1
EXHIBIT 99.1
LOAN AND SECURITY AGREEMENT
Dated as of September 30, 1996 and
amended and restated as of January 30, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
--------------
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
------------
and
HILLS DEPARTMENT STORE COMPANY
as Borrower
-----------
C.R.H. INTERNATIONAL, INC.
as Borrower
-----------
and
THE OTHER LOAN PARTIES NAMED HEREIN
2
TABLE OF CONTENTS
Section Page
------- ----
ARTICLE 1 INTERPRETATION OF THIS AGREEMENT................................ 2
1.1 Definitions..................................................... 2
1.2 Accounting Terms................................................ 28
1.3 Interpretive Provisions......................................... 28
ARTICLE 2 LOANS AND LETTERS OF CREDIT..................................... 29
2.1 Total Facility.................................................. 29
2.2 Revolving Loans................................................. 30
2.3 Letters of Credit............................................... 36
2.4 Term Loans...................................................... 44
ARTICLE 3 INTEREST AND FEES............................................... 46
3.1 Interest........................................................ 46
3.2 Conversion and Continuation Elections........................... 47
3.3 Maximum Interest Rate........................................... 48
3.4 Facility Fee.................................................... 48
3.5 Unused Line Fee................................................. 49
3.6 Letter of Credit Fee............................................ 49
3.7 Administration Fee.............................................. 49
ARTICLE 4 PAYMENTS AND PREPAYMENTS........................................ 49
4.1 Loans........................................................... 49
4.2 Termination of Facility......................................... 50
4.3 Payments by the Borrowers....................................... 51
4.4 Payments as Revolving Loans..................................... 52
4.5 Apportionment, Application and Reversal of Payments............. 52
4.6 Indemnity for Returned Payments................................. 53
4.7 Agent's and Lenders' Books and Records; Monthly Statements...... 53
ARTICLE 5 TAXES, YIELD PROTECTION AND ILLEGALITY.......................... 53
5.1 Taxes........................................................... 53
5.2 Illegality...................................................... 55
5.3 Increased Costs and Reduction of Return......................... 55
5.4 Funding Losses.................................................. 56
5.5 Inability to Determine Rates.................................... 56
5.6 Certificates of Lenders......................................... 57
5.7 Survival........................................................ 57
ARTICLE 6 COLLATERAL...................................................... 57
6.1 Grant of Security Interest...................................... 57
6.2 Perfection and Protection of Security Interest.................. 58
6.3 Location of Collateral.......................................... 59
i
3
Section Page
------- ----
6.4 Title to, Liens on, and Sale and Use of Collateral.............. 60
6.5 Appraisals...................................................... 60
6.6 Access and Examination; Confidentiality......................... 60
6.7 Collateral Reporting............................................ 62
6.8 [Intentionally Omitted.......................................... 62
6.9 Collection of Accounts, Inventory and Other Amounts............. 62
6.10 Inventory....................................................... 63
6.11 [Intentionally Omitted]......................................... 63
6.12 [Intentionally Omitted]......................................... 63
6.13 Documents, Instruments, and Chattel Paper....................... 64
6.14 Right to Cure................................................... 64
6.15 Power of Attorney............................................... 64
6.16 The Agent's and Lenders' Rights, Duties and Liabilities......... 64
ARTICLE 7 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES............... 65
7.1 Books and Records............................................... 65
7.2 Financial Information........................................... 65
7.3 Notices to the Lenders.......................................... 68
ARTICLE 8 GENERAL WARRANTIES AND REPRESENTATIONS.......................... 70
8.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents................................ 70
8.2 Validity and Priority of Security Interest...................... 70
8.3 Organization and Qualification.................................. 71
8.4 Corporate Name; Prior Transactions.............................. 71
8.5 Subsidiaries.................................................... 71
8.6 Financial Statements and Projections............................ 71
8.7 Capitalization.................................................. 72
8.8 Solvency........................................................ 72
8.9 Debt............................................................ 72
8.10 Distributions................................................... 72
8.11 Title to Property............................................... 72
8.12 Real Estate; Leases............................................. 73
8.13 Proprietary Rights.............................................. 73
8.14 Trade Names..................................................... 73
8.15 Litigation...................................................... 74
8.16 Restrictive Agreements.......................................... 74
8.17 Labor Disputes.................................................. 74
8.18 Environmental Laws.............................................. 74
8.19 No Violation of Law............................................. 75
8.20 No Default...................................................... 75
8.21 ERISA Compliance................................................ 75
8.22 Taxes........................................................... 76
8.23 Regulated Entities.............................................. 76
ii
4
Section Page
------- ----
8.24 Use of Proceeds; Margin Regulations............................. 76
8.25 Copyrights, Patents, Trademarks and Licenses, etc............... 77
8.26 No Material Adverse Change...................................... 77
8.27 Full Disclosure................................................. 77
8.28 Parent Activity................................................. 77
8.29 Senior Debt..................................................... 77
8.30 Bankruptcy...................................................... 78
8.31 Dividend and Intercompany Note.................................. 78
ARTICLE 9 AFFIRMATIVE AND NEGATIVE COVENANTS.............................. 79
9.1 Taxes and Other Obligations..................................... 79
9.2 Corporate Existence and Good Standing........................... 79
9.3 Compliance with Law; Maintenance of Licenses.................... 79
9.4 Maintenance of Property......................................... 80
9.5 Insurance....................................................... 80
9.6 Condemnation.................................................... 81
9.7 Environmental Laws.............................................. 81
9.8 Compliance with ERISA........................................... 82
9.9 Mergers, Consolidations or Sales................................ 82
9.10 Restricted Investments; Capital Change; Distributions........... 83
9.11 Transactions Affecting Collateral or Obligations................ 84
9.12 [Intentionally Omitted]......................................... 84
9.13 Debt............................................................ 84
9.14 Prepayment...................................................... 85
9.15 Transactions with Affiliates.................................... 85
9.16 Investment Banking and Finder's Fees............................ 86
9.17 Standstill Agreement............................................ 86
9.18 Business Conducted.............................................. 86
9.19 Liens........................................................... 86
9.20 Sale and Leaseback Transactions................................. 86
9.21 New Subsidiaries................................................ 87
9.22 Fiscal Year..................................................... 87
9.23 Adjusted Tangible Net Worth..................................... 87
9.24 Cash Flow Test.................................................. 87
9.25 Cleanup......................................................... 87
9.26 Use of Proceeds................................................. 87
9.27 Senior Note Documents and Deferred Tax Obligations and
Intercompany Note............................................... 87
9.28 Store Closings.................................................. 88
9.29 Indemnity Payments.............................................. 88
9.30 Further Assurances.............................................. 88
ARTICLE 10 CONDITIONS OF LENDING........................................... 88
10.1 Conditions Precedent to Effectiveness of Agreement.............. 88
iii
5
Section Page
------- ----
10.2 Conditions Precedent to Each Loan............................... 90
ARTICLE 11 DEFAULT; REMEDIES............................................... 91
11.1 Events of Default............................................... 91
11.2 Remedies........................................................ 94
ARTICLE 12 TERM AND TERMINATION............................................ 95
12.1 Term and Termination............................................ 95
ARTICLE 13 AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS;
SUCCESSORS...................................................... 96
13.1 No Waivers; Cumulative Remedies................................. 96
13.2 Amendments and Waivers.......................................... 96
13.3 Assignments; Participations..................................... 97
ARTICLE 14 THE AGENT....................................................... 100
14.1 Appointment and Authorization................................... 100
14.2 Delegation of Duties............................................ 100
14.3 Liability of Agent.............................................. 100
14.4 Reliance by Agent............................................... 101
14.5 Notice of Default............................................... 101
14.6 Credit Decision................................................. 102
14.7 Indemnification................................................. 102
14.8 Agent in Individual Capacity.................................... 102
14.9 Successor Agent................................................. 103
14.10 Withholding Tax................................................. 103
14.11 Co-Agents....................................................... 104
14.12 Collateral Matters.............................................. 105
14.13 Restrictions on Actions by Lenders; Sharing of Payments......... 106
14.14 Agency for Perfection........................................... 106
14.15 Payments by Agent to Lenders.................................... 106
14.16 Concerning the Collateral and the Related Loan Documents........ 107
14.17 Field Audit and Examination Reports; Disclaimer by Lenders...... 107
14.18 Relation Among Lenders.......................................... 108
ARTICLE 15 GUARANTEES...................................................... 108
ARTICLE 16 MISCELLANEOUS................................................... 109
16.1 Cumulative Remedies; No Prior Recourse to Collateral............ 109
16.2 Severability.................................................... 109
16.3 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver............................................... 109
16.4 WAIVER OF JURY TRIAL............................................ 110
16.5 Survival of Representations and Warranties...................... 111
iv
6
Section Page
------- ----
16.6 Other Security and Guaranties................................... 111
16.7 Fees and Expenses............................................... 111
16.8 Notices......................................................... 112
16.9 Waiver of Notices............................................... 113
16.10 Binding Effect.................................................. 113
16.11 Indemnity of the Agent and the Lenders by the Loan Parties...... 114
16.12 Limitation of Liability......................................... 114
16.13 Final Agreement................................................. 114
16.14 Counterparts.................................................... 114
16.15 Captions........................................................ 114
16.16 Right of Setoff................................................. 115
16.17 Joint and Several Liability..................................... 115
v
7
EXHIBITS AND SCHEDULES
EXHIBIT A - FORM OF BORROWING BASE CERTIFICATE
EXHIBIT B - [INTENTIONALLY OMITTED]
EXHIBIT C - NOTICE OF BORROWING
EXHIBIT D - NOTICE OF CONVERSION/CONTINUATION
EXHIBIT E - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
EXHIBIT F - FORM OF TERM LOAN NOTE
EXHIBIT G - COPY OF INTERCOMPANY NOTE
SCHEDULE A - ADDRESSES FOR NOTICES TO LENDERS AND WIRE TRANSFER INFORMATION
FOR LENDERS
SCHEDULE 6.3 - LOCATIONS OF COLLATERAL
SCHEDULE 8.3 - CORPORATE ORGANIZATION AND QUALIFICATION
SCHEDULE 8.12 - REAL ESTATE; LEASES
SCHEDULE 8.13 - REGISTERED PROPRIETARY RIGHTS
SCHEDULE 8.14 - TRADE NAMES
SCHEDULE 8.18 - ENVIRONMENTAL LAWS
SCHEDULE 8.21 - ERISA
SCHEDULE 9.13 - DEBT
SCHEDULE 9.19 - LIENS
SCHEDULE 9.20 - SALE AND LEASEBACK TRANSACTIONS
vi
8
LOAN AND SECURITY AGREEMENT
Loan and Security Agreement, dated as of September 30, 1996 and amended
and restated as of January 30, 1998, among the financial institutions listed on
the signature pages hereof (such financial institutions, together with their
respective successors and assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"), BankAmerica Business Credit,
Inc., a Delaware corporation ("BABC") with an office at 00 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, as agent for the Lenders (in its capacity as agent,
together with any successor in such capacity, the "Agent"), Hills Stores
Company, a Delaware corporation with offices at 00 Xxx Xxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 ("Parent"), Hills Department Store Company, a Delaware
corporation with offices at 00 Xxx Xxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("HDSC"),
C.R.H. International, Inc., an Ohio corporation with offices at 00 Xxx Xxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 ("CRH" and, together with HDSC, each a "Borrower"
and collectively, the "Borrowers"), and the other Loan Parties named herein and
signatories hereto. Notwithstanding the foregoing, the parties hereto hereby
acknowledge that, contemporaneously with the Amendment and Restatement Effective
Date, or within 60 days of such date, the Borrowers anticipate that CRH will be
merged with and into HDSC (which will be the surviving corporation) so long as
such merger complies with the conditions of SECTION 9.9(vi)(a) and that, from
and after the effectiveness of such merger, (i) HDSC shall assume (and does
hereby agree to assume) all of the obligations of CRH hereunder, (ii) the terms
"Borrower" and "Borrowers" as used in this Agreement shall be deemed to refer to
HDSC and (iii) except for provisions of this Agreement that restrict the rights
of CRH or impose restrictions on the activities of CRH, in either case to a
greater degree than the rights or activities of HDSC are restricted (which
provisions with respect to, and only to the extent they relate to, CRH shall, as
of the effectiveness of the merger, have no further force or effect) the term
"CRH" as used in this Agreement shall be deemed to refer to HDSC.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, pursuant to and subject to the terms of a certain Loan and
Security Agreement, dated as of September 30, 1996, among the Lenders, the
Agent, the Parent, the Borrowers and the other Loan Parties signatories hereto,
as amended by a certain First Amendment To Loan and Security Agreement dated as
of February 28, 1997 (as so amended, the "Original Loan and Security
Agreement"), the Lenders made available to the Borrowers a revolving line of
credit for loans and letters of credit in an aggregate amount not to exceed
$300,000,000, which extensions of credit the Borrowers agreed were to be used to
refinance certain existing debt and for their working capital needs and general
corporate purposes not prohibited hereby;
WHEREAS, the Borrowers have requested that the Lenders allocate a
certain portion of the revolving line of credit under the Original Loan and
Security Agreement for use as term loans and make certain other changes to the
provisions of the Original Loan and Security Agreement;
9
WHEREAS, the Lenders are agreeable to making such allocation and other
changes to the Original Loan and Security Agreement upon the terms and
conditions set forth herein (including, without limitation, treatment of the
term loans as third party financing for purposes of calculating financial
covenant compliance);
WHEREAS, the Parent and its Subsidiaries will each derive substantial
benefits from the execution, delivery and performance of this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Lenders, the Agent, the Borrowers,
the Parent and the other Loan Parties hereby agree that the Original Loan and
Security Agreement is hereby amended and restated in its entirety as follows:
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 DEFINITIONS. As used herein:
"ACCOUNTS" means, with respect to any Loan Party, all of such
Loan Party's now owned or hereafter acquired or arising accounts, and any other
rights of such Loan Party to payment for the sale or lease of goods or rendition
of services, whether or not they have been earned by performance.
"ACCOUNT DEBTOR" means each Person obligated in any way on or in
connection with an Account.
"ADJUSTED TANGIBLE NET WORTH" means, at any date, all amounts
which would be included under either common or preferred shareholders' equity on
a consolidated balance sheet of the Parent and its Subsidiaries determined on a
consolidated basis in accordance with GAAP as at such date, LESS unamortized
value in excess of amounts allocable to identifiable assets (goodwill), PLUS any
non-cash writedowns of assets of the Parent or any of its Subsidiaries due to
compliance by the Parent and its Subsidiaries with Statement of Financial
Accounting Standards No. 121: "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". Adjusted Tangible Net Worth
shall specifically exclude any actual charge (to a maximum of $10,000,000) in
excess of the then current accrual as reflected on the monthly financial
statements of the Parent and its Subsidiaries required to be delivered pursuant
to SECTION 7.2(b) for the impact of Federal or state income tax audits with
respect to the Parent or any of its Subsidiaries.
"AFFILIATE" means, as to any Person, (i) any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, ten percent
(10%) or more of the outstanding equity interest of such Person or (ii) any
director of such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power
2
10
to direct or cause the direction of the management and policies of the other
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"AGENT" means BankAmerica Business Credit, Inc., solely in its
capacity as agent for the Lenders, and any successor agent.
"AGENT ADVANCES" has the meaning specified in SECTION 2.2(i).
"AGENT'S LIENS" means the Liens granted to the Agent, for the
ratable benefit of the Lenders, BABC and Agent pursuant to this Agreement and
the other Loan Documents.
"AGENT-RELATED PERSONS" means the Agent and any successor agent,
together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"AGREEMENT" means the Original Loan and Security Agreement, as
amended, modified, amended and restated or supplemented from time to time.
"AMENDMENT AND RESTATEMENT EFFECTIVE DATE" means the date all
the conditions precedent in SECTION 10.1 have been satisfied.
"ANNIVERSARY DATE" means each anniversary of the Closing Date.
"APPLICABLE ADVANCE RATE PERCENTAGE" means, for any calendar
month, the percentage set forth below opposite such month:
Calendar Month Percentage
-------------- ----------
January, February, March, sixty percent (60%)
April, May, June, July,
August and December
September, October and November sixty-five percent (65%)
"APPLICABLE MARGIN" means, with respect to any Loan or Letter of
Credit, as appropriate, except as otherwise provided in the immediately
succeeding sentence the amount set forth below which corresponds to the Coverage
Ratio set forth below for the twelve (12) fiscal month period of the Parent
ended with the most recent fiscal quarter of the Parent for which the Agent
receives the financial statements and Coverage Ratio Certificate required below,
determined and adjusted as provided herein. On the Closing Date and thereafter
until the first day of the first full calendar month after the delivery to the
Agent of the financial statements of the Parent and its Subsidiaries as at the
end of and for the fiscal month of the Parent ended November 2, 1996 required
pursuant to SECTION 7.2(b) together with the corresponding Coverage Ratio
Certificate for the twelve (12) fiscal month period ended on such date, the
Libor Applicable Margin shall be 2.25%,
3
11
the Base Rate Applicable Margin shall be .50% and the Letter of Credit
Applicable Margin shall be 2.00% and each shall thereafter be adjusted after
each delivery to the Agent of the monthly financial statements of the Parent and
its Subsidiaries required pursuant to SECTION 7.2(b) for each month which ends
on the last day of each fiscal quarter of the Parent together with the
corresponding Coverage Ratio Certificate for the twelve (12) fiscal month period
ending on the last day of such fiscal quarter, each such adjustment to be
effective on the first day of the first full calendar month after each such
delivery.
Libor Applicable Base Rate Letter of Credit
Coverage Ratio Margin Applicable Margin Applicable Margin
-------------- ---------------- ----------------- -----------------
Equal to or greater 1.50% zero(0) 1.50%
than 1.60 to 1.00
Equal to or greater 1.75% zero(0) 1.50%
than 1.45 to 1.00 but
less than 1.60 to 1.00
Equal to or greater 2.00% .25% 1.75%
than 1.30 to 1.00 but
less than 1.45 to 1.00
Equal to or greater 2.25% .50% 2.00%
than 1.00 to 1.00 but
less than 1.30 to 1.00
Less than 1.00 to 1.00 2.50% .75% 2.25%
Notwithstanding anything in this definition to the contrary,
(i)in the event that the Agent shall fail to receive any such financial
statements and the related Coverage Ratio Certificate for the last fiscal month
in any fiscal quarter of the Parent within thirty (30) days following the end of
such fiscal month (within ninety (90) days following the end of such fiscal
month if such fiscal month is the last fiscal month of any Fiscal Year), then
the Applicable Margin shall, at the end of such thirtieth or ninetieth day, as
appropriate, immediately and without notice or further action be the highest
Applicable Margin provided herein (such Applicable Margin to be in effect until
the first day of the first full calendar month after the Agent receives the
monthly financial statements of the Parent and its Subsidiaries required under
SECTION 7.2(b) for the last fiscal month of the most recent fiscal quarter of
the Parent and the related Coverage Ratio Certificate) and (ii) in the event
that, with respect to any twelve (12) fiscal month period of the Parent which
shall be a Fiscal Year, the audited financial statements of the Parent and its
Subsidiaries required under SECTION 7.2(a) for such Fiscal Year shall indicate a
Coverage Ratio for such twelve (12) fiscal month period (as determined by the
Agent) less than that reflected in the Coverage Ratio Certificate delivered to
the Agent for such twelve (12) fiscal month period, the Applicable Margin shall
be adjusted retroactively (to the effective date of the Applicable Margin which
was determined based upon the delivery of such Coverage Ratio Certificate and
the related monthly financial statements of the Parent and its Subsidiaries
delivered pursuant to SECTION 7.2(b) for the last month of such twelve (12)
fiscal month period) to reflect an Applicable Margin based upon the Coverage
Ratio determined from the audited financial
4
12
statements and each of the Borrowers shall make payments to the Agent on behalf
of the Lenders to reflect such adjustment.
"ASSIGNEE" has the meaning specified in SECTION 13.3(a).
"ASSIGNMENT AND ACCEPTANCE" has the meaning specified in
SECTION 13.3(a).
"ATTORNEY COSTS" means and includes all reasonable and
documented (to the satisfaction of the Agent) fees, expenses and disbursements
of any law firm or other external counsel engaged by the Agent, the reasonable
and documented (to the satisfaction of the Agent) allocated cost of internal
legal services of the Agent and all reasonable and documented (to the
satisfaction of the Agent) expenses and disbursements of internal counsel of the
Agent.
"BABC" means BankAmerica Business Credit, Inc.
"BABC LOAN" and "BABC LOANS" have the meanings specified in
SECTION 2.2(h).
"BANK OF AMERICA" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"BANKRUPTCY CODE" means Title 11 of the United States Code
(11 X.X.X.xx. 101 ET SEQ.).
"BANKRUPTCY PLAN" means the Parent's First Amended Consolidated
Plan of Reorganization approved by the United States Bankruptcy Court for the
Southern District of New York on September 10, 1993.
"BASE RATE" means, for any day, the rate of interest in effect
for such day as publicly announced from time to time by Bank of America in San
Francisco, California, as its "reference rate" (the "reference rate" being a
rate set by Bank of America based upon various factors including Bank of
America's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate). Any change in the reference
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change. Each Interest
Rate based upon the Base Rate shall be adjusted simultaneously with any change
in the Base Rate.
"BASE RATE LOANS" means, collectively, the Base Rate Revolving
Loans and the Base Rate Term Loans.
"BASE RATE REVOLVING LOAN" means a Revolving Loan during any
period in which it bears interest based on the Base Rate.
5
13
"BASE RATE TERM LOAN" means any portion of a Term Loan during
any period in which such portion bears interest based on the Base Rate.
"BOOK VALUE" means at any time, as to any Inventory of a
Borrower in respect of which such amount is to be determined, the lower of (a)
cost at such time (determined in accordance with GAAP on a first-in, first-out
basis) or (b) market value at such time.
"BORROWERS" has the meaning specified in the introductory
paragraph to this Agreement.
"BORROWING" means a borrowing hereunder consisting of Revolving
Loans or Term Loans made on the same day by the Lenders (or by BABC in the case
of a Borrowing funded by BABC Loans or by the Agent in the case of a Borrowing
consisting of an Agent Advance) to a Borrower.
"BORROWING BASE CERTIFICATE" means a certificate by a
Responsible Officer of each of the Parent and the Borrowers, substantially in
the form of EXHIBIT A (or another form acceptable to the Agent) setting forth
the calculation of the Combined Availability, including a calculation of each
component thereof, as of the close of business no more than five (5) Business
Days prior to the date of such certificate, all in such detail as shall be
satisfactory to the Agent. All calculations of the Combined Availability in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by the Parent and each of the Borrowers and certified to the
Agent; provided, that the Agent shall have the right to review and adjust, in
the exercise of its reasonable credit judgment, any such calculation (1) to
reflect its reasonable estimate of declines in value of any of the Eligible
Inventory described therein, and (2) to the extent that such calculation is not
in accordance with this Agreement.
"BUSINESS DAY" means (a) any day that is not a Saturday, Sunday,
or a day on which banks in San Francisco, California, New York, New York or
Boston, Massachusetts are required or permitted to be closed, and (b) with
respect to all notices, determinations, fundings and payments in connection with
the LIBOR Rate or LIBOR Rate Loans, any day that is a Business Day pursuant to
clause (a) above and that is also a day on which trading is carried on by and
between banks in the London interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"CAPITAL EXPENDITURES" means all expenditures (except interest
capitalized during construction) that, in accordance with GAAP, are required to
be included in property, plant or equipment or a similar fixed asset account and
shall in any event include all Capital Leases.
6
14
"CAPITAL LEASE" means any lease of property by the Parent or any
of its Subsidiaries which, in accordance with GAAP, is or should be reflected as
a capital lease on the consolidated balance sheet of the Parent and its
Subsidiaries.
"CASH REQUIREMENTS" means, for any period, the sum of (a) Net
Capex for such period; (b) cash interest paid by the Parent and its Subsidiaries
during such period, net of cash interest income received by the Parent and its
Subsidiaries during such period, but excluding from this clause (b) in any event
(x) amortization of one-time placement, syndications, work and similar fees in
connection with this Agreement or in connection with other Debt For Borrowed
Money or any other financing issued by the Parent or any of its Subsidiaries
(including the Senior Notes), (y) fees paid with respect to letters of credit
under SECTION 3.6 or under the loan facility related to the Existing Bank Debt
(in each instance under this clause (y), such fees are to be deducted in
determining the amount in clause (a) of the definition of EBITDA for such
period), and (z) monitoring expenses or unused line fees payable under this
Agreement or under the loan facility related to the Existing Bank Debt (in each
instance under this clause (z), such fees or expenses are to be deducted in
determining the amount in clause (a) of the definition of EBITDA for such
period); (c) cash taxes paid by the Parent and its Subsidiaries during such
period, less cash tax refunds received by the Parent and its Subsidiaries during
such period, but excluding from cash taxes paid any assessment paid by the
Parent or any of its Subsidiaries as a result of Federal or state income tax
audits with respect to the Parent or any of its Subsidiaries; and (d) the Debt
Reduction Amount for such period.
"CHANGE OF CONTROL" means (i) the occurrence of a "Change of
Control" as defined in the Senior Indenture or (ii) the occurrence of any of the
following after the Closing Date:
(a) any person (other than, in the case of clause
(2) below, Xxxxxxxxx Partners Inc. and investment funds that it controls (as
such term is defined in the definition of Affiliate) or otherwise has the sole
power to manage), together with its affiliates and associates (as defined in
Rule 12b-2 under the Exchange Act or any successor rule thereto),
(1) shall file with the Securities and Exchange Commission
and deliver to the Parent a report under or in response to Schedule 13D
or 14D-1 (or any successor schedule, form or report) pursuant to the
Exchange Act disclosing that such person has become the beneficial owner
(as defined in Rule 13D-3 under the Exchange Act, or any successor
provisions) of more than 25% (or, in the case of Xxxxxxxxx Partners Inc.
and investment funds that it controls or otherwise has the sole power to
manage, 50%) of the total voting power of all classes of voting stock of
the Parent or
(2) shall succeed in having a sufficient number of its
nominees elected to the board of directors of the Parent such that such
nominees so elected (whether new or continuing as directors) shall
constitute a majority of the board of directors of the Parent;
7
15
(b) any person or group (within the meaning of such
Rule 13d-5) other than the Parent shall own directly, beneficially or of record,
any shares of the issued and outstanding capital stock of HDSC; or
(c) any person or group other than the Parent or any
wholly owned Subsidiary of the Parent shall otherwise directly control HDSC or
CRH.
Notwithstanding the foregoing clauses (a), (b) and (c), the
election or re-election of directors nominated by the board of directors of the
Parent at any annual or special meeting of stockholders, or the election or
appointment of directors to fill vacancies in the board of directors (including
as a result of an increase in the size of the board of directors of the Parent),
shall not constitute a "Change of Control" under this clause (ii) unless such
election or appointment is part of a plan to effect a change of control of the
Parent. For purposes of this definition, the term "person" shall have the
meaning set forth in or for purposes of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act, or any successor provisions to either of the foregoing,
including any "group" acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act.
"CLOSING DATE" means September 30, 1996.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute, and regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in SECTION 6.1.
"COMBINED AVAILABILITY" of the Borrowers means, at any time:
(a) the lesser of (i) the Maximum Revolver Amount or
(ii) the sum of (x) the then Applicable Advance Rate Percentage of the Book
Value of Eligible Inventory of the Borrowers (excluding Inventory referred to in
clause (y) below) plus (y) fifty percent (50%) of the cost of finished goods not
in the possession of the Borrowers as to which a documentary Letter of Credit
has been issued and which, if in the possession of a Borrower, would be treated
as Eligible Inventory of a Borrower, but only if (1) title to such goods shall
have passed to a Borrower and (2) such goods are insured to the extent of 100%
of CIF value, MINUS
(b) the sum of (i) the aggregate unpaid balance of
all Revolving Loans and Term Loans made to the Borrowers at such time, (ii) the
aggregate amount of all Pending Revolving Loans to be made to the Borrowers at
such time, (iii) the aggregate undrawn amount of all outstanding Letters of
Credit, (iv) the aggregate amount of any unpaid reimbursement obligations in
respect of Letters of Credit, (v) reserves for accrued interest on the
Obligations, (vi) reserves for Shipping Release Indemnities (as defined in
SECTION 2.3(k)) and (vii) all other reserves which the Agent deems necessary in
the exercise of its reasonable credit judgment to maintain as a result of
matters which the Agent determines, in the exercise of such judgment, may affect
the value of any Eligible Inventory,
8
16
the priority of the Lien of the Agent thereon or the ability of the Agent to
realize on any such Inventory, including, without limitation, reserves for
landlords liens with respect to real properties leased by a Borrower, reserves
for shrinkage and markdowns and reserves for any amounts which the Agent or any
Lender is reasonably expected to be obligated to pay in the future for the
account of any Borrower.
"COMMITMENT" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"COMMITMENT" on the signature pages of this Agreement or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 13.3, as such Commitment
may be adjusted from time to time in accordance with the provisions of
SECTION 13.3, and "COMMITMENTS" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"CONTAMINANT" means any pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any hazardous or toxic constituent of any such substance or waste.
"CONVERSION/CONTINUATION DATE" means the date of any conversion
or continuation of a Base Rate Loan or LIBOR Rate Loan, or portion thereof, as
contemplated by SECTION 3.2.
"COVERAGE RATIO" means, for any period, the ratio of (a) EBITDA
for such period to (b) Cash Requirements for such period.
"COVERAGE RATIO CERTIFICATE" means a certificate of a
Responsible Officer of the Parent setting forth the Coverage Ratio for the
twelve (12) fiscal month period of the Parent ending on the last day of each
fiscal quarter of the Parent, together with such supporting documentation and
calculations as the Agent may reasonably request with respect to such Coverage
Ratio.
"CREDIT SUPPORT" has the meaning specified in SECTION 2.3(a).
"CRH" has the meaning specified in the introductory paragraph to
this Agreement.
"DEBT" means, as to any Person, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind,
(b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sales or other title retention agreements relating to property or
assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, (f) all Debt of
others secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations
9
17
secured thereby have been assumed, (g) all Guaranties by such Person of Debt of
others, (h) all obligations under Capital Leases of such Person, (i) all
obligations of such Person in respect of Rate Protection Agreements or foreign
currency exchange agreements, other exchange rate hedging agreements, interest
rate or commodity swaps and any similar derivative transactions (valued at its
marked-to-market value), (j) all obligations of such Person as an account party
in respect of letters of credit and bankers' acceptances or otherwise with
respect to the reimbursement of drawings or payments under letters of credit or
bankers acceptances or credit support for any of the foregoing and (k) all
equity interests of such Person that, by their respective terms (or by the terms
of any security into which any such equity interest is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is five (5) years after the
Stated Termination Date. The Debt of any Person shall include the Debt of any
partnership in which such Person is a general partner. Notwithstanding the
foregoing, the term "Debt" shall not include liabilities incurred in the
ordinary course of business classified as trade payables or other payables or
accrued expenses in accordance with GAAP.
"DEBT FOR BORROWED MONEY" means, as to any Person, Debt for
borrowed money or as evidenced by notes, bonds, debentures or similar evidences
of any such Debt of such Person, the deferred and unpaid purchase price of any
property or business and all obligations under Capital Leases.
"DEBT REDUCTION AMOUNT" means for any period that amount which
is (1) the aggregate amount of payments of principal made during such period on
Debt For Borrowed Money (including the Term Loans, but excluding all other
Obligations and excluding the Existing Bank Debt) of the Parent and its
Subsidiaries, Debt under sale-leaseback arrangements of the Parent and its
Subsidiaries permitted hereunder and other similar Debt of the Parent and its
Subsidiaries permitted hereunder LESS (2) any cumulative additions to all such
Debt (including the Term Loans) after May 1, 1996 not included in clause (2)(ii)
of the definition "Net Capex" for such period; provided, that except for the
calculation of the EBITDA Carryforward Amount, the Debt Reduction Amount for any
period shall in no event be less than zero.
"DEFAULT" means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"DEFAULT RATE" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the otherwise applicable Interest Rate PLUS
(b) two percent (2.00%). Each Default Rate shall be adjusted simultaneously with
any change in the applicable Interest Rate. In addition, with respect to Letters
of Credit, the Default Rate shall mean an increase in the Letter of Credit Fee
by 2.00 percentage points.
"DEFAULTING LENDER" has the meaning specified in
SECTION 2.2(g)(ii).
10
18
"DEFERRED TAX OBLIGATIONS" means the obligations of HDSC to
Federal, state and local taxing authorities in an aggregate principal amount not
in excess of $4,000,000 being paid on an installment basis pursuant to the
Bankruptcy Plan.
"DISTRIBUTION" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in common stock or capital stock (or any
options or warrants for such stock) of the same class; or (b) the redemption or
other acquisition of any capital stock (or any options or warrants for such
stock) of such corporation.
"DOL" means the United States Department of Labor or any
successor department or agency.
"DOLLAR" and "$" means dollars in the lawful currency of the
United States.
"EBITDA" means for any period, the sum of:
(a) the net income of the Parent and its
Subsidiaries on a consolidated basis after provision for income taxes for such
period, as determined in accordance with GAAP and reported on the Financial
Statements for such period, excluding any and all of the following included in
such net income: (i) gain or loss arising from the sale of any capital assets;
(ii) gain arising from any write-up in the book value of any asset; (iii)
earnings or loss of any corporation, substantially all the assets of which have
been acquired by the Parent or any of its Subsidiaries in any manner, to the
extent realized by such other corporation prior to the date of acquisition; (iv)
earnings of any business entity in which the Parent or any of its Subsidiaries
has an ownership interest unless (and only to the extent) such earnings shall
actually have been received by the Parent or any of its Subsidiaries in the form
of cash distributions; (v) earnings or loss of any Person to which assets of the
Parent or any of its Subsidiaries shall have been sold, transferred or disposed
of, or into which the Parent or any of its Subsidiaries shall have been merged,
or which has been a party with the Parent or any of its Subsidiaries to any
consolidation or other form of reorganization, prior to the date of such
transaction; (vi) gain or loss arising from the acquisition of debt or equity
securities of the Parent or any of its Subsidiaries or from cancellation or
forgiveness of Debt; and (vii) gain (net of losses) arising from extraordinary
items, as determined in accordance with GAAP, or from other non-recurring
transactions;
(b) the sum of the provision for income taxes,
interest expense, depreciation and amortization expense, other non-cash charges,
the effect of accounting changes and extraordinary items, in each case to the
extent deducted in determining such net income for such period; PLUS
(c) except for the calculation of the Coverage Ratio
for any period, one hundred percent (100%) of the EBITDA Carryforward Amount
(but only if positive) for the period commencing on February 3, 1996 and ending
on the last day of the Fiscal
11
19
Year ended immediately prior to the first day of the period for which EBITDA is
being calculated,
in each of the foregoing cases for the Parent and its Subsidiaries on a
consolidated basis in accordance with GAAP. Notwithstanding the foregoing,
EBITDA shall not in any event include any loss arising directly and solely from
store closures by HDSC.
"EBITDA CARRYFORWARD AMOUNT" means, for any period, the amount,
if any, by which EBITDA for such period shall exceed Cash Requirements for such
period.
"ELIGIBLE INVENTORY" of a Borrower means Inventory of such
Borrower (including Purchase Accrual Inventory and Layaway Inventory) that
constitutes first quality finished goods and that, unless the Agent in its sole
discretion elects: (a) is not, in the Agent's reasonable opinion, obsolete, slow
moving, unmerchantable or out-of-season seasonal Inventory (other than
pre-seasonal "forward buy" Inventory); (b) is located at premises owned or
leased by such Borrower or on premises otherwise reasonably acceptable to the
Agent (it being agreed by the Agent that the locations set forth on SCHEDULE 6.3
as in effect on the Closing Date are acceptable to the Agent) or is in transit
between HDSC's distribution center and its stores or between its stores; (c)
upon which the Agent for the benefit of the Lenders has a first priority
perfected security interest; (d) is not work-in-process, snack bar Inventory,
spare parts, packaging and shipping materials, supplies, xxxx- and-hold
Inventory, returned or defective Inventory, Inventory delivered to such Borrower
on consignment or Inventory being held by a consolidator (other than a
consolidator at a location listed on SCHEDULE 6.3 as in effect on the Closing
Date or another consolidator from whom the Agent shall have received a bailee
letter, in form and substance satisfactory to the Agent, duly executed by such
consolidator); and (e) the Agent, in the exercise of its reasonable commercial
discretion, deems eligible as the basis for Revolving Loans based on such
collateral and credit criteria as the Agent may from time to time establish. If
any Inventory at any time ceases to be Eligible Inventory, such Inventory shall
promptly be excluded from the calculation of Eligible Inventory.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for Release or injury
to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case relating to environmental, health or safety matters.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (1) any liability under any Environmental Laws, or (2) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
12
20
"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"EQUIPMENT" means, with respect to any Loan Party, all of such
Loan Party's now owned and hereafter acquired machinery, equipment, furniture,
furnishings, fixtures, and other tangible personal property (except Inventory),
including motor vehicles with respect to which a certificate of title has been
issued, aircraft, dies, tools, jigs, and office equipment, as well as all of
such types of property leased by such Loan Party and all of such Loan Party's
rights and interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future additions
and accessions thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with any Loan Party within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any
ERISA Affiliate from a Multi-employer Plan or notification that a Multi-
employer Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multi-employer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multi-employer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any Loan Party or any ERISA Affiliate.
"EVENT OF DEFAULT" has the meaning specified in SECTION 11.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
13
21
"EXISTING BANK DEBT" means all indebtedness, obligations and
liabilities under or in connection with the Credit Agreement, dated as of August
21, 1995, among the Parent, HDSC, the lenders party thereto and Chemical Bank,
as Administrative Agent and Fronting Bank, as the foregoing shall be amended,
restated, modified and supplemented from time to time to the Closing Date.
"FACILITY FEE" has the meaning specified in SECTION 3.4.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"FINANCIAL STATEMENTS" means, according to the context in which
it is used, the financial statements referred to in SECTION 8.6(a) or any other
financial statements required to be given to the Lenders or the Agent pursuant
to this Agreement.
"FISCAL YEAR" means the fiscal year of the Parent and its
Subsidiaries for financial accounting purposes. The current Fiscal Year of the
Parent and its Subsidiaries will end on February 1, 1997.
"FIXED ASSETS" means, with respect to any Loan Party, Equipment
and Real Estate of such Loan Party.
"FUNDING DATE" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession); PROVIDED, HOWEVER, that for the purpose of
determining Book Value of Eligible Inventory, the Coverage Ratio and compliance
with SECTIONS 9.23 and 9.24, "GAAP" means generally accepted accounting
principles as in effect as of the Closing Date and consistent with those applied
in the preparation of the unaudited August 3, 1996 Financial Statements which
are part of the
14
22
Parent's Quarterly Report on Form 10Q for the fiscal quarter of the Parent ended
on such date; and PROVIDED, FURTHER, that if (i) any changes in accounting
principles from those in effect on the Closing Date are hereafter occasioned by
promulgation of rules, regulations, pronouncements or opinions by or are
otherwise required by the Accounting Principles Board, the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession) or (ii) any Loan Party shall after the Closing Date
otherwise change any of the accounting principles it utilizes and such change is
permitted under GAAP and any of such changes in clauses (i) or (ii) above
results in a change in the method of calculation of, or affects the results of
such calculation of, Book Value of Eligible Inventory, the Coverage Ratio or any
of the financial covenants set forth in SECTIONS 9.23 and 9.24, then the Loan
Parties, the Agent and the Lenders agree to enter into and diligently pursue in
good faith negotiations in order to amend such valuation and financial covenants
and tests (or the terms used therein or the calculation thereof) so as to
equitably reflect such accounting changes with the desired result that the
criteria for evaluating the Book Value of Eligible Inventory and the financial
condition and results of operations of the Parent and its Subsidiaries based
upon such financial covenants and tests shall be the same after such accounting
changes as if such accounting changes had not been made (and, to the extent that
the Loan Parties, the Agent and the Lenders shall fail to agree in writing to
any such amendment, then for purposes of such valuation and financial covenants
and tests, GAAP shall be generally accepted accounting principles as in effect
as of the Closing Date and consistent with those applied in the preparation of
the unaudited August 3, 1996 Financial Statements which are part of the Parent's
Quarterly Report on Form 10Q for the fiscal quarter of the Parent ended on such
date or as otherwise previously agreed to in writing by the Loan Parties, the
Agent and the Lenders).
"GENERAL INTANGIBLES" means, with respect to any Loan Party, all
of such Loan Party's now owned or hereafter acquired general intangibles, choses
in action and causes of action and all other intangible personal property of
such Loan Party of every kind and nature (other than Accounts), including,
without limitation, all contract rights, Proprietary Rights, corporate or other
business records, inventions, designs, blueprints, plans, specifications,
patents, patent applications, trademarks, service marks, trade names, trade
secrets, goodwill, copyrights, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, claims or rights to any funds which may
become due to such Loan Party in connection with the termination of any Plan or
other employee benefit plan or any rights thereto and any other amounts payable
to such Loan Party from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any similar
type of insurance and any proceeds thereof, proceeds of insurance covering the
lives of key employees on which such Loan Party is beneficiary, and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to such Loan Party.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative
15
23
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"GUARANTORS" means the Parent and each of its Subsidiaries.
"GUARANTY" means, with respect to any Person, all obligations of
such Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any indebtedness,
dividend or other obligations of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity securities
or other property or services.
"HDSC" has the meaning specified in the introductory paragraph
to this Agreement.
"INTERCOMPANY ACCOUNTS" means all assets and liabilities,
however arising, which are due to the Parent and/or any of its Subsidiaries
from, which are due from the Parent and/or any of its Subsidiaries to, or which
otherwise arise from any transaction by the Parent and/or any of its
Subsidiaries with, any Affiliate of the Parent or any of its Subsidiaries.
"INTERCOMPANY NOTE" means the intercompany note dated the
Amendment and Restatement Effective Date and issued by HDSC to the order of the
Parent in the original principal amount of $195,000,000, a copy of which is set
forth as EXHIBIT G, as amended, modified or supplemented from time to time in
accordance with the terms thereof and hereof, which intercompany note evidences
the loan by the Parent to HDSC of $195,000,000 from the proceeds of the dividend
in such amount paid by HDSC to the Parent on the Amendment and Restatement
Effective Date (with no actual cash exchange between the Parent and HDSC with
respect to the making of such loan and dividend as a result of such transactions
being effected contemporaneously).
"INTEREST PERIOD" means, as to any LIBOR Rate Loan, the period
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and
ending on the date one, two, three or six months (to the extent available as
determined by the Agent) thereafter as selected by the relevant Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
16
24
(ii) any Interest Period pertaining to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the
Stated Termination Date.
"INTEREST RATE" means each or any of the interest rates,
including the Default Rate, set forth in SECTION 3.1.
"INVENTORY" means, with respect to any Loan Party, all of such
Loan Party's now owned and hereafter acquired inventory, goods and merchandise,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, other materials and supplies of any
kind, nature or description which are or might be consumed in such Loan Party's
business or used in connection with the packing, shipping, advertising, selling
or finishing of such goods, merchandise and such other personal property, and
all documents of title or other documents representing them.
"IRS" means the Internal Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.
"LATEST PROJECTIONS" means: (a) on the Closing Date and
thereafter until the Agent receives new projections pursuant to SECTION 7.2(f),
the projections of the consolidated financial condition, results of operations
and cash flow of the Parent and its Subsidiaries for the Parent's current Fiscal
Year delivered to the Agent prior to the Closing Date; and (b) thereafter, the
projections most recently received by the Agent pursuant to SECTION 7.2(f).
"LAYAWAY INVENTORY" means Inventory of HDSC that a customer of
HDSC intends to purchase and has placed in HDSC's layaway program, but only if
(a) title to such Inventory remains with HDSC, (b) such Inventory is physically
segregated from other Inventory of the Borrowers or is otherwise identified as
layaway inventory of HDSC and (c) such layaway program is generally consistent
with HDSC's historical layaway practices.
"LENDER" and "LENDERS" have the meanings specified in the
introductory paragraph hereof and shall include the Agent to the extent of any
Agent Advance outstanding and BABC to the extent of any BABC Loan outstanding;
PROVIDED that no such Agent Advance or BABC Loan shall be taken into account in
determining any Lender's Pro Rata Share or in determining the Majority Lenders.
"LETTER OF CREDIT" means a letter of credit issued or caused to
be issued for the account of a Borrower pursuant to SECTION 2.3.
"LETTER OF CREDIT FEE" has the meaning specified in SECTION 3.6.
17
25
"LIBOR INTEREST PAYMENT DATE" means, with respect to a LIBOR
Rate Loan, the last day of each Interest Period applicable to such Loan, and, in
the case of a LIBOR Rate Loan with an Interest Period of more than three months'
duration, each day that would have been a LIBOR Interest Payment Date had
successive Interest Periods of three months' duration been applicable to such
Loan.
"LIBOR RATE" means, for any Interest Period, with respect to
LIBOR Rate Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/1000th of 1.0%) determined by the Agent as
follows:
LIBOR
LIBOR Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
where:
"EURODOLLAR RESERVE PERCENTAGE" means for any day for
any Interest Period the maximum reserve percentage (expressed as
a decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to any Lender) under
regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded
upward to the next 1/16th of 1%) notified to the Agent by Bank
of America as the rate of interest at which dollar deposits in
the approximate amount of the Loan to be made or continued as,
or converted into, a LIBOR Rate Loan and having a maturity
comparable to such Interest Period would be offered by Bank of
America's applicable lending office to major banks in the London
eurodollar market at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
"LIBOR RATE LOANS" means, collectively, the LIBOR Revolving
Loans and the LIBOR Term Loans.
"LIBOR REVOLVING LOAN" means a Revolving Loan during any period
in which it bears interest based on the LIBOR Rate.
"LIBOR TERM LOAN" means any portion of a Term Loan during any
period in which such portion bears interest based on the LIBOR Rate.
18
26
"LIEN" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property. Notwithstanding the foregoing, under no circumstance shall the term
"LIEN" be construed to include the interest that any retail buyer may have in
Layaway Inventory.
"LOAN ACCOUNT" means, with respect to a Borrower, the loan
account of such Borrower, which account shall be maintained by the Agent.
"LOAN DOCUMENTS" means this Agreement, the Term Loan Notes, the
Pledge Agreement, the Trademark Agreement, and any other agreements,
instruments, and documents heretofore, now or hereafter evidencing, securing,
guaranteeing or otherwise relating to the Obligations, the Collateral, or any
other aspect of the transactions contemplated by this Agreement.
"LOANS" means, collectively, all loans and advances provided for
in ARTICLE 2.
"LOAN PARTY" shall refer to each of HDSC, CRH, the Parent and
each of the other Guarantors.
"MAJORITY LENDERS" means at any time Lenders whose Pro Rata
shares aggregate more than 50% of the Commitments or, if no Commitments shall
then be in effect, Lenders who hold more than 50% of the aggregate principal
amount of the Loans then outstanding.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business, profits,
properties, condition (financial or otherwise) or prospects of the Parent and
its Subsidiaries taken as a whole or any material portion of the Collateral; (b)
a material impairment of the ability of the Parent or any of its Subsidiaries to
perform under any Loan Document and to avoid any Event of Default; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability against the Parent or any of its Subsidiaries of any Loan
Document.
"MAXIMUM REVOLVER AMOUNT" means $300,000,000.
19
27
"MULTI-EMPLOYER PLAN" means a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Loan Party
or any ERISA Affiliate.
"NET CAPEX" means, for any period, that amount which is (1) the
greater of (a) the product of $1,000,000 and the number of fiscal months of the
Parent (or portion thereof) comprising such period or (b) the aggregate amount
of Capital Expenditures (including, without limitation, any Capital Expenditures
that would arise from any acquisition described in clause (m) of the definition
Restricted Investment) made by the Parent and its Subsidiaries during such
period (which aggregate amount of Capital Expenditures shall, for purposes of
determining compliance with SECTION 9.24 (and not for the purpose of determining
the Coverage Ratio) for each of the twelve consecutive fiscal month periods of
the Parent ending on the last day of any fiscal quarter of the Parent comprising
part of the Parent's 1997 or 1998 Fiscal Year (without duplication), be reduced
by $10,000,000), LESS (2) the aggregate amount of (i) Net Cash Proceeds received
by the Parent or any of its Subsidiaries during such period from the sale or
other disposition to non-Affiliates of Equipment permitted to be sold or
disposed of hereunder and (ii) Debt For Borrowed Money incurred by the Parent or
any of its Subsidiaries during such period which is permitted hereunder in
connection with the financing (but not refinancing) of Capital Expenditures made
in such period or made at any time prior to the beginning of such period.
"NET CASH PROCEEDS" means, with respect to any sale of assets of
a Loan Party, cash (freely convertible into U.S. dollars) received by such Loan
Party from such sale (including cash received as consideration for the
assumption or incurrence of liabilities incurred in connection with or in
anticipation of such sale), after (a) provision for all title, recording or
other taxes measured by or resulting from such sale, (b) payment of all
reasonable brokerage commissions, investment banking and legal fees and other
fees and expenses related to such sale, (c) deduction of appropriate amounts to
be provided by such Loan Party as a reserve, in accordance with GAAP, against
any liabilities associated with the assets sold or disposed of in such
transaction and retained by such Loan Party after such transaction, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such transaction
and (d) amounts paid to satisfy Debt (other than the Obligations) which are
required to be repaid in connection with any such sale.
"NOTICE OF BORROWING" has the meaning specified in
SECTION 2.2(b).
"NOTICE OF CONVERSION/CONTINUATION" has the meaning specified in
SECTION 3.2(b).
"OBLIGATIONS" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by any Borrower or
other Loan Party to the Agent and/or any Lender, arising under or pursuant to
this Agreement or any of the other Loan Documents, whether or not evidenced by
any note, or other instrument or document,
20
28
whether arising from an extension of credit, opening of a letter of credit,
acceptance, loan, guaranty, indemnification or otherwise, whether direct or
indirect (including, without limitation, those acquired by assignment from
others, and any participation by the Agent and/or any Lender in any Borrower's
debts owing to others), absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including, without limitation, all
principal, interest, charges, expenses, fees, attorneys' fees, filing fees and
any other sums chargeable to any Borrower hereunder or under any of the other
Loan Documents. "Obligations" includes, without limitation, all Revolving Loans,
Term Loans and all debts, liabilities, and obligations now or hereafter owing
from any Borrower to the Agent and/or any Lender under or in connection with the
Letters of Credit or Credit Support.
"ORIGINAL LOAN AND SECURITY AGREEMENT" has the meaning specified
in the recitals to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any other Loan
Documents.
"PARENT" has the meaning specified in the introductory paragraph
to this Agreement.
"PARTICIPATING LENDER" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by such
Lender under this Agreement, and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.
"PAYMENTS" has the meaning specified in SECTION 6.9(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
"PENDING REVOLVING LOANS" means, with respect to a Borrower, at
any time, the aggregate principal amount of all Revolving Loans requested by
such Borrower in any Notice(s) of Borrowing received by the Agent which have not
yet been advanced.
"PENSION PLAN" means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA which any Loan Party sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or in
the case of a Multiple-employer Plan has made contributions at any time during
the immediately preceding five (5) plan years.
"PERMITTED LIENS" means:
(a) Liens for taxes not delinquent or statutory
Liens for taxes in an amount not to exceed $2,500,000 provided that the payment
of such taxes which are due and
21
29
payable is being contested in good faith and by appropriate proceedings
diligently pursued and as to which adequate financial reserves have been
established on the relevant Loan Party's books and records and a stay of
enforcement of any such Lien is in effect.
(b) the Agent's Liens;
(c) deposits under worker's compensation,
unemployment insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other similar bonds for
the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations (other than liens arising
under ERISA or Environmental Liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course of
business;
(d) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like Persons
arising in the ordinary course of business, PROVIDED that (1) if any such Lien
arises from the nonpayment by the Parent or any of its Subsidiaries of such
claims or demand when due and such Lien covers any Inventory, such claims or
demands do not exceed $1,000,000 in the aggregate and (2) if any such Lien
arises from the nonpayment by the Parent or any of its Subsidiaries of such
claims or demands when due and such Lien does not cover any Inventory, HDSC
agrees to obtain a bond to fully secure the payment of such claims or demands
within thirty days after the date such payment was due or to use reasonable
efforts to take or cause to be taken such other steps to remove such Lien within
thirty days after the date such payment was due;
(e) reservations, exceptions, encroachments,
easements, rights of way, covenants running with the land, and other similar
title exceptions or encumbrances affecting any Real Estate; PROVIDED that they
do not in the aggregate materially detract from the value of the Real Estate or
materially interfere with its use in the ordinary conduct of any Loan Party's
business;
(f) judgment and other similar Liens arising in
connection with court proceedings to the extent the attachment or enforcement of
such Liens would not result in an Event of Default hereunder;
(g) purchase money Liens (other than Liens on
Inventory), PROVIDED that, in any event, the principal amount of the Debt
secured by any item of property shall not exceed 100% of the cost thereof;
(h) Liens on property or assets (other than
Inventory) of the Parent and any of its Subsidiaries existing on the Closing
Date and listed on SCHEDULE 9.19, PROVIDED that such Liens shall secure only
those obligations that they secure on the Closing Date;
22
30
(i) any Lien existing on any property (other than
Inventory or proceeds thereof) prior to the acquisition thereof by the Parent or
any of its Subsidiaries, PROVIDED that (A) such Lien is not created in
contemplation of or in connection with such acquisition, (B) such Lien does not
apply to any other property or assets of the Parent or any of its Subsidiaries
and (C) such acquisition is permitted hereunder;
(j) leases, subleases and license agreements arising
in the ordinary course of business and not otherwise prohibited under this
Agreement;
(k) financing statements filed under any Uniform
Commercial Code or comparable law of any jurisdiction in respect of operating
leases and consignments and not otherwise prohibited under this Agreement;
(l) Liens (other than on Inventory) in favor of
HDSC's credit card processing company securing obligations of HDSC to such
processing company incurred in the ordinary course of business in connection
with HDSC's credit card receivables collection process;
(m) Liens on Inventory of a Borrower created under
agreements entered into by it in the ordinary course of business with customs
brokers, but only to the extent such Liens secure amounts owing by such Borrower
to such customs brokers for customs services provided by such brokers;
(n) Liens on Real Estate owned by HDSC securing Debt
permitted to be incurred by it hereunder, PROVIDED that, in any event, the
aggregate principal amount of the Debt secured by such property shall not exceed
100% of the fair market value of such property at each date any such Debt is
incurred;
(o) Liens on store fixtures and store Equipment of
HDSC securing Debt permitted to be incurred by it hereunder, PROVIDED that, in
any event, the aggregate principal amount of the Debt secured by such property
shall not exceed 100% of the fair market value of such property at each date any
such Debt is incurred;
(p) Liens on other Equipment of the Loan Parties
securing Debt permitted pursuant to SECTION 9.13(n), provided that, in any
event, the aggregate principal amount of the Debt secured by such property shall
not exceed 100% of the fair market value of such property at each date any such
Debt is incurred;
(q) Liens on property in connection with
transactions permitted pursuant to SECTION 9.20; and
(r) extensions and replacements of any Liens
referred to in clauses (g), (h), (n), (o), (p) and (q) above, PROVIDED that any
such extension or replacement Lien is limited to the property or asset covered
by the Lien extended or replaced and does not secure any Debt in addition to
that secured immediately prior to such extension or replacement.
23
31
"PERSON" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
Governmental Authority, or any other entity.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which any Loan Party sponsors or maintains or to which such Loan
Party makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"PLEDGE AGREEMENT" means the Pledge Agreement to be entered into
on the Closing Date among the Parent, the Borrowers and the Agent with respect
to any equity interests, now or hereafter owned by such Loan Party, in any
Subsidiaries of the Parent.
"PRO RATA SHARE" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments, or if no Commitments are outstanding, a
fraction (expressed as a percentage), the numerator of which is the amount of
Obligations owed to such Lender and the denominator of which is the aggregate
amount of the Obligations owed to the Lenders.
"PROPRIETARY RIGHTS" means, with respect to a Loan Party, all of
such Loan Party's now owned and hereafter arising or acquired: licenses,
franchises, permits, patents, patent rights, copyrights, works which are the
subject matter of copyrights, trademarks, service marks, trade names, trade
styles, patent, trademark and service xxxx applications, and all licenses and
rights related to any of the foregoing, including, without limitation, those
patents, trademarks, service marks, trade names and copyrights set forth on
SCHEDULE 8.13 hereto, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to xxx for past,
present and future infringement of any of the foregoing.
"PURCHASE ACCRUAL INVENTORY" of HDSC means, at any time,
Inventory located on the premises of HDSC's distribution center in Columbus,
Ohio and retail stores or in- transit to such locations (a) title to which shall
have passed to HDSC, (b) that is subject to a first priority perfected security
interest in favor of the Agent for the benefit of the Agent and the Lenders and
(c) that has not yet been recorded in HDSC's stock ledger due to the timing of
processing invoices or receiving documents. Any such Inventory which HDSC
acquires from CRH shall no longer constitute Purchase Accrual Inventory if, 45
days after any such Inventory arrives in the United States, such Inventory
remains unrecorded in HDSC's stock ledger.
"RATE PROTECTION AGREEMENTS" means interest rate swap, cap,
collar or floor arrangements or other similar agreements entered into by HDSC to
provide protection against fluctuations in interest rates. Each Rate Protection
Agreement shall be on terms satisfactory to the Agent with a counterparty
satisfactory to the Agent.
"REAL ESTATE" means all of the present and future interests of
any Loan Party, as owner, lessee, or otherwise, in any real property or any
improvements thereon, including,
24
32
without limitation, any interest arising from an option to purchase or lease any
such real property or improvements or any portion thereof.
"RELEASE" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater, Real Estate or other property.
"REPORTABLE EVENT" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer or the
president of the Parent or any Borrower, as appropriate, or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants and the preparation of the Borrowing Base
Certificate, the chief financial officer, the treasurer or the controller of the
Parent and each Borrower, or any other officer having substantially the same
authority and responsibility.
"RESTRICTED INVESTMENT" means any acquisition by the Parent or
any of its Subsidiaries of an interest in another Person or of assets of another
Person comprising all or a substantial part of the assets or any business of
such Person or which assets are material in relation to the assets of the
acquiror (whether in one transaction or a series of related transactions) in
exchange for cash or other property, whether in the form of an acquisition of
stock, debt, or other indebtedness or obligation or otherwise, or the purchase
or acquisition of a loan, advance, capital contribution, or subscription, except
for the following:
(a) Equipment to be used in the business of HDSC;
(b) Inventory of a Borrower in the ordinary course
of business;
(c) pledges and deposits described under clause (c)
of the definition of Permitted Liens;
(d) direct obligations of the United States of
America, or any agency thereof, or obligations guaranteed by the United States
of America, PROVIDED that such obligations mature within six months from the
date of acquisition thereof;
(e) certificates of deposit maturing within six
months from the date of acquisition, bankers' acceptances, Eurodollar bank
deposits, or overnight bank deposits,
25
33
in each case issued by, created by, or with a bank or trust company organized
under the laws of the United States or any state thereof having capital and
surplus aggregating at least $500,000,000;
(f) commercial paper given a rating of "A2" or
better by Standard & Poor's Corporation or "P2" or better by Xxxxx'x Investors
Service, Inc. and maturing not more than 90 days from the date of creation
thereof or any liquid investment which the Agent approves in writing as being of
substantially equal quality (which approval shall not be unreasonably withheld);
(g) in the case of the Parent, common equity
investments in the capital stock of HDSC;
(h) in the case of HDSC, (1) investments by HDSC
existing on the Closing Date in the capital stock of its Subsidiaries and (2)
loans to the Parent permitted pursuant to Section 9.13(k);
(i) loans or advances in the ordinary course of
business consistent with past practices to any wholly-owned Subsidiary of HDSC
by (1) HDSC or (2) any other Subsidiary of HDSC;
(j) loans and advances to HDSC by any Subsidiary of
HDSC in the ordinary course of business consistent with past practices;
(k) loans to officers and employees of HDSC in the
ordinary course of business consistent with past practices not to exceed
$5,000,000 in aggregate outstanding principal amount (and no more than
$1,000,000 in aggregate outstanding principal amount to any single officer or
employee);
(l) individual store deposit accounts with local
depository banks required in the ordinary course of business and concentration
deposit accounts, in each instance, that are maintained in accordance with
SECTION 6.9;
(m) so long as no Default or Event of Default shall
exist at the time of acquisition (or after giving effect thereto) and subject to
SECTION 9.18, acquisitions by HDSC of assets of a business of a non-Affiliated
Person not to exceed in purchase price (whether in the form of cash, property,
stock, Debt, assumption of liabilities or otherwise) $15,000,000 individually or
$30,000,000 in the aggregate for all such acquisitions during the term of this
Agreement;
(n) Rate Protection Agreements entered into by HDSC;
and
(o) the Intercompany Note.
Upon the request of the Agent or if an Event of Default shall be
continuing, HDSC shall pledge in favor of the Agent for the benefit of the Agent
and the Lenders all
26
34
of HDSC's investments under clauses (d), (e) and (f) above pursuant to pledge
agreements in form and substance satisfactory to the Agent, as a result of which
the Agent shall have a first priority perfected security interest therein.
"REVOLVING LOANS" has the meaning specified in SECTION 2.2 and
includes each Agent Advance and BABC Loan.
"SENIOR INDENTURE" means the Indenture, dated as of April 19,
1996, among the Parent, certain of its Subsidiaries and Fleet National Bank, as
trustee, as amended, modified or supplemented from time to time in accordance
with the terms thereof and hereof.
"SENIOR NOTE DOCUMENTS" means the Senior Indenture, the Senior
Notes and any and all guarantees executed in connection therewith from time to
time, each as amended, modified or supplemented from time to time in accordance
with the terms thereof and hereof.
"SENIOR NOTES" means any and all promissory notes at any time
issued and outstanding under or pursuant to the Senior Indenture, as amended,
modified, supplemented, replaced or substituted for from time to time in
accordance with the terms thereof and hereof.
"SETTLEMENT" and "SETTLEMENT DATE" have the meanings specified
in SECTION 2.2(j)(i).
"STATED TERMINATION DATE" means February 5, 2001.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Parent.
"TAXES" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Lender or the Agent, as the case may be,
is organized or maintains a lending office.
"TERM LOAN" and "TERM LOANS" have the meanings specified in
SECTION 2.4(a).
"TERM LOAN NOTE" and "TERM LOAN NOTES" have the meanings
specified in SECTION 2.4(b).
27
35
"TERMINATION DATE" means the earliest to occur of (i) the Stated
Termination Date, (ii) the date the Total Facility is terminated either by the
Borrowers pursuant to SECTION 4.2 or by the Majority Lenders pursuant to SECTION
11.2 or automatically as provided in the proviso to SECTION 11.2(a), and (iii)
the date this Agreement is otherwise terminated for any reason whatsoever.
"TOTAL FACILITY" has the meaning specified in SECTION 2.1.
"TRADEMARK AGREEMENT" means the Trademark Security Agreement,
dated as of the Closing Date, executed and delivered by the Loan Parties to the
Agent to evidence and perfect the Agent's security interest in each of the Loan
Parties' present and future trademarks and related rights, for the benefit of
the Agent and the Lenders.
"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of New York or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
"UNUSED LETTER OF CREDIT SUBFACILITY" means an amount equal to
$200,000,000 MINUS the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit PLUS (b) the aggregate unpaid reimbursement
obligations with respect to all Letters of Credit.
"UNUSED LINE FEE" has the meaning specified in SECTION 3.5.
1.2 ACCOUNTING TERMS. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 INTERPRETIVE PROVISIONS. (a) The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
28
36
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding" and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent, the
Loan Parties and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lenders' involvement in their preparation.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 TOTAL FACILITY. Subject to all of the terms and conditions of
this Agreement, the Lenders severally agree to make available a total credit
facility of up to $300,000,000 (the "Total Facility") for the Borrowers' use
from time to time during the term of this Agreement. The Total Facility shall be
comprised of (a) a revolving line of credit for the Borrowers consisting of
revolving loans and letters of credit up to the limits of the Combined
Availability as described in SECTIONS 2.2 and 2.3 and (b) the Term Loans
described in SECTION 2.4. Notwithstanding anything contained in this Agreement
(including, without limitation, ARTICLE 2), CRH may not request any financial
accommodations hereunder other than (i) the issuance of documentary Letters of
Credit to be issued for its account to secure the payment by CRH of the purchase
of finished goods Inventory purchased by CRH in the ordinary course of business,
(ii) the provision of Credit Support for such Letters of Credit or (iii)
Revolving Loans, the proceeds of which are used to
29
37
reimburse drawings under such Letters of Credit or payments made with respect to
any such Credit Support; PROVIDED that the foregoing shall in no event restrict
or invalidate the making to CRH of Agent Advances or Revolving Loans deemed
requested by CRH under SECTION 2.3(e)(2) or SECTION 4.4.
2.2 REVOLVING LOANS.
(a) AMOUNTS. Subject to the satisfaction of the conditions
precedent set forth in ARTICLE 10, each Lender severally agrees, upon a
Borrower's request from time to time on any Business Day during the period from
the Closing Date to the Termination Date, to make revolving loans (the
"Revolving Loans") to such Borrower, in amounts not to exceed for the Borrowers
on an aggregate basis (except for BABC with respect to BABC Loans or Agent
Advances) such Lender's Pro Rata Share of the Combined Availability. The
Lenders, however, in their discretion, may elect to make Revolving Loans to the
Borrowers or participate (as provided for in SECTION 2.3(f)) in the credit
support or enhancement provided through the Agent to the issuers of Letters of
Credit in excess of the Combined Availability on one or more occasions, but if
they do so, neither the Agent nor the Lenders shall be deemed thereby to have
changed the limits of the Maximum Revolver Amount or the Combined Availability
or to be obligated to exceed such limits on any other occasion. If the sum of
(i) the aggregate outstanding Revolving Loans and Term Loans to the Borrowers,
(ii) the aggregate amount of Pending Revolving Loans to the Borrowers, (iii) the
aggregate undrawn amount of outstanding Letters of Credit and (iv) any unpaid
reimbursement obligations in respect of Letters of Credit exceeds the Combined
Availability (with Combined Availability determined as if clauses (b)(i) through
(iv) of such definition were zero), the Lenders may refuse to make or otherwise
restrict the making of Revolving Loans to a Borrower as the Lenders determine
until such excess has been eliminated, subject to the Agent's authority, in its
sole discretion, to make Agent Advances pursuant to the terms of SECTION 2.2(i).
(b) PROCEDURE FOR BORROWING. (1) Each Borrowing by a
Borrower shall be made upon such Borrower's irrevocable written notice delivered
to the Agent in the form of a Notice of Borrowing (substantially in the form of
EXHIBIT C or another form acceptable to the Agent) together with a Borrowing
Base Certificate reflecting sufficient Combined Availability, which must be
received by the Agent prior to 12:00 noon (New York City time) (i) three
Business Days prior to the requested Funding Date, in the case of LIBOR Rate
Loans and (ii) no later than 12:00 noon on the requested Funding Date, in the
case of Base Rate Loans, specifying:
(A) the amount of the Borrowing by such
Borrower (which Borrowing, in case of the request for LIBOR Rate Loans, shall be
in the amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof);
(B) the requested Funding Date, which shall be
a Business Day;
30
38
(C) whether the Revolving Loans requested by
such Borrower are to be Base Rate Revolving Loans or LIBOR Revolving Loans; and
(D) the duration of the Interest Period if the
requested Revolving Loans are to be LIBOR Revolving Loans. If the Notice of
Borrowing fails to specify the duration of the Interest Period for any Borrowing
comprised of LIBOR Rate Loans, such Interest Period shall be three months;
provided, however, that with respect to any Borrowing to be made on the Closing
Date, such Borrowing will consist of Base Rate Revolving Loans only.
(2) After giving effect to any Borrowing by a
Borrower, there may not be more than ten different Interest Periods in effect
for the Borrowers in the aggregate.
(3) With respect to any request for Base Rate
Revolving Loans, in lieu of delivering the above-described Notice of Borrowing,
a Borrower may give the Agent telephonic notice of such request by the required
time, with such telephonic notice to be confirmed in writing within 24 hours of
the giving of such notice but the Agent shall be entitled to rely on the
telephonic notice in making such Revolving Loans.
(c) RELIANCE UPON AUTHORITY. On or prior to the Closing Date
and thereafter prior to any change with respect to any of the information
contained in the following clauses (i) and (ii), the applicable Borrower shall
deliver to the Agent a writing setting forth (i) the account of such Borrower to
which the Agent is authorized to transfer the proceeds of the Revolving Loans
requested by such Borrower pursuant to this SECTION 2.2, and (ii) the names of
the officers authorized to request Revolving Loans on behalf of such Borrower,
and shall provide the Agent with a specimen signature of each such officer. The
Agent shall be entitled to rely conclusively on such officer's authority to
request Revolving Loans on behalf of the applicable Borrower, the proceeds of
which are to be transferred to any of the accounts of the applicable Borrower
specified by such Borrower pursuant to the immediately preceding sentence, until
the Agent receives written notice to the contrary. The Agent shall have no duty
to verify the identity of any individual representing him or herself as one of
the officers authorized by the applicable Borrower to make such requests on its
behalf.
(d) NO LIABILITY. The Agent shall not incur any liability to
any Borrower as a result of acting upon any notice referred to in SECTIONS
2.2(b) and (c), which notice the Agent believes in good faith to have been given
by an officer duly authorized by such Borrower to request Revolving Loans on its
behalf or for otherwise acting in good faith under this SECTION 2.2, and the
crediting of Revolving Loans to the applicable Borrower's deposit account, or
transmittal to such Person as the applicable Borrower shall direct, shall
conclusively establish the obligation of such Borrower to repay such Revolving
Loans as provided herein.
31
39
(e) NOTICE IRREVOCABLE. Any Notice of Borrowing (or
telephonic notice in lieu thereof) made by a Borrower pursuant to SECTION 2.2(b)
shall be irrevocable and such Borrower shall be bound to borrow the funds
requested therein in accordance therewith.
(f) AGENT'S ELECTION. Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to SECTION 2.2(b), the
Agent shall elect, in its discretion, (i) to have the terms of SECTION 2.2(g)
apply to such requested Borrowing, or (ii) to request BABC to make a BABC Loan
pursuant to the terms of SECTION 2.2(h) in the amount of the requested
Borrowing; PROVIDED, HOWEVER, that if BABC declines in its sole discretion to
make a BABC Loan pursuant to SECTION 2.2(h), the Agent shall elect to have the
terms of SECTION 2.2(g) apply to such requested Borrowing.
(g) MAKING OF REVOLVING LOANS. (i) In the event that the
Agent shall elect to have the terms of this SECTION 2.2(g) apply to a requested
Borrowing as described in SECTION 2.2(f), then promptly after receipt of a
Notice of Borrowing or telephonic notice pursuant to SECTION 2.2(b), the Agent
shall notify the Lenders by telecopy, telephone or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to the Agent
in same day funds, to such account of the Agent as the Agent may designate, not
later than 1:00 p.m. (New York City time), on the Funding Date applicable
thereto. After the Agent's receipt of the proceeds of such Revolving Loans, upon
satisfaction of the applicable conditions precedent set forth in ARTICLE 10, the
Agent shall make the proceeds of such Revolving Loans available to the
applicable Borrower on the applicable Funding Date by transferring same day
funds equal to the proceeds of such Revolving Loans received by the Agent to an
account of such Borrower, designated in writing by such Borrower and acceptable
to the Agent; PROVIDED, HOWEVER, that the amount of Revolving Loans or Letters
of Credit so made or issued to or for the account of the Borrowers on any date
shall in no event exceed the Combined Availability on such date.
(ii) Unless the Agent receives notice from a Lender
on or prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least one Business Day prior to the date of such Borrowing (or
with respect to Base Rate Loans for which notice of such borrowings is given to
the Agent by the applicable Borrower on the same day as the requested date for
the making of such borrowings, not later than 1:00 p.m. (New York City time) on
such requested date for the making of such borrowings), that such Lender will
not make available as and when required hereunder to the Agent for the account
of the applicable Borrower the amount of that Lender's Pro Rata Share of the
Borrowing for such Borrower, the Agent may assume that each Lender has made such
amount available to the Agent in immediately available funds on the Funding Date
and the Agent may (but shall not be so required), in reliance upon such
assumption, make available to such Borrower on such date a corresponding amount.
If and to the extent any Lender shall not have made its full amount available to
the Agent in immediately available funds and the Agent in such circumstances has
made available to the applicable Borrower such amount, that Lender shall on the
Business Day following such Funding Date make such amount available to the
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Agent submitted to any Lender with respect to
32
40
amounts owing under this subsection shall be conclusive, absent manifest error.
If such amount is so made available, such payment to the Agent shall constitute
such Lender's Loan to the applicable Borrower on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the Agent on
the Business Day following the Funding Date, the Agent will notify the
applicable Borrower of such failure to fund and, upon demand by the Agent, such
Borrower shall pay such amount to the Agent for the Agent's account, together
with interest thereon for each day elapsed since the date of such Borrowing, at
a rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing. The failure of any Lender to make any Loan on any
Funding Date (any such Lender, prior to the cure of such failure, being
hereinafter referred to as a "Defaulting Lender") shall not relieve any other
Lender of any obligation hereunder to make a Loan on such Funding Date, but no
Lender shall be responsible for the failure of any other Lender to make the Loan
to be made by such other Lender on any Funding Date.
(iii) The Agent shall not be obligated to transfer to
a Defaulting Lender any payments made by any Borrower to the Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by the Agent. The Agent may hold and, in its
discretion, re-lend to any Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender. Any amounts so re-lent
to any Borrower shall bear interest at the rate applicable to Base Rate
Revolving Loans and for all other purposes of this Agreement shall be treated as
if they were Revolving Loans, provided, however, that for purposes of voting or
consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Lender's Commitment shall be deemed to be zero (-0-). Until a Defaulting
Lender cures its failure to fund its Pro Rata Share of any Borrowing (1) such
Defaulting Lender shall not be entitled to any portion of the Unused Line Fee
and (2) the Unused Line Fee shall accrue in favor of the Lenders which have
funded their respective Pro Rata Shares of such requested Borrowing, shall be
allocated among such performing Lenders ratably based upon their relative
Commitments, and shall be calculated based upon the average amount by which the
aggregate Commitments of such performing Lenders exceeds the sum of outstanding
Revolving Loans and Term Loans and the undrawn face amount of all outstanding
Letters of Credit. This section shall remain effective with respect to such
Lender until such time as the Defaulting Lender shall no longer be in default of
any of its obligations under this Agreement. The terms of this Section shall not
be construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by any Borrower of its duties and obligations
hereunder.
(h) MAKING OF BABC LOANS. (i) In the event the Agent shall
elect, with the consent of BABC, to have the terms of this SECTION 2.2(h) apply
to a requested Borrowing as described in SECTION 2.2(f), BABC shall make a
Revolving Loan in the amount of such Borrowing (any such Revolving Loan made
solely by BABC pursuant to this SECTION 2.2(h) being referred to as a "BABC
Loan" and such Revolving Loans being referred to collectively as "BABC Loans")
available to the applicable Borrower on the Funding Date
33
41
applicable thereto by transferring same day funds to an account of such
Borrower, designated in writing by such Borrower and acceptable to the Agent.
Each BABC Loan is a Revolving Loan hereunder and shall be subject to all the
terms and conditions applicable to other Revolving Loans except that all
payments thereon shall be payable to BABC solely for its own account (and for
the account of the holder of any participation interest with respect to such
Revolving Loan). The Agent shall not request BABC to make any BABC Loan if (i)
the Agent shall have received written notice from any Lender, or otherwise has
actual knowledge, that one or more of the applicable conditions precedent set
forth in ARTICLE 10 will not be satisfied on the requested Funding Date for the
applicable Borrowing, or (ii) the requested Borrowing would exceed the Combined
Availability on such Funding Date. BABC shall not otherwise be required to
determine whether the applicable conditions precedent set forth in ARTICLE 10
have been satisfied or the requested Borrowing would exceed the Combined
Availability on the Funding Date applicable thereto prior to making, in its sole
discretion, any BABC Loan.
(ii) The BABC Loans shall be secured by the
Collateral, shall constitute Revolving Loans and Obligations hereunder, and
shall bear interest at the rate applicable to the Revolving Loans from time to
time.
(i) AGENT ADVANCES. (i) Subject to the limitations set forth
in the provisos contained in this SECTION 2.2(i), the Agent is hereby authorized
by the Borrowers and the Lenders, from time to time in the Agent's sole
discretion, (1) after the occurrence of a Default or an Event of Default, or (2)
at any time that any of the other applicable conditions precedent set forth in
ARTICLE 10 have not been satisfied, to make Revolving Loans to any of the
Borrowers on behalf of the Lenders which the Agent, in its reasonable business
judgment, deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of, or
maximize the amount of, repayment of the Loans and other Obligations, or (C) to
pay any other amount chargeable to any Borrower pursuant to the terms of this
Agreement, including, without limitation, costs, fees and expenses as described
in SECTION 16.7 (any of the advances described in this SECTION 2.2(i) being
hereinafter referred to as "Agent Advances"); PROVIDED, that (i) the Majority
Lenders may at any time revoke the Agent's authorization contained in this
SECTION 2.2(i) to make Agent Advances, any such revocation to be in writing and
to become effective prospectively upon the Agent's receipt thereof, and (ii)
immediately after giving effect to the making of the Agent Advances, the sum of
(x) the aggregate unpaid balance of all Revolving Loans and Term Loans made to
the Borrowers at such time, (y) the aggregate undrawn amount of all outstanding
Letters of Credit and (z) the aggregate amount of any unpaid reimbursement
obligations in respect of Letters of Credit shall not exceed the Maximum
Revolver Amount or $25,000,000 in excess of clause (a)(ii) of the definition of
Combined Availability at such time.
(ii) The Agent Advances shall be repayable on demand
and secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving Loans
from time to time. The Agent shall notify each Lender in writing of each such
Agent Advance.
34
42
(j) SETTLEMENT. It is agreed that each Lender's funded
portion of the Revolving Loan is intended by the Lenders to be equal at all
times to such Lender's Pro Rata Share of the outstanding Revolving Loans.
Notwithstanding such agreement, the Agent, BABC, and the other Lenders agree
(which agreement shall not be for the benefit of or enforceable by any Borrower)
that in order to facilitate the administration of this Agreement and the other
Loan Documents, settlement among them as to the Revolving Loans, the BABC Loans
and the Agent Advances shall take place on a periodic basis in accordance with
the following provisions:
(i) The Agent shall request settlement
("Settlement") with the Lenders on a weekly basis, or on a more frequent basis
if so determined by the Agent, (1) on behalf of BABC, with respect to each
outstanding BABC Loan, (2) for itself, with respect to each Agent Advance, and
(3) with respect to collections received, in each case, by notifying the Lenders
of such requested Settlement by telecopy, telephone or other similar form of
transmission, of such requested Settlement, no later than 12:00 noon (New York
City time) on the date of such requested Settlement (the "Settlement Date").
Each Lender (other than BABC, in the case of BABC Loans) shall make the amount
of such Lender's Pro Rata Share of the outstanding principal amount of the BABC
Loans and Agent Advances with respect to which Settlement is requested available
to the Agent, for itself or for the account of BABC, in same day funds, to such
account of the Agent as the Agent may designate, not later than 3:00 p.m. (New
York City time), on the Settlement Date applicable thereto, regardless of
whether the applicable conditions precedent set forth in ARTICLE 10 have then
been satisfied. Such amounts made available to the Agent shall be applied
against the amounts of the applicable BABC Loan or Agent Advance and, together
with the portion of such BABC Loan or Agent Advance representing BABC's Pro Rata
Share thereof, shall constitute Revolving Loans of such Lenders. If any such
amount is not made available to the Agent by any Lender on the Settlement Date
applicable thereto, the Agent shall be entitled to recover such amount on demand
from such Lender together with interest thereon at the Federal Funds Rate for
the first three (3) days from and after the Settlement Date and thereafter at
the Interest Rate then applicable to the Revolving Loans.
(ii) Notwithstanding the foregoing, not more than one
(1) Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a BABC Loan or Agent Advance),
each other Lender shall irrevocably and unconditionally purchase and receive
from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by any
Lender, the Agent shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Federal Funds Rate for the first
three (3) days from and after such demand and thereafter at the Interest Rate
then applicable to the Revolving Loans.
35
43
(iii) From and after the date, if any, on which any
Lender purchases an undivided interest and participation in any BABC Loan or
Agent Advance pursuant to subsection (ii) above, the Agent shall promptly
distribute to such Lender at such address as such Lender may request in writing,
such Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such BABC Loan or
Agent Advance.
(iv) Between Settlement Dates, the Agent, to the
extent no Agent Advances or BABC Loans are outstanding, may pay over to BABC any
payments received by Agent, which in accordance with the terms of this Agreement
would be applied to the reduction of the Revolving Loans, for application to
BABC's other outstanding Revolving Loans. If, as of any Settlement Date,
collections received since the then immediately preceding Settlement Date have
been applied to BABC's other outstanding Revolving Loans other than to BABC
Loans or Agent Advances, as provided for in the previous sentence, BABC shall
pay to the Agent for the account of the Lenders, to be applied to the
outstanding Revolving Loans of such Lenders, an amount such that each Lender
shall, upon receipt of such amount, have, as of such Settlement Date, its Pro
Rata Share of the Revolving Loans. During the period between Settlement Dates,
BABC with respect to BABC Loans, the Agent with respect to Agent Advances, and
each Lender with respect to the Revolving Loans other than BABC Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the actual average daily amount of funds employed by
BABC, the Agent and the other Lenders.
(k) NOTATION. The Agent shall record on its books the
principal amount of the Revolving Loans owing by each Borrower to each Lender,
including the BABC Loans owing by each Borrower to BABC, and the Agent Advances
owing by each Borrower to the Agent, from time to time. In addition, each Lender
is authorized, at such Lender's option, to note the date and amount of each
payment or prepayment of principal of such Lender's Revolving Loans to each
Borrower in its books and records, including computer records, such books and
records constituting rebuttably presumptive evidence, absent manifest error, of
the accuracy of the information contained therein.
(l) LENDERS' FAILURE TO PERFORM. All Loans (other than BABC
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (a) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Loans hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Loans hereunder, (b) no failure by any Lender to perform
its obligation to make any Loans hereunder shall excuse any other Lender from
its obligation to make any Loans hereunder, and (c) the obligations of each
Lender hereunder shall be several, not joint and several.
2.3 LETTERS OF CREDIT.
(a) AGREEMENT TO CAUSE ISSUANCE. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of the Loan Parties
36
44
herein set forth, the Agent agrees to take reasonable steps to cause to be
issued for the account of any Borrower and to provide credit support or other
enhancement to banks acceptable to the Agent and the Borrowers (initially, Bank
of America), which issue Letters of Credit for the account of any Borrower (any
such credit support or enhancement being herein referred to a "Credit Support")
in accordance with this SECTION 2.3 from time to time during the term of this
Agreement.
(b) AMOUNTS; OUTSIDE EXPIRATION DATE. The Agent shall not
have any obligation to take steps to cause to be issued any Letter of Credit or
to provide Credit Support for any Letter of Credit at any time if: (1) the
maximum undrawn amount of the requested Letter of Credit is greater than the
Unused Letter of Credit Subfacility at such time; (2) the maximum undrawn amount
of the requested Letter of Credit and all commissions, fees, and charges due
from the applicable Borrower in connection with the opening thereof exceed the
Combined Availability at such time; or (3) such (a) documentary Letter of Credit
has an expiration date later than the Stated Termination Date or more than
one-hundred and eighty (180) days from the date of issuance or (b) standby
Letter of Credit has an expiration date later than the Stated Termination Date
or more than twelve (12) months from the date of issuance; PROVIDED, HOWEVER,
that standby Letters of Credit may have "evergreen" clauses providing for
automatic annual renewals unless terminated by the Agent (or issuer of the
Letter of Credit at the request of the Agent) by written notice to the
beneficiary of such standby Letter of Credit no less than thirty (30) days prior
to an annual renewal date.
(c) OTHER CONDITIONS. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in ARTICLE 10, the
obligation of the Agent to take reasonable steps to cause to be issued any
Letter of Credit or to provide Credit Support for any Letter of Credit is
subject to the following conditions precedent having been satisfied in a manner
satisfactory to the Agent:
(1) The applicable Borrower shall have delivered to
the proposed issuer of such Letter of Credit, at such times and in such manner
as such proposed issuer may prescribe, an application in form and substance
satisfactory to such proposed issuer and the Agent for the issuance of the
Letter of Credit and such other documents as may be required pursuant to the
terms thereof, and the form and terms of the proposed Letter of Credit shall be
satisfactory to the Agent and such proposed issuer; and
(2) As of the date of issuance, no order of any
court, arbitrator or Governmental Authority shall purport by its terms to enjoin
or restrain money center banks generally from issuing letters of credit of the
type and in the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed issuer of such Letter of Credit refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit.
37
45
(d) ISSUANCE OF LETTERS OF CREDIT.
(1) REQUEST FOR ISSUANCE. The Borrower for whose
account the Letter of Credit is to be issued shall give the Agent two (2)
Business Days' prior written notice of such Borrower's request for the issuance
of a Letter of Credit. Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit, whether such Letter of Credit may be drawn in a single or in partial
draws, the date on which such requested Letter of Credit is to expire (which
date shall be a Business Day), the purpose for which such Letter of Credit is to
be issued, and the beneficiary of the requested Letter of Credit. The applicable
Borrower shall attach to such notice the proposed form of the Letter of Credit.
(2) RESPONSIBILITIES OF THE AGENT; ISSUANCE. The
Agent shall determine, as of the Business Day immediately preceding the
requested effective date of issuance of the Letter of Credit set forth in the
notice from the applicable Borrower pursuant to SECTION 2.3(d)(1), (i) the
amount of the applicable Unused Letter of Credit Subfacility and (ii) the
Combined Availability as of such date. If (i) the undrawn amount of the
requested Letter of Credit is not greater than the applicable Unused Letter of
Credit Subfacility and (ii) the issuance of such requested Letter of Credit and
all commissions, fees, and charges due from the applicable Borrower in
connection with the opening thereof would not exceed the Combined Availability,
the Agent shall, subject to the terms and conditions hereof, take reasonable
steps to cause the intended issuer of the Letter of Credit to issue the
requested Letter of Credit on such requested effective date of issuance.
(3) NOTICE OF ISSUANCE. On each Settlement Date the
Agent shall give notice to each Lender of the issuance of all Letters of Credit
issued since the last Settlement Date.
(4) NO EXTENSIONS OR AMENDMENT. The Agent shall not
be obligated to cause any Letter of Credit to be extended or amended unless the
requirements of this SECTION 2.3(d) are met as though a new Letter of Credit
were being requested and issued. With respect to any Letter of Credit which
contains any "evergreen" or automatic renewal provision, each Lender shall be
deemed to have consented to any such extension or renewal unless any such Lender
shall have provided to the Agent, not less than 30 days prior to the last date
on which the applicable issuer can in accordance with the terms of the
applicable Letter of Credit decline to extend or renew such Letter of Credit,
written notice that it declines to consent to any such extension or renewal,
provided, that if all of the requirements of this SECTION 2.3 are met and no
Default or Event of Default exists, no Lender shall decline to consent to any
such extension or renewal.
(e) PAYMENTS PURSUANT TO LETTERS OF CREDIT AND SHIPPING
RELEASE INDEMNITIES.
(1) PAYMENT OF LETTER OF CREDIT OBLIGATIONS. Each
Borrower agrees to reimburse the issuer for any draw under any Letter of Credit
issued for such Borrower's
38
46
account and the Agent for the account of the Lenders upon any payment pursuant
to any Credit Support issued for such Borrower's account immediately upon
demand, and to pay the issuer of the Letter of Credit the amount of all other
obligations and other amounts payable to such issuer under or in connection with
any Letter of Credit issued for such Borrower's account immediately when due,
irrespective of any claim, setoff, defense or other right which such Borrower
may have at any time against such issuer or any other Person.
(2) REVOLVING LOANS TO SATISFY REIMBURSEMENT
OBLIGATIONS. In the event that the issuer of any Letter of Credit honors a draw
under such Letter of Credit or makes any payment with respect to any Shipping
Release Indemnity (as defined in SECTION 2.3(k)) or the Agent shall have made
any payment pursuant or with respect to any Credit Support or Shipping Release
Indemnity and the applicable Borrower shall not have repaid such amount to the
issuer of such Letter of Credit or Shipping Release Indemnity or the Agent, as
applicable, pursuant to SECTION 2.3(e)(1) or 2.3(k)(2), as appropriate, the
Agent shall, upon receiving notice of such failure, notify each Lender of such
failure, and each Lender shall unconditionally pay to the Agent, for the account
of such issuer or the Agent, as applicable, as and when provided hereinbelow, an
amount equal to such Lender's Pro Rata Share of the amount of such payment in
Dollars and in same day funds. If the Agent so notifies the Lenders prior to
12:00 noon (New York City time) on any Business Day, each Lender shall make
available to the Agent the amount of such payment, as provided in the
immediately preceding sentence, on such Business Day. Such amounts paid by the
Lenders to the Agent shall constitute Revolving Loans which shall be deemed to
have been requested by the applicable Borrower pursuant to SECTION 2.2 as set
forth in SECTION 4.4.
(f) PARTICIPATIONS.
(1) PURCHASE OF PARTICIPATIONS. Immediately upon
issuance of any Letter of Credit in accordance with SECTION 2.3(d) or of any
Shipping Release Indemnity in accordance with SECTION 2.3(k), each Lender shall
be deemed to have irrevocably and unconditionally purchased and received without
recourse or warranty, an undivided interest and participation in the Letter of
Credit or the Credit Support provided through the Agent to such issuer in
connection with the issuance of such Letter of Credit or in the Shipping Release
Indemnity, as appropriate, equal to such Lender's Pro Rata Share of the face
amount of such Letter of Credit or the amount of such Credit Support or the
liability under or with respect to such Shipping Release Indemnity (including,
without limitation, all obligations of the applicable Borrower with respect
thereto, and any security therefor or guaranty pertaining thereto).
(2) SHARING OF REIMBURSEMENT OBLIGATION PAYMENTS.
Whenever the Agent receives a payment from any Borrower on account of
reimbursement obligations in respect of a Letter of Credit, Credit Support or
Shipping Release Indemnity as to which the Agent has previously received for the
account of the issuer thereof payment from a Lender pursuant to SECTION
2.3(e)(2), the Agent shall promptly pay to such Lender such Lender's Pro Rata
Share of such payment from such Borrower in Dollars. Each such payment shall be
made by the Agent on the Business Day on which the Agent receives immediately
available funds paid to such Person pursuant to the immediately preceding
sentence, if
39
47
received prior to 12:00 noon (New York City time) on such Business Day and
otherwise on the next succeeding Business Day.
(3) DOCUMENTATION. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreements executed in connection therewith, application for any
Letter of Credit and credit support or enhancement provided through the Agent in
connection with the issuance of any Letter of Credit, copies of any Shipping
Release Indemnity and such other documentation as may reasonably be requested by
such Lender.
(4) OBLIGATIONS IRREVOCABLE. The obligations of each
Lender to make payments to the Agent with respect to any Letter of Credit or
with respect to any Credit Support provided through the Agent with respect to a
Letter of Credit or with respect to any Shipping Release Indemnity, and the
obligations of the Borrowers to make payments to the Agent, for the account of
the Lenders, shall be irrevocable, not subject to any qualification or exception
whatsoever, including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability
of this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff,
defense or other right which any Borrower may have at any time against a
beneficiary named in a Letter of Credit or Shipping Release Indemnity or any
transferee of any Letter of Credit or Shipping Release Indemnity (or any Person
for whom any such transferee may be acting), any Lender, the Agent, the issuer
of such Letter of Credit or Shipping Release Indemnity, or any other Person,
whether in connection with this Agreement, any Letter of Credit or Shipping
Release Indemnity, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between any Borrower or any
other Person and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Letter of Credit or with respect to any Shipping
Release Indemnity proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents; or
(v) the occurrence of any Default or Event
of Default.
(g) RECOVERY OR AVOIDANCE OF PAYMENTS. In the event any
payment by or on behalf of any Borrower received by the Agent with respect to
any Letter of Credit or Shipping Release Indemnity or Credit Support provided
for any Letter of Credit (or any guaranty by any Borrower or reimbursement
obligation of any Borrower relating thereto) and distributed by the Agent to the
Lenders on account of their respective participations therein is thereafter set
aside, avoided or recovered from the Agent in connection with any
40
48
receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon
demand by the Agent, pay to the Agent their respective Pro Rata Shares of such
amount set aside, avoided or recovered, together with interest at the rate
required to be paid by the Agent upon the amount required to be repaid by it.
(h) COMPENSATION FOR LETTERS OF CREDIT.
(1) LETTER OF CREDIT FEE. Each Borrower agrees to
pay to the Agent with respect to each Letter of Credit issued for such
Borrower's account, for the account of the Lenders, the Letter of Credit Fee
specified in, and in accordance with the terms of, SECTION 3.6.
(2) ISSUER FEES AND CHARGES. Each Borrower shall pay
to the issuer of any Letter of Credit issued for such Borrower's account, or to
the Agent, for the account of the issuer of any such Letter of Credit, solely
for such issuer's account, such fees and other charges as are charged by such
issuer for letters of credit issued by it, including, without limitation, its
standard fees for issuing, administering, amending, renewing, paying and
canceling letters of credit and all other fees associated with issuing or
servicing letters of credit, as and when assessed.
(i) INDEMNIFICATION; EXONERATION; POWER OF ATTORNEY.
(1) INDEMNIFICATION. In addition to amounts payable
as elsewhere provided in this SECTION 2.3, each Borrower hereby agrees to
protect, indemnify, pay and save the Lenders and the Agent harmless from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) which any Lender or
the Agent may incur or be subject to as a consequence, direct or indirect, of
the issuance of any Letter of Credit for the account of such Borrower or the
provision of any credit support or enhancement in connection therewith;
PROVIDED, that the Borrowers shall have no obligation to the Agent or any Lender
under this clause (1) with respect to any such claims, demands, liabilities,
damages, losses, costs, charges and expenses to the extent resulting from the
gross negligence or wilful misconduct of such Lender or the Agent. The agreement
in this SECTION 2.3(i)(1) shall survive payments of all Obligations.
(2) ASSUMPTION OF RISK BY THE BORROWERS. As among
the Borrowers, the Lenders, and the Agent, each Borrower assumes all risks of
the acts and omissions of, or misuse of any of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Lenders and the Agent shall not be responsible
for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any Person in connection with the application for
and issuance of and presentation of drafts with respect to any of the Letters of
Credit, even if it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any Letter of Credit to comply
duly with
41
49
conditions required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(E) errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order make a drawing under
any Letter of Credit or of the proceeds thereof; (G) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or (H) any consequences arising from causes beyond the control
of the Lenders or the Agent, including, without limitation, any act or omission,
whether rightful or wrongful, of any present or future DE JURE or DE FACTO
Governmental Authority. None of the foregoing shall affect, impair or prevent
(i) the vesting of any rights or powers of the Agent or any Lender under this
SECTION 2.3(i) or (ii) any action that might be brought by a Borrower against an
issuer of a Letter of Credit with respect to the foregoing.
(3) EXONERATION. In furtherance and extension, and
not in limitation, of the specific provisions set forth above, any action taken
or omitted by the Agent or any Lender under or in connection with any of the
Letters of Credit or any related certificates, if taken or omitted in the
absence of gross negligence or willful misconduct, shall not put the Agent or
any Lender under any resulting liability to any Borrower or relieve any Borrower
of any of its obligations hereunder to any such Person.
(4) POWER OF ATTORNEY. In connection with all
Inventory financed by Letters of Credit, each Borrower hereby appoints the
Agent, or the Agent's designee, as its attorney, with full power and authority:
(a) to sign and/or endorse such Borrower's name upon any warehouse or other
receipts; (b) to sign such Borrower's name on bills of lading and other
negotiable and non-negotiable documents; (c) to clear Inventory through customs
in the Agent's or such Borrower's name, and to sign and deliver to customs
officials powers of attorney in such Borrower's name for such purpose; (d) to
complete in such Borrower's or the Agent's name, any order, sale, or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof; and (e) to do such other acts and things as are necessary
in order to enable the Agent to obtain possession of the Inventory and to obtain
payment of the Obligations. Neither the Agent nor its designee, as any
Borrower's attorney, will be liable for any acts or omissions, nor for any error
of judgement or mistakes of fact or law. This power, being coupled with an
interest, is irrevocable until all Obligations have been paid and satisfied.
(5) ACCOUNT PARTY. Each Borrower hereby authorizes
and directs any issuer of a Letter of Credit for the account of such Borrower to
name such Borrower as the "Account Party" therein and to deliver to the Agent
all instruments, documents and other writings and property received by the
issuer pursuant to the Letter of Credit, and to accept and rely upon the Agent's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit or the application therefor.
(6) CONTROL OF INVENTORY. In connection with all
Inventory financed by Letters of Credit, each Borrower will, at the Agent's
request, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory,
42
50
documents or instruments in which the Agent holds a security interest to deliver
them to the Agent and/or subject to the Agent's order, and if they shall come
into such Borrower's possession, to deliver them, upon request, to the Agent in
their original form. Each Borrower shall also, at the Agent's request, designate
the Agent as the consignee on all bills of lading and other negotiable and
non-negotiable documents. In the event the Agent is designated as consignee
hereunder, at the applicable Borrower's request, the Agent will use best efforts
to send promptly to such Borrower a copy of the consigned documents.
(j) CASH COLLATERAL. If, notwithstanding the provisions of
SECTION 2.3(b) and SECTION 12.1 any Letter of Credit is outstanding upon the
termination of this Agreement, then upon such termination the applicable
Borrower shall deposit with the Agent, for the ratable benefit of the Agent and
the Lenders, with respect to each Letter of Credit issued for the account of
such Borrower then outstanding, cash in amounts necessary to reimburse the Agent
and the Lenders for payments made by the Agent or the Lenders under such Letter
of Credit or under any credit support or enhancement provided through the Agent
with respect thereto and any fees and expenses associated with such Letter of
Credit. Such deposit of cash shall be held by the Agent, for the ratable benefit
of the Agent and the Lenders, as security for, and to provide for the payment
of, the aggregate undrawn amount of such Letters of Credit remaining
outstanding.
(k) AIRWAY BILLS, ETC. Each Borrower hereby confirms and
agrees that (i) from time to time such Borrower may request the Agent to issue
or cause to be issued Letters of Credit providing for direct consignment of
goods to the Agent or the issuer of a Letter of Credit and providing that the
original bills of lading, airway bills and other documents be forwarded directly
to the Agent or any such issuer, (ii) such Borrower may request that the Agent
or any such issuer from time to time endorse the bills of lading or other
shipping documents and deliver them to such Borrower so as to permit such
Borrower to obtain the goods covered by the Letters of Credit without first
waiting for the bank that issued the Letter of Credit to examine the documents
to be submitted by the beneficiary of the Letter of Credit to determine whether
the documents conform to the terms of the Letter of Credit, and (iii) such
Borrower may request that the Agent or the issuer of a Letter of Credit from
time to time issue letters of indemnity, guarantees, air releases, and/or other
documents (each a "Shipping Release Indemnity") to steamship companies, air
freight companies and other shippers in order to permit such Borrower to take
possession of the goods covered by Letters of Credit without production and
surrender to the shipper of the original xxxx of lading, airway xxxx or other
shipping documents. In connection with the foregoing, each Borrower hereby
expressly and irrevocably:
(1) represents and warrants that it is otherwise
entitled to the delivery of the goods and no other person or entity has any
claim to its delivery;
(2) agrees to indemnify the Agent, the Lenders and
any issuer of a Shipping Release Indemnity and to hold the Agent, the Lenders
and any such issuer harmless from and against any and all claims, actions and
suits, whether groundless or otherwise, and from and against all liabilities,
losses, damages, judgments, attorney fees (including any in-house counsel costs
and expenses) and other expenses of every nature and
43
51
character, by reason of the Agent or any such issuer of a Shipping Release
Indemnity (i) issuing its Shipping Release Indemnities to steamship companies,
freight companies or other shippers and (ii) endorsing and/or delivering to such
Borrower the bills of lading and other documents so as to permit such Borrower
to obtain possession of the goods covered by the Letters of Credit; agrees to
reimburse the Agent, the Lenders and each issuer of a Shipping Release Indemnity
on demand for any and all payments of or with respect to the foregoing which the
Agent or any issuer of a Shipping Release Indemnity is required to make by any
of such actions or in accordance with the terms or provisions of said Shipping
Release Indemnities, regardless of any offsets, counterclaims or other defenses
thereto which the Agent, any Lender or any issuer of a Shipping Release
Indemnity might have or be entitled to assert, all of which offsets,
counterclaims or other defenses the Agent, each Lender and each issuer of a
Shipping Release Indemnity is hereby expressly and irrevocably authorized to
waive at its discretion; and further agrees that upon the Agent's request such
Borrower shall appear and defend, represented by counsel satisfactory to the
Agent and at such Borrower's cost and expense, any action or proceeding which
may be commenced against the Agent, any Lender or the issuer in connection with
any of the aforementioned actions; PROVIDED, that the Borrowers shall have no
obligation to the Agent, any Lender or any issuer of a Shipping Release
Indemnity under this clause (2) with respect to any such liabilities, losses,
damages, judgments, attorneys' fees and other expenses to the extent resulting
from the gross negligence or wilful misconduct of the Agent, such Lender or such
issuer.
(3) authorizes and requests the Agent and the issuer
of any Letters of Credit to honor and pay any drawing under the Letters of
Credit covering the shipment notwithstanding the absence of any or all documents
required thereunder or any discrepancy, defect or omission which may exist at
the time of presentment in any of the required documents, all of which
deficiencies, discrepancies, defects and omissions such Borrower hereby
expressly and irrevocably waives. Such Borrower further authorizes the Agent to
charge its Loan Account for all amounts drawn plus any applicable charges;
(4) agrees to pay on demand or to reimburse to the
Agent, each Lender and each issuer of a Shipping Release Indemnity upon demand
all freight and other charges which may be due or may appear to be due and
chargeable to the said goods;
(5) agrees to procure and to subsequently surrender
to the Agent all original bills of lading and other negotiable documents
relating to the shipment of goods properly endorsed; and
(6) agrees to execute such other documents and
indemnities relating to the foregoing as the Agent may from time to time
reasonably request.
2.4 TERM LOANS.
(a) AMOUNTS OF TERM LOANS. Each Lender severally agrees to
make a term loan (any such term loan being referred to as a "Term Loan" and such
term loans being referred to collectively as the "Term Loans") to HDSC on the
Amendment and Restatement
44
52
Effective Date, upon the satisfaction of the conditions precedent set forth in
ARTICLE 10, in an amount equal to such Lender's Pro Rata Share of $10,000,000.
Each Lender shall make the amount of such Lender's Term Loan available to the
Agent in same day funds to such account of the Agent as the Agent may designate,
not later than 1:00 p.m. (New York City time) on the Amendment and Restatement
Effective Date. After the Agent's receipt of the proceeds of such Term Loans,
upon satisfaction of the conditions precedent set forth in ARTICLE 10, the Agent
shall make the proceeds of such Term Loans available to HDSC on such Funding
Date by transferring same day funds equal to the proceeds of such Term Loans
received by the Agent to an account of HDSC designated in writing by HDSC or as
HDSC shall otherwise instruct in writing.
(b) TERM LOAN NOTES. HDSC shall execute and deliver to the
Agent on behalf of each Lender, on the Amendment and Restatement Effective Date,
a promissory note, substantially in the form of EXHIBIT F attached hereto and
made a part hereof (such promissory notes, together with any new notes issued
pursuant to SECTION 13.3(d) upon the assignment of any portion of any Lender's
Term Loan, being hereinafter referred to collectively as the "Term Loan Notes"
and each of such promissory notes being hereinafter referred to individually as
a "Term Loan Note"), to evidence such Lender's Term Loan, in an original
principal amount equal to the amount of such Lender's Pro Rata Share of
$10,000,000 and with other appropriate insertions. The Term Loan Notes delivered
to the Agent on behalf of each Lender shall be dated the Amendment and
Restatement Effective Date and stated, subject to the last sentence of this
SECTION 2.4(b), to mature in installments as follows:
$500,000 due on the 15th of November, 1998, and on the 15th of each
subsequent February, May, August and November, until the earlier of:
(i) total repayment of the Term Loans, or
(ii) the Termination Date, at which date the remaining
principal balance of the Term Loan Notes shall be paid
in full,
all such installments and payments with respect to each Lender to be in
amounts equal to such Lender's Pro Rata Share of such installment or
remaining principal balance.
Each such installment shall be payable to the Agent for the account of the
applicable Lender. Notwithstanding the foregoing, the Term Loans and all accrued
interest thereon shall in any event become due and payable on the Termination
Date.
(c) NOTATION AND ENDORSEMENT. The Agent shall record on its
books the principal amount of the Term Loans owing to each Lender from time to
time. In addition, each Lender is authorized, at such Lender's option, to note
the date and amount of each payment or prepayment of principal of such Lender's
Term Loans in its books and records, such books and records constituting
rebuttably presumptive evidence, absent manifest error, of the accuracy of the
information contained therein. Prior to the transfer of a Term Loan
45
53
Note, the applicable Lender shall endorse on the reverse side thereof the
outstanding principal balance of the Term Loan evidenced thereby. Failure by
such Lender to make such notation or endorsement shall not affect the
obligations of HDSC under such Term Loan Note or any of the other Loan
Documents.
ARTICLE 3
INTEREST AND FEES
3.1 INTEREST.
(a) INTEREST RATES. All outstanding Obligations shall bear
interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate or
the LIBOR Rate and SECTIONS 3.1(a)(i) or (ii), as applicable, but not to exceed
the Maximum Rate described in SECTION 3.3. Subject to the provisions of SECTION
3.2, any of the Loans may be converted into, or continued as, Base Rate Loans or
LIBOR Rate Loans in the manner provided in SECTION 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to the Agent in
accordance with the terms of this Agreement specifying the basis for determining
the interest rate applicable thereto, then those Loans shall be Base Rate Loans
and shall bear interest at a rate determined by reference to the Base Rate until
notice to the contrary has been given to the Agent in accordance with this
Agreement and such notice has become effective. Except as otherwise provided
herein, the outstanding Obligations shall bear interest as follows:
(i) For all Base Rate Loans and other Obligations
(other than LIBOR Rate Loans) at a fluctuating per annum rate equal to the Base
Rate plus the Applicable Margin therefor; and
(ii) For all LIBOR Rate Loans at a per annum rate
equal to the LIBOR Rate plus the Applicable Margin therefor.
Each change in the Base Rate shall be reflected in the interest rate described
in (i) above as of the effective date of such change. All interest charges shall
be computed on the basis of a year of 360 days and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365-day
year). Interest accrued on all Loans (other than LIBOR Rate Loans) will be
payable in arrears on the first day of each month hereafter and at maturity
(whether by acceleration or otherwise) and thereafter upon demand. Interest
accrued on LIBOR Rate Loans will be payable in arrears on each LIBOR Interest
Payment Date therefor and at maturity (whether by acceleration or otherwise) and
thereafter upon demand.
46
54
(b) DEFAULT RATE. If any Event of Default occurs and is
continuing then, while any such Event of Default is outstanding, all of the
Obligations shall bear interest at the Default Rate applicable thereto.
3.2 CONVERSION AND CONTINUATION ELECTIONS. (a) The applicable
Borrower may, upon irrevocable written notice to the Agent in accordance with
Subsection 3.2(b):
(i) elect, as of any Business Day (a
"Conversion/Continuation Date"), in the case of Base Rate Loans made to it to
convert any such Loans (or any part thereof) in an amount equal to $5,000,000 or
an integral multiple of $1,000,000 in excess thereof into LIBOR Rate Loans; or
(ii) elect, as of the last day of the applicable
Interest Period (a "Conversion/Continuation Date"), to continue any LIBOR Rate
Loans made to it having Interest Periods expiring on such day (or any part
thereof) in an amount equal to $5,000,000 or an integral multiple of $1,000,000
in excess thereof;
PROVIDED, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $5,000,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the applicable Borrower to continue such Loans as, and convert such Loans
into, LIBOR Rate Loans, as the case may be, shall terminate.
(b) The applicable Borrower shall deliver a Notice of
Conversion/Continuation (substantially in the form of EXHIBIT D or another form
acceptable to Agent) to be received by the Agent not later than 12:00 noon (New
York City time) at least three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as LIBOR Rate Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans owing by such
Borrower to be converted or renewed;
(iii) the type of Loans resulting from the proposed
conversion or continuation; and
(iv) the duration of the requested Interest Period,
PROVIDED, HOWEVER, HDSC may not select an Interest Period with respect to any
portion of the Term Loans which extends beyond an installment payment date for
the Term Loans unless, after giving effect to such election, the portion of the
Term Loans not subject to Interest Periods ending after such installment payment
date is equal to or greater than the principal due on such installment payment
date.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Rate Loans, the applicable Borrower has failed to select timely a new
Interest Period to be
47
55
applicable to LIBOR Rate Loans or if any Default or Event of Default then
exists, the applicable Borrower shall be deemed to have elected to convert such
LIBOR Rate Loans into Base Rate Loans effective as of the expiration date of
such Interest Period.
(d) The Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Lender.
(e) During the existence of a Default or Event of Default,
the Borrowers may not elect to have a Loan converted into or continued as a
LIBOR Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, there may not be more than ten different Interest Periods in effect with
respect to the Borrowers in the aggregate.
3.3 MAXIMUM INTEREST RATE. In no event shall any interest rate
provided for hereunder exceed the maximum rate legally chargeable by the Lenders
under applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations, the
total amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this SECTION 3.3,
have been paid or accrued if the interest rates otherwise set forth in this
Agreement had at all times been in effect, then the applicable Borrower shall,
to the extent permitted by applicable law, pay the Agent, for the account of the
Lenders, an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged to such Borrower if the Maximum
Rate had, at all times, been in effect or (ii) the amount of interest owing by
such Borrower which would have accrued had the interest rates otherwise set
forth in this Agreement, at all times, been in effect and (b) the amount of
interest actually paid or accrued by such Borrower under this Agreement. In the
event that a court determines that the Agent and/or any Lender has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, the Agent and/or such Lender shall
refund to the applicable Borrower such excess.
3.4 FACILITY FEE. The Borrowers agree, jointly and severally, to pay
to BABC, for its own account, on the Closing Date the facility fee (the
"Facility Fee") set forth in the fee letter dated the Closing Date between the
Borrowers and the BABC, which Facility Fee shall be paid with the proceeds of
Loans to be made on the Closing Date.
48
56
3.5 UNUSED LINE FEE. Until the Obligations have been paid in full
and this Agreement is terminated, the Borrowers agree, jointly and severally, to
pay, on the first day of each month and on the Termination Date, to the Agent,
for the ratable account of the Lenders, an unused line fee equal to
three-eighths of one percent (0.375%) per annum on the average daily amount by
which the Maximum Revolver Amount exceeded the sum of the average daily
outstanding amount of Revolving Loans and Term Loans and the undrawn face amount
of all outstanding Letters of Credit, during the immediately preceding month or
shorter period if calculated on the Termination Date. The unused line fee shall
be computed on the basis of a 360-day year for the actual number of days
elapsed. All payments received by the Agent as proceeds of Collateral shall be
deemed to be credited to the Borrowers' Loan Accounts immediately upon receipt
for purposes of calculating the unused line fee pursuant to this SECTION 3.5.
3.6 LETTER OF CREDIT FEE. Each Borrower agrees to pay to the Agent,
for the ratable account of the Lenders, for each Letter of Credit issued for the
account of such Borrower, a per annum fee (the "Letter of Credit Fee") equal to
the Applicable Margin for Letters of Credit (as determined pursuant to the
definition of "Applicable Margin" in this Agreement) of the average undrawn
amount of such Letter of Credit, PLUS all out-of-pocket costs, fees and expenses
incurred by the Agent in connection with the application for, issuance of, or
amendment to any Letter of Credit, which costs, fees and expenses could include
a "fronting fee" required to be paid by the Agent to such issuer for the
assumption of the settlement risk in connection with the issuance of such Letter
of Credit; The Letter of Credit Fee shall be payable by each Borrower monthly in
arrears on the first day of each month following any month in which a Letter of
Credit issued for the account of such Borrower was issued and/or in which a
Letter of Credit issued for the account of such Borrower remains outstanding.
The Letter of Credit Fee shall be computed on the basis of a 360-day year for
the actual number of days elapsed.
3.7 ADMINISTRATION FEE. The Borrowers agree, jointly and severally,
to pay to the Agent, for its own account, on the Closing Date and on each
Anniversary Date a non-refundable administration fee in the amount of $200,000.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 LOANS. Each Borrower shall repay the outstanding principal
balance of the Revolving Loans made to it, plus all accrued but unpaid interest
thereon, on the Termination Date. Each Borrower may prepay Revolving Loans at
any time, and reborrow subject to the terms of this Agreement; PROVIDED,
HOWEVER, that with respect to any LIBOR Revolving Loans prepaid by any Borrower
prior to the expiration date of the Interest Period applicable thereto, such
Borrower promises to pay to the Agent for account of the Lenders the amounts
described in SECTION 5.4. In addition, and without limiting the generality of
the foregoing, upon demand each Borrower promises to pay to the Agent, for the
account of the Lenders, the amount, without duplication, by which the sum of (i)
the aggregate
49
57
outstanding Revolving Loans and Term Loans owing by the Borrowers, (ii) the
aggregate amount of Pending Revolving Loans to be made to the Borrowers, (iii)
the aggregate undrawn amount of all outstanding Letters of Credit and (iv) the
amount of all unpaid reimbursement obligations with respect to Letters of Credit
exceeds the Combined Availability (with Combined Availability determined as if
clauses (b)(i) through (iv) of such definition were zero). If after repaying in
full its Revolving Loans as provided in the immediately preceding sentence any
portion of such excess still remains, then HDSC shall repay the Term Loans until
such excess no longer remains (such repayment of Term Loans to be applied to
installments of principal of the Term Loans in the inverse order of maturity and
such repayment to be accompanied by all accrued but unpaid interest owing on the
amount repaid and any amounts payable therefor under SECTION 5.4) and if after
repaying in full the Term Loans any portion of such excess still remains the
Borrowers shall deposit cash in the amount thereof in a cash collateral account
with the Agent to be held in such account on terms satisfactory to the Agent.
HDSC shall repay the outstanding principal balance of the Term Loans, plus
accrued but unpaid interest thereon and any amounts payable under SECTION 5.4,
as provided in this Agreement, including, without limitation, SECTIONS 2.4, 3.1
and 5.4. HDSC may prepay the principal of the Term Loans in whole or in part, at
any time and from time to time upon (a) at least five (5) Business Days' prior
written notice to the Agent and the Lenders, and (b) payment of, with respect to
any LIBOR Term Loans to be prepaid prior to the expiration date of the Interest
Period applicable thereto, the amounts described in SECTION 5.4. All payments
and prepayments of principal of the Term Loans (other than scheduled payments of
installments of principal as provided in the third sentence of SECTION 2.4(b)
unless otherwise required under SECTION 3.1) shall be accompanied by the payment
of all accrued but unpaid interest on the Term Loans to the date of payment or
prepayment. Any payment (other than any scheduled payment of an installment of
principal as provided in the third sentence of SECTION 2.4(b)) or prepayment of
less than all of the outstanding principal of the Term Loans shall be applied to
the installments of principal of the Term Loans in the inverse order of
maturity. Amounts paid or prepaid in respect of the Term Loans pursuant to this
Section 4.1 or otherwise may not be reborrowed as a Term Loan.
4.2 TERMINATION OF FACILITY. The Borrowers may jointly (but not
individually) terminate this Agreement upon at least three (3) Business Days'
joint notice to the Agent and the Lenders, upon (a) the payment in full of all
outstanding Revolving Loans and Term Loans, together with accrued interest
thereon, and the cancellation of all outstanding Letters of Credit (or delivery
to the Agent of cash collateral therefor as required by SECTION 2.3(j)), (b) the
payment of the early termination fee set forth in the next sentence, (c) the
payment in full in cash of all other Obligations together with accrued interest
thereon, and (d) with respect to any LIBOR Rate Loans prepaid in connection with
such termination prior to the expiration date of the Interest Period applicable
thereto, the payment of the amounts described in SECTION 5.4. If this Agreement
is terminated at any time on or prior to the third Anniversary Date, whether
pursuant to this Section or pursuant to SECTION 11.2, the Borrowers shall pay to
the Agent, for the account of the Lenders, an early termination fee determined
in accordance with the following table:
50
58
PERIOD DURING WHICH EARLY
EARLY TERMINATION OCCURS TERMINATION FEE
------------------------ ---------------
On or prior to the first 0.50% of the Total
Anniversary Date Facility
After the first 0.25% of the Total
Anniversary Date but on Facility
or prior to the third
Anniversary Date
PROVIDED, HOWEVER, that the early termination fee described in this SECTION 4.2
shall not be payable in the event that the Borrowers terminate this Agreement
(x) and repay all amounts required under this SECTION 4.2 using the proceeds of
a loan facility not secured by any Inventory; (y) in connection with the
acquisition by a Borrower of all the capital stock or all or a substantial part
of the assets of another Person that is not an Affiliate which requires the
refinancing of the Total Facility and such acquisition is actually consummated;
and/or (z) after ten (10) days prior written notice to the Agent as a result of
mutual dissatisfaction between the Agent or the Lenders, on the one hand, and
the Borrowers, on the other hand, resulting in an inability to agree on
executory elements of this Agreement following good faith negotiation.
4.3 PAYMENTS BY THE BORROWERS. (a) All payments to be made by any
Borrower shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by any Borrower shall be made
to the Agent for the account of the Lenders at the Agent's address set forth in
SECTION 16.8, and shall be made in Dollars and in immediately available funds,
no later than 12:00 noon (New York City time) on the date specified herein. Any
payment received by the Agent later than 12:00 noon (New York City time) shall
be deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from a Borrower prior
to the date on which any payment is due from such Borrower to the Lenders that
such Borrower will not make such payment in full as and when required, the Agent
may assume that such Borrower has made such payment in full to the Agent on such
date in immediately available funds and the Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each Lender on such
due date an amount equal to the amount then due such Lender from such Borrower.
If and to the extent a Borrower has not made such payment in full to the Agent,
each Lender shall repay to the Agent on demand such amount distributed to such
Lender, together with interest thereon at the Federal Funds Rate for each day
from the date such amount is distributed to such Lender until the date repaid.
51
59
4.4 PAYMENTS AS REVOLVING LOANS. All payments of principal,
interest, reimbursement obligations in connection with Letters of Credit, fees,
premiums and other sums payable hereunder, including all reimbursement for
expenses pursuant to SECTION 16.7, may, at the option of the Agent, in its sole
discretion, subject only to the terms of this SECTION 4.4, be paid from the
proceeds of Revolving Loans made hereunder to the applicable Borrower, whether
made following a request by a Borrower pursuant to SECTION 2.2 or a deemed
request as provided in this SECTION 4.4. Each Borrower hereby irrevocably
authorizes the Agent to charge its Loan Account for the purpose of paying
principal, interest, reimbursement obligations in connection with Letters of
Credit, fees, premiums and other sums payable hereunder by such Borrower,
including reimbursing expenses pursuant to SECTION 16.7, and agrees that all
such amounts charged shall constitute Revolving Loans (including BABC Loans and
Agent Advances) to such Borrower and that all such Revolving Loans so made to
such Borrower shall be deemed to have been requested by such Borrower pursuant
to SECTION 2.2.
4.5 APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS. Aggregate
principal and interest payments of a Borrower shall be apportioned ratably among
the Lenders (according to the unpaid principal balance of the Loans to which
such payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to the Agent and all such payments not relating to principal or
interest of specific Loans, or not constituting payment of specific fees, and
all proceeds of Collateral received by the Agent (including all payments
received by the Agent with respect to Collateral as loss payee under insurance
policies of the Borrowers), shall be applied, ratably, subject to the provisions
of this Agreement, FIRST, to pay any fees, indemnities or expense reimbursements
then due to the Agent from the applicable Borrower; SECOND, to pay any fees or
expense reimbursements then due to the Lenders from the applicable Borrower;
THIRD, to pay interest due in respect of all Revolving Loans owing by any
Borrower, including BABC Loans and Agent Advances, and in respect of all Term
Loans owing by HDSC; FOURTH, to pay or prepay principal of the BABC Loans and
Agent Advances owing by any Borrower; FIFTH, to pay or prepay principal of the
Revolving Loans (other than BABC Loans and Agent Advances) and unpaid
reimbursement obligations in respect of Letters of Credit owing by any Borrower;
SIXTH, to pay or prepay principal of the Term Loans; SEVENTH, to the payment of
any other Obligation due to the Agent or any Lender by any Borrower; EIGHTH, to
be paid over to such Person or Persons as may be required by law (including
pursuant to Section 9-504 of the UCC) or by court order; and NINTH, to be paid
to the Borrowers by transfer to bank accounts designated by either of them in
writing. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by the applicable Borrower, or unless an Event of Default is
outstanding, neither the Agent nor any Lender shall apply any payments which it
receives to any LIBOR Revolving Loan or LIBOR Term Loan, except (a) on the
expiration date of the Interest Period applicable to any such LIBOR Rate Loan,
or (b) in the event, and only to the extent, that there are no outstanding Base
Rate Revolving Loans or Base Rate Term Loans, as the case may be. The Agent
shall promptly distribute to each Lender, pursuant to the applicable wire
transfer instructions received from each Lender in writing, such funds as it may
be entitled to receive, subject to a Settlement delay as provided for in SECTION
2.2(j). The Agent and the Lenders shall have the continuing and exclusive right
to apply
52
60
and reverse and reapply any and all such proceeds and payments to any portion of
the Obligations.
4.6 INDEMNITY FOR RETURNED PAYMENTS. If, after receipt of any
payment of, or proceeds applied to the payment of, all or any part of the
Obligations, the Agent or any Lender is for any reason compelled to surrender
such payment or proceeds to any Person, because such payment or application of
proceeds is invalidated, declared fraudulent, set aside, determined to be void
or voidable as a preference, impermissible setoff, or a diversion of trust
funds, or for any other reason, then the Obligations or part thereof intended to
be satisfied shall be revived and continue and this Agreement shall continue in
full force as if such payment or proceeds had not been received by the Agent or
such Lender, and the applicable Borrower shall be liable to pay to the Agent,
and hereby do indemnify the Agent and the Lenders and hold the Agent and the
Lenders harmless for, the amount of such payment or proceeds surrendered. The
provisions of this SECTION 4.6 shall be and remain effective notwithstanding any
contrary action which may have been taken by the Agent or any Lender in reliance
upon such payment or application of proceeds, and any such contrary action so
taken shall be without prejudice to the Agent's and the Lenders' rights under
this Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions of
this SECTION 4.6 shall survive the termination of this Agreement.
4.7 AGENT'S AND LENDERS' BOOKS AND RECORDS; MONTHLY STATEMENTS. Each
Borrower agrees that the Agent's and each Lender's books and records showing the
Obligations owing by it and the transactions pursuant to this Agreement and the
other Loan Documents shall be admissible in any action or proceeding arising
therefrom, and shall constitute rebuttably presumptive proof thereof,
irrespective of whether any Obligation is also evidenced by a promissory note or
other instrument. The Agent will provide to the Borrowers a monthly statement of
Loans, payments, and other transactions pursuant to this Agreement. Such
statement shall be deemed correct, accurate, and binding on the Borrowers and an
account stated (except for reversals and reapplications of payments made as
provided in SECTION 4.5 and corrections of errors discovered by the Agent),
unless the Borrowers notify the Agent in writing to the contrary within ninety
(90) days after such statement is rendered. In the event a timely written notice
of objections is given by the Borrowers, only the items to which exception is
expressly made will be considered to be disputed by the Borrowers.
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 TAXES. (a) Any and all payments by any Borrower to each Lender
or the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for any Taxes. In addition,
the Borrowers shall, jointly and severally, pay all Other Taxes.
53
61
(b) Each Borrower agrees, jointly and severally, to
indemnify and hold harmless each Lender and the Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Lender or the
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender or the
Agent makes written demand therefor.
(c) If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased (the amount
of such increase, an "additional amount") as necessary so that after making all
required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) such Lender or the
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) such Borrower shall make such deductions and
withholdings;
(iii) such Borrower shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) such Borrower shall also pay to each Lender or
the Agent for the account of such Lender, at the time interest is paid, all
additional amounts which the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such Taxes or
Other Taxes had not been imposed.
(d) As soon as practicable after the date of any payment by
any Borrower of Taxes or Other Taxes, such Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) If any Borrower is required to pay additional amounts to
any Lender or the Agent pursuant to subsection (c) of this Section, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its lending office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
(f) If a Lender (or Assignee) or the Agent receives a refund
in respect of any Taxes or Other Taxes as to which it has been indemnified by a
Borrower or with respect to which a Borrower has paid additional amounts
pursuant to this SECTION 5.1, it shall within 30 days from the date of such
receipt pay over such refund to such Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by such Borrower
54
62
under this SECTION 5.1 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all reasonable and documented (to the satisfaction of the
Agent) out-of-pocket expenses of (and all Taxes and Other Taxes that may be
imposed by virtue of the receipt of such tax refund by) such Lender (or
Assignee) or the Agent and without interest (other than interest paid by the
relevant Governmental Authority with respect to such refund); PROVIDED, HOWEVER,
that such Borrower, upon the request of such Lender (or Assignee) or the Agent,
agrees to repay the amount paid over to such Borrower (plus penalties, interest
or other charges) to such Lender (or Assignee) or the Agent in the event such
Lender (or Assignee) or the Agent is required to repay such refund to such
Governmental Authority.
(g) Each Lender which is a "foreign corporation, partnership
or trust" within the meaning of the Code claiming exemption from, or a reduction
of, U.S. withholding tax under Section 1441 or 1442 of the Code shall deliver to
the Borrowers all tax forms it delivers to the Agent from time to time under
SECTION 14.10(a), such delivery to the Borrowers to be concurrent with the
delivery of such tax forms to the Agent.
5.2 ILLEGALITY. (a) If any Lender determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable lending office to make
LIBOR Rate Loans, then, on notice thereof by the Lender to the Borrowers through
the Agent, any obligation of that Lender to make LIBOR Rate Loans shall be
suspended until the Lender notifies the Agent and the Borrowers that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender determines in its reasonable judgment that
it is unlawful to maintain any LIBOR Rate Loan, each Borrower shall, upon its
receipt of notice of such fact and demand from such Lender (with a copy to the
Agent), prepay in full such LIBOR Rate Loans of that Lender owing by such
Borrower then outstanding, together with interest accrued thereon and amounts
required under SECTION 5.4, either on the last day of the Interest Period
thereof, if the Lender may lawfully continue to maintain such LIBOR Rate Loans
to such day, or immediately, if the Lender may not lawfully continue to maintain
such LIBOR Rate Loan. If any Borrower is required to so prepay any LIBOR Rate
Loan, then concurrently with such prepayment, such Borrower shall borrow from
the affected Lender, in the amount of such repayment, a Base Rate Loan.
5.3 INCREASED COSTS AND REDUCTION OF RETURN. (a) If any Lender
determines that, due to either (i) the introduction of or any change in the
interpretation of any law or regulation or (ii) the compliance by that Lender
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or maintaining
any LIBOR Rate Loans, then the applicable Borrower shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Agent), pay to the Agent for the account of such Lender, additional amounts
as are sufficient to compensate such Lender for such increased costs.
55
63
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation or other entity controlling the
Lender with any Capital Adequacy Regulation, affects or would affect the amount
of capital required or expected to be maintained by the Lender or any
corporation or other entity controlling the Lender and (taking into
consideration such Lender's or such corporation's or other entity's policies
with respect to capital adequacy and such Lender's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then, upon
demand of such Lender to the Borrowers through the Agent, the Borrowers shall,
jointly and severally, pay to the Lender, from time to time as specified by the
Lender, additional amounts sufficient to compensate the Lender for such
increase.
5.4 FUNDING LOSSES. Each Borrower shall reimburse each Lender and
hold each Lender harmless from any loss or expense which the Lender may sustain
or incur as a consequence of:
(a) the failure of such Borrower to make on a timely basis
any payment of principal of any LIBOR Rate Loan owing by such Borrower;
(b) the failure of such Borrower to borrow, continue or
convert a Loan after such Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the prepayment or other payment (including after
acceleration thereof) by such Borrower of a LIBOR Rate Loan on a day that is not
the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained.
5.5 INABILITY TO DETERMINE RATES. If the Agent determines that for
any reason adequate and reasonable means do not exist for determining the LIBOR
Rate for any requested Interest Period with respect to a proposed LIBOR Rate
Loan, or that the LIBOR Rate for any requested Interest Period with respect to a
proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to the
Lenders of funding such Loan, the Agent will promptly so notify the Borrowers
and each Lender. Thereafter, the obligation of the Lenders to make or maintain
LIBOR Rate Loans hereunder shall be suspended until the Agent revokes such
notice in writing. Upon receipt of such notice, each Borrower may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If any Borrower does not revoke such Notice, the Lenders shall make, convert or
continue the Loans, as proposed by such Borrower, in the amount specified in the
applicable
56
64
notice submitted by such Borrower, but such Loans shall be made, converted or
continued as Base Rate Loans instead of LIBOR Rate Loans.
5.6 CERTIFICATES OF LENDERS. Any Lender claiming reimbursement or
compensation under this Article 5 shall deliver to the applicable Borrower (with
a copy to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Lender hereunder, together with reasonable supporting
documentation, to the extent available with respect to the circumstances giving
rise to such claim for reimbursement or compensation (and then only to the
extent any of the information which would need to be included on such supporting
documentation is not confidential to such Lender as reasonably determined by
such Lender), and such certificate and documentation shall be conclusive and
binding on the Borrowers in the absence of manifest error.
5.7 SURVIVAL. The agreements and obligations of the Borrowers in
this Article 5 shall survive the payment of all other Obligations.
ARTICLE 6
COLLATERAL
6.1 GRANT OF SECURITY INTEREST. (a) As security for all present and
future Obligations, each Loan Party hereby grants to the Agent, for the ratable
benefit of the Agent and the Lenders, a continuing security interest in, lien
on, and right of set-off against, all of the following property of such Loan
Party, whether now owned or existing or hereafter acquired or arising,
regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights, letters of credit, chattel
paper, instruments, notes, documents, and documents of title;
(iv) all General Intangibles;
(v) all Equipment (other than store fixtures and
store equipment);
(vi) all money, investment property, securities,
security entitlements, securities accounts and other property of any kind of
such Loan Party in the possession or under the control of the Agent or any
Lender, any assignee of or participant in the Obligations, or a bailee of any
such party or such party's affiliates;
(vii) all deposit accounts, credits and balances with
and other claims against the Agent or any Lender or any of its affiliates or any
other financial institution in which such Loan Party maintains deposits;
57
65
(viii) all books, records and other property related to
or referring to any of the foregoing, including, without limitation, books,
records, account ledgers, data processing records, computer software and other
property and General Intangibles at any time evidencing or relating to any of
the foregoing; and
(ix) all accessions to, substitutions for and
replacements, products and proceeds of any of the foregoing, including, but not
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, together with all other property of any Loan Party in
which the Agent or any Lender may at any time be purportedly granted a Lien, is
herein collectively referred to as the "Collateral."
(b) All of the Obligations shall be secured by all of the
Collateral.
6.2 PERFECTION AND PROTECTION OF SECURITY INTEREST. (a) Each Loan
Party shall, at its expense, perform all steps requested by the Agent at any
time to perfect, maintain, protect, and enforce the Agent's Liens, including,
without limitation: (i) executing, delivering and/or filing and recording of the
Trademark Agreement and the Pledge Agreement and executing and filing financing
or continuation statements, and amendments thereof, in form and substance
satisfactory to the Agent; (ii) delivering to the Agent the originals of all
instruments, documents, and chattel paper, and all other Collateral of which the
Agent determines it should have physical possession in order to perfect and
protect the Agent's security interest therein, duly pledged, endorsed or
assigned to the Agent without restriction; (iii) delivering to the Agent
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued; (iv) delivering to the Agent all
letters of credit on which such Loan Party is named beneficiary; and (v) taking
such other steps as are deemed necessary or desirable by the Agent to maintain
and protect the Agent's Liens. To the extent permitted by applicable law, the
Agent may file, without any Loan Party's signature, one or more financing
statements disclosing the Agent's Liens. Each Loan Party agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of any Loan Party's agents or
processors (other than the consolidators listed in SCHEDULE 6.3), then the
applicable Loan Party shall notify the Agent thereof and shall notify such
Person of the Agent's security interest in such Collateral and, upon the Agent's
request, instruct such Person to hold all such Collateral for the Agent's
account subject to the Agent's instructions. Each Loan Party agrees to use its
best efforts to deliver to the Agent an executed bailee letter in form and
substance satisfactory to the Agent from each warehouseman, bailee, agent,
processor and consolidator which has possession or control of any Inventory of a
Loan Party.
58
66
(c) From time to time, each Loan Party shall, upon the
Agent's request, execute and deliver confirmatory written instruments pledging
to the Agent, for the ratable benefit of the Agent and the Lenders, the
Collateral with respect to such Loan Party, but any Loan Party's failure to do
so shall not affect or limit the Agent's security interest or the Agent's other
rights in and to the Collateral with respect to such Loan Party. So long as this
Agreement is in effect and until all Obligations have been fully satisfied, the
Agent's Liens shall continue in full force and effect in all Collateral (whether
or not deemed eligible for the purpose of calculating the Combined Availability
or as the basis for any advance, loan, extension of credit, or other financial
accommodation).
6.3 LOCATION OF COLLATERAL. Each Loan Party represents and warrants
to the Agent and the Lenders that: (a) SCHEDULE 6.3 sets forth as of the Closing
Date a correct and complete list of such Loan Party's chief executive office,
the location of its books and records, the locations of the Collateral (and,
with respect to Collateral constituting Inventory, the locations of such
Collateral granted by such Loan Party set forth separately from the locations of
Collateral constituting Inventory granted by each of the other Loan Parties),
and the locations of all of its other places of business; and (b) SCHEDULE 6.3
correctly identifies as of the Closing Date any of such facilities and locations
that as of the Closing Date are not owned by such Loan Party and sets forth as
of the Closing Date the names of the lessors or sublessors of such facilities
and locations. Each Loan Party covenants and agrees that it will not (i)
maintain any Collateral (other than (x) finished goods not in the possession of
the Borrowers as to which a documentary Letter of Credit has been issued for the
account of one of the Borrowers and which, if in the possession of one of the
Borrowers, would constitute Inventory of such Borrower or (y) Collateral in
transit between the locations listed on SCHEDULE 6.3) at any location other than
those locations listed for such Loan Party on SCHEDULE 6.3, (ii) otherwise
change or add to any of such locations, or (iii) change the location of its
chief executive office from the location identified in SCHEDULE 6.3, unless,
with respect to each of clauses (i) through (iii) above, it uses its best
efforts to give the Agent at least thirty (30) days' prior written notice
thereof (and in any event it shall give the Agent at least fifteen (15) days'
prior written notice thereof) (any such written notice timely received by the
Agent to be deemed an amendment to SCHEDULE 6.3 unless such notice shall be with
respect to any Inventory to be stored or held at a consolidator not described on
SCHEDULE 6.3 as in effect on the Closing Date, in which case such notice shall
be deemed to constitute an amendment to SCHEDULE 6.3 only if the Agent shall
have received a bailee letter, in form and substance satisfactory to the Agent,
duly executed by such consolidator) and executes any and all financing
statements and other documents that the Agent requests in connection therewith.
Without limiting the foregoing, each Loan Party represents that all of its
Inventory (other than Inventory in transit) is, and covenants that all of its
Inventory (other than Inventory in transit) will be, located either (a) on
premises owned by such Loan Party, (b) on premises leased by such Loan Party or
(c) in a public warehouse (as to which such Loan Party shall give the Agent
prompt written notice), provided that, with respect to this clause (c), either
the Agent has received an executed bailee letter from the applicable public
warehouseman in form and substance satisfactory to the Agent or, if the Agent
shall not receive such an executed bailee letter with respect to a public
warehouse, then the Loan Parties, the Agent and the Lenders agree that the
Inventory of any Borrower located therein shall not be Eligible Inventory.
59
67
Notwithstanding the foregoing, to the extent that any Loan Party maintains
Inventory at any location other than those locations listed on SCHEDULE 6.3,
such non-compliance with this SECTION 6.3 shall not constitute a Default so long
as (x) such Inventory is temporarily being held by a consolidator and awaiting
shipment to a location listed on SCHEDULE 6.3 (other than that of another
consolidator), (y) such Inventory is not reported as Eligible Inventory on any
reports provided to the Agent or any Lender and (z) promptly upon a Responsible
Officer of a Loan Party receiving actual knowledge thereof, the relevant
particulars are included in the collateral reporting materials to be delivered
to the Agent in accordance with SECTION 6.7.
6.4 TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. Each Loan
Party represents and warrants to the Agent and the Lenders and agrees with the
Agent and the Lenders that: (a) all of the Collateral in which it purportedly
granted a Lien in favor of the Agent is and will continue to be owned by such
Loan Party (or, with respect to Equipment, owned by such Loan Party or subject
to a valid leasehold interest in favor of such Loan Party), free and clear of
all Liens whatsoever, except for Permitted Liens; (b) the Agent's Liens in such
Collateral will not be subject to any prior Lien except for Permitted Liens; (c)
such Loan Party will use, store, and maintain such Collateral with all
reasonable care and will use such Collateral for lawful purposes only; and (d)
such Loan Party will not sell or dispose of or permit the sale or disposition of
any of such Collateral except for sales of Inventory in the ordinary course of
business or as otherwise permitted hereunder; and upon the disposition of
Collateral permitted pursuant to this clause (d) (other than sales of Inventory
from CRH to HDSC) and receipt by the Agent of the Net Cash Proceeds thereof to
the extent required by this Agreement, the security interest in such Collateral
shall be released. The inclusion of proceeds in the Collateral shall not be
deemed to constitute the Agent's or any Lender's consent to any sale or other
disposition of the Collateral except as expressly permitted herein.
6.5 APPRAISALS. Whenever a Default or Event of Default exists, and
at such other times not more frequently than once a year as the Agent requests
if the Agent has reasonable cause or need to do so, the Borrowers shall, upon
the Agent's request and at the Borrowers' expense (but at the Borrowers' expense
only if the Agent's request is made during the continuance of a Default or Event
of Default and at the Agent's expense at all other times), provide the Agent
with appraisals or updates thereof of any or all of the Inventory of the
Borrowers from an appraiser, and prepared on a basis, satisfactory to the Agent,
such appraisals and updates to include, without limitation, information required
by applicable law and regulation and by the internal policies of the Lenders.
6.6 ACCESS AND EXAMINATION; CONFIDENTIALITY. (a) The Agent,
accompanied by any Lender which so elects, may at all reasonable times during
regular business hours (and at any time when a Default or Event of Default
exists) have access to, examine, audit, make extracts from or copies of and
inspect any or all of any Loan Party's records, files, and books of account and
the Collateral, and discuss any Loan Party's affairs with such Loan Party's
officers and management; PROVIDED that the Agent may not conduct more than three
audits in any Fiscal Year (except that there shall be no limit to the number of
audits commenced during the continuance of a Default or Event of Default and any
audits commenced during
60
68
the continuance of a Default or Event of Default shall not count towards such
limit of three audits in any Fiscal Year). Each Loan Party will deliver to the
Agent any instrument necessary for the Agent to obtain records from any service
bureau maintaining records for such Loan Party. The Agent may, and at the
direction of the Majority Lenders shall, at any time when a Default or Event of
Default exists, and at the Borrowers' expense, make copies of all of the books
and records of any Loan Party, or require each Loan Party to deliver such copies
to the Agent. The Agent may, without expense to the Agent, use such of each Loan
Party's personnel, supplies, and premises as may be reasonably necessary for
maintaining or enforcing the Agent's Liens. The Agent shall have the right, at
any time, in the Agent's name or in the name of a nominee of the Agent, to
verify the validity, amount or any other matter relating to the Accounts,
Inventory, or other Collateral, by mail, telephone, or otherwise.
(b) Each Loan Party agrees that, subject to such Loan
Party's prior consent for uses other than in a traditional tombstone, which
consent shall not be unreasonably withheld or delayed, the Agent and each Lender
may use each Loan Party's name in advertising and promotional material and in
conjunction therewith disclose the general terms of this Agreement. The Agent
and each Lender agree to take normal and reasonable precautions and exercise due
care to maintain the confidentiality of all information provided to the Agent or
such Lender by or on behalf of such Loan Party, under this Agreement or any
other Loan Document, and neither the Agent, nor such Lender nor any of their
respective Affiliates shall use any such information other than in connection
with or in enforcement of this Agreement and the other Loan Documents, except to
the extent that such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Agent or such Lender, (ii)
was or becomes available on a nonconfidential basis from a source other than a
Loan Party, provided that such source is not bound by a confidentiality
agreement with a Loan Party known to the Agent or such Lender, or (iii) was
pre-cleared by any Loan Party as not confidential or as being permitted to be
disclosed to others; PROVIDED, HOWEVER, that the Agent and any Lender may
disclose such information (1) at the request or pursuant to any requirement of
any Governmental Authority to which the Agent or such Lender is subject or in
connection with an examination of the Agent or such Lender by any such
Governmental Authority; (2) pursuant to subpoena or other court process; (3)
when required to do so in accordance with the provisions of any applicable
requirement of law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Agent, any Lender or their respective Affiliates may be
party; (5) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (6) to the Agent's or
such Lender's independent auditors, accountants, attorneys and other
professional advisors; (7) to any prospective Participating Lender or assignee
under any Assignment and Acceptance, actual or potential, provided that such
prospective Participating Lender or assignee agrees to keep such information
confidential to the same extent required of the Agent and the Lenders hereunder;
(8) as expressly permitted under the terms of any other document or agreement
regarding confidentiality to which a Loan Party is party or is deemed party with
the Agent or such Lender, and (9) to its Affiliates.
61
69
6.7 COLLATERAL REPORTING. Each Borrower shall provide the Agent with
the following documents at the following times in form satisfactory to the
Agent: (a) by Friday of each week, a Borrowing Base Certificate for the
seven-day period ended the Saturday of the prior week; (b) on a monthly basis, a
distribution service center stock ledger with detail by department, a whole
chain stock ledger with detail by department and a stock ledger of all
departments combined, detailed by store; (c) on a monthly basis, a trial balance
of each Borrower and of the Parent and its Subsidiaries on a consolidated basis;
(d) on a monthly basis, a consolidated inventory schedule reconciling the stock
ledger to the monthly financial statements required by SECTION 7.2(b); (e) on a
monthly basis, the total from the last page of the accounts payable trial
balance; (f) on a monthly basis, a listing of the top 10 vendors (by dollar
amount) of each Borrower as of the end of such month; (g) weekly roll-forward
inventory reports (at other than month end) with such supporting documentation
as reasonably requested by the Agent; (h) such other reports as to the
Collateral of such Borrower or any other Loan Party as the Agent shall
reasonably request from time to time; and (i) with the delivery of each of the
foregoing, a certificate of such Borrower executed by an officer thereof
certifying as to the accuracy and completeness of the foregoing (subject to the
minor and routine errors inherent in the accounting systems and processes of the
Borrowers).
6.8 [INTENTIONALLY OMITTED].
6.9 COLLECTION OF ACCOUNTS, INVENTORY AND OTHER AMOUNTS. (a) Each
Borrower will, at its own cost and expense, cause all payments received by such
Borrower on account of Accounts, Inventory and other Collateral and all other
payments received by any Borrower from whatever source (other than cash needed
to operate such Borrower's stores in the ordinary course of business consistent
with past practice), whether in the form of cash, checks, notes, drafts, bills
of exchange, money orders or otherwise (referred to herein as "Payments"), (i)
to be deposited not less often than once each Business Day in one or more bank
accounts maintained by such Borrower and which meet criteria acceptable to the
Agent and (ii) to be transferred on each Business Day from the accounts referred
to in clause (i) to one or more concentration accounts designated by a Borrower
with a bank which meets criteria acceptable to the Agent. Each bank requested by
the Agent at which an account referred to in clause (i) of the first sentence of
this SECTION 6.9(a) is maintained and each bank at which a concentration account
referred to in clause (ii) of such sentence shall execute and deliver to the
Agent such agreements, in form and substance satisfactory to the Agent, as the
Agent shall request with respect to such accounts, including, without
limitation, with respect to prohibitions on such Borrower, upon notice from the
Agent to the bank, withdrawing funds from such accounts or otherwise directing
or modifying actions with respect to such accounts. Each agreement with a bank
at which a concentration account is established shall provide, among other
things, that, upon notice from the Agent to such bank, all funds deposited into
such account shall be transferred directly to the Agent on a daily basis (it
being agreed that the Agent may give such notice if a Default or Event of
Default is continuing or if Combined Availability is less than $30,000,000). The
Agent or the Agent's designee may, at any time after the occurrence of a Default
or an Event of Default, notify Account Debtors that the Accounts have been
assigned to the Agent and of the Agent's security interest therein, and may
collect them directly and charge the collection
62
70
costs and expenses to the applicable Borrower's Loan Account as a Revolving
Loan. Upon the written request of the Agent, the Loan Parties agree to provide
to the Agent a complete and accurate list of all bank accounts maintained by any
Loan Party with any bank or other financial institution.
(b) All payments, including immediately available funds
received by the Agent at a bank designated by it, received by the Agent on
account of Accounts or as proceeds of other Collateral will be the Agent's sole
property for its benefit and the benefit of the Lenders and will be credited to
the applicable Borrower's Loan Account (conditional upon final collection) after
allowing one (1) Business Day for collection (except that collected funds
received by the Agent on or prior to 12:00 noon (New York City time) on any
Business Day will be credited to the applicable Borrower's Loan Account on such
Business Day); PROVIDED, HOWEVER, that such payments shall be deemed to be
credited to the applicable Borrower's Loan Account immediately upon receipt for
purposes of (i) determining Combined Availability, (ii) calculating the unused
line fee pursuant to SECTION 3.5, and (iii) calculating the amount of interest
to be distributed by the Agent to the Lenders (but not the amount of interest
payable by the Borrowers).
(c) In the event the Borrowers repay all of the Obligations
upon the termination of this Agreement or upon acceleration of the Obligations,
other than through the Agent's receipt of payments on account of the Accounts or
proceeds of the other Collateral, such payment will be credited (conditional
upon final collection) to the Borrowers' Loan Account one (1) Business Day after
the Agent's receipt of such funds.
6.10 INVENTORY. Each Borrower represents and warrants to the Agent
and the Lenders and agrees with the Agent and the Lenders that all of the
Inventory owned by such Borrower is and will be held for sale or lease, or to be
furnished in connection with the rendition of services, in the ordinary course
of such Borrower's business, and is and will be fit for such purposes. Each
Borrower represents, warrants and covenants that it keeps and will keep, at its
own expense, its Inventory in good and marketable condition consistent with
current practices, including those practices regarding damaged and returnable
Inventory. Each Borrower represents and warrants that all its Eligible Inventory
is in good and marketable condition. No Borrower will acquire or accept any
Inventory on consignment or approval (none of which Inventory shall in any event
be Eligible Inventory), except on a basis consistent with its historical
business practices. Each Borrower agrees that all Inventory manufactured by any
Loan Party in the United States will be produced in accordance with the Federal
Fair Labor Standards Act of 1938, as amended, and all rules, regulations, and
orders thereunder. The Borrowers will conduct a physical count of the Inventory
of the Borrowers at least once per Fiscal Year, and after and during the
continuation of an Event of Default, at such other times as the Agent reasonably
requests.
6.11 [INTENTIONALLY OMITTED].
6.12 [INTENTIONALLY OMITTED].
63
71
6.13 DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. Each Loan Party
represents and warrants to the Agent and the Lenders that (a) all documents,
instruments, and chattel paper describing, evidencing, or constituting
Collateral, and all signatures and endorsements thereon, are and will be
complete, valid, and genuine, and (b) all goods evidenced by such documents,
instruments, and chattel paper are and will be owned by such Loan Party, free
and clear of all Liens other than Permitted Liens.
6.14 RIGHT TO CURE. The Agent may, in its discretion, and shall, at
the direction of the Majority Lenders, pay any amount, subject to SECTION
2.2(i), or do any act required of any Loan Party hereunder or under any other
Loan Document in order to preserve, protect, maintain or enforce the
Obligations, the Collateral or the Agent's Liens therein, and which any Loan
Party fails to pay or do after reasonable notice to such Loan Party by the Agent
(except that no notice shall be required if a Default or Event of Default is
continuing at the time), including, without limitation, payment of any judgment
against any Loan Party, any insurance premium, any warehouse charge, any
finishing or processing charge, any landlord's claim, and any other Lien upon or
with respect to the Collateral. All payments that the Agent makes under this
SECTION 6.14 and all out-of-pocket costs and expenses that the Agent pays or
incurs in connection with any action taken by it hereunder shall be charged to
the Borrowers' Loan Accounts as a Revolving Loan. Any payment made or other
action taken by the Agent under this SECTION 6.14 shall be without prejudice to
any right to assert an Event of Default hereunder and to proceed thereafter as
herein provided.
6.15 POWER OF ATTORNEY. Each Loan Party hereby appoints the Agent and
the Agent's designee as such Loan Party's attorney, with power: (a) to endorse
such Loan Party's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Agent's or any Lender's
possession; (b) to sign such Loan Party's name on any invoice, xxxx of lading,
warehouse receipt or other document of title relating to any Collateral, on
drafts against customers, on assignments of Accounts, on notices of assignment,
financing statements and other public records; (c) to send requests for
verification of Accounts to customers or Account Debtors; (d) to clear
Inventory, the purchase of which was financed with Letters of Credit, through
customs in such Loan Party's name, the Agent's name or the name of the Agent's
designee, and to sign and deliver to customs officials powers of attorney in
such Loan Party's name for such purpose; and (e) to do all things necessary to
carry out this Agreement. Each Loan Party ratifies and approves all acts of such
attorney. None of the Lenders or the Agent nor their attorneys will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable until this
Agreement has been terminated and the Obligations have been fully satisfied.
6.16 THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES. The
Loan Parties assume all responsibility and liability arising from or relating to
the use, sale or other disposition of the Collateral. The Obligations shall not
be affected by any failure of the Agent or any Lender to take any steps to
perfect the Agent's Liens or to collect or realize upon the Collateral, nor
shall loss of or damage to the Collateral release any Loan Party from any of the
Obligations. Following the occurrence and continuation of an Event of Default,
the Agent may (but shall not be required to), and at the direction of the
Majority
64
72
Lenders shall, without notice to or consent from any Loan Party, xxx upon or
otherwise collect, extend the time for payment of, modify or amend the terms of,
compromise or settle for cash, credit, or otherwise upon any terms, grant other
indulgences, extensions, renewals, compositions, or releases, and take or omit
to take any other action with respect to the Collateral, any security therefor,
any agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of any Loan Party for the
Obligations or under this Agreement or any other agreement now or hereafter
existing between the Agent and/or any Lender and any Loan Party.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 BOOKS AND RECORDS. Each Loan Party shall maintain, at all times,
books, records and accounts in which complete, correct and timely entries are
made of its trans actions in accordance with GAAP. Each Loan Party shall
maintain at all times and in reasonable detail books and records pertaining to
the Collateral owned by it in such form and scope as is customary for companies
of established reputation engaged in the same or similar business and similarly
situated and of a similar size, including, but not limited to, records of (a)
all payments received and all credits and extensions granted with respect to the
Accounts; (b) the return, rejections, repossession, stoppage in transit, loss,
damage, or destruction of any Inventory; and (c) all other dealings affecting
the Collateral.
7.2 FINANCIAL INFORMATION. Each Loan Party shall promptly furnish to
each Lender all such financial information as the Agent or any Lender shall
reasonably request. Without limiting the foregoing, the Parent and the Borrowers
will furnish to the Agent, in sufficient copies for distribution by the Agent to
each Lender, in such detail as the Agent or the Lenders shall request, the
following:
(a) As soon as reasonably practical, but in any event not
later than ninety-five (95) days after the close of each Fiscal Year, audited
consolidated balance sheets, and consolidated statements of operations, cash
flows and common shareholders' equity for the Parent and its Subsidiaries for
such Fiscal Year, and the accompanying notes thereto, setting forth in each case
in comparative form figures for the previous Fiscal Year, fairly presenting the
financial position and the results of operations of the Parent and its
consolidated Subsidiaries as at the date thereof and for the Fiscal Year then
ended in accordance with GAAP. Such consolidated statements shall be examined in
accordance with generally accepted auditing standards by and accompanied by a
report thereon unqualified as to scope of independent certified public
accountants selected by the Parent and reasonably satisfactory to the Agent. At
the written request of the Agent for each Fiscal Year, the Parent,
simultaneously with retaining such independent public accountants to conduct
such annual audit, shall send a letter (in form acceptable to the Agent) to such
accountants, with a copy to the Agent and the Lenders, notifying such
accountants substantially to the effect
65
73
that one of the primary purposes for retaining such accountants' services and
having audited financial statements prepared by them is for use by the Agent and
the Lenders.
(b) As soon as reasonably practicable, but in any event not
later than thirty (30) days (ninety (90) days for the last fiscal month of each
Fiscal Year) after the end of each fiscal month, consolidated unaudited balance
sheets of the Parent and its consolidated Subsidiaries as at the end of such
month, and consolidated unaudited statements of operations and cash flow for the
Parent and its consolidated Subsidiaries for such fiscal month and for the
period from the beginning of the Fiscal Year to the end of such fiscal month,
fairly presenting the financial position and results of operations of the Parent
and its consolidated Subsidiaries as at the date thereof and for such periods.
The Parent shall certify by a certificate signed by a Responsible Officer that
all such statements have been prepared in accordance with GAAP as applicable to
interim periods and present fairly, subject to the addition of year-end
schedules and notes and normal year-end adjustments, the financial position of
the Parent and its consolidated Subsidiaries as at the dates thereof and the
results of operations of the Parent and its consolidated Subsidiaries for the
periods then ended.
(c) As soon as reasonably practicable, but in any event not
later than fifty (50) days after the close of each of the first three fiscal
quarters of each Fiscal Year, consolidated unaudited balance sheets of the
Parent and its consolidated Subsidiaries as at the end of such quarter, and
consolidated unaudited statements of operations and cash flows for the Parent
and its Subsidiaries for such quarter and for the period from the beginning of
the Fiscal Year to the end of such quarter, fairly presenting the financial
position and results of operation of the Parent and its Subsidiaries as at the
date thereof and for such periods. The Parent shall certify by a certificate
signed by a Responsible Officer that all such statements have been prepared in
accordance with GAAP as applicable to interim periods and present fairly,
subject to the addition of year-end schedules and notes and normal year-end
adjustments, the financial position of the Parent and its consolidated
Subsidiaries as at the dates thereof and the results of operations of the Parent
and its consolidated Subsidiaries for the periods then ended.
(d) As soon as reasonably practical, but in any event not
later than ninety-five (95) days after the close of each Fiscal Year, a
certificate of the independent certified public accountants that examined the
audited Financial Statements for such Fiscal Year delivered pursuant to SECTION
7.2(a) (which certificate may be limited to accounting matters only and may
disclaim responsibility for legal interpretation), to the effect that they have
re viewed and are familiar with this Agreement and that, in examining such
Financial Statements, they did not become aware of any fact or condition which
then constituted a Default or Event of Default, except for those, if any,
described in reasonable detail in such certificate.
(e) With each of the annual audited Financial Statements
delivered pursuant to SECTION 7.2(a), and within fifty (50) days after the end
of each of the first three fiscal quarters of each Fiscal Year, a certificate of
a Responsible Officer of the Parent (i) setting forth in reasonable detail the
calculations required to establish that the Loan Parties
66
74
were in compliance with the covenants set forth in SECTIONS 9.23 and 9.24 during
the period covered in such Financial Statements and as at the end thereof and
setting forth the calculation of the Coverage Ratio for the twelve fiscal month
period of the Parent ended with such fiscal quarter or Fiscal Year, as
appropriate, and (ii) stating that, except as explained in reasonable detail in
such certificate, (A) all of the representations and warranties of the Loan
Parties contained in ARTICLES 6 and 8 of this Agreement and in the other Loan
Documents are correct in all material respects as at the date of such
certificate as if made at such time (except to the extent such representations
and warranties expressly relate to a specified prior date), (B) each Loan Party
is, at the date of such certificate, in compliance in all material respects with
all of its respective covenants and agreements in this Agreement and the other
Loan Documents and (C) no Default or Event of Default then exists or existed
during the period covered by such Financial Statements. If such certificate
discloses that a representation or warranty is not correct or complete, or that
a covenant has not been complied with, or that a Default or Event of Default
existed or exists, such certificate shall set forth what action the Parent has
taken or proposes to take with respect thereto.
(f) No later than 30 days after the beginning of each Fiscal
Year, annual projections (to include projected consolidated balance sheets and
consolidated statements of operations and cash flow) for the Parent and its
Subsidiaries as at the end of and for each month of such Fiscal Year.
(g) Promptly after filing with the PBGC and the IRS, a copy
of each annual report or other filing filed with respect to each Plan of any
Loan Party.
(h) Promptly upon the filing thereof, copies of all reports,
if any, to or other documents filed by the Parent or any of its Subsidiaries
with the Securities and Exchange Commission under the Exchange Act, and all
reports, notices, or statements sent or received by the Parent or any of its
Subsidiaries to or from the holders of any equity interests of the Parent (other
than routine or non-material correspondence sent by shareholders of the Parent
to the Parent) or any such Subsidiary or of any Debt For Borrowed Money of the
Parent or any of its Subsidiaries registered under the Securities Act of 1933 or
to or from the trustee under any indenture under which the same is issued.
(i) As soon as available, but in any event not later than 15
days after any Loan Party's receipt thereof, a copy of all final management
reports of the independent certified public accountants of any Loan Party
regarding material weaknesses of internal controls, if any.
(j) Upon written request of the Agent, promptly after filing
with the IRS, a copy of each federal tax return filed by the Parent or by any of
its Subsidiaries.
(k) Such additional information as the Agent and/or any
Lender may from time to time reasonably request regarding the financial and
business affairs of the Parent or any Subsidiary thereof
67
75
7.3 NOTICES TO THE LENDERS. The Loan Parties shall notify the Agent,
in writing of the following matters at the following times:
(a) Promptly, but in any event not later than three (3)
Business Days, after becoming aware of any Default or Event of Default.
(b) Promptly, but in any event not later than three (3)
Business Days, after becoming aware of the assertion by the holder of any Debt
in excess of $250,000 that a default exists with respect thereto or that any
Loan Party is not in compliance with the terms thereof, or the threat or
commencement by such holder of any enforcement action because of such asserted
default or non-compliance.
(c) Promptly, but in any event not later than three (3)
Business Days, after becoming aware of any Material Adverse Effect.
(d) Promptly, but in any event not later than three (3)
Business Days, after becoming aware of any pending or threatened action, suit,
proceeding, or counterclaim by any Person, or any pending or threatened
investigation by a Governmental Authority, that could reasonably be expected to
have a Material Adverse Effect.
(e) Promptly, but in any event not later than three (3)
Business Days, after becoming aware of any pending or threatened strike, work
stoppage, unfair labor practice claim, or other labor dispute affecting the
Parent or any of its Subsidiaries in a manner which could reasonably be expected
to have a Material Adverse Effect.
(f) Promptly, but in any event not later than three (3)
Business Days, after becoming aware of any violation of any law, statute,
regulation, or ordinance of a Governmental Authority affecting any Loan Party
which could reasonably be expected to have a Material Adverse Effect.
(g) Promptly, but in any event not later than three (3)
Business Days, after receipt of any notice of any violation by the Parent or any
of its Subsidiaries of any Environmental Law which could reasonably be expected
to have a Material Adverse Effect or that any Governmental Authority has
asserted that the Parent or any Subsidiary thereof is not in compliance with any
Environmental Law or is investigating the Parent's or such Subsidiary's
compliance therewith, the effect of such noncompliance with which could
reasonably be expected to have a Material Adverse Effect.
(h) Promptly, but in any event not later than three (3)
Business Days, after receipt of any written notice that the Parent or any of its
Subsidiaries is or may be liable to any Person as a result of the Release or
threatened Release of any Contaminant or that the Parent or any Subsidiary
thereof is subject to investigation by any Governmental Authority evaluating
whether any remedial action is needed to respond to the Release or threatened
Release of any Contaminant which, in either case, is reasonably likely to give
rise to liability which could have a Material Adverse Effect.
68
76
(i) Promptly, but in any event not later than three (3)
Business Days, after receipt by a Responsible Officer of any Loan Party of any
written notice of the imposition of any Environmental Lien against any property
of the Parent or any of its Subsidiaries.
(j) Any change in any Loan Party's name, state of
incorporation, or form of organization or store names under which any Loan Party
will sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
(k) Within thirty (30) days after any Loan Party or any
ERISA Affiliate knows or has reason to know, that an ERISA Event or a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto.
(l) Upon written request, or, in the event that such filing
reflects a significant change with respect to the matters covered thereby,
promptly after the filing thereof with the PBGC, the DOL or the IRS, as
applicable, copies of the following: (i) each annual report (form 5500 series),
including Schedule B thereto, filed with the PBGC, the DOL or the IRS with
respect to each Plan, (ii) a copy of each funding waiver request filed with the
PBGC, the DOL or the IRS with respect to any Plan and all communications
received by any Loan Party or any ERISA Affiliate from the PBGC, the DOL or the
IRS with respect to such request, and (iii) a copy of each other filing or
notice filed with the PBGC, the DOL or the IRS, with respect to each Plan of any
Loan Party or any ERISA Affiliate.
(m) Upon written request, copies of each actuarial report
for any Plan or Multi-employer Plan and annual report for any Multi-employer
Plan; and promptly after receipt thereof by any Loan Party or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC's intention to
terminate a Plan or to have a trustee appointed to administer such Plan; (ii)
any favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code; or (iii) any notice
from a Multi-employer Plan regarding the imposition of withdrawal liability.
(n) Promptly after the occurrence thereof: (i) any changes
in the benefits of any existing Plan which constitutes a tax-qualified or
non-qualified employee benefit plan or a retiree medical plan or program which
increase any Loan Party's annual costs with respect thereto by an amount in
excess of $5,000,000, or the establishment of any new Plan or the commencement
of contributions to any Plan to which any Loan Party or any ERISA Affiliate was
not previously contributing; or (ii) any failure by any Loan Party or any ERISA
Affiliate to make a required installment or any other required payment under
Section 412 of the Code on or before the due date for such installment or
payment.
(o) Promptly after any Loan Party or any ERISA Affiliate
knows or has reason to know that any of the following events has or will occur:
(i) a Multi-employer Plan has been or will be terminated; (ii) the administrator
or plan sponsor of a Multi-employer
69
77
\
Plan intends to terminate a Multi-employer Plan; or (iii) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multi-employer Plan.
Each notice given under this Section shall describe the subject
matter thereof in reasonable detail, and shall set forth the action that the
Loan Party or any ERISA Affiliate, as applicable, has taken or proposes to take
with respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
Each of the Loan Parties warrants and represents to the Agent and the
Lenders that except as hereafter disclosed to and accepted by the Agent and the
Majority Lenders in writing:
8.1 AUTHORIZATION, VALIDITY, AND ENFORCEABILITY OF THIS AGREEMENT
AND THE LOAN DOCUMENTS. Each of the Loan Parties has the corporate power and
authority to execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party, to incur the Obligations, and to grant to the
Agent Liens upon and security interests in the Collateral owned by it. Each of
the Loan Parties has taken all necessary corporate action (including without
limitation, obtaining approval of its stockholders if necessary) to authorize
its execution, delivery, and performance of this Agreement and the other Loan
Documents to which it is a party. No consent, approval, or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with any of the Loan Parties' execution,
delivery and performance of this Agreement and the other Loan Documents to which
it is a party, except for those already duly obtained. This Agreement and the
other Loan Documents have been duly executed and delivered by each of the Loan
Parties party thereto, and constitute the legal, valid and binding obligations
of each of the Loan Parties party thereto, enforceable against each such Loan
Party in accordance with their respective terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles) without defense (other than of a payment in full),
setoff or counterclaim. Each of the Loan Parties' execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is a
party do not and will not conflict with, or constitute a violation or breach of,
or constitute a default under, or, except for Liens created under the Loan
Documents, result in the creation or imposition of any Lien upon the property of
the Parent or any of its Subsidiaries by reason of the terms of (a) any
contract, mortgage, Lien, lease, agreement, indenture, or instrument to which
any Loan Party is a party or which is binding upon it, (b) any Requirement of
Law applicable to the Parent or any of its Subsidiaries, or (c) the charter or
by-laws of the Parent or any of its Subsidiaries.
8.2 VALIDITY AND PRIORITY OF SECURITY INTEREST. The provisions of
this Agreement and the other Loan Documents create legal and valid Liens on all
the Collateral in favor of the Agent, for the ratable benefit of the Agent and
the Lenders, and, upon the filing of
70
78
Uniform Commercial Code financing statements in the appropriate governmental
filing offices, such Liens constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral (other than
Permitted Liens), securing all the Obligations, and enforceable against the Loan
Parties and all third parties.
8.3 ORGANIZATION AND QUALIFICATION. Each Loan Party (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the state of its incorporation, (b) is qualified to do business as a foreign
corporation and is in good standing in those jurisdictions in which the failure
to so qualify would have a Material Adverse Effect and (c) has all requisite
power and authority to conduct its business and to own its property. SCHEDULE
8.3 sets forth as of the Closing Date all jurisdictions in which each Loan Party
is qualified to do business as a foreign corporation and is in good standing.
8.4 CORPORATE NAME; PRIOR TRANSACTIONS. Since emerging from
bankruptcy on October 4, 1993, no Loan Party has been known by or used any other
corporate or fictitious name (other than HDS Transport, Inc. which was formerly
known as Frando, Inc.), or been a party to any merger or consolidation (except
as permitted by SECTION 9.9(vi)), or acquired all or substantially all of the
assets of any Person, or acquired any of its property outside of the ordinary
course of business.
8.5 SUBSIDIARIES. The Parent has no Subsidiaries other than the
other Loan Parties. SCHEDULE 8.3, in addition to the information required by
SECTION 8.3, is a correct and complete list of the name and relationship to the
Parent of each and all of the Parent's Subsidiaries and the state of
incorporation of each such Subsidiary and its capitalization and stock
ownership.
8.6 FINANCIAL STATEMENTS AND PROJECTIONS. (a) The Parent has
delivered to the Agent the audited consolidated balance sheet and related
consolidated statements of operations, cash flows and changes in common
shareholders' equity for the Parent and its consolidated Subsidiaries as of
February 3, 1996, and for the Fiscal Year then ended, accompanied by the report
thereon of the Parent's independent certified public accountants. The Parent has
also delivered to the Agent the unaudited consolidated balance sheet and related
statements of operations and cash flows for the Parent and its consolidated
Subsidiaries as of August 3, 1996. All such financial statements have been
prepared in accordance with GAAP (in the case of the unaudited financial
statements, as applicable to interim periods) and present fairly the financial
position of the Parent and its consolidated Subsidiaries as at the dates thereof
and their results of operations for the periods then ended subject, in the case
of the unaudited statements, to the addition of year-end schedules and notes and
normal year-end adjustments.
(b) The Latest Projections when submitted to the Lenders as
required herein represent the Parent's estimates of the future financial
performance of the Parent and its consolidated Subsidiaries for the periods set
forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Parent believes are fair and reasonable
at the time when made in light of current and reasonably foreseeable business
conditions.
71
79
8.7 CAPITALIZATION. As of the Closing Date, the authorized capital
stock of the Parent consists of 50,000,000 shares of Common Stock, $0.01 par
value (the "Common Stock"), and 15,000,000 shares of Preferred Stock, $0.10 par
value (the "Preferred Stock"), of which 5,000,000 shares are designated Series A
Convertible Preferred Stock, $0.10 par value (the "Convertible Preferred Stock")
and 55,000 shares are designated Series B Participating Cumulative Preferred
Stock, $0.10 par value (the "Series B Preferred Stock"). As of close of business
on September 23, 1996, 10,201,981 shares of Common Stock, 1,012,154 shares of
Convertible Preferred Stock and no shares of Series B Preferred Stock were
issued and outstanding. All such shares of the Parent are duly and validly
issued, fully paid and nonassessable. The authorized capital stock of HDSC and
CRH consists of 1000 and 500 shares, respectively, of common stock, of which 100
and 250 shares, respectively, are validly issued and outstanding, fully paid and
non-assessable. The issued and outstanding shares of capital stock of HDSC and
CRH are owned by the Parent and HDSC, respectively.
8.8 SOLVENCY. Both prior to and after giving effect to the making of
the Revolving Loans to be made on the Closing Date and the issuance of the
Letters of Credit to be issued on the Closing Date, and at all times during the
term of this Agreement, the Borrowers on a consolidated basis are solvent on a
going concern balance sheet basis, are then able and expect to be able to pay
their debts (including, without limitation, contingent debts and other
commitments) as they mature and have capital sufficient to carry on their
businesses as conducted and as proposed to be conducted. For purposes of
determining whether a Borrower satisfies the foregoing, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
8.9 DEBT. After giving effect to the making of the Revolving Loans
to be made on the Closing Date, the Parent and its Subsidiaries have no Debt,
except (a) the Obligations, (b) Debt described on SCHEDULE 9.13, (c) Debt
evidenced by the Intercompany Note and (d) the other Debt permitted by SECTION
9.13.
8.10 DISTRIBUTIONS. Since February 3, 1996, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
securities of the Parent or any of its Subsidiaries that would not be permitted
hereunder, except with respect to (i) the refinancing in April, 1996 of certain
10.25% senior notes of the Parent with proceeds of senior notes issued under the
Senior Indenture and (ii) the exchange in August, 1996 of the initial senior
notes issued under the Senior Indenture with the Senior Notes as contemplated by
the Senior Indenture.
8.11 TITLE TO PROPERTY. Each of the Loan Parties has good and
marketable title in fee simple to its real property owned as of the Closing
Date, and each Loan Party has good title (or, with respect to Fixed Assets, good
title or valid leasehold interests) to all of its Inventory and other material
property (including, without limitation, the assets reflected on the August 3,
1996 Financial Statements delivered to the Agent and the Lenders, except as
disposed of in the ordinary course of business since the date thereof) except,
with respect
72
80
to property other than Inventory, for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes. All Inventory and other
material property of each Loan Party is free of all Liens except Permitted
Liens.
8.12 REAL ESTATE; LEASES. SCHEDULE 8.12 sets forth a correct and
complete list of all Real Estate owned in fee by the Parent or any of its
Subsidiaries as of the Closing Date and a list of all Real Estate leased or
subleased by the Parent or any of its Subsidiaries as of the Closing Date.
Except as noted on SCHEDULE 8.12 and except as promptly disclosed to the Agent
in writing from time to time after the Closing Date (but in any event within
three (3) Business Days after any of the following shall no longer be correct),
(i) each of such leases and subleases is valid and enforceable in accordance
with its terms and is in full force and effect, (ii) no material default by any
Loan Party exists under any such lease or sublease (with respect to which the
landlord thereof has threatened to terminate such lease or sublease or has taken
action to terminate such lease or sublease) and, (iii) to the knowledge of the
Loan Parties, no material default by any other party to any such lease or
sublease exists; PROVIDED, that, with respect to any event relating to clauses
(i) or (ii) above which is required to be so disclosed to the Agent, if the
Agent shall, within thirty (30) days after its receipt of any such disclosure,
deliver to a Borrower a written notice that the Agent has determined that the
event described in such disclosure is material then the relevant Loan Party
shall cause such event to be cured within the earlier of (1) thirty (30) days
after receipt by a Borrower of such notice from the Agent and (2) the date such
lease or sublease is no longer valid and enforceable in accordance with its
terms or in full force and effort (in the case of clause (i) above) or the date
such lease or sublease is terminated (in the case of clause (ii) above), or such
failure to cure same within such period of time shall constitute a Default.
8.13 PROPRIETARY RIGHTS. SCHEDULE 8.13, as updated in writing from
time to time (and in any event not less often than once each calendar quarter)
by the Parent to the Agent for any needed changes to such schedule, sets forth a
correct and complete list of all of the registered Proprietary Rights of the
Parent and its Subsidiaries which are material to their business or operations
(including, without limitation, the servicemark "Hills"). None of such
Proprietary Rights is subject to any licensing agreement or similar arrangement
except as set forth on SCHEDULE 8.13. To the Loan Parties' knowledge, none of
such Proprietary Rights infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with such
Proprietary Rights. The Proprietary Rights described on SCHEDULE 8.13 constitute
all of the property of such type necessary to the current and anticipated future
conduct of the Loan Parties' business.
8.14 TRADE NAMES. All registered trade names or styles under which
the Parent or any of its Subsidiaries will sell Inventory or create Accounts, or
to which instruments in payment of Accounts may be made payable, are listed on
SCHEDULE 8.14 as updated in writing from time to time by the Parent to the Agent
(it being agreed by the Parent that it shall use its best efforts to provide to
the Agent such an update at least thirty (30) days prior to any new registered
trade name or style so being utilized by the Parent or any of its Subsidiaries
(and in any event such update shall be delivered to the Agent not less than
73
81
fifteen (15) days prior to any such utilization), and the relevant Loan Party
shall execute any and all financing statements and other documents that the
Agent requests in connection therewith).
8.15 LITIGATION. Except as described in the Parent's Annual Report on
Form 10K filed with the Securities and Exchange Commission for the Fiscal Year
ended February 3, 1996 or in any of the Parent's Quarterly Reports on Form 10Q
or Annual Reports on Form 10K filed thereafter with the Securities and Exchange
Commission from time to time and delivered to the Agent and the Lenders, there
is no pending or (to the best of the Loan Parties' knowledge) threatened action,
suit, proceeding, or counterclaim by any Person, or investigation by any
Governmental Authority, or any basis for any of the foregoing, which could
reasonably be expected to cause a Material Adverse Effect.
8.16 RESTRICTIVE AGREEMENTS. Neither the Parent nor any of its
Subsidiaries is a party to any contract or agreement, or subject to any charter
or other corporate restriction, which affects its ability to execute, deliver,
and perform the Loan Documents and repay the Obligations or which materially and
adversely affects or, insofar as the Loan Parties can reasonably foresee, could
reasonably be expected to materially and adversely affect, the property,
business, operations, profits, prospects or condition (financial or otherwise)
of the Loan Parties or such Subsidiary, or would in any respect cause a Material
Adverse Effect.
8.17 LABOR DISPUTES. As of the Closing Date, (a) there is no
collective bargaining agreement or other labor contract covering employees of
the Parent or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement, (c) to the knowledge of a Responsible Officer of the Parent or any of
its Subsidiaries, no union or other labor organization is seeking to organize,
or to be recognized as, a collective bargaining unit of employees of the Parent
or any of its Subsidiaries or for any similar purpose, and (d) to the knowledge
of a Responsible Officer of the Parent or any of its Subsidiaries, there is no
pending or threatened strike, work stoppage, material unfair labor practice
claim, or other material labor dispute against or affecting the Parent or its
Subsidiaries or their employees.
8.18 ENVIRONMENTAL LAWS. To the knowledge of each Responsible Officer
of the Parent or any of its Subsidiaries, except as otherwise disclosed on
SCHEDULE 8.18 (as the same may be updated from time to time by written notice to
the Agent):
(a) the Parent and its Subsidiaries have complied in all
material respects with all Environmental Laws applicable to its Real Estate and
business, and neither the Parent nor any Subsidiary nor any of its present Real
Estate or operations, nor its past property or operations, is currently subject
to any enforcement order from or liability agreement with any Governmental
Authority or private Person respecting (i) compliance with any Environmental Law
or (ii) any potential liabilities and costs or remedial action arising from the
Release or threatened Release of a Contaminant.
(b) The Parent and its Subsidiaries have obtained all
permits necessary for their current operations under Environmental Laws, and all
such permits are in good
74
82
standing and the Parent and its Subsidiaries are in material compliance with all
terms and conditions of such permits.
(c) Neither the Parent nor any of its Subsidiaries has
received any summons, complaint, order or similar written notice that it is not
currently in material compliance with, or that any Governmental Authority is
investigating its compliance with, any Environmental Laws or that it is or may
be liable in a material amount to any other Person as a result of a Release or
threatened Release of a Contaminant.
(d) None of the present or past operations of the Parent and
its Subsidiaries is currently the subject of any investigation by any
Governmental Authority evaluating whether any remedial action is needed to
respond to a Release or threatened Release of a Contaminant.
(e) Neither the Parent nor any of its Subsidiaries has
entered into any negotiations or settlement agreements with any Person
(including, without limitation, the prior owner of its property) imposing
material obligations or liabilities on the Parent or any of its Subsidiaries
with respect to any remedial action in response to the Release of a Contaminant
or environmentally related claim.
(f) No Environmental Lien has attached to any Real Estate of
the Parent or any of its Subsidiaries.
8.19 NO VIOLATION OF LAW. Neither the Parent nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation could reasonably be
expected to have a Material Adverse Effect.
8.20 NO DEFAULT. Neither the Parent nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which the Parent or such Subsidiary is a party or by
which it is bound, which default could reasonably be expected to have a Material
Adverse Effect.
8.21 ERISA COMPLIANCE. Except as specifically disclosed in SCHEDULE
8.21 (as the same may be updated from time to time by written notice to the
Agent):
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS within the time frame
required under applicable law and to the best knowledge of each Loan Party,
nothing has occurred which would cause the loss of such qualification. Each Loan
Party and each ERISA Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
75
83
(b) There are no pending or, to the best knowledge of each
Responsible Officer of each Loan Party, threatened claims, actions or lawsuits,
or action by any Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material Adverse Effect.
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Events have occurred or are reasonably
expected to occur which are reasonably likely to result in liability to any Loan
Party or ERISA Affiliate in an amount exceeding $1,000,000 individually or in
the aggregate for all such events; (ii) no Pension Plan has any Unfunded Pension
Liability in excess of $1,000,000 individually or in the aggregate for all such
plans; (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plans (other than premiums due and not delinquent under Section
4007 of ERISA) in excess of $1,000,000 individually or in the aggregate for all
such plans; (iv) neither any Loan Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability in excess of $1,000,000 individually
or in the aggregate (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to its Multi-employer Plans; and (v) neither any
Loan Party nor any ERISA Affiliate has engaged in any transactions that could be
subject to Section 4069 or 4212(c) of ERISA which are reasonably likely to
result in liability to a Loan Party or ERISA Affiliate in an amount exceeding
$1,000,000 individually or in the aggregate for all such transactions.
8.22 TAXES. The Parent and its Subsidiaries have filed all Federal
and other tax returns and reports required to be filed, and have paid all
Federal and other taxes, assessments, fees and other governmental charges levied
or imposed upon them or their properties, income or assets otherwise due and
payable (except for (i) the non-payment of any such taxes, assessments, fees and
other governmental charges permitted by SECTION 9.1 and (ii) the payment of the
Deferred Tax Obligations in accordance with the installment payment terms set
forth in the Bankruptcy Plan).
8.23 REGULATED ENTITIES. None of the Parent, any Person controlling
the Parent, or any Subsidiary of the Parent, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. Except for HDS Transport,
Inc. which is licensed by the Interstate Commerce Commission and subject to
regulation under the Interstate Commerce Act, neither the Parent nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state
public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur indebtedness.
8.24 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans
are to be used solely to refinance the Existing Bank Debt and for working
capital purposes and other general corporate purposes of the Parent and its
Subsidiaries not prohibited hereby. Neither the Parent nor any Subsidiary
thereof is engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
76
84
8.25 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. Each Loan
Party owns or is licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for the operation
of its businesses, without material conflict with the rights of any other
Person. To the best knowledge of each Loan Party, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Parent or any Subsidiary
infringes upon any rights held by any other Person, the result of which
infringement could reasonably be expected to have a Material Adverse Effect. No
claim or litigation regarding any of the foregoing is pending or threatened, and
no patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of any Loan Party,
proposed, which, in either case, could reasonably be expected to have a Material
Adverse Effect.
8.26 NO MATERIAL ADVERSE CHANGE. No Material Adverse Effect has
occurred since the date of the Financial Statements referred to in SECTION
8.6(a). It is agreed that the events described in the Waivers and Consents to
the Original Loan and Security Agreement dated as of January 29, 1997 and as of
January 31, 1997 are not applicable to this representation.
8.27 FULL DISCLOSURE. None of the representations or warranties made
by the Parent or any Subsidiary thereof in the Loan Documents as of the date
such representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Parent or any Subsidiary thereof in connection with the
Loan Documents (including the offering and disclosure materials delivered by or
on behalf of any Loan Party to the Lenders prior to the Closing Date), contains
any untrue statement of a material fact or omits any material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered.
8.28 PARENT ACTIVITY. The Parent owns no assets (other than the
capital stock of HDSC, the Intercompany Note and such cash (not in excess of
$1,000,000 book balance for any 5 consecutive Business Days, other than cash
held by the trustee for the Senior Notes for the payment of scheduled interest
due on the Senior Notes) and other de-minimis property as are needed in the
conduct of its business as a publicly traded holding company), has no Debt
outstanding to any Person except as otherwise permitted by this Agreement and
engages in no business activity of any kind, other than the holding of the
capital stock of HDSC and other activities associated with being a
publicly-traded holding company.
8.29 SENIOR DEBT. All Revolving Loans and Term Loans, interest owing
thereon (both before and after the commencement of a proceeding in bankruptcy or
insolvency with respect to any Loan Party, whether or not such interest is an
allowed claim in any such proceeding), reimbursement obligations with respect to
Letters of Credit and Credit Support and guarantee obligations of Subsidiaries
of the Parent with respect to the Obligations (collectively, the foregoing, the
"Senior Debt Obligations") constitute, and at all times will
77
85
continue to constitute, "Senior Debt" (as defined in the Senior Indenture) under
the Senior Indenture, the Senior Notes and the guarantees issued from time to
time pursuant to the Senior Indenture.
8.30 BANKRUPTCY. Except for the payment of (a) the Deferred Tax
Obligations, (b) cash distributions remaining to be made to Class 6 and Class 7
claims holders (such distributions estimated to aggregate less than $2,000,000),
and (c) resolution of certain personal injury litigation (for which the Parent
and its Subsidiaries have insurance for each such item of litigation in excess
of $250,000 per claim), the Parent and its Subsidiaries have performed all of
their respective material obligations under or pursuant to the Bankruptcy Plan.
8.31 DIVIDEND AND INTERCOMPANY NOTE. Each of HDSC and the Parent, as
the case may be, has the corporate power and authority to declare and pay the
dividend to be made by it on the Amendment and Restatement Effective Date
described in the definition of "Intercompany Note", to make the loan evidenced
by the Intercompany Note and to execute, deliver and perform the Intercompany
Note and to incur the obligations owing under the Intercompany Note. Each of
HDSC and the Parent, as the case may be, has taken all necessary corporate
action (including without limitation, obtaining approval of its stockholders if
necessary) to authorize such dividend and loan and the execution, delivery and
performance of the Intercompany Note and the incurrence of the obligations
thereunder. No consent, approval, or authorization of, or declaration or filing
with, any Governmental Authority, and no consent of any other Person, is
required in connection with any of the foregoing, except for those already duly
obtained. The Intercompany Note has been duly executed and delivered by HDSC,
and constitutes the legal, valid and binding obligation of HDSC enforceable
against HDSC in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles) without defense (other than of a payment in full),
setoff or counterclaim. The foregoing dividend, loan and execution, delivery and
performance of the Intercompany Note and the incurrence of the obligations
thereunder do not and will not conflict with, or constitute a violation or
breach of, or constitute a default under, or result in the creation or
imposition of any Lien upon the property of the Parent or any of its
Subsidiaries by reason of, the terms of (a) any contract, mortgage, Lien, lease,
agreement, indenture, or instrument to which any Loan Party is a party or which
is binding upon it (including, without limitation, the Senior Indenture), (b)
any Requirement of Law applicable to the Parent or any of its Subsidiaries
(including, without limitation, the General Corporation Law of the State of
Delaware) or (c) the charter or by-laws of the Parent or any of its
Subsidiaries. Both prior to and immediately after giving effect to the payment
of the above-described dividend on the Amendment and Restatement Effective Date,
the borrowing on the Amendment and Restatement Effective Date evidenced by the
Intercompany Note, the making of the Term Loan and other Loans to be made on the
Amendment and Restatement Effective Date and the issuance of any Letters of
Credit to be issued on the Amendment and Restatement Effective Date, as of the
Amendment and Restatement Effective Date HDSC is solvent on a going concern
balance sheet basis, is then able and expects to be able to pay its debts
(including, without limitation, contingent debts
78
86
and other commitments) as they mature and has capital sufficient to carry on its
business as conducted and as proposed to be conducted. For purposes of
determining whether HDSC satisfies the foregoing, the amount of any contingent
liability shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability. The representations and
warranties in this SECTION 8.31 are being made after giving effect to the
provisions contemplated by this Agreement to become effective on the Amendment
and Restatement Effective Date.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
Each of the Loan Parties covenants to the Agent and each Lender
that, so long as any of the Obligations remain outstanding or this Agreement is
in effect:
9.1 TAXES AND OTHER OBLIGATIONS. The Parent shall, and shall cause
each of its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file; (b) pay, or provide for the payment, when due, of
all taxes, fees, assessments and other governmental charges against it or upon
its property, income and franchises, make all required withholding and other tax
deposits, and establish adequate reserves in accordance with GAAP for the
payment of all such items, and provide to the Agent and the Lenders, upon
request, satisfactory evidence of its timely compliance with the foregoing; and
(c) pay when due all Debt owed by it and all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, and all other
indebtedness owed by it and trade payables and rent payable under leases of real
property and perform and discharge in a timely manner all other material
obligations undertaken by it; PROVIDED, HOWEVER, neither the Parent nor any of
its Subsidiaries need pay any tax, fee, assessment, or governmental charge, that
(i) it is contesting in good faith by appropriate proceedings dili gently
pursued, (ii) the Parent or its Subsidiary, as the case may be, has established
proper reserves for as provided in GAAP, and (iii) no Lien (other than a
Permitted Lien) results from such non-payment.
9.2 CORPORATE EXISTENCE AND GOOD STANDING. The Parent shall, and
shall cause each of its Subsidiaries to, maintain its corporate existence
(except as otherwise permitted under SECTION 9.9(vi)) and its qualification and
good standing in all jurisdictions (x) in which the failure to maintain such
qualification or good standing could reasonably be expected to have a Material
Adverse Effect and (y) additionally with respect to HDSC, where HDSC has any
stores or distribution centers.
9.3 COMPLIANCE WITH LAW; MAINTENANCE OF LICENSES. The Parent shall
comply, and shall cause each of its Subsidiaries to comply, with all
Requirements of Law of any Governmental Authority having jurisdiction over it or
its business, the failure to comply with which would have a Material Adverse
Effect. The Parent shall, and shall cause each of its Subsidiaries to, obtain
and maintain all licenses, permits, franchises, and governmental
79
87
authorizations determined by the Parent or its Subsidiary, in their respective
good faith reasonable business judgment, to be material to the ownership of its
property and to the conduct of its business as conducted on the Closing Date.
The Parent shall not, and shall not permit any of its Subsidiaries to, modify,
amend or alter its charter or by-laws or any certificate of designation or other
documents establishing and setting forth the rights and terms of any of its
preferred stock other than in a manner which does not adversely affect the
rights of the Lenders or the Agent.
9.4 MAINTENANCE OF PROPERTY. The Parent shall, and shall cause each
of its Subsidiaries to, maintain all of its property necessary and useful in the
conduct of its business, in good operating condition and repair, ordinary wear
and tear excepted.
9.5 INSURANCE. (a) The Parent shall maintain, and shall cause each
of its Subsidiaries to maintain, with financially sound and reputable insurers
having a rating of at least A-VII or better by Best Rating Guide, its insurable
properties insured at all times; and shall maintain, and shall cause each of its
Subsidiaries to maintain, such other insurance or self-insurance, to such extent
and against such risks, including fire and other risks insured against by
extended coverage, as is customary with companies in the same or similar
businesses, including public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it and such
other insurance or self-insurance as may be required by law. Without limiting
the foregoing, the Parent shall also maintain, and shall cause each of its
Subsidiaries to maintain, flood insurance, in the event of a designation of the
area in which any Real Estate and any of the Equipment and Inventory located on
such Real Estate is located as "flood prone" or a "flood risk area" (hereinafter
"SFHA"), as defined by the Flood Disaster Protection Act of 1973, in an amount
to be reasonably determined by the Agent, and shall comply with the additional
requirements of the National Flood Insurance Program as set forth in said Act.
Upon the Majority Lenders' request, the Loan Parties shall maintain flood
insurance for its Inventory and Equipment which is, at any time, located in a
SFHA.
(b) The Loan Parties shall cause the Agent, for the ratable
benefit of the Agent and the Lenders, to be named in each such policy as secured
party or mortgagee and loss payee or additional insured, in a manner acceptable
to the Agent. Each Loan Party acknowledges and agrees that the Agent has a Lien
on all proceeds of Collateral (including all proceeds thereof representing
payments on insurance with respect to a casualty of any Collateral). The Agent,
each Lender and each Loan Party agree that (i) proceeds of insurance in an
amount equal to or less than $2,500,000 with respect to any individual casualty
relating to Collateral may be paid by the insurer directly to the relevant Loan
Party and (ii) any proceeds of insurance in excess of $2,500,000 with respect to
any individual casualty shall be paid by the insurer directly to the Agent. Each
policy of insurance shall contain a clause or endorsement requiring the insurer
to give not less than thirty (30) days' prior written notice to the Agent in the
event of cancellation of the policy for any reason whatsoever and a clause or
endorsement stating that the interest of the Agent shall not be impaired or
invalidated by any act or neglect of the Parent or any of its Subsidiaries or
the owner of any premises for purposes more hazardous than are permitted by such
policy. All
80
88
premiums for such insurance shall be paid by the Loan Parties when due, and
certificates of insurance and photocopies of the policies shall be delivered to
the Agent. If the Loan Parties fail to procure such insurance or to pay the
premiums therefor when due, the Agent may, and at the direction of the Majority
Lenders shall, do so from the proceeds of Revolving Loans.
(c) The Loan Parties shall promptly notify the Agent and the
Lenders of any substantial or total damage or destruction of any of its stores
or any of its distribution centers or of any loss, damage, or destruction to any
portion of the Collateral having a value in excess of $5,000,000, whether or not
covered by insurance. The Agent is hereby authorized, during the continuance of
a Default or an Event of Default, to collect all insurance proceeds directly,
and to apply or remit them as follows:
(i) With respect to insurance proceeds relating to
property other than Collateral, after deducting from such proceeds the
reasonable expenses, if any, incurred by the Agent in the collection or handling
thereof, the Agent shall promptly remit to the applicable Loan Party such
proceeds.
(ii) With respect to insurance proceeds relating to
Collateral, after deducting from such proceeds the reasonable expenses, if any,
incurred by the Agent in the collection or handling thereof, the Agent shall
apply such proceeds, ratably, to the reduction of the Obligations in the order
provided for in SECTION 4.5.
9.6 CONDEMNATION. The Loan Parties shall, promptly (but in any event
=within three (3) Business Days) upon a Responsible Officer of any Loan Party
learning of the institution of any proceeding for the condemnation or other
taking of any of such Loan Party's leased Real Estate (but only if such
proceeding or taking would give the lessor the right to terminate the lease) or
owned Real Estate (but only if such proceeding or taking would have a material
adverse effect on the value of such Real Estate), notify the Agent of the
pendency of such proceeding, and agrees that the Agent may participate in any
such proceeding, and the Loan Parties from time to time will deliver to the
Agent all instruments reasonably requested by the Agent to permit such
participation.
9.7 ENVIRONMENTAL LAWS. (a) The Parent shall, and shall cause each
of its Subsidiaries to (and shall use its best efforts to cause all tenants and
subtenants of the Parent or its Subsidiaries to), conduct its business in
compliance with all Environmental Laws applicable to it, including, without
limitation, those relating to the generation, handling, use, storage, and
disposal of any Contaminant, except to the extent that the failure so to comply
could not reasonably be expected to have a Material Adverse Effect. The Parent
shall, and shall cause each of its Subsidiaries to, take prompt and appropriate
action to respond to any material non-compliance with Environmental Laws and
shall regularly report to the Agent on such response.
(b) Without limiting the generality of the foregoing, the
Parent shall submit to the Agent and the Lenders annually, commencing on the
first Anniversary Date, and on each Anniversary Date thereafter, an update of
the status of each environmental compliance
81
89
or liability issue. The Agent or any Lender may request copies of
non-attorney-client privileged technical reports prepared by any Loan Party and
its communications with any Governmental Authority to determine whether the
Parent or any of its Subsidiaries is proceeding reasonably to correct, cure or
contest in good faith any alleged non-compliance or environmental liability. The
Parent shall, at the Agent's or the Majority Lenders' request and at the
Parent's expense, (a) retain an independent environmental engineer acceptable to
the Agent to evaluate the site, including tests if appropriate, where the
material non-compliance or alleged material non-compliance with Environmental
Laws has occurred and prepare and deliver to the Agent, in sufficient quantity
for distribution by the Agent to the Lenders, a report setting forth the results
of such evaluation, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof, and (b) provide to the
Agent and the Lenders a supplemental report of such engineer whenever the scope
of the environmental problems, or the response thereto or the estimated costs
thereof, shall change in any material respect.
9.8 COMPLIANCE WITH ERISA. Each Loan Party shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; (c) make all required
contributions to any Plan subject to Section 412 of the Code; (d) not engage in
a prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan; and (e) not engage in a transaction that could be subject
to Section 4069 or 4212(c) of ERISA.
9.9 MERGERS, CONSOLIDATIONS OR SALES. Neither the Parent nor any of
its Subsidiaries shall enter into any transaction of merger, reorganization, or
consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or
any part of its property, or wind up, liquidate or dissolve, or agree to do any
of the foregoing, except (i) for sales of Inventory and other assets in the
ordinary course of its business, (ii) for sales or other dispositions of
Equipment that are obsolete or no longer useable by a Loan Party, including the
sale of Equipment in connection with the closing of stores otherwise permitted
hereunder, (iii) other sales of assets (other than Inventory or in connection
with sale-leaseback transactions permitted hereunder) outside the ordinary
course of business having an aggregate sales price during the term of this
Agreement not in excess of $6,000,000, (iv) sales of assets permitted to be made
under SECTION 9.20 (provided that the Borrowers shall apply an amount equal to
100% of the Net Cash Proceeds of any transfer or other disposition pursuant to
clause (iii) or this clause (iv) to prepay, upon receipt of such Net Cash
Proceeds, the Obligations in the manner set forth in SECTION 4.5), (v) leases,
subleases and license agreements in the ordinary course of business and the sale
by HDSC of the Real Estate it owns on the Closing Date; and (vi) if at the time
thereof and immediately after giving effect thereto no Event of Default or
Default shall have occurred and be continuing (a) any wholly owned Subsidiary of
HDSC may merge into HDSC in a transaction in which HDSC is the surviving
corporation so long as the net worth of the survivor of such merger immediately
after such merger is greater than the net worth of HDSC immediately prior to
such merger, (b) any wholly owned Subsidiary of HDSC may merge into or
consolidate with any other wholly owned Subsidiary of HDSC in a transaction in
which the surviving entity
82
90
is a wholly owned Subsidiary of HDSC, no person other than HDSC or a wholly
owned Subsidiary of HDSC received any consideration and if such merger or
consolidation involves CRH, CRH is the survivor and as such (and immediately
after giving effect thereto) the net worth of CRH as the survivor is greater
than the net worth of CRH immediately prior to such merger or consolidation, (c)
any Subsidiary of HDSC may be liquidated as long as pursuant to such liquidation
all the assets or proceeds therefrom of such Subsidiary are transferred to HDSC
or any other wholly owned Subsidiary of HDSC.
9.10 RESTRICTED INVESTMENTS; CAPITAL CHANGE; DISTRIBUTIONS. Neither
the Parent nor any of its Subsidiaries shall (i) make any change in its capital
structure which could have a Material Adverse Effect, (ii) make any Restricted
Investment, (iii) directly or indirectly declare or make, or incur any liability
to make, any Distribution or (iv) make any payment on or with respect to the
Intercompany Note, except (a) any Subsidiary of a Borrower may declare and pay
dividends or make other distributions to such Borrower, (b) so long as no
Default or Event of Default shall have occurred and be continuing or result
therefrom, HDSC may pay interest accrued and owing on the Intercompany Note,
make loans to the Parent pursuant to and in accordance with SECTION 9.13(k)
and/or pay dividends in the ordinary course of its business to the Parent, in
each instance, in any Fiscal Year to the extent required to enable the Parent in
the ordinary course of its business to conduct the business of being a publicly
traded holding company, including to (I) make payments of interest on the Senior
Notes, (II) pay all Federal and state income and other taxes then due and owing,
(III) pay reasonable fees and expenses of directors of the Parent, (IV) pay
required listing fees, annual fees and registration fees to the Securities and
Exchange Commission, the New York Stock Exchange or any other national or
regional stock exchange or the National Association of Securities Dealers, Inc.,
in connection with registering, listing and maintaining the listing of the
capital stock and Senior Notes of the Parent, (V) pay reasonable legal and
accounting fees of the Parent, (VI) pay premiums on the Parent's directors' and
officers' liability insurance policy and (VII) satisfy obligations under its
charter or employment agreements to indemnify officers and directors of the
Parent; PROVIDED, HOWEVER, that with respect to indemnification obligations for
officers and directors of the Parent in connection with litigation arising out
of the 1995 change of control of the Parent, the aggregate amount that HDSC may
dividend to the Parent to pay same, together with the aggregate amount of any
loans by HDSC to the Parent for such purpose and the aggregate amount of
interest payments under the Intercompany Note which are used for such purpose,
during the term of this Agreement shall not exceed $2,000,000 and PROVIDED,
FURTHER, that if the aggregate of proceeds of such interest payments, loans and
dividends permitted under this clause (b) retained by the Parent and not yet
applied for the purposes permitted above shall exceed the amounts required to
meet the then current cash requirements of the Parent, and HDSC has Revolving
Loans outstanding, then the Parent will undertake to temporarily transfer such
excess proceeds back to HDSC (as advances or otherwise) for purposes of reducing
its Revolving Loans outstanding until such time as the Parent is required to
meet its then current cash obligations as permitted under this clause, whereupon
such previous excess proceeds may be remitted to or made available to the Parent
to meet its then current cash requirements (it being agreed that this further
provision is not intended to apply to de minimis amounts of less than $100,000
or periods of less than 20 consecutive Business Days), (c) the Parent may
repurchase the remaining Series 1993
83
91
Stock Rights issued by it for shares of its common stock or for cash and other
property not exceeding in the aggregate for such cash and property $100,000 in
total value and (d) so long as no Default or Event of Default shall have
occurred and be continuing or result therefrom (including, without limitation,
by breaching SECTION 8.31), HDSC may, on the Amendment and Restatement Effective
Date, pay to the Parent the dividend described in the definition "Intercompany
Note"; provided that the proceeds of such dividend are used solely to make the
loan to HDSC evidenced by the Intercompany Note and no cash is distributed or
required at any time to be distributed to the Parent with respect to the making
of such dividend.
9.11 TRANSACTIONS AFFECTING COLLATERAL OR OBLIGATIONS. Neither the
Parent nor any of its Subsidiaries shall enter into any transaction which would
be reasonably expected to have a Material Adverse Effect.
9.12 [INTENTIONALLY OMITTED].
9.13 DEBT. Neither the Parent nor any of its Subsidiaries shall
incur, maintain or guarantee any Debt, other than:
(a) the Obligations and the Debt under the Senior Note
Documents;
(b) Rate Protection Agreements;
(c) with the prior written consent of the Agent (which
consent shall not be unreasonably withheld), Debt referred to in clause (g) of
Permitted Liens, subject to the limitations set forth therein;
(d) other Debt (other than Debt For Borrowed Money) existing
on the Closing Date and reflected in the Financial Statements delivered by the
Borrowers to the Agent on or prior to the Closing Date;
(e) Debt For Borrowed Money outstanding on the Closing Date
and listed on SCHEDULE 9.13 (other than Debt For Borrowed Money permitted
elsewhere in this SECTION 9.13), but not any extensions, renewals or
replacements of such Debt;
(f) in the case of HDSC, the Deferred Tax Obligations;
(g) intercompany Debt described in clauses (i), (j) and (o)
of the definition of Restricted Investment;
(h) in the case of HDSC, other Debt (other than under
Capital Leases) not to exceed $15,000,000;
(i) Debt permitted to be incurred under SECTION 9.20;
84
92
(j) Debt in connection with performance bonds (other than
for the repayment of Debt For Borrowed Money) arising in the ordinary course of
business;
(k) Debt of the Parent to HDSC incurred by the Parent and
lent by HDSC in the ordinary course of their respective businesses, the proceeds
of which, together with dividends by HDSC to the Parent and payments of interest
on the Intercompany Note (without duplication), are used solely for any action
permitted by SECTION 9.10(iii)(b);
(l) in the case of HDSC, Debt under Capital Leases entered
into by HDSC in the ordinary course of its business;
(m) Debt referred to in clauses (n) and (o) of Permitted
Liens, subject to the limitations set forth therein; and
(n) with the prior written consent of the Agent (which
consent shall not be unreasonably withheld), Debt referred to in clause (p) of
Permitted Liens, subject to the limitations set forth therein.
9.14 PREPAYMENT. Neither the Parent nor any of its Subsidiaries shall
voluntarily prepay, acquire or redeem any Debt, except the prepayment of
Obligations in accordance with the terms of this Agreement. Further, without the
prior written consent of the Majority Lenders, (i) the Parent shall not enforce
payments of any amounts owing under the Intercompany Note, nor declare a default
thereunder or accelerate any obligations owing thereunder nor take any other
remedial action to enforce or collect any payment under the Intercompany Note
and (ii) the Parent shall not transfer, pledge or otherwise xxxxx x Xxxx in, or
otherwise dispose of, any interest in the Intercompany Note.
9.15 TRANSACTIONS WITH AFFILIATES. Except as set forth below, neither
the Parent nor any of its Subsidiaries shall sell, transfer, distribute, or pay
any money or property, including, but not limited to, any fees or expenses of
any nature (including, but not limited to, any fees or expenses for management
services), to any Affiliate, or lend or advance money or property to any
Affiliate, or invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or indebtedness, or any property, of any Affiliate, or
become liable on any Guaranty of the indebtedness, dividends, or other
obligations of any Affiliate. Notwithstanding the foregoing, so long as no
Default or Event of Default shall have occurred and be continuing or would
result therefrom (i) HDSC may issue the Intercompany Note to the Parent to
evidence the loan of $195,000,000 made by the Parent to HDSC on the Amendment
and Restatement Effective Date in accordance with the terms hereof and (ii) the
Parent and its Subsidiaries may enter into transactions and agreements with
Affiliates in the ordinary course of business, in amounts and upon terms no less
favorable to the Parent and its Subsidiaries than would be obtained in a
comparable arm's-length transaction with a third party who is not an Affiliate,
provided that if any such transaction or series of transactions involves
aggregate payments in excess of $1,000,000 (other than intercompany payments
between HDSC and any of its Subsidiaries or between HDSC's wholly owned
Subsidiaries), the Board of Directors of HDSC, the Parent or such Subsidiary, as
the case may be, shall have determined that such transaction or series of
transaction complies with
85
93
the foregoing and such determination shall be evidenced by a resolution of such
Board of Directors. Notwithstanding the foregoing, neither the Parent nor any of
its Subsidiaries may engage in any transactions permitted under this SECTION
9.15 unless such transaction is also permitted by the other provisions of this
Agreement.
9.16 INVESTMENT BANKING AND FINDER'S FEES. Neither the Parent nor any
of its Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
finder's fee, or broker's fee to any Person in connection with this Agreement.
The Loan Parties shall defend and indemnify the Agent and the Lenders against
and hold them harmless from all claims of any Person that the Parent or any of
its Subsidiaries is obligated to pay for any such fees, and all costs and
expenses (including without limitation, attorneys' fees) incurred by the Agent
and/or any Lender in connection therewith.
9.17 STANDSTILL AGREEMENT. HDSC shall use its best efforts to obtain
from General Electric Capital Corporation a standstill agreement, in
substantially the form of the standstill agreement made by General Electric
Capital Corporation in favor of the administrative agent with respect to the
Existing Bank Debt or otherwise in form and substance satisfactory to the Agent,
with respect to the Equipment subject to the sale and leaseback arrangements
between General Electric Capital Corporation and HDSC.
9.18 BUSINESS CONDUCTED. The Parent shall not and shall not permit
any of its Subsidiaries to engage, directly or indirectly, in any line of
business other than the businesses in which the Parent or such Subsidiary is
engaged on the Closing Date; PROVIDED the Parent shall not and shall not permit
any of its Subsidiaries (other than the Borrowers) to own any Inventory and
shall not permit CRH to engage in any business other than the business of
purchasing Inventory for resale to HDSC. The Parent shall own no assets (other
than the capital stock of HDSC, the Intercompany Note and such cash (not in
excess of $1,000,000 book balance for any 5 consecutive Business Days, other
than cash held by the trustee for the Senior Notes for payment of scheduled
interest due on the Senior Notes) and other de-minimis property as are needed
in the conduct of its business as a publicly traded holding company), shall have
no Debt outstanding to any Person except as otherwise permitted by this
Agreement and shall engage in no business activity of any kind, other than the
holding of the capital stock of HDSC and other activities associated with being
a publicly-traded holding company.
9.19 LIENS. Neither the Parent nor any of its Subsidiaries shall
create, incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens.
9.20 SALE AND LEASEBACK TRANSACTIONS. Neither the Parent nor any of
its Subsidiaries shall, directly or indirectly, enter into any arrangement with
any Person providing for the Parent or such Subsidiary to lease or rent property
that the Parent or such Subsidiary has sold or will sell or otherwise transfer
to such Person, except for the sale and leaseback transactions existing as of
the Closing Date described on SCHEDULE 9.20 and except that so long as no
Default or Event of Default exists at such time or immediately after
86
94
giving effect thereto the Borrowers may enter into such arrangements with
respect to store fixtures, store Equipment and Real Estate without the prior
written consent of the Agent or any Lender and may enter into other such
arrangements with the prior written consent of the Agent.
9.21 NEW SUBSIDIARIES. The Parent shall not, directly or indirectly,
organize, create, acquire or permit to exist any Subsidiary other than those
listed on SCHEDULE 8.3.
9.22 FISCAL YEAR. The Parent shall not change, and shall not permit
any of its Subsidiaries to change, its Fiscal Year.
9.23 ADJUSTED TANGIBLE NET WORTH. The Parent will maintain Adjusted
Tangible Net Worth, determined as of the last day of each fiscal quarter of the
Parent, of not less than the following:
Fiscal Quarter Ending
In or About Amount
--------------------- ------
January of any year $110,000,000
April of any year $100,000,000
July of any year $ 90,000,000
October of any year $ 80,000,000
9.24 CASH FLOW TEST. The Parent will not permit for any period of
four consecutive fiscal quarters of the Parent (determined as of the last day of
each fiscal quarter of the Parent) EBITDA for such four fiscal quarter period to
be less than Cash Requirements for such four fiscal quarter period.
9.25 CLEANUP. The Borrowers will cause the outstanding principal
balance of the Revolving Loans (other than any Revolving Loans deemed to be made
pursuant to SECTION 2.3(e) provided that each such Revolving Loan shall have
been repaid in full not later than the Business Day following the making
thereof) to be zero for at least thirty (30) consecutive days during the period
from December 1 of each year to March 31 of the next year.
9.26 USE OF PROCEEDS. The Parent shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of any Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
9.27 SENIOR NOTE DOCUMENTS, DEFERRED TAX OBLIGATIONS AND INTERCOMPANY
NOTE. The Parent shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, amend, modify, supplement, waive compliance with, or
assert to non-compliance with, (i) any material term or provision of the
Deferred Tax Obligations if the effect thereof is to impose additional or
increased scheduled repayment obligations in respect of such Debt or
87
95
to require any scheduled payment to be made in respect of the Deferred Tax
Obligations prior to the date that such payment would otherwise be due or the
effect thereof is otherwise adverse in any respect to the Lenders or (ii) any
term or provision of any of the Senior Note Documents or the Intercompany Note.
Without limiting the generality of the foregoing, with respect to the Deferred
Tax Obligations, it is understood that any increase in the interest, fees or
other amounts payable in connection therewith, or any amendment that imposes
additional covenants or events of default or makes more restrictive the
covenants or events of default contained therein, shall require the consent of
the Majority Lenders.
9.28 STORE CLOSINGS. HDSC shall not after the Amendment and
Restatement Effective Date close any of its stores in an aggregate amount in
excess of fifteen percent (15%) of the number of its stores on the Amendment and
Restatement Effective Date unless at such time the Agent and the Lenders shall
have received an Inventory appraisal, at the expense of the Borrowers, by an
outside appraisal firm satisfactory to the Agent and the Lenders with respect to
the Inventory of the Borrowers, and the results of such appraisal shall be in
form and substance satisfactory to the Agent and the Lenders (including
confirming that the borrowing base based upon the advance rate with respect to
Eligible Inventory of the Borrowers at the stores of HDSC not being closed is
less than 85% of the orderly liquidation value of such Eligible Inventory).
9.29 INDEMNITY PAYMENTS. Neither of the Borrowers shall, directly or
indirectly, make any payments to satisfy obligations under its charter or
agreements, applicable law or otherwise to indemnify officers and/or directors
in connection with litigation arising from the 1995 change of control of the
Parent in an aggregate amount for both Borrowers during the term of this
Agreement in excess of that amount which is $5,000,000 less the aggregate amount
of dividends and loans made by HDSC to the Parent under SECTIONS
9.10(iii)(b)(vii) and 9.13(k) with respect to such litigation (all such payments
by each Borrower to be made in accordance with its charter, agreements or
applicable law, as appropriate).
9.30 FURTHER ASSURANCES. The Loan Parties shall execute and deliver,
or cause to be executed and delivered, to the Agent and/or the Lenders such
documents and agreements, and shall take or cause to be taken such actions, as
the Agent or any Lender may, from time to time, request to carry out the terms
and conditions of this Agreement and the other Loan Documents.
ARTICLE 10
CONDITIONS OF LENDING
10.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT. The
occurrence of the Amendment and Restatement Effective Date, and the obligation
of the Lenders to make Revolving Loans and Term Loans on the Amendment and
Restatement Effective Date, and the obligation of the Agent to cause to be
issued or provide Credit Support for any Letter
88
96
of Credit on the Amendment and Restatement Effective Date and the obligation of
the Lenders to participate in Letters of Credit issued on the Amendment and
Restatement Effective Date or in Credit Support for any Letters of Credit, are
subject to the following conditions precedent having been satisfied in a manner
satisfactory to the Agent and each Lender:
(a) This Agreement and the Term Loan Notes have been
executed by each party thereto and the Loan Parties shall have performed and
complied with all covenants, agreements and conditions contained herein and the
other Loan Documents which are required to be performed or complied with by the
Loan Parties before or on the Amendment and Restatement Effective Date.
(b) All representations and warranties made hereunder and in
the other Loan Documents (other than any representation or warranty which
relates to a specified prior date) shall be true and correct as of the Amendment
and Restatement Effective Date as if made on such date.
(c) No Default or Event of Default shall exist on the
Amendment and Restatement Effective Date, or would exist after giving effect to
the Loans to be made on such date.
(d) The Agent and the Lenders shall have received such
opinions of counsel for the Parent and its Subsidiaries as the Agent or any
Lender shall request, each such opinion to be in a form, scope, and substance
satisfactory to the Agent, the Lenders, and their respective counsel.
(e) The Agent shall have received for the benefit of the
Lenders an amendment fee in the amount of $375,000 (such fee to be allocated to
each Lender according to its Pro Rata Share).
(f) All proceedings taken in connection with the execution
of this Agreement, the Term Loan Notes and all documents and papers relating
thereto shall be satisfactory in form, scope, and substance to the Agent and the
Lenders, and the Agent shall have received a certificate, dated the Amendment
and Restatement Effective Date, signed by the president, any vice president or
the treasurer of each Loan Party, and attested to by the secretary or any
assistant secretary of the respective Loan Party, in form and substance
satisfactory to the Agent and the Lenders (x) certifying that there were no
changes, or providing the text of any changes, to the certificate of
incorporation and by-laws of such Loan Parties as delivered to the Agent on the
Closing Date, (y) to the effect that each such Loan Party is in good standing in
its respective state of incorporation and in those states where each such Loan
Party conducts business and (z) providing the resolutions adopted by each such
Loan Party with respect to the actions contemplated in this Agreement
(including, without limitation, with respect to the amendment and restatement of
the Original Loan and Security Agreement as herein contemplated, and the
obligations of such Loan Party with respect to the Term Loans), and the
foregoing shall be acceptable to the Agent and the Lenders.
89
97
(g) In the judgment of the Agent and the Lenders, no
Material Adverse Effect shall have occurred since the date of the Financial
Statements referred to in SECTION 8.6(A).
(h) All necessary material governmental and third party
approvals and/or consents in connection with the transactions contemplated by
this Agreement and otherwise referred to herein shall have been obtained and
remain in effect, and all applicable waiting periods shall have expired without
any action being taken by any competent authority which restrains, prevents or
imposes materially adverse conditions upon the consummation of the transactions
contemplated by this Agreement. Additionally, there shall not exist any
judgment, order, injunction or other restraint prohibiting or imposing
materially adverse conditions upon the transactions contemplated by this
Agreement.
(i) The Agent shall have received evidence satisfactory to
the Agent that (x) HDSC has sufficient surplus (as defined in the relevant
provisions of the General Corporation Law of the State of Delaware) to pay the
dividend to be made on the Amendment and Restatement Effective Date described in
the definition of "Intercompany Note" and (y) after giving effect to such
dividend, the notices of the loan evidenced by the Intercompany Note, the Term
Loan and any other financial accommodations to be made to HDSC on the Amendment
and Restatement Effective Date, HDSC is solvent.
The acceptance by any Borrower of any Loans made on the Amendment and
Restatement Effective Date shall be deemed to be a representation and warranty
made by the Loan Parties to the effect that all of the conditions precedent to
the occurrence of the Amendment and Restatement Effective Date and making of
such Loans have been satisfied, with the same effect as delivery to the Agent
and the Lenders of a certificate signed by a Responsible Officer of the Parent
or the Borrowers, dated the Amendment and Restatement Effective Date, to such
effect.
Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (i) all conditions
precedent in this SECTION 10.1 have been fulfilled to the satisfaction of such
Lender and (ii) the decision of such Lender to execute and deliver to the Agent
an executed counterpart of this Agreement was made by such Lender independently
and without reliance on the Agent or any other Lender as to the satisfaction of
any condition precedent set forth in this SECTION 10.1.
10.2 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lenders
to make each Loan, including the initial Revolving Loans on the Closing Date and
the Term Loan on the Amendment and Restatement Effective Date, and the
obligation of the Agent to take reasonable steps to cause to be issued or to
provide Credit Support for any Letter of Credit and the obligation of the
Lenders to participate in Letters of Credit or Credit Support for Letters of
Credit, shall be subject to the further conditions precedent that on and as of
the date of any such extension of credit:
(a) the following statements shall be true, and the
acceptance by any Borrower of any extension of credit shall be deemed to be a
statement to the effect set forth
90
98
in clauses (i) and (ii), with the same effect as the delivery to the Agent and
the Lenders of a certificate signed by a Responsible Officer of the applicable
Borrower, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in
ARTICLES 6 and 8 of this Agreement are correct in all material respects on and
as of the date of such extension of credit as though made on and as of such
date, other than any such representation or warranty which relates to a
specified prior date and except to the extent the Agent and the Lenders have
been notified by the Borrowers that any representation or warranty is not
correct and the Majority Lenders have explicitly waived in writing compliance
with such representation or warranty; and
(ii) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes a Default or an
Event of Default; and
(b) the amount of the Combined Availability shall be
sufficient to make such Loan or cause the issuance or provision of such Letter
of Credit or Credit Support without exceeding the Combined Availability (or with
respect to the making of the Term Loans, after giving effect to the making
thereof, the sum of (i) the aggregate outstanding Revolving Loans and Term Loans
to the Borrowers, (ii) the aggregate amount of Pending Revolving Loans to the
Borrowers, (iii) the aggregate undrawn amount of outstanding Letters of Credit
and (iv) any unpaid reimbursement obligations in respect of Letters of Credit
shall not exceed the Combined Availability (with Combined Availability
determined as if clauses (b)(i) through (iv) of such definition were zero)),
PROVIDED, HOWEVER, that the foregoing conditions precedent are not conditions to
each Lender participating in or reimbursing BABC or the Agent for such Lenders'
Pro Rata Share of any BABC Loan or Agent Advance as provided in SECTIONS 2.2(h),
(i) and (j).
ARTICLE 11
DEFAULT; REMEDIES
11.1 EVENTS OF DEFAULT. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) any failure to pay the principal of or interest or
premium on any of the Obligations when due, whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by
any Loan Party in ARTICLE 6 (other than in SECTION 6.4 to the extent same
relates solely to Collateral other than Inventory or proceeds of Inventory), 8
or 10 of this Agreement or by any Loan Party in any of the other Loan Documents,
any Financial Statement, or any certificate furnished by any Loan Party at any
time to the Agent or any Lender shall prove to be untrue in any material respect
as of the date on which made, deemed made, or furnished;
91
99
(c) any default shall occur in the observance or performance
of any of the covenants and agreements contained in SECTION 6.3, 6.7 or 6.9 or
in ARTICLE 7 or in ARTICLE 9 (other than SECTIONS 9.1, 9.3, 9.4, 9.6, 9.7 and
9.8);
(d) (i) any default shall occur in the observance or
performance of any of the covenants, representations, warranties and agreements
contained in this Agreement, any other Loan Documents, or any other agreement
entered into at any time to which any Loan Party and the Agent or any Lender are
party (other than as specified in clauses (a), (b) and (c) above) and such
default shall continue unremedied for a period of 30 days after the earlier to
occur of (x) notice thereof from the Agent or any Lender to the Parent or any
Borrower and (y) the Parent's or any Borrower's receipt of actual knowledge
thereof, or (ii) if any such agreement or document shall terminate (other than
in accordance with its terms or the terms hereof or with the written consent of
the Agent and the Majority Lenders) or become void or unenforceable, without the
written consent of the Agent and the Majority Lenders;
(e) any default shall occur with respect to any Debt For
Borrowed Money (including Debt under the Senior Note Documents, but excluding
the Obligations) in an outstanding principal amount which exceeds $2,500,000, or
under any agreement or instrument under or pursuant to which any such Debt For
Borrowed Money may have been issued, created, assumed, or guaranteed by any Loan
Party, and such default shall continue for more than the period of grace, if
any, therein specified, if the effect thereof (with or without the giving of
notice or further lapse of time or both) is to accelerate, or to permit the
holders of any such Debt For Borrowed Money to accelerate, the maturity of any
such Debt For Borrowed Money; or any such Debt For Borrowed Money shall be
declared due and payable or be required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof;
(f) any Loan Party shall (i) file a voluntary petition in
bankruptcy or file a voluntary petition or an answer or otherwise commence any
action or proceeding seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the federal Bankruptcy Code, as amended, or
under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, or consent to, approve of, or acquiesce in, any such
petition, action or proceeding; (ii) apply for or acquiesce in the appointment
of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee
or similar officer for it or for all or any part of its property; (iii) make an
assignment for the benefit of creditors; or (iv) be unable generally to pay its
debts as they become due;
(g) an involuntary petition or proposal shall be filed or an
action or proceeding otherwise commenced seeking reorganization, arrangement,
consolidation or readjustment of the debts of any Loan Party or for any other
relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter existing
and either (i) such petition, proposal, action or proceeding shall not have been
dismissed within a period of sixty (60) days after its commencement or (ii) an
order for relief against any Loan Party shall have been entered in such
proceeding;
92
100
(h) a receiver, assignee, liquidator, sequestrator,
custodian, monitor, trustee or similar officer for any Loan Party or for all or
any part of its property shall be appointed or a warrant of attachment,
execution or similar process shall be issued against any part of the property of
any Loan Party;
(i) except as permitted under clause (vi) of SECTION 9.9,
any Loan Party shall file a certificate of dissolution under applicable state
law or shall be liquidated, dissolved or wound-up or shall commence or have
commenced against it any action or proceeding for dissolution, winding-up or
liquidation, or shall take any corporate action in furtherance thereof;
(j) all or any material part of the property of any Loan
Party shall be nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such property or of any Loan Party shall
be assumed by any Governmental Authority or any court of competent jurisdiction
at the instance of any Governmental Authority, except where contested in good
faith by proper proceedings diligently pursued where a stay of enforcement is in
effect;
(k) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(l) one or more judgments or orders for the payment of money
aggregating in excess of $2,500,000 over the aggregate insurance coverage (other
than self insurance) therefor, shall be rendered against any Loan Party and
either (i) enforcement proceedings shall have been commenced by any creditor
upon any such judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect (or if any
such stay shall at any time be in effect, such stay shall thereafter at any time
not be in effect);
(m) any loss, theft, damage or destruction of any item or
items of Collateral or other property of any Loan Party occurs which (i) could
reasonably be expected to have a Material Adverse Effect or (ii) is material in
amount and is not adequately covered by insurance;
(n) there occurs a Material Adverse Effect;
(o) there is filed against any Loan Party any civil or
criminal action, suit or proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred twenty (120) days, and (2) could result in the confiscation
or forfeiture of any material portion of the Collateral;
(p) for any reason other than the failure of the Agent to
take any action available to it to maintain perfection of the Agent's Liens,
pursuant to the Loan Documents, any Loan Document ceases to be in full force and
effect or any Lien with respect to any
93
101
material portion of the Collateral intended to be secured thereby ceases to be,
or is not, valid, perfected and prior to all other Liens (other than Permitted
Liens) or is terminated, revoked or declared void;
(q) an ERISA Event shall occur with respect to a Pension
Plan or Multi- employer Plan which has resulted or could reasonably be expected
to result in liability of any Loan Party under Title IV of ERISA to the Pension
Plan, Multi-employer Plan or the PBGC in an aggregate amount in excess of
$1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $1,000,000; or (iii) any Loan Party or any
ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multi-employer Plan in an
aggregate amount in excess of $1,000,000; or
(r) there occurs a Change of Control; or
(s) the Senior Debt Obligations (as defined in SECTION 8.29)
shall cease to constitute, or shall be asserted by the Parent or any other Loan
Party not to constitute, Senior Debt (as defined in the Senior Indenture) under
the subordination provisions of the Senior Indenture or the subordinated
guarantees issued pursuant to the Senior Note Documents or any such
subordination provisions shall be invalidated or otherwise cease to be a legal,
valid and binding obligation of the parties thereto, enforceable in accordance
with their terms.
11.2 REMEDIES. (a) If a Default or an Event of Default exists, the
Agent may, in its discretion, and shall, at the direction of the Majority
Lenders, do one or more of the following at any time or times and in any order,
without notice to or demand on any Loan Party: (i) reduce the Maximum Revolver
Amount, or the advance rates against Eligible Inventory and/or goods covered by
documentary Letters of Credit used in computing the Combined Availability or
reduce one or more of the other elements used in computing the Combined
Availability; (ii) restrict the amount of or refuse to make Revolving Loans; and
(iii) restrict or refuse to arrange for or provide Letters of Credit or Credit
Support. If an Event of Default exists, the Agent shall, at the direction of the
Majority Lenders, do one or more of the following, in addition to the actions
described in the preceding sentence, at any time or times and in any order,
without notice to or demand on any Loan Party: (a) terminate the Commitments and
this Agreement; (b) declare any or all Obligations to be immediately due and
payable; PROVIDED, HOWEVER, that upon the occurrence of any Event of Default
described in SECTION 11.1(f), 11.1(g), 11.1(h), or 11.1(i), the Commitments
shall automatically and immediately expire and all Obligations shall
automatically become immediately due and payable without notice or demand of
any kind; and (c) pursue its other rights and remedies under the Loan Documents
and applicable law.
(b) If an Event of Default exists: (i) the Agent shall have
for the benefit of the Agent and the Lenders, in addition to all other rights of
the Agent and the Lenders, the rights and remedies of a secured party under the
UCC; (ii) the Agent may, at any time, take possession of the Collateral and keep
it on any Loan Party's premises, at no cost to the
94
102
Agent or any Lender, or remove any part of it to such other place or places as
the Agent may desire, or the Loan Parties shall, upon the Agent's demand, at the
Loan Parties' cost, assemble the Collateral and make it available to the Agent
at a place reasonably convenient to the Agent; and (iii) the Agent may sell and
deliver any Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as the Agent deems advisable, in
its sole discretion, and may, if the Agent deems it reasonable, postpone or
adjourn any sale of the Collateral by an announcement at the time and place of
sale or of such postponed or adjourned sale without giving a new notice of sale.
Without in any way requiring notice to be given in the following manner, each
Loan Party agrees that any notice by the Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to the Loan Parties if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least five (5)
Business Days prior to such action to the applicable Loan Party's address
specified in or pursuant to SECTION 16.8. If any Collateral is sold on terms
other than payment in full at the time of sale, no credit shall be given against
the Obligations until the Agent or the Lenders receive payment, and if the buyer
defaults in payment, the Agent may resell the Collateral without further notice
to any Loan Party. In the event the Agent seeks to take possession of all or any
portion of the Collateral by judicial process, each Loan Party irrevocably
waives: (a) the posting of any bond, surety or security with respect thereto
which might otherwise be required; (b) any demand for possession prior to the
commencement of any suit or action to recover the Collateral; and (c) any
requirement that the Agent retain possession and not dispose of any Collateral
until after trial or final judgment. Each Loan Party agrees that the Agent has
no obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person. The Agent is hereby granted a license or other right
to use, without charge, each Loan Party's labels, patents, copyrights, name,
trade secrets, trade names, trademarks, and advertising matter, or any similar
property, in completing production of, advertising or selling any Collateral,
and each Loan Party's rights under all licenses and all franchise agreements
shall inure to the Agent's benefit for such purpose. The proceeds of sale shall
be applied first to all expenses of sale, including attorneys' fees, and then to
the Obligations in whatever order the Agent elects. The Agent will return any
excess to the applicable Loan Party and the Loan Parties shall remain liable for
any deficiency.
(c) If an Event of Default occurs, each Loan Party hereby
waives all rights to notice and hearing prior to the exercise by the Agent of
the Agent's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
ARTICLE 12
TERM AND TERMINATION
12.1 TERM AND TERMINATION. The term of this Agreement shall end on
the Stated Termination Date. The Agent upon direction from the Majority Lenders
may terminate this
95
103
Agreement without notice upon the occurrence of an Event of Default. Upon the
effective date of termination of this Agreement for any reason whatsoever, all
Obligations (including, without limitation, all unpaid principal, accrued
interest and any early termination or prepayment fees or penalties) shall become
immediately due and payable and the Borrowers shall immediately arrange for the
cancellation of Letters of Credit then outstanding. Notwithstanding the
termination of this Agreement, until all Obligations are indefeasibly paid and
performed in full in cash, the Loan Parties shall remain bound by the terms of
this Agreement and shall not be relieved of any of their respective Obligations
hereunder, and the Agent and the Lenders shall retain all their rights and
remedies hereunder (including, without limitation, the Agent's Liens in and all
rights and remedies with respect to all then existing and after-arising
Collateral).
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 NO WAIVERS; CUMULATIVE REMEDIES. No failure by the Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement thereto, or in any other agreement between or among
any Loan Party and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will not operate as a waiver thereof. No waiver
by the Agent or any Lender will be effective unless it is in writing, and then
only to the extent specifically stated. No waiver by the Agent or the Lenders on
any occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by the Loan Parties of any provision of
this Agreement. The Agent's and each Lender's rights under this Agreement will
be cumulative and not exclusive of any other right or remedy which the Agent or
any Lender may have.
13.2 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Loan Parties therefrom, shall be effective unless the same
shall be in writing and signed by the Majority Lenders (or by the Agent at the
written request of the Majority Lenders) and the Loan Parties party thereto and
then any such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; PROVIDED, HOWEVER, that no such
waiver, amendment, or consent shall, unless in writing and signed by all the
Lenders and the Loan Parties and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
96
104
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder;
(e) increase any of the percentages set forth in the
definition of Combined Availability;
(f) amend this Section or any provision of this Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by SECTION
14.12 or release any Loan Party of its guaranty obligations under ARTICLE 15;
(h) change the definition of "Majority Lenders";
and, PROVIDED FURTHER, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent, affect the rights or duties of the Agent under
this Agreement or any other Loan Document.
13.3 ASSIGNMENTS; PARTICIPATIONS. (a) Any Lender may, with the
written consent of the Agent (which consent shall not be unreasonably withheld),
assign and delegate to one or more assignees (provided that no written consent
of the Agent shall be required in connection with any assignment and delegation
by a Lender to an Affiliate of such Lender) (each an "Assignee") all, or any
ratable part of all, of the Loans, the Commitments and the other rights and
obligations of such Lender hereunder, in a minimum amount of $15,000,000 or if
less the entire amount of such Lender's Commitment (PROVIDED, that, unless an
assignor Lender has assigned and delegated all its Loans and Commitment, no such
assignment and/or delegation shall be permitted unless, after giving effect to
such assignment and/or delegation, such assignor Lender retains a Commitment in
a minimum amount of $15,000,000); PROVIDED, HOWEVER, that the Loan Parties and
the Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Loan
Parties and the Agent by such Lender and the Assignee; (ii) such Lender and its
Assignee shall have delivered to the Loan Parties and the Agent an Assignment
and Acceptance in the form of EXHIBIT E ("Assignment and Acceptance") together
with any Term Loan Note or Term Loan Notes subject to such assignment and (iii)
the assignor Lender or Assignee has paid to the Agent a processing fee in the
amount of $3,000. The Agent agrees that if, as a result of any assignments or
delegations of its Commitment, the aggregate of the Commitments of the Agent, in
its capacity as a Lender, and its Affiliates shall fall below $50,000,000, the
Agent shall, upon the written request of the Borrowers (but only if there exists
no Default or Event of Default at the time of such request), resign as Agent in
accordance with the provisions set forth in SECTION 14.9.
(b) From and after the date that the Agent notifies the
assignor Lender that it has received an executed Assignment and Acceptance and
payment of the above-
97
105
referenced processing fee, (i) the Assignee thereunder shall be a party hereto
and, to the extent that rights and obligations, including, but not limited to,
the obligation to participate in Letters of Credit and Credit Support have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (1) other
than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document furnished pursuant hereto; (2) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Loan Parties or the performance or observance by the
Loan Parties of any of their respective obligations under this Agreement or any
other Loan Document furnished pursuant hereto; (3) such Assignee confirms that
it has received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (4) such Assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (5) such Assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and (6)
such Assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) Within five Business Days after its receipt of notice by
the Agent that the Agent has received an executed Assignment and Acceptance and
payment of the processing fee, HDSC shall execute and deliver to the Agent new
Term Loan Notes evidencing such Assignee's assigned Term Loans and, if the
assignor Lender has retained a portion of its Term Loans and its Commitment,
replacement Term Loan Notes in the principal amount of the Term Loans retained
by the assignor Lender (such Term Loan Notes to be in exchange for, but not in
payment of, the Term Loan Notes held by such Lender). Immediately upon each
Assignee's or assigning Lender's making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
98
106
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender PRO TANTO.
(e) Any Lender may at any time sell to one or more
commercial banks, financial institutions, or other Persons not Affiliates of the
Loan Parties (a "PARTICIPANT") participating interests in any Loans, the
Commitment of that Lender and the other interests of that Lender (the
"originating Lender") hereunder and under the other Loan Documents; PROVIDED,
HOWEVER, that (i) the originating Lender's obligations under this Agreement
shall remain unchanged, (ii) the originating Lender shall remain solely
responsible for the performance of such obligations, (iii) the Loan Parties and
the Agent shall continue to deal solely and directly with the originating Lender
in connection with the originating Lender's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Lender shall transfer or
grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, and all amounts payable by any Loan Party
hereunder shall be determined as if such Lender had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement.
(f) Notwithstanding any other provision in this Agreement,
any Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Term Loan
Note held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such
Federal Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
(g) In the event that a Lender shall assign and/or delegate
to an Assignee all or a portion of the Loans and/or Commitment of such Lender
and the Assignee shall thereafter demand payment from a Borrower under SECTION
5.3, such Borrower shall not be liable to make any payments to such Assignee
under SECTION 5.3 as a result of circumstances existing with respect to such
Assignee on the date of such assignment and/or delegation if and to the extent
such Borrower would not be required to make any such payment to the assigning
Lender under such section had such assignment and/or delegation not been made,
unless (i) prior to such Assignee's demand for payment therefor, such Borrower
shall have consented in writing to such assignment and/or delegation (which
consent is not required under the terms of this Agreement to effectuate any
assignment, delegation, participation or other transfer of any interest in any
Loans, Commitment or rights or obligations in any Loan Document) or (ii) a
Default or Event of Default shall exist at the time of such Assignee's demand
for payment therefor.
99
107
ARTICLE 14
THE AGENT
14.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby designates and
appoints BankAmerica Business Credit, Inc. as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes the Agent
to take such action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform such duties as
are expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. The
Agent agrees to act as such on the express conditions contained in this ARTICLE
14. The provisions of this ARTICLE 14 are solely for the benefit of the Agent
and the Lenders and the Loan Parties shall have no rights as a third party
beneficiary of any of the provisions contained herein. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Except as expressly
otherwise provided in this Agreement, the Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the other
Loan Documents, including, without limitation, (a) the determination of the
applicability of ineligibility criteria with respect to the calculation of the
Combined Availability, (b) the making of Agent Advances pursuant to SECTION
2.2(i), and (c) the exercise of remedies pursuant to SECTION 11.2, and any
action so taken or not taken shall be deemed consented to by the Lenders.
14.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
14.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Loan Party or any Subsidiary
or Affiliate of any Loan Party, or any officer thereof, contained in
100
108
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Loan Party or
any other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party or
any Loan Party's Subsidiaries or Affiliates.
14.4 RELIANCE BY AGENT. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Loan Parties), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders or all Lenders, as
applicable, as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Lenders or all Lenders, as
applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the
conditions specified in SECTION 10.1, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Agent to such
Lender for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the Lender.
14.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Lenders, unless the Agent shall
have received written notice from a Lender or the Borrowers referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." The Agent will promptly notify the Lenders of
its receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Lenders in
accordance with SECTION 11; PROVIDED, HOWEVER, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain
101
109
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable.
14.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Parent and its Subsidiaries, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Parent and its Subsidiaries, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Borrowers. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrowers and other Loan
Parties. Except for notices, reports and other documents expressly herein
required to be furnished to the Lenders by the Agent, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of any Loan Party which may come into
the possession of any of the Agent-Related Persons.
14.7 INDEMNIFICATION. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the Loan
Parties and without limiting the obligation of the Loan Parties to do so), pro
rata, from and against any and all Indemnified Liabilities as such term is
defined in SECTION 16.11; PROVIDED, HOWEVER, that no Lender shall be liable for
the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Loan Parties. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of the Agent.
14.8 AGENT IN INDIVIDUAL CAPACITY. BABC and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other
102
110
business with the Loan Parties and their Subsidiaries and Affiliates as though
BABC were not the Agent hereunder and without notice to or consent of the
Lenders. The Lenders acknowledge that, pursuant to such activities, BABC or its
Affiliates may receive information regarding the Loan Parties or their
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Loan Parties or such Subsidiary) and acknowledge
that the Agent shall be under no obligation to provide such information to them.
With respect to its Loans, BABC shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent, and the terms "Lender" and "Lenders" include BABC in its individual
capacity.
14.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days'
notice to the Lenders and the Borrowers. If the Agent resigns under this
Agreement, the Majority Lenders shall appoint from among the Lenders a successor
agent for the Lenders. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Lenders and the Borrowers, a successor agent from among the Lenders.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall upon such
acceptance be terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this SECTION 14 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent which
shall be a commercial bank organized under the laws of the United States or of
any State thereof and having a combined capital and surplus of at least
$500,000,000, without the consent of the Majority Lenders, and the retiring
Agent's resignation shall nevertheless thereupon become effective.
14.10 WITHHOLDING TAX. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment of
any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid under
this Agreement, and IRS Form W-9; and
103
111
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations owing to such Lender, such Lender agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations owing to such Lender. To the extent of such
percentage amount, the Agent will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations owing to
such Lender, such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Lender not providing such forms
or other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Lenders under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
14.11 CO-AGENTS. None of the Lenders, if any, identified on the facing
page or signature pages of this Agreement as a "co-agent" shall have any right,
power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the foregoing,
none of the Lenders so identified as a "co- agent" shall have or be deemed to
have any fiduciary relationship with any Lender. Each Lender acknowledges that
it has not relied, and will not rely, on any of the Lenders so
104
112
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
14.12 COLLATERAL MATTERS. (a) The Lenders hereby irrevocably authorize
the Agent, at its option and in its sole discretion, to release any Agent's Lien
upon any Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by the Borrowers of all Loans and reimbursement obligations
in respect of Letters of Credit and Credit Support, and the termination of all
outstanding Letters of Credit (whether or not any of such obligations are due)
and all other Obligations; (ii) constituting property (other than Inventory)
being sold or disposed of or used as collateral in connection with a borrowing
if a Borrower certifies to the Agent that the sale, disposition or borrowing is
made in compliance with SECTION 9.9, 9.13 or 9.20, as appropriate (and the Agent
may rely conclusively on any such certificate, without further inquiry); (iii)
constituting property in which a Loan Party owned no interest at the time the
Lien was granted or at any time thereafter; or (iv) constituting property leased
to a Loan Party under a lease which has expired or been terminated in a
transaction permitted under this Agreement. Except as provided above, the Agent
will not release any of the Agent's Liens without the prior written
authorization of the Lenders; PROVIDED that the Agent may, in its discretion,
release the Agent's Liens on Collateral valued in the aggregate not in excess of
$10,000,000 without the prior written authorization of the Lenders. Upon request
by the Agent or the Borrowers at any time, the Lenders will confirm in writing
the Agent's authority to release any Agent's Liens upon particular types or
items of Collateral pursuant to this SECTION 14.12.
(b) Upon receipt by the Agent of any authorization required
pursuant to SECTION 14.12(A) from the Lenders of the Agent's authority to
release any Agent's Liens upon particular types or items of Collateral, and upon
at least five (5) Business Days' prior written request by the Borrowers, the
Agent shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of the Agent's Liens
upon such Collateral; PROVIDED, HOWEVER, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent's opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of the Loan Parties in respect of) all interests retained by any
Loan Party, including (without limitation) the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by any Loan Party
or is cared for, protected or insured or has been encumbered, or that the
Agent's Liens have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Agent pursuant to any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole
105
113
discretion given the Agent's own interest in the Collateral in its capacity as
one of the Lenders and that the Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing.
14.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS. (a)
Each of the Lenders agrees that it shall not, without the express consent of all
Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of all Lenders, set off against the Obligations, any amounts owing
by such Lender to any Loan Party or any accounts of any Loan Party now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by the Agent, take or cause
to be taken any action to enforce its rights under this Agreement or against any
Loan Party, including, without limitation, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral.
(b) If at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations owing to such Lender arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from the Agent pursuant to the
terms of this Agreement, or (ii) payments from the Agent in excess of such
Lender's ratable portion of all such distributions by the Agent, such Lender
shall promptly (1) turn the same over to the Agent, in kind, and with such
endorsements as may be required to negotiate the same to the Agent, or in same
day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of
this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; PROVIDED, HOWEVER, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
14.14 AGENCY FOR PERFECTION. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender (other than the Agent) obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and, promptly upon
the Agent's request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent's instructions.
14.15 PAYMENTS BY AGENT TO LENDERS. All payments to be made by the
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to each Lender pursuant to such transfer
instructions for such Lender set forth on SCHEDULE A (or, with respect to a
Lender which was an Assignee, on the applicable Assignment and Acceptance
pursuant to which such Assignee became a Lender) or pursuant to such other wire
transfer instructions as each party may designate for itself by written
106
114
notice to the Agent. Concurrently with each such payment, the Agent shall
identify whether such payment (or any portion thereof) represents principal,
premium or interest on the Revolving Loans, Term Loans or otherwise.
14.16 CONCERNING THE COLLATERAL AND THE RELATED LOAN DOCUMENTS. Each
Lender authorizes and directs the Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the ratable benefit of the
Agent and the Lenders. Each Lender agrees that any action taken by the Agent,
Majority Lenders or all Lenders, as applicable, in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral, and the
exercise by the Agent, the Majority Lenders, or all Lenders, as applicable, of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
14.17 FIELD AUDIT AND EXAMINATION REPORTS; DISCLAIMER BY LENDERS. By
signing this Agreement, each Lender:
(a) is deemed to have requested that the Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by the
Agent;
(b) expressly agrees and acknowledges that neither BABC nor
the Agent (i) makes any representation or warranty as to the accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that the Agent or other party
performing any audit or examination will inspect only specific information
regarding the Borrowers and other Loan Parties and will rely significantly upon
each Loan Party's books and records, as well as on representations of each Loan
Party's personnel;
(d) agrees to keep all Reports confidential and strictly for
its internal use, and not to distribute except to its participants, or use any
Report in any other manner; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold the
Agent and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to the Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of the Borrowers; and (ii) to pay and protect, and
indemnify, defend and hold the Agent and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses and other amounts (including, without limitation reasonable
attorney costs) incurred by the Agent and any such other Lender preparing a
Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
107
115
14.18 RELATION AMONG LENDERS. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.
ARTICLE 15
GUARANTEES
Each Guarantor unconditionally guarantees, as a primary obligor
and not merely as a surety, jointly and severally with each other Guarantor, the
due and punctual payment of the principal of and interest on the Revolving
Loans, the Term Loans and of all other Obligations, when and as due, whether at
maturity, by acceleration, by notice or prepayment or otherwise. Each Guarantor
further agrees that the Obligations may be extended and renewed, in whole or in
part, without notice to or further assent from it, and that it will remain bound
upon its guarantee notwithstanding any extension or renewal of any Obligations.
To the fullest extent permitted by law, each Guarantor waives
presentment to, demand of payment from and protest to the Borrowers or any other
Person of any of the Obligations, and also waives notice of acceptance of its
guarantee and notice of protest for nonpayment. To the fullest extent permitted
by law, the obligations of a Guarantor hereunder shall not be affected by (a)
the failure of the Agent or any Lender to assert any claim or demand or to
enforce any right or remedy against any Borrower or any other Guarantor under
the provisions of this Agreement or any of the other Loan Documents or
otherwise; (b) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement, any of the other Loan Documents, any
guarantee or any other agreement; (c) the release of any security held by the
Agent or any Lender for the Obligations or any of them; or (d) the failure of
the Agent or any Lender to exercise any right or remedy against any other
Guarantor of the Obligations.
Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by the Agent or any Lender to any security (if
any) held for payment of the Obligations or to any balance of any deposit
account or credit on the books of the Agent or any Lender in favor of any
Borrower or any other Person.
To the fullest extent permitted by law, the obligations of each
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, to
the fullest extent permitted by law, the obligations of each Guarantor hereunder
shall not be discharged or impaired or otherwise affected by the failure of the
Agent or any Lender to assert any claim or demand or to enforce any remedy under
this Agreement or under any
108
116
other Loan Document, any guarantee or any other agreement, by any waiver or
modification of any provision thereof, by any default, failure or delay, willful
or otherwise, in the performance of the Obligations, or by any other act or
omission which may or might in any manner or to any extent vary the risk of such
Guarantor or otherwise operate as a discharge of such Guarantor as a matter of
law or equity.
Each Guarantor further agrees that its guarantee shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal or of interest on any Obligation is rescinded or
must otherwise be returned by the Agent or any Lender upon the bankruptcy or
reorganization of any Borrower or otherwise.
Each Guarantor hereby waives and releases all rights of
subrogation against each Loan Party and its property and all rights of
indemnification, contribution and reimbursement from each Loan Party and its
property, in each case in connection with this guarantee and any payments made
hereunder, and regardless of whether such rights arise by operation of law,
pursuant to contract or otherwise.
ARTICLE 16
MISCELLANEOUS
16.1 CUMULATIVE REMEDIES; NO PRIOR RECOURSE TO COLLATERAL. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. The Agent and the Lenders may, without limitation, proceed
directly against any or all of the Loan Parties to collect the Obligations
without any prior recourse to the Collateral. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
16.2 SEVERABILITY. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
16.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS
109
117
PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE
EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF
THE UCC) OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY, THE AGENT AND THE
LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH LOAN PARTY, THE AGENT AND THE
LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE
FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST ANY LOAN PARTY OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND
(2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS
DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) EACH LOAN PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE
MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH LOAN PARTY
AT ITS ADDRESS SET FORTH IN SECTION 16.8 AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE
U.S. MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE
LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
16.4 WAIVER OF JURY TRIAL. EACH LOAN PARTY, LENDER AND THE AGENT
WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON,
110
118
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS,
OR OTHERWISE. EACH LOAN PARTY, LENDER AND THE AGENT AGREES THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
16.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of each Loan
Party's representations and warranties contained in this Agreement shall survive
the execution, delivery, and acceptance thereof by the parties, notwithstanding
any investigation by the Agent or the Lenders or their respective agents.
16.6 OTHER SECURITY AND GUARANTIES. The Agent, may, without notice or
demand and without affecting the Loan Parties' obligations hereunder, from time
to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
16.7 FEES AND EXPENSES. Each Borrower agrees, jointly and severally,
to pay to the Agent, for its benefit, on demand, all costs and expenses that the
Agent pays or incurs in connection with the negotiation, preparation,
consummation, administration, enforcement, and termination of this Agreement,
including, without limitation: (a) Attorney Costs; (b) costs and expenses
(including reasonable and documented (to the satisfaction of the Agent)
attorneys' and paralegals' fees and disbursements which shall include the
reasonable and documented (to the satisfaction of the Agent) allocated costs of
Agent's in-house counsel fees and disbursements) for any amendment, supplement,
waiver, consent, or subsequent closing in connection with the Loan Documents
and the transactions contemplated thereby; (c) costs and expenses of lien and
title searches and title insurance; (d) taxes, fees and other charges for
recording any real estate mortgage or deed of trust, filing financing statements
and continuations, and other actions to perfect, protect, and continue the
Agent's Liens (including costs and expenses paid or incurred by the Agent in
connection with the consummation of Agreement); (e) sums paid or incurred to pay
any amount or take any action required of any Loan Party under the Loan
Documents that such Loan Party fails to pay or take; (f) costs of appraisals,
inspections, and verifications of the Collateral, including, without limitation,
travel, lodging, and meals for inspections of the Collateral and any Loan
Party's operations by the Agent plus the Agent's then customary charge for field
111
119
examinations and audits and the preparation of reports thereof (such charge is
currently $750 per day (or portion thereof) for each agent or employee of the
Agent with respect to each field examination or audit); PROVIDED, HOWEVER, that
so long as no Default or Event of Default shall be in existence, the Borrowers
shall not be required to pay more than $40,000 in any calendar year with respect
to any costs and fees in connection with such field examinations and audits; (g)
costs and expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining payment accounts and lock
boxes; (h) costs and expenses of preserving and protecting the Collateral; and
(i) costs and expenses (including reasonable and documented (to the satisfaction
of the Agent) attorneys' and paralegals' fees and disbursements which shall
include the reasonable and documented (to the satisfaction of the Agent)
allocated cost of Agent's in-house counsel fees and disbursements) paid or
incurred to obtain payment of the Obligations, enforce the Agent's Liens, sell
or otherwise realize upon the Collateral, and otherwise enforce the provisions
of the Loan Documents, or to defend any claims made or threatened against the
Agent or any Lender arising out of the transactions contemplated hereby
(including without limitation, preparations for and consultations concerning any
such matters). Each Borrower further agrees, jointly and severally, to pay to
each Lender on demand all costs and expenses that such Lender pays or incurs in
connection with the enforcement or protection of such Lender's rights under this
Agreement or the other Loan Documents. The foregoing shall not be construed to
limit any other provisions of the Loan Documents regarding costs and expenses to
be paid by any Borrower or other Loan Party. All of the foregoing costs and
expenses shall be charged to the Borrowers' Loan Account as Revolving Loans as
described in SECTION 4.4.
16.8 NOTICES. Except as otherwise provided herein, all notices,
demands and requests that any party is required or elects to give to any other
shall be in writing, or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by overnight mail and
courier service, (b) four (4) days after it shall have been mailed by United
States mail, first class, certified or registered, with postage prepaid, or (c)
in the case of notice by such a telecommunications device, when properly
transmitted (and additionally with respect to notices by the Agent or any of the
Lenders to a Loan Party of a Default or Event of Default, when such notice is
mailed by the Agent or such Lender, as appropriate, to such Loan Party by
overnight mail or courier service), in each case addressed to the party to be
notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
00 Xxxx 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxxxx
Telecopy No. (000) 000-0000
with copies to:
112
120
Bank of America NT & SA
00000 Xxx Xxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
Telecopy No. (000) 000-0000
If to any Lender (other than BABC): at such address for such Lender as set forth
on SCHEDULE A (or, with respect to a Lender which was an Assignee, on the
applicable Assignment and Acceptance pursuant to which such Assignee became a
Lender);
If to any Loan Party:
c/o Hills Stores Company
00 Xxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Vice President-Secretary
Telecopy No. (000) 000-0000
with copies to:
Xxxxx, Xxxx & Xxxxx LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy No. (000) 000-0000
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
16.9 WAIVER OF NOTICES. Unless otherwise expressly provided herein,
each Loan Party waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate the Obligations and
notice of acceleration of the Obligations, as well as any and all other notices
to which it might otherwise be entitled. No notice to or demand on any Loan
Party which the Agent or any Lender may elect to give shall entitle any Loan
Party to any or further notice or demand in the same, similar or other
circumstances.
16.10 BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; PROVIDED, HOWEVER, that no
interest herein may be assigned by any Loan Party without prior written consent
of the Agent and each Lender. The rights and benefits of the Agent and the
Lenders hereunder shall, if such Persons so agree, inure to any party acquiring
any interest in the Obligations or any part thereof.
113
121
16.11 INDEMNITY OF THE AGENT AND THE LENDERS BY THE LOAN PARTIES. Each
Loan Party agrees, jointly and severally, to defend, indemnify and hold the
Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, Affiliates, counsel, agents and attorneys-in-fact (each,
an "Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any insolvency proceeding or
appellate proceeding) related to or arising out of this Agreement, any other
Loan Document, or the Loans or the use of the proceeds thereof, whether or not
any Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); PROVIDED, that the Loan Parties shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities to the extent resulting from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
16.12 LIMITATION OF LIABILITY. No claim may be made by any Loan Party,
any Lender or other Person against the Agent, any Lender, or the affiliates,
directors, officers, officers, employees, or agents of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any other Loan Document, or
any act, omission or event occurring in connection therewith, and each Loan
Party and each Lender hereby waive, release and agree not to xxx upon any claim
for such damages, whether or not accrued and whether or not know or suspected to
exist in its favor.
16.13 FINAL AGREEMENT. This Agreement and the other Loan Documents are
intended by each Loan Party, the Agent and the Lenders to be the final,
complete, and exclusive expression of the agreement among them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be made, except by
a written agreement signed by the Loan Parties and a duly authorized officer of
each of the Agent and the requisite Lenders.
16.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender and each Loan Party in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
16.15 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
114
122
16.16 RIGHT OF SETOFF. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to any Loan Party, any such notice being waived by the Loan
Parties to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of any Loan Party against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured. Each Lender agrees
promptly to notify the Borrowers and the Agent after any such set-off and
application made by such Lender; PROVIDED, HOWEVER, that the failure to give
such notice shall not affect the validity of such set-off and application.
NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF,
BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF ANY LOAN
PARTY HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS
CONSENT OF THE LENDERS.
16.17 JOINT AND SEVERAL LIABILITY. The Borrowers shall be liable for
all amounts due to the Agent and/or any Lender under this Agreement, regardless
of which Borrower actually receives Loans or other extensions of credit
hereunder or the amount of such Loans received or the manner in which the Agent
and/or such Lender accounts for such Loans or other extensions of credit on its
books and records. Each Borrower's Obligations with respect to Loans made to it,
and each Borrower's Obligations arising as a result of the joint and several
liability of the Borrowers hereunder, with respect to Loans made to the other
Borrower hereunder, shall be separate and distinct obligations, but all such
Obligations shall be primary obligations of each Borrower.
The Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to Loans or other
extensions of credit made to the other Borrower hereunder shall, to the fullest
extent permitted by law, be unconditional irrespective of (i) the validity or
enforceability, avoidance or subordination of the Obligations of the other
Borrower or of any promissory note or other document evidencing all or any part
of the Obligations of the other Borrower, (ii) the absence of any attempt to
collect the Obligations from the other Borrower, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by the Agent and/or any Lender with respect to any provision of any instrument
evidencing the Obligations of the other Borrower, or any part thereof, or any
other agreement now or hereafter executed by the other Borrower and delivered to
the Agent and/or any Lender, (iv) the failure by the Agent and/or any Lender to
take any steps to perfect and maintain its security interest in, or to preserve
its rights to, any security or collateral for the Obligations of the other
Borrower, (v) the Agent's and/or any Lender's election, in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by
the other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy
Code, (vii) the disallowance of all or any portion of the Agent's
115
123
and/or any Lender's claim(s) for the repayment of the Obligations of the other
Borrower under Section 502 of the Bankruptcy Code, or (viii) any other
circumstances which might constitute a legal or equitable discharge or defense
of a guarantor or of the other Borrower. With respect to the Borrower's
Obligations arising as a result of the joint and several liability of the
Borrowers hereunder with respect to Loans or other extensions of credit made to
the other Borrower hereunder, each Borrower waives, until the Obligations shall
have been paid in full and this Agreement shall have been terminated, any right
to enforce any right of subrogation or any remedy which the Agent and/or any
Lender now has or may hereafter have against any Borrower, any endorser or any
guarantor of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to the Agent and/or
any Lender to secure payment of the Obligations or any other liability of any
Borrower to the Agent and/or any Lender.
Upon any Event of Default, the Agent may proceed directly and at
once, without notice, against any Borrower to collect and recover the full
amount, or any portion of the Obligations, without first proceeding against the
other Borrower or any other Person, or against any security or collateral for
the Obligations. Each Borrower consents and agrees that the Agent shall be under
no obligation to marshal any assets in favor of any Borrower or against or in
payment of any or all of the Obligations.
16.18 EFFECTIVENESS; RATIFICATION AND CONFIRMATION. This Agreement
shall become effective on the date on which (i) each of the Lenders, the Agent,
the Parent, the Borrowers and the other Loan Parties shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered the same to the Agent and (ii) the conditions contained in ARTICLE 10
are satisfied. Each of the Loan Parties hereby (i) ratifies and confirms its
grant of security interests and liens in the Collateral in which it has rights
and confirms and agrees that such Collateral secures any and all of the
Obligations, including, without limitation, the Revolving Loans and Term Loans
and (ii) ratifies and confirms its guarantee pursuant to this Agreement of any
and all of the Obligations, including, without limitation, the Revolving Loans
and Term Loans.
116
124
IN WITNESS WHEREOF, the parties have entered into this Agreement
on the date first above written.
"BORROWERS"
HILLS DEPARTMENT STORE COMPANY
By /s/ C. Xxxxx Xxxxxx
-----------------------------------------
Name: C. Xxxxx Xxxxxx
Title: Executive Vice President-Chief
Financial Officer
C.R.H. INTERNATIONAL, INC.
By /s/ Xxxxxxx X. Friend
-----------------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President-Secretary
OTHER "LOAN PARTIES"
HILLS STORES COMPANY
By /s/ C. Xxxxx Xxxxxx
-----------------------------------------
Name: C. Xxxxx Xxxxxx
Title: Executive Vice President-Chief
Financial Officer
CANTON ADVERTISING, INC.
By /s/ Xxxxxxx X. Friend
-----------------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President-Secretary/Clerk
HDS TRANSPORT, INC.
By /s/ Xxxxxxx X. Friend
-----------------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President-Secretary
117
125
CORPORATE VISION INC.
By /s/ Xxxxxxx X. Friend
-----------------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President-Secretary/Clerk
HILLS DISTRIBUTING COMPANY
By /s/ Xxxxxxx X. Friend
-----------------------------------------
Name: Xxxxxxx X. Friend
Title: Vice President-Secretary
"AGENT"
BANKAMERICA BUSINESS CREDIT, INC., as
the Agent
By /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Sr Account Executive
"LENDERS"
Commitment: $75,000,000 BANKAMERICA BUSINESS CREDIT, INC., as
a Lender
By /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Sr Account Executive
Commitment: $25,000,000 THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: V.P.
118
126
Commitment: $25,000,000 THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By /s/ Xxxxxx Xxxxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Assistant Secretary
Commitment: $25,000,000 CONGRESS FINANCIAL CORPORATION, as
a Lender
By /s/ Xxxxxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxxxxx Xxxxxx
Title: 1st VP
Commitment: $30,000,000 XXXXXX FINANCIAL, INC., as a Lender
By /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: VP
Commitment: $15,000,000 IBJ XXXXXXXX BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
Commitment: $25,000,000 LASALLE BUSINESS CREDIT, INC., as a
Lender
By /s/ Xxxxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: First Vice President
119
127
Commitment: $30,000,000 SANWA BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
Commitment: $50,000,000 TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Xxxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Sr. Vice President
120
