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LOAN AND SECURITY AGREEMENT
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FLEET RETAIL FINANCE INC.
AGENT
FOR THE TRANCHE A LENDERS REFERENCED HEREIN
AND
BACK BAY CAPITAL FUNDING LLC
TRANCHE B LENDER
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LECHTERS, INC.,
DEBTOR & DEBTOR-IN-POSSESSION
LEAD BORROWER
FOR THE BORROWERS REFERENCED HEREIN
EACH A DEBTOR & DEBTOR-IN-POSSESSION
AND
THE GUARANTORS PARTY HERETO
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MAY 22, 2001
TABLE OF CONTENTS
Page
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ARTICLE I - DEFINITIONS...........................................................................................2
ARTICLE II - THE REVOLVING CREDIT AND TRANCHE B LOAN FACILITY....................................................43
2.1 Establishment of Revolving Credit and Tranche B Loan Facility..........................................43
2.2 Advances in Excess of Borrowing Base...................................................................47
2.3 Risks of Value of Collateral...........................................................................47
2.4 Loan Requests..........................................................................................48
2.5 Making of Loans........................................................................................50
2.6 SwingLine Loans........................................................................................51
2.7 The Loan Account.......................................................................................52
2.8 Notes..................................................................................................54
2.9 Payment of Loans.......................................................................................55
2.10 Interest Rates.........................................................................................57
2.11 Agent's Fee............................................................................................60
2.12 UpFront Fee; Tranche B Commitment Fee..................................................................60
2.13 Line (Unused) Fee; Annual Facility Fee.................................................................60
2.14 Early Termination Fees.................................................................................61
2.15 Concerning Fees........................................................................................62
2.16 Agent's and Lenders' Discretion........................................................................62
2.17 Procedures For Issuance of L/C's.......................................................................63
2.18 Fees For L/C's.........................................................................................65
2.19 Concerning L/C's.......................................................................................66
2.20 Changed Circumstances..................................................................................69
2.21 Increased Costs/Taxes..................................................................................71
2.22 Lenders' Commitments...................................................................................74
2.23 Concerning Joint and Several Liability of the Borrowers................................................76
2.24 Lechters, Inc. as Lead Borrower........................................................................80
ARTICLE III - CONDITIONS PRECEDENT...............................................................................81
3.1 Corporate Due Diligence................................................................................81
3.2 Opinion................................................................................................82
3.3 Additional Documents...................................................................................82
3.4 Officers' Certificates.................................................................................82
3.5 Representations and Warranties.........................................................................83
3.6 Minimum Excess Availability............................................................................83
3.7 All Fees and Expenses Paid.............................................................................83
3.8 No Event of Default....................................................................................83
3.9 No Adverse Change......................................................................................84
3.10 Delivery of Notices....................................................................................84
3.11 Repayment..............................................................................................84
3.12 Bankruptcy.............................................................................................84
ARTICLE IV - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES...................................................86
4.1 Payment and Performance of Liabilities.................................................................86
4.2 Due Organization - Corporate Authorization - No Conflicts..............................................86
4.3 Trade Names............................................................................................88
4.4 Infrastructure.........................................................................................89
4.5 Borrowing Order/Use of Proceeds/Default Under Other Indebtedness.......................................89
4.6 Locations..............................................................................................90
4.7 Title to Assets........................................................................................94
4.8 Indebtedness...........................................................................................94
4.9 Repayment of 5.00% Notes...............................................................................95
4.10 Insurance Policies.....................................................................................95
4.11 Licenses...............................................................................................97
4.12 Leases.................................................................................................98
4.13 Requirements of Law....................................................................................98
4.14 Maintain Collateral....................................................................................99
4.15 Pay Taxes.............................................................................................100
4.16 No Margin Stock.......................................................................................102
4.17 ERISA.................................................................................................102
4.18 Hazardous Materials...................................................................................103
4.19 Litigation............................................................................................104
4.20 Dividends, Investments, Repurchases and Debt Retirement...............................................104
4.21 Loans.................................................................................................106
4.22 Protection of Assets..................................................................................107
4.23 Line of Business......................................................................................108
4.24 Affiliate Transactions................................................................................108
4.25 Additional Assurances.................................................................................108
4.26 Adequacy of Disclosure................................................................................109
4.27 No Restrictions on Liabilities........................................................................110
4.28 Other Covenants.......................................................................................111
4.29 Security Documents....................................................................................111
4.30 Return of Property....................................................................................112
4.31 Bankruptcy Proceedings................................................................................112
ARTICLE V - FINANCIAL REPORTING AND PERFORMANCE COVENANTS.......................................................112
5.1 Maintain Records......................................................................................112
5.2 Access to Records.....................................................................................113
5.3 Immediate Notice to Agent.............................................................................115
5.4 Borrowing Base Certificate............................................................................117
5.5 Monthly Collateral Reports............................................................................117
5.6 Monthly Financial Reports.............................................................................117
5.7 Quarterly Financial Reports...........................................................................118
5.8 Annual Reports........................................................................................118
5.9 Officers' Certificates................................................................................119
5.10 Inventories, Appraisals, and Audits...................................................................120
5.11 Additional Financial Information......................................................................122
5.12 Financial Performance Covenants.......................................................................123
ARTICLE VI - USE AND COLLECTION OF COLLATERAL...................................................................123
6.1 Use of Inventory Collateral...........................................................................123
6.2 Inventory Quality.....................................................................................124
6.3 Adjustments and Allowances............................................................................124
6.4 Validity of Accounts..................................................................................124
6.5 Notification to Account Debtors.......................................................................125
ARTICLE VII - CASH MANAGEMENT; PAYMENT OF LIABILITIES...........................................................125
7.1 Depository Accounts...................................................................................125
7.2 Credit Card Receipts..................................................................................126
7.3 The Concentration, Blocked, and Operating Accounts....................................................126
7.4 Proceeds and Collection of Accounts...................................................................127
7.5 Payment of Liabilities................................................................................128
7.6 The Operating Account.................................................................................130
ARTICLE VIII - GRANT OF SECURITY INTEREST.......................................................................130
8.1 Grant of Security Interest............................................................................130
8.2 Extent and Duration of Security Interest..............................................................131
8.3 Delivery of Instruments, etc..........................................................................132
8.4 Concerning Revised Article 9 of the Uniform Commercial Code...........................................133
8.5 Leasehold and Real Estate Interests...................................................................136
ARTICLE IX - AGENT AS BORROWERS' AND GUARANTORS' ATTORNEY-IN-FACT...............................................137
9.1 Appointment as Attorney-In-Fact.......................................................................137
9.2 No Obligation to Act..................................................................................138
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ARTICLE X - EVENTS OF DEFAULT...................................................................................139
10.1 Failure to Pay Revolving Credit or Tranche B Loan.....................................................139
10.2 Failure To Make Other Payments........................................................................139
10.3 Failure to Perform Covenant or Liability (No Grace Period)............................................139
10.4 Failure to Perform Covenant or Liability (Grace Period)...............................................141
10.5 Misrepresentation.....................................................................................141
10.6 Default Under Other Debt; Breach of Lease.............................................................141
10.7 Default Under Other Agreements........................................................................141
10.8 Uninsured Casualty Loss...............................................................................142
10.9 Judgment; Restraint of Business.......................................................................142
10.10 Business Failure......................................................................................142
10.11 Reserved..............................................................................................143
10.12 Indictment; Forfeiture................................................................................143
10.13 Foreign Proceeding...................................................................................143
10.14 Challenge to Loan Documents...........................................................................144
10.15 Change in Control.....................................................................................144
10.16 Reserved..............................................................................................144
10.17 Reserved..............................................................................................144
10.18 Failure to Comply.....................................................................................144
10.19 Changes in Borrowing Order............................................................................144
10.20 Plan of Reorganization................................................................................145
10.21 Approval of Senior Claims or Liens....................................................................145
10.22 Termination of Agent's Security Interests.............................................................145
10.23 Interim Borrowing Order...............................................................................145
10.24 Final Borrowing Order.................................................................................145
10.25 Appointment of Trustee or Examiner....................................................................145
10.26 Dismissal or Conversion of Case.......................................................................145
10.27 Relief from Stay......................................................................................145
10.28 Guarantors............................................................................................146
10.29 Discharge of Pre-Petition Indebtedness................................................................146
10.30 Cash Collateral.......................................................................................146
10.31 Adequate Protection...................................................................................146
ARTICLE XI - RIGHTS AND REMEDIES UPON DEFAULT COLLATERAL........................................................146
11.1 Rights of Enforcement.................................................................................147
11.2 Sale of Collateral....................................................................................147
11.3 Occupation of Business Location.......................................................................149
11.4 Grant of Nonexclusive License.........................................................................149
11.5 Assembly of Collateral................................................................................150
11.6 Rights and Remedies...................................................................................150
ARTICLE XII - NOTICES...........................................................................................150
12.1 Notice Addresses......................................................................................151
12.2 Notice Given..........................................................................................152
ARTICLE XIII - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS......................................................152
13.1 Revolving Credit Funding Procedures...................................................................152
13.2 SwingLine Loans.......................................................................................153
13.3 Agent's Covering of Fundings..........................................................................154
13.4 Ordinary Course Distributions: Revolving Credit.......................................................157
ARTICLE XIV- ACCELERATION AND LIQUIDATION.......................................................................159
14.1 Acceleration Notices..................................................................................159
14.2 Acceleration Notice by the Tranche B Lender...........................................................159
14.3 Mandatory Acceleration Right of Tranche B Lender......................................................159
14.4 Acceleration..........................................................................................161
14.5 Initiation of Liquidation.............................................................................161
14.6 Actions At and Following Initiation of Liquidation....................................................161
14.7 Agent's Conduct of Liquidation........................................................................162
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14.8 Distribution of Liquidation Proceeds..................................................................162
14.9 Relative Priorities To Proceeds of Liquidation........................................................163
ARTICLE XV - THE AGENT..........................................................................................164
15.1 Appointment of Agent..................................................................................164
15.2 Responsibilities of Agent.............................................................................165
15.3 Concerning Distributions By the Agent.................................................................166
15.4 Dispute Resolution....................................................................................168
15.5 Distributions of Notices and of Documents.............................................................168
15.6 Confidential Information..............................................................................169
15.7 Reliance by Agent.....................................................................................169
15.8 Non-Reliance on Agent and Other Lenders...............................................................169
15.9 Indemnification.......................................................................................171
15.10 Resignation of Agent..................................................................................171
ARTICLE XVI - ACTION BY AGENT; CONSENTS; AMENDMENTS; WAIVERS....................................................173
16.1 Administration of Credit Facilities...................................................................173
16.2 Actions Requiring Consent or Direction of Majority Lenders............................................174
16.3 Actions Requiring Consent or Direction of SuperMajority Lenders.......................................174
16.4 Actions Requiring or Directed By Unanimous Consent....................................................175
16.5 Actions Requiring SwingLine Lender Consent............................................................177
16.6 Tranche B Lender Consent..............................................................................177
16.7 Actions Requiring Agent's Consent.....................................................................178
16.8 Miscellaneous Actions.................................................................................178
16.9 Nonconsenting Tranche A Lenders.......................................................................179
ARTICLE XVII ASSIGNMENTS AND PARTICIPATIONS.....................................................................181
17.1 Assignments and Assumptions by Lenders................................................................181
17.2 Participations........................................................................................185
17.3 Pledges To Federal Reserve Banks......................................................................185
ARTICLE XVIII - TERM............................................................................................185
18.1 Termination of Revolving Credit.......................................................................185
18.2 Effect of Termination.................................................................................186
ARTICLE XIX - GENERAL...........................................................................................186
19.1 Protection of Collateral..............................................................................186
19.2 Successors and Assigns................................................................................187
19.3 Severability..........................................................................................187
19.4 Amendments; Course of Dealing.........................................................................187
19.5 Power of Attorney.....................................................................................189
19.7 Costs and Expenses of Agent and Of Lenders............................................................189
19.8 Copies and Facsimiles.................................................................................190
19.9 New York Law..........................................................................................191
19.10 Consent to Jurisdiction...............................................................................191
19.11 Indemnification.......................................................................................192
19.12 Rules of Construction.................................................................................193
19.13 Intent................................................................................................195
19.14 Right of Set-Off......................................................................................195
19.15 Maximum Interest Rate.................................................................................196
19.16 Waivers...............................................................................................196
19.17 Pre-Petition Loan Agreement and Related Documents.....................................................197
19.18 Counterparts..........................................................................................199
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LIST OF EXHIBITS
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EXHIBIT 1 Local Disbursement Account
EXHIBIT 2.4(b) Form of Revolving Credit Loan Request
EXHIBIT 2.6(c) Form of SwingLine Note
EXHIBIT 2.8 Form of Revolving Credit Note
EXHIBIT 2.8(b) Form of Tranche B Note
EXHIBIT 2.17 (a) Letters of Credit issued under Pre-Petition Loan Agreement
EXHIBIT 3.3(1) Pledge Agreement
EXHIBIT 4.2 State of Organization
EXHIBIT 4.3 Trade Names / Related Entities
EXHIBIT 4.6(a) Executive Office and Other Locations
EXHIBIT 4.6(c)(1) Form of Landlord Waiver
EXHIBIT 4.7 Permitted Encumbrances
EXHIBIT 4.8 Indebtedness
EXHIBIT 4.10 Schedule of all insurance policies owned by the Borrowers
EXHIBIT 4.12 Capital Leases
EXHIBIT 4.15 Taxes
EXHIBIT 4.19 Litigation
EXHIBIT 4.25 Certain Properties
EXHIBIT 5.4 Borrowing Base Certificate
EXHIBIT 5.5 Monthly Collateral Reports
EXHIBIT 5.11(c) Business Plan
EXHIBIT 7.1 Depository Accounts
EXHIBIT 7.2 Credit Card Arrangements
EXHIBIT 17.1 Tranche A Assignment and Acceptance
EXHIBIT 17.2 Tranche B Assignment and Acceptance
SCHEDULE A List of Borrowers
SCHEDULE B Schedule of Lenders' Commitments
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FLEET RETAIL FINANCE INC.
LOAN AND SECURITY AGREEMENT AGENT
May 22, 2001
THIS AGREEMENT is made among
FLEET RETAIL FINANCE INC., (in such capacity, herein the "AGENT") a
Delaware corporation with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, as agent for the benefit of (i) the "Tranche A Lenders", on a Tranche A
Pro Rata basis, based upon each Tranche A Lender's Commitment Percentage, who
are, at present, those financial institutions identified on the signature pages
of this Agreement and who in the future shall include those Persons (if any) who
become "Tranche A Lenders" in accordance with the provisions of Section 2.22(c)
below and (ii) the Tranche B Lender and those Persons (if any) who in the future
become a "Tranche B Lender " in accordance with the provisions of Section
2.22(e) below;
Each of the Tranche A Lenders identified on the signature pages of
this Agreement;
BACK BAY CAPITAL FUNDING LLC, a Delaware limited liability company,
with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Tranche B
Lender");
Each of the corporations described on Schedule A of this Agreement,
each a Debtor and Debtor-in-Possession in the Proceeding pending before the
Bankruptcy Court (collectively the "Borrowers" and except in the case of
Lechters, Inc., the "Subsidiaries", and each individually, a "BORROWER" and
except in the case of Lechters, Inc., a "Subsidiary"), each of which has its
principal executive offices at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇;
LECHTERS, INC., a New Jersey corporation, which is a Debtor and
Debtor-in-Possession in the Proceeding pending before the Bankruptcy Court, with
its principal executive offices at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ (the "LEAD BORROWER" and the "PARENT", as well as a "Borrower");
and
HARRISON INVESTMENT CORP., a Delaware corporation, COOKS CLUB, INC., a
New Jersey corporation, REGENT GALLERY, INC., a New Jersey corporation, and
SIMPLE SOLUTIONS OF NJ, INC., a New Jersey corporation, each of which is a
Debtor and Debtor-in-Possession in the Proceeding pending before the Bankruptcy
Court, with its principal executive offices at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "GUARANTORS").
in consideration of the mutual covenants contained herein and benefits
to be derived herefrom,
WITNESSETH:
ARTICLE I - DEFINITIONS:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"5.00% NOTES": The Parent's 5.00% Convertible Subordinated Debentures
due September 27, 2001.
"ACCELERATION": With respect to any Indebtedness, its becoming due and
payable prior to its stated maturity. Derivations of the word
"Acceleration" (such as "Accelerate") are used with like meaning
in this Agreement.
"ACCELERATION NOTICE": Written notice as follows:
(a) From the SuperMajority Lenders, as provided in Section 14.1.
(b) From the Tranche B Lender, as provided in Section 14.2.
The Agent shall provide copies of any Acceleration notice to each
Lender.
"ACCEPTABLE CREDIT CARD RECEIVABLES": Those Accounts that from time to
time are due and owing to each Borrower on a non-recourse basis
from major credit card processors that are acceptable to the
Agent, which processors include, without limitation, Visa,
MasterCard, Discover and American Express.
"ACCEPTABLE IN-TRANSIT INVENTORY": That portion of the Borrowers'
Inventory (without duplication as to Acceptable L/C Inventory or
Acceptable Prepaid Inventory), title or document of title to
which has passed to a Borrower and which has been shipped from a
foreign location to one of the Borrowers' warehouses PROVIDED
THAT
(a) Such Inventory is of such type, character, qualities and
quantities as the Agent in its discretion from time to time
determines to be Acceptable Inventory;
2
(b) The documents which relate to such shipment name the
Agent as consignee of the subject inventory and the Agent has
control over the documents which evidence ownership of the
subject Inventory (such as by providing a Customs Brokers
Agreement to the Agent); and
(c) Such Inventory has not yet been delivered to one of
Borrowers' warehouses and has been in transit from the applicable
foreign location for no more than 45 calendar days.
"ACCEPTABLE INVENTORY": Such of the Borrowers' Inventory, at such
locations, and of such types, character, qualities and
quantities, as the Agent in its sole discretion from time to time
determines to be acceptable Collateral for Borrowing Base
purposes, including Acceptable L/C Inventory, Acceptable Prepaid
Inventory, and Acceptable In-Transit Inventory, as to which the
Agent has a perfected security interest that is prior and
superior to all claims and Encumbrances (other than Permitted
Encumbrances, subject to the Agent's right to establish Reserves
therefor). Without limiting the foregoing, "Acceptable Inventory"
shall NOT include: (i) any non-merchandise Inventory (such as
labels, bags and purchasing materials) and (ii) damaged goods,
return to vendor merchandise, packages, consigned inventory and
other similar categories.
"ACCEPTABLE L/C INVENTORY": That portion of the Borrowers' Inventory
(without duplication as to Acceptable In-Transit Inventory or
Acceptable Prepaid Inventory), the purchase of which is supported
by a documentary L/C then having an expiry within sixty (60) days
of the issuance of such L/C, PROVIDED THAT
(a) Such Inventory is of such types, character, qualities and
quantities
3
as the Agent in its discretion from time to time determines to be
Acceptable Inventory; and
(b) The documentary L/C supporting such purchase names the
Agent as consignee of the subject Inventory and the Agent has
control over the documents which evidence ownership of the
subject Inventory (such as by providing a Customs Brokers
Agreement to the Agent).
"ACCEPTABLE PREPAID INVENTORY": That portion of the Borrowers'
Inventory (without duplication as to Acceptable In-Transit
Inventory or Acceptable L/C Inventory), but in no event to exceed
Inventory with a value (at Cost) of in excess of Four Million
Dollars ($4,000,000): (i) for which the Borrowers have paid in
full and in cash and title or document of title which has passed
to the Borrowers, (ii) the purchase of which is subject to an
order for merchandise Inventory of a category currently in or
planned to be in the Borrowers' merchandise assortment (so long
as it is consistent with the Borrowers' line of business as
conducted on the date of this Agreement); (iii) which is
scheduled to be delivered to the Borrowers within thirty (30)
days after the order was placed; and (iv) for which the Borrowers
have provided documents and detail required by the Agent from
time to time, PROVIDED THAT such Inventory is of such types,
character, qualities and quantities as the Agent in its
discretion from time to time determines to be Acceptable
Inventory.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts,
accounts receivable, credit card receivables, notes, drafts,
acceptances, and other forms of obligations and receivables and
rights to payment for credit extended and for goods sold or
leased,
4
or services rendered, whether or not yet earned by performance;
all "contract rights" as formerly defined in the UCC; all
Inventory which gave rise thereto, and all rights associated with
such Inventory, including the right of stoppage in transit; and
all reclaimed, returned, rejected or repossessed Inventory (if
any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"AFFILIATE": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Twenty Five
Percent (25%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other; or
(b) one has, directly or indirectly, the right, under ordinary
circumstances, to elect a majority of the directors (or other
body or Person who has those powers customarily vested in a board
of directors of a corporation); or (c) the same third Person
holds, directly or indirectly, not less than Twenty Five percent
(25%) of their respective capital stock, beneficial interests,
partnership interests or other equity interests; or has directly
or indirectly the right to elect the majority of directors of
both such parties.
"AGENCY AGREEMENT": Collectively and individually: (a) the
Pre-Petition Agency Agreement; and (b) any other agreement
between a Borrower and an inventory purchaser or other party for
the liquidation of the Borrowers' assets.
"AGENT": Defined in the Preamble.
"AGENT FEE LETTER": Defined in Section 2.11.
"AGENT'S COVER": The amount which the Agent makes available to the
Borrowers, as
5
provided in Section 13.3(c)(i), below, on behalf of a Tranche A
Lender that was obligated to provide such amount to the Agent in
accordance with this Agreement.
"AGENT'S FEE": Defined in Section 2.11.
"AGENT'S RIGHTS AND REMEDIES": Defined in Section 11.6.
"ASSIGNING LENDER": Defined in Section 17.l(a).
"ASSIGNMENT AND ACCEPTANCE": Defined in Section 17.1(b).
"AVAILABILITY": Defined in Section 2.l(c)(i).
"AVAILABILITY DEFAULT": The breach by Borrowers of Section 5.12(a)
hereof for three (3) consecutive days.
"AVAILABILITY RESERVES": Such reserves as the Agent from time to time
determines in the Agent's discretion as being appropriate to
reflect the impediments to the Agent's ability to realize upon
the Collateral. Without limiting the generality of the foregoing,
Availability Reserves may include (but are not limited to)
reserves based on the following:
(i) Rent for: (x) any location (other than stores permitted to
be closed under Section 4.6(b)(iv) hereof) for which rent
is past due, any grace period has passed and a notice of
rent default has been received by the Borrower, provided,
that such reserves shall not exceed the amount of rent that
is past due for said location; (y) any location in which a
lien for such rent is not avoidable under 11 U.S.C. ss.
545(3); and (z) any location at any time upon the
occurrence and continuance of an Event of Default.
(ii) In-store customer credits, which shall initially be 50% of
that amount
6
reflected on the Borrowers' Consolidated general ledger.
(iii) Gift Certificates, which shall initially be 50% of that
amount reflected as such on the Borrowers' Consolidated
general ledger.
(iv) Frequent Shopper Programs, which shall initially be zero.
(v) Layaways and Customer Deposits, which shall initially be
zero.
(vi) Taxes and other governmental charges as estimated or
calculated by the Agent with reasonable particularity (and
notice to the Lead Borrower), including ad valorem,
personal property, and other taxes which will have priority
over the security interests of the Agent in the Collateral,
which initially shall be zero.
(vii) L/C Landing Costs.
(viii) Payables arising or incurred Post-Petition (based upon
payables which are past the Borrowers' normal trade terms).
(ix) Reserved.
"BANKRUPTCY CODE": Title 11 U.S.C., as amended from time to time.
"BANKRUPTCY COURT": The United States Bankruptcy Court for the
Southern District of New York or any other court having
jurisdiction over the Proceedings.
"BASE": The Prime Rate announced from time to time by Fleet National
Bank (or any successor in interest to Fleet National Bank). In
the event that said bank (or any such successor) ceases to
announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Agent, in good
faith, designates as the functional equivalent to said Prime
Rate. Any change in Base shall be effective, for purposes of the
calculation of interest due hereunder, when
7
such change is made effective generally by the bank on the basis
of whose rate or index Base is being set. In all events, interest
that is determined by reference to Base (or any successor to
Base) shall be calculated on a 360 day year and actual days
elapsed.
"BASE MARGIN": During the first year of this Agreement: One Percent
(1%). Effective as of the first anniversary date of the Closing
Date, as determined pursuant to Section 2.10(e) and the Margin
Pricing Grid set forth therein.
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest
at the Base Margin Rate.
"BASE MARGIN RATE": The aggregate of Base plus the Base Margin per
annum.
"BLOCKED ACCOUNT": A DDA over which the Agent has sole dominion and
control pursuant to a Blocked Account Agreement.
"BLOCKED ACCOUNT AGREEMENT": A tri-party agreement in a form
acceptable to the Agent, among the Lead Borrower (or the Borrower
named on the DDA), the Agent and the depository institution at
which the Lead Borrower (or such other Borrower) maintains one or
more DDAs, providing for the Agent's dominion and control over
such DDAs.
"BORROWER": Defined in the Preamble.
"BORROWER DEFAULT": Any Borrowing Base Default, Availability Default,
Tranche B Payment Default or General Default.
"BORROWING BASE": Defined in Section 2.1(b)(ii).
"BORROWING BASE DEFAULT": Any time that the unpaid balance of the Loan
Account (excluding the outstanding amount of the Tranche B Loans)
plus the then stated
8
amount of all L/Cs shall exceed the Borrowing Base.
"BORROWING ORDER": The Interim Borrowing Order or the Final Borrowing
Order, whichever is then in effect.
"BUSINESS DAY": Any day (with any references herein to time of day
requirements meaning such times based on Eastern time) other than
(a) a Saturday or Sunday; (b) any day on which banks in Boston,
Massachusetts generally are not open to the general public for
the purpose of conducting commercial banking business; or (c) a
day on which the Agent is not open to the general public to
conduct business.
"BUSINESSPLAN": The Borrower's business plan annexed hereto as EXHIBIT
5.11 and any revision, amendment, or update of such business
plan, provided such revision, amendment or update has been
accepted in writing by Agent.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities for leaseholds, leasehold improvements, real
property, furniture and equipment, to the extent such
expenditures must be capitalized in accordance with GAAP, and net
of amounts reimbursed by Landlords.
"CAPITAL EXPENDITURE CAP": Defined in Section 5.12(b).
"CAPITAL LEASE": Any lease which must be capitalized in accordance
with GAAP.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) The acquisition, by any group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended) or by
any Person (other than any shareholder currently holding or
controlling 20% or more of the issued and outstanding capital
stock of the Parent, and any members of such shareholder's
9
immediate family, or any trust or other entity established by
such shareholder or shareholder's family member or members for
estate or tax planning purposes or any group of Persons of which
such shareholder's family members, trust or other entity has a
controlling interest) of beneficial ownership (within the meaning
of Rule 13d-3 of the SEC) of 50% or more of the issued and
outstanding capital stock of the Parent having the right, under
ordinary circumstances, to vote for the election of directors of
the Parent.
(b) More than half of the persons who were directors of the
Parent on the first day of any period consisting of Twelve (12)
consecutive calendar months (the first of such Twelve (12) month
periods commencing with the first day of the month in which this
Agreement was executed) cease (for any reason other than death,
disability or retirement) to be directors of the Parent, and the
board of directors as thereafter constituted is not acceptable to
Agent.
"CHAPTER 11 CASE": The case or cases initiated by the Proceedings.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"CLOSING DATE": Defined in Article III.
"COLLATERAL": Defined in Section 8.1, as supplemented by Sections 8.4
and 8.5.
"COLLATERAL REPORTS": Defined in Section 5.5.
"COMMITMENT": Subject to Section 16.1(d) (which provides for
Permissible Overloans) with respect to each Lender of a
particular tranche of Loans (either Tranche A Loans or Tranche B
Loans, as the case may be), such Lender's "DOLLAR COMMITMENT" and
"COMMITMENT PERCENTAGE" of such tranche of Loans as set forth on
Schedule B to this Agreement or assigned to such Lender in
accordance
10
with Section 17.1 (which provides for Assignments and Assumption
of Commitments and/or Loans), and (a) as to the Tranche A
Lenders, collectively, the "Tranche A Commitment" shall be the
aggregate amount of the Tranche A Dollar Commitments of all
Tranche A Lenders, the maximum amount of which shall not exceed
$80,000,000.00 (provided however that for the purposes of the
calculation of Availability, and not for the calculation of fee
or other purposes, it shall not exceed $46,000,000 prior to the
entry of the Final Order) and (b) as to the Tranche B Lender, the
"Tranche B Commitment" shall be the Tranche B Dollar Commitment
of $6,000,000.
"CONCENTRATION ACCOUNT": The deposit account established by Agent over
which the Agent has sole dominion and control and into which all
contents of the DDA's and Blocked Accounts shall be transferred
on a daily basis, as provided in Sections 7.3 and 7.4 of this
Agreement.
"CONSENT": Actual consent given by the Lender from whom such consent
is sought; or the passage of seven (7) Business Days from the
receipt by a Lender of written notice from the Agent of a
proposed course of action to be followed by the Agent without the
Agent having received from such Lender written notice of that
Lender's objection to such course of action, PROVIDED THAT the
Agent may rely on such passage of time as consent by a Lender
only if the Agent's notice specifically states that consent will
be deemed to have been given if no objection is received within
such time period.
"CONSOLIDATED": When used to modify a financial term, test, statement,
or report, refers to the application or preparation of such term,
test, statement, or report (as
11
applicable) based upon the consolidation, in accordance with
GAAP, of the financial condition or operating results of the
corporations which constitute the Parent and its Subsidiaries.
"COST": The lower of
(a) the calculated cost of Inventory purchases, as
determined from invoices received by the Borrowers and reflected
in the Borrowers' Consolidated purchase journal or stock ledger,
based upon the Borrowers' accounting practices in effect on the
date on which this Agreement was executed; AND
(b) the cost equivalent of the lowest ticketed or promoted
price at which the subject Inventory is offered to the public,
after all ▇▇▇▇-▇▇▇▇▇ (whether or not such price is then reflected
on the Borrowers' accounting system), determined in accordance
with the retail method of accounting and reflecting the
Borrowers' historic business practices.
"Cost" does not include inventory capitalization costs or
other non-purchase price charges (such as outbound freight to the
store location) used in the Borrowers' calculation of cost of
goods sold.
"COSTS OF COLLECTION": Includes, without limitation, all reasonable
fees and reasonable out-of-pocket expenses of the Agent's
attorneys, and all reasonable out-of-pocket costs incurred by the
Agent including, without limitation, reasonable out-of-pocket
costs and expenses associated with travel on behalf of the Agent,
which costs and expenses are directly or indirectly related to or
in respect of the Agent's: administration and management of the
Liabilities; negotiation, documentation, interpretation and
amendment of any Loan Document; or efforts to preserve,
12
protect, collect, or enforce the Collateral, the Liabilities,
and/or any of the Agent's rights and remedies against or in
respect of any guarantor or other person liable in respect of the
Liabilities (whether or not suit is instituted in connection with
such efforts). Following the occurrence of any Event of Default,
"Costs of Collection" also includes all reasonable fees and
reasonable out-of-pocket expenses of counsel for the Lenders IT
BEING UNDERSTOOD that Costs of Collection for the Tranche A
Lenders shall be limited to the reasonable fees of a single
counsel for all Tranche A Lenders but that Costs of Collection
also shall include the reasonable fees and reasonable
out-of-pocket expenses of separate counsel for the Tranche B
Lender.
"CREDIT CARD ADVANCE RATE": Eighty-five percent (85%).
"CUSTOMS BROKERS AGREEMENT": A tri-party agreement in form
satisfactory to the Agent, among the Lead Borrower or any
Borrower, a customs broker and the Agent, in which the customs
broker acknowledges that the Agent has control over the documents
evidencing ownership of the subject Inventory and agrees, upon
notice from the Agent, to hold and dispose of the subject
Inventory solely as directed by the Agent.
"DDA": Any checking or other demand deposit account maintained by any
of the Borrowers, other than a Local Disbursement Account.
"DELINQUENT TRANCHE A LENDER": Defined in Section 13.3(c).
"DELINQUENT TRANCHE B LENDER" A Tranche B Lender that fails to fund
the Tranche B Loan within one (1) Business Day notice from the
Agent that all conditions precedent to the making of such Tranche
B Loan have been satisfied.
"DEPOSIT ACCOUNT": Any checking or other demand deposit account
maintained by any
13
of the Borrowers or Guarantors, as the case may be.
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in Section
1-201(15) of the UCC.
"DOLLAR COMMITMENT": As set forth in the definition of "Commitment"
above.
"ELIGIBLE TRANCHE A ASSIGNEE": A bank, insurance company, or company
engaged in the business of making commercial loans having a
combined capital and surplus in excess of $300,000,000.00, or any
Affiliate of any Tranche A Lender.
"ELIGIBLE TRANCHE B ASSIGNEE": As long as no Event of Default has
occurred and is continuing, any Person that is consented to by
Lead Borrower as provided in Section 17.1(h) or any Affiliate of
any Tranche B Lender and, if an Event of Default has occurred and
is continuing, any Person.
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": Any of the following:
(a) Any security interest, mortgage, pledge, hypothecation,
lien, attachment, or charge of any kind (including any agreement
to grant any of the foregoing); the interest of a lessor under a
Capital Lease; a conditional sale or other title retention
agreement; a sale of accounts receivable or chattel paper; or any
other arrangement pursuant to which any Person is entitled to any
preference or priority with respect to the property, assets,
income or profits of another Person or which constitutes an
interest in property to secure an obligation, regardless of
whether consensual or non-consensual or whether arising by way of
agreement, operation of law, legal process or otherwise.
14
(b) The filing of any financing statement under the UCC or
comparable law of any jurisdiction.
"END DATE": The date upon which both (a) all Liabilities have been
paid in full and (b) all obligations of all Lenders to make loans
and advances and to provide other financial accommodations to the
Borrowers hereunder shall have been irrevocably terminated.
"ENVIRONMENTAL LAWS": All of the following:
(a) Any and all federal, state, local or municipal laws,
rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements which regulate or relate to, or impose any
standard of conduct or liability on account of or in respect to
environmental protection matters, including, without limitation,
Hazardous Materials, as are now or hereafter in effect.
(b) The common law relating to damage to Persons or property
from Hazardous Materials.
"EQUIPMENT": Includes, without limitation, "equipment" as defined in
the UCC, and also all motor vehicles, rolling stock, machinery,
office equipment, plant equipment, tools, dies, molds, store
fixtures, furniture, and other tangible goods, property, and
assets which are used and/or were purchased for use in the
operation or furtherance of the Borrowers' or Guarantors'
business, and any and all accessions or additions thereto, and
substitutions therefor.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE": Any Person that is (i) under common control with
the Borrowers within the meaning of Section 400l of ERISA or (ii)
is part of a group including
15
the Borrowers or the Parent and that would be treated as a single
employer under Section 414(b) or (c) of the Internal Revenue Code
of 1986, as amended.
"EURODOLLAR BUSINESS DAY": Any day that is both a Business Day and a
day on which the principal market in Eurodollars in which Fleet
National Bank or its successors participate is open for dealings
in United States Dollar deposits.
"EURODOLLAR LOAN": Any Revolving Credit Loan bearing interest at a
Eurodollar Rate.
"EURODOLLAR MARGIN": During the first year of this Agreement: 275
basis points. Effective as of the first pricing adjustment
pursuant to Section 2.10(e) following the first anniversary date
of the Closing Date, as determined pursuant to the applicable
section of the Margin Pricing Grid.
"EURODOLLAR OFFER RATE": With respect to any Eurodollar Loan, the rate
of interest (rounded upwards, if necessary, to the next 1/100 of
1%) determined by the Agent to be the highest prevailing rate per
annum at which deposits in U.S. Dollars are offered to Fleet
National Bank, by first-class banks in the Eurodollar market in
which Fleet National Bank participates, at or about 10:00 AM
(Boston Time) two (2) Eurodollar Business Days before the first
day of the Interest Period for such Eurodollar Loan, for a
deposit in approximately the amount of such Eurodollar Loan, for
a period of time approximately equal to such Interest Period.
"EURODOLLAR RATE": The rate per annum (calculated on a 360 day year
and actual days elapsed) equal to the Eurodollar Offer Rate PLUS
the Eurodollar Margin PROVIDED THAT, in the event that it is
determined by the Agent that any Tranche A Lender may be subject
to the Reserve Percentage, the "Eurodollar Rate" shall mean, with
respect to any Eurodollar Loans then outstanding (from the date
on which that
16
Reserve Percentage first became applicable to such Eurodollar
Loans), and with respect to all Eurodollar Loans thereafter made
for as long as the Reserve Percentage shall be applicable to a
Tranche A Lender, an interest rate per annum equal to the sum of
(a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
Eurodollar Offer Rate
---------------------
1 minus Reserve Percentage
(b) is the applicable Eurodollar Margin.
"EVENTS OF DEFAULT": Defined in Article 10. Each reference herein to
an "Event of Default" is to an Event of Default that has occurred
and is continuing and has not been duly waived by the requisite
Lenders or by the Agent, as applicable (as to which due waiver,
see Section 16.2 through 16.7). In the event of such due waiver,
the so-called Event of Default shall be deemed never to have
occurred (other than with respect to any Costs of Collection for
which the Borrowers are obligated to reimburse the Agent or the
Lenders, unless such reimbursement obligation has also been duly
waived).
"FINAL BORROWING ORDER": A Borrowing Order entered by the Bankruptcy
Court after opportunity for a final hearing in accordance with
Fed. R. Bankr. Pro. 4001(c)(2), together with such amendments,
supplements, modifications, and restatements as are approved by
the Agent in writing and entered by the Bankruptcy Court after
notice and a hearing.
"FIXTURES": Has the meaning given that term in the UCC.
"FRF": Fleet Retail Finance Inc. and any successor thereof.
"GAAP": Principles which are consistent with those promulgated or
adopted by the
17
Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to the accounting period in
respect of which reference to GAAP is being made, PROVIDED,
HOWEVER, that in the event of a Material Accounting Change,
unless otherwise specifically agreed to by the Lenders, (a) the
Lead Borrower's compliance with the financial performance
covenants imposed pursuant to Section 5.12 hereof (if applicable)
shall be determined as if such Material Accounting Change had not
taken place and (b) the Lead Borrower shall include, with its
monthly, quarterly and annual financial statements a schedule,
certified by its chief financial officer, on which the effect of
such Material Accounting Change on such statements shall be
described.
"GENERAL DEFAULT": The occurrence of an Event of Default, other than
an Event of Default which constitutes a Borrowing Base Default,
Availability Default, or a Tranche B Payment Default.
"GENERAL INTANGIBLES": Includes, without limitation, "general
intangibles" as defined in the UCC; and also all: rights to
payment for credit extended; deposits; amounts due to the
Borrowers; credit memoranda in favor of the Borrowers; warranty
claims; tax refunds and abatements; insurance refunds and premium
rebates; all means and vehicles of investment or hedging,
including, without limitation, options, warrants, and futures
contracts; records; customer lists; telephone numbers; goodwill;
causes of action; judgments; payments under any settlement or
other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of
the Borrowers to enforce the foregoing; permits, certificates
18
of convenience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents
pending, and other intellectual property; internet addresses and
domain names; developmental ideas and concepts; proprietary
processes; blueprints, drawings, designs, diagrams, plans,
reports, and charts; catalogs; manuals; technical data; computer
software programs (including the source and object codes therefor
and related documentation), computer records, databases, rights
of access to computer record service bureaus, service bureau
computer contracts, and computer data; tapes, disks,
semi-conductor chips and printouts; trade secrets, copyrights,
copyrightable materials, copyright registrations and
applications, mask work rights and interests, and derivative
works and interests; user, technical reference, and other manuals
and materials; trade names, trademarks, service marks, and all
goodwill relating thereto; registrations and applications for
registration of the foregoing; letter of credit rights,
including, without limitation the proceeds of letters of credit,
whether or not written; and all other intangible property of the
Borrower in the nature of intellectual property; proposals; cost
estimates, and reproductions on paper, or otherwise, of any and
all concepts or ideas, and any matter related to, or connected
with, the design, development, manufacture, sale, marketing,
leasing, or use of any or all property produced, sold, or leased,
by the Borrowers or credit extended or services performed, by the
Borrowers, whether intended for an individual customer or the
general business of the Borrowers, or used or useful in
connection with research and development by the Borrowers.
"GOODS": Has the meaning given that term in the UCC.
19
"GUARANTIES": The Guaranty agreements executed and delivered by each
of the Guarantors dated as of even date herewith.
"GUARANTORS": ▇▇▇▇▇▇▇▇ Investment Corp., a Delaware corporation, Cooks
Club, Inc., a New Jersey corporation, Regent Gallery, Inc., a New
Jersey corporation, and Simple Solutions of NJ, Inc., a New
Jersey corporation, each or which is a debtor and
debtor-in-possession in the Proceedings.
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances or petroleum products that are
defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state.
"INDEBTEDNESS": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) Money borrowed (including any indebtedness which is
non-recourse to the credit of such Person but which is secured by
an Encumbrance on any asset of such Person) whether or not
evidenced by a promissory note, bond, debenture or other written
obligation to pay;
(b) Any letter of credit or acceptance transaction,
including, without limitation, the Stated Amount of all
outstanding letters of credit and acceptances issued for the
account of such Person, and (without duplication) any amounts for
which such Person would be obligated to provide reimbursement or
for which such person is liable in connection with a letter of
credit or acceptance transaction;
(c) The provision of recourse in connection with the sale or
discount
20
of accounts receivable or chattel paper of such Person;
(d) On account of recourse or repayment obligations with
respect to deposits or advances.
(e) As lessee under Capital Leases. "Indebtedness" also
includes:
(x) Indebtedness of others secured by an Encumbrance on
any asset of such Person, whether or not such Indebtedness
is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or other
undertaking pursuant to which such Person may be liable on
account of any obligation of another Person.
(z) The Indebtedness of a partnership or joint venture
in which such Person is a general partner or joint venturer,
for which indebtedness such Person is liable.
"INDEMNIFIED PERSON": Defined in Section 19.11.
"INOPERATIVE SUBSIDIARY": A Subsidiary that at all times has no
liabilities of any kind (other than fees or franchise taxes
relating to any such Subsidiary's corporate or entity
subsistance) and no assets other than the right to use in its
corporate name a trademark used by the Borrowers in connection
with the conduct of their business.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTEREST PAYMENT DATE": With reference to:
(a) Each Base Margin Loan: the first Business Day of each
month, the Termination Date, and the End Date.
21
(b) Each Eurodollar Loan: the last day of the Interest
Period relating thereto, the Termination Date and the End Date.
(c) The Tranche B Loan: the first Business Day of each
month, the Termination Date and the End Date.
"INTEREST PERIOD":
(a) With respect to each Eurodollar Loan: Subject to
Subsection (c), below, the period commencing on the date of the
making or continuation of, or conversion to, such Eurodollar Loan
and ending on the day that corresponds numerically to such date,
one (1), two (2), or three (3) months thereafter, as the Lead
Borrower may elect by notice to the Agent.
(b) The setting of Interest Periods is in all instances
subject to the following:
(i) Any Interest Period for a Eurodollar Loan which
would otherwise end on a day that is not a Eurodollar
Business Day shall be extended to the next succeeding
Eurodollar Business Day, unless that succeeding Eurodollar
Business Day is in the next calendar month, in which event
such Interest Period shall end on the last Eurodollar
Business Day of the month during which the Interest Period
ends.
(ii) Subject to Subsections (iii) and (iv) below, any
Interest Period applicable to a Eurodollar Loan that begins
on a day for which there is no numerically corresponding day
in the
22
calendar month during which such Interest Period ends shall
end on the last Eurodollar Business Day of the month during
which that Interest Period ends.
(iii) Any Interest Period that would otherwise end
after the Termination Date shall end on the Termination
Date.
(iv) No Interest Period applicable to a Eurodollar Loan
may be less than one (1) month.
(v) There shall be no more than six (6) Interest
Periods applicable to Eurodollar Loans in effect at any one
time.
"INTERIM BORROWING ORDER": A Borrowing Order entered by the Bankruptcy
Court prior to the date of the making of the first advance
hereunder in accordance with Fed. R. Bankr. Pro. 4001(c).
"INVENTORY": Includes, without limitation, "inventory" as defined in
the UCC and also all: packaging, advertising, and shipping
materials related to any of the foregoing, and all names or marks
affixed or to be affixed thereto for identifying or selling the
same; Goods held for sale or lease or furnished or to be
furnished under a contract or contracts of sale or service by the
Borrowers or Guarantors, or used or consumed or to be used or
consumed in the Borrowers' or Guarantors' business; Goods in
transit; returned, repossessed and rejected Goods; and all
Documents (whether or not negotiable) which represent any of the
foregoing.
"INVENTORY ADVANCE RATE": The following percentages during the periods
of each calendar year indicated in the chart below:
---------------------------------------------------
Period Percentage
---------------------------------------------------
23
---------------------------------------------------
January 1 - August 31 74%
---------------------------------------------------
September 1 - December 31 80%
---------------------------------------------------
"INVENTORY APPRAISAL CAP": 85% of the Net Liquidation Value.
"INVENTORY RESERVES": Such reserves as may be established from time to
time by the Agent in the Agent's reasonable discretion (using a
methodology disclosed to and after consultation with, the Lead
Borrower) with respect to the determination of the
merchantability, at Retail, of the Acceptable Inventory, or which
reflect such other factors as affect the market value of the
Acceptable Inventory. Without limiting the generality of the
foregoing, Inventory Reserves may include (but are not limited
to) reserves based on the following:
(i) Obsolescence (determined based upon Inventory on hand
beyond a given number of days).
(ii) Seasonality.
(iii) Shrinkage (including any amount required to bring
Inventory in line with Borrowers' historical stock
ledger shrinkage reserve, to the extent that the
Borrowers' stock ledger shrinkage reserve is lower
than its last 12 months historical stock ledger
shrinkage reserve).
(iv) Change in Inventory character.
(v) Change in Inventory composition
(vi) Change in Inventory mix.
(vii) Markdown (both permanent and point of sale).
24
(viii) Retail markdowns and markups inconsistent with prior
period practice and performance; industry standards;
the Business Plan; or advertising calendar and
planned advertising events.
(ix) Return to Vendors.
(x) Damage.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": The issuer of any L/C.
"LANDLORDSTATE": Initially Washington, Virginia, and Pennsylvania, and
such other states in which a landlord's claim for rent has
priority over the Security Interests of the Agent in the
Collateral.
"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of any Borrower and any acceptance made on
account of such letter of credit.
"L/C LANDING COSTS": To the extent not included in the Stated Amount
of an L/C, customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to "land" the Inventory, the
purchase of which is supported by such L/C.
"LEASE": Any lease or other agreement, no matter how styled or
structured, pursuant to which any Borrower is entitled to the use
or occupancy of any space.
"LEASEHOLD INTEREST": Any interest of the Borrowers as lessee under
any Lease.
"LENDERS": The Tranche A Lenders and the Tranche B Lender collectively
and individually.
"LIABILITIES" (in the singular, "Liability"): All and each of' the
following arising under
25
the Loan Documents, whether now existing or hereafter arising:
(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrowers to the Agent or to any Lender, of
every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrowers to the Agent or any Lender
(including all future advances whether or not made pursuant to a
commitment by the Agent or any Lender), whether or not any of
such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any
other type, nature, or description, or by reason of' any cause of
action which the Agent or any Lender may hold against the
Borrowers.
(c) All notes and other obligations of the Borrowers now or
hereafter assigned to or held by the Agent or any Lender, of
every kind, nature, and description.
(d) All interest, fees, and charges and other amounts which
may be charged by the Agent or any Lender to the Borrowers and/or
which may be due from the Borrowers to the Agent or any Lender
from time to time.
(e) All costs and expenses incurred or paid by the Agent or
any Lender in respect of any agreement between the Borrowers and
the Agent or any Lender or instrument furnished by the Borrowers
to the Agent or any Lender (including, without limitation, Costs
of Collection, reasonable attorneys' fees, and all court and
litigation costs and expenses).
26
(f) Any and all covenants of the Borrowers to or with the
Agent or any Lender and any and all obligations of the Borrowers
to act or to refrain from acting in accordance with any agreement
between the Borrowers and the Agent or any Lender or instrument
furnished by the Borrowers to the Agent or any Lender.
(g) Each of the foregoing as if each reference to the
"Agent" therein were to each Affiliate of the Agent.
"LINE (UNUSED) FEE": Defined in Section 2.13.
"LIQUIDATION": The exercise, by the Agent, of those rights accorded to
the Agent under the Loan Documents as a creditor of the Borrowers
following and on account of Acceleration looking towards the
realization of the Collateral. Derivations of the word
"Liquidation" (such as "Liquidate") are used with like meaning in
this Agreement.
"LOAN": Any Revolving Credit Loan, Swingline Loan or Tranche B Loan
made hereunder.
"LOAN ACCOUNT": Defined in Section 2.7.
"LOAN CEILING": The aggregate amount of the Tranche A Dollar
Commitments and the Tranche B Dollar Commitment.
"LOAN DOCUMENTS": This Agreement, each instrument and document
executed and/or delivered as contemplated by Article 3, below,
and each other instrument or document from time to time executed
and/or delivered in connection with the arrangements contemplated
hereby with the Agent or any Lender or any Affiliate of the
Agent, including, without limitation, any transaction which
arises out of any cash management (including any ACH transfer
arrangements), depository,
27
investment, letter of credit, interest rate protection provided
by the Agent or any Affiliate of the Agent in connection with the
arrangements contemplated hereby, or in connection with any
transaction of the Borrowers or any Borrower with the Agent or
any Affiliate of the Agent, as each may be amended from time to
time.
"LOAN TO COLLATERAL RESERVES": Reserves set so that the amount made
available under the Borrowing Base on account of Acceptable
Inventory does not exceed in the aggregate the Net Liquidation
Value MULTIPLIED by 85%.
"LOCAL DISBURSEMENT ACCOUNT": A deposit account maintained by a
Borrower, into which amounts may be transferred FROM the
Operating Account for use solely (i) as a source of ▇▇▇▇▇ cash;
(ii) to make payroll payments; or (iii) to make other
disbursements that are identified on EXHIBIT 1 hereto.
"MAJORITY LENDERS": Lenders (other than Delinquent Tranche A Lenders
and Delinquent Tranche B Lender) holding 51% or more of the
aggregate of the Dollar Commitments of the Tranche A Lenders and
Tranche B Lender (other than Dollar Commitments held by
Delinquent Tranche A Lenders and Delinquent Tranche B Lender)
and, to the extent that the Dollar Commitments of the Lenders are
no longer in effect, based upon the outstanding Liabilities held
by such Lenders.
"MARGIN PRICING GRID" Provides for monthly adjustment to the interest
rate to be charged on Revolving Credit Loans based on
Availability and is shown in Section 2.10(e).
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
accounting periods subsequent to the Borrowers' fiscal year most
recently completed prior to
28
the execution of this Agreement, if such change has a material
effect on the Borrowers' financial condition or operating
results, as reflected on financial statements and reports
prepared by or for the Borrowers, when compared with such
condition or results as if such change had not taken place, or
where preparation of the Borrowers' statements and reports in
compliance with such change results in the breach of a financial
performance covenant imposed pursuant to Section 5.12 (if
applicable), where such a breach would not have occurred if such
change had not taken place or VISA VERSA.
"MATERIAL ADVERSE CHANGE": Any event, fact, circumstance, change in,
or effect on, the business of any Borrower, which individually or
in the aggregate or on a cumulative basis with any other events,
facts, circumstances, changes in, or effects on, the Borrowers or
the Collateral, taken as a whole, which occurs after the Petition
Date and:
(a) Would reasonably be expected to materially adversely
affect the ability of the Borrowers taken as a whole to (i)
operate or conduct their business in the aggregate in all
material respects in the manner in which such business is
currently operated or conducted or in which such business
(meaning primarily the retail sale of housewares, and items for
the home and related concepts) might be viably conducted by
expansion into additional, or by transition into other, venues or
mediums, or (ii) to perform their obligations under the Loan
Documents.
(b) Would reasonably be expected to have a material adverse
effect on the value, enforceability, or collectability of the
Collateral. Notwithstanding the foregoing, the commencement of
the Proceeding shall not
29
constitute a Material Adverse Change.
"MATERIAL ADVERSE EFFECT": A result, consequence, or outcome which
constitutes a Material Adverse Change.
"MATURITY DATE": The earliest to occur of: (a) May 31, 2003, or if
such day is not a Business Day, the next succeeding Business Day;
(b) the date set by the Bankruptcy Court for a hearing on the
Final Borrowing Order, unless the Bankruptcy Court on such date
approves the Final Borrowing Order; or (c) the effective date of
the Plan.
"NET LIQUIDATION VALUE": The product of (a) the Cost of Acceptable
Inventory (net of Inventory Reserves) multiplied by (b) the
percentage of such Cost estimated to be realizable in a
Liquidation thereof, as determined by the then most recent
appraisal of the Borrowers' Inventory undertaken at the request
of the Agent.
"NOMINEE": A business entity (such as a corporation or limited
partnership) formed by the Agent to own or manage any Post
Foreclosure Asset.
"NONCONSENTING LENDER": Defined in Section 16.9(a).
"NOTES": The Revolving Credit Notes, the Tranche B Note and the
SwingLine Note.
"OPERATING ACCOUNT": Defined in Section 7.3(a)(iii).
"OVERALL INVENTORY ADVANCE RATE": The following percentages during the
periods indicated on the chart below:
-----------------------------------------------
Period Percentage
-----------------------------------------------
January 1 - August 31 83%
-----------------------------------------------
September 1 - December 31 88%
-----------------------------------------------
"OVERALL INVENTORY APPRAISAL CAP": 94% of the Net Liquidation Value.
"PARTICIPANT": Defined in Section 19.14, hereof.
30
"PERMISSIBLE OVERLOANS": Revolving Credit Loans hereunder which
aggregate not more than 5% of the Tranche A Loan Ceiling in
effect on the date of this Agreement, where such loans are either
(a) Protective Advances or (b) made when Availability equals zero
(0) and are not extant for more than sixty (60) days absent the
consent of Super Majority Lenders pursuant to Section 16.3 hereof
and of the Tranche B Lender pursuant to Section 16.6 hereof;
PROVIDED HOWEVER, in no event shall the making of any Permissible
Overloan cause the Tranche A Loan Ceiling to be exceeded.
"PERMITTED ENCUMBRANCES": The following:
(a) Encumbrances in favor of the Agent.
(b) Those Encumbrances (if any) listed on EXHIBIT 4.7,
annexed hereto.
(c) Liens securing the payment of taxes, either not yet
overdue or the validity of which is being contested as permitted
by Section 4.15(d); non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary
course of Borrowers' business to the extent such liens secure (i)
indebtedness that is not overdue, (ii) 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 are being contested by the Borrowers in good faith by
appropriate proceedings diligently pursued, in each instance
prior to the commencement of foreclosure or other similar
proceedings and provided that adequate reserves therefor have
been set aside on the Borrowers' books (PROVIDED, HOWEVER, that
the inclusion of any of the foregoing as "Permitted Encumbrances"
31
shall not affect their respective relative priorities vis a vis
the security interests created herein), or (iii) zoning
restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property.
(d) Deposits under workmen's compensation, unemployment
insurance and social security laws, or to secure the performance
of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory Obligations or
surety or appeal bonds, or to secure indemnity, performance or
other similar bonds arising in the ordinary course of business.
(e) Landlord's liens arising by operation law where waivers
have not been obtained.
(f) Purchase money security interests or capitalized
equipment leases on any property acquired or held by the
Borrowers in the ordinary course of business and securing
indebtedness incurred or assumed for the purpose of financing all
or any part of the cost of acquiring such property; PROVIDED
HOWEVER that (i) any such Encumbrance attaches to such property
concurrently with or within twenty (20) days after the
acquisition thereof, (ii) such Encumbrance attaches solely to the
property so acquired in such transaction and (iii) the principal
amount of the Indebtedness secured thereby does not exceed 100%
of the cost of such property.
"PERMITTED INVESTMENT": An investment which fulfills any of the
following numbered criteria:
(1) Debt entitled to the full faith and credit of the
United States with maturities not to exceed one hundred and
eighty-one (181) days.
32
(2) Banker's acceptances accepted, savings accounts
made available, repurchase agreements entered into, and
certificates of deposit issued by Fleet National Bank or any
bank whose most senior debt has been assigned an investment
grade credit rating by a nationally recognized credit rating
service.
(3) Commercial paper rated A-l/P-1.
(4) Money market accounts or funds within the meaning
of Rule 2a-7 of the Investment Company Act of 1940, in
effect as of the date of this Agreement.
(5) Such other investments as may be approved in
writing by Agent in its discretion.
"PERSON": Any natural person, corporation, limited liability company,
trust, partnership, joint venture, or other enterprise or entity.
"PETITION DATE": May 21, 2001
"PLAN": A Plan of Reorganization filed in the Proceedings in
accordance with the Bankruptcy Code, together with all
amendments, restatements, modifications, and supplements thereto.
"POST FORECLOSURE ASSET": All or any part of the Collateral, ownership
of which has been acquired by the Agent or a Nominee on account
of the Agent "bidding in" on behalf of the Lenders at a
foreclosure of Collateral as part of a Liquidation.
"POST-PETITION": Any date arising or event occurring on or after the
Petition Date.
"PRE-PETITION AGENCY AGREEMENT": That certain letter agreement re:
Store Closing Sale dated as of February 8, 2001 among the
Borrowers and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Retail
33
Partners, LLC.
"PRE-PETITION LOAN AGREEMENT" That certain Loan and Security Agreement
dated November 14, 2000, as amended through the Petition Date,
among Fleet Retail Finance Inc., as Agent on behalf of a
syndicate of lenders, Back Bay Capital Funding, LLC and Lechters,
Inc., the Lead Borrower for the Borrowers referenced therein.
"PROCEEDINGS": The case(s) pursuant to Chapter 11 of the Bankruptcy
Code filed by the Borrowers in the Bankruptcy Court on the
Petition Date.
"PRO-RATA": With respect to any Lender, a fraction (expressed as a
percentage), the numerator of which shall be the amount of such
Lender's Dollar Commitment and the denominator of which shall be
the aggregate amount of all of the Lenders' Dollar Commitments,
as adjusted from time to time in accordance with the provisions
of Section 11.13 hereof, provided that, if the Commitments have
been terminated, the numerator shall be the unpaid amount of such
Lender's Loans and its interest in L/C exposure and the
denominator shall be the aggregate amount of all unpaid Loans and
L/C exposure.
"PROCEEDS": Includes, without limitation, "proceeds" as defined in the
UCC, and proceeds of all Collateral.
"PROTECTIVE ADVANCES": The aggregate of Revolving Credit Loans and
expenditures and incurrence of obligations by the Agent which are
made or undertaken in the Agent's reasonable discretion to
protect or preserve the Collateral and the Agent's rights upon
default or otherwise, or which the Agent determines in its
reasonable discretion are appropriate to facilitate a
Liquidation.
34
"REAL ESTATE INTEREST": Any interest of the Borrowers (other than a
Leasehold Interest) in any real property or any improvements
thereon, whether holding such interest as legal owner, as
beneficiary, or otherwise.
"RECEIPTS": All cash, cash equivalents, checks and credit card slips
arising from the sale of the Collateral including, without
limitation, all amounts due and payments made to Borrowers under
any Agency Agreement.
"RECEIVABLES COLLATERAL": Any rights to payment with respect to any of
the Collateral.
"REGISTER": Defined in Section 17.1(f).
"RELATED ENTITY": Any Person (other than a natural person) which is a
parent, Subsidiary, or Affiliate of any Borrower; could have such
enterprise's tax returns or financial statements consolidated
with any Borrower's; could be a member of the same controlled
group of corporations (within the meaning of Section 1563(a)(1),
(2) and (3) of the Internal Revenue Code of 1986, as amended from
time to time) of which any Borrower is a member or controls or is
controlled by any Borrower or by any Affiliate of any Borrower.
"REQUIREMENT OF LAW": As to any Person:
(a)(i) All statutes, rules, regulations, orders, or other
requirements having the force of law and (ii) all court orders
and injunctions, arbitrator's decisions, and/or similar rulings,
in each instance ((i) and (ii)) of or by any federal, state,
municipal, and other governmental authority, or court, tribunal,
panel, or other body which has or claims jurisdiction over such
Person, or any property of such Person, or of any other Person
for whose conduct such Person would be responsible.
35
(b) Such Person's charter, certificate of incorporation,
articles of organization, and/or other organizational documents,
as applicable; and
(c) Such Person's by-laws and/or other instruments which
deal with corporate or similar governance, as applicable.
"RESERVE PERCENTAGE": The decimal equivalent of that rate applicable
to a Tranche A Lender under regulations issued from time to time
by the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Tranche A
Lender with respect to "Eurocurrency liabilities" as defined in
such regulations. The Reserve Percentage applicable to a
particular Eurodollar Loan shall be based upon that in effect
during the subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to take
effect (and to consequently change any interest rate determined
with reference to the Reserve Percentage) if and when such change
is applicable to such loans.
"RESERVES": All Availability Reserves and Inventory Reserves, if any.
"RESERVE ACCOUNT": As defined in the Borrowing Orders.
"RETAIL":The current ticket price aggregated by SKU of a Borrower's
Acceptable Inventory, as reflected in the Borrowers' Consolidated
stock ledger, except that to the extent that Acceptable Inventory
is not reflected in the stock ledger, "Retail" shall be
determined using such non stock ledger inventory systems of the
Borrowers as the Agent shall deem adequate for such purpose in
its reasonable discretion.
"REVOLVING CREDIT": Defined in Section 2.1.
36
"REVOLVING CREDIT LOAN": A particular loan or advance made or
continued by a Tranche A Lender pursuant to the Revolving Credit.
"REVOLVING CREDIT NOTE": Defined in Section 2.8.
"SEC": The United States Securities and Exchange Commission, or any
successor thereto.
"STANDSTILL PERIOD": A period initiated by written notice by the
Tranche B Lender to the Agent in accordance with Section 14.2,
which period is 15 days for a Borrowing Base Default,
Availability Default, or Tranche B Payment Default or 30 days for
a General Default.
"STATED AMOUNT": The maximum amount for which an L/C may be honored,
less any amounts already drawn thereunder.
"STRUCTURING FEE": Defined in Section 2.11.
"SUBSIDIARY" or "SUBSIDIARIES": (a) Any corporation or limited
liability company of which more than fifty percent (50%) of the
issued and outstanding securities having ordinary voting power
for the election of directors or membership interests is owned or
controlled, directly or indirectly, by a Person and/or by one or
more of its Subsidiaries, and (b) any partnership in which a
Person and/or one or more Subsidiaries of such Person shall have
a general partnership interest or any other interest (whether in
the form of voting or participation in profits or capital
contribution), in each case, of more than fifty percent (50%).
"SUPER MAJORITY LENDERS": Lenders (other than Delinquent Tranche A
Lenders or Delinquent Tranche B Lender) holding 66-2/3% or more
of the aggregate of the Dollar Commitments of the Tranche A
Lenders and Tranche B Lender (other than
37
Dollar Commitments held by a Delinquent Tranche A Lender or
Delinquent Tranche B Lender) and, to the extent that the Dollar
Commitments of the Lenders are no longer in effect, based upon
the outstanding Liabilities held by such Lenders.
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) except in the case of
the events described in Sections 10.4 and 10.7, would become an
Event of Default if any requisite notice were given by the Agent
and/or any requisite period of time were to run and such
occurrence, circumstance, or state of facts were not absolutely
cured within any applicable grace period.
"SWINGLINE": The facility described in Section 2.6 pursuant to which
the SwingLine Lender may advance SwingLine Loans to the Borrowers
aggregating up to the SwingLine Loan Ceiling.
"SWINGLINE LENDER": FRF.
"SWINGLINE LOAN CEILING": Ten Million Dollars ($10,000,000.00).
"SWINGLINE LOANS": Revolving Credit Loans advanced under the SwingLine
by the SwingLine Lender and defined in Section 2.6(a).
"SWINGLINE NOTE": As defined in Section 2.6(c).
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
date set as the Termination Date in a notice by the Agent to the
Lead Borrower on account of the occurrence of any Event of
Default.
"TRANCHE A CONSENT": The Consent of all Tranche A Lenders other than
the Delinquent Tranche A Lenders.
38
"TRANCHE A COMMITMENT": With respect to each Tranche A Lender, that
respective Tranche A Lender's Tranche A Dollar Commitment.
"TRANCHE A DEBT": The aggregate of the Borrowers' Liabilities,
obligations and indebtedness of any character to the Tranche A
Lenders that arise from or are related to the Tranche A Loans,
other than Tranche A Fees.
"TRANCHE A DOLLAR COMMITMENT": As set forth on Schedule B annexed
hereto (as such amounts may change in accordance with the
provisions of this Agreement), for each Tranche A Lender,
provided that the aggregate of the Tranche A Dollar Commitments
shall not exceed Eighty Million Dollars ($80,000,000.00)
(provided however that for the purposes of the calculation of
Availability, and not for the calculation of fee or other
purposes, such aggregate shall not exceed $46,000,000 prior to
the entry of the Final Order).
"TRANCHE A EARLY TERMINATION FEE": As defined in Section 2.14(a).
"TRANCHE A FEES" All fees (such as a fee on account of the execution
of an amendment of the Loan Agreement) payable by the Borrowers
in respect of the Tranche A Loans, other than any fee payable as
provided in the Agent Fee Letter, and any amount payable to an
Agent as reimbursement for any cost or expense incurred by that
Agent on account of the discharge of that Agent's duties under
this Agreement or the other Loan Documents.
"TRANCHE A FEE LETTER": That certain letter of even date by and
between the Lead Borrower and the Agent described in Section
2.12(a).
"TRANCHE A LENDERS": Each Tranche A Lender to which reference is made
in the Preamble of this Agreement and any other Person who
becomes a "Tranche A Lender" in accordance with the provisions of
this Agreement.
"TRANCHE A LOAN CEILING": The aggregate amount of the Tranche A
Commitments of all Tranche A Lenders which shall not exceed
Eighty Million Dollars
39
($80,000,000.00) (provided however that for the purposes of the
calculation of Availability, and not for the calculation of fee
or other purposes, it shall not exceed $46,000,000 prior to the
entry of the Final Order).
"TRANCHE A OBLIGATIONS": The aggregate of Tranche A Debt and Tranche A
Fees.
"TRANCHE A PERCENTAGE COMMITMENT": As set forth on Schedule B, annexed
hereto reflecting, with respect to any Tranche A Lender, the
ratio of (i) the amount of the Tranche A Dollar Commitment of
such Tranche A Lender to (ii) the aggregate amount of the Tranche
A Dollar Commitments of all Tranche A Lenders (as such percentage
may change in accordance with the provisions of this Agreement).
"TRANCHE A PRO-RATA": With respect to any Tranche A Lender, a fraction
(expressed as a percentage), the numerator of which shall be the
amount of such Tranche A Lender's Tranche A Dollar Commitment and
the denominator of which shall be the aggregate amount of all of
the Tranche A Lenders' Tranche A Dollar Commitments, as adjusted
from time to time in accordance with the provisions of Section
17.1 hereof, provided that, if the Tranche A Commitments have
been terminated, the numerator shall be the unpaid amount of such
Tranche A Lender's Loans and its interest in L/C exposure and the
denominator shall be the aggregate amount of all unpaid Revolving
Credit Loans and L/C exposure.
"TRANCHE A TERMINATION DATE": The earliest of (a) the Maturity Date;
or (b) the date set as the Termination Date in a notice by the
Agent to the Lead Borrower on account of the occurrence of any
Event of Default; or (c) the Tranche B Termination Date.
40
"TRANCHE B COMMITMENT": With respect to the Tranche B Lender, the
Tranche B Dollar Commitment.
"TRANCHE B COMMITMENT FEE": Defined in Section 2.12(b).
"TRANCHE B DEBT": The aggregate of the Borrowers' Liabilities,
obligations, and indebtedness of any character to the Tranche B
Lender arising from or related to the Tranche B Loan, other than
Tranche B Fees.
"TRANCHE B DEBT PAYMENT": Any payment of principal, interest (whether
payable in cash or otherwise), fees, premium, or otherwise on
account of the Tranche B Debt.
"TRANCHE B DEFERRED INTEREST": Defined in Section 2.10(f)(i).
"TRANCHE B DOLLAR COMMITMENT": As set forth on Schedule B annexed
hereto (as such amounts may change in accordance with the
provisions of this Agreement) for each Tranche B Lender, provided
that the aggregate amount of the Tranche B Dollar Commitments
shall not exceed Six Million Dollars ($6,000,000.00).
"TRANCHE B EARLY TERMINATION FEE": Defined in Section 2.14(b).
"TRANCHE B FEES" All fees (such as Tranche B Commitment Fee, Tranche B
Early Termination Fee, annual facility fee, and any other fee)
payable by the Borrowers in respect of the Tranche B Loan, other
than any amount payable to the Agent as reimbursement for any
cost or expense incurred by the Agent on account of the discharge
of the Agent's duties under this Agreement or the other Loan
Documents.
41
"TRANCHE B FEE LETTER": That certain letter of even date by and
between the Lead Borrower and the Tranche B Lender.
"TRANCHE B INTEREST": Defined in Section 2.10(f)(i).
"TRANCHE B LENDER": Defined in the Preamble, together with its
successors and assigns.
"TRANCHE B LOAN": Defined in Section 2.1(b).
"TRANCHE B LOAN CEILING": $6,000,000.00.
"TRANCHE B MATURITY DATE": The Maturity Date.
"TRANCHE B MINIMUM LOAN": $6,000,000.00.
"TRANCHE B NOTE": Defined in Section 2.8(b).
"TRANCHE B OBLIGATIONS": The aggregate of Tranche B Debt and Tranche B
Fees.
"TRANCHE B PAYMENT DEFAULT" The failure of the Borrowers to have made
any Tranche B Debt Payment prior to the expiry of any grace
period applicable to such payment.
"TRANCHE B TERMINATION DATE": The earliest of (a) the Maturity Date;
or (b) the date set as the Termination Date in a notice by the
Agent to the Lead Borrower on account of the occurrence of any
Event of Default; or (c) the Tranche A Termination Date.
"TRANSFER": Wire transfer pursuant to the wire transfer system
maintained by the Board of Governors of the Federal Reserve
Board, or as otherwise may be agreed to
42
from time to time by the Agent making such Transfer and the
respective Lender.
Transfers by the Agent to all Lenders or to any Person who
becomes a Lender pursuant to Section 17.1, shall be effected
pursuant to wire instructions given by the respective Lenders or
by such Person to, and agreed to by, the Agent or as otherwise
mutually agreed.
Wire transfers to the Agent shall be in accordance with the
following wire instructions:
Fleet National Bank
ABA No. ▇▇▇▇▇▇▇▇▇
Acct Name: Fleet Retail Finance Inc.
Acct No.: 53039952
Reference: Lechters, Inc., debtor-in-possession
Wire instructions may be changed in the same manner that Notice
Addresses may be changed, except that no change of the wire
instructions for Transfers to any Lender shall be effective
without the Consent of the Agent.
"UCC": The Uniform Commercial Code, as presently in effect in the
State of New York as used herein in the context of any
definitions; otherwise, as in effect from time to time in the
State of New York.
"UNANIMOUS CONSENT": The Consent of all Lenders other than Delinquent
Tranche A Lenders.
"UNANIMOUS TRANCHE A CONSENT": The Consent of all Tranche A Lenders
other than Delinquent Tranche A Lenders.
"UPFRONT FEE": Defined in Section 2.12(a).
ARTICLE II - THE REVOLVING CREDIT AND TRANCHE B LOAN FACILITY:
2.1 Establishment of Revolving Credit and Tranche B Loan Facility.
-------------------------------------------------------------
43
(a) The Tranche A Lenders hereby establish a revolving line of credit
(the "Revolving Credit") in the Borrowers' favor pursuant to which each Tranche
A Lender, subject to, and in accordance with, this Agreement, acting through the
Agent, shall make loans and advances and otherwise provide financial
accommodations to and for the account of the Borrowers as provided herein, in
each instance equal to that Tranche A Lender's Commitment Percentage of
Availability, up to the maximum amount of that Tranche A Lender's Dollar
Commitment. The amount available for borrowing under the Revolving Credit shall
be determined by the Agent by reference to Availability, as determined by the
Agent from time to time.
(b) The Tranche B Lender agrees, subject to, and in accordance with
this Agreement including, without limitation, the satisfaction of the conditions
in Section 2.4(f) hereof, to make a loan (the "TRANCHE B LOAN") in the amount of
$6 Million ($6,000,000.00) on the Closing Date.
There shall be only one borrowing under the Tranche B Loan Facility and such
borrowing shall occur only on the Closing Date.
(c) As used herein, the following terms have the following meanings:
(i) "AVAILABILITY" refers at any time to the result of applying
the following formula:
(A) Borrowing Base. MINUS
(B) The then unpaid principal balance of the Loan Account
(excluding the outstanding amount of the Tranche B
Loans).
44
MINUS
(C) The then Stated Amount of all L/C's.
(ii) "BORROWING BASE" refers at any time to the lesser of
2.1(c)(ii)(A), 2.1 (c)(ii)(B) or 2.1(c)(ii)(C) (except that
2.1(c)(ii)(C) shall not apply if the Tranche B Loan has been
repaid), where:
(A) is the Tranche A Loan Ceiling.
(B) is the result of applying the following formula:
(I) The product of the Credit Card Advance Rate
MULTIPLIED by the aggregate face amount of
Acceptable Credit Card Receivables.
PLUS
(II) The product of the Inventory Advance Rate
MULTIPLIED by the Cost of Acceptable Inventory
(Net of Inventory Reserves), not to exceed the
Inventory Appraisal Cap.
MINUS
(III) Carve-outs or the like associated with
professional fees, trustee fees, and US Trustee
fees in connection with the Proceedings.
MINUS
(IV) The then aggregate of the Availability Reserves.
(C) is the result of applying the following formula:
45
(I) The product of the Credit Card Advance Rate
MULTIPLIED by the aggregate face amount of
Acceptable Credit Card Receivables.
PLUS
(II) The product of the Overall Inventory Advance Rate
MULTIPLIED by the Cost of Acceptable Inventory
(Net of Inventory Reserves), not to exceed the
Overall Inventory Appraisal Cap.
MINUS
(III) Carve-outs or the like associated with
professional fees, trustee fees, and US Trustee
fees in connection with the Proceedings.
MINUS
(IV) The then aggregate of the Availability Reserves.
MINUS
(V) The unpaid principal balance of all outstanding
Tranche B Loans and all accrued and unpaid
Tranche B Deferred Interest.
(d) Availability shall be based upon Borrowing Base Certificates
furnished as provided in Section 5.4 hereof.
(e) The proceeds of borrowings under the Revolving Credit and of the
Tranche B Loan shall be used
(i) to repay the Liabilities under the Pre-Petition Credit
Facility;
46
(ii) for on-going working capital requirements of the Borrowers;
and
(iii) for general corporate purposes, and in all cases to the
extent permitted by this Agreement.
2.2 Advances in Excess of Borrowing Base.
------------------------------------
(a) No Tranche A Lender has any obligation to make any loan or
advance, or otherwise to provide any credit for the benefit of the Borrowers to
the extent that the balance of the Loan Account (excluding the outstanding
amount of the Tranche B Loan) plus the then stated amount of all L/Cs would as a
result thereof exceed the Borrowing Base.
(b) The Tranche A Lenders' obligations among themselves are
subject to Section 13.3(a) (which relates to each Tranche A Lender's making
amounts available to the Agent) and to Sections 16.1(d) and 16.3(a) (which
relate to Permissible Overloans).
(c) The Tranche A Lenders' providing of credit in excess of their
obligations under this Agreement on any one occasion does not affect the
Liabilities of the Borrowers hereunder nor shall it obligate the Tranche A
Lenders to do so on any other occasion.
2.3 Risks of Value of Collateral. The Agent's reference to a given
asset in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Agent or any Lender relative to the actual value of the
asset in question. All risks concerning the collectability of the Receivables
Collateral and the merchantability of the Borrowers' Inventory are and remain
the Borrowers'. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities and, with respect to the Guarantors, secures
their obligations under their respective Guaranties, whether or not relied
47
upon by the Agent or by any Lender in connection with the making of loans,
credits, and advances and the providing of financial accommodations under the
Revolving Credit.
2.4 Loan Requests.
-------------
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Lead
Borrower shall be made pursuant hereto, PROVIDED THAT:
(i) The Borrowing Base shall not be exceeded; and
(ii) The Revolving Credit has not been suspended as provided
in Section 2.4 (h).
(b) Subject to the provisions of this Agreement, the Lead
Borrower may request a Revolving Credit Loan by giving the Agent written or
telephone notice (confirmed in writing) in the form of EXHIBIT 2.4(B) as
follows:
(i) If such Revolving Credit Loan is to be a Base Margin
Loan (which shall include the conversion of a Eurodollar Loan): By
11:30 A.M. on the Business Day on which such Revolving Credit Loan is
to be made. Base Margin Loans requested by the Lead Borrower, other
than those resulting from the conversion of a Eurodollar Loan, shall
not be less than $10,000.00.
(ii) If such Revolving Credit Loan is to be Eurodollar Loan
(which shall include the continuation of, or the conversion of a Base
Margin Loan to, a Eurodollar Loan): By 1:00 P.M. on the third
Eurodollar Business Day prior to the first day of the Interest Period
being requested. Eurodollar Loans shall each be not less than
$1,000,000 and in increments of $500,000 in excess of such minimum.
48
(iii) Any Eurodollar Loan which matures while an Suspension
Event is extant may be converted, at the option of the Agent, to a
Base Margin Loan notwithstanding any notice from the Borrower that
such loan is to be continued as a Eurodollar Loan.
(c) Any request for a Revolving Credit Loan or for the conversion
of a Revolving Credit Loan which is made after the applicable deadline therefor,
as set forth above, shall be deemed to have been made at the opening of business
on the next Business Day or Eurodollar Business Day, as applicable. Each request
for a Revolving Credit Loan or for the conversion of a Revolving Credit Loan
shall be made in such manner as may from time to time be acceptable to the
Agent.
(d) The Lead Borrower may request that the Agent cause the
issuance of L/C's for the account of a Borrower as provided in Section 2.17.
(e) The Agent may rely on any request for a loan or advance or
other financial accommodation under the Revolving Credit which the Agent, in
good faith, believes to have been made by a Person duly authorized to act on
behalf of the Lead Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation pending the
Agent's being furnished with such documentation concerning that Person's
authority to act as may be reasonably satisfactory to the Agent.
(f) A request by the Lead Borrower for a loan or advance or other
financial accommodation under the Revolving Credit or for the Tranche B Loan
shall be irrevocable and shall constitute certification by each Borrower that as
of the date of such request, each of the following is true and correct:
49
(i) There has been no Material Adverse Change in the
Borrowers' Consolidated financial condition from the most recent
financial information furnished Agent pursuant to this Agreement;
(ii) All or a portion of any loan or advance so requested
will be set aside or adequate reserves will otherwise be established
by the Borrowers to the extent necessary to pay when due all of the
Borrowers' obligations for sales tax on account of sales since the
then most recent borrowing pursuant to this Agreement;
(iii) Each representation which is made herein or in any of
the other Loan Documents is then true and complete in all material
respects as of the date of such request (unless such representation
relates to an earlier date, in which event such representation shall
be true as of such earlier date, or such representation relates to a
changed condition which change is permitted under the covenants set
forth in this Agreement); and
(iv) No Suspension Event is then continuing.
(g) Reserved.
(h) During the continuance of any Suspension Event, neither the
Agent on behalf of the Tranche A Lenders, the Tranche A Lenders, the Swingline
Lender nor the Tranche B Lender shall be obligated to make any loans or
advances, to provide any financial accommodation hereunder, to issue any L/C, or
to accept any request of the Lead Borrower that any Eurodollar Loan be made or
any Base Margin Loan be converted to a Eurodollar Loan.
2.5 Making of Loans.
---------------
50
(a) A loan or advance under this Agreement shall be made by the
transfer of the proceeds of such loan or advance to the Operating Account or as
otherwise instructed by the Lead Borrower.
(b) A loan or advance shall be deemed to have been made under
this Agreement (and the Borrowers shall be indebted to the Lenders for the
amount thereof immediately) upon the Agent's initiation of the transfer of the
proceeds of such loan or advance in accordance with the Lead Borrower's
instructions or the charging of the amount of such loan to the Loan Account (in
all other circumstances).
(c) There shall not be any recourse to or liability of the Agent
or any Lender (except to the extent caused by the gross negligence or willful
misconduct of the Agent or any Lender as determined by a court of competent
jurisdiction), on account of:
(i) Any delay in the making of any loan or advance requested
under the Revolving Credit.
(ii) Any delay in the proceeds of any such loan or advance
constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of funds
which constitute a loan or advance under the Revolving Credit, the
wire transfer of which was properly initiated by the Agent in
accordance with wire instructions provided to the Agent by the Lead
Borrower.
2.6 SwingLine Loans.
----------------
(a) For ease of administration, Base Margin Loans may be made by
the SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in accordance
with the procedures set forth in this Agreement for the making of loans and
advances under the Revolving Credit.
51
The unpaid principal balance of the SwingLine Loans shall not at any one time be
in excess of the SwingLine Loan Ceiling (which SwingLine Loan Ceiling is subject
to amendments from time to time, by reasonable advance written notice by the
Agent to the Lead Borrower).
(b) The aggregate unpaid principal balance of SwingLine Loans
shall bear interest as if the same were loans and advances under the Revolving
Credit.
(c) The obligation to repay SwingLine Loans shall be evidenced by
a Note (the "SWINGLINE NOTE") in the form of EXHIBIT 2.6(C), annexed hereto,
executed by the Lead Borrower on behalf of itself and the other Borrowers and
payable to the SwingLine Lender. Neither the original nor a copy of the
SwingLine Note shall be required, HOWEVER, to establish or prove any Liability
with respect to the SwingLine Loans. Upon the Lead Borrower being provided with
an affidavit (which shall include an indemnity reasonably satisfactory to the
Lead Borrower) from the Agent to the effect that the SwingLine Note has been
lost, mutilated, or destroyed, the Lead Borrower shall on behalf of itself and
the other Borrowers execute a replacement thereof and deliver such replacement
to the SwingLine Lender.
(d) For all purposes of this Loan Agreement, the SwingLine Loans
and the Lead Borrower's obligations to the SwingLine Lender constitute Revolving
Credit Loans and are secured as "Liabilities".
(e) SwingLine Loans may be subject to periodic settlement with
the Lenders as provided in Section 13.2 of this Loan Agreement.
2.7 The Loan Account.
----------------
(a) An account ("LOAN ACCOUNT") shall be opened on the books of
the Agent. A record may be kept in the Loan Account of all Loans made under or
pursuant to this Agreement and of all payments thereon.
52
(b) The Agent may also keep a record (either in the Loan Account
or elsewhere, as the Agent may from time to time elect) of all interest, fees,
service charges, costs, expenses, and any other amounts owed the Agent, the
SwingLine Lender and each Lender on account of the Liabilities and of all
credits against all such amounts so owed.
(c) All credits against the Liabilities shall be conditional upon
receipt of final payment to the Agent for the Account of each Lender of the
amounts so credited. The amount of any item credited against the Liabilities
which is charged back against Agent or any Lender for any reason or is not
finally paid shall be a Liability and shall be added to the Loan Account,
whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrowers are obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments which will be due
and payable between the date of such determination and the first day of the then
next succeeding month as having been advanced under the Revolving Credit,
whether or not such amounts are then due and payable.
(e) The Agent, without the request of the Lead Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
payment to which the Agent or any Lender is entitled from the Borrowers pursuant
hereto and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in the Borrowing Base being exceeded. Such action
on the part of the Agent shall not constitute a waiver of the Agent's rights or
the Borrowers' obligations under Section 2.9(b). Any amount which is added to
the principal balance of the Loan Account as provided in this Section 2.7(e)
shall bear interest, subject to Section 2.10(d), at the Base Margin Rate.
53
(f) Any statement rendered by the Agent or any Lender to the
Borrowers concerning the Liabilities shall, in the absence of manifest error, be
considered correct and accepted by the Borrowers and shall be conclusively
binding upon the Borrowers unless the Lead Borrower provides the Agent with
written objection thereto within thirty (30) days from the mailing of such
statement, which written objection shall indicate, with particularity, the
reason for such objection. In the absence of manifest error, the Loan Account
and the Agent's books and records concerning the loan arrangement contemplated
herein and the Liabilities shall be prima facie evidence of the items described
therein.
2.8 Notes.
-----
(a) The obligation to repay the Revolving Credit Loans, with
interest as provided herein, shall be evidenced by Notes (each, a "REVOLVING
CREDIT NOTE") in the form of EXHIBIT 2.8, annexed hereto, executed by the Lead
Borrower on behalf of itself and the other Borrowers, one payable to each
Tranche A Lender. Neither the original nor a copy of any Revolving Credit Note
shall be required, however, to establish or prove any Liability. In the event
that any Revolving Credit Note is ever lost, mutilated, or destroyed, the Lead
Borrower shall execute a replacement thereof on behalf of itself and the other
Borrowers and deliver such replacement to the Agent.
(b) The Borrowers' obligation to repay the Tranche B Loan, with
interest as provided herein, shall be evidenced by a Note (a "TRANCHE B NOTE")
in the form of EXHIBIT 2.8(B), annexed hereto, executed by the Lead Borrower on
behalf of itself and the other Borrowers, payable to the Tranche B Lender.
Neither the original nor a copy of the Tranche B Note shall be required,
however, to establish or prove any Liability. In the event that the
54
Tranche B Note is lost, mutilated, or destroyed, the Lead Borrower on behalf of
itself and the other Borrowers shall execute and deliver a replacement thereto
to the Tranche B Lender.
2.9 Payment of Loans.
----------------
(a) The Borrowers may repay all or any portion of the principal
balance of the Loan Account with respect to the Revolving Credit Loans from time
to time until the Termination Date. Such payments when made in respect of
Revolving Credit Loans shall be applied first to Base Margin Loans and only then
to Eurodollar Loans.
(b) The Borrowers, upon notice or demand from the Agent or any
Lender, shall pay the Agent that amount, from time to time, which is necessary
so that the sum of the unpaid balance of the Loan Account PLUS the Stated Amount
of all L/C's does not exceed the Borrowing Base. Such payments shall be applied
first to Base Margin Loans and only then to Eurodollar Loans.
(c) Unless otherwise instructed by the Lead Borrower, the Agent
shall endeavor to cause those application of payments (if any), pursuant to
Sections 2.9(a) and 2.9(b) against Eurodollar Loans then outstanding in such
manner as results in the least cost to the Borrowers, but shall not have any
affirmative obligation to do so nor any liability on account of its failure to
do so. The Lead Borrower may request the Agent to defer the application of a
payment to a Eurodollar Loan until the end of the applicable Eurodollar Interest
Period and to hold the funds allocated for such payment as interim cash
collateral. In no event shall action or inaction by the Agent excuse the
Borrowers from any indemnification obligation under Section 2.9(e) unless such
action or inaction resulted from the Agent's gross negligence or willful
misconduct.
55
(d) The Borrowers shall repay the then entire unpaid balance of
the Loan Account and all other Liabilities on the Termination Date.
(e) Upon the written request of the Agent, the Borrowers shall
indemnify each Tranche A Lender and hold each Tranche A Lender harmless from and
against any loss, cost or expense (including loss of anticipated profits) which
such Tranche A Lender may sustain or incur (including, without limitation, by
virtue of acceleration after the occurrence of any Event of Default) as a
consequence of the following:
(i) Default by the Borrowers in payment of the principal
amount of or any interest on any Eurodollar Loan as and when due and
payable, including any such loss or expense arising from interest or
fees payable by such Tranche A Lender to lenders of funds obtained by
it in order to maintain its Eurodollar Loans.
(ii) Default by the Borrowers in making a borrowing or
conversion after the Lead Borrower has given (or is deemed to have
given) a request for a Revolving Credit Loan or a request to convert a
Revolving Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a Eurodollar Loan or the
conversion of any such Eurodollar Loan to a Base Margin Loan on a day
that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by such Eurodollar
Lender to lenders of funds obtained by it in order to maintain any
such Loans as "breakage fees".
(f) The Borrowers shall not make any prepayment of principal on
the Tranche B Loan, except in connection with repayment of all the Liabilities
and termination of the Commitments.
56
(g) No amounts repaid or prepaid with respect to the
principal of the Tranche B Loan may be reborrowed.
2.10 Interest Rates.
--------------
(a) Each Revolving Credit Loan shall bear interest at the Base
Margin Rate (determined based on a 360 day year and actual days elapsed) unless
it is made as, or is converted to, a Eurodollar Loan pursuant to Section 2.4
hereof.
(b) Each Revolving Credit Loan which consists of a Eurodollar
Loan shall bear interest at the applicable Eurodollar Rate (determined based on
a 360 day year and actual days elapsed), as adjusted pursuant to Section
2.10(e), below.
(c) The Lead Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit Loan such that, in addition to interest at
the Base Margin Rate, there are more than Six (6) Eurodollar Rates applicable to
the Revolving Credit Loans at any one time.
(d) The Borrowers shall pay accrued and unpaid interest on each
Revolving Credit Loan in arrears on the applicable Interest Payment Date
therefor. Following the occurrence of any Event of Default (and whether or not
the Agent exercises the Agent's rights on account thereof), all Revolving Credit
Loans shall bear interest, at the option of the Agent or at the direction of the
SuperMajority Lenders, at a rate which is the aggregate, in the case of Base
Margin Loans, of the then applicable Base Margin Rate PLUS three percent (3%)
per annum, and in the case of Eurodollar Loans, the then applicable Eurodollar
Rate PLUS three percent (3%) per annum.
(e) Following the first anniversary of the Closing Date, the
Eurodollar Margin and Base Margin shall be reset quarterly, effective on the
first day of each April, July, October and January (each, a "Reset Date"), as
set forth in the Margin Pricing Grid set forth below based
57
upon the average daily Availability for the prior calendar quarter as determined
by Agent on or before the tenth (10th) day of each calendar quarter. If the
average daily Availability during any calendar quarter (or portion thereof)
ending on March 31, June 30, September 30 and December 31 of any year, in the
case of Revolving Credit Loans priced at Tier III, falls below $35 million, or
in the case of Revolving Credit Loans priced at Tier II, falls below $15
million, the Eurodollar Margin and the Base Margin shall be adjusted downward
commencing the first day of the following calendar quarter. The Eurodollar
Margin and the Base Margin shall be reset upward effective on the first day of a
given calendar quarter only if during the immediately preceding calendar quarter
in the case of Revolving Credit Loans priced at Tier II, average daily
Availability during the prior calendar quarter was $35 million or more, and in
the case of Revolving Credit Loans priced at Tier I, average daily Availability
was $15 million or more:
MARGIN PRICING GRID
-----------------------------------------------------------------------------
TIER Minimum Availability for Eurodollar Margin Base Margin
Preceding Quarter (Basis Points) (Percentage)
-----------------------------------------------------------------------------
I $15 million or less 275 1.00
-----------------------------------------------------------------------------
II $15 Million, but less 250 0.75
than $35 million
-----------------------------------------------------------------------------
III $35 million or more 225 0.50
-----------------------------------------------------------------------------
Notwithstanding the foregoing, for the twelve month period beginning
on the Closing Date and ending on the first Reset Date following the first
anniversary of the Closing Date, Revolving Credit Loans will be priced at Tier
I.
(f) Tranche B Loan.
(i) Subject to Section 2.10(f)(iii) hereof, the Tranche B
Loan shall bear interest (computed on the basis of the actual number
of days elapsed over year of
58
360 days) at a rate per annum equal to Sixteen Percent (16.00%) (the
"TRANCHE B INTEREST"). Subject to Section 2.10(f)(iii) hereof,
Borrowers shall have the option to pay all or a portion of the
interest payable on the Tranche B Loan in excess of Thirteen and
One-Half Percent (13.50%) per annum by adding such excess amount to
the principal amount outstanding under the Tranche B Note on the first
Business Day of each calendar month (the "TRANCHE B DEFERRED
INTEREST"). The Lead Borrower shall give the Agent and the Tranche B
Lender an irrevocable notice that it will exercise such right at least
three (3) Business Days prior to any Interest Payment Date as to which
such right is exercised.
(ii) Subject to Section 2.10(f)(iii) hereof, accrued
Interest on the Tranche B Loan, other than that portion of interest on
the Tranche B Loan which the Borrowers' elect to add to the principal
amount of the Tranche B Note as Tranche B Deferred Interest in
accordance with Section 2.10(f)(i), shall be payable in arrears on the
first Business Day of each calendar month and on the Tranche B
Maturity Date and the Tranche B Termination Date. Accrued interest on
the Tranche B Loan which Borrowers elect to add to the principal
amount of the Tranche B Note in accordance with Section 2.10(f)(i)
hereof shall be payable as provided in Section 2.10(f)(i).
(iii) Effective upon the occurrence and at all times during
the continuance of any Event of Default (and whether or not the Agent
exercises the Agent's rights on account thereof), the Tranche B Loan
shall accrue interest at the rate of 18% per annum (computed in the
basis of the actual number of days elapsed over a year of 360 days)
and such interest shall be payable in cash on demand.
59
2.11 Agent's Fee. In addition to any other fee or expense paid by the
Borrowers on account of the Revolving Credit, the Borrowers shall pay the Agent
an AGENT'S FEE and a STRUCTURING FEE as provided in a separate AGENT FEE LETTER,
dated May 1, 2001, from the Agent to the Borrowers (the "AGENT FEE LETTER").
2.12 UpFront Fee; Tranche B Commitment Fee.
-------------------------------------
(a) In addition to any other fee or expense paid by the Borrowers
on account of the Revolving Credit, the Borrowers shall pay the Agent for the
Tranche A Pro Rata benefit of the Tranche Lenders an UPFRONT FEE as provided in
the Tranche A Fee Letter dated as of the date hereof (the "TRANCHE A FEE
LETTER").
(b) In addition to any other fee or expense paid by the Borrowers
on account of the Tranche B Loan facility, the Borrowers shall pay the Agent for
the account of Tranche B Lender a TRANCHE B COMMITMENT FEE as provided in the
Tranche B Fee Letter.
2.13 Line (Unused) Fee; Annual Facility Fee. (a) In addition to any
other fee or expense paid by the Borrowers on account of the Revolving Credit,
the Borrowers shall pay the Agent for the Pro-Rata benefit of the Tranche A
Lenders a LINE (UNUSED) FEE in arrears, on the first Business Day of each
calendar quarter (and on the Termination Date). The Line (Unused) Fee shall be
equal to one half of one percent (0.50%) per annum of the average difference,
during the quarter just ended (or such shorter period as may pertain to the
first such payment and to the payment being made on the Termination Date as to
which no Line (Unused) Fee shall previously have been paid), between:
(i) the Tranche A Loan Ceiling
AND
(ii) the aggregate of
60
(A) the unpaid principal balance of the Revolving
Credit Loans.
PLUS
(B) the Stated Amount of all then outstanding L/C's.
(b) In addition to any other fee or expense paid by the Borrowers
on account of the Tranche B Loan facility, the Borrowers shall pay the Agent for
the account of the Tranche B Lender an ANNUAL FACILITY FEE as provided in the
Tranche B Fee Letter.
(c) In addition to any other fee or expense paid by the Borrowers
on account of the Tranche B Loan facility the Borrowers shall pay the Agent for
the account of Tranche B Lender a TRANCHE B COLLATERAL MONITORING FEE as
provided in the Tranche B Fee Letter.
2.14 Early Termination Fees. (a) In the event that the Tranche A
Termination Date occurs, for any reason, prior to the Maturity Date, the
Borrower shall pay the Agent, for the Pro-Rata benefit of the Tranche A Lenders,
as a TRANCHE A EARLY TERMINATION FEE an amount equal to: (i) if the Tranche A
Termination Date occurs prior to the first anniversary date of the Closing Date
(and before the Maturity Date), three-quarters of one percent (0.75%) of the
Tranche A Loan Ceiling in effect as of the date of this Agreement, and (ii) if
the Tranche A Termination Date occurs on or after the first anniversary date of
the Closing Date (and before the Maturity Date), one half of one percent (0.50%)
of the Tranche A Loan Ceiling in effect as of the date of this Agreement.
(b) In the event the Tranche B Termination Date occurs, for any
reason, on or prior to the first anniversary of the Closing Date, the Borrower
shall pay the Agent, for the account of the Tranche B Lender, as a TRANCHE B
EARLY TERMINATION FEE as provided in the Tranche B Fee Letter.
61
2.15 Concerning Fees. The Borrowers shall not be entitled to any
credit, rebate or repayment of the Agent's Fee, Structuring Fee, Tranche B
Commitment Fee, Line (Unused) Fee, Tranche B Annual Facility Fee, Tranche B
Collateral Monitoring Fee, Tranche A Early Termination Fee, Tranche B Early
Termination Fee or other fee previously earned by the Agent or any Lender
pursuant to this Agreement, notwithstanding any termination of this Agreement or
suspension or termination of the Agent's and any Lender's respective obligation
to make loans and advances hereunder.
2.16 Agent's and Lenders' Discretion.
-------------------------------
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by the Agent or any Lender shall be to that Person's
reasonable exercise of its judgment, in good faith (which shall be rebuttably
presumed), based upon that Person's consideration of any such factor as that
Person, taking into account information of which that Person then has actual
knowledge, believes:
(i) Would reasonably be expected to affect the value of the
Collateral, the enforceability of the Agent's security and collateral
interests therein, or the amount which the Agent would likely realize
therefrom (taking into account delays which may possibly be
encountered in the Agent's realizing upon the Collateral and likely
Costs of Collection);
(ii) Indicates that any report or financial information
delivered to the Agent or any Lender by or on behalf of the Borrowers
is incomplete, inaccurate, or misleading in any material manner or was
not prepared in accordance with the requirements of this Agreement; or
(iii) Constitutes a Suspension Event.
62
(b) In the exercise of such judgment, the Agent also may take
into account any of the following factors:
(i) Those included in, or tested by, the definitions of
"Acceptable Inventory," "Acceptable L/C Inventory," "Acceptable
In-Transit Inventory," "Acceptable Pre-Paid Inventory", "Retail," and
"Cost";
(ii) Changes to the current financial and business climate
of the industry in which the Borrowers compete (having regard for the
Borrowers' position in that industry);
(iii) Changes to general macroeconomic conditions which have
a material effect on the Borrowers' cost structure;
(iv) Changes reflecting seasonality with respect to the
Borrowers' Inventory and patterns of retail sales; and
(v) Changes in such other factors as the Agent determines to
have a material bearing on credit risks associated with the providing
of loans and financial accommodations to the Borrowers.
(c) The burden of establishing the failure of the Agent or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrowers'.
2.17 Procedures For Issuance of L/C's.
--------------------------------
(a) The Lead Borrower on behalf of itself and the other Borrowers
may request that the Agent cause the issuance of L/C's for the account of the
Borrowers. Each such request shall be made in such a manner as may from time to
time be acceptable to the Agent. All letters of credit caused to be issued under
the Pre-Petition Loan Agreement shall be deemed to be
63
L/C's issued hereunder, including, without limitation, those letters of credit
described on EXHIBIT 2.17(a) attached hereto.
(b) The Agent will endeavor to cause the issuance of any L/C so
requested by the Lead Borrower, PROVIDED THAT, at the time that the request is
made, the Revolving Credit has not been suspended as provided in Section 2.4(g)
and,
(i) The aggregate Stated Amount of all L/C's then
outstanding (giving effect to the L/C whose issuance is requested),
does not exceed Ten Million Dollars ($10,000,000.00);
(ii) The expiry of the requested L/C is not later than the
earlier of thirty (30) days prior to the Maturity Date or the
following:
(A) For standby L/C's: One (1) year from initial
issuance.
(B) For documentary L/C's: One hundred eighty (180)
days from issuance; and
(iii) The Borrowing Base would not be exceeded upon the
issuance of the requested L/C.
(c) The Lead Borrower shall execute such documentation to apply
for and support the issuance of a L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue a L/C; or
(ii) Any action or inaction of an Issuer on account of or in
respect to, any L/C unless the Issuer is the Agent or a Tranche A
Lender and such action or inaction
64
is determined by a court of competent jurisdiction to constitute gross
negligence or willful misconduct.
(e) The Borrowers shall reimburse the Issuer for the amount of
any drawing honored under a L/C on the same day on which such drawing is
honored. The Agent, without the request of the Lead Borrower, may advance under
the Revolving Credit (and charge to the Loan Account) the amount of any draws
honored under any L/C and any other amount for which the Lead Borrower, the
Issuer, or any Tranche A Lender becomes obligated on account of, or in respect
to, any L/C, other than any such amounts incurred as a result of the gross
negligence or willful misconduct of the Issuer or such Tranche A Lender, as the
case may be. Such advance shall be made whether or not a Suspension Event is
then continuing or such advance would result in Borrowing Base's being exceeded.
Such action shall not constitute a waiver of the Agent's rights under section
2.9(b) hereof.
2.18 Fees For L/C's.
--------------
(a) The Lead Borrower on behalf of itself and the other Borrowers
shall pay to the Agent for the account of the Tranche A Lenders, on account of
each L/C procured by the Agent, a fee, as follows:
(i) For each standby L/C: The then applicable Eurodollar
Margin, per annum, of the Stated Amount of such standby L/C, payable
quarterly in arrears, on the first day of each of the Lead Borrower's
fiscal quarters.
(ii) For each documentary L/C's: The then applicable
Eurodollar Margin less fifty (50) basis points, per annum, of the
weighted average of the Stated Amount of such documentary L/C
outstanding at any time during the period since the
65
then most recent payment of such fee, payable quarterly in arrears, on
the first day of each of the Lead Borrower's fiscal quarters, and on
the End Date.
(iii) Notwithstanding Subsections (i) and (ii), above,
following the occurrence of any Event of Default (and whether or not
the Agent exercises the Agent's rights on account thereof), the above
fees, at the option of the Agent or the direction of the SuperMajority
Lenders, shall be three percent (3%) per annum above the applicable
rates above.
(b) In addition to the fees to be paid as provided in Subsection
2.18(a), above, the Lead Borrower shall pay to the Agent (or to the Issuer, if
so requested by Agent), on demand, all issuance, processing, negotiation,
amendment, and administrative fees and other amounts charged by the Issuer on
account of, or in respect to, any L/C.
2.19 Concerning L/C's.
----------------
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any L/C of that
beneficiary's obligations to any Borrower.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing, the falsification, or the legal
effect of, any documents called for under any L/C if such documents
appear to be in order.
(b) The Issuer may honor, as complying with the terms of any L/C
and of any drawing thereunder, any drafts or other documents otherwise in order,
but signed or issued by an administrator, executor, conservator, trustee in
bankruptcy, debtor in possession, assignee for the
66
benefit of creditors, liquidator, receiver, or other legal representative of the
party authorized under such L/C to draw or issue such drafts or other documents.
(c) Unless the Lead Borrower on behalf of itself and the other
Borrowers otherwise instructs any Issuer, in the particular instance, the Lead
Borrower hereby authorizes such Issuer to:
(i) Select an advising bank;
(ii) Select a paying bank; and
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers relating
to any L/C are at the risk of the Borrowers. The Issuer shall have discharged
the Issuer's obligations under any L/C or drawing thereunder which includes
payment instructions if the Issuer initiates the method of payment called for
thereby (or initiates any other commercially reasonable and comparable method).
None of the Agent, any Tranche A Lender, or the Issuer shall have any
responsibility for any inaccuracy, interruption, error, or delay in transmission
or delivery by post, telegraph or cable, or for any inaccuracy of translation,
to the extent not caused by them.
(e) The Agent's, each Tranche A Lender's, and the Issuer's
rights, powers, privileges and immunities specified in or arising under this
Agreement are in addition to any heretofore or at any time hereafter otherwise
created or arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided hereunder
or agreed to in writing by the Issuer and the Borrowers, each L/C will be
governed by either, at the election of the Issuer, the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce, Publication
No. 500, and any subsequent revisions thereof or the International
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Standby Practices - ISP 98, International Chamber of Commerce Publication, No.
590, and any subsequent revisions thereof.
(g) If any change in any law, executive order or regulation, or
any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirements against letters of credit heretofore
or hereafter issued by any Issuer or with respect to which the Agent,
any Tranche A Lender or any Issuer has an obligation to lend or to
fund drawings under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit; and the result of
any event referred to in Section 2.19(g)(i) or 2.19(g)(ii), above,
shall be to increase the cost to any Issuer of issuing or maintaining
any L/C (which increase in cost shall be the result of such Issuer's
reasonable allocation among that Issuer's letter of credit customers
of the aggregate of such cost increases resulting from such events),
then, upon demand by the Agent and delivery by the Agent to the Lead
Borrower of a certificate of an officer of such Issuer describing such
change in law, executive order, regulation, directive, or
interpretation thereof, its effect on such Issuer, and the basis for
determining such increased costs and their allocation, the Lead
Borrower shall immediately pay to the Agent, from time to time as
specified by the Agent, such amounts as shall be sufficient to
compensate such Issuer for such increased cost. Any Issuer's
determination of costs incurred under Section 2.19(g)(i) or
2.19(g)(ii), above, and the allocation, if any, of such costs among
the Lead Borrower and other letter
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of credit customers of such Issuer, if done in good faith and made on
an equitable basis and in accordance with such officer's certificate,
shall, in the absence of manifest error, be conclusive and binding on
the Borrowers.
(h) The obligations of the Lead Borrower on behalf of itself and
the other Borrowers under this Agreement with respect to L/C's are absolute,
unconditional, and irrevocable and shall be performed strictly in accordance
with the terms hereof under all circumstances whatsoever including, without
limitation, the following:
(i) Any lack of validity or enforceability or restriction,
restraint, or stay in the enforcement of this Agreement, any L/C, or
any other agreement or instrument relating thereto;
(ii) Any amendment or waiver of, or consent to the departure
from, any L/C;
(iii) The existence of any claim, set-off, defense, or other
right which the Lead Borrower may have at any time against the
beneficiary of any L/C; and
(iv) Any good faith honoring of a drawing under any L/C,
which drawing possibly could have been dishonored based upon a strict
construction of the terms of the L/C.
2.20 Changed Circumstances.
---------------------
(a) The Agent may give the Lead Borrower notice that:
(i) The Agent shall have determined in good faith (which
determination shall be final and conclusive) on any day on which the
Eurodollar rate would otherwise be set, that by reason of changes
arising after the date of this Agreement
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affecting the principal market in Eurodollars in which Fleet National
Bank participates, adequate and fair means do not exist for
ascertaining such rate; or
(ii) The Agent shall have determined in good faith (which
determination shall be final and conclusive) that:
(A) The continuation of, or conversion of any Revolving
Credit Loan to, a Eurodollar Loan has been made impracticable or
unlawful by the occurrence of a contingency that materially and
adversely affects the applicable market or compliance by the
Agent or any Tranche A Lender in good faith with any applicable
law or governmental regulation, guideline or order or
interpretation or change thereof by any governmental authority
charged with the interpretation or administration thereof or with
any request or directive of any such governmental authority
(whether or not having the force of law); or
(B) The indices on which the interest rates for
Eurodollar Loans are based shall no longer represent the
effective cost to the Agent or any Tranche A Lender for U.S.
dollar deposits in the interbank market for deposits in which it
regularly participates.
(b) In the event that the Agent gives the Lead Borrower notice of
an occurrence described in Section 2.20(a), then, until the Agent notifies the
Lead Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Agent and of each Tranche A Lender
to make Eurodollar Loans of the type affected by such changed
circumstances or to permit the Lead Borrower to select the affected
interest rate as otherwise applicable to any Revolving Credit Loans
shall be suspended.
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(ii) Any notice which the Lead Borrower shall have given the
Agent with respect to any Eurodollar Loan, the time for action with
respect to which has not occurred prior to the Agent's having given
notice pursuant to Section 2.20(a), shall be deemed at the option of
the Agent not to have been given.
(iii) Subject to the provisions of Section 2.9(e), the Lead
Borrower may (and, with respect to any event described in Section
2.20(a)(ii), shall)
(A) cancel the relevant borrowing or conversion notice
on the same date the Lead Borrower was notified of such event;
and
(B) prepay or cause to be prepaid any then affected
Eurodollar Loans.
2.21 Increased Costs/Taxes.
---------------------
(a) If, as a result of any changes, arising after the date of
this Agreement, in any requirement of law, or of the interpretation or
application thereof by any court or by any governmental or other authority or
entity charged with the administration thereof, whether or not having the force
of law, which:
(i) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrowers to the Agent or any
Lender under this Agreement except for taxes on the Agent or any
Lender's overall net income or capital imposed by the jurisdiction in
which the Agent or that Lender's principal or lending offices are
located, or subjects any Lender to any stamp or documentary taxes and
any other excise or property taxes or charges or similar levies which
arise from any payment made under this
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Agreement or any other Loan Document or from the execution or delivery
of, or otherwise with respect to, this Agreement or any other Loan
Document;
(ii) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held
by, or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender;
(iii) imposes on any Lender any other condition with respect
to any Loan Document; or
(iv) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in such Lender's reasonable opinion, is
to increase the cost to that Lender of making or maintaining any loan, advance
or financial accommodation or to reduce the income receivable by such Lender in
respect of any loan, advance or financial accommodation by an amount which such
Lender deems to be material, then upon the Agent's giving written notice
thereof, from time to time, to the Lead Borrower (such notice to set out in
reasonable detail the facts giving rise to and a summary calculation of such
increased cost or reduced income), the Lead Borrower on behalf of itself and the
other Borrowers shall forthwith pay to the Agent, for the benefit of such
Lender, upon receipt of such notice, that amount which shall compensate the
subject Lender for such additional cost or reduction in income. Each Lender
agrees, with respect to the provisions of this Section 2.21, to treat the
Borrowers in a manner substantially similar to its other similarly situated
customers
(b) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each
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Lender listed on the signature pages hereof and on or prior to the date on which
it becomes a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Lead Borrower or the Agent (but only
so long as such Lender remains lawfully able to do so), shall provide the Lead
Borrower and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income tax treaty
to which the United States is a party that reduces the rate of withholding tax
on payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or business
in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and (iii) any other form or certificate required by any governmental authority
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Lender is entitled to an exemption
from or a reduced rate of tax on payments pursuant to this Agreement or any of
the other Loan Documents.
(c) For any period with respect to which a Lender has failed to
provide the Borrowers and the Agent with the appropriate form pursuant to
Section 2.21(b) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to indemnification
under Section 2.21(a) with respect to taxes imposed by or within the United
States; PROVIDED, HOWEVER, that should a Lender that is otherwise exempt from or
subject to a reduced rate of withholding tax become subject to taxes because of
its failure to deliver a form required hereunder, the Borrowers shall take such
steps as such Lender shall reasonably request to assist such Lender to recover
such taxes.
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(d) If the Borrowers are required to pay additional amounts to or
for the account of any Lender or Agent pursuant to Section 2.2 l(a), then such
Lender or the Agent will agree to use reasonable efforts to change the
jurisdiction of its applicable lending office (meaning the office by which
Revolving Credit Loans from such Lender are made and maintained) so as to
eliminate or reduce any such additional payment which may thereafter accrue.
2.22 Lenders' Commitments.
--------------------
(a) The obligations of each Tranche A Lender are several and not
joint. As between the Tranche A Lenders and the Tranche B Lender, the
obligations are several and not joint. No Tranche A Lender shall have any
obligation to the Borrowers to make any loan or advance under the Revolving
Credit in excess of the lesser of:
(i) that Tranche A Lender's Tranche A Commitment Percentage
of the subject loan or advance or of Availability; and
(ii) that Tranche A Lender's unused Tranche A Dollar
Commitment
(b) No Tranche A Lender shall have any liability to any Borrower
on account of the failure of any other Tranche A Lender to provide any loan or
advance under the Revolving Credit nor any obligation to make up any shortfall
which may be created by such failure.
(c) The Tranche A Dollar Commitments, Tranche A Commitment
Percentages, and identities of the Tranche A Lenders (but not the overall
Tranche A Commitment) may be changed, from time to time by the reallocation or
assignment of Tranche A Dollar Commitments and Tranche A Commitment Percentages
amongst the Tranche A Lenders or with other Persons who determine to become
"Tranche A Lenders", PROVIDED, HOWEVER,
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(i) Unless an Event of Default has occurred (in which event,
no consent of the Lead Borrower is required) any assignment to a
Person not then a Tranche A Lender shall be in an amount not less than
$10,000,000 and shall be subject to the prior consent of the Lead
Borrower (not to be unreasonably withheld), which consent will be
deemed given unless the Lead Borrower provides the Agent with written
objection not more than five (5) Business Days after the Agent shall
have given the Lead Borrower written notice of such proposed
assignment.
(ii) Any such assignment or reallocation shall be on a
pro-rata basis such that the ratio (expressed as a percentage) of the
Dollar Commitment reallocated or assigned to any Person to the overall
Dollar Commitments equals the Commitment Percentage assigned or
reallocated to such Person.
(d) Upon written notice given to the Lead Borrower from time to
time by the Agent, of any assignment or allocation referenced in Section
2.22(c):
(i) The Lead Borrower, on behalf of itself and the other
Borrowers, shall execute one or more replacement Revolving Credit
Notes to reflect such changed Dollar Commitments, Commitment
Percentages, and Tranche A Lenders and shall deliver such replacement
Revolving Credit Notes to the Agent (which promptly thereafter shall
cancel and deliver to the Lead Borrower the Revolving Credit Notes so
replaced), PROVIDED HOWEVER, that in the event a Revolving Credit Note
is to be exchanged following its acceleration or the entry of an order
for relief under the Bankruptcy Code with respect to the Borrowers,
the Agent, in lieu of causing the Lead Borrower, on behalf of itself
and the other Borrowers, to execute one or more new Revolving Credit
Notes, may issue a
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certificate confirming the resulting Tranche A Dollar Commitments and
Tranche A Commitment Percentages.
(ii) Such change shall be effective from the effective date
specified in such written notice and any Person added as a Tranche A
Lender shall have all rights and privileges of a Tranche A Lender
hereunder thereafter as if such Person had been a signatory to this
Agreement and any other Loan Document to which the Tranche A Lenders
are signatories and any person removed as a Lender shall thereafter be
relieved of any obligations or responsibilities of a Tranche A Lender
hereunder and thereunder.
2.23 Concerning Joint and Several Liability of the Borrowers.
-------------------------------------------------------
(a) Each Borrower is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Agent and the Lenders under this Agreement
and the Loan Documents, for the mutual benefit, directly and indirectly, of each
Borrower and in consideration of the undertakings of each other Borrower to
accept joint and several liability for the Liabilities.
(b) Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but as a co-debtor, joint and
several liability with the other Borrowers, with respect to the payment and
performance of all Liabilities, it being the intention of the parties that all
the Liabilities shall be the joint and several Liabilities of each of the
Borrowers without preferences or distinction. In addition to and without in any
way limiting the foregoing, each Borrower jointly and severally absolutely and
unconditionally guarantees to Agent and the Lenders the payment and performance
of all the Liabilities and agrees to be liable for the full and indefeasible
payment and performance of all the Liabilities. This guarantee is a
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continuing guarantee, and shall not be terminated or terminable when any of the
Liabilities or Commitments are outstanding and shall apply to all Liabilities
whenever arising.
(c) If and to the extent that any of the Borrowers fail to make
any payment with respect to any of the Liabilities as and when due or to perform
any of the Liabilities in accordance with the terms thereof, then in each such
event the other Borrowers will make such payment with respect to, or perform,
such Liability.
(d) The Liabilities of each Borrower under this Agreement
constitute full recourse Liabilities of such Borrowers enforceable against such
Borrowers to the full extent of its properties and assets, irrespective of the
validity, regularity, or enforceability of this Agreement or any other
circumstance whatsoever.
(e) Except as otherwise expressly provided in this Agreement,
each Borrower other than the Lead Borrower hereby (without prejudice to its
status as Borrower and for the purposes of providing for the eventuality that,
contrary to the terms of this Agreement, it is held by a court or arbitrator to
be a guarantor) waives notice of acceptance of its joint and several liability,
notice of any Revolving Credit Loans or Tranche B Loan made under this
Agreement, notice of any action at any time taken or omitted by the Agent or the
Lenders under or in respect of any of the Liabilities, and generally, to the
extent permitted by applicable law, all demands, notices and other formalities
of every kind in connection with this Agreement.
(f) Each Borrower other than the Lead Borrower hereby (without
prejudice to its status as Borrower and for the purposes of providing for the
eventuality that, contrary to the terms of this Agreement, it is held by a court
or arbitrator to be a guarantor) assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the Liabilities, the
acceptance of any payment of any of the Liabilities, the acceptance of any
partial
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payment thereon, any waiver, consent or other action or acquiescence by the
Agent or the Lenders at any time or times in respect of any default by any other
Borrower in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by the
Agent or the Lenders in respect of any of the Liabilities, and the taking,
addition, substitution or release, in whole or in part, at any time or times, of
any security for any of the Liabilities or the addition, substitution or
release, in whole or in part, of any Borrower. Without limiting the generality
of the foregoing, each Borrower other than the Lead Borrower (without prejudice
to its status as Borrower and for the purposes of providing for the eventuality
that, contrary to the terms of this Agreement, it is held by a court or
arbitrator to be a guarantor) assents to any other action or delay in acting or
failure to act on the part of the Agent or the Lenders with respect to the
failure by the other Borrowers to comply with any of its respective Liabilities,
including, without limitation, any failure strictly or diligently to assert any
right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might afford grounds for terminating, discharging
or relieving any Borrower, in whole or in part, from any of its Liabilities.
Each Borrower waives notice of acceptance, the making of loans and providing
other financial accommodations to the other Borrowers and presentment, demand,
protest, notice of protest, notice of nonpayment or default and all other
notices to which any Borrower or a guarantor is entitled (except as explicitly
provided in this Agreement). Each Borrower hereby further waives and
relinquishes any and all other defenses or rights that it might assert as a
surety or guarantor of the Liabilities.
(g) It is the intention of each Borrower that, so long as any of
the Liabilities hereunder remain unsatisfied, the Liabilities of the Borrowers
shall not be discharged except by performance and then only to the extent of
such performance. The Liabilities of any Borrower
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under this Agreement shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, re-construction or similar
proceeding with respect to any other Borrower. The joint and several liability
of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any of
the Borrowers, the Agent or any Lender. No invalidity, irregularity or
unenforceability of all or any part of the Liabilities shall affect, impair or
be a defense to the obligations of the Borrowers hereunder, nor shall any other
circumstance which might otherwise constitute a defense available or legal or
equitable discharge of the Lead Borrower or any other Borrower discharge any
other Borrower in respect of the Liabilities or such Borrowers in respect of
their obligations hereunder or otherwise affect, impair or be a defense to such
obligations.
(h) The provisions of this Section are made for the benefit of
the Agent and the Lenders and their successors and assigns, and may be enforced
in good faith by them from time to time against any or all of the Borrowers as
often as occasion therefor may arise and without requirement on the part of the
Agent or the Lenders first to marshal any of their claims or to exercise any of
their rights against any other Borrower or to exhaust any remedies available to
them against any other Borrower or to resort to any other source or means of
obtaining payment of any of the Liabilities hereunder or to elect any other
remedy. The provisions of this Section shall remain in effect until all of the
Liabilities shall have been paid in full or otherwise fully satisfied. Without
prejudice to the status of any Borrower as Borrower, and for the purposes of
providing for the eventuality that, contrary to the terms of this Agreement, it
is held by a court or arbitrator that any Borrower other than the Lead Borrower
is a guarantor, each Borrower, other than the Lead Borrower, hereby agrees that,
if at any time, any payment, or any
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part thereof, made in respect of any of the Liabilities, is rescinded or must
otherwise be restored or returned by the Agent or any Lenders upon the
insolvency, bankruptcy or reorganization, of any of the Borrowers, or otherwise,
the provisions of this Section will forthwith be reinstated in effect, as though
such payment had not been made.
2.24 Lechters, Inc. as Lead Borrower. The Borrowers for their
convenience have appointed the Lead Borrower as their agent for the purposes of
entering into the loan arrangements contemplated hereby, requesting advances,
making representations, warranties and certifications, and distributing proceeds
of loans and generally taking such other action as is reasonably necessary to
administer the Revolving Credit and Tranche B Loan on behalf of the Borrowers.
Each Borrower authorizes the Lead Borrower to execute and deliver, on each
Borrower's behalf and stead, the Revolving Credit Notes to each Tranche A
Lender, the SwingLine Note to the SwingLine Lender, the Tranche B Note to the
Tranche B Lender, this Agreement and the other Loan Documents to evidence the
Liabilities of the Borrowers to the Lenders and to the Agent, as well as to
execute such additional documents as the Agent may require to further evidence
the Revolving Credit and Tranche B Loan or the granting of security interests in
the Collateral as contemplated by this Agreement, and for such purposes, each
Borrower appoints the Lead Borrower as its attorney-in-fact to do all things
consistent with the foregoing. Any document executed by the Lead Borrower in
connection herewith or in furtherance of the Borrowers' undertakings hereunder,
shall be binding upon each Borrower as if such Borrower had executed such
document, and neither the Agent nor the Lenders shall have any responsibility to
inquire as to the Lead Borrower's authority to act on behalf of the other
Borrowers. The authority of the Lead Borrower to act on behalf of and to bind
each Borrower, shall continue unless and until the Agent's actual receipt of
written notice of the termination of
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such authority, which notice is signed by the respective President or other
appropriate corporate officer of any of the Borrowers revoking such authority,
and which notice shall be effective only as to loans, advances or other
accommodations made more than thirty (30) days following the Agent's receipt of
such notice. In recognition of the role of the Lead Borrower, the Agent and the
Lenders agree to communicate with, and send notices to, only the Lead Borrower
in connection with or relating to the Loan Documents.
ARTICLE III - CONDITIONS PRECEDENT
As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit and the making of the Tranche B Loan, each
of the documents respectively described in Sections 3.1 through and including
3.4 (each in form and substance satisfactory to the Agent, the Tranche A Lenders
and the Tranche B Lender) shall have been delivered to the Agent, and the
conditions respectively described in Sections 3.5 through and including 3.11,
shall have been satisfied (the "CLOSING DATE"):
3.1. Corporate Due Diligence.
-----------------------
(a) A Certificate of corporate good standing with respect to each
Borrower and Guarantor issued by the Secretary of State of the State in which
that Borrower or Guarantor, as the case may be, was organized.
(b) Certificates of qualification to do business as a foreign
corporation for any Borrowers and Guarantors issued by the Secretary of State of
each State in which such Borrower's or Guarantor's, as the case may be, conduct
of business or ownership of assets requires such qualification.
(c) A certificate of each Borrower's and Guarantor's respective
Secretary as to the due adoption and continued effectiveness of, each corporate
resolution adopted in
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connection with the establishment of the loan arrangement contemplated by the
Loan Documents and attesting to the true signatures of each Person authorized as
a signatory to any of the Loan Documents, such certificate to set forth the text
of each such resolution in an attachment thereto.
3.2. Opinion. An opinion of counsel to the Borrowers and Guarantors in
form and substance satisfactory to the Agent and Tranche B Lender.
3.3. Additional Documents. Such additional instruments and documents
as the Agent, Tranche B Lender or their respective counsel reasonably may
require or request, including the following:
(a) Those documents required to be provided pursuant to Section
7.1 (which relates to deposit accounts) and 7.2 (which relates to credit card
accounts).
(b) Pledges by each of the Borrowers and Guarantors of the
capital stock of any other Borrower or Guarantor which the pledgor Borrower or
Guarantor holds, including a pledge by the Parent of the stock it holds in all
of its Subsidiaries, in the form of Exhibit 3.3(1).
(c) Revolving Credit Notes, payable to each Tranche A Lender in
the amount of such Lender's Dollar Commitment, and the SwingLine Note, payable
to the SwingLine Lender, in the amount of the SwingLine Loan Ceiling.
(d) Tranche B Note, payable to the Tranche B Lender in the amount
of the Tranche B Loan Ceiling.
(e) Unlimited Guaranties by each of the Guarantors.
3.4. Officers' Certificates. Certificates executed by the President,
Chief Executive Officer or the Chief Financial Officer of the Lead Borrower and
stating that the representations and warranties made by the Borrowers to the
Agent and the Lenders in the Loan Documents are true and complete as of the date
of such certificate, and that no event has occurred which is or
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which, solely with the giving of notice or passage of time (or both), would be
an Event of Default.
3.5. Representations and Warranties. Each of the representations made
by or on behalf of the Borrowers and Guarantors in this Agreement or in any of
the other Loan Documents or in any other report, statement, document, or paper
provided by or on behalf of the Borrowers and Guarantors shall be true and
complete as of the date as of which such representation or warranty was made.
3.6. Minimum Excess Availability. After giving effect to the first
loan under the Revolving Credit and the Tranche B Loan, any charges to the Loan
Account made in connection with the establishment of the credit facility
contemplated hereby, and L/C's to be issued at, or immediately subsequent to,
such establishment, Availability shall be not less than $12.5 Million
($12,500,000.00), which amount shall include for the purposes of this Section
3.6, cash and marketable securities. The Lead Borrower shall deliver a current
borrowing base certificate as of such date demonstrating such Availability.
3.7. All Fees and Expenses Paid. All fees due at or immediately after
the first loan under the Revolving Credit and all costs and expenses incurred by
the Agent in connection with the establishment of the credit facility
contemplated hereby (including the fees and expenses of counsel to the Agent)
shall have been paid. All fees due on the Closing Date with respect to the
Tranche B Loan and all costs and expenses incurred by the Tranche B Lender in
connection with the Tranche B Loan (including fees and expenses of counsel to
the Tranche B Lender) shall have been paid in full.
3.8. No Event of Default. No Event of Default shall then be
continuing.
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3.9. No Adverse Change. Other than the commencement of the
Proceedings, no event shall have occurred or failed to occur, which occurrence
or failure has had or would have a Materially Adverse Effect upon the Borrower's
financial condition when compared with such financial condition at the Petition
Date.
3.10. Delivery of Notices. The Borrowers shall have complied with the
provisions of Sections 7.1(b) and 7.2(b), below.
3.11. Repayment. The Borrowers shall have repaid the Prior Lender
Claim, as such term is defined in the Borrowing Orders (other than early
termination fees provided thereunder) in full.
3.12. Bankruptcy.
----------
(a) No trustee and no examiner shall have been appointed or
designated in the Proceedings with respect to the Borrowers or their respective
businesses, properties or assets, and no motion shall be pending seeking such
appointment.
(b) A Borrowing Order satisfactory in all respects to the Agent
and the Lenders shall have been entered by the Bankruptcy Court authorizing the
secured financing hereunder on the terms and conditions set forth herein, and,
providing for, without limitation, (i) modification of the automatic stay, (ii)
authorizing and granting to Agent for the benefit of the Lenders senior security
interests and liens subject only to certain specified expenses of the United
States Trustee and certain expenses of professionals engaged by the Borrowers
and any creditors committee in a Reserve Account to be established in accordance
with the Borrowing Order, (iii) authorizing and granting the Liabilities
super-priority administrative expense status junior only to certain specified
expenses of the United States Trustee, professionals engaged by the Borrowers
and any creditors' committee, (iv) that no costs, expenses or other charges may
be
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assessed or attributed to Agent or Lenders or the Collateral pursuant to Section
506(c) of the Bankruptcy Code (subject to certain Availability Reserves in the
event that such provisions are not in any Borrowing Order), and (v)
subordination of the debt and liens of (A) the Agent under the Pre-Petition Loan
Agreement and (B) all other creditors asserting liens, claims or encumbrances
against the Collateral (including without limitation all store landlords, to the
extent permitted by applicable law), other than creditors holding Permitted
Liens, which Borrowing Order shall be in full force and effect and shall not
have been vacated, reversed, modified or stayed, pending appeal in any respect.
The Borrowers shall have complied in full with the notice and other requirements
of the Bankruptcy Code and any applicable Bankruptcy Rules with respect to any
relevant Borrowing Order in a manner.
(c) The Interim Borrowing Order shall be entered on or before the
date of the initial advances made hereunder (and in no event after May 24, 2001)
and shall provide that it shall remain in effect until entry of the Final
Borrowing Order, unless expressly agreed to in writing by Agent and Lenders.
(d) Reserved.
(e) An order in the Proceedings shall have entered directing the
joint administration of the Borrowers' and Guarantors' estates.
(f) The Agent and the Tranche B Lender shall be satisfied with
the terms of any adequate protection provided to other pre-petition creditors of
the Borrowers. No document shall be deemed delivered to the Agent or any Lender
until received and accepted by the Agent at its head office in Boston,
Massachusetts, except for such documents as are executed and delivered to the
Agent at the closing of the transaction contemplated hereby. Under no
circumstances will this Agreement take effect until executed and accepted by the
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Agent and the Lenders at their respective head offices.
ARTICLE IV - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under this Agreement (each of which loans shall be deemed to have been made in
reliance thereupon) the Borrowers and Guarantors, in addition to all other
representations, warranties, and covenants made by the Borrowers or Guarantors
in any other Loan Document, represent, warrant, and covenant as follows:
4.1. Payment and Performance of Liabilities. The Borrowers and
Guarantors shall, and the Borrowers hereby authorize the Lead Borrower on their
behalf to, pay each Liability when due (or when demanded if payable on demand)
and shall promptly, punctually, and faithfully perform each other Liability.
4.2. Due Organization - Corporate Authorization - No Conflicts.
---------------------------------------------------------
(a) Each Borrower and each Guarantor presently is and shall
(except as otherwise permitted by this Agreement in connection with (i)
permitted store closings, (ii) restructurings of the manner in which the
Borrowers or Guarantors carry on their business, and (iii) mergers between or
among Related Entities) hereafter remain in good standing as a corporation
organized under the laws of the State of its incorporation indicated in EXHIBIT
4.2 to this Agreement and shall hereafter remain duly qualified and in good
standing in every other State in which, by reason of the nature or location of
that Borrower's or Guarantor's assets or operation of that Borrower's or
Guarantor's business, such qualification is necessary.
(b) Each Related Entity is listed on EXHIBIT 4.2, annexed hereto.
Each Related Entity is and shall (except as otherwise permitted by Agreement (i)
in connection with
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permitted store closings, (ii) restructurings of the manner in which they carry
on their business, and (iii) mergers between or among Related Entities)
hereafter remain in good standing in the State in which incorporated and is and
shall hereafter remain duly qualified as a foreign corporation in every other
State in which, by reason of that entity's assets or the operation of such
entity's business, such qualification is necessary. The Lead Borrower shall
provide the Agent with prior written notice of any entity's becoming or ceasing
to be a Related Entity.
(c) No Borrower or any Guarantor shall change its State of
incorporation or form of organization without prior notification to Agent.
(d) Each Borrower and each Guarantor has all requisite corporate
power to execute and deliver all Loan Documents to which it is a party and has
and will hereafter, subject to Section 4.2(a), retain all requisite corporate
power to perform all Liabilities.
(e) The execution and delivery of each Loan Document by each
Borrower and each Guarantor, or by the Lead Borrower on behalf of each Borrower
that is a party thereto, such Borrower's and Guarantor's consummation of the
transactions contemplated by such Loan Document (including, without limitation,
the creation of security interests by such Borrower and Guarantor as
contemplated hereby), such Borrower's and Guarantor's performance under such
Loan Document, the borrowings hereunder, and the use of the proceeds thereof,
and the guaranties of the Guarantors:
(i) Have been duly authorized by all necessary corporate
action on the part of such Borrower or Guarantor, as the case may be;
(ii) Do not, and will not, contravene in any material
respect with any Requirement of Law or obligation of such Borrower or
Guarantor, as the case may be; and
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(iii) Will not result in the creation or imposition of, or
the obligation to create or impose, any Encumbrance upon any assets of
such Borrower or Guarantor, as the case may be pursuant to any
Requirement of Law or obligation of such Borrower or Guarantor, as the
case may be, except pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and delivered by
the Lead Borrower on behalf of itself and the other Borrowers and by the
Guarantors and are the legal, valid and binding obligations of the Borrowers and
Guarantors, enforceable against the Borrowers and Guarantors in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, or other laws relating to or affecting generally the enforcement of
creditors' rights or by general principles of equity (regardless of whether such
principles are considered in a proceeding at law or in equity).
4.3. Trade Names.
-----------
(a) EXHIBIT 4.3, annexed hereto, is a listing of:
(i) All names under which each Borrower or Guarantor has
ever conducted its business and
(ii) All entities and/or persons with whom each Borrower or
Guarantor ever consolidated or merged, or from whom each Borrower or
Guarantor ever acquired in a single transaction or in a series of
related transactions substantially all of such entity's or person's
assets.
(b) No Borrower or Guarantor will change its name or conduct its
business under any name not listed on EXHIBIT 4.3 or conduct its business in a
state in which that Borrower or Guarantor does not presently conduct its
business except:
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(i) upon not less than ten (10) days subsequent written
notice (with reasonable particularity) to the Agent; and
(ii) in compliance with all other provisions of this
Agreement.
4.4. Infrastructure.
--------------
(a) The Borrowers and Guarantors have and will maintain a
sufficient infrastructure to conduct their business without experiencing a
Material Adverse Effect.
(b) Each Borrower and Guarantor owns and possesses, or has the
right to use (and will hereafter own, possess, or have such right to use) all
patents, industrial designs, trademarks, trade names, trade styles, brand names,
service marks, logos, copyrights, trade secrets, know-how, confidential
information, and other intellectual or proprietary property of any third Person
necessary for the Borrowers' or Guarantor's, as the case may be, conduct of the
Borrowers' or Guarantor's, as the case may be, business, except where the
failure to possess such intellectual or proprietary information will not have a
Material Adverse Effect.
(c) The conduct by the Borrowers or Guarantor's of the Borrowers'
or Guarantors' business does not presently infringe (nor will the Borrowers or
Guarantors, as the case may be, conduct their business in the future so as to
infringe) the patents, industrial designs, trademarks, trade names, trade
styles, brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, or other intellectual or proprietary property of any
third Person, except where such infringement does not have a Material Adverse
Effect.
4.5. Borrowing Order/Use of Proceeds/Default Under Other Indebtedness
(a) A Borrowing Order has been duly entered, valid, subsisting
and continuing and shall not be vacated, modified, reversed on appeal, or
modified by any order of
89
the Bankruptcy Court or otherwise, and is and shall not be, nor shall any
borrowing of the Loans or the issuance of any L/C's be, subject to any stay
pending appeal.
(b) All loans and L/C's provided hereunder shall be used by
Borrowers exclusively: (i) on the Closing Date, to refinance the loans under the
Pre-Petition Loan Agreement in full; and (ii) for general operating and working
capital purposes in the ordinary course of Borrowers' business and for such
other purposes as are permitted hereby, but only to the extent set forth in or
consistent with the Business Plan and the Borrowing Orders approving the loans
and L/C's hereunder including without limitation payment of the Prior Lender
Claim as that term is defined in the Borrowing Orders. No portion of any
administrative expense claim or other claim relating to the Chapter 11 Case
shall be paid with the proceeds of such loans provided hereunder, other than
those administrative expense claims directly attributable to the operation of
the business of the Borrowers (including, to the extent allowed by the
Bankruptcy Court, claims for professional fees or trustee's fees).
(c) No Borrower or any Guarantor is in default in the payment of
any amounts at any time due on any Indebtedness arising after the Petition Date,
or in the performance of an other material terms or covenants of any such
Indebtedness or of any mortgage, security agreement, indenture, pledge, or other
agreement relating thereto or securing such Indebtedness.
4.6. Locations.
---------
(a) The Collateral, and the books, records, and papers of
Borrowers and Guarantors pertaining thereto, are kept and maintained solely at
the Borrowers' and Guarantors' chief executive offices and those locations which
are listed on EXHIBIT 4.6(A), which EXHIBIT includes, with respect to each such
location, the name and address of the landlord on
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the Lease which covers such location (or an indication that the Borrowers or
Guarantors own the subject location) and of all service bureaus with which any
such records are maintained.
(b) The Borrowers and Guarantors shall not remove any of the
Collateral from such chief executive office or locations listed on EXHIBIT
4.6(A) except to:
(i) accomplish sales, returns, and transfers of Inventory in
the ordinary course of business; or
(ii) move Inventory from one such location to another such
location;
(iii) utilize such of the Collateral as is removed from such
locations in the ordinary course of business (such as motor vehicles);
or
(iv) close or open any store as permitted by Section 4.6(d)
(ii) (iii), or (iv).
(c) the Borrowers and Guarantors shall use their reasonable
efforts to provide the Agent with Landlord's Waivers or subordinations, in
substantially the form annexed hereto as Exhibit 4.6(c)(1) for each of the
Borrower's locations in any of the Landlord States, PROVIDED THAT no Borrower or
Guarantor shall be obligated to pay any amount or to grant any concession to a
landlord in order to obtain such Waiver or subordination. The Agent may
establish an Availability Reserve for each of such locations as to which such a
waiver is not so delivered, which Availability Reserve shall be reduced or
eliminated upon delivery of a Waiver for such a location.
(d) The Borrowers and Guarantors will not:
(i) Alter, modify, or amend any Lease in any material
respect in any manner which would have a Material Adverse Effect upon
the liquidation of Inventory except as provided in clause (iv) hereof.
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(ii) Close any location at which any Borrower or Guarantor
maintains, offers for sale, or stores any of the Collateral, except as
provided in clause (iv) hereof.
(iii) Commit to open or open any new location except
(A) in connection with the relocation of a retail
location of a Borrower or Guarantor; or
(B) the opening of new retail locations; provided, that
each of the following requirements is satisfied:
(I) the Agent shall be provided not less than ten
(10) days prior written notice (with reasonable detail) of
the proposed opening;
(II) Immediately prior to the earliest day on
which the respective Borrower or Guarantor becomes legally
obligated on account of its leasing of the respective new
location, no Event of Default shall occur by reason of such
Borrower's or Guarantor's so becoming obligated.
(III) (1) Such opening is contemplated by the
Business Plan, provided, however, up to five (5) additional
store openings not contemplated by the Business Plan shall
be permitted in any fiscal year, and (2) Availability for
the ninety (90) days prior to making any commitment with
respect to such additional store openings was not and
immediately after such commitment is not less than $20
Million ($20,000,000.00) and on a pro forma going forward
basis for the twelve (12) month period following such
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commitment, as reflected in a projections provided to the
Agent no later than seven (7) days prior to such commitment
(and prepared based on the same methodology and with the
same assumptions as those used in the preparation of the
Business Plan) will not be less than $20 Million
($20,000,000.00).
(IV) If the location is in a Landlord State, the
Lead Borrower shall use its best efforts to provide the
Agent with a Landlord's Waiver or subordination (in the form
described in Section 4.6(c)) for such location.
(V) The Borrowers and Guarantors shall be in
compliance with Section 4.25 and shall have executed such
additional financing statements, on account of the subject
new location, as may then be required by Agent.
(iv) Notwithstanding the foregoing limitations of this
Section 4.6(d): (A) Borrowers may close the 166 locations provided for
under the Pre-Petition Agency Agreement and reject, modify, abandon,
or assign the leases corresponding thereto; and (B) Borrowers may
close up to twenty-five (25) locations in any fiscal year and reject,
modify, abandon, or assign the leases corresponding thereto, provided
that, (I) except with respect to the first ten (10) locations closed
in any fiscal year, the Borrowers must enter into an Agency Agreement
in form and substance satisfactory with a third party liquidator
satisfactory to the Agent and the Tranche B Lender with respect to
such closings; (II) in connection with any and all Inventory sold or
otherwise disposed of as
93
part of any going-out-of-business sale, the Borrowers must provide the
Agent with such detail and written material respecting such sales as
the Agent requests.
(e) Except as otherwise disclosed pursuant to, or permitted by,
this Section 4.6 and except for goods in the control of a customs broker who has
entered into a Customs Brokers Agreement, no tangible personal property of the
Borrowers or Guarantors having a cost in excess of $1 Million ($1,000,000.00) in
the aggregate is in the care or custody of, or stored or entrusted with, a
bailee or other third party and none having a cost in excess of $1 Million
($1,000,000.00) shall hereafter be placed under such care, custody, storage, or
entrustment.
4.7. Title to Assets.
---------------
(a) The Borrowers and Guarantors are, and shall hereafter remain,
the owners of the Collateral free and clear of all Encumbrances other than
Permitted Encumbrances.
(b) The Borrowers and Guarantors do not and shall not have
possession of any property on consignment to the Borrowers or Guarantors having
a value in excess of $5 Million ($5,000,000.00) in the aggregate, at any one
time, other than pursuant to a consignment in respect of which either:
(i) no financing statement has been filed by consignor or
other action taken by consignor under the UCC to perfect or protect
its interest in the consigned goods against the claims of third party
secured creditors; or
(ii) an intercreditor agreement (in a form reasonably
satisfactory to the Agent) between the consignor and the Agent has
been executed.
4.8 Indebtedness.
------------
(a) The Borrowers and Guarantors do not and shall not hereafter
have any Indebtedness with the exceptions of:
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(i) Any Indebtedness to the Lenders;
(ii) The Indebtedness (if any) arising prior to the Petition
Date and listed on EXHIBIT 4.8;
(iii) Indebtedness secured by purchase money security
interests not otherwise described in this Section 4.8 and Capital
Leases for the acquisition of Equipment not exceeding $2.5 million
($2,500,000.00) outstanding at any one time;
(iv) The 5.00% Notes; and
(v) Indebtedness, not to exceed $2,500,000 at any one time
outstanding, which is not otherwise described in this Section 4.8(a)
and is not otherwise prohibited by this Agreement.
(b) The Borrowers and Guarantors shall not permit more than 20%
of that portion of the aggregate of their Indebtedness for the purchase of goods
or services which is not the subject of reasonable dispute to remain unpaid more
than forty-five (45) days beyond then current trade terms provided to the
subject Borrower or Guarantor by the supplier of such goods and services.
4.9 Repayment of 5.00% Notes. The Borrowers and Guarantors shall not
redeem, retire, defease, pay, prepay, refinance or restructure the 5.00% Notes
or any other indebtedness arising or incurred prior to the Petition Date (other
than (i) under the Pre-Petition Loan Agreement; (ii) as permitted by customary
first day orders approved by the Bankruptcy Court; or (iii) payments in
accordance with ordinary operating expenses which are specifically approved by
the Bankruptcy Court in an order approved by the Agent).
4.10. Insurance Policies.
------------------
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(a) EXHIBIT 4.10 is a schedule of all insurance policies owned by
the Borrowers and Guarantors or under which the Borrowers and Guarantors are the
named insured. Each of such policies that is material is in full force and
effect. Neither the issuer of any such policy nor the Borrowers or Guarantors
are in default or violation of any material policy.
(b) The Borrowers and Guarantors shall have and maintain at all
times insurance covering such risks, in such amounts, containing such terms, in
such form, for such periods, and written by such companies as may be reasonable
given the nature and magnitude of the Borrower's and Guarantor's business and
customary practices in such business. The Agent and the Lenders acknowledge that
the coverage reflected on EXHIBIT 4.10 presently satisfies the foregoing
requirements, it being recognized by the Borrowers, the Guarantors, the Agent
and the Lenders, HOWEVER, that such requirements may change hereafter to reflect
changing circumstances. All insurance carried by the Borrowers shall provide for
a minimum of thirty (30) days' written notice of cancellation to the Agent and
all such insurance which covers the Collateral shall include an endorsement in
favor of the Agent, which endorsement shall provide that the insurance, to the
extent of the Agent's interest therein, shall not be impaired or invalidated, in
whole or in part, by reason of any act or neglect of the Borrowers or Guarantors
or by the failure of the Borrowers or Guarantors to comply with any warranty or
condition of the policy. In the event of the failure by the Borrowers or
Guarantors to maintain insurance as required herein, the Agent, at its option,
may obtain such insurance, PROVIDED, HOWEVER, the Agent's obtaining of such
insurance shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrowers' failure to have maintained such insurance. The Lead
Borrower shall furnish to the Agent certificates or other evidence satisfactory
to the Agent regarding the insurance maintained by the Borrowers and Guarantors.
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(c) The Lead Borrower shall advise the Agent of each claim in
excess of $500,000.00 made by any Borrower or Guarantor or group of Borrowers or
Guarantors under any policy of insurance which covers the Collateral and
following the occurrence of an Event of Default will permit the Agent, at the
Agent's option in each instance, to the exclusion of the Borrowers, to conduct
the adjustment of each such claim. The Borrowers and Guarantors hereby appoint
the Agent, effective following the occurrence of an Event of Default, as the
Borrowers' and Guarantors' attorney in fact to obtain, adjust, settle, and
cancel any insurance described in this Section 4.10 and to endorse in favor of
the Agent any and all drafts and other instruments with respect to such
insurance. The within appointment, being coupled with an interest, is
irrevocable until this Agreement is terminated by a written instrument executed
by a duly authorized officer of the Agent. The Agent shall not be liable on
account of any exercise of such power of attorney except for any exercise that
constitutes gross negligence or willful misconduct. Prior to the occurrence of
an Event of Default the Borrowers and Guarantors may use the proceeds of such
insurance to purchase Inventory or in the case of insurance proceeds from fixed
assets, to purchase replacement fixed assets or to retire related purchase money
Indebtedness. Following the occurrence of an Event of Default or in the event
that the Borrowers or Guarantors do not use the proceeds for the above purposes,
the Agent may apply any proceeds of such insurance against the Liabilities,
whether or not such have matured, in the order of application provided for
herein.
4.11. Licenses. Each license, distributorship, franchise, and similar
agreement issued to any of the Borrowers or Guarantors, or to which any of the
Borrowers or Guarantors is a party, and which is material to the business of the
Borrowers and Guarantors, taken as a whole, is in full force and effect. No
Borrower or Guarantor nor, to the Parent's knowledge, any other party
97
to any such license or agreement is in default or violation thereof, where such
violation would have a Material Adverse Effect. No Borrower or Guarantor has
received any notice or threat of cancellation of any such license or agreement
where such cancellation would have a Material Adverse Effect.
4.12. Leases. EXHIBIT 4.12 is a schedule of all presently effective
Capital Leases. EXHIBIT 4.6(A) includes a list of all other presently effective
Leases. Each of such Leases and Capital Leases is in full force and effect.
Except with respect to the 166 locations provided for under the Pre-Petition
Agency Agreement and the locations permitted to be closed pursuant to Section
4.6(b)(iv) hereof, neither the Borrowers, the Guarantors, nor, to the Parent's
knowledge, any other party to any such Leases or Capital Leases is in default or
violation of any ten (10) or more such Leases or Capital Leases and neither the
Parent nor the Borrowers or Guarantors have received any currently pending
notice or threats of cancellation of more than ten (10) such Leases or Capital
Leases (or such lesser number where such default or violation would have a
Material Adverse Effect). The Borrowers and Guarantors hereby authorize the
Agent at any time and from time to time to contact any of the Borrowers' and
Guarantors' landlords in order to confirm the continued compliance by any
Borrower or Guarantor with the terms and conditions of the Lease(s) between such
Borrower or Guarantor and the relevant landlords and to discuss such issues,
concerning such Borrower's or Guarantor's occupancy under such Lease(s), as the
Agent may determine..
4.13. Requirements of Law. The Borrowers and Guarantors are in
compliance with, and shall hereafter comply with and use their respective assets
in compliance, with all material Requirements of Law. No Borrower or Guarantor
has received any notice of any material
98
violation of any Requirement of Law, other than any such violations that have
been cured or otherwise remedied.
4.14. Maintain Collateral. Each Borrower and Guarantor shall:
-------------------
(a) Keep the Collateral under its control in good order and
repair (ordinary reasonable wear and tear and insured casualty excepted);
(b) Not suffer or cause the waste or destruction of any material
part of the Collateral
(c) Not use any of the Collateral in violation of any policy of
insurance thereon; and
(d) Subject to Section 4.14(e), below, not sell, lease, or
otherwise dispose of any of the Collateral, except for:
(i) The sale of Inventory in the ordinary course of
business;
(ii) The turning over to the Agent of all Receipts as
provided herein; and
(iii) The sale, rollover, reinvestment, or liquidation of
Permitted Investments.
(e) The Borrowers and Guarantors may dispose of Collateral
outside of the ordinary course of business as follows:
(i) The disposal of store related Collateral consisting of
Inventory, Equipment and Fixtures in connection with store closures
permitted pursuant to Sections 4.6(d)(ii) and 4.6(d)(iv); and
(ii) The disposal of the Borrowers' Equipment and Fixtures
located as of the date hereof at the Humboldt Industrial Park in
Hazelton, Pennsylvania.
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(iii) The disposal of up to $2.5 Million ($2,500,000.00) of
obsolete, duplicate or other Inventory (at Cost) and Equipment and
Fixtures (net of accumulated depreciation) in the aggregate during
each calendar year during the term of the Agreement, that is not
necessary or required for the operation of the Borrowers' or
Guarantors' business, taken as a whole, exclusive of such amounts
referenced in Sections 4.14(e)(i) and (ii), above.
4.15. Pay Taxes.
---------
(a) As of the date of this Agreement, the Borrowers and
Guarantors have received written notice from the Internal Revenue Service that
the Internal Revenue Service has completed its examination of the Borrowers' and
Guarantors federal income tax returns for all tax years through and including
the Borrowers' taxable year referenced on EXHIBIT 4.15, and that all
deficiencies, assessments, and other amounts asserted as a result of such
examinations have been fully paid, settled or otherwise resolved. No agreement
is extant which waives or extends any statute of limitations applicable to the
right of the Internal Revenue Service to assert a deficiency or make any other
claim for or in respect to federal income taxes. Except as set forth on EXHIBIT
4.15, no issue has been raised in any such examination which, by application of
similar principles, reasonably could be expected to result in the assertion of a
deficiency for any fiscal year open for examination, assessment, or claim by the
Internal Revenue Service.
(b) As of the date of this Agreement, the Borrowers and
Guarantors have paid all state and local income, excise, sales, and other taxes
which are incurred or arise after the Petition Date and for which the Borrowers
are liable except, as referenced on EXHIBIT 4.15, and have filed all returns
required with respect to such taxes.
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(c) Except as disclosed on EXHIBIT 4.15, there are no
examinations of or with respect to the Borrowers or Guarantors presently being
conducted by the Internal Revenue Service or any other taxing authority.
(d) The Borrowers and Guarantors at all times after the Petition
Date shall: pay, as they become due and payable, all taxes and unemployment
contributions and other charges arising or incurred after the Petition Date of
any kind or nature levied, assessed or claimed against any Borrower or Guarantor
or the Collateral by any person or entity whose claim could reasonably be
expected to result in an Encumbrance upon any asset of any Borrower or Guarantor
or by any governmental authority; properly exercise any trust responsibilities
imposed upon the Borrowers or Guarantors by reason of withholding from
employees' pay or by reason of any Borrower's or Guarantor's receipt of sales
tax or other funds for the account of any third party; timely make all
Post-Petition contributions and other payments as may be required pursuant to
any Employee Benefit Plan now or hereafter established by the Borrowers or
Guarantors; and timely file all tax and other returns and other reports with
each governmental authority with which the Borrowers or Guarantors are obligated
to file after the Petition Date, PROVIDED, HOWEVER, any Borrower or Guarantor
may timely contest in good faith and by appropriate proceedings any amount of
the type described in this Section 4.15(d) which it is alleged to be obligated
to pay, but only if and for so long as no lien is filed on any of the Collateral
with respect to such taxes, and adequate cash reserves have been set aside for
the payment thereof.
(e) At its option, the Agent may, but shall not be obligated to,
pay any Post-Petition taxes, unemployment contributions, and any and all other
charges levied or assessed upon the Borrowers or Guarantors or the Collateral by
any person or entity or governmental
101
authority, and make any contributions or other payments on account of any
Employee Benefit Plan maintained by the Borrowers or Guarantors as the Agent, in
the Agent's discretion, may deem necessary or desirable to protect, maintain,
preserve, collect, or realize upon any or all of the Collateral or the value
thereof or any right or remedy pertaining thereto, PROVIDED, HOWEVER, the
Agent's making of any such payment shall not constitute a cure or waiver of any
Event of Default occasioned by the Borrowers' or Guarantors' failure to have
made such payment.
4.16. No Margin Stock. The Borrowers and the Guarantors are not
engaged in the business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulations U, T, and X of the
Board of Governors of the Federal Reserve System of the United States). No part
of the proceeds of any borrowing hereunder will be used at any time to purchase
or carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock other than stock of the Parent, or
any Related Entity.
4.17. ERISA. Neither the Borrowers nor the Guarantors nor any ERISA
Affiliate shall in any manner such as would have a Material Adverse Effect, or
could result in a lien being imposed upon any material assets of the Borrowers
or Guarantors:
(a) Violate or fail to be in compliance with any Employee Benefit
Plan maintained by the Borrowers or Guarantors,
(b) Fail to timely file all reports and filings required by ERISA
to be filed by the Borrowers or Guarantors;
(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA);
102
(d) Engage in, or commit, any act that would permit the
imposition of a tax or penalty upon the Borrowers or Guarantors pursuant to
ERISA;.
(e) Accumulate, after the Petition Date, any material funding
deficiency within the meaning of ERISA;
(f) Terminate any Employee Benefit Plan in a manner that would
permit a lien to be imposed upon any assets of the Borrowers or Guarantors on
account thereof pursuant to ERISA; or
(g) Incur withdrawal liability under Title IV of ERISA in
connection with any Employee Benefit Plan which is a multiemployer plan within
the meaning of Section 4001(a) of ERISA.
4.18. Hazardous Materials.
-------------------
(a) The Borrowers and Guarantors have never:
(i) Been legally responsible for any release or threat of
release of any Hazardous Material where such legal responsibility
would have a Material Adverse Effect.
(ii) Received notification of any release or threat of
release of any Hazardous Material from any site or vessel occupied or
operated by the Borrowers and/or of the incurrence of any expense or
loss in connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any such
site or vessel, to the extent such release or incurrence would have a
Material Adverse Effect.
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(b) Unless their failure to act as set forth in (i) and (ii)
below would not have a Material Adverse Effect, the Borrowers and Guarantors
shall (and in any event shall use their best efforts to):
(i) Dispose of any Hazardous Material only in compliance
with all Environmental Laws; and
(ii) Not store any Hazardous Material on any site or vessel
occupied or operated by the Borrowers or Guarantors and not transport
or arrange for the transport of any Hazardous Material, unless such
storage or transport is in the ordinary course of the Borrowers' or
Guarantors' business and is in compliance with all Environmental Laws.
(c) The Lead Borrower shall provide the Agent with written notice
upon obtaining knowledge that any governmental authority or other Person has
incurred any expense or suffered any loss for which the Borrowers or Guarantors
would be liable in connection with the assessment, containment, or removal of
any Hazardous Material, if Borrowers' or Guarantors' liability for such expense
or loss would have a Material Adverse Effect.
4.19. Litigation. Except as described in EXHIBIT 4.19, there is not
presently pending or threatened against any Borrower or Guarantor any suit,
action, proceeding, or investigation which is not stayed by the Proceedings and
which, if determined adversely to such Borrower or Guarantor or the Borrowers or
Guarantors, would have a Material Adverse Effect.
4.20. Dividends, Investments, Repurchases and Debt Retirement.
-------------------------------------------------------
(a) The Borrowers and Guarantors shall not:
(i) Pay any cash dividend or make any other distribution in
respect of any class of the Borrowers' or Guarantors' capital stock
other than dividends by the Subsidiaries to the Parent and scheduled
payments of preferred dividends by the Parent.
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(ii) Redeem, retire, purchase, or acquire any of the
Parent's capital stock, or any of the Parent's securities. (iii)
Invest in or purchase any stock or securities or rights to purchase
any stock or securities of any corporation or other entity other than
Permitted Investments.
(iv) Merge or consolidate or be merged or consolidated with
or into any other corporation or other entity (other than with any
other Borrower, in which case thirty (30) days prior notice shall be
given to Agent).
(v) Consolidate any of the Borrowers' or Guarantors'
operations with those of any other corporation or other entity (other
than with any other Borrower).
(vi) Organize or create any Related Entity, without the
prior written consent of the Agent, which consent shall not be
unreasonably withheld; PROVIDED THAT the Parent may establish
additional Inoperative Subsidiaries to preserve the rights to trade
names in certain jurisdictions and may establish additional
Subsidiaries to own and operate store locations and make additional
investments in Subsidiaries, so long as each such Subsidiary becomes a
Borrower or guarantor of the Liabilities and the other conditions set
forth below in clauses (A)-(C) below, are complied with:
(A) The capital stock of such Subsidiary is pledged to
the Agent for the ratable benefit of the Lenders as additional
Collateral for the Liabilities;
(B) Such Subsidiary executes and delivers a guaranty of
the Liabilities or becomes a Borrower; and
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(C) Such Subsidiary executes and delivers such
documentation as the Agent may require to grant security and
mortgage interests in such Subsidiary's assets to secure the
Subsidiary's guaranty of (or obligation as a Borrower for) the
Liabilities
and provided, further, if such Subsidiary is and remains an Inoperative
Subsidiary, the Borrowers shall have complied only with clause (A) above.
(b) Parent shall not repurchase, redeem or otherwise retire any
of its capital stock.
(c) The Borrowers and Guarantors shall not subordinate any debts
or obligations owed to the Borrowers or Guarantors by any third party to any
other debts owed by such third party to any other Person.
(d) Except as contemplated by this Agreement, the Borrowers and
Guarantors shall not acquire any assets other than in the ordinary course of the
Borrowers' or Guarantors' business as conducted at the execution of this
Agreement.
(e) Borrowers and Guarantors shall not refinance, restructure,
amend, modify, or replace the 5.00% Notes or any other indebtedness (other than
under the Pre-Petition Loan Agreement or as permitted by customary first day
orders approved by the Bankruptcy Court) except upon terms and conditions
including, without limitation, subordination terms, satisfactory to the Agent,
in its discretion.
4.21. Loans. The Borrowers and Guarantors shall not make any loans or
advances to, nor acquire the Indebtedness of, any Person, PROVIDED, HOWEVER,
that the foregoing does not prohibit any of the following:
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(a) Advance payments made to the Borrowers' or Guarantors
suppliers in the ordinary course;
(b) Advances to or on behalf of the Borrowers' or Guarantors'
officers, with unsecured advances not to exceed in the aggregate at any one time
$100,000.00; and with secured advances (on such security as may be satisfactory
to the Agent) not to exceed in the aggregate at any one time $50,000.00 provided
that Agent's approval of such security shall not be required where an
independent appraisal confirms the fair market value of the collateral to be
equal to or greater than the amount of such advances.
(c) Advances to or on behalf of the Borrowers' or Guarantors'
employees, and salespersons with respect to reasonable expenses to be incurred
by such officers, employees, and salespersons for the benefit of the Borrowers
or Guarantors, which expenses are properly substantiated by the person seeking
such advance and properly reimbursable by the Borrowers or Guarantors;
(d) Loans to any Related Entity, Affiliate or other venture
permitted pursuant to Section 4.20 (a)(iii) which is not a Borrower, not to
exceed $100,000.00 in the aggregate when combined with any other loans or
investments permitted pursuant to Section 4.20 (a)(iii) outstanding at any one
time, not otherwise expressly prohibited herein, PROVIDED THAT no Event of
Default shall have occurred and none will occur by reason of such loan.
4.22. Protection of Assets. The Agent may in its discretion from time
to time discharge any tax or Encumbrance on any of the Collateral, or take any
other action that the Agent may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The Agent
shall not have any obligation to undertake any of the foregoing and shall have
no liability on account of any action so undertaken except where there is a
specific
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finding in a judicial proceeding (in which the Agent has had an opportunity to
be heard), from which finding no further appeal is available, that the Agent has
acted in bad faith or in a grossly negligent manner or has engaged in willful
misconduct. The Borrowers shall pay to the Agent, on demand, or the Agent, in
its discretion, may add to the Loan Account, all amounts paid or incurred by the
Agent pursuant to this section. The obligation of the Borrowers to pay such
amounts is a Liability.
4.23. Line of Business. The Borrowers and Guarantors shall not engage
in any business other than the business in which they are currently engaged or a
business reasonably related thereto (the conduct of which reasonably related
business is reflected in the Business Plan or otherwise permitted by this
Agreement).
4.24. Affiliate Transactions. Except as otherwise permitted hereunder,
the Borrowers and Guarantors shall not make any payment, nor give any value to
any Related Entity except in the ordinary course of business or consistent with
practices in effect on August 31, 2000 and not otherwise prohibited under the
Loan Documents, PROVIDED THAT no Event of Default shall have occurred and none
will occur by reason thereof.
4.25. Additional Assurances.
---------------------
(a) Except as set forth in Exhibit 4.25, the Borrowers and
Guarantors are not the owner of, nor have they any interest in, any property or
asset material or necessary to their business, which immediately upon the
satisfaction of the conditions precedent to the effectiveness of the credit
facility contemplated hereby (Article 3) will not be subject to a perfected
security interest or other collateral interest in favor of the Agent (subject
only to Permitted Encumbrances) to secure the Liabilities.
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(b) The Borrowers and Guarantors will not hereafter acquire any
asset or any interest in personal property which (if a security interest in such
asset or interest may be perfected by filing under Article 9 of the UCC), is
not, immediately upon such acquisition, subject to such a perfected security or
other collateral interest in favor of the Agent to secure the Liabilities
(subject only to Permitted Encumbrances).
(c) The Borrowers and Guarantors shall execute and deliver to the
Agent such instruments, documents, and papers, and shall do all such things from
time to time hereafter as the Agent may reasonably request: to carry into effect
the provisions and intent of this Agreement; to protect and perfect the Agent's
security interests in the Collateral; to comply with all applicable statutes and
laws; and to facilitate the collection of the Receivables Collateral. The
Borrowers and Guarantors shall execute all such instruments as may be reasonably
required by the Agent with respect to the recordation and/or perfection of the
security interests created herein.
(d) The Borrowers and Guarantors hereby designate the Agent as
and for the Borrowers' and Guarantors true and lawful attorney, with full power
of substitution, to sign and file, where permitted by law any financing
statements in order to perfect or protect the Agent's security interest and
other collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4.25 shall be sufficient for filing to perfect the security
interests granted herein, where permitted by law.
4.26. Adequacy of Disclosure.
----------------------
(a) All quarterly and annual financial statements
furnished to the Agent and each Lender by the Borrowers and Guarantors have been
prepared in accordance with GAAP
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consistently applied (and in the case of monthly management statements,
consistent with GAAP methodology and substantially in accordance with GAAP) and
present fairly in all material respects the Consolidated condition of the Parent
and its Subsidiaries at the date(s) thereof and the Consolidated results of
operations and cash flows of the Parent and its Subsidiaries for the period(s)
covered. There has been no change in the financial condition, results of
operations, or cash flows of the Borrowers or Guarantors since the date(s) of
such financial statements, other than changes in the ordinary course of
business, which changes have not been materially adverse, either individually or
in the aggregate.
(b) The Borrowers and Guarantors do not have any contingent
obligations or obligations under any Lease or Capital Lease which are not noted
in the Parent's Consolidated financial statements and the notes thereto
furnished to the Agent and each Lender prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or hereafter
given the Agent or any Lender by or on behalf of the Borrowers or any guarantor
of the Liabilities in connection with the execution of this Agreement by the
Agent and each Lender contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. There is no fact known to the
Borrowers which has, or which, in the foreseeable future would reasonably be
expected to have, a Material Adverse Effect.
4.27 No Restrictions on Liabilities. No Borrower or Guarantor shall
enter into or become subject to, directly or indirectly, any agreement
prohibiting or restricting in any manner (including, without limitation, by way
of covenant, representation or event of default) any of the following:
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(a) The incurrence, creation or assumption of the Liabilities or
any Encumbrances in favor of the Agent on any property of any Borrower or
Guarantor.
(b) The granting of a security interest, pledge, or Encumbrance
in favor of the Agent and the Lenders on any asset of any Borrower or Guarantor.
4.28 Other Covenants. No Borrower or Guarantor shall indirectly do or
cause to be done any act which, if done directly by such Borrower or Borrowers
or Guarantor or Guarantors, would breach any covenant contained in this
Agreement.
4.29 Security Documents.
------------------
(a) Each of the Borrowing Orders creates in favor of the Agent,
for the benefit of the Lenders, a legal, valid and enforceable security interest
in the Collateral and constitute the creation of a fully perfected lien on, and
security interest in, all right, title and interest of the Borrowers and
Guarantors thereunder in such Collateral, in each case prior and superior in
right to any other person, other than as provided in such Borrowing Order.
(b) Each of the Borrowing Orders create in favor of the Agent,
for the benefit of the Lenders, legal, valid and enforceable mortgage and
security interests in the Real Estate Interests and Proceeds of the Leasehold
Interests, which constitute fully perfected liens on, and security interests in,
all right, title and interest of the grantors thereunder in such Real Estate
Interests and Proceeds of the Leasehold Interests, in each case prior and
superior in right to any other person, other than as provided in such Borrowing
Order.
(c) Upon the entry of the Interim Borrowing Order or the Final
Borrowing Order, whichever occurs first, all filings, assignments, pledges and
deposits of documents or instruments will have been made and all other actions
will have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral are not subject
to
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any setoff, claims, withholdings, or other defenses. The Borrowers and
Guarantors are the owners of the Collateral, free from any lien, security
interest, encumbrance, or any other claim or demand, except for Permitted
Encumbrances.
4.30 Return of Property. Without the prior written consent of the
Agent, the Borrowers and Guarantors shall not consent to or suffer the entry of
an order in the Proceedings which authorizes the return of any of the Borrowers'
or Guarantors' property pursuant to ss.546(g)* of the Bankruptcy Code.
4.31 Bankruptcy Proceedings. The Borrowers and Guarantors will not
seek, consent or suffer to exist (i) any modification, stay, vacation or
amendment to the Borrowing Orders; (ii) a priority claim for any administrative
expense or unsecured claim against the Borrowers or Guarantors (now existing or
hereafter arising of any kind or nature whatsoever, including without limitation
any administrative expense of the kind specified in ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇, ▇▇▇, ▇▇▇,
▇▇▇(▇), 503(b), 506(c), 507(a), 507(b), 546(c), 546(d) or 1114 of the Bankruptcy
Code) equal or superior to the priority claim of the Agent and the Lenders in
respect of the Liabilities, except with respect to the Carve Out (as defined in
the Borrowing Orders) and to the proceeds of avoidance actions of the Borrowers
or Guarantors under Chapter 5 of the Bankruptcy Code (with the exception of
actions brought pursuant to Section 549 of such Chapter to recover any
post-petition transfer of the Collateral); and (iii) any lien on any Collateral,
having a priority equal or superior to the liens in favor of the Agent and the
Lenders in respect of the Liabilities, other than Permitted Liens.
ARTICLE V - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
5.1. Maintain Records. The Borrowers and Guarantors shall:
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(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrowers' and
Guarantors' transactions, all in accordance with GAAP applied consistently with
prior periods to fairly reflect the financial condition of the Borrowers
Guarantors at the close of, and the results of their operations for, the fiscal
periods in question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article V or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrowers and Guarantors at the close of,
and the results of their operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the Collateral
including, without limitation, accurate current stock, cost, and sales records
of their Inventory, accurately and sufficiently itemizing and describing the
kinds, types, and quantities of Inventory and the cost and selling prices
thereof.
(d) At all times, retain independent certified public accountants
who are reasonably satisfactory to the Agent and who are of nationally
recognized standing and request such accountants to fully cooperate with, and be
available to, the Agent to discuss the Borrowers' and Guarantors financial
performance, financial condition, operating results, controls, and such other
matters within the scope of the retention of such accountants as may be raised
by the Agent.
(e) Not change their respective fiscal years or taxpayer
identification numbers without giving twenty (20) days notice to the Agent.
5.2. Access to Records.
-----------------
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(a) The Borrowers and Guarantors shall accord the Agent and the
Agent's representatives access from time to time as the Agent and such
representatives may reasonably require to all properties owned by or over which
any Borrower or Guarantor has control. The Agent and the Agent's representatives
shall have the right, and the Borrowers and Guarantors will permit the Agent and
such representatives from time to time as the Agent and such representatives
reasonably may request (in the absence of an Event of Default, upon reasonable
notice and during normal business hours), to examine, inspect, copy, and make
extracts from any and all of the Borrowers' and Guarantors' books, records,
electronically stored data, papers, and files. The Borrowers and Guarantors
shall make sufficient copying facilities available to the Agent.
(b) The Borrowers and Guarantors hereby authorize the Agent and
the Agent's representatives to:
(i) Inspect, copy, duplicate, review, cause to be reduced to
hard copy, run off, draw off, and otherwise use any and all computer
or electronically stored information or data which relates to the
Borrowers and Guarantors, and agree to direct any service bureau,
contractor, accountant, or other person who maintains such information
for the Borrowers and Guarantors fully to cooperate with the Agent and
the Agent's representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrowers' and Guarantors' computer billing companies, collection
agencies, and accountants and to sign the name of the Borrowers or
Guarantors on any notice to the Borrowers' or Guarantors' Account
Debtors or verification of the Collateral.
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5.3. Immediate Notice to Agent.
-------------------------
(a) The Lead Borrower shall provide the Agent with written notice
immediately upon the occurrence of any of the following events, which written
notice shall be reasonably particular as to the facts and circumstances in
respect of which such notice is being given:
(i) Any change in the Parent's Chief Executive Officer or
Chief Financial Officer.
(ii) The completion of any physical count of all or a
material portion of the Borrowers' or Guarantors' Inventory (together
with a copy of the results thereof certified by the Lead Borrower).
(iii) Any cessation by the Borrowers or Guarantors of their
making payment to their creditors on account of Post-Petition debts
generally as such debts become due.
(iv) Any failure by the Borrowers or Guarantors to pay rent
on or after the Petition Date at any five (5) of the Borrowers' or
Guarantors' locations (other than the 166 locations provided for under
the Pre-Petition Agency Agreement or the other locations permitted to
be closed under Section 4.6(b)(iv) of this Agreement) at any one time.
(v) Any Material Adverse Change in the business, operations,
or financial affairs of the Borrowers or Guarantors occurring after
the Petition Date.
(vi) The occurrence of any Suspension Event.
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(vii) Any intention on the part of the Parent to discharge
the Parent's present independent accountants or any withdrawal or
resignation by such independent accountants from their acting in such
capacity.
(viii) Any litigation which, if determined adversely to the
Borrowers, would reasonably be expected to have a Material Adverse
Effect after the Petition Date.
(ix) The occurrence of an event or circumstance with respect
to any Employee Benefit Plan which would reasonably be expected to
have Material Adverse Effect.
(x) Any intended bulk sale, liquidation, or other
disposition of assets of the Borrowers or Guarantors other than in the
ordinary course of business (other than in connection with the closing
of the 166 locations provided for under the Pre-Petition Agency
Agreement or the first ten (10) locations permitted to be closed in
any fiscal year under Section 4.6(b)(iv)(B) of this Agreement).
(b) The Lead Borrower shall:
(i) Provide the Agent, when so distributed, with copies of
any materials distributed to the shareholders of the Parent (QUA such
shareholders).
(ii) Provide the Agent:
(A) When filed, copies of all filings by the Parent
with the SEC.
(B) When received, copies of all correspondence from
the SEC, other than routine non-substantive general
communications from the SEC.
(C) Copies of all pleadings filed by or on behalf of
the Borrowers relating to the Proceedings.
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(iii) Add the Agent as an addressee on all mailing lists
maintained by or for the Borrowers or Guarantors which Agent may
request.
(iv) At the request of the Agent, from time to time, provide
the Agent with copies of all advertising (including copies of all
print advertising and duplicate tapes of all video and radio
advertising).
(v) Provide the Agent, when received by the Borrowers or
Guarantors, with a copy of any management letter or similar
communications from any accountant of the Borrowers or Guarantors.
5.4. Borrowing Base Certificate. The Lead Borrower shall provide the
Agent a Borrowing Base Certificate (in the form of EXHIBIT 5.4, as such form may
be revised by agreement of the Lead Borrower and the Agent), reflecting the
Borrowers' condition on the last Business Day of the reporting period
immediately prior to the date when furnished, at the following times:
(a) On the Thursday of each week (or the next Business Day, if
any Thursday is not a Business Day) for the prior week.
(b) Intentionally omitted.
(c) Intentionally omitted.
5.5. Monthly Collateral Reports. Monthly, within thirty (30) days of
the end of the previous fiscal month, the Lead Borrower shall provide the Agent
with such Collateral Reports (in the form acceptable to Agent) as are identified
on EXHIBIT 5.5. For the purposes of this Section, the first "previous month"
shall be April, 2001.
5.6 Monthly Financial Reports. Monthly, within thirty (30) days of the
end of the previous fiscal month, the Lead Borrower shall provide the Agent, in
such form as the Agent and
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the Lead Borrower may agree, original counterparts of
an internally prepared statement of the Borrowers' Consolidated financial
condition for the period ending with the end of the subject month, which
financial statement shall include, at a minimum, a balance sheet, income
statement (on a Consolidated basis), cash flow statement and comparison of same
store sales for the corresponding month of the prior year, as well as
comparisons to the Business Plan.
5.7 Quarterly Financial Reports. Quarterly, within forty-five (45)
days following the end of each of its first three (3) fiscal quarters in each
fiscal year, the Lead Borrower shall provide the Agent a copy of its Report on
Form 10-Q filed with the SEC. In the event that the Lead Borrower has not filed
or is no longer required to file such a form with the SEC prior to such
forty-fifth (45th) day, the Borrower shall provide the Agent on or before such
forty-fifth (45th) day with an original counterpart of a management prepared
consolidated financial statement of the Borrowers for the period from the
beginning of the Borrowers' then current fiscal year through the end of the
subject quarter, with comparative information for the same period of the
previous fiscal year, which statement shall include, at a minimum, a balance
sheet, income statement (on a "consolidated" basis), statement of changes in
shareholders' equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year, as well as to the Business Plan.
5.8 Annual Reports. Annually, within ninety (90) days following the
end of its Fiscal Year, the Lead Borrower shall furnish the Agent with a copy of
its Report on Form 10-K filed with the SEC, and within ten (10) days of delivery
by Borrower's independent accountants, any so-called management letters. In the
event that the Lead Borrower has not filed or is no longer required to file such
a form with the SEC prior to such ninetieth (90th) day, the Borrower shall
provide the Agent on or before such ninetieth (90th) day with an original signed
counterpart of
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the Borrowers' annual consolidated financial statement, which statement shall
have been prepared by, and bear the unqualified opinion of, the Borrowers'
independent certified public accountants (i.e. said statement shall be
"certified" by such accountants). Such annual statement shall include, at a
minimum (with comparative information for the then prior fiscal year) a balance
sheet, income statement, statement of changes in shareholders' equity, and cash
flows.
5.9 Officers' Certificates. The Lead Borrower shall cause its Chief
Executive Officer, Chief Financial Officer or Vice President of Finance to
certify in connection with the monthly, quarterly, and annual statements to be
furnished pursuant to this Agreement that:
(a) Such statements (other than the monthly statements) were
prepared in accordance with GAAP consistently applied and present fairly the
financial condition of the Borrowers at the close of, and the results of the
Borrowers' operations and cash flows for, the period(s) covered, SUBJECT,
HOWEVER to the following:
(i) usual year end adjustments (this exception shall not be
included in the certificate which accompanies the annual statement).
(ii) Material Accounting Changes (in which event, such
certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in determining satisfaction of the
financial performance covenant imposed by Section 5.12.
(b) No Suspension Event has occurred or, if such an event has
occurred shall describe, its nature (in reasonable detail) and the steps (if
any) being taken or contemplated by the Borrower to be taken on account thereof.
(c) The Borrowers were in compliance (or had failed to comply) as
of the date of the applicable statement with each of the financial performance
covenants included in Section
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5.12 hereof, such certification to be accompanied by calculations demonstrating
such compliance or failure to comply.
5.10 Inventories, Appraisals, and Audits.
-----------------------------------
(a) The Agent may, at the expense of the Borrowers, participate
in and/or observe, each physical count and/or inventory of so much of the
Collateral as consists of Inventory which is undertaken on behalf of the
Borrowers.
(b) The Borrowers, at their own expense, shall cause each store
location to have not less than one (1) physical inventory in each fiscal year to
be undertaken on a generally annual basis, consistent with current practice,
while this Agreement is in effect (the scheduling of which shall be subject to
the Agent's reasonable discretion), conducted by such inventory takers as are
satisfactory to the Agent and following such methodology as may be satisfactory
to the Agent.
(i) The Lead Borrower shall provide the Agent with a copy of
the preliminary results of each such inventory (as well as of any
other physical inventory undertaken by the Borrowers) within thirty
(30) days following its completion.
(ii) The Lead Borrower shall provide the Agent with a
reconciliation of the results of each such inventory (as well as of
any other physical inventory reconciliation undertaken by the
Borrowers) to the Borrowers' books and records within thirty (30) days
following the completion of such inventory.
(iii) Following the occurrence of an Event of Default, the
Agent may, in its discretion, cause such additional inventories to be
taken as the Agent determines (each at the expense of the Borrowers).
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(c) Upon the Agent's request from time to time, the Borrowers
shall permit the Agent to arrange for Inventory appraisals (at the Borrower's
expense) conducted by such appraisers as are satisfactory to the Agent. Prior to
the occurrence of any Event of Default the Agent shall have the right to obtain
(at the Borrower's expense) up to four (4) appraisals in each twelve (12) month
period during which this Agreement is in effect (the spacing of the scheduling
of which appraisals shall be subject to the Agent's discretion). The Agent, in
its discretion, following the occurrence of an Event of Default, may cause such
additional appraisals to be taken as the Agent determines (each, at the expense
of the Borrowers).
(d) The Agent contemplates conducting up to three (3) commercial
finance audits (at the Borrowers' expense) of the Borrowers' books and records
during any twelve (12) month period during which this Agreement is in effect.
The Agent, in its discretion, following the occurrence of an Event of Default,
may cause such additional audits to be taken as the Agent determines (at the
expense of the Borrowers).
(e) The Agent contemplates causing not more than two (2)
(so-called) "mystery shopping" visits to all or any of the Borrowers' business
premises during any 12-month period during which this Agreement is in effect,
but following the occurrence of an Event of Default, may cause additional such
visits to be undertaken (in each event, at the Borrowers' expense). The Agent
shall provide the Borrowers with a copy of any non-confidential results of such
mystery shopping.
(f) In addition to and without limitation of the foregoing, the
Borrowers shall permit the Agent, at the request of the Tranche B Lender, to
arrange for an Inventory Appraisal (at Borrowers' expense) conducted by an
appraiser satisfactory to Tranche B Lender and the Borrowers acknowledge and
agree that the Agent, at the request of the Tranche B Lender, in its
121
discretion, may conduct a commercial finance audit of Borrower's books and
records (at Borrowers' expense).
5.11. Additional Financial Information.
--------------------------------
(a) In addition to all other information required to be provided
pursuant to this Article V, the Lead Borrower promptly shall provide the Agent
(and any guarantor of the Liabilities), (i) such other and additional
information concerning the Borrowers, the Guarantors, the Collateral, the
operation of the Borrowers' and Guarantors' business, and the Borrowers' and
Guarantors' financial condition, including financial reports and statements
(including supporting schedules), as the Agent may from time to time reasonably
request from the Lead Borrower; and (ii) copies of all material provided by any
Borrower or Guarantor to the United States Trustee or any creditors' or other
committee appointed in the Proceedings.
(b) The Lead Borrower may provide the Agent, from time to time
hereafter, with updated projections of the Borrowers' and Guarantors'
anticipated performance and operating results.
(c) The Lead Borrower shall, no later than thirty (30) days
following the end of each of the Borrowers' and Guarantors' fiscal years,
furnish the Agent with an updated and extended projection which shall extend at
least through the end of the then current fiscal year, as well as with any
modifications to the Business Plan, the initial version of which is annexed
hereto as EXHIBIT 5.11(C).
(d) Such updated and extended projections shall be prepared
pursuant to such methodology and shall include such assumptions as are
satisfactory to the Agent.
(e) Upon the request of the Tranche B Lender made from time to
time, the Agent will provide to the Tranche B Lender (at Borrowers' expense)
copies of such reports,
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notices, statements and other information that the Borrowers and Guarantors
furnish to the Agent hereunder.
5.12. Financial Performance Covenants. The Borrowers shall at all
times comply with the financial performance covenants described below.
Compliance with such financial performance covenants shall be determined as if
no Material Accounting Changes had been made since the date of this Agreement
(other than any Material Accounting Changes specifically taken into account in
the setting of such covenants). The Agent may determine the Borrowers'
compliance with such covenants by using financial reports and statements
provided by the Lead Borrower to the Agent or any Lender (whether or not such
financial reports and statements are required to be furnished pursuant to this
Agreement) as well as by reference to interim financial information provided to,
or developed by, the Agent. These covenants are as follows:
(a) Availability. Borrowers shall at all times maintain
Availability of at least $4 million from the Closing Date through December 15,
2001 and at least $6 million from December 16, 2001 through the Maturity Date.
(b) Capital Expenditures. At no time shall the Borrowers permit
their annual Capital Expenditures to exceed the Capital Expenditure Cap of
$7,500,000.00 in any fiscal year.
ARTICLE VI - USE AND COLLECTION OF COLLATERAL:
6.1. Use of Inventory Collateral.
---------------------------
(a) The Borrowers and Guarantors shall not engage in any sale of
the Inventory other than for fair consideration in the conduct of the Borrowers'
and Guarantors' business in the ordinary course (including but not limited to
seasonal and promotional sales) and shall not engage in sales or other
dispositions to creditors, sales or other dispositions in bulk
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other than going out of business sales performed in connection with store
closures that are permitted pursuant to Section 4.14(e).
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrowers' or
Guarantors', as the case may be, customary return policy applicable to the
return of Inventory purchased by the Borrowers' or Guarantors', as the case may
be, retail customers in the ordinary course, such Inventory may be returned to
the Borrowers or Guarantors, as the case may be, without the consent of the
Agent.
6.2. Inventory Quality. All Inventory now owned or hereafter acquired
by the Borrowers and Guarantors are and will be of good and merchantable quality
and free from defects (other than within customary trade tolerances).
6.3. Adjustments and Allowances. The Borrowers and Guarantors may
grant such allowances or other adjustments to the Borrowers' Account Debtors as
the Borrowers and Guarantors may reasonably deem to accord with sound business
practice and consistent with the Borrowers' or Guarantors', as the case may be,
past practice, PROVIDED, HOWEVER, the authority granted the Borrowers and
Guarantors pursuant to this Section 6.3 may be limited or terminated by the
Agent during the continuation of an Event of Default.
6.4. Validity of Accounts.
--------------------
(a) The amount of each Account shown on the books, records, and
invoices of the Borrowers and Guarantors represented as owing by each Account
Debtor is and will be the correct amount actually owing by such Account Debtor
and shall have been fully earned by performance by the Borrowers and Guarantors.
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(b) The Borrowers and Guarantors have no knowledge of any
material impairment of the validity or collectability of any of the Accounts and
shall cause the Lead Borrower to notify the Agent of any such fact immediately
after any Borrower or Guarantor becomes aware of any such impairment.
6.5. Notification to Account Debtors. The Agent shall have the right
at any time to notify any of the Borrowers' and Guarantors' Account Debtors to
make payment directly to the Agent and to collect all amounts due on account of
the Collateral.
ARTICLE VII - CASH MANAGEMENT; PAYMENT OF LIABILITIES:
7.1. Depository Accounts.
-------------------
(a) Annexed hereto as EXHIBIT 7.1 is a Schedule of all present
DDA's, which Schedule includes, with respect to each depository
(i) the name and address of that depository;
(ii) the account number(s) of the account(s) maintained with
such depository;
(iii) a contact person at such depository; and
(iv) the Borrower or Guarantor, as the case may be, and such
Borrower's or Guarantor's, as the case may be, store locations
utilizing such DDA.
(b) The Lead Borrower shall deliver to the Agent, as a condition
to the effectiveness of this Agreement the following:
(i) Notification, executed on behalf of the Borrowers, to
each depository institution with which any DDA is maintained (other
than the Operating Account of any Local Disbursement Account), in form
satisfactory to Agent, of Agent's
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interest in such DDA, which notice provides that the contents of such
DDA shall be directed to the Concentration Account.
(ii) A Blocked Account Agreement with any depository
institution at which a Blocked Account is maintained.
(c) No Borrower shall establish any DDA hereafter (other than a
Local Disbursement Account) unless within ten (10) days after such
establishment, the Lead Borrower provides a notification, as required by Section
7.1(b)(i) above, that the contents of such DDA are to be directed into the
Concentration Account.
7.2 Credit Card Receipts.
--------------------
(a) Annexed hereto as EXHIBIT 7.2 is a Schedule which describes
all arrangements to which the Borrowers and Guarantors are parties with respect
to the payment to the Borrowers and Guarantors of the proceeds of all credit
card charges for sales by the Borrowers and Guarantors.
(b) The Borrowers and Guarantors shall deliver to the Agent as a
condition to the effectiveness of this Agreement, notification, executed on
behalf of the Borrowers and Guarantors, to each of the Borrowers' and
Guarantors' credit card clearinghouses and processors (in form satisfactory to
the Agent), which notification provides that payment of all credit card charges
submitted by the Borrowers and Guarantors to that clearinghouse or other
processor and any other amount payable to the Borrowers and Guarantors by such
clearinghouse or other processor shall be directed to the Concentration Account
or as otherwise designated from time to time by the Agent. The Borrowers and
Guarantors shall not change such direction or designation except upon and with
the prior written consent of the Agent.
7.3. The Concentration, Blocked, and Operating Accounts.
--------------------------------------------------
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(a) The following deposit accounts shall be established (and are
so referred to herein):
(i) The CONCENTRATION ACCOUNT: An account established by the
Agent with Fleet National Bank.
(ii) The OPERATING ACCOUNT; LOCAL DISBURSEMENT ACCOUNTS:
Established by the Borrowers with Fleet National Bank, from which
disbursements may be made and into which only advances under the
Revolving Credit may be deposited. At any time that Revolving Credit
Loans are outstanding, the aggregate amount of the balances in the
Operating Account and all Local Disbursement Accounts, after giving
effect to the disbursements to be made therefrom in any day, shall not
at any time exceed $1 Million ($1,000,000.00).
(b) The contents of each DDA (other than the Operating Account)
constitute Collateral and Proceeds of Collateral. Funds in the Concentration
Account constitute a payment of Liabilities when collected to the extent of
Liabilities.
(c) Intentionally Omitted.
(d) The Borrowers and Guarantors shall pay all fees and charges
of, and maintain such minimum balances as may be required by the Agent or by any
bank in which any account is opened as required hereby (even if such account is
opened by the Agent).
7.4. Proceeds and Collection of Accounts
-----------------------------------
(a) All Receipts constitute Collateral and Proceeds of Collateral
and (other than Receipts from the sale of Investment Property or Permitted
Investments) shall be held in trust by the Borrowers and Guarantors, as the case
may be, for the Agent, shall not be
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commingled with any of the Borrowers' or Guarantors', as the case may be, other
funds and shall be deposited and/or transferred only to the Concentration
Account.
(b) Intentionally Omitted.
(c) At all times the Borrowers and Guarantors shall undertake the
following (and the Agent may give notice to the bank at which each DDA and
Blocked Account is maintained to undertake the following):
(i) Cause the ACH or wire transfer to the Concentration
Account, no less frequently than daily, of the contents of each DDA,
net of such minimum balance, as may be required to be maintained in
the DDAs by the bank at which a DDA is maintained, not to exceed $750
per DDA.
(ii) Cause to be transferred to the Agent's control, or to
an intermediary subject to a control agreement with the Agent, all
cash (other than on deposit in the Local Disbursement Accounts),
Investment Property and other Permitted Investments. In the event
that, notwithstanding the provisions of this Section 7.4(c), any of
the Borrowers or Guarantors receives or otherwise has dominion and
control of any Receipts, or any proceeds or collections of any
Collateral, such Receipts, proceeds and Collection shall be held in
trust by the Borrowers and Guarantors, as the case may be, for the
Agent and shall not be commingled with any of the Borrowers' or
Guarantors', as the case may be, other funds or deposited in any
account of Borrowers other than as instituted by Agent.
7.5. Payment of Liabilities.
----------------------
(a) On each Business Day the Agent shall apply, towards the
unpaid balance of the Loan Account in respect of the Tranche A Loans, the then
collected balance of the
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Concentration Account (net of fees charged, and of such minimum balances as may
be required by the bank at which the Concentration Account is maintained).
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to the
Concentration Account on the Business Day on which deposited, PROVIDED
THAT such deposit is received by the Agent by 2:00 PM on that Business
Day.
(ii) Funds paid to the Agent, other than by deposit to the
Concentration Account, shall be deemed to have been received on the
Business Day when they are good and collected funds, PROVIDED THAT
such payment is received by the Agent by 2:00 PM on that Business Day.
(iii) If a deposit to the Concentration Account (Section
7.5(b)(i)) or payment (Section 7.5(b)(ii)) is not received by the
Agent until after 2:00 PM on a Business Day, such deposit or payment
shall be deemed to have been made at 9:00 AM on the next succeeding
Business Day.
(iv) All deposits to the Concentration Account and other
payments to the Agent are subject to clearance and collection.
(c) So long as no Event of Default has occurred and is
continuing, the Agent shall transfer to the Operating Account any surplus in the
Concentration Account remaining after the application towards the Liabilities
referred to in Section 7.5(a) (less those amounts which are to be netted out, as
provided therein) PROVIDED, HOWEVER, in the event that both (i) a Suspension
Event has occurred and (ii) one or more L/C's are then outstanding, the Agent
may establish a funded reserve of up to 105% of the aggregate Stated Amounts of
such L/C's.
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7.6 The Operating Account. Except as otherwise specifically provided
in, or permitted by, this Agreement, all checks shall be drawn by the Borrowers
upon, and other disbursements shall be made by the Borrowers solely from, the
Operating Account and the Local Disbursement Accounts. ARTICLE VIII - GRANT OF
SECURITY INTEREST:
8.1. Grant of Security Interest. To secure the Borrowers' and
Guarantors' prompt, punctual, and faithful performance and payment of all and
each of the Liabilities and, with respect to the Guarantors, to secure such
Guarantors obligations under their respective Guaranties, each Borrower and
Guarantor hereby grants to the Agent, for the benefit of the Lenders, a
continuing security interest in and to, and assigns to the Agent, for the
benefit of the Lenders, all assets of each such Borrower and Guarantor,
including, without limitation, the following, and each item thereof, whether now
owned or now due, or in which that Borrower or Guarantor, as the case may be,
has an interest, or hereafter acquired, arising, or to become due, or in which
that Borrower or Guarantor, as the case may be, obtains an interest, and all
products, Proceeds, substitutions, and accessions of or to any of the following
(all of which, together with any other property in which the Agent may in the
future be granted a security interest and the Collateral referred to in Section
8.4(a) and Section 8.5, is referred to herein as the "COLLATERAL"):
(a) All Accounts.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
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(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's or Guarantor's, as the case
may be, business, and all rights of access to such books, records, and
information, and all property in which such books, records, and information are
stored, recorded, and maintained.
(i) All Investment Property, Instruments, Documents, Deposit
Accounts, Proceeds of Leaseholds, Real Estate Interests, policies and
certificates of insurance, deposits, impressed accounts, compensating balances,
money, cash, or other property.
(j) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit insurance, whether
any of such proceeds, refunds, and premium rebates arise out of any of the
foregoing (8.1 (a) through 8.1 (i)) or otherwise.
(k) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8.1 (a) through 8.l(j), including the right
of stoppage in transit. Notwithstanding anything else herein or in any Loan
Document to the contrary, the Collateral shall not include any Equipment
acquired prior to the Petition Date as to which the purchase price was financed
by a third party and as to which the Borrowers' or Guarantors', as the case may
be, obligations to pay such price is secured by a valid, enforceable, perfected,
and unavoidable security interest in such Equipment in favor of such third
party.
8.2. Extent and Duration of Security Interest. The security interest
created and granted herein is in addition to, and supplemental of, any security
interest previously granted by the Borrowers or Guarantors to the Agent and
shall continue in full force and effect until all Liabilities have been paid
and/or satisfied in full, no more Commitments exist and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Agent, which termination shall not unreasonably be withheld.
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8.3 Delivery of Instruments, etc.
----------------------------
(a) Pursuant to the terms hereof, the Borrowers and Guarantors
have endorsed, assigned and delivered to the Agent all negotiable or
non-negotiable instruments, certificated securities and chattel paper pledged by
them hereunder, together with instruments of transfer or assignment duly
executed in blank as the Agent may have specified. In the event that any
Borrower or Guarantor shall, after the date of this Agreement, acquire any other
negotiable or non-negotiable instruments, certificated securities or chattel
paper to be pledged by it hereunder, such Borrower or Guarantor, as the case may
be, shall forthwith endorse, assign and deliver the same to the Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as the Agent may from time to time specify.
(b) To the extent that any securities now or hereafter acquired
by any Borrower or Guarantor are uncertificated and are issued to a Borrower or
Guarantor or its nominee directly by the issuer thereof, that Borrower or
Guarantor shall cause the issuer to note on its books the security interest of
the Agent in such securities and shall cause the issuer, pursuant to an
agreement in form and substance reasonably satisfactory to the Agent, to agree
to comply with instructions from the Agent as to such securities, without
further consent of such Borrower or Guarantor or such nominee. To the extent
that any securities, whether certificated or uncertificated, or other investment
property now or hereafter acquired by any Borrower or Guarantor are held by a
Borrower or Guarantor or its nominee through a securities intermediary or
commodity intermediary, that Borrower or Guarantor shall, at the request of the
Agent, cause such securities intermediary or (as the cause may be) commodity
intermediary, pursuant to an
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agreement in form and substance reasonably satisfactory to the Agent, to agree
to comply with entitlement orders or other instructions from the Agent to such
securities intermediary as to such securities or other investment property, or
(as the case may be) to apply any value distributed on account of any commodity
contract as directed by the Agent to such commodity intermediary, without
further consent of such Borrower or Guarantor or such nominee.
(c) To the extent that any Borrower or Guarantor is a beneficiary
under any written letter of credit now or hereafter issued in favor of a
Borrower or Guarantor, that Borrower or Guarantor shall deliver such letter of
credit to the Agent. The Agent shall from time to time, at the request and
expense of the Borrowers and Guarantors, make such arrangements with the
Borrowers and Guarantors as are in the Agent's discretion necessary and
appropriate so that the Borrowers and Guarantors may make any drawing to which
the Borrowers or Guarantors, as the case may be, are entitled under such letter
of credit, without impairment of the Agent's perfected security interest in the
Borrowers' or Guarantors' rights to proceeds of such letter of credit or in the
actual proceeds of such drawing. At the Agent's request, the Borrowers and
Guarantors shall, for any letter of credit, whether or not written, now or
hereafter issued in favor of a Borrower or Guarantor as beneficiary, execute and
delivery to the issuer and any confirmer of such letter of credit an assignment
of proceeds form, in the favor of the Agent and satisfactory to the Agent and
such issuer or (as the case may be) such confirmer, requiring the proceeds of
any drawing under such letter of credit to be paid directly to the Agent for
application as provided in this Agreement.
8.4 Concerning Revised Article 9 of the Uniform Commercial Code. The
parties acknowledge and agree to the following provisions of this Agreement in
anticipation of the possible application, in one or more jurisdictions to the
transactions contemplated hereby, of
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revised Article 9 of the Uniform Commercial code in the form or substantially in
the form approved by the American Law Institute and the National Conference of
Commissioners on Uniform State Law and contained in the 1999 official test of
Revised Article 9 ("Revised Article 9").
(a) Attachment. In applying the law of any jurisdiction in which
Revised Article 9 is in effect, the Collateral is all assets of the Borrowers
and Guarantors, whether or not within the scope of Revised Article 9. The
Collateral shall include, without limitation, the following categories of assets
as defined in Revised Article 9: goods (including inventory, equipment and any
accessions thereto), instruments (including promissory notes), documents,
accounts (including health-care-insurance receivables), chattel paper (whether
tangible or electronic), deposit accounts, letter-of-credit rights (whether or
not the letter of credit is evidenced by a writing), commercial tort claims,
securities and all other investment property, general intangibles (including
payment intangibles and software), supporting obligations and any and all
proceeds of any thereof, wherever located, whether now owned or hereafter
acquired. If any Borrower or Guarantor shall at any time, whether or not Revised
Article 9 is in effect in any particular jurisdiction, acquire a commercial tort
claim, as defined in Revised Article 9, that Borrower or Guarantor, as the case
may be, shall immediately notify the Agent in a writing signed by such Borrower
or Guarantor, as the case may be, of the brief details thereof and grant to the
Agent in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to the Agent.
(b) Perfection by Filing. The Agent may at any time and from time
to time, pursuant to the provisions of Section 9.1, file financing statements,
continuation statements and amendments thereto that describe the Collateral as
all assets of the Borrowers and Guarantors or
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words of similar effect and which contain any other information required by Part
5 of Revised Article 9 for the sufficiency or filing office acceptance of any
financing statement, continuation statement or amendment, including whether a
Borrower or Guarantor is an organization, the type of organization and any
organization identification number issued to such Borrower or Guarantor. The
Borrowers and Guarantors agree to furnish any such information to the Agent
promptly upon request. Any such financing statements, continuation statements or
amendments may upon notice to Lead Borrower and the failure of the applicable
Borrower or Guarantor to sign such financing statements within seven (7) days of
such notice (or, if an Event of Default has occurred, without such notice) be
signed by the Agent on behalf of the Borrowers or Guarantors, as the case may
be, as provided in this Agreement, and may be filed at any time in any
jurisdiction whether or not Revised Article 9 is then in effect in that
jurisdiction.
(c) Other Perfection, etc. The Borrowers and Guarantors shall at
any time and from time to time, whether or not Revised Article 9 is in effect in
any particular jurisdiction, take such steps as the Agent may reasonably request
for the Agent (a) to obtain an acknowledgement, in form and substance reasonably
satisfactory to the Agent, of any bailee having possession of any of the
Collateral that the bailee holds such Collateral for the Agent, (b) to obtain
"control" of any investment property, deposit accounts, letter-of-credit rights
or electronic chattel paper (as such terms are defined in Revised Article 9 with
corresponding provisions in Rev. ss.ss.9-104, 9-105, 9-106 and 9-107 relating to
what constitutes "control" for such items of Collateral), with any agreements
establishing control to be in form and substance satisfactory to the Agent, and
(c) otherwise to insure the continued perfection and priority of the Agent's
security interest in any of the Collateral and of the preservation of its rights
therein, whether in anticipation and following the effectiveness of Revised
Article 9 in any jurisdiction.
135
(d) Savings Clause. Nothing contained in his Section 8.4 shall be
construed to narrow the scope of the Agent's security interest in any of the
Collateral or the perfection or priority thereof or to impair otherwise limit
any of the rights, powers, privileges or remedies of the Agent or any Lender
hereunder except (and then only to the extent) mandated by Revised Article 9 to
the extent then applicable.
8.5 Leasehold and Real Estate Interests
-----------------------------------
(a) The Borrowers and Guarantors hereby grant to the Agent, for
the benefit of the Agent and the Lenders, without further order of the
Bankruptcy Court, a security interest in, collateral assignment of, and mortgage
upon all of the Borrowers' and Guarantors' Real Estate Interests and the
Proceeds of all Leasehold Interests and to secure all Liabilities, and with
respect to the Guarantors, to secured their obligations under their respective
Guaranties, all of which shall be included within the term Collateral, as
defined herein. The Borrowers and Guarantors agree to execute and deliver to
Agent, upon the request of Agent, one or more mortgages, as the case may be,
which are acceptable to Agent and its counsel with respect to Borrowers' and
Guarantors' Real Estate Interests, as the case may be, duly executed and
acknowledged on behalf of the Borrowers and Guarantors and in proper form for
recording in the appropriate land records with the appropriate county or
municipal filing officer ( "REAL ESTATE MORTGAGES", as the case may be),
together with any UCC-1 financing statements covering any ancillary security
interest granted under any of the Real Estate Mortgages, as the case may be, and
has provided herewith full legal descriptions, including the identity of each
fee owner, of each Real Estate Mortgage, as the case may be.
(b) The Borrowers and Guarantors shall pay all fees and expenses
associated with any recordation of the Real Estate Mortgages, including, without
limitation, reasonable
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attorney's fees and legal expenses incurred by Agent's retention of local real
estate counsel, if necessary.
(c) The Borrowers and Guarantors shall, at the Agent's direction
upon or following an Event of Default, immediately effect any disposition,
transfer, assignment, sale or other conveyance of any or all of the Borrowers'
and Guarantors' Leasehold Interests in such form as may be requested by the
Agent.
ARTICLE IX - AGENT AS BORROWERS' AND GUARANTORS' ATTORNEY-IN-FACT:
9.1. Appointment as Attorney-In-Fact. The Borrowers and Guarantors
hereby irrevocably constitute and appoint the Agent as the Borrowers' and
Guarantors' true and lawful attorney, with full power of substitution, effective
following Acceleration to convert the Collateral into cash at the sole risk,
cost, and expense of the Borrower and Guarantors, but for the ratable benefit of
the Agent and the Lenders. The rights and powers granted the Agent by the within
appointment include but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action relating
to the Collateral.
(b) Sign change of address forms to change the address to which
the Borrowers' and Guarantors' mail is to be sent to such address as the Agent
shall designate; receive and open the Borrowers' and Guarantors' mail; remove
any Receivables Collateral and Proceeds of Collateral therefrom and turn over
the balance of such mail either to the Borrowers or Guarantors or to any trustee
in bankruptcy, receiver, assignee for the benefit of creditors of the Borrowers
or Guarantors, or other legal representative of the Borrowers or Guarantors whom
the Agent determines to be the appropriate person to whom to so turn over such
mail.
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(c) Endorse the name of the Borrowers and Guarantors in favor of
the Agent upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrowers and Guarantors on, and
receive as secured party, any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title respectively relating to the
Collateral (with copies of the foregoing to be made available by Agent to the
Lead Borrower).
(d) Sign the name of the Borrowers and Guarantors on any notice
to the Borrowers' and Guarantors' Account Debtors or verification of the
Receivables Collateral; sign the Borrowers' and Guarantors' name on any proof of
claim in bankruptcy against Account Debtors, and on notices of lien, claims of
mechanic's liens, or assignments or releases of mechanic's liens securing the
Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the
Borrowers and Guarantors are a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrowers and Guarantors.
(g) Use, license or transfer any or all General Intangibles of
the Borrowers and Guarantors.
9.2. No Obligation to Act. The Agent shall not be obligated to do any
of the acts or to exercise any of the powers authorized by Section 9.1 herein,
but if the Agent elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result of the
reasonable exercise of such power, and shall not be responsible to the
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Borrowers and Guarantors for any act or omission to act except for any act or
omission to act as to which there is a final determination made in a judicial
proceeding (in which proceeding the Agent has had an opportunity to be heard)
which determination includes a specific finding that the subject act or omission
to act had been grossly negligent, actual bad faith, constituted willful
misconduct or was commercially unreasonable.
ARTICLE X - EVENTS OF DEFAULT:
The occurrence of any event described in this Article X shall, upon
the passage of any applicable grace or cure period, constitute an "EVENT OF
DEFAULT". Upon the occurrence of any Event of Default, any and all Liabilities
shall become immediately due and payable, at the option of the Agent or at the
direction of the requisite Lenders (as provided in Article XVI) and upon notice
or demand to the Lead Borrower. The occurrence of any Event of Default shall
also constitute, without notice or demand, a default under all other agreements
between the Agent or any Lender and the Borrowers and instruments, whether such
agreements now exist or hereafter arise.
10.1. Failure to Pay Revolving Credit or Tranche B Loan. The failure
by the Borrowers to pay (i) any principal amount when due and (ii) any interest
or fees within three (3) Business Days of when due, under the Revolving Credit
or the Tranche B Loan.
10.2. Failure To Make Other Payments. The failure by the Borrowers to
pay within five (5) Business Days of when due (or upon demand, if payable on
demand) any payment Liability other than those referred to in Section 10.1
above.
10.3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by the Borrowers to promptly, punctually, faithfully and timely perform,
discharge, or comply with any
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covenant or Liability not otherwise described in Section 10.1 or Section 10.2
hereof, and included in any of the following provisions hereof:
Section Relates to
------- ----------
4.3(b) Notice of Name Change
4.6 Location of Collateral
4.7 Title to Assets
4.8 Indebtedness
4.10 Insurance Policies
4.15 Pay taxes
4.20 Dividends, Investments, Repurchases
and Debt Retirement
4.25 Additional Assurances
4.29 Security Documents
4.30 Return of Property
4.31 Bankruptcy Proceedings
5.1 Maintain Records
5.2 Access to Records
5.3 Immediate Notice to Agent
5.4 Borrowing Base Certificate
5.10 Inventories, Appraisals, and Audits
5.11 Additional Financial Information
5.12 Financial Performance Covenants
6.1 Use of Collateral
Article VII Cash Management
PROVIDED, HOWEVER, that in the case of a breach of any covenant set forth in
Sections 4.3, 4.6, 4.7, 4.15 and 4.25, no such occurrence (either singly or in
the aggregate) shall be an Event of Default unless it (i) has a Material Adverse
Effect, (ii) results in an impairment, loss or diminution of
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Collateral of $3 Million ($3,000,000.00) or more or (iii) is not cured within
five (5) days written notice from the Agent as provided in Section 10.4;
PROVIDED FURTHER, HOWEVER, in the case of Section 5.4, no such occurrence shall
be an Event of Default if cured within one (1) Business Day.
10.4. Failure to Perform Covenant or Liability (Grace Period). The
failure by the Borrowers or Guarantors, upon ten (10) days written notice by the
Agent to the Lead Borrower, to cure the Borrowers' failure to promptly,
punctually and faithfully perform, discharge, or comply with any covenant or
Liability under this Agreement or any of the other Loan Documents not described
in any of Sections 10.1, 10.2, or 10.3 hereof.
10.5. Misrepresentation. The reasonable determination by the Agent,
made in good faith that any material representation or warranty at any time made
by the Borrowers to the Agent or any Lender, was not true or complete in all
material respects when given. 10.6. Default Under Other Debt; Breach of Lease.
Any Borrower or Guarantor shall fail to make any payment (whether of principal
or interest) when due and payable in respect of, or the occurrence of any event
such that a default has occurred (after giving effect to the expiration of any
grace or cure period applicable thereto) under any Indebtedness arising or
incurred after the Petition Date of the Borrowers or Guarantors in excess of $1
million ($1,000,000.00) to any creditor other than the Agent or any Lenders, or
the holder of such Indebtedness has the right to accelerate it, or without the
consent of such Borrowers, ten (10) Leases are terminated (excluding the Leases
for the locations closed or previously closed pursuant to Section 4.6(d)(iv)) at
any given time after the Petition Date.
10.7. Default Under Other Agreements. The occurrence of any breach or
default under any agreement between the Agent and the Borrowers (and which does
not constitute a Loan
141
Document), whether such agreement now exists or hereafter arises
(notwithstanding that the Agent may not have exercised its rights upon default
under any such other agreement, instrument or paper), which breach has not been
cured within twenty (20) days or (if more) any applicable cure period.
10.8. Uninsured Casualty Loss. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral,
in excess of $1 Million ($1,000,000.00) during any calendar year while this
Agreement is in effect.
10.9. Judgment; Restraint of Business..
-------------------------------
(a) The service of process upon the Agent or any Lender or any
Participant seeking to attach, by trustee, means, or other process, any of a
Borrower's funds on deposit with, or assets of such Borrower in the possession
of, the Agent or any Lender or such Participant, which is not timely contested
in good faith by such Borrower by appropriate proceedings, or if so contested,
is not dismissed within the applicable appeals period.
(b) The entry of any judgments that are not stayed by the
Proceedings against any Borrower or group of Borrowers in excess of $2.5 Million
(for Post-Petition Indebtedness) (net of insurance) in the aggregate, which
judgment(s) are not satisfied (if a money judgment), bonded or appealed from
(with execution or similar process stayed) within the applicable appeal period.
(c) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain in any material way
the conduct by any Borrower of its business in the ordinary course which would
result in a Material Adverse Effect.
10.10. Business Failure. Other than to the extent permitted by Section
4.6(b)(iv) hereof: any act by, against, or relating to any Borrower, or its
property or assets, which act
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constitutes the determination, by such Borrower, whether or not by vote of such
Borrower's board of directors, to suspend the operation of such Borrower's
business in the ordinary course, initiate a program of partial or total
self-liquidation; employ an agent or other third party to conduct any so-called
store closing, store liquidation, or going-out-of business sales; application
for, consent to, or sufferance of the appointment of a receiver, trustee, or
other person, pursuant to court action or otherwise, over all, or any part of
any Borrower's property; or the occurrence of any other voluntary or involuntary
liquidation; and/or the initiation by or on behalf of such Borrower of the
liquidation or winding up of all or any part of such Borrower's business or
operations; or the filing by any Borrower or any person authorized to act on a
Borrower's behalf of a motion or other application in the Proceedings seeking
authority to do any of the foregoing.
10.11. Reserved.
--------
10.12. Indictment; Forfeiture. The indictment of, or institution of
any legal process or proceeding against, any Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of any property of any
Borrower and/or the imposition of any stay or other order, to the extent such
relief, penalties, remedies, stay or other order would reasonably be expected to
have a Material Adverse Effect.
10.13 Foreign Proceeding. There occurs in relation to any Borrower in
any country or territory in which it carries on business or, to the jurisdiction
of whose courts any of its assets is subject, any event which, in the reasonable
opinion of the Agent, appears to correspond to or to have an effect equivalent
or substantially similar to any of those referenced in Sections 10.9 through and
including 10.12 or any Borrower becomes subject (other than as a creditor or
claimant) in any such country or territory to the operation of any law relating
to bankruptcy,
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insolvency, or liquidation, to the extent such event or such Borrower becoming
subject to such a law would result in a Material Adverse Effect.
10.14. Challenge to Loan Documents.
---------------------------
(a) Any challenge in writing by or on behalf of any Borrower or
any guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the material substance of such Loan Document's terms or which seeks to void,
avoid, limit, or otherwise adversely affect any security interest created by or
in any Loan Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable substantially in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any material security interest created by
any Loan Document or which determines any material payment made pursuant thereto
is void or voidable.
10.15. Change in Control. Any Change in Control.
10.16 Reserved.
--------
10.17 Reserved.
--------
10.18 Failure to Comply. The Borrowers or Guarantors fail to comply or
shall default in the performance of any term of the Borrowing Order.
10.19 Changes in Borrowing Order. The Borrowers or Guarantors (except
following the Agent's prior written request or with the Agent's express prior
written consent) file a motion with the Bankruptcy Court or any other court with
jurisdiction in the matter seeking an order, or an order is otherwise entered,
modifying, reversing, revoking, staying, rescinding, vacating, or amending any
Borrowing Order or any of the other Loan Documents, without the Agent's express
prior written consent (and no such consent shall be implied from any other
action, inaction, or acquiescence of the Agent).
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10.20 Plan of Reorganization. The Borrowers or Guarantors file, or any
other person obtains Bankruptcy Court approval of a Disclosure Statement for, a
Plan which does not provide for the full, final, and irrevocable repayment of
all of the Liabilities upon the effectiveness of such plan, unless the Agent has
expressly joined in or consented to such plan in writing.
10.21 Approval of Senior Claims or Liens. The Borrowers or Guarantors
file any motion or application, or the Bankruptcy Court allows the motion or
application of any other Person, which seeks approval for or allowance of any
claim, lien, security interest ranking equal or senior in priority to the
claims, liens and security interests granted to the Agent under any Borrowing
Order, this Agreement, or the other Loan Documents or any such equal or prior
claim, lien, or security interest shall be established in any manner, except, in
any case, for any Permitted Lien, or as otherwise expressly permitted under any
Borrowing Order.
10.22 Termination of Agent's Security Interests. Except for expiration
or termination in accordance with any Borrowing Order, the terms of the Loan
Documents, or the sale of Inventory in the ordinary course of business, any of
the Loan Documents or any lien or security interest of the Agent created
thereunder ceases for any reason to be in full force and effect or to have the
priority provided in a Borrowing Order, or the Borrowers or Guarantors file any
motion or application or adversary proceeding to challenge the validity,
enforceability, perfection or priority of any of the Loan Documents or any of
such liens and security interests.
10.23 Interim Borrowing Order. The Interim Borrowing Order ceases to
be in full force and effect and the Final Borrowing Order has not been entered
by the Bankruptcy Court prior to such cessation.
10.24 Final Borrowing Order. The Bankruptcy Court has not entered a
Final Borrowing Order satisfactory in all respects to the Agent and the Tranche
B Lender on or before June 15, 2001 or the Final Borrowing Order ceases to be in
full force and effect from and after the date of entry thereof by the Bankruptcy
Court.
10.25 Appointment of Trustee or Examiner. The appointment in the
Proceedings of a trustee, or any other fiduciary for the Borrowers, the
Guarantors or any property of any Borrower's or Guarantor's estate, or of any
examiner.
10.26 Dismissal or Conversion of Case. The entry of an order
dismissing the Proceedings or converting any Borrower's or Guarantor's case to a
case under Chapter 7 of the Bankruptcy Code.
10.27 Relief from Stay. The entry of an order which provides relief
from the automatic stay otherwise imposed pursuant to section 362 of the
Bankruptcy Code, which order permits any creditor, other than the Agent, to
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realize upon, or to exercise any right or remedy with respect to, any asset of
the Borrowers or Guarantors or to terminate any license, franchise, or similar
agreement, where such termination could have a material adverse effect on any
Borrower's or Guarantor's financial condition or ability to conduct its business
in the ordinary course.
10.28 Guarantors. Any default by a Guarantor pursuant to the terms of
its guaranty or any other document, instrument or agreement executed and/or
delivered by it for the benefit of the Agent or any Lender in respect of the
Liabilities.
10.29 Discharge of Pre-Petition Indebtedness. The Borrowers or
Guarantors shall pay or discharge any Indebtedness arising prior to the Petition
Date (other than (i) pursuant to customary first day orders reasonably
acceptable to the Agent, or (ii) the payment of obligations under the
Pre-Petition Loan Agreement).
10.30 Cash Collateral. The Borrowers or Guarantors (or any other
person in the case of clause (ii)) shall file a motion in the Proceedings (i) to
use cash collateral of the Agent or the Lenders under Section 363(c) of the
Bankruptcy Code without the Agent's consent, (ii) to recover from any portions
of the Collateral any costs or expenses of preserving or disposing of such
Collateral under Section 506(c) of the Bankruptcy Code, or (iii) to take any
other action or actions adverse to the Agent or the Lenders or their rights and
remedies hereunder or under any of the other Loan Documents or the Agent's
interest in any of the Collateral.
10.31 Adequate Protection. Any adequate protection is granted by the
Borrowers or Guarantors or is ordered by the Bankruptcy Court in the Proceedings
in favor of the Borrowers' or Guarantors' Pre-Petition creditors without the
consent of the Agent, or any such adequate protection is modified or expanded
without the consent of the Agent.
ARTICLE XI - RIGHTS AND REMEDIES UPON DEFAULT COLLATERAL:
Upon Acceleration, and at all times thereafter, and subject to any
Bankruptcy Court order as may be required under the terms of the Borrowing
Orders, the Agent shall have the following
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rights and remedies in addition to all of the rights, remedies, powers,
privileges, and discretions which the Agent is provided prior to the occurrence
of an Event of Default:.
11.1. Rights of Enforcement. The Agent shall have all of the rights
and remedies of a secured party upon default under the UCC, in addition to which
the Agent shall have all and each of the following rights and remedies after and
during the occurrence of any Event of Default:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral;
(b) To take possession of all or any portion of the Collateral;
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Agent deems advisable and with or without the taking of possession of any of
the Collateral;
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral;
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities; and
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11.2. Sale of Collateral.
------------------
(a) Subject to any requirement of the Borrowing Orders, any sale
or other disposition of the Collateral may be at public or private sale upon
such terms and in such manner as the Agent deems advisable, having due regard to
compliance with any statute or regulation which might affect, limit, or apply to
the Agent's disposition of the Collateral.
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(b) Subject to any requirement of the Borrowing Orders, the
Agent, in the exercise of the Agent's rights and remedies upon default, may
conduct one or more going out of business sales, in the Agent's own right or by
one or more agents and contractors. Such sale(s) may be conducted upon any
premises owned, leased, or occupied by any Borrower or Guarantor. The Agent and
any such agent or contractor, in conjunction with any such sale, may augment the
Inventory with other goods (all of which other goods shall remain the sole
property of the Agent or such agent or contractor). Any amounts realized from
the sale of such goods which constitute augmentations to the Inventory (net of
an allocable share of the costs and expenses incurred in their disposition)
shall be the sole property of the Agent or such agent or contractor and neither
the Borrowers, the Guarantors, nor any Person claiming under or in right of the
Borrowers or Guarantors shall have any interest therein.
(c) Subject to any requirement of the Borrowing Orders, unless
the Collateral is perishable or threatens to decline speedily in value, or is of
a type customarily sold on a recognized market (in which event the Agent shall
provide the Lead Borrower with such notice as may be practicable under the
circumstances), the Agent shall give the Lead Borrower at least ten (10) days
prior written notice of the date, time, and place of any proposed public sale,
and of the date after which any private sale or other disposition of the
Collateral may be made. The Borrowers and Guarantors agree that such written
notice shall satisfy all requirements for notice to the Borrowers and Guarantors
which are imposed under the UCC or other applicable law with respect to the
exercise of the Agent's rights and remedies upon default.
(d) Subject to any requirement of the Borrowing Orders, the Agent
and any Lender may, to the extent permitted by the UCC, purchase the Collateral,
or any portion of it at any sale held under this Article.
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(e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Agent on credit, the Liabilities shall be deemed to have been
reduced as a result thereof to the extent that payment is finally received
thereon by the Agent.
(f) The Agent shall apply the proceeds of any exercise of the
Agent's Rights and Remedies under this Article 11 towards the Liabilities in the
manner set forth in Section 14.9.
11.3. Occupation of Business Location. In connection with the Agent's
exercise of the Agent's rights under this Article XI, the Agent may, unless
prohibited by law, enter upon, occupy, and use any premises owned or occupied by
any Borrower or Guarantor, and may, unless prohibit by law, exclude the
Borrowers and Guarantors from such premises or portion thereof as may have been
so entered upon, occupied, or used by the Agent. The Agent shall not be required
to remove any of the Collateral from any such premises upon the Agent's taking
possession thereof, and may render any Collateral unusable to the Borrowers or
Guarantors. In no event shall the Agent be liable to the Borrowers or Guarantors
for use or occupancy by the Agent of premises to this Article XI, nor for any
charge (such as wages for the Borrowers' or Guarantors' employees and utilities)
incurred in connection with the Agent's exercise of the Agent's Rights and
Remedies.
11.4. Grant of Nonexclusive License. Each Borrower and Guarantor
hereby grants to the Agent a royalty free nonexclusive irrevocable license,
subject to the terms of any applicable licensing agreement, with any third party
licensor, to use, apply, and affix any trademark, trade name, logo, or the like
in which the Borrower or Guarantor, as the case may be, now or hereafter has
rights, such license being with respect to the Agent's exercise of the rights
hereunder, in connection with any sale or other disposition of Inventory.
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11.5. Assembly of Collateral. The Agent may require the Borrowers and
Guarantors to assemble the Collateral and make it available to the Agent at the
Borrowers' and Guarantors' sole risk and expense at a place or places which are
reasonably convenient to both the Agent and Borrowers and Guarantors.
11.6. Rights and Remedies. The rights, remedies, powers, privileges,
and discretions of the Agent hereunder (herein, the "AGENT'S RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by the Agent in exercising or
enforcing any of the Agent's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Agent of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
any of the Agent's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Agent and any person, at
any time, regarding a particular, limited exercise of the Agent's Rights and
Remedies shall preclude any other or further exercise of the Agent's Rights and
Remedies. No waiver by the Agent of any of the Agent's Rights and Remedies on
any one occasion shall be deemed a waiver on any subsequent occasion, nor shall
it, in the absence of express provisions in that regard, be deemed a continuing
waiver. All of the Agent's Rights and Remedies and all of the Agent's rights,
remedies, powers, privileges, and discretions under any other agreement or
transaction may be exercised by the Agent at such time or times and in such
order of preference as the Agent in its sole discretion may determine. The
Agent's Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.
ARTICLE XII - NOTICES:
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12.1 Notice Addresses. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit or the Tranche B Loan)
shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given as provided in Section 12.2:
If to the Agent: Fleet Retail Finance Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇.▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director
Fax: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Freed & Gesmer
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Tranche B Lender: Back Bay Capital Funding, LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, Director
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Borrowers
or the Guarantors: Lechters, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Financial Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO: ▇▇▇▇▇ ▇▇▇▇▇, General Counsel
Lechters, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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12.2. Notice Given.
------------
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or three
(3) days following deposit in the United States mail, postage prepaid.
(ii) By recognized overnight express delivery: the Business
Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after 9:00 AM
and no later than two (2) hours prior to the close of customary
business hours of the recipient, when delivered. Otherwise, at the
opening of the next succeeding Business Day.
(iv) By facsimile transmission (which must include a header
on which the party sending such transmission is indicated): If sent on
a Business Day after 9:00 AM and no later than two (2) hours prior to
the close of customary business hours of the recipient, one (1) hour
after being sent. Otherwise, at the opening of the next succeeding
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or facsimile number for which no due notice
was given shall each be deemed receipt of the notice sent.
ARTICLE XIII - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:
13.1. Revolving Credit Funding Procedures. Subject to Section 13.2:
(a) The Agent shall advise each of the Tranche A Lenders by no
later than 2:00 PM (Boston Time) on any day on which any Revolving Credit Loan
other than a SwingLine
152
Loan is to be made. Such advice, in each instance, may be by telephone, provided
that any such telephonic advice shall be confirmed in writing and shall include
reference (as applicable) to the interest rate applicable to the proposed
Revolving Credit Loan.
(b) Each Tranche A Lender, by no later than the end of business
on the day on which the subject Revolving Credit Loan is to be made, subject to
that Tranche A Lender's Tranche A Dollar Commitment, shall transfer that Tranche
A Lender's Tranche A Percentage Commitment of the requested Revolving Credit
Loan to the Agent.
13.2 SwingLine Loans.
---------------
(a) In the event that, when a Revolving Credit Loan is requested,
the aggregate unpaid balance of the SwingLine Loan is less than the SwingLine
Loan Ceiling, then the SwingLine Lender may advise the Agent that the SwingLine
Lender has determined to include up to the amount of the requested Revolving
Credit Loan as part of the SwingLine Loan. In such event, the SwingLine Lender
shall transfer the amount of the requested Revolving Credit Loan to the Agent.
(b) The SwingLine Loan shall be converted to a Revolving Credit
Loan in which all Tranche A Lenders participate as follows:
(i) Weekly, the SwingLine Lender shall advise the Agent that
the SwingLine Loan is to be converted to a Revolving Credit Loan in
which all Tranche A Lenders participate.
(ii) At the initiation of a Liquidation, the entire unpaid
principal balance of the SwingLine Loan shall be converted to a
Revolving Credit Loan in which all Tranche A Lenders participate. In
either such event, the Agent shall advise each
153
Tranche A Lender of such conversion as if, and with the same effect as
if such conversion were the making of a Revolving Credit Loan as
provided in Section 13.1.
(c) The SwingLine Lender, in separate capacities, may also be the
Agent and a Tranche A Lender.
(d) The SwingLine Lender, in its capacity as SwingLine Lender, is
not a "Tranche A Lender" for any of the following purposes:
(i) Except as otherwise specifically provided in the
relevant Section, any distribution pursuant to Section 14.9. (ii)
Determination of whether the requisite Tranche A Commitment Percentage
has Consented to action requiring such Consent.
13.3 Agent's Covering of Fundings.
----------------------------
(a) Each Tranche A Lender shall make available to the Agent, as
provided herein, that Tranche A Lender's Commitment Percentage of the following:
(i) Each Revolving Credit Loan, up to the maximum
amount of that Tranche A Lender's Tranche A Dollar Commitment.
(ii) Each L/C Drawing (to the extent that such L/C
Drawing is not "covered" by a Revolving Credit Loan as provided
herein).
(b) In all circumstances, the Agent may:
(i) Assume that each Tranche A Lender timely shall make
available to the Agent that Tranche A Lender's Tranche A Commitment
Percentage of each Revolving Credit Loan notice of which is provided
pursuant to Section 12.1 and shall make available, to the extent not
"covered" by a Revolving Credit Loan, its Tranche A Commitment
Percentage of each L/C Drawing.
154
(ii) In reliance upon such assumption, make available the
corresponding amount to the Borrowers. (iii) Assume that each Tranche
A Lender timely shall pay, and shall make available, to the Agent all
other amounts which that Tranche A Lender is obligated to so pay
and/or make available hereunder or under any of the Loan Documents.
(c) In the event that, in reliance upon any of such assumptions,
the Agent makes available advances or pays a Tranche A Lender's Tranche A
Commitment Percentage of one (1) or more Revolving Credit Loans, L/C drawings,
or any other amount to be made available hereunder or under any of the Loan
Documents with respect to the Revolving Credit, which amounts a Tranche A Lender
(a "DELINQUENT TRANCHE A LENDER") fails to provide to the Agent within one (1)
Business Day of written notice of such failure, then:
(i) The amount which had been made available by the Agent is
an "AGENT'S COVER".
(ii) All interest paid by the Borrowers on account of a
Revolving Credit Loan or coverage of a L/C drawing which relate to an
Agent's Cover shall be retained by the Agent until the Agent's Cover
has been paid with interest by the applicable Delinquent Tranche A
Lender.
(iii) The Delinquent Tranche A Lender shall pay to the
Agent, on demand, interest (based upon a 360 day year and actual days
elapsed) at a rate equal to the weighted average interest rate paid by
the Agent for federal funds during the period during which such amount
remains unpaid, on the principal balance of the Agent's Cover, from
the date of the making of the Agent's Cover until repaid.
155
(iv) The Agent shall succeed to all rights to payment to
which the Delinquent Tranche A Lender otherwise would have been
entitled hereunder in respect of those amounts paid by or in respect
of the Borrowers on account of any Agent's Cover together with
interest until it is repaid by the applicable Delinquent Tranche A
Lender. Such payments shall be deemed made first towards the amounts
in respect of which the Agent's Cover was provided and only then
towards amounts in which the Delinquent Tranche A Lender is then
participating. For purposes of distributions to be made pursuant to
Section 13.4(a) (which relates to ordinary course distributions) or
Section 14.7 (which relates to distributions of proceeds of a
Liquidation) below, amounts shall be deemed distributable to a
Delinquent Tranche A Lender (and consequently, to the Agent to the
extent to which the Agent is then entitled) at the highest level of
distribution (if applicable) at which the Delinquent Tranche A Lender
would otherwise have been entitled to a distribution.
(v) Subject to Subsection 13.3(c)(iv), the Delinquent
Tranche A Lender shall be entitled to receive any payments from the
Borrower which do not relate to an Agent's Cover.
(d) A Delinquent Tranche A Lender shall not be relieved, by
virtue of any Agent's Cover or otherwise, of any obligation of such Delinquent
Tranche A Lender hereunder (all and each of which shall constitute continuing
obligations on the part of any Delinquent Tranche A Lender).
(e) A Delinquent Tranche A Lender may cure its status as a
Delinquent Tranche A Lender by paying the Agent the aggregate of the following:
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(i) The Agent's Cover (to the extent not previously repaid
by the Borrower and retained by the Agent in accordance with
Subsection 13.3(c)(iv), above) with respect to that Delinquent Tranche
A Lender.
PLUS
(ii) Any interest payable under Subsection 13.3(c)(iii),
above.
PLUS
(iii) All such costs and expenses as may be incurred by the
Agent in the enforcement of the Agent's rights against such Delinquent
Tranche A Lender.
13.4 Ordinary Course Distributions: Revolving Credit. This Section
13.4 applies unless the provisions of Section 14.9 (which relates to
distributions in the event of a Liquidation) become operative.
(a) Weekly, on such day as may be set from time to time by the
Agent (or more frequently at the Agent's option) the Agent and each Tranche A
Lender shall settle up on amounts advanced and payments received under the
Revolving Credit.
(b) The Agent shall distribute to the SwingLine Lender and to
each Tranche A Lender, their respective Pro-Rata shares of interest payments on
the Revolving Credit Loans when actually received and collected by the Agent
(excluding the one (1) Business Day settlement delay to the extent provided for
in Section 8.6(a), which shall be for the account of the Agent only). For
purposes of calculating interest due to a Tranche A Lender, that Tranche A
Lender shall be entitled to receive interest on the actual amount contributed by
that Tranche A Lender towards the principal balance of the Revolving Credit
Loans outstanding during the applicable period covered by the interest payment
made by the Borrowers. Any net principal reductions to the Revolving Credit
Loans received by the Agent in accordance with the Loan
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Documents during such period shall not reduce such actual amount so contributed,
for purposes of calculation of interest due to that Tranche A Lender, until the
Agent has distributed to that Tranche A Lender its Pro-Rata share thereof.
(c) The Agent shall distribute fees paid on account of the
Revolving Credit, as follows: (i) Unused (Line) Fee and Upfront Fee: Pro-Rata to
the Tranche A Lenders. (ii) Tranche A Early Termination Fee: Pro-Rata to the
Tranche A Lenders. (iii) Structuring Fee: As provided in separate fee letter
between the Agent and the Lead Borrower. (iv) Agency Fee: As provided in
separate fee letter between the Agent and the Lead Borrower.
(d) No Lender shall have any interest in, or right to receive any
part of the Structuring Fee or Agent's Fee to be paid by the Borrowers to the
Agent pursuant to the separate fee letters.
(e) Any amount received by the Agent as reimbursement for any
cost or expense (including without limitation, reasonable attorneys' fees) shall
be distributed by the Agent to the Person entitled to such reimbursement as
provided in this Agreement.
(f) Each distribution pursuant to this Section 13.4 is subject to
Section 13.3(c), above (which relates to Delinquent Lenders).
(g) Except as otherwise provided in Section 14.9 below (which
relates to distributions on account of a Liquidation), the Agent promptly shall
distribute to the Tranche B
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Lender, as provided in this Section, payments made by the Borrowers on account
of the Tranche B Obligations to the extent such payments are actually received
and collected by the Agent, or are made available to the Agent. The Agent shall
distribute to the Tranche B Lender the payments on account of principal of,
interest on, and fees in respect of the Tranche B Obligations as received and
collected by the Agent from the Borrowers or as made available by the Agent as
the proceeds of advances under the Revolving Credit.
ARTICLE XIV- ACCELERATION AND LIQUIDATION:
14.1 Acceleration Notices.
--------------------
The SuperMajority Lenders may give the Agent an Acceleration Notice at
any time following the occurrence of an Event of Default. Such notice may be by
multiple counterparts, PROVIDED THAT counterparts executed by the requisite
Lenders are received by the Agent within a period of five (5) consecutive
Business Days.
14.2 Acceleration Notice by the Tranche B Lender.
-------------------------------------------
The Tranche B Lender may give the Agent an Acceleration Notice as
follows: (a) At any time following the occurrence of an Event of Default which
occurs after payment
of all Tranche A Liabilities and the obligation of the Tranche A Lenders to make
Revolving Credit Loans and other financial accommodations hereunder has been
terminated.
(b) At any time following any default under Sections 10.10, with
respect to any Borrower. (c) At any time as permitted pursuant to Section 14.3
below.
14.3 Mandatory Acceleration Right of Tranche B Lender.
------------------------------------------------
(a) Following the occurrence of any Borrower Default, the Tranche
B Lender may initiate a Standstill Period by written notice to the Agent.
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(b) Upon the expiry of the relevant Standstill Period, the
Tranche B Lender may give the Agent an Acceleration Notice unless:
(i) If the relevant Borrower Default is a Borrowing Base
Default, the sum of the Loan Account (other than the outstanding
amount of the Tranche B Loans) plus the then stated amount of the L/Cs
is restored to and remains less than or equal to the Borrowing Base
for at least Ten (10) consecutive days during the relevant Standstill
Period.
(ii) If the relevant Borrower Default is a Tranche B Payment
Default, all then due Tranche B Debt Payments (other than those which
would be due only if Tranche B Loans were accelerated) have been paid.
(iii) If the relevant Borrower Default is a General Default,
such General Default has been duly waived by the Agent (with the
consent of the requisite Lenders, as provided in this Agreement) in
accordance with this Agreement.
(iv) Acceleration has been stayed by judicial or statutory
process.
(v) If the relevant Borrower Default is an Availability
Default, such Availability Default is cured for a period of at least
ten (10) consecutive days during the Standstill Period.
(c) In the event that the Tranche B Lender is not permitted to
give an Acceleration Notice in accordance with Section 14.3 (b) above due to the
occurrence of an event described in Sections 14.3 (b)(i)-(iv), above, then the
relevant Standstill Period shall be reset for any subsequent Borrower Default
which triggers the mandatory acceleration right of the Tranche B Lender under
this Section.
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14.4 Acceleration. Unless stayed by judicial or statutory process, the
Agent shall Accelerate the Liabilities (including any Liabilities in respect of
the Tranche B Obligations) under the Loan Documents within a commercially
reasonable time following:
(a) The Agent's receipt of an Acceleration Notice from the
SuperMajority Lenders, in compliance with Section 14.1.
(b) The Agent's receipt of an Acceleration Notice from the
Tranche B Lender, in compliance with Section 14.2.
14.5 Initiation of Liquidation. Unless stayed by judicial or statutory
process, a Liquidation may (and upon the direction of the Majority Lenders,
shall) be initiated by the Agent within a commercially reasonable time following
Acceleration of the Liabilities pursuant to Agent's receipt of an Acceleration
Notice under Section 14.4.
14.6 Actions At and Following Initiation of Liquidation.
--------------------------------------------------
(a) At the initiation of a Liquidation:
(i) The unpaid principal balance of the SwingLine Loan (if
any) shall be converted, pursuant to Section 13.1, to a Revolving
Credit Loan in which all Tranche A Lenders participate.
(ii) The Agent and the Tranche A Lenders shall "net out"
each Tranche A Lender's respective contributions towards the Revolving
Credit Loans, so that each Tranche A Lender holds that Tranche A
Lender's Revolving Credit Commitment Percentage of the Revolving
Credit Loans.
(b) Following the initiation of a Liquidation, each Tranche A
Lender shall contribute towards any L/C thereafter honored and not immediately
reimbursed by the Borrowers that Tranche A Lender's Revolving Credit Tranche A
Commitment Percentage of such honoring.
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14.7 Agent's Conduct of Liquidation.
------------------------------
(a) Any Liquidation shall be conducted by the Agent with the
advice and assistance of the Lenders.
(b) The Agent may establish one or more Nominees to "bid in" or
otherwise acquire ownership to any Post Foreclosure Asset.
(c) The Agent shall manage the Nominee and manage and dispose of
any Post Foreclosure Assets with a view towards the realization of the economic
benefits of the ownership of the Post Foreclosure Assets and in such regard, the
Agent and/or the Nominee may operate, repair, manage, maintain, develop, and
dispose of any Post Foreclosure Asset in such manner as the Agent determines is
appropriate under the circumstances.
(d) The Agent may decline to undertake or to continue taking a
course of action or to execute an action plan (whether proposed by the Agent or
by any Lender) unless indemnified to the Agent's satisfaction by the Lenders
against any and all liability and expense which may be incurred by the Agent by
reason of taking or continuing to take that course of action or action plan.
(e) The Agent and each Lender shall execute all such instruments
and documents not inconsistent with the provisions of this Agreement as the
Agent and/or the Nominee reasonably may request with respect to the creation and
governance of any Nominee, the conduct of the Liquidation, and the management
and disposition of any Post Foreclosure Asset.
14.8 Distribution of Liquidation Proceeds.
------------------------------------
(a) The Agent may establish one or more reasonably funded reserve
accounts into which proceeds of the conduct of any Liquidation may be deposited
in anticipation of future
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expenses which may be incurred by the Agent in the exercise of rights as a
secured creditor of the Borrowers and prior claims which the Agent anticipates
may need to be paid.
(b) The Agent shall distribute the proceeds of any Liquidation to
itself and the Lenders in accordance with the relative priorities set forth in
Section 14.9.
(c) Each Lender shall, on the written request of the Agent and/or
any Nominee, but not more frequently than once each month, reimburse the Agent
and/or any Nominee, Pro-Rata, for any cost or expense reasonably incurred by the
Agent and/or the Nominee in the conduct of a Liquidation, if such amount is not
covered out of current proceeds of the Liquidation.
14.9 Relative Priorities To Proceeds of Liquidation. The relative
priorities in which the proceeds of a Liquidation are to be applied are as
follows:
(a) FIRST: To the Agent as reimbursement for all Costs of
Collection incurred by the Agent and to any funded
reserve established pursuant to Section 14.6(a)
and on account of payment of the Agency Fee.
(b) SECOND: The SwingLine Lender, on account of any SwingLine
loans not converted to Revolving Credit Loans
pursuant to Section 14.4(a)(i).
(c) THIRD: The Tranche A Lenders, Tranche A Pro-Rata, on
account of the principal balance of Revolving
Credit Loans.
(d) FOURTH: The Tranche A Lenders, Tranche A Pro-Rata, on
account of accrued interest on the Revolving
Credit Loans.
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(e) FIFTH: The Tranche A Lenders, Tranche A Pro-Rata, on
account of all fees payable to the Tranche A
Lenders and the Costs of Collection incurred by
the Tranche A Lenders, including without
limitation the Unused (Line) Fee, other than the
Tranche A Early Termination Fee.
(f) SIXTH: To the Tranche B Lender to the extent of the
Tranche B Debt, including any Tranche B Deferred
Interest and any accrued interest.
(g) SEVENTH: To the Tranche B Lender to the extent of the
aggregate of all Tranche B Fees and Costs of
Collection incurred by the Tranche B Lender, other
than the Tranche B Early Termination Fee.
(h) EIGHTH: To the Tranche A Lenders, the Tranche A Early
Termination Fee.
(i) NINTH: To the Tranche B Lender, the Tranche B Early
Termination Fee.
(j) TENTH: To any other Liabilities under the Loan Documents.
ARTICLE XV - THE AGENT:
15.1 Appointment of Agent.
--------------------
(a) Each Lender appoints and designates FRF as the "Agent"
hereunder and under the other Loan Documents.
(b) Each Lender authorizes the Agent:
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(i) To execute those of the Loan Documents and all other
instruments relating thereto to which Agent is a party.
(ii) To take such action on behalf of the Lenders and to
exercise all such powers as are expressly delegated to the Agent
hereunder and in the other Loan Documents and all related
documents, together with such other powers as are reasonably
incident thereto.
15.2 Responsibilities of Agent.
-------------------------
(a) The Agent shall have principal responsibilities for and
primary authority for the administration of the credit facilities contemplated
by the Loan Documents and for all matters for which the Agent is accorded
responsibility under this Agreement, including the conduct of the Liquidation
and the distribution of the proceeds of such Liquidation.
(b) The Agent shall have no duties or responsibilities to, or any
fiduciary relationship with, any Lender except for those expressly set forth in
this Agreement.
(c) Neither the Agent nor any of its affiliates shall be
responsible to any Lender for any of the following:
(i) Any recitals, statements, representations or warranties
made by the Borrowers, or any other person.
(ii) any appraisals or other assessments of the assets of
the Borrowers or of anyone else responsible for or on account of the
Liabilities.
(iii) The value, validity, effectiveness, genuineness,
enforceability, or sufficiency of the Loan Agreement, any other Loan
Documents or any other document referred to or provided for therein.
165
(iv) Any failure by the Borrowers, or any other person
(other than the Agent) to perform their respective obligations under
the Loan Documents.
(d) The Agent may employ attorneys, accountants, and other
professionals and agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such attorneys, accountants, and other
professionals or agents or attorneys-in-fact selected by the Agent with
reasonable care. No such attorney, accountant, other professional, agent, or
attorney in fact shall be responsible for any action taken or omitted to be
taken by any other such Person.
(e) Neither the Agent, nor any of its directors, officers, or
employees shall be responsible for any action taken or omitted to be taken by
any other of them nor for any action taken or omitted to be taken in connection
herewith, or with respect to the credit facility contemplated by this Agreement,
except for any action taken or omitted to be taken as to which a final judicial
determination has been or is made (in a proceeding in which such person has had
an opportunity to be heard) that such Person had acted in a grossly negligent
manner, in actual bad faith, or in willful misconduct.
(f) The Agent shall have no responsibility in any event for more
funds than the Agent actually receives and collects.
(g) The Agent, in its separate capacity as Lender, shall have the
same rights and powers hereunder as any other Lender.
15.3 Concerning Distributions By the Agent.
-------------------------------------
(a) The Agent, in its reasonable discretion based upon its
determination of the likelihood that additional payments will be received,
expenses incurred, and/or claims made by
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third parties to all or a portion of such proceeds, may delay the distribution
of any payment received on account of the Liabilities.
(b) The Agent may disburse funds prior to determining that the
sums which the Agent expects to receive have been finally and unconditionally
paid to the Agent. If and to the extent that the Agent does disburse funds and
it later becomes apparent that the Agent did not then receive a payment in an
amount equal to the sum paid out, then any Lender to whom the Agent made the
funds available, on demand from the Agent, shall refund to the Agent the sum
paid to that person that exceeds the amount actually received by the Agent.
(c) If, in the opinion of the Agent, the distribution of any
amount received by the Agent might involve the Agent in liability, or might be
prohibited hereby, or might be questioned by any Person, then the Agent may
refrain from making distribution until the Agent's right to make distribution
has been adjudicated by a court of competent jurisdiction.
(d) The proceeds of any Lender's exercise of any right of, or in
the nature of, set-off shall be deemed, FIRST, to the extent that a Lender is
entitled to any distribution hereunder, to constitute such distribution and
SECOND, shall be shared with the other Lenders Pro-Rata based upon their
respective contributions to the then principal balance of the Revolving Credit
(and shall be deemed distributions by the Agent hereunder).
(e) Each Lender acknowledges that the crediting of the Borrowers
with the "proceeds" of any transaction in which a Post Foreclosure Asset is
acquired is a non-cash transaction and that, in consequence, no distribution of
such "proceeds" will be made by Agent to any Lender.
(f) In the event that (x) a court of competent jurisdiction shall
adjudge that any amount received and distributed by Agent is to be repaid or
disgorged, or (y) the Lenders,
167
acting by Consent of the SuperMajority Lenders, determine to effect such
repayment or disgorgement, then each Lender to which any such distribution shall
have been made shall repay, to the Agent, that Lender's Pro-Rata share of the
amount so adjudged or determined to be repaid or disgorged.
15.4 Dispute Resolution. Any dispute among the Lenders and/or the
Agent hereunder, under any of the other Loan Documents, or concerning the
interpretation, administration, or enforcement of the credit facilities
contemplated by this Agreement or the interpretation or administration of any
Loan Document which cannot be resolved amicably shall be resolved in the United
States District Court for the District of Massachusetts, sitting in Boston or in
the Superior Court of Suffolk County, Massachusetts, to the jurisdiction of
which courts all parties hereto hereby submit.
15.5 Distributions of Notices and of Documents. The Agent will forward
to each Lender, promptly after the Agent's receipt thereof, a copy of each
notice or other document furnished to the Agent pursuant to the Loan Documents,
including monthly, quarterly, and annual financial statements received from the
Borrower pursuant to Article V of this Agreement, other than any of the
following:
(a) Routine communications associated with requests for Revolving
Credit Loans and/or the issuance of L/C's.
(b) Routine and nonmaterial communications;
(c) Any notice or document required by any of the Loan Documents
to be furnished to the Lenders by the Lead Borrower or any Borrower.
(d) Any notice or document of which the Agent has knowledge that
such notice or document had been forwarded to the Lenders other than by the
Agent.
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15.6 Confidential Information.
------------------------
Each Lender will maintain, as confidential, all of the following:
(a) Proprietary approaches, techniques, and methods of analysis
which are applied by the Agent in the administration of the credit facility
contemplated by the Loan Agreement.
(b) Proprietary forms and formats utilized by the Agent in
providing reports to the Lenders pursuant hereto, which forms or formats are not
of general currency.
(c) Confidential information provided by any Borrower pursuant to
the Loan Documents, other than any information which becomes known to the
general public through sources other than that Lender. Nothing included herein
shall prohibit the disclosure of any such information as may be required to be
provided by judicial process or by regulatory authorities having jurisdiction
over any party to this Agreement.
15.7 Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, telex, or
facsimile) reasonably believed by the Agent 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 attorneys, accountants and other experts selected
by the Agent. As to any matters not expressly provided for in this Agreement,
any Loan Document, or in any other document referred to therein, the Agent shall
in all events be fully protected in acting or in refraining from acting, in
accordance with the applicable Consent required by this Agreement. Instructions
given with the requisite Consent shall be binding on all Lenders.
15.8 Non-Reliance on Agent and Other Lenders.
---------------------------------------
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(a) Each Lender represents to all other Lenders and to the Agent
that such Lender:
(i) Independently and without reliance on any representation
or act by the Agent or by any other Lender, and based on such documents and
information as that Lender has deemed appropriate, has made such Lender's own
appraisal of the financial condition and affairs of the Borrowers and decision
to enter into this Agreement and the other Loan Documents.
(ii) Has relied upon that Lender's review of the Loan
Documents and such review of the Loan Documents by counsel to that
Lender as that Lender deemed appropriate under the circumstances.
(b) Each Lender agrees that such Lender, independently and
without reliance upon the Agent or any other Lender, and based upon such
documents and information as such Lender shall deem appropriate at the time,
will continue to make such Lender's own appraisals of the financial condition
and affairs of the Borrowers when determining whether to take or not to take any
discretionary action under this Agreement or any other Loan Document.
(c) The Agent, in the discharge of its duties hereunder, shall
not be required to make inquiry of, or to inspect the properties or books of,
any Person.
(d) Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder (as to which, see Section 15.5), the Agent shall not have any
affirmative duty or responsibility to provide any Lender with any credit or
other information concerning any Person which may come into the possession of
the Agent or any of its Affiliates.
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(e) Each Lender shall have reasonable access to all documents
relating to the Agent's performance of the Agent's duties hereunder at such
Lender's request.
15.9 Indemnification. Without limiting the liabilities of the
Borrowers under any of the Loan Documents, each Lender shall indemnify the
Agent, Pro-Rata, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including reasonable attorneys' fees and expenses and
other out-of-pocket expenditures) which may at any time be imposed on, incurred
by, or asserted against the Agent and in any way relating to or arising out of
this Agreement or any other Loan Document or any documents contemplated by or
referred to therein or the transactions contemplated thereby or the enforcement
of any of the terms hereof or of any other documents, PROVIDED, HOWEVER, that no
Lender shall be liable for any of the foregoing to the extent that any of the
foregoing arises from any action taken or omitted to be taken by the Agent as to
which a final judicial determination has been or is made (in a proceeding in
which the Agent has had an opportunity to be heard) that the Agent had acted in
a grossly negligent manner or in bad faith, or has engaged in willful
misconduct.
15.10 Resignation of Agent.
--------------------
(a) The Agent may resign at any time by giving sixty (60) days
(thirty (30) days after the payment of all Tranche A Liabilities and the
obligation of the Tranche A Lenders to make Revolving Credit Loans and other
financial accommodations has terminated) prior written notice thereof to the
Lenders (including, without limitation, the Tranche B Lender) and the Lead
Borrower. Upon receipt of any such notice of resignation, the Majority Lenders,
with the consent of the Tranche B Lender, shall have the right to appoint a
successor Agent (provided, that no such consent of the Lead Borrower shall be
requested if an Event of Default has occurred,
171
and provided, further that such consent shall be deemed given if no written
objection is received within seven (7) days of the Lead Borrower's receipt of
notice of such successor). If no successor Agent shall have been so appointed
and shall have accepted such appointment within the requisite period after the
giving of notice by the Agent, then the resigning Agent may appoint a successor
Agent, which shall be either the Tranche B Lender or a financial institution
with an office in the Northeastern United States having a combined capital and
surplus in excess of $500 Million ($500,000,000.00). The consent of the
Borrowers otherwise required by this Section 15.10(a) shall not be required if
an Event of Default has occurred.
(b) Upon the acceptance of any appointment as an Agent hereunder
by a successor Agent, such successor shall thereupon succeed to, and become
vested with, all the rights, powers, privileges, and duties of the (resigning)
Agent so replaced, and the (resigning) Agent shall be discharged from the
(resigning) Agent's duties and obligations hereunder, other than on account of
any responsibility for any action taken or omitted to be taken by the
(resigning) Agent as to which a final judicial determination has been or is made
(in a proceeding in which the (resigning) Agent has had an opportunity to be
heard) that such Agent had acted in a grossly negligent manner or in bad faith
or has engaged in willful misconduct. Upon the effectiveness of the resignation
of an Agent and the appointment of a successor Agent the (resigning) Agent will,
at the cost of the Borrowers, promptly assign, without recourse (except as
provided herein) of record its rights as named party under all UCC financing
statements, mortgages and other instruments of record to the successor Agent.
(c) After the retiring Agent's resignation, the provisions of
this Agreement shall continue in effect for the retiring Agent's benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
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ARTICLE XVI - ACTION BY AGENT; CONSENTS; AMENDMENTS; WAIVERS:
16.1 Administration of Credit Facilities.
-----------------------------------
(a) Except as otherwise specifically provided in this Agreement,
the Agent may take any action with respect to the credit facility contemplated
by the Loan Documents as the Agent determines to be appropriate within its area
of responsibility and authority, as set forth in Sections 15.2(b) and 15.2(a),
PROVIDED, HOWEVER, the Agent is not under any affirmative obligation to take any
action which it is not required by this Agreement or the other Loan Documents
specifically to so take.
(b) Except as specifically provided in the following Sections of
this Agreement, whenever this Agreement or any other Loan Document provides that
action may be taken or omitted to be taken in the Agent's discretion, the Agent
shall have the sole right to take, or refrain from taking, such action without,
and notwithstanding, any vote of the Lenders:
Actions Described in Section Type of Consent Required
---------------------------- ------------------------
16.2 Majority Lenders
16.3 Super Majority Lenders
16.4 Unanimous Consent
16.5 Consent of SwingLine Lender
16.6 Tranche B Lender Consent
16.7 Agent's Consent
16.8 Miscellaneous Actions
16.9 Nonconsenting Tranche A Lenders
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(c) The rights granted to the Lenders in those sections
referenced in Section 16.1(b) shall not otherwise limit or impair the Agent's
exercise of its discretion under the Loan Documents.
(d) The Tranche A Lenders agree that, subject to Section 16.3,
any advance under the Revolving Credit which results in a Permissible Overloan
may be made by the Agent in its discretion without the Consent of the Tranche A
Lenders and that each Tranche A Lender shall be bound thereby.
16.2 Actions Requiring Consent or Direction of Majority Lenders.
Except as otherwise provided in this Agreement, the Consent or direction of the
Majority Lenders is required for any amendment, waiver, or modification of any
Loan Document.
16.3 Actions Requiring Consent or Direction of SuperMajority Lenders.
The Consent or direction of the SuperMajority Lenders is required as follows:
(a) To permit a Permissible Overloan to be outstanding for more
than sixty (60) consecutive Business Days or more than twice in any twelve (12)
month period; provided that the Tranche B Lender shall have consented thereto as
required by Section 16.6.
(b) If an Event of Default shall have occurred and be continuing,
the SuperMajority Lenders may direct the Agent to suspend the Revolving Credit
(including the making of any Permissible Overloans), whereupon, as long as such
Event of Default exists and is continuing, Revolving Credit Loans shall be made
and L/C's shall be issued, amended, or renewed only with Consent of the
SuperMajority Lenders.
(c) If an Event of Default has occurred and not been duly waived,
the SuperMajority Lenders may direct the Agent to:
(i) Give an Acceleration Notice in accordance with Section
14.l(a); or
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(ii) Increase the rate of interest on the Revolving Credit
Loans to the default rate of interest as provided in, and to the
extent permitted by, the Loan Agreement.
(d) To waive any Availability Default or to amend the definition
thereof.
16.4 Actions Requiring or Directed By Unanimous Consent. None of the
following may take place except with the written consent of each Lender
adversely affected thereby or with Unanimous Consent.
(a) Any increase in any Lender's Dollar Commitment (other than by
reason of the application of Section 16.9 (which deals with Nonconsenting
Tranche A Lenders) or Section 17.1 (which deals with assignments and
participations).
(b) Any decrease in any interest rate or fee payable to the
Tranche A Lenders on account of the Revolving Credit Loans (but with respect to
any such decrease, the Tranche B Lender's consent shall not be required).
(c) Any change to the Maturity Date.
(d) Any forgiveness of all or any portion of any payment
Liability.
(e) Any release of a material portion of the Collateral not
otherwise permitted, required or provided for in the Loan Documents.
(f) Any amendment of the definition of the terms "Borrowing
Base", or "Availability" or of any definition of any component thereof, such
that more credit would be available to the Borrowers, based on the same assets,
than would have been available to the Borrowers immediately prior to such
amendment, IT BEING UNDERSTOOD, HOWEVER, that:
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(i) The foregoing shall not limit the adjustment by the
Agent of any Reserve in the Agent's administration of the Revolving
Credit as otherwise permitted by this Agreement; and
(ii) The foregoing shall not prevent the Agent, in its
administration of the Revolving Credit, from restoring any component
of the Borrowing Base which had been lowered by the Agent back to the
value of such component as stated in this Agreement or to an
intermediate value.
(g) Any release of any Person obligated on account of the
Liabilities;
(h) The making of any Revolving Credit Loan which, when made,
exceeds Availability and is
not a Permissible Overloan, PROVIDED, HOWEVER, that
(i) No Consent shall be required in connection with the
making of any Revolving Credit Loan to "cover" any honoring of a
drawing under any L/C; and
(ii) Each Lender acknowledges that subsequent to the making
of a Revolving Credit Loan which does not constitute a Permissible
Overloan, the unpaid principal balance of the Loan Account may exceed
the Borrowing Base on account of changed circumstances beyond the
control of the Agent (such as a drop in collateral value).
(i) The waiver of the obligation of the Borrowers to reduce the
unpaid principal balance of loans under the Revolving Credit to an amount so
that a Permissible Overloan does not exceed 5% of the Tranche A Loan Ceiling, or
is no longer subject to the time limits included in Sections 16.3(a) and 16.6(d)
(which relates to the outside limit on the number of consecutive Business Days
that a Permissible Overloan may be outstanding);
(j) Any amendment to Section 13.4, Section 14.9 or this Article
XVI;
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(k) Amendment of the definitions of the following terms:
"Majority Lenders"
"Permissible Overloan"
"Protective Advances"
"SuperMajority Lenders"
"Unanimous Consent"
(l) Any continuation of the Revolving Credit following the
occurrence and during the continuance of an Event of Default under Section
10.10; and
16.5 Actions Requiring SwingLine Lender Consent. No action under,
amendment of, or waiver of compliance with, any provision of this Agreement or
any of the other Loan Documents which affects the SwingLine Lender may be
undertaken without the Consent of the SwingLine Lender.
16.6 Tranche B Lender Consent. Notwithstanding the foregoing
provisions of this Article XVI for so long as the Tranche B Commitment remains
in effect or any of the Tranche B Debt remains outstanding, no modification,
amendment or waiver (including any modification, amendment or waiver of any
related defined terms) shall without the Consent of the Tranche B Lender (a)
change the terms and conditions of the Tranche B Loan or the Tranche B Fees, or
forgive all or any portion thereof, (b) waive any Borrowing Base Default, any
Availability Default or any Tranche B Payment Default or change the Tranche B
Lender acceleration rights under Article XIV or rights to the proceeds of a
Liquidation under Article XIV, (c) change the Tranche B Lender's reporting or
monitoring rights, or the conditions to assignment of the Tranche B Loan, (d)
permit a Permissible Overloan to be outstanding for more than sixty (60)
consecutive Business Days or more than twice in any twelve (12) month period,
(e) accelerate
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the scheduled dates of principal or interest payments, or the maturity of the
Revolving Credit Loans (other than in connection with an acceleration of the
Loans following an Event of Default), (f) increase the Eurodollar Margin or Base
Margin applicable to the Revolving Credit Loans (other than an increase to the
default rate in accordance with the Loan Agreement) by more than one percent
(1%) per annum; provided that in any event any increase in such rate shall
result in an equal increase in the rate of interest applicable to the Tranche B
Loan, or (g) increase the fees payable for the account of the Tranche A Lenders
from those in effect on the Closing Date, or require payment of any amendment or
similar fee, unless (in either case) the Tranche B Lender is paid its Pro Rata
portion thereof.
16.7 Actions Requiring Agent's Consent.
---------------------------------
(a) No action under, amendment of, or waiver of compliance with,
any provision of this Agreement or any of the other Loan Documents which affects
the Agent in its capacity as an Agent may be undertaken without the consent of
the Agent; and
(b) No action referenced herein which affects the rights, duties,
obligations or liabilities of the Agent shall be effective without the written
consent of the Agent.
16.8 Miscellaneous Actions.
---------------------
(a) Notwithstanding any other provision of this Agreement, no
single Lender independently shall exercise any right of action or enforcement
against or with respect to the Borrowers.
(b) The Agent shall be fully justified in failing or refusing to
take action under this Agreement or any other Loan Document on behalf of any
Lender unless the Agent shall first
(i) Receive such clear, unambiguous, written instructions as
the Agent deems appropriate; and
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(ii) Be indemnified to the Agent's satisfaction by the
Lenders against any and all liability and expense which may be
incurred by the Agent by reason of taking or continuing to take any
such action, unless such action had been grossly negligent, or in bad
faith or shall constitute willful misconduct.
(c) The Agent may establish reasonable procedures for the
providing of direction and instructions from the Lenders to the Agent, including
the Agent's reliance on multiple counterparts, facsimile transmissions, and time
limits within which such direction and instructions must be received in order to
be included in a determination of whether the requisite Commitment Percentage of
Lenders has provided its direction or instructions.
16.9 Nonconsenting Tranche A Lenders.
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(a) In the event that a Tranche A Lender (in this Section 16.9, a
"NONCONSENTING TRANCHE A LENDER") does not provide its Consent to a proposal by
the Agent to take action which requires consent under this Article XVI, then one
or more Tranche A Lenders who provided Consent to such action may require the
assignment, without recourse and in accordance with the procedures outlined in
Section 17.1, of the NonConsenting Tranche A Lender's Commitment on fifteen (15)
days written notice to the Agent and to the NonConsenting Tranche A Lender.
(b) At the end of such fifteen (15) days, the Tranche A Lenders
who have given such written notice shall Transfer the following to the
NonConsenting Tranche A Lender, but only if the NonConsenting Tranche A Lender
delivers to the Agent the Revolving Credit Note held by the NonConsenting
Tranche A Lender:
(i) Such NonConsenting Tranche A Lender's Pro-Rata share of
the principal and interest of the Revolving Credit Loans.
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(ii) All fees due to the NonConsenting Tranche A Lender to
the date of such assignment.
(iii) Any out-of-pocket costs and expenses for which the
NonConsenting Tranche A Lender is entitled to reimbursement from the
Borrowers.
(c) In the event that the NonConsenting Tranche A Lender fails to
deliver to the Agent the Revolving Credit Note held by the NonConsenting Tranche
A Lender as provided in Section 16.9(b), then:
(i) The amount otherwise to be Transferred to the
NonConsenting Tranche A Lender shall be Transferred to the Agent and
held by the Agent, without interest, to be turned over to the
NonConsenting Tranche A Lender upon delivery of the Revolving Credit
Note held by that NonConsenting Tranche A Lender;
(ii) The Revolving Credit Note held by the NonConsenting
Tranche A Lender shall have no force or effect whatsoever;
(iii) The NonConsenting Tranche A Lender shall cease to be a
"Lender"; and (iv) The Tranche A Lender(s) which have Transferred the
amount to the Agent as described above shall succeed to all rights and
become subject to all of the obligations of the NonConsenting Tranche
A Lender as "Tranche A Lender".
(d) In the event that more than one (1) Tranche A Lender wishes
to require such assignment, the NonConsenting Tranche A Lender's Tranche A
Commitment shall be divided amongst such Tranche A Lenders, Pro-Rata based upon
their respective Tranche A Commitments, with the Agent coordinating such
transaction.
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(e) The Agent shall coordinate the retirement of the Revolving
Credit Note held by the NonConsenting Tranche A Lender and the issuance of
Revolving Credit Notes to those Tranche A Lenders which "take-out" such
NonConsenting Tranche A Lender, PROVIDED, HOWEVER, that no processing fee
otherwise payable as provided in Section 17.1(c) shall be due under such
circumstances.
ARTICLE XVII ASSIGNMENTS AND PARTICIPATIONS
17.1 Assignments and Assumptions by Lenders.
--------------------------------------
(a) Except as provided herein, each Tranche A Lender (in this
Section 17.1, an "ASSIGNING LENDER") may assign to one or more Eligible Tranche
A Assignees (in this Section 17.1, an "ASSIGNEE LENDER") all or a portion of
such Tranche A Lender's interests, rights and obligations under this Agreement
and the other Loan Documents (including all or a portion of its Tranche A
Commitment) and the same portion of the Revolving Credit Loans at the time owing
to it, and of the Revolving Credit Note held by it, PROVIDED THAT:
(i) The Agent shall have given its prior written consent to
such assignment, which consent shall not be unreasonably withheld, but
need not be given if the proposed assignment would result in any
Assignee Lender's having a Tranche A Dollar Commitment of less than
the "minimum hold" amount specified in Section 17.l(a)(iv).
(ii) If no Event of Default has occurred, such assignment
shall be subject to the consent of the Lead Borrower. Such consent,
unless such assignment would cause any one or more of the other
Tranche A Lenders to hold a larger Commitment than FRF, shall not be
unreasonably withheld or delayed and shall be
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deemed given if no written objection is received within seven (7) days
of the Lead Borrower's receipt of notice of such proposed assignment.
(iii) Each such assignment shall be of a constant, and not a
varying, percentage of all the Assigning Lender's rights and
obligations under this Agreement.
(iv) Following the effectiveness of such assignment, the
Assigning Lender's Tranche A Dollar Commitment (if not an assignment
of all of the Assigning Lender's Commitment) shall not be less than
$10 Million ($10,000,000.00).
(b) The parties to such assignment shall execute and deliver to
the Agent, for recording in the Register, an Assignment and Acceptance
substantially in the form of EXHIBIT 17.1, annexed hereto (a "Tranche A
ASSIGNMENT AND ACCEPTANCE"):
(c) The Assigning Lender shall deliver to the Agent, with such
Tranche A Assignment and Acceptance, the Revolving Credit Note held by such
Assigning Lender and the Agent's processing fee of $3,000.00 PROVIDED, HOWEVER,
that no such processing fee shall be due where the Assigning Lender is one of
the Lenders at the initial execution of this Agreement.
(d) From and after the effective date specified in an Assignment
and Acceptance which has been executed, delivered, and recorded (which effective
date the Agent may delay by up to five (5) Business Days after the delivery of
such Assignment and Acceptance):
(i) The Assignee Lender;
(A) Shall be a party to this Agreement and
the other Loan Documents (and to any amendments of this
Agreement and the other Loan Documents) as fully as if the
Assignee Lender had executed each.
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(B) Shall have the rights of a Tranche A
Lender hereunder, to the extent of the Tranche A Commitment
assigned by such Assignment and Acceptance.
(ii) The Assigning Lender shall be released from the
Assigning Lender's obligations under this Agreement and the other Loan
Documents, with the Assignee Lender being released to the extent of
the Tranche A Commitment assigned by such Assignment and Acceptance.
(iii) The Agent shall undertake to obtain and distribute
replacement Revolving Credit Notes to such Assigning Lender and
Assignee Lender.
(e) Each party to an Assignment and Acceptance confirms to and
agrees with all parties to this Agreement as to those matters which are set
forth in such Assignment and Acceptance.
(f) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "REGISTER") for
the recordation of the names and addresses of the Lenders and the Commitment of,
and principal amount of the Revolving Credit Loans and Tranche B Loans hereunder
owing to, the Lenders from time to time. As between the Agent and the Lenders,
the entries in the Register shall be conclusive, in the absence of manifest
error, and the Agent and the 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 the Lenders at any
reasonable time and from time to time upon reasonable prior notice.
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(g) The Assigning Lender and Assignee Lender, directly between
themselves, shall make all appropriate adjustments in payments for periods prior
to the effective date of an Assignment and Assumption.
(h) Unless an Event of Default has occurred (in which event, no
consent of the Lead Borrower is required), the Tranche B Commitment and Tranche
B Loan may be assigned in whole or in part at any time by the Tranche B Lender
to any Eligible Tranche B Assignee with the prior consent of the Lead Borrower
(not to be unreasonably withheld), which consent will be deemed given unless the
Lead Borrower provides the Agent with written objection not more than seven (7)
days after the Agent shall have given the Lead Borrower notice of such proposed
assignment. In addition, the Agent's prior written consent to such assignment
shall be required, not to be unreasonably withheld. The parties to such
assignment shall execute and deliver to the Agent, an Assignment and Acceptance
substantially in the form of Exhibit 17.2 annexed hereto. The Tranche B
Assigning Lender shall deliver to the Agent with such Assignment and Acceptance
the Tranche B Note held by such Tranche B Lender. Upon written notice to the
Lead Borrower from time to time given by the Agent of any assignment under this
Section 17.2, the Lead Borrower shall execute one or more replacement Tranche B
Notes, on behalf of itself and the other Borrowers reflecting such assignment,
and shall deliver such replacement Tranche B Notes to the Agent (which promptly
thereafter shall cancel and deliver to the Lead Borrower the Tranche B Notes so
replaced), provided, however, that in the event a Tranche B Note is to be
exchanged following its acceleration or the entry of an order for relief under
the Bankruptcy Code with respect to the Borrowers, the Agent, in lieu of
obtaining a replacement Tranche B Note, may issue one or more certificates
confirming the Tranche B Loans. Such change shall be effective from the
effective date specified in such Assignment and Acceptance and any person
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added as a Tranche B Lender shall have the rights and privileges of a Tranche B
Lender hereunder thereafter as if such Person had been a signatory to this
Agreement and any other Loan Agreement to which the Tranche B Lender is a
signatory and any Person removed as a Tranche B Lender shall thereafter be
relieved of any obligations or responsibilities of a Tranche B Lender hereunder
and thereunder.
17.2 Participations. Each Lender may sell participations to one or
more financial institutions in all or a portion of such Lender's rights and
obligations under the Loan Agreement, PROVIDED THAT no such participation shall
include any provision which accords the Person purchasing such participation the
right to consent to any action, amendment, or waiver which is subject to any
requirement herein for approval by all or a requisite number or proportion of
the Lenders. No such sale of a participation shall relieve a Lender from that
Lender's obligations hereunder nor obligate the Agent to any Person other than a
Lender.
17.3 Pledges To Federal Reserve Banks. Nothing included in this
Agreement shall prevent or limit any Lender, to the extent that such Lender is
subject to any of the twelve Federal Reserve Banks organized under ss.4 of the
Federal Reserve Act (12 U.S.C. ss.341), from pledging all or any portion of that
Lender's interest and rights under this Agreement to any such Federal Reserve
Bank, PROVIDED, HOWEVER, that neither such pledge nor the enforcement thereof
shall release the pledging Lender from its obligations hereunder or under any of
the Loan Documents.
ARTICLE XVIII - TERM:
18.1 Termination of Revolving Credit. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2.4(g) hereof)
until the Termination Date.
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18.2 Effect of Termination. On the Termination Date, the Borrowers
shall pay the Agent (whether or not then due), in immediately available funds,
all then outstanding Liabilities including, without limitation: the entire
balance of the Loan Account; any accrued and unpaid Line (Unused) Fee, Annual
Facility Fee, Collateral Monitoring Fee, Tranche A Early Termination Fee,
Tranche B Early Termination Fee and any other fees and charges; any payments due
on account of the indemnification obligations included in Section 2.9(e); and
all unreimbursed costs and expenses of the Agent and of each Lender for which
the Borrowers are responsible; and shall make such arrangements concerning any
L/C's then outstanding as are reasonably satisfactory to the Agent. Until such
payment, all provisions of this Agreement, other than those contained in Article
II which place an obligation on the Agent and any Lender to make any loans or
advances or to provide financial accommodations under the Revolving Credit or
otherwise, shall remain in full force and effect until all Liabilities shall
have been paid in full. The release by the Agent of the security and other
collateral interests granted the Agent by the Borrowers hereunder may be upon
such conditions and indemnifications as the Agent may reasonably require.
ARTICLE XIX - GENERAL:
19.1. Protection of Collateral. The Agent has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrowers and
Guarantors (and may utilize any logo or other distinctive symbol associated with
the Borrowers and Guarantors) in connection with any advertising, promotion, or
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marketing undertaken by the Agent with the Lead Borrower's approval, which
approval shall not be unreasonably withheld or delayed.
19.2. Successors and Assigns. This Agreement shall be binding upon the
Borrowers, the Guarantors, and the Borrowers' and Guarantors' representatives,
successors, and assigns and shall inure to the benefit of the Agent and each
Lender and the respective successors and assigns of each PROVIDED, HOWEVER, no
trustee or other fiduciary appointed with respect to the Borrowers or Guarantors
shall have any rights hereunder. In the event that the Agent or any Lender
assigns or transfers its rights under this Agreement, the assignee shall
thereupon succeed to and become vested with all rights, powers, privileges, and
duties of such assignor hereunder and such assignor shall thereupon be
discharged and relieved from its duties and obligations hereunder.
19.3. Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
19.4. Amendments; Course of Dealing.
-----------------------------
(a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between the Borrowers, the Guarantors, and the
Agent and each Lender, either express or implied, concerning the matters
included herein and in such other instruments, any custom, usage, or course of
dealings to the contrary notwithstanding. No such discussions, negotiations,
custom, usage, or course of dealings shall limit, modify, or otherwise affect
the provisions thereof. No failure by the Agent or any Lender to give notice to
the Borrowers or Guarantors of the Borrowers' or Guarantors' having failed to
observe and comply with any warranty or covenant included in any Loan Document
shall constitute a waiver of such warranty
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or covenant or the amendment of the subject Loan Document. No change made by the
Agent in the manner by which Availability is determined shall obligate the Agent
to continue to determine Availability in that manner.
(b) The Borrowers and Guarantors may undertake any action
otherwise prohibited hereby, and may omit to take any action otherwise required
hereby, upon and with the express prior written consent of the Agent. No
consent, modification, amendment, or waiver of any provision of any Loan
Document shall be effective unless executed in writing by or on behalf of the
party to be charged with such modification, amendment, or waiver (and if such
party is the Agent, then by a duly authorized officer thereof). Any
modification, amendment, or waiver provided by the Agent shall be in reliance
upon all representations and warranties theretofore made to the Agent by or on
behalf of the Borrowers (and any guarantor, endorser, or surety of the
Liabilities) and consequently may be rescinded in the event that any of such
representations or warranties was not true and complete in all material respects
when given.
(c) The following provisions of this Agreement may be amended
without the consent of the Lead Borrower or any Borrower or any Guarantor (a
copy of which amendments shall be provided by the Agent to the Lead Borrower):
Article Relates To
13: Revolving Credit
Fundings and
Distributions
15 (other than 15.10 with respect to The Agent
required notices to and consents of Lead
Borrower):
17 (other than 17.1(a)(ii), 17.2 Assignments and
Participations
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and 17.3 with respect to required notices
to and consents of Lead Borrower):
19.5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, each Borrower and Guarantor hereby grants unto the
Agent full power (exercisable after and during the occurrence of an Event of
Default) to do any and all things necessary or appropriate in connection with
the exercise of such powers as fully and effectually as the Borrowers or
Guarantors might or could do, hereby ratifying all that said attorney shall do
or cause to be done by virtue of this Agreement. No power of attorney set forth
in this Agreement shall be affected by any disability or incapacity suffered by
the Borrowers or Guarantors and each shall survive the same. All powers
conferred upon the Agent by this Agreement, being coupled with an interest,
shall be irrevocable until this Agreement is terminated by a written instrument
executed by a duly authorized officer of the Agent.
19.6. Application of Proceeds. The proceeds of any collection, sale,
or disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion (subject, as between the Agent and the
Lenders, to Section 14.7). The Borrowers and Guarantors shall remain liable for
any deficiency remaining following such application.
19.7. Costs and Expenses of Agent and Of Lenders.
------------------------------------------
(a) The Borrowers and Guarantors shall pay on demand all Costs of
Collection and all reasonable expenses of the Agent and Tranche B Lender in
connection with the preparation, execution, and delivery of this Agreement and
of any other Loan Documents,
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whether now existing or hereafter arising, and all
other reasonable expenses which may be incurred by the Agent and Tranche B
Lender in preparing or amending this Agreement and all other agreements,
instruments, and documents related thereto, or otherwise incurred with respect
to the Liabilities, and all costs and expenses of the Agent which relate to the
credit facility contemplated hereby.
(b) The Borrowers and Guarantors shall pay on demand all costs
and expenses (including reasonable attorneys' fees) incurred, following the
occurrence of any Event of Default, by each Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights and remedies
under this, or any other Loan Document, as well as any such costs and expenses
in connection with any "workout", forbearance, or restructuring of the credit
facility contemplated hereby.
(c) The Borrowers and Guarantors authorize the Agent to pay all
such fees and expenses and in the Agent's discretion, to add such fees and
expenses to the Loan Account.
(d) The undertaking on the part of the Borrowers and Guarantors
in this Section 19.7 shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the
Borrowers and Guarantors, other than a termination, release, or discharge which
given because all Liabilities had been paid in full.
19.8. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Agent or any
Lender may be reproduced by such Lender or by the Agent by any photographic,
microfilm, xerographic, digital imaging, or other process, and any document so
reproduced may be destroyed. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the
190
regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.
19.9. New York Law. Pursuant to Section 5-1401 of the New York General
Obligations Law, this Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance, shall be governed
by the laws of the State of New York.
19.10 Consent to Jurisdiction.
-----------------------
(a) Pursuant to Section 5-1402 of the New York General
Obligations Law, the Borrowers and Guarantors agree that any legal action,
proceeding, case, or controversy against any Borrower or Guarantor with respect
to any Loan Document may be brought in the New York State courts and the United
State District Court sitting in Manhattan, as the Agent may elect in the Agent's
sole discretion. By execution and delivery of this Agreement, each Borrower and
Guarantor, for itself and in respect of its property, accepts, submits, and
consents generally and unconditionally, to the jurisdiction of the aforesaid
courts.
(b) To the extent permitted by applicable law, each Borrower and
Guarantor WAIVES personal service of any and all process upon it, and
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
certified mail, postage prepaid, to the Lead Borrower at the Lead Borrower's
address for notices as specified herein, such service to become effective five
(5) Business Days after such mailing.
(c) Each Borrower and Guarantor WAIVES any objection based ON
FORUM NON CONVENIENS and any objection to venue of any action or proceeding
instituted under any of the
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Loan Documents and consents to the granting of such legal or equitable remedy as
is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to bring
legal actions or proceedings in any other court of competent jurisdiction.
(e) Each Borrower and Guarantor agrees that any action commenced
by that Borrower or Guarantor asserting any claim or counterclaim arising under
or in connection with this Agreement or any other Loan Document shall be brought
solely in New York City and that such Courts shall have exclusive jurisdiction
with respect to any such action.
19.11. Indemnification. The Borrowers and Guarantors shall indemnify,
defend, and hold the Agent and each Lender and any Participant and any employee,
officer, or agent of any of the foregoing (each, an "INDEMNIFIED PERSON")
harmless of and from any claim brought or threatened against any Indemnified
Person by any Person other than any Borrower or Guarantor (as well as from
reasonable attorneys' fees and expenses in connection therewith) on account of
the relationship of the Borrowers or Guarantors with the Agent or any Lender
(each of claims which may be defended, compromised, settled, or pursued by the
Indemnified Person with counsel of the Lender's selection, but at the expense of
the Borrowers and Guarantors with the understanding that in the absence of an
Event of Default any compromise or settlement shall be with the Lead Borrower's
consent) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Agent and any other Indemnified Person has had
an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith or has engaged in willful misconduct.
This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the
Borrowers
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and Guarantors, other than a termination, release, or discharge which makes
specific reference to this Section 19.11.
19.12. Rules of Construction. The following rules of construction
shall be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and words in the
plural include the singular.
(b) Each representation, warranty, covenant, and undertaking of
the Borrowers and Guarantors in any Loan Document is the joint and several
representation, warranty, covenant, and undertaking of all of the Borrowers and
Guarantors unless such representation, warranty, covenant or undertaking is made
by the Lead Borrower alone or by any other specific Borrowers or Guarantors.
(c) Titles, headings (indicated by being underlined or shown in
SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(d) The words "includes" and "including" are not limiting.
(e) Text which follows the words "including, without limitation"
(or similar words) is illustrative and not limitational.
(f) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any
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warranty or covenant of any Loan Document which includes subsections which are
joined by "or" may be accomplished by compliance with any of such subsections.
(g) Text which is shown in ITALICS, shown in BOLD, shown IN ALL
CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to be
conspicuous.
(h) The words "may not" are prohibitive and not permissive.
(i) Any reference to a Person's "knowledge" (or words of similar
import) are to such Person's knowledge assuming that such Person has undertaken
reasonable and diligent investigation with respect to the subject of such
"knowledge" (whether or not such investigation has actually been undertaken).
(j) Terms which are defined in one section of any Loan Document
are used with such definition throughout the instrument in which so defined.
(k) The symbol "$" refers to United States Dollars.
(l) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(m) References to "this Agreement" or to any other Loan Document
are to such instrument as amended to the date on which application of such
reference is being made.
(n) Except as otherwise specifically provided, all references to
time are to Boston time.
(o) In the determination of any notice, grace, or other period of
time prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act, event,
or default from which the designated period of time begins to run
shall not be included and the last
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day of the period so computed shall be included unless such last day
is not a Business Day, in which event the last day of the relevant
period shall be the then next Business Day and (II) the period so
computed shall end at 5:00 PM on the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The word "through" means "to and including".
(p) In the event of any inconsistency between the provisions of
this Agreement and any other Loan Document, the provisions of this Agreement
shall govern and control.
19.13. Intent. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this Agreement
be broadly construed in favor of the Agent.
(c) The security interests created by this Agreement secure all
Liabilities under the Loan Documents, whether now existing or hereafter arising.
(d) Unless otherwise explicitly provided herein, the Agent's
consent to any action of the Borrowers or Guarantors which is prohibited unless
such consent is given may be given or refused by the Agent in its sole
discretion and without reference to Section 2.16 hereof.
19.14. Right of Set-Off. Any and all deposits or other sums at any
time credited by or due to any Borrower or Guarantor from the Agents, any
Lender, or any participant (a "PARTICIPANT") in the credit facility contemplated
hereby or any from any Affiliate of the Agent or, any Lender, or any Participant
and any cash, securities, instruments or other property of the Borrowers in the
possession of the Agent, any Lender, any Participant or any such Affiliate,
195
whether for safekeeping or otherwise (regardless of the reason such Person had
received the same) shall at all times constitute security for all Liabilities
and for any and all obligations of the Borrowers and Guarantors to the Agent and
each Lender or any Participant or any such Affiliate and may be applied or set
off against the Liabilities and against such obligations, following the
occurrence of an Event of Default and then only with the consent of, or upon the
direction of, the Agent and whether or not other Collateral is then available to
the Agent, any Lender, or any Participant or any such Affiliate.
19.15. Maximum Interest Rate. Regardless of any provision of any Loan
Document, none of the Agent or any Lender shall be entitled to contract for,
charge, receive, collect, or apply as interest on any Liability, any amount in
excess of the maximum rate imposed by applicable law. Any payment which is made
which, if treated as interest on a Liability would result in such interest's
exceeding such maximum rate shall be held, to the extent of such excess, as
additional collateral for the Liabilities as if such excess were "Collateral."
19.16. Waivers.
-------
(a) The Borrowers (and all guarantors, endorsers, and sureties of
the Liabilities) make each of the waivers included in Section 19.16(b), below,
knowingly, voluntarily, and intentionally, and understand that the Agent and
each Lender, in entering into the financial arrangements contemplated hereby and
in providing loans and other financial accommodations to or for the account of
the Borrowers as provided herein, whether not or in the future, are relying on
such waivers.
(b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING:
196
(i) Except as otherwise specifically required hereby, notice
of non-payment, demand, presentment, protest and all forms of demand
and notice, both with respect to the Liabilities and the Collateral.
(ii) Except as otherwise specifically required hereby or by
applicable law, the right to notice and/or hearing prior to the
Agent's exercising of the Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWERS OR ANY OTHER
PERSON AND THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER
LIKEWISE WAIVE THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR
CONTROVERSY).
(iv) Any defense, counterclaim, set-off, recoupment, or
other basis on which the amount of any Liability, as stated on the
books and records of the Agent or any Lender, could be reduced or
claimed to be paid otherwise than in accordance with the tenor of and
written terms of such Liability.
(v) Any claim to consequential, special, or punitive
damages.
19.17 Pre-Petition Loan Agreement and Related Documents.
-------------------------------------------------
197
(a) The Borrowers and the Guarantors agree that the Agent and the
Lenders shall be fully subrogated to the rights and interests, including
priorities, of the agent under the Pre-Petition Loan Agreement and that all
collateral, and security interests, pledges, and liens granted therein, by any
or all of them under or in connection with the Pre-Petition Loan Agreement or in
connection with any predecessor agreement to the Pre-Petition Loan Agreement
shall secure the Obligations outstanding under this Agreement without any
diminution thereof and shall remain in full force and effect, including, without
limitation, as provided under or pursuant to: (i) the Pre-Petition Loan
Agreement, (ii) that certain Stock Pledge Agreement dated as of November 30,
1999 by and between the Lead Borrower and BankBoston Retail Finance Inc.,
predecessor-in-interest to the Agent, as amended; (iii) that certain Trademark
and Trademark Applications Security Agreement dated as of November 30, 1999 by
the Lead Borrower for itself and each of its Subsidiary Borrowers (as defined
therein) and BankBoston Retail Finance Inc., predecessor-in-interest to the
Agent, as amended; (iv) that certain Trademark and Trademark Applications
Security Agreement dated as of November 30, 1999 by ▇▇▇▇▇▇▇▇ Investment Corp., a
Delaware corporation, and BankBoston Retail Finance Inc.,
predecessor-in-interest to the Agent, as amended; (v) that certain Tri-Party
Deposit Account Agreement dated November 30, 1999 by and among Borrower for
itself and each of its Subsidiaries (as defined therein), The Chase Manhattan
Bank, and BankBoston Retail Finance Inc., predecessor-in-interest to the Agent;
(vi) that certain Trademark and Trademark Applications Security Agreement dated
as of November 14, 2000 by Cooks Club, Inc., a New Jersey corporation, and the
Agent, as amended; (vii) that certain Trademark and Trademark Applications
Security Agreement dated as of November 14, 2000 by Regent Gallery, Inc., a New
Jersey corporation, and the Agent, as amended; (viii) that certain Trademark and
Trademark Applications Security
198
Agreement dated as of November 14, 2000 by Simple Solutions of NJ, Inc., a New
Jersey corporation, and the Agent, as amended; and (vi) any and all UCC-1
financing statements, UCC-3 amendments, UCC-3 continuation statements,
assignments of letters of credit, intercreditor agreements, landlords'
agreements, notices to third parties, blocked account agreements, warehousemen
agreements, custom brokers' agreements, filings with the U.S. Patent and
Trademark Office, and filings with any other governmental agencies, offices, and
authorities.
(b) Each Guarantor hereby assents to the execution and delivery
of the Agreement and all other instruments and documents required to be executed
and delivered pursuant thereto by the Borrowers, and to the performance by the
Borrowers of their respective agreements and obligations hereunder.
19.18 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
[Remainder of Page Intentionally Left Blank]
199
LECHTERS, INC.
("Lead Borrower")
By. /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President and Chief Financial
Officer
ALL BORROWERS IN SCHEDULE A HERETO
(other than the Lead Borrower)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President and Chief Financial
Officer
▇▇▇▇▇▇▇▇ INVESTMENT CORP.
-------------------------
(a "Guarantor")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
COOKS CLUB, INC.
----------------
(a "Guarantor")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
REGENT GALLERY, INC.
--------------------
(a "Guarantor")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
SIMPLE SOLUTIONS OF NJ, INC.
----------------------------
(a "Guarantor")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
200
FLEET RETAIL FINANCE INC.
-------------------------
("Agent")
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director
▇▇▇▇▇▇ FINANCIAL, INC.
----------------------
(a "Tranche A Lender")
By /s/ ▇▇▇▇▇▇▇ ▇. Holster
Print Name: ▇▇▇▇▇▇▇ ▇. Holster
Title: Assistant Vice President
FLEET RETAIL FINANCE INC.
-------------------------
(a "Tranche A Lender")
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director
FOOTHILL CAPITAL CORPORATION
----------------------------
(a "Tranche A Lender")
By ▇▇▇▇▇▇▇ ▇. Sadilesk
Print Name: ▇▇▇▇▇▇▇ ▇. Sadilesk
Title: Senior Vice President
BACK BAY CAPITAL FUNDING LLC
----------------------------
("Tranche B Lender")
By /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Title: Director
201
SCHEDULE A
----------
Borrowers
---------
Lechters Alabama, Inc.
Lechters Arizona, Inc.
Lechters Arkansas, Inc.
Lechters California, Inc.
Lechters Colorado, Inc.
Lechters Connecticut, Inc.
Lechters Delaware, Inc.
Lechters Florida, Inc.
Lechters Georgia, Inc.
Lechters Idaho, Inc.
Lechters Illinois, Inc.
Lechters Indiana, Inc.
Lechters Iowa, Inc.
Lechters Kansas, Inc.
Lechters Kentucky, Inc.
Lechters Louisiana, Inc.
Lechters Maine, Inc.
Lechters Baltimore, Inc.
Lechters Holyoke, Inc.
Lechters Michigan, Inc.
Lechters Minnesota, Inc.
202
Lechters Mississippi, Inc.
Lechters Missouri, Inc.
Lechters Nebraska, Inc.
Lechters Nevada, Inc.
Lechters New Hampshire, Inc.
Lechters New Jersey, Inc.
Lechters New Mexico, Inc.
Lechters New York, Inc.
Lechters N.Y.C., Inc.
Lechters North Carolina, Inc.
Lechters Ohio, Inc.
Lechters Oklahoma, Inc.
Lechters Oregon, Inc.
Lechters Pennsylvania, Inc.
Lechters Rhode Island, Inc.
Lechters South Carolina, Inc.
Lechters Tennessee, Inc.
Lechters Texas, Inc.
Lechters Utah, Inc.
Lechters Vermont, Inc.
Lechters Springfield, Inc.
Lechters Washington, Inc.
Lechters West Virginia, Inc.
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Inc.
Lechters M Street, Inc.
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
204
SCHEDULE B
----------
SCHEDULE OF TRANCHE A LENDERS' COMMITMENTS
------------------------------------------
TRANCHE A LENDER TYPE OF DOLLAR COMMITMENT
LOAN COMMITMENT PERCENTAGE
Fleet Retail Finance Inc. Revolving $27,500,000 34.375%
Credit
▇▇▇▇▇▇ Financial, Inc. Revolving $27,500,000 34.375%
Credit
Foothill Capital Corporation Revolving $25,000,000 31.250%
Credit
SCHEDULE OF TRANCHE B LENDER'S COMMITMENT
TRANCHE A LENDER TYPE OF DOLLAR COMMITMENT
LOAN COMMITMENT PERCENTAGE
Back Bay Capital Funding LLC Tranche B $6,000,000 100%
205