Subsidiaries. Within thirty (30)
days after the date hereof, Agent shall have received satisfactory evidence of
the dissolution of all of each Borrower's Subsidiaries, other than Obligors.
(e) Copies of Leases and Consents to Leasehold Mortgages. Within
thirty (30) days after the date hereof, Agent shall have received (i) copies of
all leases or other such agreements for all leased locations of any Borrower or
Obligor which have not been delivered to Agent; (ii) evidence that Borrowers
have delivered to each lessor or other applicable Person with respect to each
leased location of a Borrower or Obligor a form of consent and estoppel
certificate, substantially in the form of Exhibit H hereto, with a request that
such Person execute and return the same to Agent.
39
(f) Corporate Status. Within thirty (30) days after the date hereof,
Agent shall have received (i) certificates from the Secretary of State, or other
applicable Governmental Authority, of each of Arizona, Connecticut, the District
of Columbia, Nevada, New Jersey and Texas, indicating that Borrower Agent is
duly qualified as a foreign entity and in good standing in such
states/jurisdictions and (ii) a certificate from the Secretary of State of
California indicating that TTSR is duly qualified as a foreign entity and in
good standing in such state.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, each Borrower hereby grants to Agent, for itself and the ratable
benefit of Lenders, a continuing security interest in, a lien upon, and a right
of set off against, and hereby assigns to Agent, for itself and the ratable
benefit of Lenders, as security, all personal and real property and fixtures and
interests in property and fixtures of such Borrower, whether now owned or
hereafter acquired or existing, and wherever located (together with all other
collateral security for the Obligations at any time granted to or held or
acquired by Agent or any Lender, collectively, the "Collateral"), including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and
Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper (including all tangible and electronic
chattel paper);
(f) all instruments (including all promissory notes);
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
40
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts); provided, however, that in the case
of voting securities of any Subsidiary that is not incorporated under the laws
of the United States or any state, territory or other political subdivision
thereof, the pledge under this Section 5.1 shall not exceed sixty-five percent
(65%) of such voting securities and (ii) monies, credit balances, deposits and
other property of such Borrower now or hereafter held or received by or in
transit to Agent, any Lender or any of their respective Affiliates or at any
other depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise;
(l) all commercial tort claims, including, without limitation, those
identified on Schedule 5.2(g) hereto;
(m) the Life Insurance Policies and all proceeds thereof;
(n) to the extent not otherwise described above, all Receivables;
(o) all Records; and
(p) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Each Borrower irrevocably and unconditionally authorizes Agent
(or its agent) to file at any time and from time to time such financing
statements with respect to the Collateral naming Agent or its designee as the
secured party and such Borrower as debtor, as Agent may require, and including
any other information with respect to such Borrower or otherwise required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent
may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on,
prior to or after the date hereof. Each Borrower hereby ratifies and approves
all financing statements naming Agent or its designee as secured party and such
Borrower as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Agent prior to
the date hereof and ratifies and confirms the authorization of Agent to file
such financing statements (and amendments, if any). Each Borrower hereby
authorizes Agent to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In the event that the description of the
collateral in any financing statement naming Agent or its designee as the
secured party and any Borrower as debtor includes assets and properties of such
Borrower that do not at any time constitute Collateral, whether hereunder, under
any of the Financing Agreements or otherwise, the filing of such financing
statement shall nonetheless be deemed authorized by such Borrower to the extent
of the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral. In no event
shall any Borrower at any time file, or permit or cause to be filed, any
correction statement or termination statement
41
with respect to any financing statement (or amendment or continuation with
respect thereto) naming Agent or its designee as secured party and any Borrower
as debtor.
(b) No Borrower has any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth on
Schedule 5.2(b) hereto. In the event that any Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, such
Borrower shall promptly notify Agent thereof in writing. Promptly upon the
receipt thereof by or on behalf of any Borrower (including by any agent or
representative), such Borrower shall deliver, or cause to be delivered to Agent,
all tangible chattel paper and instruments that such Borrower may at any time
acquire, accompanied by such instruments of transfer or assignment duly executed
in blank as Agent may from time to time specify, in each case except as Agent
may otherwise agree. At Agent's option, each Borrower shall, or Agent may at any
time on behalf of any Borrower, cause the original of any such instrument or
chattel paper to be conspicuously marked in a form and manner acceptable to
Agent with the following legend referring to chattel paper or instruments as
applicable: "This [chattel paper] [instrument] is subject to the security
interest of The CIT Group/Business Credit, Inc., as Agent, and any sale,
transfer, assignment or encumbrance of this [chattel paper] [instrument]
violates the rights of such secured party."
(c) In the event that any Borrower shall at any time hold or acquire
an interest in any electronic chattel paper or any "transferable record" (as
such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent's request, each
Borrower shall take, or cause to be taken, such actions as Agent may reasonably
request to give Agent control of such electronic chattel paper under Section
9-105 of the UCC and control of such transferable record under Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect
in such jurisdiction.
(d) No Borrower has any deposit accounts as of the date hereof,
except as set forth in Schedule 5.2(d) hereto (which listing identifies each of
the deposit accounts at such banks to a retail store location of such Borrower
or otherwise describes the nature of the use of such deposit account by such
Borrower). No Borrower shall, directly or indirectly, after the date hereof
open, establish or maintain any deposit account unless each of the following
conditions is satisfied: (i) Agent shall have received not less than five (5)
Business Days prior written notice of the intention of such Borrower to open or
establish such account which notice shall specify in reasonable detail and
specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the bank at which such account is to be opened
or established, the individual at such bank with whom such Borrower is dealing
and the purpose of the account, (ii) the bank where such account is opened or
maintained shall be acceptable to Agent, and (iii) on or before the opening of
such deposit account, such Borrower shall, as Agent may specify, either (A)
deliver to Agent a Deposit Account Control Agreement with respect to such
deposit account duly authorized, executed and delivered by such Borrower and the
bank at which such deposit account is opened and maintained or (B) arrange for
Agent, for itself and the ratable benefit of Lenders, to become the customer of
the bank with respect to the deposit account on terms and conditions acceptable
to Agent.
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(e) No Borrower owns or holds, directly or indirectly, beneficially
or as record owner or both, any investment property, as of the date hereof, or
has any investment account, securities account, commodity account or other
similar account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in Schedule 5.2(e) hereto.
(i) In the event that any Borrower shall be entitled to or
shall at any time after the date hereof hold or acquire any certificated
securities, such Borrower shall promptly endorse, assign and deliver the same to
Agent, accompanied by such instruments of transfer or assignment duly executed
in blank as Agent may from time to time specify. If any securities, now or
hereafter acquired by any Borrower are uncertificated and are issued to such
Borrower or its nominee directly by the issuer thereof, such Borrower shall
immediately notify Agent thereof and shall, as Agent may specify, either (A)
cause the issuer to agree to comply with instructions from Agent as to such
securities, without further consent of such Borrower or such nominee, or (B)
arrange for Agent, for itself and the ratable benefit of Lenders, to become the
registered owner of the securities.
(ii) No Borrower shall, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (A) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of such Borrower to
open or establish such account which notice shall specify in reasonable detail
and specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the securities intermediary or commodity
intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Agent, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall, as Agent
may specify, either (1) execute and deliver, and cause to be executed and
delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Agent, for
itself and the ratable benefit of Lenders, to become the entitlement holder with
respect to such investment property on terms and conditions acceptable to Agent.
(f) No Borrower is the beneficiary of or otherwise entitled to any
right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth on Schedule 5.2(f) hereto.
In the event that any Borrower shall be entitled to or shall receive any right
to payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
such Borrower shall promptly notify Agent thereof in writing. Such Borrower
shall immediately, as Agent may specify, either (i) deliver, or cause to be
delivered to Agent, with respect to any such letter of credit, banker's
acceptance or similar instrument, the written agreement of the issuer and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit by such Borrower to Agent, for itself and the
43
ratable benefit of Lenders, and agreeing to make all payments thereon directly
to Agent, for the ratable benefit of Lender, or as Agent may otherwise direct or
(ii) cause Agent, for itself and the ratable benefit of Lenders, to become, at
Borrowers' expense, the transferee beneficiary of the letter of credit, banker's
acceptance or similar instrument (as the case may be).
(g) No Borrower has any commercial tort claims as of the date
hereof, except as set forth on Schedule 5.2(g) hereto. In the event that any
Borrower shall at any time after the date hereof have any commercial tort
claims, such Borrower shall promptly notify Agent thereof in writing, which
notice shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by such Borrower to
Agent, for itself and the ratable benefit of Lenders, of a security interest in
such commercial tort claim (and the proceeds thereof). In the event that such
notice does not include such grant of a security interest, the sending thereof
by such Borrower to Agent shall be deemed to constitute a grant of security
interest therein to Agent, for itself and the ratable benefit of Lenders. Upon
the sending of such notice, any commercial tort claim described therein shall
constitute part of the Collateral and shall be deemed included therein. Without
limiting the authorization of Agent provided in Section 5.2(a) hereof or
otherwise arising by the execution by Borrowers of this Agreement or any of the
other Financing Agreements, Agent is hereby irrevocably authorized from time to
time and at any time to file such financing statements naming Agent or its
designee as secured party and any Borrower as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, each Borrower shall promptly upon Agent's request, execute and
deliver, or cause to be executed and delivered, to Agent such other agreements,
documents and instruments as Agent may require in connection with such
commercial tort claim.
(h) No Borrower has any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in Schedule 5.2(h) hereto and except for goods
located in the United States in transit to a location of a Borrower permitted
herein in the ordinary course of Borrowers' business in the possession of the
carrier transporting such goods. In the event that any goods, documents of title
or other Collateral of any Borrower are at any time after the date hereof in the
custody, control or possession of any other person not referred to in Schedule
5.2(h) hereto, such Borrower shall promptly notify Agent thereof in writing.
Promptly upon Agent's request, such Borrower shall deliver to Agent a Collateral
Access Agreement duly authorized, executed and delivered by such person and such
Borrower.
(i) Each Borrower shall take any other actions reasonably requested
by Agent from time to time to cause the attachment, perfection and first
priority of, and the ability of Agent and the Lenders to enforce, the security
interests of Agent in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that such Borrower's signature thereon is required
therefor, (ii) causing Agent's name, for itself and in its capacity as agent for
Lenders, to be noted as secured party on any certificate of title for a titled
good if such notation is a condition to attachment, perfection or priority of,
or ability of Agent to enforce, the security interest of Agent and the Lenders
in such Collateral, (iii) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if compliance
with such provision is a condition to attachment, perfection or priority
44
of, or ability of Agent and the Lenders to enforce, the security interests of
Agent and the Lenders in such Collateral, (iv) obtaining the consents and
approvals of any Governmental Authority or third party, including, without
limitation, any consent of any licensor, lessor or other person obligated on
Collateral, and taking all actions required by any earlier versions of the UCC
or by other law, as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Agent's customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Borrower Agent each month a
statement setting forth the balance in Borrowers' loan account(s) maintained by
Agent for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Agent but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by each Borrower and
conclusively binding upon each Borrower as an account stated except to the
extent that Agent receives a written notice from Borrower Agent of any specific
exceptions of Borrowers thereto within thirty (30) days after the date such
statement has been mailed by Agent. Until such time as Agent shall have rendered
to Borrower Agent a written statement as provided above, the balance in
Borrowers' loan account(s) shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by Borrowers.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts") as Agent may specify, with such banks as are acceptable to
Agent into which Borrowers shall promptly deposit and direct their respective
account debtors to directly remit all payments on Receivables and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. Each
Borrower shall deliver, or cause to be delivered to Agent, a Depository Account
Control Agreement duly authorized, executed and delivered by each bank where a
Blocked Account is maintained as provided in Section 5.2 hereof or at any time
and from time to time Agent, for itself and the ratable benefit of Lenders, may
become bank's customer with respect to the Blocked Accounts and promptly upon
Agent's request, such Borrower shall execute and deliver such agreements or
documents as Agent may require in connection therewith. Each Borrower agrees
that all payments made to such Blocked Accounts or other funds received and
collected by Agent or any Lender, whether in respect of the Receivables, as
proceeds of Inventory or other Collateral or otherwise shall be treated as
payments to Agent and Lenders in respect of the Obligations and therefore shall
constitute the property of Agent and Lenders to the extent of the then
outstanding Obligations.
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(b) Borrowers shall establish and maintain, at their expense, check,
credit card, charge card and debit card processing and other such merchant
payments processing arrangements only with the Merchant Payment Processors set
forth in Schedule 6.3(b) hereto, and after prior written notice to Agent, with
such other Merchant Payment Processors as any Borrower may select which are
acceptable to Agent. Each Borrower shall irrevocably authorize and direct in
writing all current and future Merchant Payment Processors to remit all payments
due such Borrower under any Merchant Payment Agreement to the Blocked Account by
wire transfer on a daily basis or as otherwise directed by Agent. Such
authorizations and directions shall not be rescinded, revoked or modified
without the prior written consent of Agent and shall continue in full force and
effect until all Obligations are fully and indefeasibly paid and this Agreement
terminated.
(c) For purposes of calculating the amount of the Revolving Loans
available to Borrowers, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Agent of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Agent's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrowers' loan account(s) on such day, and if not, then on the next Business
Day. For the purposes of calculating interest on the Obligations, such payments
or other funds received will be applied (conditional upon final collection) to
the Obligations one (1) Business Day following the date of receipt of
immediately available funds by Agent in the Payment Account provided such
payments or other funds and notice thereof are received in accordance with
Agent's usual and customary practices as in effect from time to time and within
sufficient time to credit Borrowers' loan account(s) on such day, and if not,
then on the next Business Day.
(d) Each Borrower and its shareholders, directors, employees,
agents, Subsidiaries or other Affiliates shall, acting as trustee for Agent and
Lenders, receive, as the property of Agent and Lenders, any monies, checks,
notes, drafts, credit, charge or debit card sales drafts, credit, charge or
debit card sales, charge or debit slips, charge or debit receipts, or any other
payment relating to and/or proceeds from sales of Inventory or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to Agent.
In no event shall the same be commingled with any Borrower's own funds.
Borrowers agree to reimburse Agent and the Lenders on demand for any amounts
owed or paid to any bank at which a Blocked Account is established or any other
bank or person involved in the transfer of funds to or from the Blocked Accounts
arising out of Agent's or any Lender's payments to or indemnification of such
bank or person. The obligation of Borrowers to reimburse Agent and Lenders for
such amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Agent may designate from time to
time. Agent shall apply payments received or collected from a Borrower or for
the account of any Borrower (including the monetary proceeds of collections or
of realization upon any Collateral) as follows: first, to pay any fees,
indemnities or expense reimbursements then due to Agent or Lenders from
46
Borrowers; second, to pay interest due in respect of any Revolving Loans or the
Term Loan; third, to pay any interest due in respect of any Real Estate Loans;
fourth, to pay the outstanding principal balance of the Revolving Loans; fifth,
to pay principal then due in respect of the Real Estate Loans, if any; sixth, to
pay or prepay any other Obligations (other than, so long as no Event of Default
shall have occurred, the principal balance of any Real Estate Loans) whether or
not then due, in such order and manner as Agent determines. Notwithstanding the
foregoing, if an Event of Default shall have occurred and be continuing, Agent
may apply payments received or collected on account of the Obligations at such
times, in such order and in such amounts as Agent may determine in its sole and
reasonable discretion. Notwithstanding anything to the contrary contained in
this Agreement, (i) unless so directed by Borrower Agent, or unless a Default or
an Event of Default shall exist or have occurred and be continuing, Agent shall
not apply any payments which it receives to (A) any Eurodollar Rate Loans,
except (1) on the expiration date of the Interest Period applicable to any such
Eurodollar Rate Loans, or (2) in the event that there are no outstanding Prime
Rate Loans or (B) any Real Estate Loans not yet due and payable, and (ii) to the
extent any Borrower uses any proceeds of the Loans or Letter of Credit
Accommodations to acquire rights in or the use of any Collateral or to repay any
Indebtedness used to acquire rights in or the use of any Collateral, payments in
respect of the obligations shall be deemed applied first to the Obligations
arising from Loans and Letter of Credit Accommodations that were not used for
such purposes and second to the Obligations arising from Loans and Letter of
Credit Accommodations the proceeds of which were used to acquire rights in or
the use of any Collateral in the chronological order in which such Borrower
acquired such rights or use.
(b) At Agent's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers.
Borrowers shall make all payments to Agent and the Lenders on the Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Agent or any Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by such Person. Borrowers shall be
liable to pay to Agent and Lenders, and each does hereby indemnify and hold
Agent and each Lender harmless for the amount of any payments or proceeds
surrendered or returned. This Section 6.4 shall remain effective notwithstanding
any contrary action which may be taken by Agent or any Lender in reliance upon
such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
(c) Except as otherwise provided with respect to Defaulting Lenders,
aggregate principal payments and interest payments shall be apportioned ratably
among the Lenders (according to their applicable Pro Rata Shares) and payments
of the fees (other than fees designated for Agent's sole and separate account
and fees otherwise payable in accordance with the Fee Letter) shall, as
applicable, be apportioned ratably among the Lenders. All payments which may be
so applied shall be applied as set forth in Section 6.4(a) hereof.
47
6.5 Taxes.
(a) Any and all payments by or on behalf of any Borrower or any
Obligor hereunder and under any other Financing Agreement shall be made, in
accordance with Section 6.4, free and clear of and without deduction for any and
all Taxes. In addition, Borrowers agree to pay to the relevant Governmental
Authority, in accordance with applicable law, any Other Taxes.
(b) If any Borrower or any Obligor shall be required by law to
deduct or withhold in respect of any Taxes or Other Taxes from or in respect of
any sum payable hereunder to Agent or any Lender, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender (or Agent on behalf of such Lender) receives an amount equal to the sum
it would have received had no such deductions or withholdings been made;
(ii) such Person shall make such deductions and withholdings;
(iii) such Person shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) to the extent not paid to Agent and Lenders pursuant to
clause (i) above, such Person shall also pay to Agent or any Lender, at the time
interest is paid, all additional amounts which Agent or any Lender specifies as
necessary to preserve the after-tax yield such Lender would have received if
such Taxes or Other Taxes had not been imposed.
(c) Within thirty (30) days after the date of any payment by any
Borrower or any Obligor of Taxes or Other Taxes, such Person shall furnish to
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment reasonably satisfactory to Agent.
(d) Borrowers will indemnify Agent and each Lender (or Transferee)
for the full amount of Taxes and Other Taxes paid by Agent or such Lender (or
Transferee, as the case may be). If Agent or such Lender (or Transferee)
receives a refund in respect of any Taxes or Other Taxes for which Lender (or
Transferee) has received payment from any Borrower or any Obligor hereunder, so
long as no Default or Event of Default shall exist or have occurred and be
continuing, Agent or such Lender (as the case may be) shall credit to the loan
account(s) of Borrowers the amount of such refund plus any interest received
(but only to the extent of indemnity payments made, or additional amounts paid,
by any Borrower or any Obligor under this Section 6.5 with respect to the Taxes
or Other Taxes giving rise to such refund). If a Lender (or any Transferee)
claims a tax credit in respect of any Taxes for which it has been indemnified by
Borrowers or any Obligor pursuant to this Section 6.5, such Lender will apply
the amount of the actual dollar benefit received by such Lender as a result
thereof, as reasonably calculated by Lender and net of all expenses related
thereto, to the Loans. If Taxes or Other Taxes were not correctly or legally
asserted, Agent or such Lender shall, upon Borrower Agent's request and at
Borrowers' expense, provide such documents to Borrower Agent as Borrower Agent
may
48
reasonably request, to enable Borrowers to contest such Taxes or Other Taxes
pursuant to appropriate proceedings then available to Borrowers (so long as
providing such documents shall not, in the good faith determination of Agent,
have a reasonable likelihood of resulting in any liability of Agent or any
Lender).
(e) In the event any Transferee is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") such Non-U.S. Lender shall deliver to Borrower
Agent two (2) copies of either United States Internal Revenue Service Form 1001
or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S.
Federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", a Form W-8, or any subsequent versions
thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8,
a certificate representing that such Non-U.S. Lender is not a bank for purposes
of Section 881(c) of the Code, is not a ten (10%) percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of any Borrower or any Obligor
and is not a controlled foreign corporation related to any Borrower or any
Obligor (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from U.S. Federal withholding tax on payments by any Borrower or any Obligor
under this Agreement and the other Financing Agreements. Such forms shall be
delivered by any Transferee that is a Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of a Transferee that is a
Participant, on or before the date such Participant becomes a Transferee
hereunder) and on or before the date, if any, such Non-U.S. Lender changes its
applicable lending office by designating a different lending office (a "New
Lending Office"). In addition, a Non-U.S. Lender shall upon written notice from
Borrower Agent promptly deliver such new forms as are required by the Code or
the regulations issued thereunder to claim exemption from, or reduction in the
rate of, U.S. Federal withholding tax upon the obsolescence or invalidity of any
form previously delivered by such Non-U.S. Lender. Notwithstanding any other
provision of this Section 6.5(e), a Non-U.S. Lender shall not be required to
deliver any form pursuant to this Section 6.5(e) that such Non-U.S. Lender is
not legally able to deliver.
(f) Borrowers and Obligors shall not be required to indemnify any
Non-U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to subsections (a) or
(d) above to the extent that (i) the obligation to withhold amounts with respect
to United States Federal withholding tax was applicable on the date such
Non-U.S. Lender became a party to this Agreement (or, in the case of a
Transferee that is a Participant, on the date such Participant became a
Transferee hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S. Lender designated such New Lending Office with respect to a
Loan; provided, that, this subsection (f) shall not apply (A) to any Transferee
or New Lending Office that becomes a Transferee or New Lending Office as a
result of an assignment, participation, transfer or designation made at the
request of Borrowers (or Borrower Agent on their behalf) or Obligors and (B) to
the extent the indemnity payment or additional amounts any Transferee, acting
through a New Lending Office, would be entitled to receive (without regard to
this subsection (f)) do not exceed the indemnity payment or additional amounts
that the person making the assignment, participation or transfer to such
Transferee making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the
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obligation to pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Lender to comply with the provisions of subsection (e)
above.
6.6 Authorization to Make Loans. Agent and each Lender are authorized to
make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of a Borrower or other authorized person or, at the discretion of Agent
or any Lender, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount of
the requested Loan. Requests received after 11:00 a.m. Los Angeles time on any
day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, any Borrower when
deposited to the credit of any Borrower (or Borrower Agent on its behalf) or
otherwise disbursed or established in accordance with the instructions of any
Borrower (or Borrower Agent on its behalf) or in accordance with the terms and
conditions of this Agreement. In the event that any Loans are requested during
the existence of an Event of Default, as a condition to making such Loans (but
in no way obligating Agent or any Lender to in fact make such Loans), Borrowers
shall deliver to Agent a schedule of all proposed uses for such Loans, certified
by an officer of each Borrower as being true, correct and complete. Agent and
the Lenders may, in their discretion, refuse the make any Loans the proceeds of
which Agent believes will not be used for working capital purposes or will
otherwise be used for any purpose not permitted under the terms of this
Agreement. The fact that any Loans are made to Borrowers during an Event of
Default shall in no way be deemed a waiver or modification of any of the rights
and remedies (including, without limitation, those set forth in Section 10.2(g)
hereof) of Agent or any Lender set forth in this Loan Agreement or any Financing
Agreement.
6.7 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
provided by or on behalf of Lenders to Borrowers hereunder only for: (a)
payments to each of the persons listed in the disbursement direction letter
furnished by Borrowers to Agent on or about the date hereof and (b) costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing Agreements. All other Loans
made or Letter of Credit Accommodations provided by or on behalf of Lenders to
any Borrower pursuant to the provisions hereof shall be used by such Borrower
only for general operating, working capital and other proper corporate purposes
of such Borrower not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be
considered a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended.
6.8 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans; and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular
50
day shall be allocated among the Lenders entitled to such payments based on
their respective Pro Rata Shares and shall be distributed accordingly.
6.9 Sharing of Payments, Etc.
(a) Each Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim any Agent or
Lender may otherwise have, each Lender shall be entitled, at its option (but
subject, as among Agent and Lenders, to the provisions of Section 6.9(b)
hereof), to offset balances held by it for the account of any Borrower at any of
its offices, in dollars or in any other currency, against any principal of or
interest on any Loans owed to such Lender or any other amount payable to such
Lender hereunder, that is not paid when due (regardless of whether such balances
are then due to any Borrower), in which case it shall promptly notify Borrower
Agent and Agent thereof; provided, that, such Lender's failure to give such
notice shall not affect the validity thereof.
(b) Agent and Lenders agree that no Lender shall, except upon the
prior written consent of Agent, exercise any right of setoff, banker's lien or
counterclaim such Lender may have with respect to any property held by such
Lender for the account of any Borrower. If any Lender (including Agent) shall
obtain from any Borrower payment of any principal of or interest on any Loan
owing to it or payment of any other amount under this Agreement or any other
Financing Agreement through the exercise (in accordance with the terms hereof)
of any right of setoff, banker's lien or counterclaim or similar right or
otherwise (other than from Agent as provided herein), and, as a result of such
payment, such Lender shall have received more than its Pro Rata Share of the
principal of the Loans or more than its share of such other amounts then due
hereunder or thereunder by such Borrower to such Lender than the percentage
thereof received by any other Lender, it shall promptly pay to Agent, for the
benefit of Lenders, the amount of such excess and simultaneously purchase from
such other Lenders a participation in the Loans or such other amounts,
respectively, owing to such other Lenders (or such interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all Lenders shall share the benefit of
such excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) in accordance with their respective
Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall
make appropriate adjustments among themselves (by the resale of participation
sold or otherwise) if such payment is rescinded or must otherwise be restored.
(c) Each Borrower agrees that any Lender so purchasing a
participation pursuant to subsection (b) above (or direct interest) may
exercise, in a manner consistent with this Section, all rights of setoff,
banker's lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans or other amounts (as
the case may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
Indebtedness or obligation of any Borrower. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the extent
practicable, assign
51
such rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
6.10 Settlement Procedures.
(a) In order to administer the credit facility provided hereunder in
an efficient manner and to minimize the transfer of funds between Agent and
Lenders, Agent may, subject to the terms of this Section, make available, on
behalf of Lenders, the full amount of the Loans requested or charged to
Borrowers' loan account(s) or otherwise to be advanced by Lenders pursuant to
the terms hereof, without any requirement of prior notice to Lenders of the
proposed Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders as
provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of the date of
each settlement computation; provided, that, Agent retains the absolute right at
any time or from time to time to make the above described adjustments at
intervals more frequent than weekly. Agent shall deliver to each of the Lenders
after the end of each week, or at such lesser period or periods as Agent shall
determine, a summary statement of the amount of outstanding Loans for such
period (such week or lesser period or periods being hereinafter referred to as a
"Settlement Period"). If the summary statement is sent by Agent and received by
a Lender prior to 12:00 p.m. Los Angeles time, then such Lender shall make the
settlement transfer described in this Section by no later than 2:00 p.m. Los
Angeles time on the date of receipt. If, as of the end of any Settlement Period,
the amount of a Lender's Pro Rata Share of the outstanding Loans is more than
such Lender's Pro Rata Share of the outstanding Loans as of the end of the
previous Settlement Period, then such Lender shall forthwith (but in no event
later than the time set forth in the preceding sentence) transfer to Agent by
wire transfer in immediately available funds the amount of the increase.
Alternatively, if the amount of a Lender's Pro Rata Share of the outstanding
Loans in any Settlement Period is less than the amount of such Lender's Pro Rata
Share of the outstanding Loans for the previous Settlement Period, Agent shall
forthwith transfer to such Lender by wire transfer in immediately available
funds the amount of the decrease. The obligation of each of the Lenders to
transfer such funds and effect such settlement shall be irrevocable and
unconditional and without recourse to or warranty by Agent. Each of Agent and
Lenders agrees to ▇▇▇▇ its books and records at the end of each Settlement
Period to show at all times the dollar amount of its Pro Rata Share of the
outstanding Loans and Letter of Credit Accommodations. Each Lender shall only be
entitled to receive interest on its Pro Rata Share of the Loans to the extent
such Loans have been funded by such Lender. Because the Agent on behalf of
Lenders may be advancing and/or may be repaid Loans prior to the time when
Lenders will actually advance and/or be repaid such Loans, interest with respect
to Loans shall be allocated by Agent in accordance with the amount of Loans
actually advanced by and repaid to each Lender and the Agent and shall accrue
from and including the date such Loans are so advanced to but excluding the date
such Loans are either repaid by any Borrower or actually settled with the
applicable Lender as described in this Section.
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(c) To the extent that Agent has made any such amounts available
and the settlement described above shall not yet have occurred, upon repayment
of any Loans by any Borrower, Agent shall first apply such amounts repaid
directly to any amounts made available any Agent pursuant to this Section. In
lieu of weekly or more frequent settlements, Agent may any time require each
Lender to provide Agent with immediately available funds representing Pro Rata
Share of each Loan, prior to Agent's disbursement of such Loan to any Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Loan Commitment of any Lender
be increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is not funding a particular Loan to a Borrower
pursuant to this Section on any day, Agent may assume that each Lender will make
available to Agent such Lender's Pro Rata Share of the Loan requested or
otherwise made on such day and Agent may, in its discretion, but shall not be
obligated to, cause a corresponding amount to be made available to Borrowers on
such day. If Agent makes such corresponding amount available to Borrowers and
such corresponding amount is not in fact made available to Agent by such Lender,
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon for each day from the date such payment
was due until the date such amount is paid to Agent at the Prime Rate based
interest rate for Revolving Loans set forth in Section 3.1 hereof. During the
period in which such Lender has not paid such corresponding amount to Agent,
notwithstanding anything to the contrary contained in this Agreement or any the
other Financing Agreements, the amount so advanced by Agent to any Borrower
shall, for purposes hereof, be a Loan made by Agent for its own account. Upon
any such failure by a Lender to pay Agent, Agent shall promptly thereafter
notify Borrower Agent of such failure and Borrowers shall immediately pay such
corresponding amount to Agent for its own account. A Lender who fails to pay
Agent its Pro Rata Share of any Loans made available by the Agent on such
Lender's behalf, or any Lender who fails to pay any other amount owing to Agent,
is a "Defaulting Lender". Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by or on behalf of any Borrower or any
Obligor to Agent for the Defaulting Lender's benefit, nor shall a Defaulting
Lender be entitled to the sharing of any payments hereunder. Amounts payable to
a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, relend to any Borrower the amount of all such
payments received or retained by it for the account of such Defaulting Lender.
For purposes of voting or consenting to matters with respect to this Agreement
and the other Financing Agreements and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to a Lender and such Defaulting Lender's
Loan Commitment shall be deemed to be zero (0). This Section shall remain
effective with respect to a Defaulting Lender until such default is cured. The
operation of this Section shall not be construed to increase or otherwise affect
the Loan Commitment of any Lender, or relieve or excuse the performance by any
Borrower or any Obligor of their duties and obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Loan Commitment hereunder or
53
to prejudice any rights that any Borrower may have against any Lender as a
result of any default by any Lender hereunder in fulfilling its Loan Commitment.
6.11 Appointment of Borrower Agent for Requesting Loans and Receipts of
Loans and Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes
Borrower Agent as its agent to request and receive Loans and Letter of Credit
Accommodations pursuant to this Agreement and the other Financing Agreements
from Agent or any Lender in the name or on behalf of such Borrower. Subject to
the terms and conditions contained herein, Agent or Lenders may disburse the
Loans to any bank account of a Borrower or otherwise make such Loans to a
Borrower and provide such Letter of Credit Accommodations to a Borrower as
Borrower Agent may designate or direct, without notice to any other Borrower or
any Obligor.
(b) Borrower Agent hereby accepts the appointment by Borrowers to
act as the agent of Borrowers pursuant to this Section 6.11. Borrower Agent
shall ensure that the disbursement of any Loans to each Borrower requested by or
paid to Borrower Agent, or the issuance of any Letter of Credit Accommodations
for a Borrower hereunder, shall be paid to or for the account of such Borrower.
(c) Each Borrower hereby irrevocably appoints and constitutes
Borrower Agent as agent to receive statements on account and all other notices
from Agent or any Lender with respect to the Obligations or otherwise under or
in connection with this Agreement and the other Financing Agreements.
(d) No purported termination of the appointment of Borrower Agent
as agent as aforesaid shall be effective, except after ten (10) Business Days'
prior written notice to Agent.
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
7.1 Collateral Reporting.
(a) Each Borrower agrees to execute and deliver to Agent, from
time to time, solely for its convenience in maintaining a record of the
Collateral, the loans and the Borrowing Base, such written statements,
accounting reports, schedules and other information and documentation in the
form and with such frequency as Agent may require, in its reasonable credit
judgment. Without limiting the generality of the foregoing or any other
provision hereof, Borrowers shall deliver to Agent:
(i) as set forth in Exhibit F hereto, the reports and other
information set forth therein; and
(ii) on a monthly basis (by the 20th day of each month),
with respect to the immediately preceding month, reports on sales and use tax
collections, deposits and payments, including monthly sales and use tax accruals
and a certificate from an authorized officer of such Borrower representing that
such Borrower has made payment of sales and use taxes during such month or, at
Agent's request, other evidence of such payment.
54
Notwithstanding the foregoing, upon the occurrence and during the continuance of
an Event of Default, Borrowers shall provide the reports listed above on a
weekly (by the 3rd Business Day of each week) or more frequent basis.
(b) If any of any Borrower's records or reports of the Collateral
are prepared or maintained by an accounting service, contractor, shipper or
other agent, such Borrower hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to Agent and to follow Agent's instructions with respect to further
services at any time that an Event of Default exists or has occurred and is
continuing.
7.2 Accounts Covenants.
(a) Each Borrower shall notify Agent promptly of: (i) the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, Merchant Payment Processor, or any disputes with any such Persons, or
any settlement, adjustment or compromise with respect to the foregoing; and (ii)
all material adverse information relating to the financial condition of any
account debtor or Merchant Payment Processor. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor or Merchant Payment Processor without Agent's consent, except in the
ordinary course of Borrowers' business in accordance with practices and policies
previously disclosed in writing to Agent and except as set forth in the
schedules delivered to Agent pursuant to Section 7.1(a) above. So long as no
Event of Default exists or has occurred and is continuing, a Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor or Merchant Payment Processor. At any time that an Event of
Default exists or has occurred and is continuing, Agent shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or Merchant Payment Processor or
grant any credits, discounts or allowances.
(b) Each Borrower shall notify Agent promptly of:
(i) any notice of a material default by any Borrower under any
of the Merchant Payment Agreements or of any default which might result in a
Merchant Payment Processor ceasing to make payments or suspending payments to
any Borrower;
(ii) any notice from any Merchant Payment Processor that such
Person is ceasing or suspending, or will cease or suspend, any present or future
payments due or to become due to any Borrower from such Person, or that such
Person is terminating or will terminate any of the Merchant Payment Agreements;
and
(iii) the failure of any Borrower to comply with any material
terms of the Merchant Payment Agreements or any terms thereof which might result
in a Merchant Payment Processor ceasing or suspending payments to any Borrower.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Agent or schedule thereof delivered to Agent shall be true
and complete, (ii) no payments shall be made thereon except payments immediately
delivered to Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor or Merchant Payment Processor except as
55
reported to Agent in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
Borrowers' business in accordance with practices and policies previously
disclosed to Agent, (iv) there shall be no setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Agent in accordance with the terms of this Agreement, and
(v) none of the transactions giving rise thereto will violate any applicable
foreign, Federal, State or local laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(d) Agent shall have the right at any time or times, in Agent's
name or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory:
(a) each Borrower shall at all times maintain inventory records
reasonably satisfactory to Agent, keeping correct and accurate records itemizing
and describing the kind, type, quality and quantity of Inventory, the Cost
therefor, the retail sales price thereof, and daily withdrawals therefrom and
additions thereto;
(b) each Borrower shall conduct a physical count of its Inventory
on a semi-annual basis, but at any time or times as Agent, in good faith, may
request on or after an Event of Default, and promptly following such physical
inventory shall supply Agent with a report in the form and with such specificity
as may be reasonably satisfactory to Agent concerning such physical count;
provided, however, during any Availability Cure Period, each Borrower shall
conduct such physical counts of its Inventory and deliver such reports to Agent
on a quarterly basis if Agent, in good faith, so requests;
(c) no Borrower shall remove any Inventory from the locations set
forth or permitted herein, without the prior written consent of Agent, except
(i) for sales of Inventory in the ordinary course of such Borrower's business
(which shall be deemed to include internet sales), (ii) to move Inventory
directly from one location set forth or permitted herein to another such
location, (iii) for Inventory shipped from the manufacturer thereof to such
Borrower which is in transit to the locations set forth or permitted herein, and
(iv) for Inventory sold at non-Borrower locations in the ordinary course of
business not to exceed $1,000,000 for any one location or $2,000,000 in the
aggregate at any one time;
(d) Borrowers agree to provide to Agent, on a quarterly basis, a
full appraisal of the Inventory, performed by an appraiser reasonably acceptable
to Agent, at the sole cost of Borrowers, indicating the Net Orderly Liquidation
Value of the Inventory; provided, however, if at any time Excess Availability is
less than $35,000,000, then Borrower's shall also provide to Agent, on a monthly
basis, a desktop appraisal, performed by an appraiser reasonably acceptable to
Agent, at the sole cost of Borrowers, indicating the Net Orderly Liquidation
Value of the Inventory which monthly desktop appraisals shall be required until
such time as Excess Availability is $35,000,000 or more for ninety (90)
consecutive days;
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(e) each Borrower agrees to safeguard, protect and hold all
Inventory for Agent's account and make no disposition thereof except in the
ordinary course of its business, as herein provided;
(f) each Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory;
(g) each Borrower agrees that Inventory will be sold and shipped
by such Borrower to its customers only in the ordinary course of such Borrower's
business, and then only on open account and on terms currently being extended by
such Borrower to its customers;
(h) each Borrower shall use reasonable efforts to keep the
Inventory in good and marketable condition; and
(i) no Borrower shall acquire or accept any Inventory on
consignment or approval (i) if any such item of Inventory has the same SKU as
any item of Inventory otherwise sold or held for sale by such Borrower or (ii)
without prior written notice to Agent and the specific identification of such
Inventory (including, without limitation, location, type of Inventory and name
of consignor) with respect thereto; provided, however, that such notice is not
required if such Inventory is consigned to Borrower Agent and would not cause
the total amount of consigned Inventory at any one retail location of Borrower
Agent to exceed $100,000 or the aggregate amount of consigned Inventory at all
of Borrower Agent's retail locations to exceed $1,200,000.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property:
(a) each Borrower agrees, at its own cost and expense, to keep the
Equipment and Real Property in as good and substantial repair and condition as
the same is now or at the time the lien and security interest granted herein, or
in any other Financing Agreement, shall attach thereto, reasonable wear and tear
excepted, making any and all repairs and replacements when and where necessary;
(b) each Borrower agrees to safeguard, protect and hold all
Equipment and Real Property in accordance with the terms hereof and subject to
the security interests granted to Agent under this Agreement and the other
Financing Agreements;
(c) each Borrower agrees that the Equipment will only be used by
such Borrower in its business and will not be held for sale or lease;
(d) no Borrower shall remove any Equipment having a fair market
value of $20,000 for any item or $500,000 in the aggregate from the Collateral
locations referenced or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of the business of
such Borrower or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of motor
vehicles used by or for the benefit of such Borrower in the ordinary course of
business;
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(e) each Borrower agrees to safeguard, protect and hold all
Equipment and Real Property in accordance with the terms hereof and subject to
the security interests granted to Agent under this Agreement and the other
Financing Agreements; and
(f) if an Event of Default has occurred and is continuing, no
Borrower may, except upon Agent's prior written consent, sell, exchange or
otherwise dispose of any Equipment; provided, however, a Borrower shall not be
barred from consummating an Equipment disposition for which it is legally
obligated (pursuant to a written, binding contract under which such failure
would be a material breach thereof) as of the date of such Event of Default.
7.5 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Agent (and all Persons designated by Agent) as such Borrower's true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower's or Agent's
name, to: (a) at any time an Event of Default exists or has occurred and is
continuing (i) demand payment on Receivables or other Collateral, (ii) enforce
payment of Receivables by legal proceedings or otherwise, (iii) exercise all of
such Borrower's rights and remedies to collect any Receivable or other
Collateral, (iv) sell or assign any Receivable upon such terms, for such amount
and at such time or times as Agent deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any
Receivable, (vii) prepare, file and sign such Borrower's name on any proof of
claim in bankruptcy or other similar document against an account debtor or other
obligor in respect of any Receivables or other Collateral, (viii) notify the
post office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Agent, and open and dispose of all mail
addressed to such Borrower and handle and store all mail relating to the
Collateral; provided that, upon completion of removing Collateral from such
mail, Agent promptly forwards such mail to such Borrower; and (ix) do all acts
and things which are necessary, in Agent's determination, to fulfill such
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment in
respect of Receivables or constituting Collateral or otherwise received in or
for deposit in the Blocked Accounts or otherwise received by Agent or any
Lender, (ii) have access to any lockbox or postal box into which remittances
from account debtors or other obligors in respect of Receivables or other
proceeds of Collateral are sent or received, (iii) endorse such Borrower's name
upon any items of payment in respect of Receivables or constituting Collateral
or otherwise received by or on behalf of Agent or any Lender and deposit the
same in Agent's or a Lender's account for application to the Obligations, (iv)
endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Receivable or any
goods pertaining thereto or any other Collateral, including any warehouse or
other receipts, or bills of lading and other negotiable or non-negotiable
documents, (v) clear Inventory the purchase of which was financed with Letter of
Credit Accommodations through U.S. Customs or foreign export control authorities
in such Borrower's name, Agent's name or the name of Agent's designee, and to
sign and deliver to customs officials powers of attorney in such Borrower's name
for such purpose, and to complete in such Borrower's or Agent's name, any order,
sale or transaction, obtain the necessary documents in connection therewith and
collect the proceeds thereof, (vi) sign such Borrower's name on any verification
of Receivables and notices thereof to account debtors or any secondary obligors
or other obligors in respect thereof. Each Borrower hereby releases Agent and
each Lender and its officers, employees and
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designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Agent's or such Lender's own gross negligence or willful
misconduct as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.
7.6 Right to Cure. Agent may, at its option, (a) upon notice to
Borrower Agent, cure any default by any Borrower under any material agreement
with a third party that affects the Collateral, its value or the ability of
Agent or any Lender to collect, sell or otherwise dispose of the Collateral or
the rights and remedies of Agent or any Lender therein or the ability of such
Borrower to perform its obligations hereunder or under the other Financing
Agreements, (b) pay or bond on appeal any judgment entered against any Borrower,
(c) discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (d) pay any amount,
incur any expense or perform any act which, in Agent's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto. Agent and Lenders may add any
amounts so expended to the Obligations and charge Borrowers' account(s)
therefor, such amounts to be repayable by Borrowers on demand. Agent and
Lenders shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
any Borrower. Any payment made or other action taken by Agent or any Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designees shall have complete
access to all of each Borrower's premises during normal business hours and after
notice to Borrower Agent, or at any time and without notice to any Borrower if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of each Borrower's
books and records, including the Records, and (b) such Borrower shall promptly
furnish to Agent such copies of such books and records or extracts therefrom as
Agent may request, and (c) Agent or its designee may use during normal business
hours such of such Borrower's personnel, equipment, supplies and premises as may
be reasonably necessary for the foregoing and if an Event of Default exists or
has occurred and is continuing for the collection of Receivables and realization
of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Agent and Lenders the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and providing Letter of Credit Accommodations to Borrowers:
8.1 Corporate Existence; Power and Authority. Except as set forth on
Schedule 8.1 hereto, each Borrower is an entity duly organized and in good
standing under the laws of its state of organization and is duly qualified as a
foreign entity and in good standing in the states or jurisdictions where the
nature and extent of the business transacted by such Borrower or the ownership
of assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a Material Adverse Effect. The
execution, delivery and
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performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within each
Borrower's corporate powers, (b) have been duly authorized, (c) are not in
contravention of law or the terms of any Borrower's certificate of
incorporation, by-laws, certificate of organization, operating agreement or
other organizational documentation, or any indenture, agreement or undertaking
to which any Borrower is a party or by which any Borrower or its property are
bound and (d) will not result in the creation or imposition of, or require or
give rise to any obligation to grant, any lien, security interest, charge or
other encumbrance upon any property of any Borrower other than the lien in favor
of Agent for the benefit of the Lenders contemplated hereby. This Agreement and
the other Financing Agreements constitute legal, valid and binding obligations
of each Borrower enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditor rights generally or by general
principles of equity.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of each Borrower is as set forth on the
signature pages of this Agreement. No Borrower has, during the past five years,
been known by or used by any other corporate or fictitious name or been a party
to any merger or consolidation, or acquired all or substantially all of the
assets of any Person, or acquired any of its property or assets out of the
ordinary course of business, except as set forth in Schedule 8.2(a) hereto.
(b) Each Borrower is an organization of the type and organized in
the jurisdiction set forth in Schedule 8.2(b) hereto. Schedule 8.2(b) hereto
accurately sets forth the organizational identification number of each Borrower
or accurately states that such Borrower has none and accurately sets forth the
federal employer identification number of such Borrower.
(c) The chief executive office and mailing address of each
Borrower and each Borrower's Records concerning Accounts are located only at the
address identified as such in Schedule 8.2(c) hereto and its only other places
of business and the only other locations of Collateral, if any, are the
addresses set forth in Schedule 8.2(c) hereto, subject to the right of a
Borrower to establish new locations in accordance with Section 9.2 below.
Schedule 8.2(c) hereto correctly identifies any of such locations which are not
owned by such Borrower and sets forth (i) the owners and /or operators thereof
and (ii) whether such location is a "store within a store" or other such
space-sharing arrangement with a third party retailer, including, without
limitation, all WOW store locations.
8.3 Financial Statements; No Material Adverse Effect. All financial
statements relating to any Borrower which have been or may hereafter be
delivered by any Borrower to Agent or any Lender have been prepared in
accordance with GAAP (except as to any interim financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present the financial condition and the results of
operation of such Borrower or Borrowers as at the dates and for the periods set
forth therein. Except as disclosed in any interim financial statements furnished
by any Borrower to Agent or any Lender prior to the date of this Agreement, no
event has occurred since the date of the most recent audited financial
statements furnished by Borrowers to Agent or any Lender prior to the date of
this Agreement which could have a Material Adverse Effect.
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8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Agent, for itself and the ratable benefit of Lenders, under
this Agreement and the other Financing Agreements constitute valid and perfected
first priority liens and security interests in and upon the Collateral subject
only to the liens indicated on Schedule 8.4 hereto and the other liens permitted
under Section 9.8 hereof. Each Borrower has good and marketable fee simple title
to or valid leasehold interests in all of its Real Property and good, valid and
merchantable title to all of its other properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Agent, for itself and the ratable benefit of
Lenders, and such others as are specifically listed on Schedule 8.4 hereto or
permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Each Borrower has paid or caused
to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid federal, state, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed. Without limiting
the generality of any of the foregoing, each Borrower has paid or remitted all
sales taxes which it is required to pay or remit, except to the extent that
nonpayment would not have a Material Adverse Effect and to the extent that such
taxes are being challenged by appropriate legal proceedings and for which
adequate reserves are maintained by such Borrower in accordance with GAAP.
8.6 Litigation. Except as set forth in Schedule 8.6 hereto, there are
no present investigations by any Governmental Authority pending, or to the
knowledge of each Borrower threatened, against or affecting any Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the knowledge of each Borrower threatened, against any
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which, if adversely determined against such
Borrower would likely have a Material Adverse Effect or would result in an Event
of Default.
8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth on Schedule 8.7 hereto, no Borrower is, in any material respect, in
default under, or in violation of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound and each Borrower is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, federal, state or local
Governmental Authority.
8.8 Environmental Compliance.
(a) No Borrower or any Subsidiary of any Borrower has generated,
used, stored, treated, transported, manufactured, handled, produced or disposed
of any Hazardous Materials, on or off its premises (whether or not owned by it)
in any manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar
61
authorization thereunder and the operations of each Borrower and each Borrower's
Subsidiaries complies in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other person nor is any pending or
to the knowledge of each Borrower threatened, with respect to any non-compliance
with or violation of the requirements of any Environmental Law by any Borrower
or any Subsidiary of any Borrower or the release, spill or discharge, threatened
or actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects any
Borrower or its business, operations or assets or any properties at which any
Borrower has transported, stored or disposed of any Hazardous Materials.
(c) Each Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of such Borrower under any Environmental
Law and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in material compliance with the applicable
provisions of ERISA, the Code and other federal or state law. Each Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and to the knowledge of
each Borrower, nothing has occurred which would cause the loss of such
qualification. Each Borrower and its ERISA Affiliates have made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending, or to the knowledge of each Borrower,
threatened, claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) no Borrower or any of its ERISA Affiliates have incurred or
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) no Borrower or any of its ERISA Affiliates have incurred or
reasonably expect to incur, any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) no Borrower or any of its ERISA Affiliates have engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
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8.10 Intellectual Property. Each Borrower owns or licenses or otherwise
has the right to use all Intellectual Property necessary for the operation of
its business as presently conducted or proposed to be conducted. As of the date
hereof, no Borrower has any Intellectual Property registered, or subject to
pending applications, in the United States Patent and Trademark Office, United
States Copyright Office, or any similar office or agency in the United States,
any State thereof, any political subdivision thereof or in any other country,
other than those described in Schedule 8.10 hereto and has not granted any
licenses with respect thereto other than as set forth in Schedule 8.10 hereto.
No event has occurred which permits or would permit after notice or passage of
time or both, the revocation, suspension or termination of such rights. To the
knowledge of each Borrower (i) no slogan or other advertising device, product,
process, method, substance or other Intellectual Property or goods bearing or
using any Intellectual Property presently contemplated to be sold by or employed
by any Borrower infringes any patent, trademark, servicemark, tradename,
copyright, license or other Intellectual Property owned by any other Person
presently and (ii) except as set forth on Schedule 8.10 hereto, no claim or
litigation is pending or threatened against or affecting any Borrower contesting
its right to sell or use any such Intellectual Property which if adversely
determined would have a Material Adverse Effect. Schedule 8.10 hereto sets forth
all of the agreements or other arrangements of each Borrower pursuant to which
any Borrower has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of any Borrower as in effect on the date hereof
(collectively, together with such agreements or other arrangements as may be
entered into by any Borrower after the date hereof, collectively, the "License
Agreements" and individually, a "License Agreement"). No trademark, servicemark
or other Intellectual Property at any time used by any Borrower which is owned
by another person, or owned by any Borrower subject to any security interest,
lien, collateral assignment, pledge or other encumbrance in favor of any person
other than Agent, for itself and the ratable benefit of the Lenders, is affixed
to any Eligible Inventory, except to the extent permitted under the term of the
License Agreements.
8.11 Corporate Structure; Subsidiaries; Affiliates; Capitalization;
Solvency.
(a) Attached hereto as Schedule 8.11 is a true and correct
organizational chart of Parent, all of its direct and indirect Subsidiaries
(including all Borrowers and Obligors) and all direct and indirect Subsidiaries
of each Borrower and each Obligor with assets in excess of Ten Thousand Dollars
($10,000). None of Parent, any Borrower or any Obligor has any Subsidiaries with
assets in excess of Ten Thousand Dollars ($10,000) except as set forth on
Schedule 8.11 hereto.
(b) No Borrower is engaged in any joint venture or partnership
except as set forth in Schedule 8.11 hereto, subject to the right of such
Borrower to form or acquire Subsidiaries in accordance with Section 9.10 hereof.
(c) Each Borrower is the record and beneficial owner of all of the
issued and outstanding shares of Capital Stock of each of the Subsidiaries
listed in Schedule 8.11 hereto as being owned by such Borrower and there are no
proxies, irrevocable or otherwise, with respect to such shares and no equity
securities of any of such Subsidiaries are or may become required to be issued
by reason of any options, warrants, rights to subscribe to, calls or commitments
of any
63
kind or nature and there are no contracts, commitments, understandings or
arrangements by which any such Subsidiary is or may become bound to issue
additional shares of it Capital Stock or securities convertible into or
exchangeable for such shares.
(d) The issued and outstanding shares of Capital Stock of each
Borrower are directly and beneficially owned and held by the persons indicated
in Schedule 8.11 hereto, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as disclosed in writing to
Agent prior to the date hereof or authorized under Section 9.8 hereof.
(e) Each Borrower is Solvent and will continue to be Solvent after
the creation of the Obligations, the security interests of Agent, for itself and
the ratable benefit of Lenders, and the other transaction contemplated
hereunder.
8.12 Labor Disputes.
(a) No Borrower has any collective bargaining or similar
agreements between or applicable to such Borrower and any union, labor
organization or other bargaining agent in respect of the employees of such
Borrower on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or, to the knowledge of each Borrower, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against any
Borrower or, to the knowledge of each Borrower, threatened against it, and (ii)
no significant strike, labor dispute, slowdown or stoppage is pending against
any Borrower or, to the knowledge of each Borrower, threatened against any
Borrower.
8.13 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of any
Borrower permitted hereunder as in effect on the date hereof, there are no
contractual or consensual restrictions on any Borrower or any of its
Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or
other assets (i) between such Borrower and any of its Subsidiaries or (ii)
between any Subsidiaries of such Borrower or (b) the ability of such Borrower or
any of its Subsidiaries to incur Indebtedness or grant security interests to
Agent, for itself and the ratable benefit of Lenders, in the Collateral.
8.14 Material Contracts, etc.
(a) Schedule 8.14(a) hereto sets forth all Material Contracts to
which each Borrower is a party or is bound as of the date hereof. Each Borrower
has delivered true, correct and complete copies of such Material Contracts to
Agent on or before the date hereof. No Borrower is in breach of or in default
under any Material Contract and has not received any notice of the intention of
any other party thereto to terminate any Material Contract.
(b) Each Borrower has paid all amounts required to be paid by it
with respect to its leased facilities and is not in breach of any lease or other
such agreement with respect to such locations except (i) as set forth on
Schedule 8.14(b) hereto and (ii) for nonpayments and breaches (A) which are not
likely to result in the termination of such lease or agreement or (B) of
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which such Borrower has promptly notified Agent in writing (which notice shall
include a reasonably detailed description of such breach or nonpayment and the
actions being taken by the lessor, if known, and such Borrower with respect
thereto).
8.15 Payable Practices. No Borrower has made any material change in the
historical accounts payable practices from those in effect immediately prior to
the date hereof.
8.16 Genuineness of Accounts. Each Account is based on an actual and
bona fide sale and delivery of goods or rendition of services to customers, made
by a Borrower in the ordinary course of its business. Except as set forth in
Schedule 8.16 hereto, Inventory being sold and the Accounts being created are
the exclusive property of Borrowers. The invoices evidencing Accounts and the
receipts or other documents evidencing Merchant Payment Receivables are in the
name of a Borrower.
8.17 Owned Real Property. No Borrower or Obligor is the direct or
indirect owner of any Real Property except as set forth on Schedule 8.17 hereto,
as Borrower Agent may amend such Schedule from time to time during the term
hereof.
8.18 Cash Transport Services. No Borrower uses any armored car or other
cash transport services except as set forth on Schedule 8.18 hereto, which
schedule sets forth the name, address and account information with respect to
each such service provider.
8.19 Life Insurance Policies. Except for the Life Insurance Policies,
no Borrower owns or is the beneficiary of any life insurance policies which are
not subject to a pledge in favor of a Person other than Agent. As of the date
hereof, the aggregate cash surrender value of the Life Insurance Policies is
$254,541.99.
8.20 Accuracy and Completeness of Information. All information
furnished by or on behalf of any Borrower in writing to Agent or any Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on any
schedules hereto or thereto, is true and correct in all material respects on the
date as of which such information is dated or certified and, with respect to
financial and Collateral information provided by a Borrower, its agents or
attorneys, does not omit any material fact necessary in order to make such
information not misleading; provided, however, that Borrowers make no
representations or warranties to Agent or any Lender that any financial or other
projection or forecast provided by or on behalf of any Borrower to Agent or any
Lender will be achieved or that any deviation from such projection or forecast
will not be material and adverse. No event or circumstance has occurred which
has had or could reasonably be expected to have a Material Adverse Effect which
has not been fully and accurately disclosed to Agent and Lenders in writing.
8.21 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent and Lenders. The
representations and
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warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which any Borrower shall now or hereafter give, or
cause to be given, to Agent and Lenders.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower shall at all times preserve, renew and keep in
full, force and effect its corporate existence and rights and franchises with
respect thereto and maintain in full force and effect all permits, licenses,
trademarks, tradenames, approvals, authorizations, leases and contracts
necessary to carry on the business as presently or proposed to be conducted
except where the failure to take any of the foregoing actions is not likely to
have a Material Adverse Effect.
(b) No Borrower shall change its name unless each of the following
conditions is satisfied: (i) Agent shall have received not less than thirty (30)
days prior written notice from such Borrower of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Agent shall have received a copy of the amendment to the Certificate of
Incorporation of such Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of such
Borrower as soon as it is available.
(c) No Borrower shall change its chief executive office or its
mailing address, type of organization, organizational identification number (or
if it does not have one, shall not acquire one), jurisdiction of organization or
other legal structure unless Agent shall have received not less than thirty (30)
days' prior written notice from such Borrower of such proposed change, which
notice shall set forth such information with respect thereto as Agent may
require and Agent shall have received such agreements or other documentation as
Agent may reasonably require in connection therewith.
9.2 New Collateral Locations. Any Borrower may only relocate an
existing location within the continental United States provided (a) such
Borrower gives Agent thirty (30) days prior written notice from such Borrower of
such intended relocation, (b) such Borrower obtains the prior written consent of
Agent with respect to such relocation, which consent shall be granted or
withheld in Agent's reasonable credit judgment based on a review of all matters
related thereto, (c) such Borrower executes and delivers, or causes to be
executed and delivered, to Agent such agreements, documents, and instruments as
Agent may deem necessary or desirable to protect Agent's and the Lenders'
interests in the Collateral at such location (including, without limitation,
Collateral Access Agreements and/or leasehold mortgages) or, in the alternative,
Agent may apply an Availability Reserve accordance with the terms of this
Agreement, and (d) such relocation does not cause the number of relocations by
both Borrowers to exceed 10 relocations in any fiscal year.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, and shall cause each of its Subsidiaries
to, at all times, comply in all material respects with all laws, rules,
regulations, licenses, permits,
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approvals and orders applicable to it and duly observe all requirements of any
foreign, Federal, State or local Governmental Authority, including ERISA, the
Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including all of the Environmental Laws, except where the failure to
so comply is not likely to have a Material Adverse Effect.
(b) Each Borrower shall give written notice to Agent immediately
upon such Borrower's receipt of any notice of, or such Borrower's otherwise
obtaining knowledge of: (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
material investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any applicable Environmental Law by any Borrower or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material other than in the
ordinary course of business and other than as permitted under any applicable
Environmental Law. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrowers to Agent. Each Borrower shall
take prompt and appropriate action to respond to any non-compliance with any of
the Environmental Laws and shall regularly report to Agent on such response.
(c) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law, such Borrower shall, at
Agent's request and Borrowers' expense: (i) cause an independent environmental
engineer reasonably acceptable to Agent to conduct such tests of the site where
such Borrower's non-compliance or alleged non-compliance with such Environmental
Laws has occurred as to such non-compliance and prepare and deliver to Agent a
report as to such non-compliance setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Agent a supplemental
report of such engineer whenever the scope of such non-compliance, or such
Borrower's response thereto or the estimated costs thereof, shall change in any
material respect.
(d) Each Borrower shall indemnify and hold harmless Agent, each
Lender and their respective directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including attorneys' fees and
legal expenses) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material,
including the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of any Borrower and the preparation
and implementation of any closure, remedial or other required plans, except to
the extent that such losses, claims, damages, liabilities, costs and expenses
are attributable to the indemnified party's willful misconduct or gross
negligence. All representations, warranties, covenants and indemnifications in
this Section 9.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
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9.4 Payment of Taxes and Claims. Each Borrower shall, and shall cause
each of its Subsidiaries to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower or
such Subsidiary, as the case may be, and with respect to which adequate reserves
have been set aside on its books in accordance with GAAP. Borrowers shall be
liable for any Tax or penalties imposed on Agent or any Lender as a result of
the financing arrangements provided for herein and Borrowers agree to indemnify
and hold Agent and Lenders harmless with respect to the foregoing, and to repay
to Agent and Lenders on demand the amount thereof, and until paid by Borrowers
such amount shall be added and deemed part of the Revolving Loans. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance.
(a) General. Each Borrower shall, and shall cause each of its
Subsidiaries to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
satisfactory to Agent as to form, amount and insurer. Each Borrower shall
furnish such certificates, policies or endorsements to Agent as Agent shall
require as proof of such insurance, and, if any Borrower fails to do so, Agent
is authorized, but not required, to obtain such insurance at the expense of
Borrowers. All policies shall provide for at least thirty (30) days prior
written notice to Agent of any cancellation or reduction of coverage, or, in the
case of failure to pay premiums due, ten (10) days prior written notice of
cancellation or reduction in coverage, and that Agent may act as attorney for
the relevant Borrower in obtaining, and at any time an Event of Default exists
or has occurred and is continuing, adjusting, settling, amending and canceling
such insurance. Each Borrower shall cause Agent to be named as a loss payee and
an additional insured (but without any liability for any premiums) under such
insurance policies and each Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Agent. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Agent, for the ratable
benefit of Lenders, as its interests may appear and further specify that Agent
shall be paid regardless of any act or omission by any Borrower or any of its
Affiliates.
(b) Application of Proceeds.
(i) In the event of any loss or damage by fire or other
casualty, insurance proceeds relating to Inventory shall first reduce the then
outstanding Revolving Loans and then any other Obligations (in the manner set
forth in this Agreement) then outstanding. During the continuance of a Default
or Event of Default, such insurance proceeds may be applied to the Obligations
in such order as the Agent may elect.
(ii) In the event any part of the Real Property or Equipment
is damaged by fire or other casualty and the insurance proceeds for such damage
or other casualty is less than or equal to $100,000, Agent shall promptly apply
such insurance proceeds to reduce
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the then outstanding Revolving Loans and then any other Obligations (in the
manner set forth in this Agreement) then outstanding. Upon the occurrence of a
Default or Event of Default, such insurance proceeds may be applied to the
Obligations in such order as Agent may elect.
(iii) Absent the occurrence of an Event of Default (which has
not been waived in writing as required hereunder), and provided that (A)
Borrowers have sufficient business interruption insurance to replace the lost
profits of any facility of any Borrower and (B) the insurance proceeds received
with respect to damage or other casualty incurred with respect to Real Property
or Equipment are in excess of $100,000, Borrowers may elect (by delivering
written notice to Agent) to replace, repair or restore such Real Property or
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If Borrowers do not, or cannot, elect to use the
insurance proceeds as set forth above, Agent may, subject to the rights of any
holders of encumbrances permitted under Section 9.8 hereof which are senior to
those of Agent and the Lenders, apply such insurance proceeds to reduce the then
outstanding Revolving Loans or other Obligations (in the manner set forth in
this Agreement); during the existence of an Event of Default, such insurance
proceeds may be applied to the Obligations in such order as Agent may elect.
(iv) If Borrowers elect to use insurance proceeds for the
repair, replacement or restoration of any Real Property and/or Equipment, and
there is then no Event of Default (A) insurance proceeds for any loss in excess
of $100,000 on Equipment and/or Real Property will be applied to the reduction
of the Loans and (B) Agent may set up an Availability Reserve for an amount
equal to such insurance proceeds. Such Availability Reserve will be reduced
dollar-for-dollar upon receipt of non-cancelable executed purchase orders,
delivery receipts or contracts for the replacement, repair or restoration of
Equipment and/or the Real Property and disbursements in connection therewith.
Prior to the commencement of any material restoration, repair or replacement of
Real Property, Borrowers shall provide Agent with a restoration plan and a total
budget certified by an independent third party experienced in construction
costing. If there are insufficient insurance proceeds to cover the cost of
restoration as so determined, Borrowers shall be responsible for the amount of
any such insufficiency, prior to the commencement of restoration and shall
demonstrate evidence of such before such Availability Reserve will be reduced.
Completion of restoration shall be evidenced by a final, unqualified
certification of the design architect employed, if any, an unconditional
"Certificate of Occupancy," if applicable, such other certification as may be
required by law or if none of the above is applicable, a written good faith
determination of completion by Borrowers. Upon Agent's receipt of the applicable
completion certificate(s) required hereunder, any remaining Availability Reserve
established hereunder will be automatically released.
9.6 Financial Statements and Other Information.
(a) Each Borrower agrees to maintain books and records pertaining
the Collateral in accordance with GAAP and in such additional detail, form and
scope as Agent may, in its reasonable credit judgment, require.
(b) Until termination of this Agreement and payment and
satisfaction of all Obligations due hereunder, Borrowers agree that, unless
Agent shall have otherwise consented in
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writing, Borrowers will furnish to Agent and each Lender, with respect to
Parent, Borrowers and all consolidated Subsidiaries:
(i) within ninety (90) days after the end of each fiscal year
of Borrowers, for such fiscal year, a Consolidated Balance Sheet together with
consolidated statements of profit and loss, cash flow and retained earnings,
audited by independent public accountants selected by Borrowers and satisfactory
to Agent,
(ii) within sixty (60) days after the end of each fiscal year
of Borrowers, for such fiscal year, on an unaudited basis, a Consolidating
Balance Sheet and a Consolidated Balance Sheet, together with consolidated and
consolidating statements of profit and loss and of cash flow,
(iii) within sixty (60) days after the end of each fiscal
quarter of Borrowers, for such fiscal quarter, on an unaudited basis, a
Consolidated Balance Sheet and a Consolidating Balance Sheet, together with
consolidated and consolidating statements of profit and loss and of cash flow,
(iv) within thirty (30) days after the end of each month, for
such month and of each of them, on an unaudited basis, a Consolidated Balance
Sheet and a Consolidating Balance Sheet, together with consolidated and
consolidating statements of profit and loss and of cash flow, and
(v) from time to time, such further information regarding the
business affairs and financial condition of such entities Agent may reasonably
request, including, without limitation (A) the accountant's management practice
letter and (B) annual consolidated and consolidating projections in form
satisfactory to Agent. Without limiting the generality of the foregoing, or any
other provision of this Agreement, on or before December 15, 2002, Borrowers
shall have delivered consolidated and consolidating projections for fiscal years
2003, 2004 and 2005, in form satisfactory to Agent.
Each financial statement which is required to be provided hereunder must be
accompanied by an officer's certificate, substantially in the form of Exhibit G
hereto, signed by the President, Chief Executive Officer, Vice President, Chief
Financial Officer, Controller, or Treasurer of each certifying entity.
(c) Each Borrower shall promptly notify Agent in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would have a Material Adverse Effect, (ii) any Material
Contract of any Borrower being terminated or amended or any new Material
Contract being entered into (in which event such Borrower shall provide Agent
with a copy of such Material Contract), (iii) any order, judgment or decree in
excess of Five Hundred Thousand Dollars ($500,000) having been entered against
any Borrower or any of its properties or assets, (iv) any notification of the
violation of any laws or regulation received by any Borrower, (v) any ERISA
Event, and (vi) the occurrence of any Default or Event of Default.
(d) Each Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Agent copies of all reports which
such Borrower sends to its
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stockholders generally and copies of all reports and registration statements
which such Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(e) Each Borrower shall furnish or cause to be furnished to Agent
such budgets, forecasts, projections and other information in respect of the
Collateral and the business of such Borrower, as Agent may, from time to time,
reasonably request. Agent and Lenders are hereby authorized to deliver a copy of
any financial statement or any other information relating to the business of any
Borrower to any court or other Governmental Authority or to any Participant or
assignee or prospective Participant or assignee, provided that they comply with
Section 11.4 hereof. Each Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Agent, at Borrowers' expense, copies of
the financial statements of any Borrower and any reports or management letters
prepared by such accountants or auditors on behalf of such Borrower and to
disclose to Agent such information as they may have regarding the business of
any Borrower. Any documents, schedules, invoices or other papers delivered to
Agent may be destroyed or otherwise disposed of by them one (1) year after the
same are delivered to them, except as otherwise designated by Borrowers in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. No
Borrower shall, nor shall it permit any of its Subsidiaries to (and neither
Agent nor any Lender authorizes Borrower to), directly or indirectly:
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it;
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, except for:
(i) sales of Inventory in the ordinary course of business,
including dispositions of worn-out Inventory and rentals of Rental Inventory
(which have been reported to Agent as being Rental Inventory) to consumers in
the ordinary course of business,
(ii) the sale or other disposition of Equipment and other
miscellaneous items of personal property not comprising Inventory in the event
of a store closure, so long as any proceeds are paid to Agent, for the ratable
benefit of Lenders, for application to the Obligations (in the manner set forth
in this Agreement),
(iii) the disposition of worn-out or obsolete Equipment so
long as (A) any proceeds are paid to Agent, for the ratable benefit of Lenders,
for application to the Obligations (in the manner set forth in this Agreement)
if no Event of Default exists, and (B) such sales do not involve Equipment
having an aggregate (for all Borrowers) fair market value in excess of Five
Hundred Thousand Dollars ($500,000) for all such Equipment disposed of in any
fiscal year of Borrowers,
(iv) the issuance and sale by any Borrower of Capital Stock of
such Borrower after the date hereof; provided, that, (A) Agent shall have
received not less than ten (10) Business Days prior written notice of such
issuance and sale by such Borrower, which notice shall specify the parties to
whom such shares are to be sold, the terms of such sale, the
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total amount which it is anticipated will be realized from the issuance and sale
of such stock and the net cash proceeds which it is anticipated will be received
by such Borrower from such sale, (B) such Borrower shall not be required to pay
any cash dividends or repurchase or redeem such Capital Stock or make any other
payments in respect thereof, (C) the terms of such Capital Stock, and the terms
and conditions of the purchase and sale thereof, shall not include any terms
that include any limitation on the right of such Borrower to request or receive
Loans or Letter of Credit Accommodations or the right of such Borrower to amend
or modify any of the terms and conditions of this Agreement or any of the other
Financing Agreements or otherwise in any way relate to or affect the
arrangements of such Borrower with Agent and Lenders, and (D) as of the date of
such issuance and sale and after giving effect thereto, no Default or Event of
Default shall exist or have occurred,
(v) the termination or expiration of any contracts, other than
Material Contracts,
(vi) the termination or expiration of any Material Contracts
so long as Borrower shall have given Agent thirty (30) days prior written notice
thereof,
(vii) the sale, franchising or closing of stores (whether by a
transfer of an interest in a joint venture or otherwise) located in Ireland, the
United Kingdom, Mexico or Singapore so long as the proceeds of such transactions
are immediately remitted to Agent for application to the then outstanding
Obligations, if any,
(viii) the disposition of any assets resulting from eminent
domain action or a casualty loss to the extent that (A) any other provisions
with respect to such events contained in this Agreement are fully complied with
and (B) any proceeds or other amounts received are immediately paid to Agent,
for the benefit of Lenders, for application to the Obligations (in the manner
set forth in this Agreement),
(ix) the sale and leaseback of Equipment to the extent such
transaction otherwise complies with the terms of this Agreement, including,
without limitation, Section 9.9(b) hereof,
(x) the sale of any of the Real Property so long as: (A) such
transaction is entered into at arm's length, (B) such Real Property is sold for
fair market value, and (C) the first $20,000,000 in Net Proceeds thereof plus
50% of any Net Proceeds thereof in excess of $20,000,000 are used to repay the
then outstanding Obligations until paid in full; provided, that, if no JPMC
Indebtedness is then outstanding, 100% of such Net Proceeds shall be applied to
any then outstanding Obligations; and provided, that, no sale/leaseback of Real
Property shall be permitted hereunder except for the sale/leaseback (as
previously agreed by Borrower) of the Real Property on ▇▇▇▇▇▇ Street in Seattle,
Washington, for the sales price of approximately One Million Dollars
($1,000,000); and
(xi) the surrender by MTS of the Surrender Insurance Policies
to the issuers of such policies for their cash surrender value.
(c) wind up, liquidate or dissolve except that any Obligor may be
wound up, liquidated or dissolved at any time provided that (i) such Obligor's
assets remaining after the
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satisfaction of its liabilities are conveyed to another Obligor or to a Borrower
and (ii) the proceeds of such transactions, if any, are immediately remitted to
Agent for application to the then outstanding Obligations, if any; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. No Borrower shall, nor permit any of its Subsidiaries
to, create, incur, assume, suffer or permit to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, except:
(a) the security interests and liens of Agent and Lenders;
(b) liens securing the payment of taxes, either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or such
Subsidiary, as the case may be, to the extent (i) adequate reserves have been
set aside on its books for such liens in accordance with GAAP, (ii) the
aggregate amount of such liens does not at any time exceed $250,000, (iii) such
liens are not filed on any public records (except for liens on the Real
Property) and (iv) such liens are not and could not become senior to the liens
of Agent and the Lenders;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower's or such
Subsidiary's business to the extent: (i) such liens secure Indebtedness which is
not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower or
such Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;
(d) liens in favor of Merchant Payment Processors with respect to
Merchant Payment Receivables processed by such Persons;
(e) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(f) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Sections 9.9(b) or 9.9(c) hereof;
(g) liens of judgment creditors to the extent such liens do not
constitute an Event of Default;
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(h) the security interests and liens securing the JPMC Indebtedness
to the extent such security interests and liens are subordinated to those of
Agent and the Lenders as provided in the JPMC Intercreditor Agreement;
(i) the security interests and liens set forth on Schedule 8.4
hereto;
(j) to the extent they do not encumber or affect Eligible Merchant
Payment Receivables, Eligible Inventory or Real Property Collateral, liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business;
(k) pledges and deposits made in the ordinary course of business in
compliance with worker's compensation, unemployment insurance and other social
security laws or regulations;
(l) liens that are deemed to be part of ordinary course franchise
agreements to which a Borrower, as a franchisor, is a party;
(m) deposits of cash with owners/lessors of premises leased by
Borrowers in the ordinary course of business;
(n) liens granted with respect to the Real Property Collateral to
secure Indebtedness permitted under Section 9.9(q) hereof; and
(o) lien against the Surrendered Insurance Policies to secure the
payment of the amounts MTS owes under the Trust Note.
9.9 Indebtedness. No Borrower shall, nor permit any of its Subsidiaries
to, incur, create, assume, become or be liable in any manner with respect to,
suffer or permit to exist, any Indebtedness or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the performance,
dividends or other obligations of any Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) not to exceed Ten Million Dollars
($10,000,000) in the aggregate at any time outstanding so long as such security
interests do not apply to any property of such Person other than the Equipment
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Equipment so acquired; for purposes hereof, (i) Indebtedness shall qualify
as purchase money Indebtedness if it is incurred within one hundred eighty (180)
days of the date such Person acquires the Equipment which is to be secured by
such Indebtedness and (ii) the cost of the Equipment acquired shall include
delivery, installation and tax expenses for purchasing and installing such
Equipment;
(c) purchase money Indebtedness arising after the date hereof to the
extent secured by purchase money mortgages on Real Property not to exceed One
Million Dollars ($1,000,000) in the aggregate at any time outstanding so long as
such mortgages do not apply to
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any property of such Person other than the Real Property so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Real Property so
acquired;
(d) guaranties by any Subsidiaries of such Borrower of the
Obligations in favor of Agent and Lenders;
(e) current Indebtedness maturing in less than one year and incurred
in the ordinary course of business for raw materials, supplies, equipment,
services, taxes or labor;
(f) the Subordinated Public Debt, provided, that, (i) no Borrower or
any of its Subsidiaries shall enter into any amendment of the Indenture, the
Senior Subordinated Notes or any document, agreement, instrument, note or
guaranty related thereto (the "Public Debt Documents") without the prior written
consent of Agent, (ii) no Borrower or any of its Subsidiaries may make any
principal payments with respect to such Indebtedness unless (A) both before and
after giving effect to such payment, there exists no Default or Event of
Default, (B) Excess Availability for the ninety (90) day period immediately
preceding any such payment shall have been $25,000,000 or greater at all times,
(C) after giving effect to any such payment, Excess Availability shall be
$25,000,000 or greater, and (D) pro forma Excess Availability for the twelve
(12) month period following such payment shall be $25,000,000 or greater as
determined by Agent, in its sole discretion, based upon its review of Borrowers'
consolidated and consolidating financial projections for such period provided to
Agent upon Borrowers', or Borrower Agent's, request to make such payment; and
(iii) Borrower may make regularly scheduled interest payments only so long as
both before and after giving effect to such payment, there exists no Default or
Event of Default;
(g) the JPMC Indebtedness, provided, that, (i) no Borrower or any of
its Subsidiaries shall enter into any amendment of the JPMC Agreements without
the prior written consent of Agent; and (ii) no Borrower or any of its
Subsidiaries may make any payments with respect to such Indebtedness unless (A)
except with respect to subsection (H) below, such payments are expressly
required under the terms of Sections 2.02, 2.03(a), 2.04(a), 2.04(b), 2.04(c),
2.04(d) or 2.04(e) of the JPMC Loan Agreement, (B) with respect to prepayments
contemplated by Sections 2.04(c), (d) and (e) of the JPMC Loan Agreement, both
before and after giving effect to such payment, there exists no Default or Event
of Default, (C) with respect to prepayments contemplated by Section 2.04(c) of
the JPMC Loan Agreement, Borrowers shall have made all payments required by and
otherwise complied with the terms of Section 9.9(q) hereof, (D) with respect to
prepayments contemplated by Section 2.04(d) of the JPMC Loan Agreement: (1)
Borrowers shall have made all payments required by and otherwise complied with
the terms of Section 9.7(b)(x) hereof, (2) Excess Availability for the ninety
(90) day period immediately preceding any such payment shall have been
$25,000,000 or greater at all times and (3) after giving effect to any such
payment, Excess Availability shall be $25,000,000 or greater, (E) with respect
to prepayments contemplated by Section 2.04(e) of the JPMC Loan Agreement: (1)
Excess Availability for the ninety (90) day period immediately preceding any
such payment shall have been $25,000,000 or greater at all times, (2) after
giving effect to any such payment, Excess Availability shall be $25,000,000 or
greater, (3) pro forma Excess Availability for the twelve (12) month period
following such payment shall be $25,000,000 or greater as determined by Agent,
in its sole discretion, based upon its review of Borrowers' consolidated and
consolidating financial projections for such period provided to Agent upon
Borrowers', or
75
Borrower Agent's, request to make such payment, and (4) at the time such payment
is to be made, Borrower Agent and its consolidated Subsidiaries shall have a
positive Fixed Charge Coverage Amount (as defined in the JPMC Loan Agreement)
when measured on a cumulative basis from August 1, 2002 through the last day of
the month immediately preceding such payment date, (F) with respect to regularly
scheduled interest and principal payments, during the existence of a Default or
an Event of Default, such payments are not made using any proceeds of Collateral
or any Loans or Letter of Credit Accommodations; (G) with respect to prepayments
contemplated by Section 2.04(a) of the JPMC Loan Agreement, Agent has received
$1,500,000 of the proceeds of the Trust Note; and (H) if, in accordance with the
terms of this Agreement, Borrowers exercise their right to terminate this
Agreement and indefeasibly repay and satisfy in full, in cash all of the
Obligations then outstanding, then upon the indefeasible repayment and
satisfaction in full, in cash, of all of the Obligations then outstanding other
than the principal balance of the Term Loan, Borrowers may pay to JPMC, for
application to the then outstanding JPMC Indebtedness, an amount equal to the
then outstanding principal balance of the Term Loan so long as: (1) JPMC and the
JPMC Lenders shall have entered into an agreement, in form and substance
satisfactory to Agent, providing for the sale to JPMC and the JPMC Lenders,
without recourse, representations or warranties of any kind, of the Term Loan by
Agent and the Lenders and, upon Agent's receipt of the full amount of the
principal balance of the Term Loan in cash, the assignment to JPMC of the
Broadway Mortgage, (2) no adverse consequence to Agent or any Lender would arise
as a result of such transactions, as determined by Agent; (3) such transactions
are not prohibited by or would violate any court order or applicable law, as
determined by Agent; (4) upon consummation of such transactions, all of the
Obligations would be indefeasibly repaid and satisfied in full, in cash and
neither Agent nor any Lender would have any obligation to provide any financing
to Borrowers; and (5) Borrowers shall have consented, in writing, to such
transactions;
(h) deferred taxes and other expenses incurred in the ordinary
course of such Borrower's business;
(i) other Indebtedness listed on Schedule 9.9 hereto;
(j) any renewals or refinancings of Indebtedness described in
Sections 9.9(b), (c), (f), (g) and (i) in amounts not exceeding such
Indebtedness as of the date renewed or refinanced, if (i) the average life to
maturity of such renewed or refinanced Indebtedness is greater than or equal to
that of the Indebtedness renewed or refinanced, (ii) such renewal or refinancing
is on terms no less favorable than the terms of the original Indebtedness and
(iii) such renewal or refinancing is otherwise in compliance with this
Agreement;
(k) Indebtedness under any Hedging Transactions;
(l) guaranties by a Borrower of the Indebtedness of another Borrower
or Obligor hereunder, to the extent that such other Borrower or Obligor, as the
case may be, is not prohibited under the Financing Agreements from incurring
such Indebtedness;
(m) guaranty obligations incurred in the ordinary course of business
with respect to surety and appeal bonds, performance and return-of-money bonds
and similar
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obligations not exceeding $500,000 for any one such guaranty and $1,000,000 in
the aggregate for all such guaranties at any one time outstanding;
(n) guaranty obligations arising with respect to customary
indemnification and purchase price adjustment obligations incurred in connection
with any sale or other disposition of assets permitted hereunder;
(o) other unsecured Indebtedness not to exceed $10,000,000 in the
aggregate principal amount at any one time outstanding; provided, however, with
respect to Indebtedness of $2,000,000 or more owed to any one Person, Agent must
have received a subordination agreement, in form and substance satisfactory to
Agent in its sole discretion, from such Person;
(p) unsecured Indebtedness described in Section 1.59(i) hereof to
the extent such Indebtedness (i) is incurred with respect to software licenses
entered into in the ordinary course of business or (ii) is incurred pursuant to
such a License Agreement entered into in the ordinary course of business and
does not exceed $1,000,000, in the aggregate for both Borrowers, per fiscal
year;
(q) Indebtedness which is secured solely and directly by the Real
Property Collateral so long as (i) Agent shall consent in writing to the terms
of such transaction and (ii) the Net Proceeds of such Indebtedness are used to
repay, in the following order: (A) first, the then outstanding Real Estate Loans
and any accrued interest thereon until paid in full; (B) second, any other
Obligations then outstanding in an amount equal to (1) $7,500,000 minus (2) the
aggregate amount repaid under clause (A) above; and (C) third, any other
Obligations then outstanding in an amount equal to 50% of such Net Proceeds in
excess of $7,500,000; provided, that, if no JPMC Indebtedness is then
outstanding, 100% of such Net Proceeds shall be applied to any then outstanding
Obligations; and
(r) Indebtedness evidenced by the Trust Note, provided that (i) MTS
may not enter into any amendment of the Trust Note without the prior written
consent of Agent, (ii) no interest accrues under the Trust Note, and (iii)
principal payment of the Trust Note is made solely from the cash surrender
payments that MTS receives with respect to the Surrendered Insurance Policies.
9.10 Loans, Investments, Etc. No Borrower shall, nor permit any of its
Subsidiaries to, directly or indirectly, make, or suffer or permit to exist, any
loans or advance money or property to any Person, or any investment in (by
capital contribution, dividend or otherwise) or purchase or repurchase the
Capital Stock or Indebtedness or all or a substantial part of the assets or
property of any Person, or form or acquire any Subsidiaries, or agree to do any
of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding and (ii) the terms and conditions of Section 5.2
hereof shall have been satisfied with respect to the deposit account or
investment account in which such cash or Cash Equivalents are held;
77
(c) the existing equity investments of such Borrower as of the date
hereof in its Subsidiaries, provided, that, such Borrower shall have no
obligation to make any other investment in, or loans to, or other payments in
respect of, any such Subsidiaries other than: (i) payments made to any of
Sunset, CBI, JH, RTR or Pipernick as lease payments with respect to real
property owned by such Subsidiaries and leased to a Borrower to the extent that
such payments are materially recouped from payments made to such Borrower by
such Subsidiaries with respect to Indebtedness owing to such Borrower, (ii) to
any Obligor up to an aggregate of $1,000,000 per year (for all Obligors) for
operating expenses actually incurred by such Obligor and (iii) until March 31,
2003, up to $5,000,000 to TRS and ITR with respect to costs actually incurred in
winding down and liquidating such Obligors;
(d) equity investments of such Borrower in any wholly-owned
Subsidiary incorporated under the laws of any State of the United States of
America formed or acquired after the date hereof, provided, that, (i) promptly
upon such formation or acquisition, such Borrower shall cause any such
Subsidiary to execute and deliver to Agent, in form and substance satisfactory
to Agent, (A) an absolute and unconditional guaranty of payment of the
Obligations, (B) a security agreement granting to Agent, for itself and the
ratable benefit of the Lenders, a first security interest and lien (except as
otherwise consented to in writing by Agent) upon all of the assets of such
Subsidiary, and (C) such other agreements, documents and instruments as Agent
may require, including, but not limited to, supplements and amendments hereto
and other loan agreements or instruments evidencing Indebtedness of such new
Subsidiary to Agent and Lenders, (ii) promptly upon Agent's request: (A) such
Borrower shall execute and deliver to Agent, in form and substance satisfactory
to Agent, a pledge and security agreement granting to Agent, for itself and the
ratable benefit of the Lenders, a first pledge of and lien on all of the issued
and outstanding shares of Capital Stock of such Subsidiary, and (B) such
Borrower shall deliver the original stock certificates evidencing such shares of
Capital Stock (or such other evidence as may be issued in the case of a limited
liability company or other entity) together with stock powers with respect
thereto duly executed in blank (or the equivalent thereof in the case of a
limited liability company), (iii) as of the date of any payment in respect of
such investment and after giving effect thereto, no Default or Event of Default
shall exist or have occurred, (iv) in no event shall the aggregate amount of all
capital contributions, investments or other amounts paid by such Borrower to any
Subsidiary formed or acquired after the date hereof or to any other person for
or otherwise in connection with the formation or acquisition thereof exceed Five
Hundred Thousand Dollars ($500,000), and (v) as of the date of any payment in
respect of such investment and after giving effect thereto, Excess Availability
(A) shall be not less than Twenty Million Dollars ($20,000,000) and (B) for each
of the immediately preceding thirty (30) consecutive days shall have been not
less than Twenty Million Dollars ($20,000,000);
(e) stock or obligations issued to such Borrower by any Person (or
the representative of such Person) in respect of Indebtedness of such Person
owing to such Borrower in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person; provided, that, the original of any such stock or
instrument evidencing such obligations shall be promptly delivered to Agent,
upon Agent's request, together with such stock power, assignment or endorsement
by such Borrower as Agent may request;
78
(f) obligations of account debtors to such Borrower arising from
Accounts which are past due evidenced by a promissory note made by such account
debtor payable to such Borrower; provided, that, promptly upon the receipt of
the original of any such promissory note by such Borrower, such promissory note
shall be endorsed to the order of Agent by such Borrower and promptly delivered
to Agent as so endorsed;
(g) loans or advances to employees of a Borrower or an Obligor
extended in the ordinary course of business, to the extent that the aggregate
outstanding amount of such loans and advances (other than those in existence as
of the date hereof which are set forth on Schedule 9.10 hereto) does not exceed
$1,000,000 at any one time; provided that, upon request by Agent, Borrowers
shall endorse to the order of and deliver any original notes or other such
instruments evidencing such loans or advances to Agent; and
(h) the loans and advances set forth on Schedule 9.10 hereto;
provided, that, as to such loans and advances, (i) such Borrower shall not,
directly or indirectly, amend, modify, alter or change the terms of such loans
and advances or any agreement, document or instrument related thereto and (ii)
such Borrower shall furnish to Agent all notices or demands in connection with
such loans and advances either received by such Borrower or on its behalf,
promptly after the receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. No Borrower shall, directly or indirectly,
declare or pay any dividends on account of any shares of any class of Capital
Stock of such Borrower now or hereafter outstanding, or set aside or otherwise
deposit or invest any sums for such purpose, or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of Capital Stock (or set
aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing, except in any case in the form of shares of Capital Stock
consisting of common stock.
9.12 Transactions with Affiliates. No Borrower shall, directly or
indirectly, (a) other than the transfer of the Broadway Property to Pipernick by
Borrower Agent, purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with any Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's business and upon fair and
reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person or
(b) make any payments of management, consulting or other fees for management or
similar services, or of any Indebtedness owing to any officer, employee,
shareholder, director or other Affiliate of any Borrower except reasonable
compensation to officers, employees and directors for services rendered to such
Borrower in the ordinary course of business.
9.13 Compliance with ERISA. Each Borrower shall and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan (other than a Multiemployer
Plan) in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal and State law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such qualification; (c)
not terminate any of such Plans so as to incur any liability to the Pension
79
Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject such Borrower or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Plan which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
Plan; (f) not allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; or (g) not allow or suffer
to exist any occurrence of a reportable event or any other event or condition
which presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such Plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation.
9.14 Change in Business. No Borrower shall engage in any business other
than the business of such Borrower on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which such
Borrower is engaged on the date hereof.
9.15 Limitation of Restrictions Affecting Subsidiaries. No Borrower shall,
directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of such Borrower to (a) pay dividends or make other distributions or
pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower;
(b) make loans or advances to such Borrower or any Subsidiary of such Borrower,
(c) transfer any of its properties or assets to such Borrower or any Subsidiary
of such Borrower; or (d) create, incur, assume or suffer to exist any lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, other than encumbrances and restrictions arising under (i) applicable
law, (ii) this Agreement, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of such Borrower or any
of its Subsidiaries, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or
its Subsidiary, (v) any agreement relating to permitted Indebtedness incurred by
a Subsidiary of such Borrower prior to the date on which such Subsidiary was
acquired by such Borrower and outstanding on such acquisition date, and (vi) the
extension or continuation of contractual obligations in existence on the date
hereof; provided, that, any such encumbrances or restrictions contained in such
extension or continuation are no less favorable to Agent and Lenders than those
encumbrances and restrictions under or pursuant to the contractual obligations
so extended or continued.
9.16 Financial Covenants.
(a) During any Availability Cure Period:
(i) Borrowers and their consolidated Subsidiaries shall not
permit the Fixed Charge Coverage Amount for the periods set forth below to be
less than the amounts set forth opposite thereto:
Minimum Fixed Charge
Period Coverage Amount
------ --------------------
(A) For the one-month period ending
August 31, 2002 ($4,732,000)
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Minimum Fixed Charge
Period Coverage Amount
------ --------------------
(B) For the two-month period ending
September 31, 2002 ($10,228,000)
(C) For the three-month period ending
October 31, 2002 ($16,869,000)
(D) For the three-month period ending
November 30, 2002 ($14,212,000)
(E) For the three-month period ending
December 31, 2002 ($4,787,000)
(F) For the three-month period ending
January 31, 2003 ($2,783,000)
(G) For the three-month period ending
February 28, 2003 ($2,291,000)
(H) For the three-month period ending
March 31, 2003 ($7,825,000)
(I) For the three-month period ending
April 30, 2003 ($5,211,000)
(J) For the three-month period ending
May 31, 2003 ($4,903,000)
(K) For the three-month period ending
June 30, 2003 ($5,616,000)
(L) For the three-month period ending
July 31, 2003 ($5,933,000)
(M) For the three-month period ending
August 31, 2003 ($6,850,000)
(N) For the three-month period ending
September 30, 2003 ($7,288,000)
(O) For the three-month period ending
October 31, 2003 ($7,570,000)
(P) For the three-month period ending
November 30, 2003 ($5,367,000)
(Q) For the three-month period ending
December 31, 2003 $2,277,000
(R) For the three-month period ending
January 31, 2004 $928,000
(S) For the three-month period ending
February 29, 2004 $60,000
(T) For the three-month period ending
March 31, 2004 ($7,253,000)
(U) For the three-month period ending
April 30, 2004 ($5,483,000)
(V) For the three-month period ending
May 31, 2004 ($6,111,000)
(W) For the three-month period ending
June 30, 2004 ($6,503,000)
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Minimum Fixed Charge
Period Coverage Amount
------ --------------------
(X) For the three-month period ending
July 31, 2004 ($7,082,000)
(Y) For the three-month period ending
August 31, 2004 ($7,808,000)
(Z) For the three-month period ending
September 30, 2004 ($8,006,000)
(AA) For the three-month period ending
October 31, 2004 ($7,935,000)
(BB) For the three-month period ending
November 30, 2004 ($5,542,000)
(CC) For the three-month period ending
December 31, 2004 $2,359,000
(DD) For the three-month period ending
January 31, 2005 $993,000
(EE) For the three-month period ending
February 28, 2005 $116,000
(FF) For the three-month period ending
March 31, 2005 ($7,354,000)
(GG) For the three-month period ending
April 30, 2005 ($5,571,000)
(ii) Borrowers and their respective Subsidiaries, on a consolidated
basis, shall not permit the ratio of (A) accounts payable to (B) Inventory to be
less than the following as measured on the following dates:
Date Ratio
---- -----
(1) As of August 31, 2002 0.60 to 1.00
(2) As of September 30, 2002 0.64 to 1.00
(3) As of October 31, 2002 0.67 to 1.00
(4) As of November 30, 2002 0.69 to 1.00
(5) As of December 31, 2002 0.68 to 1.00
(6) As of January 31, 2003 0.73 to 1.00
(7) As of February 28, 2003 0.71 to 1.00
(8) As of March 31, 2003 0.68 to 1.00
(9) As of April 30, 2003 0.65 to 1.00
(10) As of May 31, 2003 0.63 to 1.00
(11) As of June 30, 2003 0.60 to 1.00
(12) As of July 31, 2003 0.61 to 1.00
(13) As of August 31, 2003 0.62 to 1.00
(14) As of September 30, 2003 0.65 to 1.00
(15) As of October 31, 2003 0.66 to 1.00
(16) As of November 30, 2003 0.68 to 1.00
(17) As of December 31, 2003 0.68 to 1.00
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Date Ratio
---- -----
(18) As of January 31, 2004 0.73 to 1.00
(19) As of February 29, 2004 0.71 to 1.00
(20) As of March 31, 2004 0.68 to 1.00
(21) As of April 30, 2004 0.65 to 1.00
(22) As of May 31, 2004 0.62 to 1.00
(23) As of June 30, 2004 0.60 to 1.00
(24) As of July 31, 2004 0.61 to 1.00
(25) As of August 31, 2004 0.62 to 1.00
(26) As of September 30, 2004 0.65 to 1.00
(27) As of October 31, 2004 0.66 to 1.00
(28) As of November 30, 2004 0.68 to 1.00
(29) As of December 31, 2004 0.68 to 1.00
(30) As of January 31, 2005 0.73 to 1.00
(31) As of February 28, 2005 0.71 to 1.00
(32) As of March 31, 2005 0.68 to 1.00
(33) As of April 30, 2005 0.65 to 1.00
(b) Borrowers shall at all times maintain Excess Availability of
$15,000,000 or more.
9.17 License Agreements.
(a) Each Borrower shall (i) promptly and faithfully observe and
perform all of the material terms, covenants, conditions and provisions of the
material License Agreements to be observed and performed by it, at the times set
forth therein, if any, (ii) not do, permit, suffer or refrain from doing
anything could reasonably be expected to result in a default under or breach of
any of the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to or permit to occur any of the foregoing; except,
to the extent that the failure to observe any of the foregoing requirements is
not likely to have a Material Adverse Effect and except that, subject to Section
9.17(b) below, such Borrower may cancel, surrender or release any material
License Agreement in the ordinary course of the business of such Borrower;
provided, that, such Borrower shall give Agent not less than thirty (30) days
prior written notice of its intention to so cancel, surrender and release any
such material License Agreement, (iv) give Agent prompt written notice of any
material License Agreement entered into by such Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may request, (v) give Agent prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Agent (promptly upon
the receipt thereof by such Borrower in the case of a notice to such Borrower,
and concurrently with the sending thereof in the case of a notice from such
Borrower) a copy of each notice of default and every other notice and other
communication received or delivered by such Borrower in connection with any
material License Agreement which relates to the right of such Borrower to
continue to use the property subject to such License Agreement, and (vi) furnish
to Agent, promptly upon the request of Agent, such information and evidence as
Agent may require
83
from time to time concerning the observance, performance and compliance by such
Borrower or the other party or parties thereto with the terms, covenants or
provisions of any material License Agreement.
(b) Each Borrower will either exercise any option to renew or extend
the term of each License Agreement which is a Material Contract in such manner
as will cause the term of such License Agreement to be effectively renewed or
extended for the period provided by such option and give prompt written notice
thereof to Agent or give Agent prior written notice that such Borrower does not
intend to renew or extend the term of any such material License Agreement or
that the term thereof shall otherwise be expiring, not less than sixty (60) days
prior to the date of any such non-renewal or expiration. In the event of the
failure of any Borrower to extend or renew any License Agreement which is a
Material Contract, Agent shall have, and is hereby granted, the irrevocable
right and authority, at its option, to renew or extend the term of such material
License Agreement, whether in its own name as agent for the Lenders, or in the
name of a designee or nominee of Agent or in the name of such Borrower, as Agent
shall determine at any time that an Event of Default shall exist or have
occurred and be continuing. During the continuance of an Event of Default, Agent
may, but shall not be required to, perform any or all of such obligations of any
Borrower under any of the License Agreements, including, but not limited to, the
payment of any or all sums due from such Borrower thereunder. Any sums so paid
by Agent shall constitute part of the Obligations.
9.18 Life Insurance. Borrowers, or any one of them, shall maintain the
Life Insurance Policies as currently in effect. Without limiting any provision
of this Agreement, upon Borrower Agent's receipt of any amounts with respect to
the termination of its obligations to pay premiums in respect of any life or
other insurance policies of which Borrower Agent or any of its Subsidiaries is
not the sole owner and beneficiary, Borrower Agent shall immediately remit such
amounts, exclusive of any amounts permitted to be paid to JPMC under the terms
of Section 9.9(g)(ii)(G) hereof, to Agent for application to the then
outstanding Obligations.
9.19 Software. In the event that any Borrower comes to be the owner of any
material (as determined by Agent in its sole and commercially reasonable
discretion) software capable of being registered with the United States
Copyright Office, such Borrower shall promptly register such software with the
United States Copyright Office and, at Agent's option, execute and deliver to
Lender a security agreement, in form and substance satisfactory to Agent to be
recorded in the United States Copyright Office with respect to such registered
software.
9.20 Chief Restructuring Officer. In the event that the Chief
Restructuring Officer shall at any time cease to be an employee of Borrower
Agent, to the extent that Agent shall reasonably require that a Chief
Restructuring Officer continue to be employed by Borrower Agent, Borrower Agent
shall promptly appoint a new chief restructuring officer satisfactory to Agent
and JPMC. The Chief Restructuring Officer (or his/her successor appointed in
accordance with the terms of this Section) shall at all times report directly to
Borrower Agent's board of directors and have an ongoing role as a principal
decision maker with respect to matters affecting Borrower Agent's and its
Subsidiaries' business strategy and operations.
9.21 Leasehold Deeds of Trust/Mortgages; Additional Collateral Access
Agreements.
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(a) Borrowers agree to use their best efforts to provide to Agent
deeds of trust or mortgages, as applicable, together with any other documents
related thereto that Agent may reasonably require, with respect to their
leasehold interests in Real Property, each substantially in the form of Exhibit
I hereto, but in any case in form and substance satisfactory to Agent; provided,
however, after an Event of Default, Borrowers shall provide such deeds of trust
or mortgages, as applicable.
(b) Borrowers agree to use their best efforts to provide to Agent
Collateral Access Agreements for all leased locations and from all third parties
who may from time to time be in possession of any portion of the Collateral,
each in form and substance satisfactory to Agent; provided, however, upon
request by Agent or after an Event of Default, Borrowers shall provide such
Collateral Access Agreements.
9.22 Costs and Expenses. Borrowers shall pay to Agent, for itself and the
ratable benefit of Lenders, on demand all costs, expenses, filing fees and taxes
paid or payable in connection with the preparation, negotiation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of the Obligations, Agent's and Lender's rights in the Collateral, this
Agreement, the other Financing Agreements and all other documents related hereto
or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and expenses and fees for insurance premiums (including,
without limitation, title insurance premiums and additional title insurance
premiums required as a result of any increase in the appraised value of Real
Property Collateral), environmental audits, surveys, assessments, engineering
reports and inspections, appraisal fees and search fees, costs and expenses of
remitting loan proceeds, collecting checks and other items of payment, and
establishing and maintaining the Blocked Accounts, together with Agent's
customary charges and fees with respect thereto; provided, however, Borrowers
shall be required to pay the costs and expenses associated with one appraisal
per quarter (and monthly desktop appraisals pursuant to Section 7.3(d)) but if
an Event of Default has occurred and is continuing, Borrowers shall be required
to pay the costs and expenses associated with any and all appraisals that may be
conducted; (c) charges, fees or expenses charged by any bank or Issuing Bank in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Agent, for itself and the ratable benefit of
Lenders, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Agent and/or Lenders arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); (f) all out-of-pocket expenses
and costs heretofore and from time to time hereafter incurred by Agent or any
Lender during the course of periodic field examinations of the Collateral and
Borrowers' operations, plus a per diem charge at the then prevailing rate
(currently Seven Hundred Fifty Dollars ($750) per person per day) for Agent's
examiners in the field and office; provided, however, Borrowers shall be
required to pay the costs and expenses associated with one field examination per
quarter but if an Event of Default has occurred and is continuing, Borrowers
shall be required to pay the costs and expenses associated with any and all
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field examinations that may be conducted; and (g) the costs, expenses, fees and
disbursements of counsel (including legal assistants) to Agent in connection
with any of the foregoing.
9.23 Further Assurances. At the request of Agent or any Lender at any time
and from time to time, Borrowers shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent may at any time and from time to time request a certificate
from an officer of each Borrower, or of Borrower Agent on behalf of all
Borrowers, representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied.
In the event of such request by Agent, Agent and Lenders may, at Agent's option,
cease to make any further Loans or provide any further Letter of Credit
Accommodations until Agent has received such certificate and, in addition, Agent
has determined that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) any Borrower fails to pay when due any of the Obligations;
provided that, nothing contained herein shall prohibit Agent from charging such
amounts to Borrowers' loan account(s) on the due date thereof;
(b) any Borrower or Obligor breaches or fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement (other
than those referenced in Section 10.1(c) below) or any of the other Financing
Agreements and such failure, as determined by Agent in its sole discretion,
continues for more than ten (10) Business Days; provided that, such ten (10)
Business Day period shall not apply in the case of (i) any failure to perform a
term, covenant, condition or provision which results in the occurrence of an
Event of Default addressed in any other provision or paragraph of this Section
10.1, (ii) any failure to perform any such term, covenant, condition or
provision that has been the subject of a previous failure within the prior
twelve (12) month period or (iii) the failure to deliver any item required on a
weekly or more frequent basis, in which case the applicable cure period for
purposes of this section shall be five (5) Business Days; and provided further,
Agent may institute such additional Availability Reserves as Agent may, in its
reasonable credit judgment, deem necessary or desirable to address such events;
(c) any Borrower breaches or fails to perform any of the terms,
covenants, conditions or provisions contained in Sections 6.3, 6.7, 9.1, 9.2,
9.5, 9.7, 9.9(f), 9.9(g) or 9.16 hereof;
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(d) Borrowers breach or fail to perform the covenants contained in
Section 9.16(a) when measured for the calendar month immediately preceding the
beginning of any Availability Cure Period;
(e) any representation, warranty or statement of fact made by any
Borrower or Obligor to Agent or any Lender in this Agreement, the other
Financing Agreements or any other agreement, schedule, confirmatory assignment
or otherwise shall when made or deemed made be false or misleading in any
material respect;
(f) any Obligor revokes or terminates any guaranty, endorsement or
other agreement of such party in favor of Agent or any Lender;
(g) any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of Five Hundred Thousand Dollars ($500,000)
(net of any amounts covered by insurance) in any one case or in excess of One
Million Dollars ($1,000,000) (net of any amounts covered by insurance) in the
aggregate;
(h) any Borrower or, except as expressly permitted under the terms
of this Agreement, any Obligor dissolves, suspends or discontinues doing
business;
(i) any Borrower shall cease to be Solvent;
(j) any Borrower or any Obligor shall make an assignment for the
benefit of creditors, or solicits a reorganization, arrangement, adjustment or
moratorium from its creditors or principal creditors generally with respect to
its debts as a whole or for the purpose of winding down or liquidating;
(k) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed against any Borrower, any Obligor or all or any part of
their respective properties and such case or proceeding is not (i) contested by
such Person within ten (10) days after filing thereof; provided however, Agent
and the Lenders shall not be obligated to make any Loans or other advances
during such period; and (ii) dismissed or vacated within sixty (60) days after
filing thereof; provided however, Agent and the Lenders shall not be obligated
to make any Loans or other advances during such period;
(l) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower, any Obligor or for all or any part of their
respective properties;
(m) any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any Indebtedness for borrowed money owing to
any person other than Agent and Lenders (including, without limitation, the JPMC
Agreements, the Senior Subordinated Notes or any agreements related thereto), or
any capitalized lease obligations, contingent Indebtedness in connection with
any guaranty, letter of credit, indemnity or similar
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type of instrument in favor of any person other than Agent and Lenders, in any
case in an amount in excess of Five Hundred Thousand Dollars ($500,000), which
default continues for more than the applicable cure period, if any, with respect
thereto, or any default by any Borrower or any Obligor under any Material
Contract which would permit the holder or holders thereof to accelerate the
payment of such other Indebtedness; provided, however, that upon cure or waiver
of such default with respect to such other Indebtedness, the Event of Default
under this Section 10.1(m) shall automatically be cured without any action by
Agent, the Lenders, Borrowers or Obligors;
(n) any bank at which any deposit account of any Borrower is
maintained shall fail to comply with any of the terms of any Deposit Account
Control Agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of such Borrower shall fail to
comply with any of the terms of any Investment Property Control Agreement to
which such person is a party and such failure (i) presents a risk of loss, as
determined by Agent, of Fifty Thousand Dollars ($50,000) or more, or (ii)
continues for more than ten (10) Business Days so long as during such ten (10)
Business Day period the funds or other property associated with such account
shall have either remained in such account or been remitted to Agent by
Borrower; provided, however, without operating as a waiver of the provisions of
this Section 10.1(n), Agent may institute additional Availability Reserves in
the amount which Agent determines is at risk for loss due to the events
described in this;
(o) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent and Lenders) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
(p) an ERISA Event shall occur;
(q) the stock of (i) Borrower Agent presently held (directly or
indirectly) by Parent is transferred, in whole or in part, (ii) TAH presently
held (directly or indirectly by Borrower Agent) is transferred, in whole or in
part, other than as a result of its dissolution into or merger into Borrower
Agent or (iii) Parent presently held (directly or indirectly) by Family Parties
is transferred, in whole or in part to a Person that is not a Family Party;
(r) the indictment by any Governmental Authority of any Borrower or
any Obligor under any criminal statute as to which there is a reasonable
possibility of an adverse determination that would have a Material Adverse
Effect in the good faith determination of Agent, or the commencement of criminal
or civil proceedings against any Borrower or any Obligor, pursuant to which
statute or proceedings the penalties or remedies sought or available include
forfeiture of (i) any of the Collateral or property of any Obligor having a
value in excess
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of Two Hundred Fifty Thousand Dollars ($250,000) or (ii) any other property of
any Borrower or any Obligor which is necessary or material to the conduct of its
business;
(s) any event shall occur which would have a Material Adverse
Effect; or
(t) the payment contemplated by Section 2.02 of the JPMC Loan
Agreement is made prior to the date on which the Obligations shall have been
indefeasibly paid and satisfied in full in cash and Agent and Lenders shall have
no further obligations to provide any Loans, Letter of Credit Accommodations or
other financing of any kind to Borrowers under this Agreement or otherwise.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower of this Agreement or any
of the other Financing Agreements. Subject to Section 12 hereof, Agent shall,
upon the direction of the Required Lenders, at any time or times an Event of
Default exists or has occurred and is continuing, proceed directly against any
Borrower or any Obligor to collect the Obligations without prior recourse to any
other Obligor or any of the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, and upon the direction of
the Required Lenders, shall (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Agent, for the ratable benefit of Lenders,
(provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(k) or 10.1(l) all Obligations shall automatically become
immediately due and payable), (ii) with or without judicial process or the aid
or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require each Borrower, at Borrowers' expense, to assemble and make
available to Agent any part or all of the Collateral at any place and time
designated by Agent, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with Agent or any Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all of
the foregoing being free from any right or equity of redemption of any Borrower,
which right or equity of redemption is hereby
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expressly waived and released by each Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Agent upon credit terms
or for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Agent, for the ratable benefit of
Lenders. If notice of disposition of Collateral is required by law, ten (10)
days prior notice by Agent to Borrower Agent designating the time and place of
any public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and each Borrower waives any other notice. In the event Agent institutes
an action to recover any Collateral or seeks recovery of any Collateral by way
of prejudgment remedy, each Borrower waives the posting of any bond which might
otherwise be required. At any time an Event of Default exists or has occurred
and is continuing, upon Agent's request, Borrowers will either, as Agent shall
specify, furnish cash collateral to the Issuing Bank to be used to secure and
fund Agent's and/or Lenders' reimbursement obligations to the Issuing Bank in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Agent, for itself and the ratable benefit of Lenders, for the Letter of
Credit Accommodations. Such cash collateral shall be in the amount equal to one
hundred five percent (105%) of the amount of the Letter of Credit Accommodations
plus the amount of any fees and expenses payable in connection therewith through
the end of the expiration of such Letter of Credit Accommodations.
(c) Agent may, at any time or times that an Event of Default exists
or has occurred and is continuing, enforce any Borrower's rights against any
account debtor, Merchant Payment Processor, secondary obligor or other obligor
in respect of any of the Accounts or other Receivables. Without limiting the
generality of the foregoing, Agent may at such time or times (i) notify any or
all account debtors, Merchant Payment Processors, secondary obligors or other
obligors in respect thereof that the Receivables have been assigned to Agent,
for itself and the ratable benefit of Lenders, and that Agent, for itself and
the ratable benefit of Lenders, has a security interest therein and Agent may
direct any or all accounts debtors, Merchant Payment Processors, secondary
obligors and other obligors to make payment of Receivables directly to Agent,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or conditions,
any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor, Merchant Payment Processor, any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its and Lender's interests. At any time that an Event of Default exists or
has occurred and is continuing, at Agent's request, all invoices and statements
sent to any account debtor or Merchant Payment Processor shall state that the
Accounts and such other obligations have been assigned to Agent and are payable
directly and only to Agent and each Borrower shall deliver to Agent such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Agent may require. In the
event any account debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, each Borrower shall, upon Agent's request, hold
the returned Inventory in trust for Agent and Lenders, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Agent's instructions, and not issue any credits, discounts
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or allowances with respect thereto inconsistent with such Borrower's normal
returns policy for consumers without Agent's prior written consent.
(d) To the extent that applicable law imposes duties on Agent or
Lenders to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower acknowledges and agrees that it
is not commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by such Person to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain consents of any
Governmental Authority or other third party for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against account debtors, secondary obligors or other persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (iv) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as any Borrower, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure such Person against
risks of loss, collection or disposition of Collateral or to provide to such
Person a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by such Person, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
such Person in the collection or disposition of any of the Collateral. Each
Borrower acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Agent or any Lender
would not be commercially unreasonable in such Person's exercise of remedies
against the Collateral and that other actions or omissions by such Person shall
not be deemed commercially unreasonable solely on account of not being indicated
in this Section. Without limitation of the foregoing, nothing contained in this
Section shall be construed to grant any rights to any Borrower or to impose any
duties on Agent or any Lender that would not have been granted or imposed by
this Agreement or by applicable law in the absence of this Section.
(e) For the purpose of enabling Agent and Lenders to exercise the
rights and remedies hereunder, each Borrower hereby grants to Agent, for itself
and the benefit of Lenders, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to any Borrower) to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by such Borrower,
wherever the same maybe located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.
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(f) Agent may apply the cash proceeds of Collateral actually
received by it from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, whether or not then due. Borrowers shall remain liable to
Agent and Lenders for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
(g) Without limiting the foregoing, upon and during the continuance
of a Default (other than a Default which Borrowers are actively engaged in
curing under the terms of Sections 10.1(b) or 10.1(n) hereof) or Event of
Default, Agent may, and upon the direction of the Required Lenders, shall,
without notice, (i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Loans and Letter of
Credit Accommodations available to Borrowers and/or (ii) terminate any provision
of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Agent or Lenders to Borrowers. Borrowers hereby
waive any rights they may have or acquire to contest the validity or strict
enforcement of this Section 10.2(g).
(h) With respect to any Deposit Account Control Agreements or
Investment Account Control Agreements which Agent and any Borrower may be party
to from time to time, unless such agreements provide that, upon the
effectiveness of such agreements, Agent is to have sole control of any accounts
or property subject to such agreements, Agent agrees that it shall only exercise
its right to sole control of such accounts or property upon the occurrence and
during the continuance of an Event of Default.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(applicable to contracts made and performed in such State).
(b) Borrowers, Agent and Lenders irrevocably consent and submit to
the non-exclusive jurisdiction of the state and federal courts located in Los
Angeles County, California, whichever Lender may elect, and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Agent or any Lender shall
have the right to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdiction which such Person deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against any Borrower or its property).
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(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
herein and service so made shall be deemed to be completed five (5) days after
the same shall have been so deposited in the U.S. mails, or, at Agent's or any
Lender's option, by service upon such Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
such Borrower or Borrowers shall appear in answer to such process, failing which
such Borrower or Borrowers shall be deemed in default and judgment may be
entered by Agent or any Lender against such Borrower or Borrowers for the amount
of the claim and other relief requested.
(d) BORROWERS, AGENT AND EACH LENDER HEREBY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, AGENT
AND EACH LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
(e) Neither Agent nor any Lender shall have any liability to any
Borrower (whether in tort, contract, equity or otherwise) for losses suffered by
any Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on such Person, that
the losses were the result of acts or omissions constituting gross negligence or
willful misconduct of such Person. In any such litigation, Agent and Lenders
shall be entitled to the benefit of the rebuttable presumption that they acted
in good faith and with the exercise of ordinary care in the performance by them
of the terms of this Agreement. Except as prohibited by law, each Borrower
waives any right which it may have to claim or recover in any litigation with
Agent or any Lender any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. Each Borrower: (i)
certifies that none of Agent, any Lender, or any of their respective
representatives, agents or attorneys acting for or on behalf of such Person has
represented, expressly or otherwise, that such Person would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Agreement or
any of the other Financing Agreements and (ii) acknowledges that in entering
into this Agreement and the other Financing Agreements, Agent and Lenders are
relying upon, among other things, the waivers and certifications set forth in
this Section 11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral,
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and any and all other demands and notices of any kind or nature whatsoever with
respect to the Obligations, the Collateral and this Agreement, except such as
are expressly provided for herein. No notice to or demand on any Borrower which
Agent or any Lender may elect to give shall entitle any Borrower to any other or
further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but only
by a written agreement signed as provided in this Section 11.3(a). Neither Agent
nor any Lender shall, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
such Person as provided in this Section 11.3(a). Any such waiver shall be
enforceable only to the extent specifically set forth therein. A waiver by Agent
or any Lender of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Agent or any Lender would otherwise have on any future occasion, whether similar
in kind or otherwise.
(b) Neither this Agreement nor any other Financing Agreement nor
any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by
Agent and the Required Lenders, and as to amendments to any of the Financing
Agreements, by Borrowers; except, that, any change, waiver, discharge or
termination with respect to the following shall require the consent of Agent and
all Lenders:
(i) the extension of the term of this Agreement beyond the
initial or any subsequent Anniversary Date;
(ii) reduction in the interest rate or any fees or the
extension of the time of payment of interest or any fees or reduction in the
principal amount of any Loans or Letter of Credit Accommodations;
(iii) increase in the Loan Commitment of any Lender over the
amount thereof then in effect or provided hereunder (it being understood that a
waiver of any Event of Default shall not constitute a change in the terms of any
Loan Commitment of any Lender);
(iv) the release of any Collateral (except as expressly
required by the Financing Agreements and except as permitted under Section
12.11(b) hereof);
(v) any increase in the borrowing availability under this
Agreement including any increase in advance rates, reduction of reserves or any
amendment, modification or waiver of the terms of the definitions of or any
provisions relating to (or application of discretionary criteria in any manner
resulting in an increase to amounts available pursuant to such definitions and
provisions relating to) (A) Borrowing Base, (B) Eligible Inventory, (C) Eligible
Merchant Payment Receivables, (D) Excess Availability, (E) Availability
Reserves, (F) Net Orderly Liquidation Value, or (G) Revolving Loan Limit, except
to the extent such amendments or modifications have the effect of making such
definitions more restrictive;
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(vi) the amendment, modification or waiver of: (A) the terms
of the definitions of or any provisions relating to Anniversary Date or Maximum
Credit; or (B) any provision of this Section 11.3;
(vii) the reduction of any percentage specified in the
definition of Required Lenders;
(viii) the consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement;
(ix) the release of any Obligor or other guarantor of the
Obligations except as required pursuant to the Financing Agreements;
(x) the reduction of the amount of Excess Availability
Borrowers are required to maintain pursuant to Section 9.16(b) hereof; or
(xi) the change or waiver of any provisions requiring a
mandatory payment or prepayment on the Obligations.
(c) Notwithstanding anything to the contrary contained in Section
11.3(b) above, in the event that Borrowers request that this Agreement or any
other Financing Agreements be amended or otherwise modified in a manner which
would require the unanimous consent of all of the Lenders or the consent of the
Required Lenders and such amendment or other modification is agreed to by Agent,
then, Agent and any consenting Lenders may amend this Agreement without the
consent of the Lender or Lenders who did not agree to such amendment or other
modification (collectively, the "Minority Lenders") to provide for (i) the
termination of the Loan Commitment of each of the Minority Lenders, (ii) the
addition to this Agreement of one or more other Lenders, or an increase in the
Loan Commitment of one or more of such consenting Lenders, so that the Loan
Commitments, after giving effect to such amendment, shall be in the same
aggregate amount as the Loan Commitments immediately before giving effect to
such amendment, (iii) if any Loans are outstanding at the time of such
amendment, the making of such additional Loans by such new Lenders or such
consenting Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (iv) the payment of all interest, fees and other Obligations
payable or accrued in favor of the Minority Lenders and such other modifications
to this Agreement as Agent and such consenting Lenders, if any, may determine to
be appropriate. Borrowers shall not be obligated to pay the Minority Lenders any
early termination fee under Section 3.3(b) hereof or otherwise in connection
with the payments to them under this Section 11.3(c).
(d) The consent of Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of Agent hereunder or under any
of the other Financing Agreements, in addition to the consent of the Lenders
otherwise required by this Section.
11.4 Confidentiality. Agent and each Lender agrees that it will use its
reasonable best efforts not to disclose, without the prior consent of Borrower
Agent, confidential information with respect to Borrowers, any Obligor, any of
their respective Subsidiaries which is furnished pursuant to this Agreement and
the other Financing Agreements that the Borrowers or Obligors
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directly provide to Agent and the Lenders that is specifically designated as
confidential in writing by such Person; provided, that, Agent or any Lender may
disclose any such information (a) to its employees, auditors or counsel, or to
another Lender if the disclosing Person or such disclosing Person's holding or
parent company in its sole discretion determines that any such party should have
access to such information, (b) as has become generally available to the public,
(c) as may be required or appropriate in any report, statement or testimony
submitted to any Governmental Authority having or claiming to have jurisdiction
over Agent or such Lender, (d) as may be required or appropriate in response to
any summons or subpoena or in connection with any litigation; provided, that,
Agent or such Lender uses good faith efforts to give such Person advance notice
of such request for disclosure unless prohibited from doing so by applicable
law, (e) in order to comply with any statute or regulation, and (f) to any
prospective or actual assignee or Participant in connection with any
contemplated transfer or participation of any of the Loan Commitments or any
interest therein by such Lender, provided, that, such assignee or Participant
has executed a confidentiality agreement consistent with the terms of this
Section 11.4; and (g) to JPMC and the JPMC Lenders.
11.5 Waiver of Counterclaims. Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
than compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.6 Indemnification. Borrowers shall indemnify and hold Agent and each
Lender, and its directors, agents, employees and counsel, harmless from and
against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel, except to the extent that the losses, claims, damages, liabilities,
costs and expenses arose from the indemnified party's gross negligence or
willful misconduct. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, each Borrower shall pay the maximum portion which it
is permitted to pay under applicable law to Agent and Lenders in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12. THE AGENT
12.1 Appointment; Powers and Immunities. Each Lender hereby irrevocably
designates, appoints and authorizes The CIT Group/Business Credit, Inc. to act
as Agent hereunder and under the other Financing Agreements with such powers as
are specifically delegated to Agent by the terms of this Agreement and of the
other Financing Agreements, together with such other powers as are reasonably
incidental thereto. Agent: (a) shall have no duties or responsibilities except
those expressly set forth in this Agreement and in the other Financing
Agreements, and shall not by reason of this Agreement or any other Financing
Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible
to Lenders for
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any recitals, statements, representations or warranties contained in this
Agreement or in any other Financing Agreement, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Financing Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Financing Agreement or any other document referred to or provided for
herein or therein or for any failure by any Borrower, any Obligor or any other
Person to perform any of its obligations hereunder or thereunder; and (c) shall
not be responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Financing Agreement or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and until
the assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent.
12.2 Reliance By Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Lenders and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, any Borrower or any Obligor
specifying such Event of Default or any unfulfilled condition precedent, and
stating that such notice is a "Notice of Default or Failure of Condition". In
the event that Agent receives such a notice, Agent shall give prompt notice
thereof to the Lenders. Agent shall (subject to Section 12.7) take such action
with respect to any such Event of Default or failure of condition precedent as
shall be directed by the Required Lenders; provided, that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to or by
reason of such Event of Default or failure of condition precedent, as it shall
deem advisable in the best interest of Lenders. Without limiting the foregoing,
and notwithstanding the existence or occurrence and continuance of an Event of
Default or any other failure to satisfy any of the conditions precedent set
forth in Section 4 of this Agreement to the contrary, Agent may, but shall have
no obligation to, continue to make Loans and issue or cause to be issued Letter
of Credit Accommodations for the ratable account and risk of Lenders from time
to time if Agent believes making such Loans
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or issuing or causing to be issued such Letter of Credit Accommodations is in
the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender may
assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
any Obligor or any of the Collateral or other property of any Borrower or
Obligor.
12.4 The CIT Group/Business Credit, Inc. in its Individual Capacity. With
respect to its Loan Commitment and the Loans made and Letter of Credit
Accommodations issued or caused to be issued by it (and any successor acting as
Agent), so long as The CIT Group/Business Credit, Inc. shall be a Lender
hereunder, it shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include The CIT Group/Business Credit, Inc. in its individual capacity as a
Lender hereunder. The CIT Group/Business Credit, Inc. (and any successor acting
as Agent) and its Affiliates may (without having to account therefor to any
Lender) lend money to, make investments in and generally engage in any kind of
business with any Borrower or Obligor (and any of their respective Subsidiaries
or Affiliates) as if it were not acting as Agent, and The CIT Group/Business
Credit, Inc. and its Affiliates may accept fees and other consideration from any
Borrower or Obligor for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers hereunder and without limiting the Obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of Agent, as determined by a final
non-appealable judgment of a court of competent jurisdiction.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of each Borrower and Obligor and has made its own decision to
enter into this Agreement and that it will, independently and without reliance
upon Agent or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements. Agent shall not be required to keep itself informed
as to the performance or observance by any Borrower or any Obligor of any term
or provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of any Borrower or any Obligor. Agent will use reasonable
efforts to provide Lenders with any information received by Agent from any
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Borrower or any Obligor which is required to be provided to Lenders hereunder
and with a copy of any "Notice of Default or Failure of Condition" received by
Agent from any Borrower, any Obligor or any Lender; provided, that, Agent shall
not be liable to any Lender for any failure to do so, except to the extent that
such failure is attributable to Agent's own gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any other credit
or other information concerning the affairs, financial condition or business of
any Borrower or any Obligor that may come into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Loans or provide any
Letter of Credit Accommodations to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Loans or Letter of Credit
Accommodations would result in an Overadvance, without the prior consent of all
Lenders, except, that, Agent may make an Overadvance on behalf of Lenders,
intentionally and with actual knowledge thereof as Agent may deem necessary or
advisable in its discretion, provided, that: (a) the total principal amount of
such Overadvance shall not exceed the amount equal to ten percent (10%) of the
Borrowing Base at that time and shall not cause the total principal amount of
the Loans and Letter of Credit Accommodations to exceed the Maximum Credit and
(b) without the consent of all Lenders, Agent shall not make any Overadvance
more than ninety (90) days from the date of the first such Overadvance. Each
Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any
such Overadvance provided that Agent is acting in accordance with the terms of
this Section 12.8.
12.9 Concerning the Collateral and the Related Financing Agreements. Each
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements relating to the Collateral, for the ratable benefit of
Lenders and Agent. Each Lender agrees that any action taken by Agent or Required
Lenders in accordance with the terms of this Agreement or the other Financing
Agreements relating to the Collateral, and the exercise by Agent or Required
Lenders of their respective powers set forth therein or herein, together with
such other powers that are reasonably incidental thereto, shall be binding upon
all of the Lenders.
12.10 Field Audits; Examination Reports and other Information; Disclaimer
by Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish to each Lender,
promptly after it becomes available, a copy of each field audit or examination
report and a weekly report with respect to the Borrowing Base prepared by Agent
(each field audit or examination report and weekly report with respect to the
Borrowing Base being referred to herein as a "Report" and collectively, the
"Reports");
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(b) expressly agrees and acknowledges that Agent (i) does not make
any representation or warranty as to the accuracy of any Report, or (ii) shall
not be liable for any information contained in any Report; provided, that,
nothing contained in this Section 12.10 shall be construed to limit the
liability of Agent under Section 12.1(c) hereof in the event of the gross
negligence or willful misconduct of Agent as determined pursuant to a final
non-appealable order of a court of competent jurisdiction;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrowers
and Obligors and will rely significantly upon each Borrower's books and records,
as well as on representations of each Borrower's personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 11.4 hereof, and not to
distribute or use any Report in any other manner.
12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances ("Special Agent
Advances") which Agent, in its sole discretion, deems necessary or desirable
either (i) to preserve or protect the Collateral or any portion thereof
(provided that in no event shall Special Agent Advances for such purpose exceed
Four Million Dollars ($4,000,000) in the aggregate outstanding at any time) or
(ii) to pay any other amount chargeable to any Borrower pursuant to the terms of
this Agreement consisting of costs, fees and expenses and payments to any
Issuing Bank of Letter of Credit Accommodations. Special Agent Advances shall be
repayable on demand and be secured by the Collateral. Special Agent Advances
shall not constitute Loans but shall otherwise constitute Obligations hereunder.
Agent shall notify each Lender and Borrower Agent in writing of each such
Special Agent Advance, which notice shall include a description of the purpose
of such Special Agent Advance. Without limitation of its obligations pursuant to
Section 6.10, each Lender agrees that it shall make available to Agent, upon
Agent's demand, in immediately available funds, the amount equal to such
Lender's Pro Rata Share of each such Special Agent Advance. If such funds are
not made available to Agent by such Lender, Agent shall be entitled to recover
such funds, on demand from such Lender together with interest thereon, for each
day from the date such payment was due until the date such amount is paid to
Agent at the Prime Rate based rate of interest for Revolving Loans set forth in
Section 3.1 hereof.
(b) Lenders hereby irrevocably authorize Agent, at its option and
in its discretion to release any security interest in, mortgage or lien upon,
any of the Collateral (i) upon termination of the Loan Commitments and payment
and satisfaction of all of the Obligations and delivery of cash collateral to
the extent required under Section 14.1 hereof, or (ii) constituting property
being sold or disposed of if Borrower Agent certifies to Agent that the sale or
disposition is made in compliance with Section 9.7 hereof (and Agent may rely
conclusively on any such certificate, without further inquiry), or (iii)
constituting property in which no Borrower
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or Obligor owned an interest at the time the security interest, mortgage or lien
was granted or at any time thereafter, or (iv) having a value of less than
$250,000 in any once case or $1,000,000 in the aggregate, or (v) if approved,
authorized or ratified in writing by all of Lenders. Except as provided above,
Agent will not release any security interest in, mortgage or lien upon, any of
the Collateral without the prior written authorization of all of Lenders (and
any Lender may require that the proceeds from any sale or other disposition of
the Collateral to be so released be applied to the Obligations in a manner
satisfactory to such Lender). Upon request by Agent at any time, Lenders will
promptly confirm in writing Agent's authority to release particular types or
items of Collateral pursuant to this Section.
(c) Without any manner limiting Agent's authority to act without
any specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent for itself and the benefit of the Lenders upon any Collateral
to the extent set forth above; provided, that, (i) Agent shall not be required
to execute any such document on terms which, in Agent's opinion, would expose
Agent to liability or create any obligations or entail any consequence other
than the release of such security interest, mortgage or liens without recourse
or warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any security interest, mortgage or lien upon (or
obligations of any Borrower in respect of) the Collateral retained by any
Borrower.
(d) Agent shall have no obligation whatsoever to any Lender or any
other Person to investigate, confirm or assure that the Collateral exists or is
owned by any Borrower or any Obligor, or is cared for, protected or insured or
has been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the Loans or Letter of Credit
Accommodations hereunder, or whether any particular reserves are appropriate, or
that the liens and security interests granted to Agent herein or pursuant hereto
or otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its discretion (subject to the terms of this Agreement),
given Agent's own interest in the Collateral as a Lender and that Agent shall
have no duty or liability whatsoever to any other Lender.
(e) Agent and Lenders agree that at least two (2) of the quarterly
field examinations of Collateral and Borrowers' operations to be conducted in
connection with this Agreement shall be conducted by Spain, Price, Reader &
▇▇▇▇▇▇▇▇, or such other auditor mutually acceptable to Agent and Lenders.
12.12 Agency for Perfection. Agent and each Lender hereby appoints each
Lender as agent for the purpose of perfecting the security interests in and
liens upon the Collateral of Agent for itself and the ratable benefit of Lenders
in assets which, in accordance with Article 9 of the UCC can be perfected only
by possession. Should any Lender obtain possession of any such
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Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13 Failure to Respond Deemed Consent. In the event any Lender's consent
is required pursuant to the provisions of this Agreement and such Lender does
not respond to any written request delivered by Agent in accordance with the
notice provisions contained in this Agreement for such consent within ten (10)
days after such request is made to such Lender, such failure to respond shall be
deemed a consent.
SECTION 13. JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS
13.1 Independent Obligations; Subrogation. The Obligations of each
Borrower hereunder are joint and several. To the maximum extent permitted by
law, each Borrower hereby waives any claim, right or remedy which such Borrower
now has or hereafter acquires against any other Borrower that arises hereunder
including, without limitation, any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Agent or any Lender against any Borrower or any
Collateral which Agent or any Lender now has or hereafter acquires, whether or
not such claim, right or remedy arises in equity, under contract, by statute,
under common law or otherwise until the Obligations are fully paid and finally
discharged. In addition, each Borrower hereby waives any right to proceed
against the other Borrowers, now or hereafter, for contribution, indemnity,
reimbursement, and any other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which any Borrower may now have or hereafter
have as against the other Borrowers with respect to the Obligations until the
Obligations are fully paid and finally discharged. Each Borrower also hereby
waives any rights of recourse to or with respect to any asset of the other
Borrowers until the Obligations are fully paid and finally discharged.
13.2 Authority to Modify Obligations and Security. Each Borrower
authorizes Agent and Lenders, without notice or demand and without affecting any
Borrowers' liability hereunder, from time to time, whether before or after any
notice of termination hereof or before or after any default in respect of the
Obligations, to: (a) renew, extend, accelerate, or otherwise change the time for
payment of, or otherwise change any other term or condition of, any document or
agreement evidencing or relating to any Obligations as such Obligations relate
to the other Borrowers, including, without limitation, to increase or decrease
the rate of interest thereon; (b) accept, substitute, waive, defease, increase,
release, exchange or otherwise alter any Collateral, in whole or in part,
securing the other Borrowers' Obligations; (c) apply any and all such Collateral
and direct the order or manner of sale thereof as Agent and Lenders, in their
sole discretion, may determine; (d) deal with the other Borrowers as Agent or
any Lender may elect; (e) in Agent's and Lenders' sole discretion, settle,
release on terms satisfactory to them, or by operation of law or otherwise,
compound, compromise, collect or otherwise liquidate any of the other Borrowers'
Obligations and/or any of the Collateral in any manner, and bid and purchase any
of the collateral at any sale thereof; (vi) apply any and all payments or
recoveries from the other Borrowers as Agent or Lenders, in their sole
discretion, may determine, whether or not such indebtedness relates to the
Obligations; all whether such Obligations are secured or unsecured or guaranteed
or not guaranteed by others; and (vii) apply any sums realized from Collateral
furnished by the other Borrowers upon any of its indebtedness or obligations to
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Administrative Agent or Lenders as they in their sole discretion, may determine,
whether or not such indebtedness relates to the Obligations; all without in any
way diminishing, releasing or discharging the liability of any Borrower
hereunder.
13.3 Waiver of Defenses. Upon and during the continuance of Event of
Default by any Borrower in respect of any Obligations, Agent and Lenders may, at
their option and without notice to any Borrower, proceed directly against any
Borrower to collect and recover the full amount of the liability hereunder, or
any portion thereof, and each Borrower waives any right to require Agent or any
Lender to: (a) proceed against the other Borrowers or any other person
whomsoever; (b) proceed against or exhaust any Collateral given to or held by
Agent or any Lender in connection with the Obligations; (c) give notice of the
terms, time and place of any public or private sale of any of the Collateral
except as otherwise provided herein; or (d) pursue any other remedy in Agent's
or any Lender's power whatsoever. A separate action or actions may be brought
and prosecuted against any Borrower whether or not action is brought against the
other Borrowers and whether the other Borrowers be joined in any such action or
actions; and each Borrower waives the benefit of any statute of limitations
affecting the liability hereunder or the enforcement hereof, and agrees that any
payment of any Obligations or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute of
limitations applicable to the liability hereunder.
13.4 Exercise of Agent's and Lenders' Rights. Each Borrower hereby
authorizes and empowers Agent and Lenders in their sole discretion, without any
notice or demand to such Borrower whatsoever and without affecting the liability
of such Borrower hereunder, to exercise any right or remedy which Agent or any
Lender may have available to them against the other Borrowers.
13.5 Additional Waivers. Each Borrower waives any defense arising by
reason of any disability or other defense of the other Borrowers or by reason of
the cessation from any cause whatsoever of the liability of the other Borrowers
or by reason of any act or omission of Agent or any Lender or others which
directly or indirectly results in or aids the discharge or release of the other
Borrowers or any Obligations or any Collateral by operation of law or otherwise.
The Obligations shall be enforceable against each Borrower without regard to the
validity, regularity or enforceability of any of the Obligations with respect to
any of the other Borrowers or any of the documents related thereto or any
collateral security documents securing any of the Obligations. No exercise by
Agent or any Lender of, and no omission of Agent or any Lender to exercise, any
power or authority recognized herein and no impairment or suspension of any
right or remedy of Agent or any Lender against any Borrower or any Collateral
shall in any way suspend, discharge, release, exonerate or otherwise affect any
of the Obligations or any Collateral furnished by the Borrowers or give to the
Borrowers any right of recourse against Agent or any Lender. Each Borrower
specifically agrees that the failure of Agent or any Lender: (a) to perfect any
lien on or security interest in any property heretofore or hereafter given any
Borrower to secure payment of the Obligations, or to record or file any document
relating thereto or (b) to file or enforce a claim against the estate (either in
administration, bankruptcy or other proceeding) of any Borrower shall not in any
manner whatsoever terminate, diminish, exonerate or otherwise affect the
liability of any Borrower hereunder.
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13.6 Additional Indebtedness. Additional Obligations may be created from
time to time at the request of any Borrower and without further authorization
from or notice to any other Borrower even though the borrowing Borrower's
financial condition may deteriorate since the date hereof. Each Borrower waives
the right, if any, to require Agent or any Lender to disclose to such Borrower
any information it may now have or hereafter acquire concerning the other
Borrowers' character, credit, Collateral, financial condition or other matters.
Each Borrower has established adequate means to obtain from the other Borrowers,
on a continuing basis, financial and other information pertaining to such
Borrower's business and affairs, and assumes the responsibility for being and
keeping informed of the financial and other conditions of the other Borrowers
and of all circumstances bearing upon the risk of nonpayment of the Obligations
which diligent inquiry would reveal. Neither Agent nor any Lender need inquire
into the powers of any Borrower or the authority of any of their respective
officers, directors, partners or agents acting or purporting to act in their
behalf, and any Obligations created in reliance upon the purported exercise of
such power or authority is hereby guaranteed. All Obligations of each Borrower
to Agent and Lenders heretofore, now or hereafter created shall be deemed to
have been granted at each Borrower's special insistence and request and in
consideration of and in reliance upon this Agreement.
13.7 Notices, Demands, Etc. Except as expressly provided by this
Agreement, neither Agent nor any Lender shall be under any obligation whatsoever
to make or give to any Borrower, and each Borrower hereby waives diligence, all
rights of setoff and counterclaim against Agent or any Lender, all demands,
presentments, protests, notices of protests, notices of protests, notices of
nonperformance, notices of dishonor, and all other notices of every kind or
nature, including notice of the existence, creation or incurring of any new or
additional Obligations.
13.8 Subordination. Except as otherwise provided in this Section 13.8,
any indebtedness for borrowed money of any Borrower now or hereafter owing to
any other Borrower is hereby subordinated to the Obligations, whether
heretofore, now or hereafter created, and whether before or after notice of
termination hereof, and, following the occurrence and during the continuation of
an Event of Default, no Borrower shall, without the prior consent of Required
Lenders, pay in whole or in part any of such indebtedness nor will any such
Borrower accept any payment of or on account of any such indebtedness at any
time while such Borrower remains liable hereunder. At the request of Agent,
after the occurrence and during the continuance of an Event of Default, each
Borrower shall pay to Agent all or any part of such subordinated indebtedness
and any amount so paid to Agent at its request shall be applied to payment of
the Obligations. Each payment on the indebtedness of any Borrower to the other
Borrowers received in violation of any of the provisions hereof shall be deemed
to have been received by any other Borrower as trustee for Agent and Lenders and
shall be paid over to Agent immediately on account of the Obligations, but
without otherwise affecting in any manner any such Borrower's liability under
any of the provisions of this Agreement. Each Borrower agrees to file all claims
against the other Borrowers in any bankruptcy or other proceeding in which the
filing of claims is required by law in respect of any indebtedness of the other
Borrowers to such Borrower, and Agent and Lenders shall be entitled to all of
any such Borrower's rights thereunder. If for any reason any such Borrower fails
to file such claim at least thirty (30) days prior to the last date on which
such claim should be filed, Agent, as such Borrower's attorney-in-fact, is
hereby authorized to do so in Borrowers' name or, in Agent's discretion, to
assign such
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claim to, and cause a proof of claim to be filed in the name of, Agent's
nominee. In all such cases, whether in administration, bankruptcy or otherwise,
the person or persons authorized to pay such claim shall pay to Agent the full
amount payable on the claim in the proceeding, and to the full extent necessary
for that purpose any such Borrower hereby assigns to Agent, for itself and the
ratable benefit of Lenders, all such Borrower's rights to any payments or
distributions to which such Borrower otherwise would be entitled. If the amount
so paid is greater than any such Borrower's liability hereunder, Agent will pay
the excess amount to the person entitled thereto.
13.9 Revival. If any payments of money or transfers of property made to
Agent or any Lender by any Borrower should for any reason subsequently be
declared to be fraudulent (within the meaning of any state or federal law
relating to fraudulent conveyances), preferential or otherwise voidable or
recoverable in whole or in part for any reason (hereinafter collectively called
"voidable transfers") under the Bankruptcy Code or any other federal or state
law and Agent or any Lender is required to repay or restore any such voidable
transfer, or the amount or any portion thereof, then as to any such voidable
transfer or the amount repaid or restored and all reasonable costs and expenses
(including reasonable attorneys' fees) of Agent or any Lender related thereto,
such Borrower's liability hereunder shall automatically be revived, reinstated
and restored and shall exist as though such voidable transfer had never been
made to Agent or such Lender.
13.10 Understanding of Waivers. Each Borrower warrants and agrees that the
waivers set forth in this Section 13 are made with full knowledge of their
significance and consequences. If any of such waivers are determined to be
contrary to any applicable law or public policy, such waivers shall be effective
only to the maximum extent permitted by law.
SECTION 14. TERM OF AGREEMENT; MISCELLANEOUS
14.1 Term.
(a) Unless extended by Agent (with the consent of all Lenders)
pursuant to a notice of renewal delivered by Agent to Borrowing Agent not less
than 10 Business Days prior to each Anniversary Date, as applicable, this
Agreement shall terminate on the initial Anniversary Date, or if extended
pursuant to this Section, the applicable next succeeding Anniversary Date. Upon
any such delivery of a notice of renewal from Agent to Borrower Agent, and
unless terminated as herein provided, this Agreement shall continue until the
Anniversary Date immediately succeeding the applicable Anniversary Date with
respect to which such notice of renewal was delivered. Notwithstanding the
foregoing, Agent may terminate this Agreement immediately upon the occurrence of
an Event of Default; provided, however, that if the Event of Default is an event
listed in Sections 10.1(k) or 10.1(l) hereof, this Agreement shall terminate in
accordance with Section 10.2(b) hereof. Notwithstanding the foregoing, the
Obligations shall mature and be immediately due and payable in the event the
Senior Subordinated Notes shall mature on a date that is prior to the
Anniversary Date. Borrowers may terminate this Agreement at any time upon sixty
(60) days prior written notice to Agent, provided that Borrowers pay to Agent,
for the benefit of the Lenders, immediately on demand the early termination fee
set forth in Section 3.3(b) hereof. Such termination fee shall not be due if
Borrowers duly terminate this Agreement as of any Anniversary Date. All
Obligations shall become due and payable as of any termination hereunder or
under Section 10 hereof and, pending a final accounting, Agent may
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withhold any balances in the Borrowers' loan account(s) (unless supplied with an
indemnity satisfactory to Agent) to cover all of the Obligations, whether
absolute or contingent, including, but not limited to, cash reserves for any
contingent Obligations, including an amount equal to one hundred five percent
(105%) of the face amount of any outstanding Letter of Credit Accommodation
having an expiry date on, or within thirty (30) days of the effective date of
termination of this Agreement. Such payments in respect of the Obligations and
cash collateral shall be remitted by wire transfer in Federal funds to such bank
account of Agent, as Agent may, in its discretion, designate in writing to
Borrower Agent for such purpose. Interest shall be due until and including the
next Business Day, if the amounts so paid by Borrowers to the bank account
designated by Agent are received in such bank account later than 11:00 a.m. Los
Angeles time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and the
continuing security interest of Agent, for itself and the ratable benefit of
Lenders, in the Collateral and the rights and remedies of Agent and Lenders
hereunder, under the other Financing Agreements and applicable law, shall remain
in effect until all such Obligations have been fully and finally discharged and
paid. Accordingly, each Borrower waives any rights which it may have under the
UCC to demand the filing of termination statements with respect to the
Collateral, and none of Agent or any Lender shall be required to send such
termination statements to any Borrower, or to file them with any filing office,
unless and until this Agreement is terminated in accordance with its terms and
all of the Obligations are paid and satisfied in full in immediately available
funds.
14.2 Interpretive Provisions.
(a) All terms used herein which are defined in Division 1 or
Division 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to any party hereto pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) All references to the term "good faith" used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers shall have the
106
burden of proving any lack of good faith on the part of Agent or any Lender
alleged by Borrowers at any time.
(g) All uses herein of the term "material" when applicable to any
Borrower shall mean material as determined by Agent in its sole and commercially
reasonable discretion.
(h) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as reasonably determined by Agent.
(i) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of any Borrower most recently
received by Agent prior to the date hereof.
(j) In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including", the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
(k) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(l) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(m) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(n) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Agent and
Lenders and the other parties, and are the products of all parties. Accordingly,
this Agreement and the other Financing Agreements shall not be construed against
Agent or Lenders merely because of their involvement in their preparation.
(o) Unless expressly stated otherwise, all calculations called for
hereunder shall be made without duplication of any item accounted for in the
elements of such calculation.
14.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by
107
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing. All notices, requests and demands upon the parties are to be given to
the addresses designated on the signature page hereto or to such other address
as any party may designate by notice in accordance with this Section.
14.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
14.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Borrowers and their
respective successors and assigns, except that no Borrower may assign its rights
under this Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent of Agent and
Lenders. No Lender may assign its rights and obligations under this Agreement
(or any part thereof) without the prior written consent of all Lenders and
Agent, except as permitted under Section 14.6 hereof. Any purported assignment
by a Lender without such prior express consent or compliance with Section 14.6
where applicable, shall be void. The terms and provisions of this Agreement and
the other Financing Agreements are for the purpose of defining the relative
rights and obligations of Borrowers, Obligors, Agent and Lenders with respect to
the transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of the
other Financing Agreements.
14.6 Assignments; Participations.
(a) Each Lender may (i) assign all or a portion of its rights and
obligations under this Agreement (including, without limitation, a portion of
its Loan Commitment, the Loans owing to it and its rights and obligations as a
Lender with respect to Letters of Credit Accommodations) and the other Financing
Agreements; to its parent company and/or any Affiliate of such Lender which is
at least fifty (50%) percent owned by such Lender or its parent company or to
one or more Lenders or (ii) assign all, or if less than all a portion equal to
at least $5,000,000 in the aggregate for the assigning Lender or assigning
Lenders, of such rights and obligations under this Agreement to one or more
Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Lender by execution of an Assignment and Acceptance; provided,
that, (A) the consent of Agent shall be required in connection with any
assignment to an Eligible Transferee pursuant to clause (ii) above, (B) if such
Eligible Transferee is not a bank, Agent shall receive a representation in
writing by such Eligible Transferee that either (1) no part of its acquisition
of its Loans is made out of assets of any employee benefit plan, or (2) after
consultation, in good faith, with Borrowers and provision by Borrowers of such
information as may be reasonably requested by such Eligible Transferee, the
acquisition and holding of such Loan Commitments and Loans does not constitute a
non-exempt prohibited transaction under Section 406 of ERISA and Section 4975 of
the Code, or (3) such assignment is an "insurance company general account," as
such term is defined in the Department of Labor
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Prohibited Transaction Class Exemption 95.60 (issued July 12, 1995) ("PTCE
95-60"), and, as of the date of the assignment, there is no "employee benefit
plan" with respect to which the aggregate amount of such general account's
reserves and liabilities for the contracts held by or on behalf of such
"employee benefit plan" and all other "employee benefit plans" maintained by the
same employer (and affiliates thereof as defined in Section V(a)(1) of PTCE
95-60) or by the same employee organization (in each case determined in
accordance with the provisions of PTCE 95-60) exceeds ten percent (10%) of the
total reserves and liabilities of such general account (as determined under PTCE
95-60) (exclusive of separate account liabilities) plus surplus as set forth in
the National Association of Insurance Commissioners Annual Statement filed with
the state of domicile of such Eligible Transferee and (C) such transfer or
assignment will not be effective until recorded by the Agent on the Register. As
used in this Section, the term "employee benefit plan" shall have the meaning
assigned to it in Title I of ERISA and shall also include a "plan" as defined in
Section 4975(e)(1) of the Code.
(b) Agent shall maintain a register of the names and addresses of
Lenders, their Loan Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. Upon its receipt of each Assignment and
Acceptance, Agent will give prompt notice thereof to Lenders and deliver to each
of them a copy of the executed Assignment and Acceptance. The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and Borrowers, Obligors, Agent and Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by Borrowers, Obligors
and any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(c) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (i)
the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrowers, Obligors or, if applicable, any of their respective Subsidiaries
or the performance or observance by any Borrower or any Obligor of any of the
Obligations; (iii) such assignee confirms that it has received a copy of this
109
Agreement and the other Financing Agreements, together with such other documents
and information it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (iv) such assignee will,
independently and without reliance upon the assigning Lender, Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Financing Agreements, (v) such
assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto, and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Financing
Agreements are required to be performed by it as a Lender. Agent and Lenders may
furnish any information concerning Borrowers, Obligors or their respective
Subsidiaries in the possession of Agent or any Lender from time to time to
assignees and Participants.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Loan Commitments and the Loans owing to it
and its participation in the Letter of Credit Accommodations, without the
consent of Agent or the other Lenders); provided, that, (i) such Lender's
obligations under this Agreement (including, without limitation, its Loan
Commitment hereunder) and the other Financing Agreements shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and Borrowers, Obligors, Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Financing Agreements, (iii) the Participant shall not have any rights
under this Agreement or any of the other Financing Agreements (the Participant's
rights against such Lender in respect of such participation to be those set
forth in the agreement executed by such Lender in favor of the Participant
relating thereto) and all amounts payable by any Borrower or Obligor hereunder
shall be determined as if such Lender had not sold such participation, and (iv)
if such Participant is not a bank, represent that either (A) no part of its
acquisition of its participation is made out of assets of any employee benefit
plan, or (B) after consultation, in good faith, with Borrower Agent and
provision by Borrowers of such information as may be reasonably requested by the
Participant, the acquisition and holding of such participation does not
constitute a non-exempt prohibited transaction under Section 406 of ERISA and
Section 4975 of the Code, or (C) such participation is an "insurance company
general account", as such term is defined in the "PTCE 95-60", and, as of the
date of the transfer there is no "employee benefit plan" with respect to which
the aggregate amount of such general account's reserves and liabilities for the
contracts held by or on behalf of such "employee benefit plan" and all other
"employee benefit plans" maintained by the same employer (and affiliates thereof
as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of PTCE
95-60) exceeds ten percent (10%) of the total reserves and liabilities of such
general account (as determined under PTCE 95-60) (exclusive of separate account
liabilities) plus surplus as set forth in the National Association of Insurance
Commissioners Annual Statement filed with the state of domicile of the
Participant.
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(f) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank.
(g) Borrowers shall assist Agent or any Lender permitted to
sell assignments or participations under this Section 14.6 in whatever manner
reasonably necessary in order to enable or effect any such assignment or
participation, including (but not limited to) the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential assignees or Participants. Each Borrower shall
certify the correctness, completeness and accuracy of all descriptions of such
Borrower and its affairs provided, prepared or reviewed by such Borrower that
are contained in any selling materials and all other information provided by it
and included in such materials.
14.7 Participant's Security Interests. If a Participant shall at any
time participate with any Lender in the Loans and Letter of Credit
Accommodations, each Borrower hereby grants to such Participant and such
Participant shall have and is hereby given, a continuing lien on and security
interest in any money, securities and other property of such Borrower in the
custody or possession of such Participant, including the right of setoff, to the
extent of such Participant's participation in the Obligations, and such
Participant shall be deemed to have the same right of setoff to the extent of
its participation in the Obligations, as it would have if it were a direct
Lender.
14.8 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
14.9 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
14.10 Treatment Under Indenture. The Obligations shall constitute
"Senior Indebtedness" and "Designated Senior Indebtedness" for purposes of the
Indenture and Agent and the Lenders shall be entitled to all rights and benefits
granted to holders thereof set forth in the Indenture.
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14.11 Tombstones. Each Borrower consents to the publication by Agent or
any Lender of a tombstone or similar advertising material relating to the
financing transactions contemplated by this Agreement. Agent or such Lender
shall provide a draft of any such tombstone or similar advertising material to
Borrower Agent for review and comment prior to the publication thereof. Agent
reserves the right to provide to industry trade organizations information
necessary and customary for inclusion in league table measurements.
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS ...................................................................... 1
SECTION 2. CREDIT FACILITIES ................................................................ 22
2.1 Revolving Loans .................................................................... 22
2.2 Term Loan .......................................................................... 23
2.3 Real Estate Loans .................................................................. 23
2.4 Letter of Credit Accommodations .................................................... 24
2.5 Commitments ........................................................................ 27
SECTION 3. INTEREST AND FEES ................................................................ 28
3.1 Interest ........................................................................... 28
3.2 Changes in Laws and Increased Costs of Loans ....................................... 31
3.3 Fees ............................................................................... 32
SECTION 4. CONDITIONS PRECEDENT ............................................................. 32
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations ..................................................................... 32
4.2 Conditions Precedent to All Real Estate Loans ...................................... 38
4.3 Conditions Precedent to All Loans and Letter of Credit Accommodations .............. 38
4.4 Conditions Subsequent to Loans and Letter of Credit Accommodations ................. 39
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST ........................................ 40
5.1 Grant of Security Interest ......................................................... 40
5.2 Perfection of Security Interests ................................................... 41
SECTION 6. COLLECTION AND ADMINISTRATION .................................................... 45
6.1 Borrowers' Loan Accounts ........................................................... 45
6.2 Statements ......................................................................... 45
6.3 Collection of Accounts ............................................................. 45
6.4 Payments ........................................................................... 46
6.5 Taxes .............................................................................. 48
6.6 Authorization to Make Loans ........................................................ 50
6.7 Use of Proceeds .................................................................... 50
6.8 Pro Rata Treatment ................................................................. 50
6.9 Sharing of Payments, Etc ........................................................... 51
6.10 Settlement Procedures .............................................................. 52
-i-
TABLE OF CONTENTS
(continued)
PAGE
6.11 Appointment of Borrower Agent for Requesting Loans and Receipts of
Loans and Statements .................................................................. 54
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS ........................................ 54
7.1 Collateral Reporting .................................................................. 54
7.2 Accounts Covenants .................................................................... 55
7.3 Inventory Covenants ................................................................... 56
7.4 Equipment and Real Property Covenants ................................................. 57
7.5 Power of Attorney ..................................................................... 58
7.6 Right to Cure ......................................................................... 59
7.7 Access to Premises .................................................................... 59
SECTION 8. REPRESENTATIONS AND WARRANTIES ...................................................... 59
8.1 Corporate Existence; Power and Authority .............................................. 59
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations ............. 60
8.3 Financial Statements; No Material Adverse Effect ...................................... 60
8.4 Priority of Liens; Title to Properties ................................................ 61
8.5 Tax Returns ........................................................................... 61
8.6 Litigation ............................................................................ 61
8.7 Compliance with Other Agreements and Applicable Laws .................................. 61
8.8 Environmental Compliance .............................................................. 61
8.9 Employee Benefits ..................................................................... 62
8.10 Intellectual Property ................................................................. 63
8.11 Corporate Structure; Subsidiaries; Affiliates; Capitalization; Solvency ............... 63
8.12 Labor Disputes ........................................................................ 64
8.13 Restrictions on Subsidiaries .......................................................... 64
8.14 Material Contracts, etc ............................................................... 64
8.15 Payable Practices ..................................................................... 65
8.16 Genuineness of Accounts ............................................................... 65
8.17 Owned Real Property ................................................................... 65
8.18 Cash Transport Services ............................................................... 65
8.19 Life Insurance Policies ............................................................... 65
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TABLE OF CONTENTS
(continued)
PAGE
8.20 Accuracy and Completeness of Information .......................................... 65
8.21 Survival of Warranties; Cumulative ................................................ 65
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS .............................................. 66
9.1 Maintenance of Existence .......................................................... 66
9.2 New Collateral Locations .......................................................... 66
9.3 Compliance with Laws, Regulations, Etc ............................................ 66
9.4 Payment of Taxes and Claims ....................................................... 68
9.5 Insurance ......................................................................... 68
9.6 Financial Statements and Other Information ........................................ 69
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc ........................... 71
9.8 Encumbrances ...................................................................... 73
9.9 Indebtedness ...................................................................... 74
9.10 Loans, Investments, Etc ........................................................... 77
9.11 Dividends and Redemptions ......................................................... 79
9.12 Transactions with Affiliates ...................................................... 79
9.13 Compliance with ERISA ............................................................. 79
9.14 Change in Business ................................................................ 80
9.15 Limitation of Restrictions Affecting Subsidiaries ................................. 80
9.16 Financial Covenants ............................................................... 80
9.17 License Agreements ................................................................ 83
9.18 Life Insurance .................................................................... 84
9.19 Software .......................................................................... 84
9.20 Chief Restructuring Officer ....................................................... 84
9.21 Leasehold Deeds of Trust/Mortgages; Additional Collateral Access
Agreements ........................................................................ 84
9.22 Costs and Expenses ................................................................ 85
9.23 Further Assurances ................................................................ 86
SECTION 10. EVENTS OF DEFAULT AND REMEDIES .................................................. 86
10.1 Events of Default ................................................................. 86
10.2 Remedies .......................................................................... 89
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TABLE OF CONTENTS
(continued)
PAGE
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW .................................................................... 92
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver .............. 92
11.2 Waiver of Notices .................................................................. 93
11.3 Amendments and Waivers ............................................................. 94
11.4 Confidentiality .................................................................... 95
11.5 Waiver of Counterclaims ............................................................ 96
11.6 Indemnification .................................................................... 96
SECTION 12. THE AGENT ........................................................................ 96
12.1 Appointment; Powers and Immunities ................................................. 96
12.2 Reliance By Agent .................................................................. 97
12.3 Events of Default .................................................................. 97
12.4 The CIT Group/Business Credit, Inc. in its Individual Capacity ..................... 98
12.5 Indemnification .................................................................... 98
12.6 Non-Reliance on Agent and Other Lenders ............................................ 98
12.7 Failure to Act ..................................................................... 99
12.8 Additional Loans ................................................................... 99
12.9 Concerning the Collateral and the Related Financing Agreements ..................... 99
12.10 Field Audits; Examination Reports and other Information; Disclaimer by
Lenders ............................................................................ 99
12.11 Collateral Matters ................................................................. 100
12.12 Agency for Perfection .............................................................. 101
12.13 Failure to Respond Deemed Consent .................................................. 102
SECTION 13. JOINT AND SEVERAL LIABILITY; SURETYSHIP WAIVERS .................................. 102
13.1 Independent Obligations; Subrogation ............................................... 102
13.2 Authority to Modify Obligations and Security ....................................... 102
13.3 Waiver of Defenses ................................................................. 103
13.4 Exercise of Agent's and Lenders' Rights ............................................ 103
13.5 Additional Waivers ................................................................. 103
13.6 Additional Indebtedness ............................................................ 104
13.7 Notices, Demands, Etc .............................................................. 104
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(continued)
PAGE
13.8 Subordination .......................................................... 104
13.9 Revival ................................................................ 105
13.10 Understanding of Waivers ............................................... 105
SECTION 14. TERM OF AGREEMENT; MISCELLANEOUS ..................................... 105
14.1 Term ................................................................... 105
14.2 Interpretive Provisions ................................................ 106
14.3 Notices ................................................................ 107
14.4 Partial Invalidity ..................................................... 108
14.5 Successors ............................................................. 108
14.6 Assignments; Participations ............................................ 108
14.7 Participant's Security Interests ....................................... 111
14.8 Entire Agreement ....................................................... 111
14.9 Counterparts, Etc ...................................................... 111
14.10 Treatment Under Indenture .............................................. 111
14.11 Tombstones ............................................................. 112
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Revolving Loan Promissory Note
Exhibit D Form of Term Loan Promissory Note
Exhibit E Form of Real Estate Loan Promissory Note
Exhibit F Collateral Reporting Schedule
Exhibit G Financial Compliance Cover Letter
Exhibit H Form of Landlord's Consent and Estoppel
Exhibit I Form of Leasehold Deed of Trust
Schedule 4.4(a) Liens to be Released
Schedule 5.2(b) Chattel Paper and Instruments
Schedule 5.2(d) Deposit Accounts
Schedule 5.2(e) Investment Property and Accounts
Schedule 5.2(f) Letters of Credit, etc.
Schedule 5.2(g) Commercial Tort Claims
Schedule 5.2(h) Property in Possession of Third Parties
Schedule 6.3(b) Merchant Payment Processors
Schedule 8.1 States in Which Qualified to do Business
Schedule 8.2(a) Names and Certain Transactions of Borrowers
Schedule 8.2(b) Organizational Information
Schedule 8.2(c) Chief Executive Offices and Other Locations
Schedule 8.4 Liens
Schedule 8.6 Litigation
Schedule 8.7 Compliance with Agreements
Schedule 8.8 Environmental Disclosures
Schedule 8.10 Intellectual Property
Schedule 8.11 Corporate Structure
Schedule 8.14(a) Material Contracts
Schedule 8.14(b) Compliance with Leases
Schedule 8.16 Consignment Inventory and Accounts
Schedule 8.17 Owned Real Property
Schedule 8.18 Cash Transport Services
Schedule 9.9 Indebtedness
Schedule 9.10 Loans and Advances
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the day and year first above written.
AGENT BORROWERS
THE CIT GROUP/BUSINESS CREDIT, INC., M T S, INCORPORATED
a New York corporation a California corporation
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------- ----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President Title: President
Address For Notices: Address For Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ West ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Regional Credit Manager Attn: ▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
THREE A'S HOLDINGS, L.L.C.,
a Deleware limited liability company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Manager
Address For Notices:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇:
Telephone:
Facsimile:
1
LENDERS
THE CIT GROUP/BUSINESS CREDIT, INC.,
a New York corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Address For Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Regional Credit Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Loan Commitment: $75,000,000
2