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LETTER OF CREDIT AND SECURITY AGREEMENT
This Letter of Credit and Security Agreement (this "Agreement") is made
and entered into as of September 25, 1997, by and between General Atlantic
Corporation, a Delaware corporation ("GAC" or "Secured Party") and Solo Serve
Corporation, a Delaware corporation ("Solo Serve" or "Debtor").
WHEREAS, Sanwa Business Credit Corporation ("SBCC") and Solo Serve have
entered into certain financing arrangements pursuant to a Loan and Security
Agreement dated as of September 25, 1997, between SBCC and Solo Serve, (as the
same may hereinafter be amended, modified, supplemented, extended, renewed,
restated or replaced, the "Loan Agreement"); and
WHEREAS, as of the date hereof, and after taking into account the sale
of 1,255,000 shares of common stock to Xxxxxxx X. Xxxxxx, GAC owns 32.7%, on a
fully diluted basis, of the issued and outstanding shares of common stock
(including shares of preferred stock convertible into common stock) of Solo
Serve; and
WHEREAS, as part of the consideration for SBCC agreeing to the matters
set forth in the Loan Agreement, Solo Serve has requested that GAC provide for
the benefit of SBCC an Irrevocable Standby Letter of Credit in the face amount
of $750,000 expiring December 31, 1998 (the "GAC L/C") which meets the SBCC's
requirements;
WHEREAS, GAC has agreed to provide the GAC L/C subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, GAC and Solo Serve hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the same meanings as in the Loan Agreement, the terms and provisions
of which are incorporated herein by this reference. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.1 "Intercreditor Agreement" shall mean that one certain
Intercreditor and Subordination Agreement dated as of September 25, 1997 by and
between SBCC and GAC, the terms and provisions of which are incorporated herein
by this reference as the same may hereinafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.2 "Obligations" shall mean any and all loans, letter of credit
accommodations, reimbursement obligations and all other obligations,
liabilities and indebtedness of every kind, nature, description owing by Solo
Serve to GAC, arising out of or as contemplated
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by this Agreement, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of this Agreement, the
GAC L/C or the Loan Agreement, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured and however acquired by GAC.
1.3 "Prime Rate" shall mean the rate of interest from time to time
publicly announced by Chase Manhattan Bank or its successors at its offices in
New York, New York, as its prime or base commercial lending rate, whether or
not such announced rate is the best rate available at such bank.
2. Letter of Credit. GAC agrees to provide the GAC L/C for the
benefit of SBCC.
3. Solo Serve Payments. In consideration of GAC's agreement, and
subject to the terms and conditions of the Intercreditor Agreement, Solo Serve
agrees to:
(a) Pay GAC the sum of One Hundred and No/100 Dollars ($100.00) per
year for each year that this Agreement is in effect;
(a) Reimburse GAC for (i) all customary and reasonable letter of
credit fees charged by any issuing and confirming banks with
respect to the GAC L/C and any renewals thereof or amendments
thereto, provided however, such bank fees shall not exceed
$15,000 for any calendar year that this Agreement is in effect
and (ii) other reasonable third party costs and expenses incurred
by GAC in connection with the furnishing of the GAC L/C, provided
however, such third party costs and expenses shall not to exceed
$5,000 for any calendar year that this Agreement is in effect;
(a) Reimburse GAC, upon demand, an amount equal to the amount which
GAC is required to pay any issuing bank or confirming bank with
respect to any drawings under the GAC L/C; and
(d) Pay GAC interest at a rate equal to the lesser of (i) the maximum
non-usurious rate of interest permitted by applicable law or (ii)
the Prime Rate in effect from time to time plus one per cent (1%)
adjusted daily on the amount outstanding from time to time under
Section 3(c) above.
Solo Serve's obligations under this Section 3 shall survive the
termination of this Agreement.
4. Security Interest. Further, in consideration of GAC's agreement
to provide the GAC L/C and in order to secure payment and performance of the
Obligations, Solo Serve as Debtor hereby grants to GAC as Secured Party a
continuing security interest in and lien upon and the right of set-off against
and hereby assigns to GAC as security, the
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following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"),
which security interest and lien is and shall be subordinate to the security
interest and lien of SBCC in the Collateral pursuant to the Intercreditor
Agreement:
4.1 Accounts;
4.2 All present and future contract rights, general intangibles
(including, but not limited to, any and all rights to payments of cash held by
factors ("Factors"), tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choices in action and other
claims), chattel paper, documents, instruments, letters of credit, bankers'
acceptances and guaranties;
4.3 All present and future monies, securities, credit balances,
deposits and deposit accounts and other property of Debtor now or hereafter
held or received by or in transit to Secured Party or its affiliates or at any
other depository or other institution from or for the account of Debtor,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Accounts and other
collateral, including, without limitation, rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, rights of stoppage in transmit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, finished goods inventory described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other collateral, including, without
limitation, returned, repossessed and reclaimed finished goods inventory, and
deposits by and property of account debtors or other persons securing the
obligations of account debtors;
4.4 Inventory;
4.5 Equipment;
4.6 Records;
4.7 All parts, accessories, attachments, special tools, additions,
replacements, substitutions and accessions to or for any or all of the
foregoing; and
4.8 All products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
Notwithstanding anything to the contrary contained in Sections 4.5 and
4.7 above, the types or items of Collateral described in such Sections shall
not include any such types
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or items of Collateral which are, on the date of the execution of this
Agreement, subject to a lien or security interest itemized in the Loan
Agreement if: (a) the valid grant of a security interest or lien to Secured
Party in such items of Collateral is prohibited by the terms of the agreement
between Debtor and the holder of such lien or security interest and (b) any
obligations are owing by Debtor to the holder of such lien or security
interest.
5. Default and Remedies. Subject to the terms of the Intercreditor
Agreement, upon the failure of Solo Serve to comply with any of its obligations
hereunder as and when due or upon the occurrence of an Event of Default under
the Loan Agreement, GAC shall be entitled to exercise all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of
Texas.
6. Term. This Agreement shall become effective as of the date
hereof and shall continue in full force and effect until the earlier of: (a)
the expiration of the GAC L/C by its own terms or (b) 120 days after the
termination of the Loan Agreement, provided, however the payment obligations of
Solo Serve and the liens and security interests granted herein shall remain in
full force and effect until the Obligations are irrevocably and indefeasibly
paid in full.
7. Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Secured Party at its address set forth below and to
Debtor at its chief executive office set forth below, or to such other address
as either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver
the next business day, one (1) business day after sending; and if by certified
mail, return receipt requested, five (5) days after mailing.
8. Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
9. Successors. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by Secured Party, Debtor and their respective
successors and assigns, except that Debtor may not assign its rights under this
Agreement or any other document referred to herein without the prior written
consent of Secured Party.
10. Entire Agreement. This Agreement and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represent the entire agreement and understanding concerning the subject matter
hereof and thereof between the parties hereto, and supersedes all other prior
agreements, understandings, negotiations
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and discussions, representations, warranties, commitments, proposals, offers
and contracts concerning the subject matter hereof, whether oral or written.
11. Nonapplicability of Article 5069-15.01 et. seq. Debtor and
Secured Party hereby agree that, except for Section 15.10(b) thereof, the
provisions of Tex. Rev. Civ. Stat. Xxx. art. 5069-15.01 et seq.(Xxxxxx 1987)
(regulating certain revolving credit loans and revolving tri-party accounts)
shall not apply to this Agreement.
12. Governing Law; Choice of Forum; Service of Process; Jury Trail
Waiver. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND ANY
DISPUTE ARISING OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
13. Subordination. THE RIGHTS OF GAC HEREUNDER ARE SUBJECT TO THE
TERMS AND CONDITIONS OF THE INTERCREDITOR AGREEMENT, AND ARE SUBORDINATE IN
RIGHT OF PAYMENT TO THE PAYMENT OF THE SENIOR DEBT (AS DEFINED IN THE
INTERCREDITOR AGREEMENT).
EXECUTED the date and year first above written.
SOLO SERVE CORPORATION
By: /s/ XXXX X. XXXXX
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Its: Executive Vice President and
Chief Financial Officer
Chief Executive Office:
0000 Xxxxxxxxx Xxxx.
Xxx Xxxxxxx, Xxxxx 00000
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GENERAL ATLANTIC CORPORATION
By: /s/ XXXXX XXXXXXXXX
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Its: Vice President
Attn: Xx. Xxxxx Xxxxxxxxx
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, X.X. 00000
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